More than 155,000 families have lost their homes to foreclosure this year; one out of every 194 U.S. households received a foreclosure filing.
Foreclosure filings in the first three months of 2008 rose more than 112% over last year, according to a study released Tuesday.
Real estate information firm RealtyTrac reported that nearly 650,000 foreclosure filings - which include notices of default, auction sales and bank repossessions - were issued in the first quarter. That represents 1 of every 194 households and marks a 23% increase from the last quarter of 2007.
So far this year 156,463 families have lost their homes to repossessions.
"Foreclosure activity hasn't slowed down yet," said Rick Sharga, spokesman for RealtyTrac. "But I was a little surprised that foreclosure filings more than doubled since last year."
Foreclosures increased in 46 states and in 90 of the nation's 100 largest metro areas. Some regions that had been only marginally hurt by the mortgage meltdown recorded large increases in filings. In Connecticut, for instance, filings tripled compared with the first three months of 2007. Massachusetts recorded a 260% increase.
Nevada: Hardest hit
The worst hit states are still clustered in the Southwest; Nevada, California and Arizona lead the nation in foreclosure filings. Prices ran up rapidly in these areas during the bubble years as speculators snapped up single-family homes and condos as investments.
In the first quarter, 1 of every 54 homes in Nevada received some type of foreclosure filing - more than any other state. Its largest city, Las Vegas, had 1 out of every 44 homes go into foreclosure.
Stockton, Calif., had the highest foreclosure rate out of any U.S. metro area, with 1 out of every 30 homes receiving a notice - nearly seven times higher than the national average. The Riverside/San Bernardino region had the second highest rate in the quarter, with one of every 38 homes in default.
Only two metro areas in the ranks of the 20 hardest hit were outside the Sunbelt - Detroit, which ranked sixth in the nation with 1 in every 68 households in default, and Cleveland which saw 1 in every 105 homes go into foreclosure.
The news comes despite increased foreclosure prevention efforts by lenders and community organizations. Hope Now, the coalition of mortgage lenders, servicers investors and community groups, announced Monday that it helped over a half a million home owners avoid foreclosure during the first three months of the year.
And some local governments have stepped up their programs to help borrowers, according to RealtyTrac CEO James Saccacio.
"For example, in late March Philadelphia issued a temporary moratorium on all foreclosure auctions for April," he said. "The city has since adopted a program that will delay foreclosure proceedings on owner-occupied properties until the owners have met face-to-face with lenders to attempt to create a loan workout plan that would prevent foreclosure."
More trouble ahead
Additionally, lawmakers in Washington, D.C. are at work on several plans that would deliver foreclosure relief to distressed borrowers.
All of these foreclosure prevention efforts may not be able to stand up to the tsunami of foreclosures on the way. Sharga says that a record number of hybrid adjustable rate mortgages (ARMs) - worth $362 billion - will reset in 2008.
These so-called "exploding ARMs" usually have low introductory interest rates that reset much higher after two or three years, and then re-adjust as often as every six months after that. Unless these loans can be reworked, many will fail.
"We expect to see another foreclosure peak in the late third or fourth quarter of the year," said Sharga, "because of the record number of resets coming."
Tuesday, April 29, 2008
Cities with High Homeowner Debt
Matt Woolsey
It's no secret that homeowners with subprime mortgages have taken a beating.
Next up: those who have combined their mortgages with home equity loans, second loans or both.
These combinations spell especially bad news for homeowners in Sacramento, Calif., San Diego, Washington, D.C., and Colorado Springs, Colo., markets with some of the nation's highest concentrations of homeowner debt. In these spots, prices are dropping, making it very difficult for homeowners to refinance as lenders are reluctant to take on risk.
Denver, Minneapolis, Los Angeles, Boise, Idaho, Las Vegas, and Madison, Wis. round out the top 10.
