The News Review:
- Mortgage Assistance Plan Impact Doubted
- US MBA’s Mortgage Applications Index Rose 5.4% Last Week
- Fed’s Krosner sees benefits, practical problems with mortgage…
- Here’s one way Wall Street turmoil costs you: Millions in local…
- Key House lawmaker warns mortgage servicers to cooperate or face more…
- Fed Weighs Options as Credit Crunch Lingers
- I have no regrets, Greenspan tells critics
Mortgage Assistance Plan Impact Doubted
San Francisco Chronicle – Apr 9, 2008
The Bush administration’s expansion Wednesday of a program to help homeowners avoid foreclosure could help some of those borrowers, but it would require significant concessions by reluctant lenders and investors in mortgage-backed securities. Those mortgage holders are not eager to reduce the value of a loan — and take the corresponding financial hit — unless they are certain that a loan is going into foreclosure, said Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda, Md. “I don’t think you will find a lot of lenders who will jump at this,” he said. Plus, for many lenders, the risk that these borrowers will default on refinanced loans outweighs the potential for generating new refinancing fees ,brokers say. Without such a reduction in the amount owed, homeowners would need to come up with a 3 percent down payment for a refinancing — a tough proposition for many strapped borrowers… The FHA is a Depression-era agency created to help low and moderate-income Americans afford homes. The Bush administration said Wednesday that FHA Secure has helped nearly 150,000 borrowers, and will be on track to aid a total of about 500,000 by year-end. Democrats are backing a broader plan for the FHA to refinance up loans for up to 2 million borrowers. While FHA loans are insured by the government in the event of default, the mortgages themselves are made by major lenders such as Bank of America Corp. and Wells Fargo & Co. , and are typically offered to investors as mortgage-backed securities by federal housing finance agency Ginnie Mae. The FHA currently insures 3.
US MBA’s Mortgage Applications Index Rose 5.4% Last Week
Bloomberg – Apr 9, 2008
rose last week as purchases and refinancing increased. The Mortgage Bankers Association's index of applications tobuy a home or refinance a loan rose 5. The group's purchase index gained 8.
Fed’s Krosner sees benefits, practical problems with mortgage…
Forbes – Apr 9, 2008
The main incentive for lenders to consider writedowns now, after avoiding them in the past, Kroszner contended, is that they lost an average 50 percent of the loan value when they foreclosed on homes in the fourth quarter of 2007. The committee’s chairman, Democrat Barney Frank of Massachusetts, is proposing mass writedowns of loan values to give borrowers some equity so they can refinance into loans guaranteed by the Federal Housing Administration. Loan value writedowns should be considered far more frequently than in the past, he said, because so many borrowers have negative equity or are more colloquially ‘underwater’. Their home value has sunk below the mortgage balance. The problem is spreading fast among subprime and even better-quality borrowers. ‘A distressed borrower with a negative equity position may have neither the means nor the incentive to remain in the home,’ Krozner said in his prepared testimony… He suggested that the industry develops a series of templates for guiding homeowners in trouble to different solutions based on their differing situations. Moral hazard risk is among the problems with a major writedown program, Kroszner warned. ‘Homeowners who can afford to pay their current mortgage should not be encouraged to default in order to qualify for a writedown. ‘ Nor should they be able to quickly cash out the new equity provided in the loan value writedown. Some exit fees and profit-sharing with the lender and the government are in order, he said. The government also needs to be wary of another problem, adverse selection, in which lenders would dump only their worst-case loans into the government program. And Kroszner said it would be difficult to work out writedowns when homeowners had a second lien on the house, as many subprime borrowers do.
Related: Fed’s TAF auctions 50 bln usd 28-day loans at 2.82 pct
Here’s one way Wall Street turmoil costs you: Millions in local…
MLive.com – Apr 9, 2008
75 percent — an extra $5,500 a day in interest. So the city is converting to a fixed rate on the bonds that were 12 years from maturity. Wallace said it is not unlike refinancing a home mortgage, and said costs of about $5 million will be covered in about 2. A similar drop-in-the-bucket impact is likely at Spectrum Health. The hospital is refinancing about $465 million of variable rate bonds, about two-thirds of its total bond debt. The hospital historically has paid about 4 percent but is paying about 8 percent, explained Mike Freed, chief financial officer.
