More bad news looming for housing

Ouch.

From the link:

The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.Home price declines will have their biggest impact on prime “conforming” loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

“We project the next phase of the housing decline will have a far greater impact on prime borrowers,” Deutsche analysts Karen Weaver and Ying Shen said in the report.

April foreclosures hit record high

Main Street is still getting pounded by this recession. The road to recovery is going to be very long.

From the link:

U.S. foreclosure activity in April jumped 32 percent from a year ago to a record high, and should mount because temporary freezes on foreclosures ended in March, RealtyTrac said on Wednesday.One in every 374 households with mortgages got a foreclosure filing in April, the highest monthly rate since RealtyTrac began tracking it in January 2005. Filings were reported on 342,038 properties last month.

The abundance of distressed properties keeps pressuring home prices, thwarting a housing recovery that is critical to rejuvenating the recessionary U.S. economy.

Most of April’s filings, which included notices of default and auctions, were in early stages. Bank repossessions, known as real-estate owned or REOs, fell on a monthly and annual basis to the lowest level since March 2008.

“This suggests that many lenders and servicers are beginning foreclosure proceedings on delinquent loans that had been delayed by legislative and industry moratoria,” RealtyTrac chief executive James J. Saccacio said in a statement.

A temporary foreclosure freeze by major banks and government-controlled home funding companies Fannie Mae (FNM.N) (FNM.P) and Freddie Mac (FRE.N) (FRE.P) ended before President Barack Obama‘s massive housing stimulus, unveiled on March 6, could take root.

“It’s likely that we’ll see a corresponding spike in REOs as these loans move through the foreclosure process over the next few months,” Saccacio said.

Fannie and Freddie push eviction halt to March

Good news for troubled mortgages. This gives home owners a little more breathing room to get things sorted out before losing their home. The two are also protecting renters who are living in foreclosed homes.

From the link:

Evictions on single-family properties that have been triggered by foreclosures have been further suspended until March, announced Fannie Mae and Freddie Mac on Friday.

At the same time, both entities, the largest holders of U.S. mortgages, are launching a new strategy to offer qualified owner-occupants and tenants’ leases so they can rent the properties on a month-to-month basis after foreclosure at market rates.

“Freddie Mac’s rental option is intended to help cushion the impact of foreclosure on families who own or rent homes with Freddie Mac-owned mortgages,” said Freddie Mac Chief Executive David Moffett.

This is the third extension of eviction suspensions. Both Fannie Mae and Freddie Mac started a program to suspend foreclosures evictions on Nov. 26. Those policies were set to expire on Jan. 9, but they were extended until Friday. A Freddie Mac spokesman declined to comment on whether the eviction restrictions would be extended past Feb. 28.

In another important development, the two mortgage entities are allowing renters in homes owned by Fannie Mae and Freddie Mac that have been foreclosed to remain there and enter into a month-to-month lease. It also allows troubled owner occupants who have been unable to obtain a modified mortgage to lease after foreclosure takes place.

No Fannie or Freddie foreclosures for the month

Good news for people in trouble with mortgages through these two.

From the link:

The government-controlled home loan giants said the extension will allow borrowers facing foreclosure to keep their homes as it works with mortgage servicers to find options for troubled mortgage holders under the Streamlined Modification Program.

Freddie and Fannie began the modification program in December, aiming to create more affordable mortgage payments for borrowers at risk of foreclosure. The program applies to borrowers who have missed three payments or more, own and occupy their homes, and have not filed for bankruptcy.

Under the program, borrowers can reduce their interest rate, extend the life of the loan or defer payments on part of the principal.

The extended hiatus on foreclosures will give Fannie more time to launch a new policy that will allow renters in company-owned foreclosed properties to stay in their homes, Fannie said in a news release. Details of the new policy have not been announced.

Laffer on the bailout

Arthur Laffer, Reagan’s economist and namesake of the Laffer curve,  disses the ongoing financial crisis bailout. I think I’ve made my thoughts about this bailout well known. Probably two words suffices to sum up my opinion — corporate socialism.