In Depth: Worst Cities For Homeowner Debt
We relied on U.S. Census data to determine which of the country's largest 150 housing markets had the highest percentage of outstanding home equity and second loans. Because neither on its own signifies a homeowner's level of overextension, we combined those data with housing price trends taken from the National Association of Realtors, to gauge which markets are experiencing steep price drops. Homeowners in these areas might have the hardest time refinancing or staying afloat.
An inability to refinance makes homes more likely to fall into foreclosure because in this situation, properies enter negative equity situations more easily; this occurs when a property is worth less than the outstanding loan on it.
Of course, it's difficult to say just how these homeowners will fare in the coming months, because there's no history of these loans in a market slump.
"Second home mortgages and home equity loans are a phenomenon of the last 15 years," says William Wheaton, an economics professor at the Massachusetts Institute of Technology. "You'd be hard pressed to see their track records during housing downturns."
What is clear is that the popularity of these loan products has grown in that time period. By the Federal Reserve Board's count, the total amount of outstanding home equity loans grew from $260 billion in 1995 to $970 billion in 2005. Homeowners love these sorts of loans in an up market because they get cash in hand, and they can deduct the interest.
It's when you start to combine home equity loans, second mortgages and a falling market that things get dicey.
Cloudy Skies Over Parts Of Colorado
Consider Denver, where 29% of mortgage holders have either a home equity loan or a second mortgage, or both--the highest rate in the country. Like home equity loans, second mortgages are often taken out for immediate cash or, in many cases during the housing boom, as a way to cover a down payment. Borrowers armed with such "piggyback loans," bought homes without any money, only credit.
That's a good deal when values are rising. When they fall, these homeowners are particularly vulnerable to foreclosures because without any equity in their homes, market downturns put them underwater. Denver has the country's ninth-highest foreclosure rate, despite a healthy economy in which the job market is growing.
"In these communities it's going to be much harder to keep people from losing their house to foreclosure," says John Vogel, an Adjunct Professor of Business Administration at Dartmouth's Tuck School of Business.
When homeowners in a negative equity situation try to short a property, they have to negotiate with all of their lien holders (first mortgage, second mortgage, home equity loan). Vogel says homeowners "have to get more people to sit around a table and agree to a deal. The more people, the more complicated it is to get things worked out."
Slumping home prices mixed with home equity lines of credit and second mortgages also signal a slowdown in local economies, since the loans are often used for home improvements or big-ticket items.
"People took money out of their homes to spend it," says Scott Hoyt, director of consumer economics at Moody's Economy.com. "There are significant, negative implications for contractors and retailers because consumers will be drastically cutting back on their spending."
It's no secret that homeowners with subprime mortgages have taken a beating.
Next up: those who have combined their mortgages with home equity loans, second loans or both.
These combinations spell especially bad news for homeowners in Sacramento, Calif., San Diego, Washington, D.C., and Colorado Springs, Colo., markets with some of the nation's highest concentrations of homeowner debt. In these spots, prices are dropping, making it very difficult for homeowners to refinance as lenders are reluctant to take on risk.
Denver, Minneapolis, Los Angeles, Boise, Idaho, Las Vegas, and Madison, Wis. round out the top 10.
In Depth: Worst Cities For Homeowner Debt
We relied on U.S. Census data to determine which of the country's largest 150 housing markets had the highest percentage of outstanding home equity and second loans. Because neither on its own signifies a homeowner's level of overextension, we combined those data with housing price trends taken from the National Association of Realtors, to gauge which markets are experiencing steep price drops. Homeowners in these areas might have the hardest time refinancing or staying afloat.
An inability to refinance makes homes more likely to fall into foreclosure because in this situation, properies enter negative equity situations more easily; this occurs when a property is worth less than the outstanding loan on it.
Of course, it's difficult to say just how these homeowners will fare in the coming months, because there's no history of these loans in a market slump.
"Second home mortgages and home equity loans are a phenomenon of the last 15 years," says William Wheaton, an economics professor at the Massachusetts Institute of Technology. "You'd be hard pressed to see their track records during housing downturns."
