ProgressNow.org Daily News Digest

HUD funds to help cities clean up foreclosures - Los Angeles Times

http://www.latimes.com/news/nationworld/nation/la-na-abandoned-homes4-2009jan04,0,4963590.story Across the country, cities and counties are performing housing triage as they prepare to spend the $4 billion Congress has allocated under the Neighborhood Stabilization Program. Pushed by Rep. Maxine Waters (D-Los Angeles), the program is intended to help local governments buy, rehab and resell foreclosed homes -- or demolish them if that is the logical alternative. "These homes that we're talking about -- the grass grows long, the pools grow fetid, they become magnets for crime," said Brian Sullivan, a spokesman for the U.S. Department of Housing and Urban Development. "It's almost a viral effect." Sullivan acknowledged that the money available was nowhere near enough to solve the foreclosure problem across the country. "This gives them an opportunity to at least stanch the bleeding," he said. The funds come with a few strings attached: The money must be spent in low- to middle-income neighborhoods, and buildings can be resold only to buyers who earn 120% or less of an area's median income. Governments, which had to submit plans to HUD by Dec. 1 to be considered for the program, have 18 months to spend the money.

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Owners find themselves trapped underwater - USATODAY.com

http://www.usatoday.com/money/economy/housing/2008-12-18-under-water-late-mortgage_N.htm Michael and Cynthia Russell wanted to move to New York City, where they both work. Jobs are more plentiful there than in their town of Poughkeepsie, N.Y. But like millions of Americans today, the couple are stuck. They owe about $80,000 more on the home they bought in 2004 than it is now worth. So instead of selling their home, Cynthia is going to school to become a registered nurse and Michael is working from home. "We have had to find opportunities closer to home," Michael Russell says. "We actually began trying to refinance in June 2007, but absolutely no one would take us." It's a problem that's only expected to get worse for legions of homeowners across the USA. Nearly one in seven homeowners is underwater, owing more on their mortgages than their homes are worth. That's about 12 million homeowners, nearly double the number underwater at the end of 2007, according to Moody's Economy.com. Most are homeowners who bought between late 2003 and 2007.

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HUD Chief Calls Aid on Mortgages A Failure - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/16/AR2008121603177.html Secretary of Housing and Urban Development Steve Preston said the centerpiece of the federal government's effort to help struggling homeowners has been a failure and he's blaming Congress. The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, Preston said in an interview. "What most people don't understand is that this program was designed to the detail by Congress," Preston said. "Congress dotted the i's and crossed the t's for us, and unfortunately it has made this program tough to use."

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Pelosi Pushing Mortgage Relief - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/15/AR2008121503087.html House Speaker Nancy Pelosi said yesterday that the Bush administration must do more to help struggling borrowers stay in their homes before Congress will agree to release any more money to the Treasury Department's financial system bailout effort, which is running low on cash. Pelosi (D-Calif.) said the White House has "totally ignored" Democratic demands to stem the rising tide of home foreclosures, one of the fundamental goals of the $700 billion rescue program. So far, the Treasury has spent $335 billion, leaving it with only $15 billion of the first installment of the money. Pelosi said she has asked Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, to draft legislation that "insists that the provisions of the law be honored before we release any more funds." Frank has said that a portion of the bailout money should be used to help homeowners exchange high-cost loans for more affordable mortgages backed by the federal government.

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Why home values may take decades to recover - USATODAY.com

http://www.usatoday.com/money/economy/housing/2008-12-12-homeprices_N.htm For every $100 spent on a house in 1950 the investment rose slightly through 2002, then soared to about $192 in 2006, adjusting for inflation. Then credit dried up, and the bust began. Rick Wallick moved into a new, three-bedroom $200,000 home in Maricopa, Ariz., in October 2005. Today, the home is worth $80,000. The disabled software engineer stopped making mortgage payments this month. His $70,000 down payment is now worthless. His dream house will be foreclosed on next year. "We're so far underwater it's not funny," says Wallick, 57, who had to return to his original home in Oregon to care for a sick family member and tend to his own medical problems. Wallick, one of the hardest-hit victims in one of the states hit hardest by the housing crisis, lost 60% of his home's value in three years. His story is an extreme example, but home values have fallen so sharply since hitting a historic peak in the spring of 2006 that many Americans are wondering how much more prices can sink.