Key House lawmaker warns mortgage servicers to cooperate or face more…
Forbes – Apr 9, 2008
‘We cannot compel the servicers to take some actions, because they have rights,’ Frank said in opening a hearing on legislation to provide relief to homeowners. Frank and other Democrats want mortgage lenders or servicers to write down the value of their loans to give borrowers some equity and allow them to refinance into government-insured loans. Frank said he was disturbed by reports that servicers were resisting loan modifications generally. But he said he wanted to ‘put the servicers on notice, we can’t make them cooperate but if we see a widespread refusal to cooperate on what we see as an important economic problem,’ then, when Congress rewrites the US financial regulatory system next year, ‘they can expect much tougher regulation in the future. In his prepared testimony for the hearing, Brian Montgomery of the Federal Housing Administration said the Bush administration had now decided to back an approach similar to Frank’s. ‘We will permit and encourage lenders to voluntarily write down outstanding principal,’ he said… ‘We cannot compel the servicers to take some actions, because they have rights,’ Frank said in opening a hearing on legislation to provide relief to homeowners. Frank and other Democrats want mortgage lenders or servicers to write down the value of their loans to give borrowers some equity and allow them to refinance into government-insured loans. Frank said he was disturbed by reports that servicers were resisting loan modifications generally. But he said he wanted to ‘put the servicers on notice, we can’t make them cooperate but if we see a widespread refusal to cooperate on what we see as an important economic problem,’ then, when Congress rewrites the US financial regulatory system next year, ‘they can expect much tougher regulation in the future. In his prepared testimony for the hearing, Brian Montgomery of the Federal Housing Administration said the Bush administration had now decided to back an approach similar to Frank’s. ‘We will permit and encourage lenders to voluntarily write down outstanding principal,’ he said.
Fed Weighs Options as Credit Crunch Lingers
thestreet.com – Apr 9, 2008
But as the Fed wrestles with how best to guide the economy through the credit crunch, calls for a fiscal response from elected officials are growing. While the Fed has not pledged to backstop the flagging mortgage market, The Wall Street Journal reported Wednesday that internal discussions are already under way at the central bank about contingency plans for expanding its lending power should the crisis continue and get worse. “It would be a big mistake for the Fed to backstop the mortgage market,” says Nouriel Roubini, an economics professor at New York University and chairman of RGE Monitor. “It’s a case for fiscal policy to consider whether to nationalize a big chunk of mortgages. There likely would be a huge fiscal cost to this, so it’s an issue of spending and taxation, and having the Fed do that is inappropriate and reckless. ”
First Recession, Then Regulation… ), the House Financial Services Committee chairman, that would have the FHA insure up to $300 billion in restructured loans for homeowners facing foreclosure. Roubini favors Frank’s plan. “Until you buy the mortgages, reduce their face values and refinance people with fixed rates and a lower principal, you’re not going to remedy the problems in the financial market,” he says. “You have to reduce the face value of the debts outstanding, and someone is going to have to take losses. ”
While the partisans on Capitol Hill haggle over their plans, the Fed is left to ponder the extent of its own powers, should more Bear-like emergencies arise. Before the credit crunch began last summer, the Fed had $790 billion in Treasury securities on its balance sheet. Since then, it has committed to sell or lend $300 billion of that, leaving the central bank with more breathing room on its balance sheet but not a limitless capacity to expand its lending.
Related: UK insurance market stable despite softening cycle, higher economic…
I have no regrets, Greenspan tells critics
The Australian – Apr 9, 2008
He is particularly perturbed by attacks over a 2004 speech in which he suggested that more borrowers would benefit from adjustable-rate mortgages. Interest rates were at a historical low at the time, which means that those who held on to the mortgages would have seen rates adjusted upward. Greenspan says the speech merely pointed out that many people who get a 30-year mortgage move or refinance long before it matures. Eight days after giving the speech, he says, he clarified his comments to say he didn’t mean to disparage 30-year fixed-rate mortgages. "I find it profoundly disturbing" that critics cite the recommendation and not the retraction, he says, tapping his fingers on the table in front of him. "In all seriousness, this is really quite unfair. "
He has also thrown himself into analysing the current crisis, immersing himself in economic data as he did at the Fed – though now without 200 PhD economists to assist him.
[...] Obesity Costs US Companies as Much as $45 Billion a Year, The…Earthtimes – Apr 9, 2008– The jury is still out on the costs and benefits of paying for employees’ weight-loss surgeries. While obese employees medically eligible for bariatric surgery (about 9 percent of the workforce) have sharply higher obesity-related medical costs and absenteeism, some say companies are unlikely to recoup surgery costs before these employees have left for other jobs. — How employers communicate a wellness or weight-loss program is as important as how they design it. Companies should involve employees in planning health initiatives, rather than working from the top-down, and should make sure personal privacy is protected. The report includes three case studies: Public Service Enterprise Group (PSEG), a large self-insured utility with high BMI and low turnover, targets obesity as a major plank in its multifaceted wellness initiatives. H-E-B, a Texas-based retail chain, believes retail’s high turnover can make it all the more important to catch employees, from checkout clerks to executives, under the wellness umbrella.Related: Here’s one way Wall Street turmoil costs you: Millions in local… [...]
[...] Fed’s TAF to auction 50 bln usd, 28-day loans at 2.11 pct minimum…Forbes – Apr 7, 200811 pct on Monday, April 7, under its new Term Auction Facility. The April 7 offering will be the ninth auction under the new TAF program designed to relieve liquidity pressure in the short-term, inter-bank funding markets. April is the second month of TAF auctions, totaling 100 bln usd. Results of today’s auction will be announced Tuesday, April 8.Related: Fed’s Krosner sees benefits, practical problems with mortgage… [...]