What is clear is that the popularity of these loan products has grown in that time period. By the Federal Reserve Board's count, the total amount of outstanding home equity loans grew from $260 billion in 1995 to $970 billion in 2005. Homeowners love these sorts of loans in an up market because they get cash in hand, and they can deduct the interest.
It's when you start to combine home equity loans, second mortgages and a falling market that things get dicey.
Cloudy Skies Over Parts Of Colorado
Consider Denver, where 29% of mortgage holders have either a home equity loan or a second mortgage, or both--the highest rate in the country. Like home equity loans, second mortgages are often taken out for immediate cash or, in many cases during the housing boom, as a way to cover a down payment. Borrowers armed with such "piggyback loans," bought homes without any money, only credit.
That's a good deal when values are rising. When they fall, these homeowners are particularly vulnerable to foreclosures because without any equity in their homes, market downturns put them underwater. Denver has the country's ninth-highest foreclosure rate, despite a healthy economy in which the job market is growing.
"In these communities it's going to be much harder to keep people from losing their house to foreclosure," says John Vogel, an Adjunct Professor of Business Administration at Dartmouth's Tuck School of Business.
When homeowners in a negative equity situation try to short a property, they have to negotiate with all of their lien holders (first mortgage, second mortgage, home equity loan). Vogel says homeowners "have to get more people to sit around a table and agree to a deal. The more people, the more complicated it is to get things worked out."
Slumping home prices mixed with home equity lines of credit and second mortgages also signal a slowdown in local economies, since the loans are often used for home improvements or big-ticket items.
"People took money out of their homes to spend it," says Scott Hoyt, director of consumer economics at Moody's Economy.com. "There are significant, negative implications for contractors and retailers because consumers will be drastically cutting back on their spending."
Tuesday, April 15, 2008
Foreclosures and REO Numbers Continue to Rise
By Lynn Adler
NEW YORK (Reuters) - Home foreclosure filings surged 57 percent in the 12 month-period ended in March and bank repossessions soared 129 percent from a year ago, as homeowners struggled to make mortgage payments, real estate data firm RealtyTrac said on Tuesday.
For the month of March, foreclosure filings, default notices, auction sale notices and bank repossessions rose 5 percent, led by Nevada, California and Florida, RealtyTrac said.
The rise in March to filings on a total of 234,685 properties followed a 4 percent decline in February, RealtyTrac reported.
RealtyTrac said the peak has yet to be reached.
"What we're really looking at is ongoing fallout from people overextending themselves to buy homes they couldn't afford and using highly toxic loan products to get into the houses in the first place," Rick Sharga, vice president of marketing at RealtyTrac, based in Irvine, California, said in an interview.
"We're going to see quite possibly a record amount of foreclosure activity in the third or fourth quarter," reflecting sharp payment increases on adjustable-rate subprime mortgages in May and June, Sharga said.
One in every 538 U.S. households living in single-family dwellings received a foreclosure filing in March. The single-family dwellings can include condominiums.
There are three phases of the foreclosure process in most states -- an initial default notice, notice of a scheduled auction, and an "REO" filing if the property is not sold at auction but instead repossessed by the bank, Sharga said. REO refers to real estate-owned property.
All of the households in the report received at least one of these filings last month.
AUCTION NOTICES UP 32 PERCENT
While default notices and repossessions soared in March, auction notices rose a relatively small 32 percent, James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.
That suggests "more defaulting homeowners are simply walking away and deeding their properties back to the foreclosing lender," he said. "This deed-in-lieu-of-foreclosure process allows the lender to take possession of a property without putting it up for public foreclosure auction."
The states with the highest foreclosure filing rates -- Nevada, California and Florida -- also are among those that had the biggest price appreciation in the five-year boom before the housing meltdown that began in 2006.
These states tend to also be plagued by defaults on unoccupied homes bought by speculative investors. In many cases, home prices have now fallen below the size of the mortgages and some owners are walking away.
In Nevada, one in every 139 households received a foreclosure filing in March, keeping the state at the top of the ranks for the 15th straight month.