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30-Year Mortgage Rate Hits Its Lowest Level in 4 Years - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/11/AR2008121103557.html The average interest on a 30-year, fixed-rate mortgage dropped to 5.47 percent this week -- its lowest point in more than four years, according to a Freddie Mac survey. But many lenders say the rates have dropped even further since Freddie Mac polled lenders on Monday, Tuesday and Wednesday. The mortgage research firm HSH Associates said yesterday's average rate was 5.33 percent. The trade publication Inside Mortgage Finance said it was 5.09 percent based on its polling of lenders.

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Fighting Foreclosures, F.D.I.C. Chief Draws Fire - NYTimes.com

http://www.nytimes.com/2008/12/11/business/11bair.html?ref=business More than any administration official, Mrs. Bair has called publicly for using billions of taxpayer dollars to finance the modification of loans threatened by default. But her advocacy has contributed to a battle that is pitting White House and Treasury officials against the F.D.I.C. and lawmakers in Congress. The discord has influenced programs that have so far proved insufficient to stem a tide of foreclosures that Moody’s Economy.com expects will affect 10 million homeowners over the next five years. And it is drawing personal conflicts and animosities into the policy-making process. White House and Treasury officials argue that Mrs. Bair’s high-profile campaigning is meant to promote herself while making them look heartless. As a result, they have begun excluding Mrs. Bair from some discussions, though she remains active in conversations where the F.D.I.C.’s support is needed, like the Citigroup rescue.

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Foreclosure numbers tumble to lowest since June - USATODAY.com

http://www.usatoday.com/money/economy/housing/2008-12-11-foreclosures_N.htm The number of American homeowners dragged into the housing crisis fell last month to the lowest level since June as new state laws lengthened the foreclosure process, RealtyTrac reported Thursday. "We're going to have a pretty significant spike in January," said Rick Sharga, RealtyTrac's vice president for marketing. Plus, as job losses mount, "increases in foreclosure activity follow that pretty directly," he added. Nationwide, more than 259,000 homes received at least one foreclosure-related notice in November, down 7% from October, but 28% higher than a year ago, RealtyTrac said. The report comes as Democrats, including President-elect Barack Obama, insist that the government must use some of the bailout funds to halt rising foreclosures.

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Ex-Executive Faults Fannie and Freddie for Nonprime Loans - NYTimes.com

http://www.nytimes.com/2008/12/10/business/10fannie.html?ref=washington The mortgage development, which began in 2005 and lasted until at least last year, happened as senior executives at the two government-sponsored enterprises ignored repeated warnings from internal risk officers that they were delving too deeply into dangerous territory, according to internal documents released at a Congressional hearing in Washington. The two companies have been taken over by the government. The former executive, Edward J. Pinto, who was chief credit officer at Fannie Mae, told the House Oversight and Government Reform Committee that the mortgage giants now guarantee or hold 10.5 million nonprime loans worth $1.6 trillion — one in three of all subprime loans, and nearly two in three of all so-called Alt-A loans, often called “liar loans.” Such loans now make up 34 percent of the total single-family mortgage portfolios at Fannie Mae and Freddie Mac, a level that will link them to eight million foreclosures, or one in six, in coming years, Mr. Pinto said. The nonprime loans “have turned the American dream of homeownership into the American nightmare of foreclosure,” he said.

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Lawmakers Grill Mortgage Chiefs - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/09/AR2008120901096.html Former Fannie Mae chief executive Franklin D. Raines, encountering accusations from a congressional panel yesterday that he and his colleagues acted irresponsibly in making decisions that led to the housing crisis, blamed the federal regulator that oversaw his company for failing to rein in risky practices. Raines joined his successor, Daniel H. Mudd, and former Freddie Mac chief executives Richard F. Syron and Leland C. Brendsel for a grilling yesterday by lawmakers on the House Oversight and Government Reform Committee who questioned why the companies moved aggressively into buying and guaranteeing risky mortgages despite warnings from risk officers about the dangers they posed to the companies and borrowers. "Their irresponsible decisions are now costing taxpayers billions of dollars," said committee Chairman Henry A. Waxman (D-Calif.).

