The News Review:
- States, cities move to refinance debt
- Public housing coming to your neighborhood?
- Equity Loans as Next Round in Credit Crisis
States, cities move to refinance debt
Forbes – Mar 27, 2008
Budgetmakers who had planned on paying around 4 percent on borrowed funds as recently as December are searching for ways to fit rates of 5 percent to 10 percent into their budgets. So far, most affected institutions appear to be withstanding the tens of millions of dollars in additional costs without laying off workers or shutting down crucial services. Still, it’s a lousy time to refinance, as many in the stampede out of the broken ‘auction-rate securities’ bond market can attest. A shrunken pool of banks willing to lend in the midst of the mortgage-related credit mess are being more selective about the bonds they choose to underwrite. There are also fewer bond insurers whose backing is worth the money, after most were downgraded because of growing losses in mortgage-backed securities. As a result, refinancing is more expensive, complicated and time-consuming than in the past. ‘A year ago, we could have issued debt without a problem in a number of different markets,’ said Tim Guenther, the chief financial officer of Pennsylvania’s student-loan agency, the second-biggest issuer of auction-rate debt this decade… So far, most affected institutions appear to be withstanding the tens of millions of dollars in additional costs without laying off workers or shutting down crucial services. Still, it’s a lousy time to refinance, as many in the stampede out of the broken ‘auction-rate securities’ bond market can attest. A shrunken pool of banks willing to lend in the midst of the mortgage-related credit mess are being more selective about the bonds they choose to underwrite. There are also fewer bond insurers whose backing is worth the money, after most were downgraded because of growing losses in mortgage-backed securities. As a result, refinancing is more expensive, complicated and time-consuming than in the past. ‘A year ago, we could have issued debt without a problem in a number of different markets,’ said Tim Guenther, the chief financial officer of Pennsylvania’s student-loan agency, the second-biggest issuer of auction-rate debt this decade. ‘But at this point, it seems to be almost impossible to issue debt anywhere.
Related: States, cities move to refinance debt
Public housing coming to your neighborhood?
WorldNetDaily – Mar 27, 2008
, with taxpayers’ money). FHA would pay a cash fee to lenders who would then reduce the amount a borrower owed and refinance the mortgage at a reduced interest rate. FHA would fully guarantee the loan, promising to pay in full if there were a default. Another $10 billion would go to states and communities to buy and fix up foreclosed houses, then re-sell them or use them for public housing. That opens the door for a Clinton amendment trying to out-bid them with her $30 billion proposal. Converting foreclosed properties into public housing will surely create many more problems than it would solve.
Equity Loans as Next Round in Credit Crisis
New York Times – Mar 27, 2008
As the housing market spirals downward, home equity loans, which turn home sweet home into cash sweet cash, are becoming the next flash point in the mortgage crisis. Americans owe a staggering $1. 1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back. To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures… “It might also impel the borrower to file for bankruptcy,” and a judge could write down the value of the second mortgage, he said. A spokeswoman for National City, Kristen Baird Adams, said the policy applied only to home equity loans originated by mortgage brokers. Underscoring the difficulties likely to arise from home equity loans, a Democratic proposal in Congress to refinance troubled mortgages and provide them with government backing specifically excludes second liens. Lenders holding a second lien would be required to write off their debts before the first loan could be refinanced. That could leave out a significant number of loans, analysts say. People with weak, or subprime, credit could be hurt the most. More than a third of all subprime loans made in 2006 had associated second-lien debt, up from 17 percent in 2000, according to.
Related: BoE leads crisis management talks