The 7,659 Nevada properties receiving foreclosure filings last month represented a 24 percent jump from February and a nearly 62 percent spike from March 2007.
California had the second highest rate of foreclosure filings, one for every 204 households, followed by Florida with one of every 282 households.
Arizona's filings fell about 5 percent, but it retained its standing as with the fourth highest pace of foreclosure activity for the third month straight.
Foreclosure activity in Colorado dropped 8 percent in March from February and 1 percent from a year ago, but it ranked No. 5, with one filing for each 339 households.
Georgia, Ohio, Michigan, Massachusetts and Maryland were the other states with the highest foreclosure rates in March.
The states with highest total number of foreclosure filings were California, Florida and Ohio.
Foreclosure filings were reported on 64,711 California properties in March, the most of any state for the 15th consecutive month, up nearly 21 percent from February and up almost 106 percent from March 2007.
Florida posted the second highest total, with foreclosure filings reported on 30,254 properties in March. While down about 7 percent from February, filings were about 112 percent higher than last March.
Georgia, Texas, Michigan, Arizona, Illinois, Nevada and Colorado were the other states with the highest foreclosure totals in March.
NEW YORK (Reuters) - Home foreclosure filings surged 57 percent in the 12 month-period ended in March and bank repossessions soared 129 percent from a year ago, as homeowners struggled to make mortgage payments, real estate data firm RealtyTrac said on Tuesday.
For the month of March, foreclosure filings, default notices, auction sale notices and bank repossessions rose 5 percent, led by Nevada, California and Florida, RealtyTrac said.
The rise in March to filings on a total of 234,685 properties followed a 4 percent decline in February, RealtyTrac reported.
RealtyTrac said the peak has yet to be reached.
"What we're really looking at is ongoing fallout from people overextending themselves to buy homes they couldn't afford and using highly toxic loan products to get into the houses in the first place," Rick Sharga, vice president of marketing at RealtyTrac, based in Irvine, California, said in an interview.
"We're going to see quite possibly a record amount of foreclosure activity in the third or fourth quarter," reflecting sharp payment increases on adjustable-rate subprime mortgages in May and June, Sharga said.
One in every 538 U.S. households living in single-family dwellings received a foreclosure filing in March. The single-family dwellings can include condominiums.
There are three phases of the foreclosure process in most states -- an initial default notice, notice of a scheduled auction, and an "REO" filing if the property is not sold at auction but instead repossessed by the bank, Sharga said. REO refers to real estate-owned property.
All of the households in the report received at least one of these filings last month.
AUCTION NOTICES UP 32 PERCENT
While default notices and repossessions soared in March, auction notices rose a relatively small 32 percent, James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.
That suggests "more defaulting homeowners are simply walking away and deeding their properties back to the foreclosing lender," he said. "This deed-in-lieu-of-foreclosure process allows the lender to take possession of a property without putting it up for public foreclosure auction."
The states with the highest foreclosure filing rates -- Nevada, California and Florida -- also are among those that had the biggest price appreciation in the five-year boom before the housing meltdown that began in 2006.
These states tend to also be plagued by defaults on unoccupied homes bought by speculative investors. In many cases, home prices have now fallen below the size of the mortgages and some owners are walking away.
In Nevada, one in every 139 households received a foreclosure filing in March, keeping the state at the top of the ranks for the 15th straight month.
The 7,659 Nevada properties receiving foreclosure filings last month represented a 24 percent jump from February and a nearly 62 percent spike from March 2007.
California had the second highest rate of foreclosure filings, one for every 204 households, followed by Florida with one of every 282 households.
Arizona's filings fell about 5 percent, but it retained its standing as with the fourth highest pace of foreclosure activity for the third month straight.
Foreclosure activity in Colorado dropped 8 percent in March from February and 1 percent from a year ago, but it ranked No. 5, with one filing for each 339 households.
Georgia, Ohio, Michigan, Massachusetts and Maryland were the other states with the highest foreclosure rates in March.
The states with highest total number of foreclosure filings were California, Florida and Ohio.