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Credit unions get $40 billion to aid mortgage losses - USATODAY.com

http://www.usatoday.com/money/industries/banking/2008-12-09-credit-unions-mortgage-bailout_N.htm Federal regulators said Tuesday that they are making more than $40 billion available to support several credit unions that suffered losses from mortgage securities, and will provide another $2 billion to help struggling homeowners. National Credit Union Administration Chairman Michael Fryzel said the credit unions should "use these programs constructively as they work through these difficult times." The new borrowing from the Treasury Department will be available under a special facility that Congress approved in September for the agency, which oversees some 8,100 federally insured credit unions.

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Internal Warnings Sounded on Loans At Fannie, Freddie - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/08/AR2008120803570.html Internal Freddie Mac documents show that senior executives at the company were warned years ago that they were offering mortgages that could pose dangers to the firm, hurt borrowers and generate more risky loans throughout the industry. At Fannie Mae, top executives were told it was necessary to develop "underground" efforts to buy subprime mortgages because of competitive pressures, although there were growing risks and borrowers often didn't understand the terms of the loans, documents show. The House Committee on Oversight and Government Reform, which has the documents, is holding a hearing today to discuss Fannie and Freddie's downfall. The companies were seized by the government three months ago after nearly collapsing in the wake of billions of dollars of losses on mortgages. In a memo to former Freddie chief executive Richard F. Syron and other top executives, former Freddie chief enterprise risk officer David Andrukonis wrote that the company was buying mortgages that appear "to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed."

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Modifying the Mortgage Giants - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/07/AR2008120702378.html After the government announced last month that Fannie Mae and Freddie Mac would take new steps to modify tens of thousands of mortgages to make them more affordable, some executives expressed concerns that the moves could weaken their already struggling companies. Fannie Mae's chief executive, Herbert M. Allison Jr., acknowledged these fears in a staffwide message. "As we take further steps to aid homeowners, some employees are asking about the potential cost to the company of modifying loans to help distressed borrowers," he wrote. "Our challenge is to keep families in their homes and support the mortgage markets." In the long-running contest between profits and public policy at Fannie and Freddie, public policy is winning. Fannie and Freddie have always had to strike a balance between the imperative of profit-maximizing, shareholder-owned institutions and the public mission of firms charged with ensuring affordable housing. But since the government seized the firms in early September, the balance has shifted. "We're tilting toward the public mission of the company to safeguard homeowners," Allison said in an interview.

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We must cut foreclosures, says Bernanke, as mortgage rates fall - USATODAY.com

http://www.usatoday.com/money/economy/housing/2008-12-04-bernanke-housing_N.htm Federal Reserve Chairman Ben Bernanke on Thursday urged the government to consider aggressive and unprecedented steps to slow the pace of foreclosures that is imperiling the housing market and the economy. Bernanke, speaking at a Fed housing conference, pressed for a number of new programs, such as the outright purchase and refinancing of troubled mortgages. He warned that lenders may initiate more than 2.25 million foreclosures in 2008, up from an average annual pace of less than 1 million before the housing crisis hit. In addition, up to 20% of homeowners may owe more on their homes than they are currently worth. "Despite good-faith efforts by both the private and public sectors, the foreclosure rate remains too high," Bernanke said. "More needs to be done."

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Troubled home loans set another record in September - USATODAY.com

http://www.usatoday.com/money/economy/housing/2008-12-05-bad-mortgages_N.htm A record one in 10 U.S. homeowners with a mortgage were either at least a month behind on their payments or in foreclosure at the end of September. The Mortgage Bankers Association said Friday that the percentage of loans at least a month overdue or in foreclosure was up from 9.2% in the April-June quarter, and up from 7.3% a year earlier. Distress in the home loan market started about two years ago as adjustable-rate loans reset to higher interest rates. But the latest wave of delinquencies is coming from the surge in unemployment. Employers slashed 533,000 jobs in November, the most in 34 years, sending the unemployment rate to 6.7%, the Labor Department said Friday. "Now it's a case of job losses hitting more across the board," said Jay Brinkmann, chief economist of the Mortgage Bankers Association.

