The Housing Bubble

Is it too easy for home builders to hide?
State makes it difficult for buyers to find past complaints against contractors

Homeowners in the Northeast Richland neighborhood of Rabon’s Farm have discovered serious problems with their homes, but thus far have been unable to file complaints.

That didn’t seem right to the homeowners. Nothing had changed in their three-year-old neighborhood. Construction was ongoing, and the same sales office remained open.

Firstar’s president, Michael Nieri, had surrendered the company’s license in February to the S.C. Department of Labor, Licensing and Regulation. Nieri said he did so to avoid a fine and probation over a consumer complaint and an administrative violation.

Still, another of his companies, Great Southern Homes — the name Rabons Farm residents had seen on signs in their neighborhood for three years — continued building.

Why? Because Firstar was licensed as a general contractor. Under state law, general contractors are registered with company names, not as individuals.

So when a general contractor quits building under its name, it cannot be pursued even if the home builder continues operating under another name. In his case, Nieri continues to build under the name of Great Southern, also licensed as a general contractor.

“This is just a shell game,” said state Sen. Joel Lourie, D-Richland, who has asked the state licensing department to look into the matter. “Homeowners have been left very vulnerable and unprotected here, and they deserve better treatment.”

Isn’t it about time for Megabank, Inc to come clean and admit that the form of ‘financial innovation’ known as ‘mortgage securitization’ has been a complete financial disaster, leading to untold misery among millions of American households?

So far as I am aware, the Fed is silent on the issue. Luckily some capable journalists are stepping up to the task:

Christopher Coughlin

* Arlington Conservative Examiner

Warnings of a Second Economic Meltdown
* October 7th, 2010 2:12 pm ET

We are on the precipice of an economic cataclysm, and this time, there may be no amount of government bailout money that can fix it.

Pretty strong, yes?

Consider the source.

In today’s Washington Post, Ariana Cha and Brady Dennis write the story that the financial and real estate industries have no doubt been dreading for some time. The article states:

“Millions of US mortgages have been shuttled around the global financial system…without the documents that traditionally prove who legally owns the loans. Now, as many of these loans have fallen into default and banks have sought to seize homes, judges around the country have increasingly ruled that lenders have no right to foreclose because they lack clear title.”

Said another way, if you are one of the millions of Americans whose mortgage company sold off your loan to Wall Street, which subsequently bundled these loans into mortgage-backed securities that were sold and resold, it is no longer clear who owns your property.

Yep. You read that correctly.

Up until now, the ailing US housing industry has been seen through the prism of the foreclosure crisis, which in turn has been viewed as the sad but necessary fallout from the financial collapse in 2008.

The thinking was that once the backlog of non-performing housing inventory was cleared out, the housing market would find a floor and begin growing (appreciating) again, either leading or joining other industries in contributing to economic recovery.

But this is only half the story.

I first wrote about this, in August 2009; how TARP, while successful, only dealt with the banks and that the foreclosure crisis had wider ramifications because it did not make appropriate adjustments for mortgage borrowers.

At the time, I did not fully appreciate how the process of securitization of mortgages impacted property title and thus the legal standing of banks in foreclosure procedures. More recently, in this post, the situation came into sharper focus, if it was still mostly hypothetical.

But a rash of events have rapidly shed light on the this pending disaster.

Recently we have had states and major banks suspend foreclosures based on the actions of “robo-signers” who processed foreclosure paperwork without thoroughly reviewing the file for completeness an accuracy. This was followed by the announcements by title insurers who stated that they would not cover mortgage titles lost in securitization nor issue insurance on foreclosed properties without evidence of a clear title. That cascaded into today’s story regarding how those titles have been chopped up or lost in the maze of securitization, threatening the very concept of ownership amid charges of fraud.
…

How MERS blurred the ownership of homes

Mortgage giants created the Mortgage Electronic Registration Systems (MERS) to speed up the loan securitization process, but as millions of homes fell into foreclosure, the lack of a paper trail left the ownership of mortgages in question.

Thousands of foreclosures are put on hold

During the housing boom, millions of homeowners got easy access to mortgages. Now, some mortgage lenders and state governments have discovered many mortgage documents were mishandled.
» LAUNCH PHOTO GALLERY

Thanks to all the big brains here on the HBB, I’ve learned a lot about fraud so regarding the very interesting discussion on evolution the other day, there are some “soft spots’ in the theory. This Conservapedia page seems to have collected them in their article on the subject.

I never heard about these arguments because the “experts’ never told me about them.

Was I hoodwinked?

flim flammed?

bamboozled?

One of the most famous proponents of the theory of evolution was the late Harvard paleontologist Stephen Jay Gould. But Gould admitted the following:

“ The extreme rarity of transitional forms in the fossil record persists as the trade secret of paleontology. The evolutionary trees that adorn our textbooks have data only at the tips and nodes of their branches; the rest is inference, however reasonable, not the evidence of fossils…We fancy ourselves as the only true students of life’s history, yet to preserve our favored account of evolution by natural selection we view our data as so bad that we never see the very process we profess to study.[76] ”

In a 1977 paper titled “The Return of Hopeful Monsters”, Gould wrote: “The fossil record with its abrupt transitions offers no support for gradual change….All paleontologists know that the fossil record contains precious little in the way of intermediate forms; transitions between major groups are characteristically abrupt.”[77][78]

The senior paleontologist at the British Museum of Natural History, Dr. Colin Patterson, put it this way:

“ Gradualism is a concept I believe in, not just because of Darwin’s authority, but because my understanding of genetics seems to demand it. Yet Gould and the American Museum people are hard to contradict when they say there are no transitional fossils….I will lay it on the line — there is not one such fossil for which one could make a watertight argument.[79]

http://www.conservapedia.com/Theory_of_evolution

I suppose that all Americans should be thankful that, unlike the toxic red sludge that recently engulfed a town in Hungary, the type spewed by our banking system has thus far not proven to be lethal.

The Foreclosure Mess
October 9, 2010 11:52 A.M.
By Andrew Stuttaford

How damaging could growing evidence of serious problems over the foreclosure process and, quite possibly, major flaws in great swathes of the documentation used in the mortgage securitization of recent years prove to be? Very, and the potential implications stretch far beyond the appalling fact that people may have been thrown out of their homes without, so to speak, due process. If there’s one thing that the economy needs if it is to move on beyond the housing and banking crises, it is the restoration of properly functioning clearing mechanisms that allow the housing market to find a “real” level and financial markets to establish a “real” price for all those toxic securities still lurking out there.

This piece from today’s Washington Post (extract follows) gives a hint of what may be to come:

Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation’s housing market and economic recovery.
…
The White House has so far resisted joining the election-season calls for action but convened two interagency meetings this week to discuss reports that banks filed fraudulent documents to evict borrowers who missed payments as well as fundamental questions about whether banks are seizing properties without having clear ownership of the mortgages.

One meeting was made up mostly of groups that regulate the housing industry, including the Department of Housing and Urban Development, the Treasury Department and the White House. The other, which involved the U.S. Securities and Exchange Commission, the Internal Revenue Service and U.S. attorneys from across the country, was focused on the question of whether financial fraud was committed.