Foreclosure filings were reported on 64,711 California properties in March, the most of any state for the 15th consecutive month, up nearly 21 percent from February and up almost 106 percent from March 2007.
Florida posted the second highest total, with foreclosure filings reported on 30,254 properties in March. While down about 7 percent from February, filings were about 112 percent higher than last March.
Georgia, Texas, Michigan, Arizona, Illinois, Nevada and Colorado were the other states with the highest foreclosure totals in March.
Wednesday, April 09, 2008
Mortgage Applications Continue to Rise
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) -- Mortgage application filings rose a seasonally adjusted 5.4% last week compared with the last week of March, the Mortgage Bankers Association reported on Wednesday.
Interest rates charged on fixed- and adjustable-rate mortgages increased across the board.
Applications for the week ended April 4 were up 10.9% compared with the same week a year ago.
Both applications for mortgages to purchase homes and to refinance existing mortgages rose on a week-to-week basis, according to the Washington-based MBA's weekly survey.
Refinancing filings rose 3.4%, while home purchase applications increased a seasonally adjusted 8.1%.
The number of applications for Federal Housing Administration-backed loans also went up last week. The seasonally adjusted government index, which includes mostly FHA loans and covers both purchase mortgages and refinancings, increased 12.9%, the MBA's data showed.
The four-week moving average for all loans as tracked by the MBA was up 1.8%, according.
Refinancings made up 52.2% of last week's application volumes, off from 53.4% the previous week. Adjustable-rate mortgages accounted for 6.5% of filings, up from 5.4%.
Meanwhile, interest rates on 30- and 15-year fixed-rate mortgages last week averaged 5.78% and 5.39%, respectively, up from the prior week's 5.75% and 5.27%. The rate on one-year ARMs averaged 7.06%, up from 7% the previous week.
The MBA survey covers about half of all U.S. retail residential mortgage applications.
CHICAGO (MarketWatch) -- Mortgage application filings rose a seasonally adjusted 5.4% last week compared with the last week of March, the Mortgage Bankers Association reported on Wednesday.
Interest rates charged on fixed- and adjustable-rate mortgages increased across the board.
Applications for the week ended April 4 were up 10.9% compared with the same week a year ago.
Both applications for mortgages to purchase homes and to refinance existing mortgages rose on a week-to-week basis, according to the Washington-based MBA's weekly survey.
Refinancing filings rose 3.4%, while home purchase applications increased a seasonally adjusted 8.1%.
The number of applications for Federal Housing Administration-backed loans also went up last week. The seasonally adjusted government index, which includes mostly FHA loans and covers both purchase mortgages and refinancings, increased 12.9%, the MBA's data showed.
The four-week moving average for all loans as tracked by the MBA was up 1.8%, according.
Refinancings made up 52.2% of last week's application volumes, off from 53.4% the previous week. Adjustable-rate mortgages accounted for 6.5% of filings, up from 5.4%.
Meanwhile, interest rates on 30- and 15-year fixed-rate mortgages last week averaged 5.78% and 5.39%, respectively, up from the prior week's 5.75% and 5.27%. The rate on one-year ARMs averaged 7.06%, up from 7% the previous week.
The MBA survey covers about half of all U.S. retail residential mortgage applications.
Tuesday, April 08, 2008
WaMu Getting out of the Wholesale Business
by Christopher Palmeri
Troubled thrift giant Washington Mutual (WM), once one of the biggest players in residential mortgages, will stop making loans through independent mortgage brokers—what the industry calls the "wholesale" side of the business. Instead the company will focus on loans through its 2,200 retail bank branches.
WaMu also announced on Apr. 8 that it will receive a $7 billion cash infusion from private equity firm TPG. The Mortgage Lender Implode-O-Meter, a Web site that traffics in industry gossip, reports that exiting the wholesale business was a condition attached to the TPG investment. According to an internal WaMu memo obtained by BusinessWeek, all loans originated by independent brokers must close by June 13.