From the (second) link:

As you read this, our government is committing enormous sums of money above and beyond normal spending, solely to stimulate the economy and prop up failing companies and markets. These additional sums are huge by any reasonable measure, with estimates as high as $3 trillion in an economy with a GDP of about $15 trillion.

Here’s the bottom line: Instead of making things better, increased spending will only drive our economy further into the ground.

And there is still a lot more spending to come. First it was a $170 billion stimulus package in February of 2008, then material add-ons to both the housing and agricultural bills, followed by Federal Reserve asset swaps with Bear Stearns and a bailout of AIG (which, by the way, isn’t over yet) and then came the debt guarantees of Fannie Mae and Freddie Mac.

Shortly after that, the administration anted up $700 billion in a bailout package, and now Obama, Reid, Pelosi and Bernanke want another stimulus package of $300 billion. Just this week the powers that be are debating bailouts for Michigan’s auto industry. With the slowdown in the economy, tax receipts are now projected to fall sharply. The logic here is totally upside down, and each new measure, far from helping the economy, does enormous damage.

Did the wheels come off the McCain campaign today?

The Straight Talk Total BS Express has been pretty creaky lately with the Palin pick proving a net loss and sinking fast. And a major financial crisis that has no end in sight, and certainly no end before the election, crashing onto the head of the candidate who’s on record a number of times explaining his complete lack of understanding economic issues.

Couple that with his campaign manager, Rick Davis, being on the take from Fannie Mae and Freddie Mac for a no-show job buying the two lenders access to the McCain inner circle after McCain has gone on record saying Davis has had no compensated role with either institution for several years.

Now he’s suspending his campaign because he’s going to head to DC and help solve an economic problem? Really.

Here’s a reaction from the National Review’s Ramesh Ponnuru at the Washington Post:

If Senator McCain believes that he can help to enact a plan that can stabilize the markets and lay the foundation for future growth, then suspending the campaign and going to Washington was the right thing to do.

But it is hard to see what McCain can do to help, and easy to see how his intervention could hurt. He brings, as he himself has admitted in the past, no expertise to the table. And won’t Democrats be less likely to cooperate on a plan if doing so will help make McCain be the hero of the hour?

So McCain’s move may have been a mistake on substance. It may prove to be a political mistake too: If McCain can’t bring both parties together in an economic crisis after staking so much on it, won’t voters draw adverse conclusions about his leadership ability?

What do you think?

Here’s a Drudge flash report on David Letterman mocking McCain canceling his appearance tonight:

EXCLUSIVE: LETTERMAN MOCKS MCCAIN CANCELLATION
Wed Sep 24 2008 17:41:58 ETDavid Letterman tells audience that McCain called him today to tell him he had to rush back to DC to deal with the economy.

Then in the middle of the taping Dave got word that McCain was, in fact just down the street being interviewed by Katie Couric. Dave even cut over to the live video of the interview, and said, “Hey Senator, can I give you a ride home?”

Earlier in the show, Dave kept saying, “You don’t suspend your campaign. This doesn’t smell right. This isn’t the way a tested hero behaves.” And he joked: “I think someone’s putting something in his metamucil.”

“He can’t run the campaign because the economy is cratering? Fine, put in your second string quarterback, Sara Palin. Where is she?”

“What are you going to do if you’re elected and things get tough? Suspend being president? We’ve got a guy like that now!”

Developing…

 

If you ask me, the wheels are off. There’s time and debates to go, but McCain is no longer a serious candidate for president. The outright lies from his staff and his mouth. The Palin pick, and subsequent quarantine. Now suspending his campaign because he apparently is incapable of legislating (something he’s been pretty derelict in since kicking his campaign for the GOP off in earnest) and participating in a debate with his adversary.

Update — Yup, the wheels are off. Here’s Ambinder’s take:

Last week, Sen. McCain said the fundamentals of the economy were strong.