The evils of “fraudulent eviction” are self evident, but note also the reference by the Washington Post to questions about whether “banks are seizing properties without having clear ownership of the mortgages”, a reference to legal problems that could conceivably unwind large numbers of supposedly securitized mortgages — and pose very ugly questions indeed over where the losses associated with them should lie.
…

Ezra Klein
Economic and Domestic Policy, and Lots of It

‘This is the biggest fraud in the history of the capital markets’

Janet Tavakoli is the founder and president of Tavakoli Structured Finance Inc. She sounded some of the earliest warnings on the structured finance market, leading the University of Chicago to profile her as a “Structured Success,” and Business Week to call her “The Cassandra of Credit Derivatives.” We spoke this afternoon about the turmoil in the housing market, and an edited transcript of our conversation follows.

Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?
…

The flies are circling the turds…

Up to 40 states plan inquiry into foreclosure data
Attorneys general in up to 40 states plan investigation into flawed foreclosure paperwork.

WASHINGTON (AP) — The attorneys general of up to 40 states plan to announce soon a joint investigation into banks’ use of flawed foreclosure paperwork.

A person briefed on the investigation said Saturday night that an announcement could come as early as Tuesday. The person spoke on condition of anonymity because the investigation was not yet public.

Iowa Attorney General Tom Miller will lead the investigation. Miller already has been leading multistate reviews of questionable foreclosure documents.

A joint investigation by 40 states would further escalate pressure on banks to widen their suspensions of foreclosures. On Friday, Bank of America became the first bank to halt foreclosures in all 50 states.

Too big to prosecute? I guess time will tell. I personally am holding out hope that some big fish will serve prison time over this one.

Fri., October 8, 2010 9:23am (EDT)
Major U.S. Banks Investigated For Foreclosure Fraud
By Chris Arnold
Updated: 2 days ago

With well over a million homes being repossessed, 2010 is shaping up to be a record year for foreclosures in the U.S. But there are serious questions about the way many have been carried out, and now prosecutors are investigating whether some of the country’s largest banks committed fraud.

Bank of America, Chase and GMAC Mortgage have put tens of thousands of foreclosures on hold and lawmakers are calling for a nationwide moratorium after bank employees acknowledged that they failed to conduct required reviews.

The question is whether this was just a costly paperwork glitch for the banks or if it’s another mortgage fiasco for the whole country.

“I’ve tried to read everything I can, I’ve called tons of people — I’m trying to figure out how big is this issue, and the answer seems to be nobody really knows,” says Thomas Lawler, an economist and former vice president at the mortgage giant Fannie Mae.

Nobody knows how the courts are going to react, but everybody is taking this very seriously — in part because it’s possible that the major lenders were committing fraud in hundreds of thousands of foreclosure cases over the past several years.
…

* Posted on Sunday, October 10, 2010

How Hank Paulson’s inaction helped Goldman Sachs

Greg Gordon speaks about Henry Paulson
ECONOMY

Treasury Secretary Henry Paulson, with other top officials, before the Senate Banking Committee Sept 23, 2008. | Chuck Kennedy / MCT
…
Paulson and Federal Reserve Chairman Ben Bernanke have been widely praised for engineering the Wall Street bailouts, which avoided systemic chaos, and they’ll probably get more plaudits if the government recovers much of the $400 billion in loans it made to financial institutions.

However, while Paulson has been criticized, unfairly or not, because $12.9 billion of the bailout money went to Goldman, he’s drawn little scrutiny for what he did in his first 18 months in office, during the final frenzied stages of the housing bubble.

In his eight years as Goldman’s chief executive, Paulson had presided over the firm’s plunge into the business of buying up subprime mortgages to marginal borrowers and then repackaging them into securities, overseeing the firm’s huge positions in what became a fraud-infested market.

During Paulson’s first 15 months as the treasury secretary and chief presidential economic adviser, Goldman unloaded more than $30 billion in dicey residential mortgage securities to pension funds, foreign banks and other investors and became the only major Wall Street firm to dramatically cut its losses and exit the housing market safely. Goldman also racked up billions of dollars in profits by secretly betting on a downturn in home mortgage securities.

“No one was better positioned . . . than Mr. Paulson to understand exactly what the implications of his moving against the (housing) bubble would have been for Goldman Sachs, because he knew what the Goldman Sachs positions were,” said William Black, a former senior thrift regulator who delivered the harshest criticism of the former secretary.

Paulson “knew that if he acted the way he should, that would have burst the bubble. Then Goldman Sachs would have been left with a very substantial loss, and that would have been the end of bonuses at Goldman Sachs.”
…

This guy sounds pretty scary. It’s great to know he is on the Obama team.

Tom Donilon’s Revolving Door

Before Advising Obama on National Security, Donilon Lobbied for Fannie Mae, Counseled Citibank, Goldman Sachs

By MATTHEW MOSK
Oct. 10, 2010

President Obama’s new National Security Advisor spent the decade prior to joining the White House as a legal advisor to powerful interests including Goldman Sachs and Citigroup, and as a lobbyist for Fannie Mae, where he oversaw the mortgage giant’s aggressive campaign to undermine the credibility of a probe into its accounting irregularities, according to government reports and public disclosure forms.

Thomas E. Donilon has been formally advising Obama on national security matters since the president’s transition to the White House, and he worked in President Clinton’s state department during the 1990s. But in between these high-profile public-sector assignments, Donilon was a highly paid lobbyist who represented an array of well-heeled and powerful clients, including former Republican New Jersey Gov. Christie Todd Whitman and Obama’s 2008 campaign fundraising chairman, billionaire heiress Penny Pritzker.

After a stint at the law firm O’Melveny & Myers, where Donilon was registered as a lobbyist for Fannie Mae, he took on full-time work with the mortgage giant as executive vice president for law and policy. Donilon’s name appears on Fannie Mae’s public lobbying disclosure reports between 2000 and 2005.

While housing sales were still booming, internally these were troubled years for the company. In a report first noted by ABC News in 2008, Donilon is described as someone who lobbied for and helped paint a rosy picture of Fannie Mae’s financial health to the company’s board. He did so at a time when Fannie Mae faced accusations that it was misstating its earnings from 1998 to 2004. Fannie Mae settled with the Securities and Exchange Commission for $400 million in 2006, and did not admit any wrongdoing.
…

Beware of geeks bearing grifts.

Whitman gets more campaign cash from Goldman Sachs
September 23, 2010 | Lance Williams

Since winning the Republican primary, Meg Whitman has banked $105,700 more in donations from her old contacts at Goldman Sachs, the powerful and controversial investment bank.

Whitman, the billionaire former CEO of the online auction house eBay, has spent more of her own money on her gubernatorial campaign than any political candidate in U.S. history – $119 million, state records show. That includes $48 million more in checks since the primary.

But she’s also collecting political donations.

Goldman, where Whitman has variously been an investor, a corporate director and a recipient of insider stock deals, has emerged as the GOP candidate’s biggest single outside source of campaign cash, records show.

Through last week, donors with Goldman connections have given Whitman $216,200. Donors associated with the Food 4 Less supermarket chain rank second, at $207,200, according to a California Watch review of state records.

Whitman has strong ties to Goldman. Much of her $1.2 billion fortune is invested in Goldman funds, according to her economic disclosure report. A Goldman subsidiary manages the money in her family foundation.

In 2001 and 2002, she served on Goldman’s board, where she was paid an estimated $475,000. She left the board after she was singled out in a congressional investigation of “spinning,” a now-banned practice in which investment banks allegedly traded access to insider stock deals in exchange for corporate underwriting business.

Goldman is perennially the most profitable of Wall Street investment banks, and over the years many U.S. politicians have regarded an association with the firm as a badge of honor.