WaMu estimates it will lose $1.1 billion during the first quarter and take a provision for loan losses of $3.5 billion. And to further shore up its capital position, the company will slash its quarterly dividend to 1¢ from 15¢. The market greeted the Apr. 8 news by pushing down WaMu's share price 1.27, or 10%, to 11.88 as of 1:15 p.m. ET.
Mitch Ohlbaum, chief executive of Legend Mortgage, an independent mortgage broker in Los Angeles, says he was told by a WaMu representative that Apr. 10 will be the last day to submit new loan applications. The wholesale business is considered risky because lenders have to offer very competitive terms to win business over dozens of rivals. Wholesale lenders are also relying on independent brokers to accurately provide borrower information.
Slammed by Losses
These have been tough times for Washington Mutual. In January the bank reported a loss of $1.87 billion for the fourth quarter, wiping out its earnings for the year, due to higher losses on its loan portfolio. The company has cut its dividend, slashed thousands of jobs, and sought additional sources of capital.
WaMu dates back to a lender founded in Seattle in 1889. It made its first home loan, for $700, the following year. Under current Chairman and CEO Kerry Killinger, WaMu has made dozens of acquisitions, including large regional lenders such as New York's Dime Savings and California's Great Western Financial. The 1999 acquisition of Long Beach Mortgage made WaMu a big player in the risky business of making subprime loans to borrowers with poor credit histories.
WaMu was an early leader in the industry's push to offer adjustable-rate mortgages, in particular one that gave borrowers the option to roll a monthly interest payment on top of the principal of the loan. Killinger told analysts in February that risky adjustable, home equity, and subprime loans made up about $36 billion of WaMu's $244 billion portfolio.
Fallen Star
Once the second-largest mortgage lender in the U.S., the company fell to sixth place overall last year. Its clever television commercials featured a smiling young banker who offered better customer service than the stuffy industry fat cats. At the same time it rolled out cozier new branches featuring tellers operating out on open floors. "WaMu bragged that it wants to be the Starbucks of the banking business; I guess it's doing about as well as Starbucks," quips Guy Cecala, publisher of Inside Mortgage Finance, an industry newsletter.
In early 2007, the bank began throttling back on mortgage loans. Killinger announced plans to focus more on credit-card lending and banking services for small businesses. "We expected a soft landing," one company executive told BusinessWeek earlier this year. "Not many people were predicting the kind of national decline we've seen."
Once an industry star, Killinger has come under fire recently, both for WaMu's poor stock performance and his still generous pay. Several large investment firms have said they will withhold votes for directors at the company's annual meeting Apr. 15.
Troubled thrift giant Washington Mutual (WM), once one of the biggest players in residential mortgages, will stop making loans through independent mortgage brokers—what the industry calls the "wholesale" side of the business. Instead the company will focus on loans through its 2,200 retail bank branches.
WaMu also announced on Apr. 8 that it will receive a $7 billion cash infusion from private equity firm TPG. The Mortgage Lender Implode-O-Meter, a Web site that traffics in industry gossip, reports that exiting the wholesale business was a condition attached to the TPG investment. According to an internal WaMu memo obtained by BusinessWeek, all loans originated by independent brokers must close by June 13.
WaMu estimates it will lose $1.1 billion during the first quarter and take a provision for loan losses of $3.5 billion. And to further shore up its capital position, the company will slash its quarterly dividend to 1¢ from 15¢. The market greeted the Apr. 8 news by pushing down WaMu's share price 1.27, or 10%, to 11.88 as of 1:15 p.m. ET.
Mitch Ohlbaum, chief executive of Legend Mortgage, an independent mortgage broker in Los Angeles, says he was told by a WaMu representative that Apr. 10 will be the last day to submit new loan applications. The wholesale business is considered risky because lenders have to offer very competitive terms to win business over dozens of rivals. Wholesale lenders are also relying on independent brokers to accurately provide borrower information.
Slammed by Losses
These have been tough times for Washington Mutual. In January the bank reported a loss of $1.87 billion for the fourth quarter, wiping out its earnings for the year, due to higher losses on its loan portfolio. The company has cut its dividend, slashed thousands of jobs, and sought additional sources of capital.