To Katie Couric, he said that the country faces its worst crisis since World War II.

Talk about bipolar messaging. And it seems some part of postponing the debate may be little more than a ploy to permanently cancel the vice presidential debate. The McCain team seems very, very frightened of allowing Palin to speak at all in an unscripted environment.

This is from TPM Election Central:

The lengths the McCain campaign is going to in order to shield Sarah Palin from questioning are reaching truly comic dimensions.

Check out this nugget from the pool report, via Jonathan Martin, on John McCain and Palin’s meeting with Georgian President Mikheil Saakashvili and Ukrainian President Viktor Yushchenko:

McCain then looked around the room and gestured as if to welcome questions. The AP reporter shouted a question at Gov. Palin (“Governor, what have you learned from your meetings?”) but McCain aide Brooke Buchanan intervened and shepherded everybody out of the room.Palin looked surprised, leaned over to McCain and asked him a question, to which your pooler thinks he shook his head as if to say “No.”

 

Palin can’t even be allowed to answer a question as basic as this?

What’s really sobering is that the McCain campaign continues to block Palin from answering questions even thoughit’s now resulting in reams and reams of bad press for the McCain-Palin ticket. That suggests McCain advisers know that letting her answer even the most elementary questions in an uncontrolled environment is so dangerous that it’s worth weathering the current media drubbing they’re taking in order to prevent it from happening at all costs.

Has anyone pointed out that McCain has placed Palin a heartbeat away from the presidency?

Just in time for the NFL season, TMQ is back

Gregg Easterbrook’s Tuesday Morning Quarterback is an NFL season staple. When he’s on it’s a great read and when he’s off the column is almost insufferable.

One aspect of TMQ is either a bonus bit of fun or just annoying depending on your perspective, but it’s a guarantee that along with pro football you’re going to get a random bit of commentary on either some of Easterbrook’s pet causes or maybe just something he’s researching for a magazine piece.

This week’s TMQ had a riff on the ongoing problems facing Fannie Mae, and a focus on corporate overpay scandals.

Easterbrook makes a great point with this bonus bit of business commentary.

From the link:

This is the core lesson of CEO overpay scandals: The corrupt or incompetent executive always keeps the money. He may be caught and embarrassed by bad press, but he keeps the money while someone else — shareholders, taxpayers, workers — is punished. Raines recently settled a federal legal complaint by agreeing to return about $3 million of his $50 million, but kept the rest; his employment contract was worded such that even if he was malfeasant, whatever he took from company coffers was his. Hilariously, federal prosecutors claimed victory because Raines “surrendered” to the government a large block of stock options — options now worthless, owing to the Fannie Mae decline Raines helped set in motion by lying about Fannie numbers. Until Congress enacts a law that allows money taken by corrupt or incompetent executives to be recovered, the lying will continue. Lying by CEOs is what society rewards!

McArdle on the Fannie/Freddie issue

Megan McArdle, the libertarian economics blogger at the Atlantic, on the Fannie Mae and Freddie Mac troubles. She titled her post “Too big not to fail.” The post is pretty comprehensive and provides a lot of information and analysis on the subject.

From the link:

In my view, the central problems with FM/FM are two:

1) Because they are government sponsored, the government let them get away with practices that would never fly in the private market. Contrary to the belief of many on the left, this is par for the course; just take a look at what’s happening to state and local government pensions now that the federal government has forced them to account for their liabilities like normal pension funds do.

2) They are too big not to fail. Their mortgage portfolios cover so much of the market that any significant problems in the mortgage market will make them technically insolvent as soon as they mark their securities to market. Any attempt to clean up their portfolios, by, for example, selling off some of their underperforming securities, will move the MBS markets against them, making the problem worse.

It’s not clear that bringing them fully into the government is even a second- or third- best solution; the government is not set up to be a hedge fund, nor should it be. Once the immediate crisis is over, it’s time to strip their GSE status and break the companies up into less risky firms.