But the investment bank faced harsh criticism for its wheeling and dealing in the ramp-up to the 2008 market crash and ensuing world recession. In July, Goldman paid a record $550 million – $350 million to the federal government, $200 million to investors – to settle a Securities and Exchange Commission lawsuit charging that the investment bank had fleeced German banks by selling them doomed investments based on underwater U.S. home loans. Goldman denied wrongdoing.
…

Evicted family breaks locks, reclaims home
http://abclocal.go.com/kabc/story?section=news/local/ventura_county&id=7716207

I don’t know the details, but they were behind on payment, 8 kids or not. This presentation of “victims” smells, imho.
(Very close to my former residence in So Ca.)

Sounds like Meg may have a case of the same foot-in-mouth disease that afflicted W.

Detroit to Whitman: Invest in struggling cities
By JULIET WILLIAMS (AP) – Sep 23, 2010

SACRAMENTO, Calif. — The Detroit mayor’s office on Thursday sharply criticized California Republican gubernatorial candidate Meg Whitman for comparing Fresno to Detroit and calling it “awful.”

Karen Dumas, a spokeswoman for Detroit Mayor Dave Bing, said in a statement Thursday to The Associated Press that the billionaire candidate should focus instead on investing in communities such as Detroit and Fresno.

“Fresno, like Detroit, shares the reality of being an urban city that continue(s) to bear the burden of a Wall Street meltdown,” Dumas said. “Perhaps Ms. Whitman is better served in making investments in communities like Detroit and Fresno rather than profiting at their expense.”

Whitman, the former chief executive officer of eBay, once served on the board of investment firm Goldman Sachs.

Whitman made the comment Tuesday in an interview with the editorial board of the San Jose Mercury News, which reported her statement the next day.

“Fresno looks like Detroit. It’s awful,” she said.
…

How about if instead of trying to resurrect the practice, mortgage securitization is turned into a federal crime, with those who perpetrate it required to serve prison time?

Legal
The Future of Freddie and Fannie
October 6, 2010, 4:47 am

From Edward L. Glaeser at Economix:

In the past, Fannie Mae and Freddie Mac operated as profit-making entities backed by an implicit government guarantee. That toxic combination always seemed designed to lose billions of taxpayer dollars, and that is exactly what happened.

Looking forward, the best option is to replace them with an entirely public entity that enables securitization by guaranteeing 30-year fixed-rate mortgages and that charges a high enough premium to stay solvent. We then should hope that private competitors will eventually put the public entity out of business.
…

Currency Wars a Threat

” Looks like we’ll have competition among the world currencies to contend with for a while longer. The International Monetary Fund (IMF) meeting Friday and Saturday didn’t resolve the problem, but IMF pledged to “deepen its work” in trying to resolve the present “war” among the money units of the U.S., Europe, China, and Japan. Canadian Finance Minister Jim Flaherty said, “Currency disputes can easily become trade disputes.”

The big fear is that devaluing currencies could lead to trade wars such as occurred in the early 1930s, contributing to the Great Depression.

~ Currency Disputes

There’s a glimmer of hope in the present currency mess. It could lead to the shocking conclusion that governmental management of money leads to a dead end. It always has, through the ages. No exceptions. And the sad thing is the United States is losing its long-held reputation for producing the most trustworthy currency in the world. Increasing numbers of Americans are holding CDs and other financial instruments denominated in foreign currencies. They are betting AGAINST the U.S.!

No Social Security COLA expected for 2011
By STEPHEN OHLEMACHERAP posted: 6:26 AM 10/10/10
AP

WASHINGTON -As if voters don’t have enough to be angry about this election year, the government is expected to announce this week that more than 58 million Social Security recipients will go through another year without an increase in their monthly benefits.

It would mark only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.

“If you’re the ruling party, this is not the sort of thing you want to have happening two weeks before an election,” said Andrew Biggs, a former deputy commissioner at the Social Security Administration and now a resident scholar at the American Enterprise Institute.

“It’s not the congressional Democrats’ fault, but that’s the way politics works,” Biggs said. “A lot of people will feel hostile about it.”

The cost-of-living adjustments, or COLAs, are automatically set each year by an inflation measure that was adopted by Congress back in the 1970s. Based on inflation so far this year, the trustees who oversee Social Security project there will be no COLA for 2011.

Credit card reform isn’t providing relief for small-business owners
San Antonio Business Journal

More finance reform may be on horizon in the form of tighter guidance for credit cards issued to small businesses.

And though it still remains a long shot for this year, area small-business owners and experts say such reform legislation is necessary and already overdue.

Some eights months after the consumer credit-card reform legislation, or CARD Act, went into effect nationally, the National Small Business Association continues to lobby for legislation that would place business and professional credit cards under the same guidelines as are now in place for consumer cards.

The CARD Act was designed to foster greater transparency through clear disclosure of contract terms and better billing and marketing practices. For example, it does not allow credit card issuers to charge consumers an inactivity fee, multiple penalty fees for the same transaction, or a late fee of more than $25 unless one of the cardholder’s last six payments was late (and then it can only go up to $35). The act also requires credit card issuers to explain any increase in their card’s annual percentage rate and to re-evaluate the increase every six months for a possible reduction in rate.

However, these guidelines were not extended to business credit cards, resulting, some observers contend, in a shifting of the burden to small businesses in the form of higher interest rates and onerous credit-card terms.

“A good politician is quite as unthinkable as an honest burglar.”

~H.L. Mencken

Mainstream media constantly chatter about what Congress is doing.
But what about the vitally important things Congress is NOT doing?

“For the first time since modern budgeting was introduced with the Budget Act of 1974, the House failed to even write a budget,” writes Charles Krauthammer. “This in a year of extraordinary deficits, rising uncertainty and jittery financial markets. Gold is going through the roof. Confidence in the dollar and the American economy is falling — largely because of massive overhanging debt. Yet no budget emerged from Congress to give guidance, let alone reassurance, about future U.S. revenues and spending.

“That’s not all. Congress has not passed a single appropriations bill. To keep the government going, Congress passed a so-called continuing resolution (CR) before adjourning to campaign.”

Myrtle Beach residents say high tax values wrong

MYRTLE BEACH - Myrtle Beach area residents who have seen the market values of their homes drop in the recession say the county tax assessor is overestimating the worth of their property.

The county’s new assessments going out in the mail this year are based on values as of Dec. 31, 2008. That’s about one year after the beginning of the recession and six months before its end.

Since then, sales prices in Horry County have dropped between 4 percent for single-family homes and 28 percent for condos.

Some residents say neighboring homes that are bigger and sometimes on larger lots are selling for less than the assessed values of their own homes, prompting concerns that their property value is well below what the county says it is.

“We have to keep doing everything we can to accelerate this recovery,” President Barack Obama said. “The only piece of economic news that folks still looking for work want to hear is, `You’re hired.’ And everything we do is dedicated to make that happen.”

So hows that working out so far Barry?

Of course he like many millions of Americans don’t or can’t understand, it is not governments roll to “create” jobs.

Tomorrows leaders…

Is teaching math and history in public school through hip-hop and rap “music” is a method taxpayers should be supporting.

Welcome to “Flocabulary,” a teaching system said to be used in more than 10,000 schools nationwide.