WaMu dates back to a lender founded in Seattle in 1889. It made its first home loan, for $700, the following year. Under current Chairman and CEO Kerry Killinger, WaMu has made dozens of acquisitions, including large regional lenders such as New York's Dime Savings and California's Great Western Financial. The 1999 acquisition of Long Beach Mortgage made WaMu a big player in the risky business of making subprime loans to borrowers with poor credit histories.
WaMu was an early leader in the industry's push to offer adjustable-rate mortgages, in particular one that gave borrowers the option to roll a monthly interest payment on top of the principal of the loan. Killinger told analysts in February that risky adjustable, home equity, and subprime loans made up about $36 billion of WaMu's $244 billion portfolio.
Fallen Star
Once the second-largest mortgage lender in the U.S., the company fell to sixth place overall last year. Its clever television commercials featured a smiling young banker who offered better customer service than the stuffy industry fat cats. At the same time it rolled out cozier new branches featuring tellers operating out on open floors. "WaMu bragged that it wants to be the Starbucks of the banking business; I guess it's doing about as well as Starbucks," quips Guy Cecala, publisher of Inside Mortgage Finance, an industry newsletter.
In early 2007, the bank began throttling back on mortgage loans. Killinger announced plans to focus more on credit-card lending and banking services for small businesses. "We expected a soft landing," one company executive told BusinessWeek earlier this year. "Not many people were predicting the kind of national decline we've seen."
Once an industry star, Killinger has come under fire recently, both for WaMu's poor stock performance and his still generous pay. Several large investment firms have said they will withhold votes for directors at the company's annual meeting Apr. 15.
Friday, April 04, 2008
First Foreclosure Bill Fails the Senate
The Associated Press
Published: April 4, 2008
WASHINGTON - Republicans and business-friendly Democrats on Thursday scuttled a plan to give people threatened with losing their homes more leverage in winning favorable loan terms from their lenders in bankruptcy courts.
The Senate killed the bankruptcy plan by a 58-36 vote on a bill designed to boost the slumping housing market.
The Democratic-backed bankruptcy law changes, opposed by banks, their GOP allies and a few Democrats, would have given judges power to cut interest rates and principal on troubled mortgages to help desperate borrowers trapped in subprime mortgages keep their homes.
The idea was to give borrowers duped into bad mortgages leverage in getting their loan terms adjusted. Such power, said the plan's chief proponent, Sen. Dick Durbin, D-Ill., would help "more people than all of the provisions combined" in the rest of the bill.
Republicans, 10 Democrats and Connecticut independent Joe Lieberman voted to scuttle the bankruptcy provision, however. Opponents said despite Durbin's modifications, the proposal would hurt more than help by leading mortgage lenders to ratchet up interest rates.
The defeat of the bankruptcy plan highlighted a weakness many find in the bill. It gives generous tax breaks to money-losing businesses such as home builders but little to help people facing foreclosure.
The bill is advertised as helping people keep their homes and injecting demand into a teetering housing market. Its most costly provision gives tax cuts worth $25 billion over the next few years to businesses like home builders and banks but only $3 billion in tax relief to homeowners, according to an estimate by the Joint Tax Committee, which explores effects of tax measures on the Treasury.
Benefits to businesses also dwarf $4 billion in the bill that would be given to cities and towns to buy and refurbish foreclosed and abandoned homes in an effort to stabilize communities and preserve neighboring home values.
Homeowners would benefit from $100 million to provide counseling to those facing foreclosure and help them to negotiate with lenders. The bill also would provide new authority for states to issue $10 billion worth of bonds to refinance subprime mortgages.
House Speaker Nancy Pelosi, D-Calif., promised improvements when the House takes up the measure and negotiates a final bill with the Senate.
The bill's tax provisions have sweeping support but give most benefits to businesses - regardless of whether they are in the housing market - that are losing money in the downturn. They would be able to deduct current losses against taxes paid up to four years ago, when times were profitable. The current limit is two years of operating loss "carrybacks."