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Bernanke Stirs Pot On Home Loan Help - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/04/AR2008120401749.html The government needs to move much more aggressively to help people avoid losing their homes to foreclosure, Federal Reserve Chairman Ben S. Bernanke said yesterday, trying to boost efforts that had stalled in recent weeks. Bernanke spoke approvingly of several proposals to use government funds to help people stuck in mortgages they cannot afford. "Steps that stabilize the housing market will help stabilize the economy as well," he said in a speech to a housing and mortgage conference at the Fed. Bernanke was wading into a tense debate among the Bush administration, Congress and the Federal Deposit Insurance Corp. The comments were an attempt to add urgency to those discussions without specifically endorsing any one proposal. Indeed, he said the proposals were "promising options, which are not necessarily mutually exclusive." Lenders are on track to foreclose on more than 2 million properties this year, and losses on those loans are a major factor in the financial crisis and resulting recession.

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Treasury Weighs Action on Mortgage Rates - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/03/AR2008120302889.html The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to dramatically force down rates and stimulate the moribund housing market, according to sources familiar with the proposal. Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home purchases, according to the sources. But to participate in the government's program, mortgage lenders would have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year fixed-rate loans. These securities would be purchased primarily from Fannie Mae and Freddie Mac, the financing giants that buy most mortgages from U.S. lenders, according to sources who spoke on condition of anonymity because the plan has not been finalized.

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Mortgage fraud up 45% as lenders tighten loan standards - USATODAY.com

http://www.usatoday.com/money/industries/banking/2008-12-03-mortgage-fraud_N.htm Reported incidents of mortgage fraud grew 45% in the second quarter vs. a year ago, as borrowers misstated financial information to maneuver around tighter lending standards, industry data show. Florida properties led the way with about one-fifth of mortgage fraud incidents reported in the second quarter, the Mortgage Asset Research Institute reported. California was second and Illinois third, the data show. In the first quarter, mortgage fraud incident reports had increased 42% vs. the first quarter 2007. The largest increase in fraud the first half of this year involved borrowers misstating their financial profile to try to get around stricter lending guidelines, the report said.

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Home prices off 21.8% since peak - USATODAY.com

http://www.usatoday.com/money/economy/housing/2008-11-25-home-prices_N.htm "The decline overall in September was greater than expected, and it will be in that level for a while," said Joel Naroff of Naroff Economic Advisors. "With the tighter credit standards, less money available, we're likely to see three or four more months of not very good numbers." Naroff said it was unclear how much of the price drops were buyers flocking to foreclosures and short sales because that's where the deals are. "That overestimates the true extent of the decline." "It is a pretty gloomy report," said Karl Case, a professor of economics at Wellesley and the co-founder of the Case-Shiller index that bears his name. Case said that two markets are developing in these metro areas: an auction market, or those bank-owned properties sold after foreclosure, and a traditional market, in which an owner sells to a buyer.

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Mortgage-Seekers Benefiting From Fed’s New Credit Plan - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/25/AR2008112502575.html For consumers looking for a mortgage, the Federal Reserve's plan to boost spending is already bringing relief from high interest rates. But for those hoping to use plastic more freely this holiday season, they likely will have to wait. The Fed's $200 billion plan immediately sparked a drop in the average rate for a prime 30-year fixed-rate loan, from 5.8 percent on Monday to 5.5 percent yesterday, said Guy Cecala, publisher of Inside Mortgage Finance Publications. Just two weeks ago, it was 6.5 percent. "You should see mortgage rates near or about 5 percent by early next year, and that should mean smaller payments that people will have to pay on loans," he said. How the credit card industry will react to the plan, which is expected to go into effect in February, is unclear, consumer advocates and analysts said. In recent months, card issuers have raised the credit score required to get a card, lowered limits or raised interest rates on existing customers, and suspended offers such as 0 percent balance transfers.