Here’s part of the lyric of a history lesson; “Andrew Jackson thinks he’s a tough guy. Killing more Indians than there are stars in the sky. Evil wars of Florida killing the Seminoles. Saying hello, putting Creek in the hell holes. Like Adolf Hitler he had the final solution. ‘No, Indians, I don’t want you to live here anymore.”

Another; “White men getting richer than Enron. They stepping on Indians, women and blacks. Era of Good Feeling doesn’t come with the facts.”

~ Old Dead White Men
http://www.youtube.com/watch?v=kLp2zBEW4aM

Here is a question.

Let’s say someone decide to strategically default, and roll the dice to see whether the bank’s paperwork is in order. Do they continue to pay property tax and HOA fees (in the hopes that the bank can’t foreclose due to a paperwork mess), or do they stop paying the whole thing on the assumption that they will lose the thing anyways?

It will be interesting to see the number of people behind on their mortgages about 90 days from now..

After Foreclosure, a Focus on Title Insurance

http://www.nytimes.com/2010/10/09/your-money/mortgages/09money.html?pagewanted=1&ref=general&src=me

Financial market prediction for near-term: The outlook will remain “unusually uncertain” for the foreseeable future; and the prospect for an export-led U.S. labor market recovery is unusually bleak.

* ECONOMY
* OCTOBER 10, 2010, 10:40 A.M. ET

IMF Meeting Fails to Resolve Conflict Over Currencies
By BOB DAVIS

WASHINGTON— The International Monetary Fund’s annual meeting this weekend failed to ease currency battles roiling markets, pushing the dispute off to a summit next month of leaders of Group of 20 countries, with no clear resolution in sight.

The meeting Saturday might have been more significant for possible solutions ruled out. Chinese central bank officials rejected calls for an international or regional currency accord, and the World Trade Organization’s chief said his institution didn’t want to get involved in exchange-rate fights.

IMF members also scotched an effort by the U.S. to link a bigger Chinese role in the IMF to changes in Beijing’s currency policies. “Nobody is linking this,” said Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the IMF’s policy-making committee.

Youssef Boutros-Ghali, Minister of Finance of Egypt and Dominique Strauss-Kahn, IMF Managing Director, spoke at a press briefing by the IMF’s Board of Governors during the IMF’s meeting in Washington, DC.

A U.S. official said the Obama administration would take the fight over currencies to a Seoul summit of leaders of the G-20 industrial and developing nations in mid-November. The administration used the last G-20 summit in June to prod China to announce beforehand that it would adopt a more “flexible” currency policy, rather than tying the yuan tightly to the dollar. But after the summit, the value of the yuan barely moved, provoking outrage on Capitol Hill and frustration in the Treasury and White House.

The U.S., European nations and a number of emerging-market countries complain that China is deliberately undervaluing its dollar to aid its exporters. To compete, South Korea Brazil and other Asian and Latin American nations have taken measures to beat down the value of their currencies as well, leading to fears that these efforts may presage a trade war.

If joblessness persists, “there’s a danger countries will turn inward, and, as a result, international cooperation will falter,” said World Bank President Robert Zoellick in a weekend briefing.
…

Yuan surpasses new high prior to IMF meeting
By Li Qiaoyi

The yuan rose to a record high Friday, despite the government’s vocal opposition to sharp appreciation.

The People’s Bank of China, China’s central bank, set the yuan’s central parity rate at 6.6830 against the dollar Friday, hitting a new high since the country launched currency reforms in July 2005.

The yuan gained in early trade to about 6.6710 against the dollar, Dow Jones Newswires reported, indicating an appreciation of 2.3 percent since the central bank in June announced plans to proceed with foreign exchange reforms. Those reform measures were previously put on hold due to the global financial crisis.

The rising yuan is in line with the government’s recent pledges to maintain a more flexible currency.
…

I’m surprised that Turbo Tax Timmy’s mea culpa in the WaPo hasn’t been posted yet…..

Oh wait, it’s not a mea culpa. It’s all about how we taxpayers are WRONG about what TARP accomplished.

Treasury Secretary Timothy Geithner tackles five myths about TARP…

1. The TARP cost taxpayers hundreds of billions of dollars.
2. The TARP was a gift for Wall Street that did nothing for Main Street.
3. The TARP was a quick fix for the market meltdown but left our financial system weak.
4. The TARP worsened the concentration of the banking sector, leaving it more vulnerable to another crisis.
5. The TARP was the centerpiece of a strategy by President Obama to assert more government control over the economy.

I’m glad that TTT convincingly argued that these layman thoughts were all wrong.

I have no evidence to bear on whether the Fed and its banking sector minions actively game the stock market on bad data release days like last Friday, but I find it puzzling how MSM commentators consistently presume that all stock market movements are driven by decentralized private investor decisions instead of centralized government intervention. This seems like a stretch, to say the least.

Nick Godt’s Market Medics

Oct. 9, 2010, 12:01 a.m. EDT
Beyond easy money and currency wars
By Nick Godt, MarketWatch

NEW YORK (MarketWatch) — As anyone who followed stocks’ reaction to a dreadful U.S. jobs report on Friday will have noted, markets are currently swimming in a world of monetary stimulus.

If the Dow rallied past 11,000 for the first time in five months, it’s because the jobs report was the latest and most important in a string of weakening reports that all but guarantee that the Federal Reserve will soon provide more easy money to try and boost the economy.

That’s great for the short to medium term for the market.

Another round of asset purchases from the Fed should keep government bonds in favor, put further pressure on the dollar while lifting stocks and commodities and, of course, gold.

But for the longer term, the question arises as to what happens to all the build-up in risk that emerges when rallying assets are so-far removed from deteriorating fundamentals, such as weakening economies and employment in most of the industrialized world, along with the rising threat of deflation.

It’s often heard in markets and often said by commentators that even in bad economic times for the domestic economy, “global growth” can save the day. It was noted recently in this column that Japan, even during its Lost Decade of deflation, had managed to benefit from global growth, especially the 1990s technology boom.

But in today’s world, two years after the eruption of the worst financial and economic crisis since the 1930s, most countries want to stimulate their economies and lower their currencies to boost exports at the same time.

Not everyone will succeed. The game is already rigged in favor of China, which keeps its currency artificially undervalued maybe by as much as 40%, according to some estimates. Meanwhile, the “growth” generated by China, and in much of Asia, is not leading to more demand for goods made elsewhere.
…

Some bovines have yet to abandon their faith in money that grows on trees. Never mind Japan’s abysmal failure in this area over the past two decades.

Buttonwood
The magic bullet
How the bulls believe quantitative easing will boost asset prices

Oct 7th 2010

BACK in the days of the gold standard countries competed to show their commitment to “sound money”. Nowadays, the competition is in a different direction: to create more money and weaken the currency. Brazil’s finance minister has talked of an “international currency war”. Dominique Strauss-Kahn, the head of the IMF, this week warned against using currencies as a policy weapon.

Wishing that your currency would decline is not the same as making it do so. The old tactic of cutting interest rates has been pursued almost to exhaustion, although Japan lowered rates to a 0-0.1% band this week (see article). But it is hard to create much of a yield differential within the developed world when rates are at or below 1% almost everywhere.

Intervention has been pursued in the rich world by both the Japanese and the Swiss. But intervention works best when central banks co-ordinate their purchases, and which country is going to help another to devalue?
…

This is the tip of Meg’s iceberg, IMO. Don’t vote for Gollum’s candidate, California!