Tax breaks, said Jerry Howard, chief executive at the National Association of Home Builders, would provide smaller home builders with an infusion of capital that would allow them to stay in business.
The four tax provisions would cost $28 billion through the end of 2010, but deliver only $1 billion this year.
"When they unveiled the package, the main theme was ... 'help families keep their homes,'" said Bob Greenstein, head of the liberal Center on Budget and Policy Priorities. "Three of the four provisions would do little or nothing to accomplish that goal."
The bill would provide a temporary $7,000 tax credit over two years to people buying foreclosed homes in the year after the bill is enacted. It would cost about $1.6 billion, which assumes about 240,000 home buyers would benefit.
It also has a rewrite of Federal Housing Administration law that would permanently raise the dollar limit on mortgages that FHA can insure to $550,000 in the most costly real estate markets.
Published: April 4, 2008
WASHINGTON - Republicans and business-friendly Democrats on Thursday scuttled a plan to give people threatened with losing their homes more leverage in winning favorable loan terms from their lenders in bankruptcy courts.
The Senate killed the bankruptcy plan by a 58-36 vote on a bill designed to boost the slumping housing market.
The Democratic-backed bankruptcy law changes, opposed by banks, their GOP allies and a few Democrats, would have given judges power to cut interest rates and principal on troubled mortgages to help desperate borrowers trapped in subprime mortgages keep their homes.
The idea was to give borrowers duped into bad mortgages leverage in getting their loan terms adjusted. Such power, said the plan's chief proponent, Sen. Dick Durbin, D-Ill., would help "more people than all of the provisions combined" in the rest of the bill.
Republicans, 10 Democrats and Connecticut independent Joe Lieberman voted to scuttle the bankruptcy provision, however. Opponents said despite Durbin's modifications, the proposal would hurt more than help by leading mortgage lenders to ratchet up interest rates.
The defeat of the bankruptcy plan highlighted a weakness many find in the bill. It gives generous tax breaks to money-losing businesses such as home builders but little to help people facing foreclosure.
The bill is advertised as helping people keep their homes and injecting demand into a teetering housing market. Its most costly provision gives tax cuts worth $25 billion over the next few years to businesses like home builders and banks but only $3 billion in tax relief to homeowners, according to an estimate by the Joint Tax Committee, which explores effects of tax measures on the Treasury.
Benefits to businesses also dwarf $4 billion in the bill that would be given to cities and towns to buy and refurbish foreclosed and abandoned homes in an effort to stabilize communities and preserve neighboring home values.
Homeowners would benefit from $100 million to provide counseling to those facing foreclosure and help them to negotiate with lenders. The bill also would provide new authority for states to issue $10 billion worth of bonds to refinance subprime mortgages.
House Speaker Nancy Pelosi, D-Calif., promised improvements when the House takes up the measure and negotiates a final bill with the Senate.
The bill's tax provisions have sweeping support but give most benefits to businesses - regardless of whether they are in the housing market - that are losing money in the downturn. They would be able to deduct current losses against taxes paid up to four years ago, when times were profitable. The current limit is two years of operating loss "carrybacks."
Tax breaks, said Jerry Howard, chief executive at the National Association of Home Builders, would provide smaller home builders with an infusion of capital that would allow them to stay in business.
The four tax provisions would cost $28 billion through the end of 2010, but deliver only $1 billion this year.
"When they unveiled the package, the main theme was ... 'help families keep their homes,'" said Bob Greenstein, head of the liberal Center on Budget and Policy Priorities. "Three of the four provisions would do little or nothing to accomplish that goal."
The bill would provide a temporary $7,000 tax credit over two years to people buying foreclosed homes in the year after the bill is enacted. It would cost about $1.6 billion, which assumes about 240,000 home buyers would benefit.
It also has a rewrite of Federal Housing Administration law that would permanently raise the dollar limit on mortgages that FHA can insure to $550,000 in the most costly real estate markets.
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