The News Review:
- Murky future in House for Senate housing fix – Apr. 8, 2008
- Bill would aid home refinancing
- The Future of Securitization
- A Bailout Scorecard
- Presidential candidates say government should play role in mortgage…
- A HORRIBLE HOUSING ‘FIX’
- Enough to make you pop a vein
Murky future in House for Senate housing fix – Apr. 8, 2008
CNN – Apr 8, 2008
Currently, only homeowners who itemize can take that deduction. But the deduction in Rangel’s bill is capped at $350 for single filers and $700 for joint filers, below the $500 and $1,000 thresholds proposed by the Senate. Rangel’s proposal also includes a measure letting states issue an additional $10 billion in tax-free municipal bonds, the proceeds of which may be used to subsidize mortgage refinancing for subprime borrowers trying to get out of unaffordable loans. Under current law, state and local housing agencies are only allowed to issue tax-free bonds to help subsidize mortgages for first-time home buyers or those purchasing property in distressed areas. Rangel has also included provisions that would offset the cost of his proposal. Chief among them is an idea the Bush administration supports: requiring stock brokers to report to the IRS the cost basis of investment when a client sells stock. That change is estimated to raise $8 billion.
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Bill would aid home refinancing
The Republican – Apr 8, 2008
, to extend agovernment program allowing homeowners to refinancesub-prime loans. Kerry said the federal money should rescue strugglinghouseholds from foreclosure. 5 millionmortgages were in default by late 2007, a 40 percentincrease in two years, he said. “Communities across Massachusetts are being hithard,” Kerry said… Gordon Smith,R-Oregon, provides $10 billion of tax-empt private activitybonds to housing finance agencies and allows proceeds fromthe bonds to be used to refinance sub-prime mortgages tohelp low-income and moderate-income families at risk offoreclosure stay in their homes or move families into homesthey can afford. If approved, $211 million in targeted mortgage relief wouldbe provided to homeowners in Massachusetts, he said. Kerry and Smith were unsuccessful in getting the provisionin the stimulus package that Congress passed earlier to helpjump start the economy. Last week, they were successful ingetting the provision in the Foreclosure Prevention Act,which the Senate is expected to vote on this week. Kerry said that the mortgage crisis evolved from acombination of things, including the fundamental problemthat “lenders lowered their standards but didn’tappropriately plan for the increased risk they hadincurred. ” “They flooded the market with mortgage loans, ignoringthe risks to borrowers and to their own bottom line,”Kerry said, calling the fiscal activity “predatorylending” that “too often hoodwinkedhomeowners.
The Future of Securitization
thestreet.com – Apr 8, 2008
Securitization, they say, will remain an important part of the way real estate is funded, although it is likely to undergo significant change. “Securitization, in the long run, is a good thing,” says Wharton finance professor Franklin Allen. “We didn’t have much experience with falling real estate prices in recent years… “I think this is the worst time to have this happen. It’s never a good time, but in an election year, you’re more likely to get a bad policy response,” he says. According to Guttentag, while Republican presidential candidate John McCain is taking a laissez-faire stance, the Democratic presidential candidates have focused on using the Federal Housing Administration (FHA) to refinance loans that are in default. The idea is similar to what happened during the Great Depression of the 1930s with another agency called the Home Owners’ Loan Corp. which was created specifically for that purpose. The problem, says Guttentag, is that FHA is not designed as a bailout agency. “The FHA’s core mission is predicated on it being a solvent operation, actuarially sound, charging an insurance premium large enough only to cover losses.
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A Bailout Scorecard
Forbes – Apr 8, 2008
- As the housing crisis unfolds, the federal government has responded with measures to bail out, bolster and brace a growing list of needy groups in hopes of fending off economic disaster. From your next door neighbor to Bear Stearns, a look at where the money is going:By the end of the summer, it was clear that housing markets were in trouble, and the White House responded in August with FHASecure, a new program from the Federal Housing Administration, to provide help to:Good borrowers with bad ARMs. Homeowners with good credit, but facing uncomfortable resets to their adjustable rate mortgages were helped to refinance with an FHA-backed loan. Former Housing and Urban Development (HUD) Secretary Alphonso Jackson anticipated that the small premiums borrowers pay for an FHA loan would cover any losses. And the program was only open to a limited group of homeowners: those with a history of on-time payments, with interest rates scheduled to reset between June 2005 and December 2008, with at least 3% equity in their home, with a sustained history of employment and income to make the mortgage payment: in other words, responsible borrowers who are not at a great deal of risk for foreclosure. In December, President Bush signed the Mortgage Debt Relief Act of 2007. According to an estimate of the Congressional Budget Office, the bill will cost $162 million in 2008 and provide a tax break for borrowers with homes losing value… Former Housing and Urban Development (HUD) Secretary Alphonso Jackson anticipated that the small premiums borrowers pay for an FHA loan would cover any losses. And the program was only open to a limited group of homeowners: those with a history of on-time payments, with interest rates scheduled to reset between June 2005 and December 2008, with at least 3% equity in their home, with a sustained history of employment and income to make the mortgage payment: in other words, responsible borrowers who are not at a great deal of risk for foreclosure. In December, President Bush signed the Mortgage Debt Relief Act of 2007. According to an estimate of the Congressional Budget Office, the bill will cost $162 million in 2008 and provide a tax break for borrowers with homes losing value. The bill provides a three-year window for borrowers whose home value declines. Prior to the break, if a lender forgives a portion of a mortgage due to declining home value, the amount forgiven was taxed as income. Hoping to further help the common borrower, Treasury Secretary Henry Paulson, along with HUD’s Jackson formed the private-sector HOPE NOW alliance.