The California governor’s race
Enter the housekeeper
An illegal immigrant disrupts the race to run the world’s eighth-largest economy

Oct 7th 2010 | Los angeles

ON OCTOBER 2nd Meg Whitman, the Republican candidate, began her second debate against Jerry Brown, her Democratic opponent, by admitting to a Hispanic audience that “I cannot win the governor’s race without the Latino vote.” And yet the ensuing debate—with questions asked in Spanish by Latino moderators—might just have cost her that vote, and thus the entire election.

If Ms Whitman, a billionaire and former boss of eBay, had had her choice of topics, they would have been the evils of California’s belated budget, red tape and government waste, all of which she, as a tough businesswoman, promises to cut in an effort to create jobs. And she would have reminded voters that several public-sector unions, whose taxpayer-funded largesse towards their pensioners is one of California’s biggest economic problems, are putting their money behind Mr Brown. But the biggest issue, instead, was illegal immigration. And the reason for that was Ms Whitman herself.

Only days earlier, a sobbing Mexican mother, Nicandra Diaz Santillan, had told a stunned press corps in Los Angeles that she had worked as a housekeeper for Ms Whitman for nine years until June 2009, when she confessed that she was an illegal immigrant. According to Ms Diaz Santillan, Ms Whitman, who was promising to be “tough as nails” on illegal immigrants and their employers to win the Republican nomination, promptly fired her. Wiping away tears, Ms Diaz Santillan said that Ms Whitman was “throwing me away like a piece of garbage”.
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A brisk fall
Oct 8th 2010, 13:16 by R.A. | LONDON

TODAY, the Bureau of Labour Statistics released the last set of American employment numbers to come ahead of the November Congressional elections. If the Democrats were looking for a boost from the numbers, they’re sure to be disappointed—and then some. For the fourth month in a row, nonfarm payroll employment declined in September, by a total of 95,000 jobs. The unemployment rate held steady at 9.6%.

The drop in payroll employment was due, in no small part, to the continuing drawdown in the temporary census workforce. Census employment fell by 77,000 for the month, leaving a payroll decline ex-census of just 18,000 jobs. But with nearly 15 million Americans still without jobs, employment drops simply will not do. It is commonly estimated that over 100,000 jobs a month must be added simply to keep up with the country’s labour force growth.

For its part, the private sector continued to add jobs, as it has in every month of 2010. Private payrolls have grown by 863,000 since the beginning of the year. That’s not rapid growth, but it is steady movement in the right direction. It’s on the public side of the ledger that matters have been particularly ugly in recent months. In 2010, state governments have shed 38,000 jobs. At the local level the picture is worse still; 231,000 jobs have been cut from local governments in just the last 10 months.

The dynamic is an inversion of the popular story of America’s struggling labour market, in which a expanding state creates uncertainty, thereby limiting private hiring. If anything, it appears that private employment is rising steadily despite the demand drag imposed by heavy government job losses, due to the forced austerity of balanced budget rules.

There is little to be positive about elsewhere in the report. The number of people working part-time for economic reasons jumped in September, and nearly 10 million Americans now fall into that category. Partially as a result, the statistic known as U-6, considered a more complete indicator of un- and under-employment, rose from 16.7% in August to 17.1% in September. The previously reported jobless figures for July and August were both revised down slightly. Aside from government employment, payrolls in good producing sectors had a rough month, and construction in particular was hard hit, shedding 21,000 jobs. Private services did better across the board, especially the leisure and hospitality sector, which added 38,000 employees. There is indeed a lot more leisure to go around in America these days.
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Let’s hope the investment banking industry shrinks down to a non-TBTF size which no longer poses systemic risk to the entire global economy.

“I’m melting! I’m melting!”

Investment banking
The big squeeze
Why the industry’s best days may be behind it

Oct 7th 2010 | NEW YORK

EVEN by its own notoriously cyclical standards, investment banking has been on a stomach-churning ride in the past five years. After an apparently golden age, with quarter after quarter of record profits, came the bursting of the debt bubble, a deluge of red ink and bail-outs; then, last year, firms bounced back obscenely quickly thanks to record trading profits. Now they are being squeezed once more, and this time the slump may last.

American banking giants’ third-quarter results, starting with JPMorgan Chase on October 13th, will show that trading revenues fell by perhaps 20-30% from the previous quarter. With nervy investors sitting on their hands, client activity was “painfully slow across the board”, according to Jefferies, a middle-sized bank.

Things are not much better in origination businesses. Several trends that buoyed underwriting last year, such as banks’ rush to raise capital and the boom in bond issuance as companies refinanced at low rates, have fizzled. Merger-advisory business has picked up but not by enough to compensate. As one Wall Streeter puts it: “If we extrapolated our third-quarter returns, we’d shoot ourselves.” Overall, 2010 will be a year to forget (see chart).

The ugly results will make for difficult decisions on bonuses as the year draws to a close. Firms won’t want to lose their “talent”: witness Goldman Sachs’s unusual mid year payout of restricted shares for partners affected by Britain’s bonus tax. But they face growing pressure to cut costs, and 40-50% of their revenues still flow to employees. Chopping people often comes more easily to banks than cutting pay. Bank of America is sacking up to 5% of its capital-markets unit. Others will follow—in a reversal of a hiring spree earlier this year—unless markets improve markedly in the fourth quarter. Meredith Whitney, an analyst with a reputation for prescience, thinks up to 80,000 jobs could go on Wall Street in the next two years.
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It isn’t that homeowners are hundreds of thousands of dollars underwater on their mortgages or lack of a cash to pay closing costs that are keeping them from refinancing, but rather those pesky Fannie fees.

NATION’S HOUSING
Fannie-Freddie add-on fees put damper on refis

The charges, which can add thousands of dollars in upfront costs or raise interest rates, are discouraging potential borrowers. Some mortgage lenders say they are excessive and unjustifiable.

With mortgage rates at unprecedented lows, why are more people not taking advantage of them to refinance or buy houses?

The answers are complex and include sagging consumer confidence in the economy and high unemployment rates. But some mortgage lenders point to what they see as overreactions within their own industry that are discouraging and disqualifying potential borrowers — sharply increased credit score requirements, higher down payments and add-on fees imposed by mortgage giants Fannie Mae and Freddie Mac, which control about two-thirds of the loan volume.
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Say, for example, you want to buy or refinance a condominium. Under Fannie’s latest add-on matrix, a condo buyer who has less than a 25% down payment must pay a 0.75% add-on fee for starters. On a $300,000 condo loan, this comes to $2,250, to either be paid in cash or financed through a higher mortgage interest rate.

The same matrix imposes additional fees based on applicants’ credit scores. For instance, anyone with a FICO credit score of 679 or lower who is buying a house with 20% to 25% down — substantial money for most budgets — is assessed a 2.5% “loan-level price adjustment” fee.

Asked for comment on what justifies the continuing imposition of costly add-ons that date back to lower-quality underwriting conditions, officials of the two companies either did not comment or said the fees are needed to cover potential future losses. Freddie Mac spokesman Brad German said, “We feel we are pricing risk appropriately.” Fannie Mae had no comment.

Private mortgage insurance companies, which provide coverage against loss to Fannie and Freddie on loans with down payments of less than 20%, are especially critical of the continuing add-on fees. They say the extra charges on top of their own insurance premiums routinely discourage borrowers from taking out conventional loans and push them instead to the Federal Housing Administration, whose market share has exploded from under 3% to more than 30% in recent years.