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Freddie Mac Increases Support for Ailing Home Loan Market - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/24/AR2008112401242.html Freddie Mac increased its support for the nation's ailing home loan market in October, in part playing the role the government desired when it seized the mortgage finance giant. The McLean-based company and its bigger sibling, Fannie Mae of the District, are two vital cogs in the nation's mortgage market, buying loans from lenders, insuring them against default and supplying fresh cash to make more loans. Some of these loans are sold to investors; others are kept by Fannie and Freddie. Under severe financial pressure, Freddie -- and to a lesser extent, Fannie -- pulled back last summer from its purchases of pools of these home loans known as mortgage-backed securities. The company said yesterday that it bought $27 billion in mortgage-backed securities in October, growing its portfolio at an annual rate of 44 percent. The company's portfolio now stands at $764 billion; it may grow to $850 billion by the end of next year under the government's plan.

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Fannie Mae, Freddie Mac to Suspend Foreclosures Over Holiday Season - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/20/AR2008112003309.html The companies said they are taking the step so they can include more people in a newly announced program to change the terms of troubled mortgages to make them more affordable. The mortgage finance giants, seized by the government in early September, have been under pressure by lawmakers and housing advocates to take bolder steps to fight foreclosures. As the owners or backers of trillions of dollars of mortgages, the companies have an unrivaled ability to shape the home loan market and help people with distressed mortgages. Last week, the companies said they would enact a program to restructure mortgages for borrowers who are falling behind in their payments. That effort would seek to help homeowners who haven't paid their loans for three months but whose homes had not been foreclosed upon yet. In a foreclosure, Fannie Mae or Freddie Mac seizes control of a home and, usually, tries to sell it.

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Years after Katrina, permanent homes remain elusive for some - USATODAY.com

http://www.usatoday.com/news/nation/2008-11-20-katrinafamily_N.htm Tears come and go as Rockell Joseph talks about the past three years of her life Her family was among the thousands of people whose lives changed forever on Aug. 29, 2005, when Hurricane Katrina struck the Gulf Coast. Accidents, injuries, family deaths and economic turmoil have kept the Josephs from recovering their balance. More than three years after Katrina uprooted them, Rockell, her husband, Rafeal, and their six children are living in two rooms with no kitchen at the Days Inn in McComb, and they have no idea what will happen next. The Josephs are among nearly 300 families in Mississippi returned to hotels from mobile homes as FEMA moves to close the last of its emergency housing sites in the state. The agency has announced a March 1 cutoff date for all temporary housing payments.

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Obama Inherits a Neglected Housing Department - washingtonpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/19/AR2008111903873.html The Obama administration will soon inherit a $35 billion federal housing agency that was a weak backbencher during the housing crisis and moved too late to do much to keep millions of families from going into foreclosure. Beyond the pressing crisis, the Department of Housing and Urban Development also has dramatically retreated in the past eight years from its mission of fostering affordable housing. Pushing homeownership has been the agency's top priority under the Bush administration, and HUD's budget for public housing for low-income families has been cut year after year. In a pre-election letter sent to HUD employees through their union, Barack Obama wrote: "As we tackle the effects of the current fiscal crisis on Americans, HUD must be part of the solution. The Department's mission -- to promote affordable quality housing and community development available to all without discrimination -- is critical to the well-being of millions of working families."

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Paulson resists Democrats’ call to rescue homeowners - Los Angeles Times

http://www.latimes.com/news/nationworld/washingtondc/la-fi-economy19-2008nov19,0,7433393.story Treasury Secretary Henry M. Paulson told unhappy congressional Democrats on Tuesday that, barring a new catastrophe, the Bush administration intended to stand pat on its existing effort to stabilize financial markets -- and leave the next stage of economic recovery to the new administration. Having committed about half of the existing $700-billion rescue fund to ease Wall Street's credit crunch, Paulson said he had no plans to spend the rest, even on the root cause of the crisis -- soaring mortgage foreclosures.

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