Presidential candidates say government should play role in mortgage…
News 10 Now – Apr 8, 2008
?Maybe, if the government wanted to have a better plan, they could lend the money through a Ginnie Mae program, a government-backed program, and say we as the government are going to stand behind this particular loan,? says Schwaber. The presidential hopefuls also think the federal government should have a role… She’s also proposing a housing stimulus package to allow cities and states to purchase foreclosed properties. Senator Barack Obama agrees that it is past time for the federal government to take action. He’s co-sponsoring legislation creating a new FHA Housing Security Program to provide incentives for lenders to buy or refinance existing mortgages, and to convert them into stable 30-year fixed mortgages. He says his plan will provide a federal backstop for lenders to reduce the principal of loans that are priced higher than the value of a home. Senator John McCain agrees the role of government is to help the truly needy and prevent systemic economic risk, but he says the best way to get there is to enact reforms that prevent a crisis like this from happening again. He?s against a multi-billion dollar bailout for big banks and speculators. While the debate continues about whether or not federal bailout programs are appropriate, there already is some federal money making its way to New York by way of grants.
A HORRIBLE HOUSING ‘FIX’
New York Post – Apr 8, 2008
Anyone who buys a foreclosed home or a home approaching foreclosure in the next two years will get a $7,000 tax credit. Plus, homebuilders, banks and other firms taking a big financial hit in the crunch will get to apply this year's losses to taxes they paid in past years – retroactive tax benefits that will cost taxpayers about $6 billion. Another feature has won support from both parties, as well as from Bush and Treasury Secretary Hank Paulson: The bill grants local and state governments the ability to raise $10 billion in tax-exempt bonds to refinance distressed mortgages in their communities. Problems abound: * The $100 million of foreclosure-prevention counseling is preordained to fail unless followed by a much larger taxpayer bailout: If you can't afford your mortgage, counseling won't help. * The $4 billion in block grants would let cities and states buy properties from grateful banks at still-inflated prices – a plunge into the property-ownership and landlord business, at which government has never excelled. * The retroactive tax breaks for homebuilders and banks are blatant favoritism driven by these groups' powerful lobbyists. Why do these institutions deserve to be shielded at taxpayer expense from the full brunt of their massive business misjudgments of the last half-decade? * The plan for governments to borrow money with which to issue new, more affordable mortgages to struggling homeowners exposes taxpayers to a huge risk… ) would let judges modify the mortgages of homeowners who declare bankruptcy, either by reducing the amount owed or by changing the interest terms. Either plan would wantonly sacrifice private benefit in a quest for social gain. Frank's would put all taxpayers on the hook for future mortgage defaults. Dodd's would mean higher interest rates on mortgages in the future – because mortgage investors would demand higher payments to protect them against the risk that bankruptcy judges could change the terms of the new loans. When some version of the current bailout package comes his way, Bush should veto it. Otherwise, he'll find himself explaining why an even bigger bailout isn't even better. Nicole Gelinas is a contributing editor for City Journal, from whose Web site this is adapted.
Enough to make you pop a vein
Denver Post – Apr 8, 2008
Then you may lose your job or business, and then your health insurance, when you need it most. Sellers racked up credit-card bills and maxed out a home-equity line. In January 2006, she turned to a mortgage broker to consolidate this debt. The mortgage broker put her in a “no-doc loan,” a. “liar loan,” with Irvine, Calif… She got an adjustable-rate loan that started out at 9. 35 percent and has since reset to more than 10 percent. She had hoped to get a job, turn around her finances and refinance at a better rate. At 59, with the demands of being a full-time caretaker, this was not the most likely outcome. By July 2006, she had filed bankruptcy, discharging most of her debts. But she wanted to keep the house — which is equipped with a wheelchair lift and other handicap accessories — so she still had to keep pace with her big, fat subprime loan. Sellers has since been trying to get New Century’s loan-servicing company to do some kind of workout.
[...] FAA: Aviation proposal would help avoid engine shutdownsSeattle Times – Apr 7, 2008The FAA said it had received reports indicating a dozen or more instances in which one or more engines aboard airliners shut down in ice-crystal conditions during descent, an event referred to as engine flameout. In all cases, crews were able to restart the engines. Under the proposed rule, before beginning a descent pilots would activate anti-ice systems aboard aircraft more frequently in extreme weather conditions involving ice crystals. The regulatory agency said there were reports of six engine flameouts on McDonnell Douglas MD-11 airplanes; several such events on Boeing 767 jetliners and four on Boeing 747 planes.Related: Murky future in House for Senate housing fix – Apr. 8, 2008 [...]
[...] Insurance cover for Kharif cropsPakistan Dawn – Apr 7, 2008The National Insurance Company Ltd (NICL) and the National Bank of Pakistan (NBP) are about to enter into an arrangement – probably within ten days – to provide insurance cover to farmers against crop losses from natural calamities and their exposure to bank loan risks. ‘’Top NBP executives were reluctant from the beginning to co-ordinate with NICL for getting insurance coverage of their production loans’’, a well-placed source in the insurance business disclosed. But the NBP changed its mind after the Prime Minister Syed Yusuf Raza Gilani, in his first speech in National Assembly put crop insurance as one of the key points on new government’s agenda. Early last week, the NICL informed the NBP that its partners the international re-insurance companies have given a final notice of quitting support arrangement if no headway is made in crop insurance.Related: The Future of Securitization [...]