Even with the FHA’s move to raise its monthly insurance premiums to borrowers effective Monday, private insurers say that in many cases Fannie’s and Freddie’s add-on fees still make them noncompetitive. Without the extra charges, they argue, consumers seeking low-down-payment conventional loans could be getting lower rates and fees, but there’s no sign they will.

Bottom line for borrowers: Absent a sudden change in policy, don’t look for the Fannie-Freddie fees to be cut or eliminated. Both corporations have bigger fish to fry. Beginning in early 2011, Congress is planning a major debate on their existence, their structures and how they relate to consumers who simply want to get the best-priced mortgage they can.
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San Diego officer, wife arraigned in home-wrecking case
Couple charged with severely damaging their foreclosed Murrieta house before leaving

By Kristina Davis

Originally published October 6, 2010 at 2:56 p.m., updated October 7, 2010 at 3:16 p.m.

San Diego police officer Robert Acosta and his wife, Monique appeared in Riverside County Superior Court in Murrieta on charges of causing $200,000 damage to their house when it was in foreclosure. Both pleaded not guilty at their arraignment.

MURRIETA — A San Diego police officer and his wife pleaded not guilty Wednesday to felony charges that they caused $165,000 in damage to their foreclosed home and stole $44,000 in property from the Riverside County house.

During an arraignment in Riverside County Superior Court in Murrieta, a judge ordered Robert and Monique Acosta each to be held on $65,000 bail. They have been charged with one count each of damaging or destroying an encumbered property. Both posted bail and did not go to jail.
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Just when it seemed that the used home sales market could not possibly get any closer to shutting down entirely, Foreclosuregate enters the picture!

Flawed Foreclosure Documents Thwart Home Sales
Chip Litherland for The New York Times

Richard Clark, left, with his agent, Kevin Corasio, is trying to buy a foreclosed home in Florida.

By ANDREW MARTIN and DAVID STREITFELD
Published: October 7, 2010

OCALA, Fla. — Amanda Ducksworth was supposed to move in to her new home this week, a three-bedroom steal here in central Florida with a horse farm across the road. Instead, she is camped out with her 7-year-old son at her boss’s house.

Like many buyers across the country, Ms. Ducksworth was about to complete the purchase of a foreclosed house when it suddenly went off the market. Fannie Mae, the giant mortgage holding company that buys loans from commercial lenders, is pulling back sales of homes that might have been foreclosed in bad faith.

“I gave up my rental thinking I would have a house,” said Ms. Ducksworth, a 28-year-old catering assistant. “Now I’m sharing a room with my son. What the hell is up with that?”

With home sales this past summer at the lowest level in more than a decade, real estate is ill-prepared to suffer another blow. But as a scandal unfolds over mortgage lenders’ shoddy preparation of foreclosure documents, the fallout is beginning to hammer the housing market, especially in states like Florida where distressed properties are abundant.
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Well let me try another “thought experiment” on a solution to the MERS mess. It has to do with the legal concept of “escheat”.

When someone dies without leaving a will, the courts will use a “default will” via the law of intestate succession. These laws are pretty much what any fair layman would write for a default will. Your stuff goes to your surviving spouse. If no surviving spouse, to your kids. If no kids, then to surviving parents. Then on to brothers/sisters, first cousins, etc. This seems to accord with our concepts of fairness and closeness of blood relations.

But there is a cut-off after a certain level of remoteness. Someplace out near 3rd cousins twice removed the blood relation closeness (look it up in a table of consanguinity) is so tenuous that the laws of intestate succession call a halt, since those remote relatives may not have even known the decedent. At that point, the decedent’s property “escheats to the state”. The state takes the property for the benefit of the public as a whole.

In the case of not knowing who owns the note for a mortgage, IIUC there is a copy of the note floating around in the paperwork. The note clearly states the payments, the interest charged, etc. What’s at issue is who presently owns the note. If nobody in the chain of assignments can document ownership, why not have the note escheat to the state? Let the state collect the payments for the general good of the people. When the note is paid off, the state can file and record the full reconveyance.

This would be a case of of “too bad” for the speculators who passed the note around without proper recording of assignments. They would lose out. Tough stuff for them.

State legislatures could pass a statute allowing for notes to escheat to the state if purported owners could not show adequate evidence that they own the note. This hardly denies the purported owners their due process: they have the chance to prove ownership. It’s just that they are unable to prove ownership.

I sincerely hope every last Senator who supported this bill gets drummed out of office. Thank you, President Obama, for acting in the interest of the American people.

Washington Extra – Obama kills the bill
Oct 7, 2010 19:03 EDT

Last night Reuters correspondent Scot Paltrow revealed that a bill had sailed through the Senate last week — without public debate — which would have made it significantly harder for homeowners to challenge improper attempts to foreclose on their houses. The legislation, which was sitting on President Barack Obama’s desk for his signature, would have forced courts to recognize out-of-state notarizations, including those stamped en masse by computers in other states, a practice critics say has been used improperly to push through foreclosure orders. Computer notarizations, now valid in around a dozen states, would effectively have become legal nationally, and challenges to improper notarizations made in other states would have become harder and costlier.

Today, after the story became public, the White House announced that Obama was sending the legislation back to the House of Representatives for further discussion – a so-called “pocket veto.” Given the rising chorus of lawmakers calling for all foreclosures to be suspended, the legislation now looks dead.
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Private Money Lending.

private money / hard money, what is its role at this stage of the housing bubble collapse?

what is its role going forward?

what loan to value would you require to fund?

what percentage rate and number of points would you require?

would you look to the equity in the property only or rely on the borrowers credit history as well?

will private money drive the recovery in housing?

As though the housing industry was not already shut down, govt-sponsored life support measures excepted:

Senior White House official: ‘Not sure’ about a national foreclosure moratorium

White House senior adviser David Axelrod signaled Sunday that the Obama administration is opposed to a national moratorium on foreclosures, even as pressure from Congress, labor unions and consumer groups mounts for the federal government to take action.

Calling the growing evidence that lenders have used inaccurately prepared and even fraudulent documents to foreclose on homes a “serious problem,” Axelrod said it had already “thrown a lot of uncertainty into the housing market that is already fragile.”

“I’m not sure about a national moratorium, because there are, in fact, valid foreclosures that probably should go forward, and where the documentation and paperwork is proper,” Axelrod said Sunday on CBS’ “Face the Nation.”

Axelrod said the administration is “working closely” with mortgage companies so that they “expedite the process of going back and reconstructing these and throwing out those that don’t work.”

The foreclosure mess has become a hot-button political issue with mid-term elections coming up. A large number of influential Democrats — including House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid — have called on the federal government to take more aggressive action.

On Sunday, Republican Rep. Eric Cantor of Virginia became one of the first Republicans to speak out. Appearing on “Fox News Sunday,” he warned that freezing the foreclosure process would hurt an already struggling housing market.

“If you impose a moratorium on foreclosures, what you’re telling people and institutions that lend money is they do not have the protection to take the risk they need to, to extend credit so people can get a mortgage,” Cantor said. He added that “you’re going to shut down the housing industry, if that’s the case.”
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White House doubts need to halt all foreclosures
By ALAN FRAM (AP) – 4 hours ago

WASHINGTON — A top White House adviser questioned the need Sunday for a blanket stoppage of all home foreclosures, even as pressure grows on the Obama administration to do something about mounting evidence that banks have used inaccurate documents to evict homeowners.

“It is a serious problem,” said David Axelrod, who contended that the flawed paperwork is hurting the nation’s housing market as well as lending institutions. But he added, “I’m not sure about a national moratorium because there are in fact valid foreclosures that probably should go forward” because their documents are accurate.

Axelrod said the administration is pressing lenders to accelerate their reviews of foreclosures to determine which ones have flawed documentation.

“Our hope is this moves rapidly and that this gets unwound very, very quickly,” he said.

With the reeling economy already the top issue on voters’ minds, the doubts raised over foreclosures and evictions are becoming a political issue with the approach of Nov. 2 elections.
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Axelrod signals White House opposition to foreclosure moratorium
By Tom Cohen, CNN
October 10, 2010 3:10 p.m. EDT

Washington (CNN) — The Obama administration opposes a moratorium on home foreclosures, but wants problems involving improper paperwork resolved as quickly as possible, senior adviser David Axelrod said Sunday.

“I’m not sure about a national moratorium,” Axelrod said on the CBS program “Face the Nation.” He said valid foreclosures with proper paperwork should go forward, and that questionable foreclosures need to be addressed right away.

“Our hope is that this moves rapidly and that this gets unwound very, very quickly,” Axelrod said.

On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The announcement came a week after the nation’s largest bank said it was freezing home foreclosures in 23 states where foreclosures must be approved by the courts.

Ally Financial, previously known as GMAC, the finance arm of General Motors, has also paused foreclosures in the 23 states, and JPMorgan Chase announced last week that it will also halt proceedings for about 56,000 homeowners after learning that its employees may have approved foreclosures without personally reviewing loan files.

State attorneys general have stepped up pressure on banks after it was revealed that some bank employees had signed foreclosure affidavits without verifying that the documents were accurate, a process now known as “robo-signing.”

Ohio’s attorney general has filed a lawsuit against Ally Financial and its subsidiary GMAC Mortgage for allegedly submitting fraudulent documents in hundreds of foreclosure cases across the state.
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Gross Says Employment Report Signals More Fed Easing: Tom Keene
By Liz Capo McCormick and Tom Keene - Oct 8, 2010 2:24 PM PT

Oct. 8 (Bloomberg) — Pacific Investment Management Co.’s Bill Gross said the U.S. may face a prolonged period of stagnation should anticipated asset purchases by the Federal Reserve fail to invigorate economic growth.

“You could have significant problems with a ‘lost decade’ for the United States,” Gross, manager of the world’s biggest mutual fund, said during a Bloomberg Television interview on “Street Smart with Carol Massar and Matt Miller.” “They’re trying to prevent a caving in of the U.S. economy.”

Employers cut staffing by 95,000 workers after a revised 57,000 decrease in August, Labor Department figures in Washington showed today. The median estimate of economists surveyed by Bloomberg News called for a 5,000 drop. The unemployment rate held at 9.6 percent.

The September employment report “is simply a signal, a strong, strong signal for Fed QE2,” Gross said. “We will respond by riding the wave and then trying to anticipate when to get off. There is a certain point in terms of yield levels where it no longer makes sense.”
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If top bankers get to live large above a rule of law, why should American households have to play by any rules, other than avoidance of getting caught?

On the Money: ‘Strategic defaults’ raise fears of ethical collapse

Gail MarksJarvis Chicago Tribune / Mct Arizona Daily Star
Sunday, October 10, 2010 12:00 am

Americans have taken a sharp slap in the face from the housing crisis, financial crisis and jobs crisis. Now some wonder if the residue of those harsh realities is an ethical crisis.

For the first time in the nation’s history, bankers say, people are walking away from mortgages they can otherwise afford to pay. The phenomenon known as strategic default was once unthinkable. It represents a calculated decision to hand over the keys to a home without making good on a loan, reasoning that it makes no sense to keep paying the monthly mortgage when the home is worth thousands of dollars less than the obligation.

Jeff Horton, a 33-year-old Orlando, Fla., technology manager, is among those who recently decided to take the step. He told his lender that he’s done making payments on the condo he bought in 2005 and the home he bought in 2007, because he wants to move from Florida and can’t sell or rent the properties at a price nearly high enough to cover his payments.

“Life is too short,” said Horton, who has mortgages totaling about $400,000 with Bank of America - about twice as much as he thinks he would get if he could sell the property. He says he has little choice because the bank has refused to refinance the mortgages or adjust original terms.

Strategic default is a symptom of a housing market that suddenly turned from “American Dream” to financial trap. With the Norman Rockwell-like images of homeownership destroyed by a 30 percent plunge in prices, some fear America is also losing its grip on another idyllic notion: that people will live by the slogan “My word is my bond.”
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Film Review
A Glimpse Into the Heart of a Rotten System
By Richard Schickel

All right—I give up. I have now sat through Charles Ferguson’s “Inside Job”—the nonfiction version of Oliver Stone’s “Wall Street: Money Never Sleeps”—and I still don’t fully understand our endless financial crisis. Nor do I think the fault is entirely my own. I was upright, alert and taking notes like any Econ. 101 student, and yet I cannot tell you how a credit default swap works or why it is inherently bad for us.

This does not mean that “Inside Job” is a failure. There is, curiously enough, something hypnotic about middle-aged men in suits earnestly explaining how the economy went from bad to worse to terrible a couple of years ago. The film offers us a few admirable guys who issued unheeded warnings about the fragility of the system and a lot more of them who pretty much function as gawkers observing a multi-car crash. I suppose the documentary suffers somewhat from the refusal of the crisis’ big names—Geithner, Bernanke, et al.—to sit for Ferguson’s cameras, but that’s not fatal; unknowns can simultaneously obfuscate and illuminate the story as well as anyone else. Indeed, it seems to me that in some ways they explore the depth of American crookedness better than the Big Names might have done.
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?, We just bought a foreclosure in May 2010. I’m worried about what we are reading about ForeclosureGate. Is there a chance the former owner’s can come back to us and fight the foreclosure?

We are in a non-judicial state. We did buy a title insurance policy as soon as we got the deed.

Dantheman - if you see this you can e-mail me at sd.re.b at hotmail dot com and I will answer the question you asked on the 7th.

Global clash over economy
By Chris Giles and Alan Beattie in Washington
Published: October 10 2010 19:13 | Last updated: October 10 2010 19:13

Global economic co-operation was in disarray and further battles in the currency war looked likely after the weekend’s international meetings of finance ministers and central bankers broke up with no resolution.

The world’s largest economies remained as far apart as ever on currencies. China accused the US of destabilising emerging economies by allowing ultra-loose monetary policy to flood the emerging world with money, while the US insisted the International Monetary Fund should intensify its focus on exchange rates and the reserve accumulation of China.

The lack of any substantive agreements and brinkmanship on proposed reforms to the IMF is likely to exacerbate currency volatility in the month running up to the Seoul Group of 20 summit.

Mohamed El-Erian, chief executive of Pimco, the world’s largest bond investor, said: “A once promising global response has now been replaced by inadequately co-ordinated national economic policies and growing frictions among countries.”

The communiqué following the main IMF meeting spoke of countries working “co- operatively” but contained no evidence that leading economies could find agreement on any of the issues that divide them.

Dominique Strauss-Kahn, IMF managing director, called on countries not just to sign up to warm words but to take concrete steps. “The language is ineffective. The language is not going to change things. Policy has to be adapted.”

But there was little sign that China would let the renminbi appreciate faster, to the growing frustration of the US. “The IMF must strengthen its surveillance of exchange-rate policies and reserve accumulation practices,” said Tim Geithner, US Treasury secretary.

This pressure on China is now being met with stiffer resistance. Zhou Xiaochuan, China’s central bank governor, told the IMF meeting the focus on currencies was one-sided. “The continuation of extremely low interest rates and unconventional monetary policies by major reserve currency issuers have created stark challenges for emerging market countries in the conduct of monetary policy.”
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Investors price in US inflation fears
By Michael Mackenzie in New York
Published: October 7 2010 22:00 | Last updated: October 7 2010 22:55

Investors are betting that an aggressive push by the Federal Reserve to revive the US economy could drive up inflation, with Treasury bond markets pricing in the effects of a return to emergency monetary easing next month.

Inflation expectations in the US have jumped sharply this week, with one measure rising to its highest level since late June. So-called breakeven inflation rates, which are the bond market’s expectations of future inflation levels, have leapt on the growing belief that the Fed will initiate a fresh round of quantitative easing – in effect, pumping money into the economy – at the November meeting of its interest rate-setting committee.

Breakeven rates reflect the difference between yields on cash Treasury bonds and those of Treasury inflation-protected securities, or Tips.

The 10-year breakeven rate rose as high as 1.98 per cent on Wednesday, its highest level since June 24. It is up from 1.8 per cent on Monday and well above its low for the year of 1.51 per cent in late August. By the close in New York on Thursday it had slipped back to 1.91 per cent.

The yield on the 30-year bond above that of the 10-year note has also hit a record at 1.31 per cent, up from 1.16 in September.

As stocks tumbled over the summer, many investors feared the US could suffer a prolonged bout of Japanese-style deflation. The Fed’s message that it is determined to avoid this has led to the recalibration of inflation expectations.

“The price action is telling you that QE is coming and that the Fed will deliver it,” said George Goncalves, head of interest rate strategy at Nomura Securities.

However, Richard Fisher, Dallas Fed president, sought to damp expectations, saying on Thursday: “The markets have drawn too quick a conclusion that this [easing] is a likely event,” Reuters reported.

“If the Fed is successful with QE, inflation breakevens should be higher,” he said.
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Does anyone besides me think the shock and awe model is inappropriate for monetary policy?

Explaining goals of QE2 occupies Fed
By Robin Harding in Washington
Published: October 7 2010 22:00 | Last updated: October 7 2010 22:00

How to communicate the goal of any new round of quantitative easing is turning into the hottest subject for debate among Federal Reserve officials as they contemplate whether to start buying assets again at their November meeting.

There is growing consensus within the Fed on the need to launch a new programme of quantitative easing – nicknamed QE2 – to boost a recovery that is too weak to bring down the 9.6 per cent unemployment rate.

Moderate members of the rate-setting Federal Open Market Committee, such as Charles Evans, Chicago Fed president, have spoken strongly in favour of action in recent days. That has led to a sharp rise in market expectations of inflation and rising global tensions over the likelihood of a weaker dollar.

The communication strategy will be particularly important if the Fed does not announce a big number for asset purchases up front – the “shock and awe” approach – but instead chooses to buy a smaller amount of Treasury bonds now with a promise to buy more as needed.

In that case the nature of the “as needed” would be the biggest signal to markets of the eventual size of QE2. It would, therefore, have the biggest effect on long-term interest rates.

The communication strategy is also important because by signalling how it intends to use QE2 the Fed can try to hold up inflation expectations and so lower real interest rates. The real cost of borrowing money is the interest rate minus expected inflation.

William Dudley, New York Fed president, described asset purchases and communications as “two potentially complementary avenues” in a recent speech. Fed officials are still at the stage of brainstorming ideas but they have several basic options and many variations around them.

In its September statement, the FOMC said inflation was below the level that it thought was consistent with its long-run mandate, so one option would be to tie continued asset purchases to getting inflation back to a “mandate” level.

But different FOMC members prefer different levels of inflation, while in recent months the committee has consistently forecast that inflation will stay low for years to come without taking action. That makes it hard for the Fed to signal what has now changed.

Some officials, therefore, argue that the Fed should set out an explicit numerical inflation objective – such as 2 per cent – and tie QE2 to achieving it or being on course to achieve it.
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US economy in pain after house price crash
By Robin Harding in Washington
Published: October 8 2010 20:24 | Last updated: October 8 2010 20:24

There is a fairly straight line between a weak US jobs report and the fears about currency manipulation occupying global finance ministers as they assemble in Washington this weekend for the annual meeting of the International Monetary Fund.

A slow recovery in the US increases the chance that the Federal Reserve will launch a new round of quantitative easing. That would lower long-term US interest rates and weaken the dollar – a boon for US exporters but not for countries whose economies rely on exports in the other direction. They may intervene to lower their own currencies in turn.

For all concerned, therefore, the questions are how weak is the US recovery and what does that say about how much quantitative easing the Fed might want to do?

“The jobs data are soft and going nowhere – there’s just no momentum,” said Paul Ashworth, senior US economist at Capital Economics in Toronto. More than a year into the recovery, the economy ought to be creating 300,000 to 400,000 jobs a month if it is to bring the 9.6 per cent unemployment rate down with reasonable speed.

The private sector is creating a modest number of jobs: it added 64,000 people to payrolls last month, and the figures for July and August were revised upward by a total of 36,000. There is little in such figures to suggest the US economy could dip back into recession.

Most economists think the problem is the legacy of a house price crash that left households with big loans backed by much less valuable property. As a result, they need to rebuild their savings. More jobs are essential to increase the incomes that consumers have to drive the economy onward.
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* U.S. NEWS
* OCTOBER 11, 2010

Foreclosure Delay Poses Risk
Some Fear Moratorium Amid Document Imbroglio Could Slow Housing Recovery

By ROBBIE WHELAN

As politicians step up their interventions to slow down the pace of foreclosures amid concerns about widespread document fraud, economists say such delays could deal another blow to a still-weak housing market.

They fear a slowdown could inflate the inventory of unsold vacant homes—delaying the day they’re put on the market—especially in the 23 states in which foreclosures must be approved by a judge.

One comparison widely cited: In California, where judges don’t handle foreclosures, the housing market appears to have hit bottom a year ago and has been bouncing back. In Florida, where foreclosures go through the court system, prices keep falling, and foreclosure inventory continues to rise.

On Friday, Bank of America Corp. announced it would suspend foreclosure sales in all 50 states. That follows the bank’s earlier suspension of tens of thousands of foreclosures in the states that handle foreclosures through the court system, a move also taken by GMAC Home Mortgage, Inc., a unit of Ally Financial Inc., and J.P. Mortgage Chase & Co.’s home-loan unit.

Meanwhile, several state attorneys general, as well as members of Congress, are calling for an across-the-board foreclosure moratorium to sort out alleged irregularities in foreclosure documents submitted by the banks.

White House adviser David Axelrod on Sunday questioned the need for a moratorium, saying that valid foreclosures with accurate documents should go ahead. “Our hope is this moves rapidly and that this gets unwound very, very quickly,” he said on CBS’s “Face the Nation”

But Richard Cordray, Ohio’s attorney general, said Sunday that as many as 40 state attorneys general across the country intend to open an investigation of lenders and servicers to figure out the scope of the problems with foreclosure documents.

While it remains unclear how long the foreclosure process will be stalled, economists say any delay is bad for the housing market long-term. “Foreclosures are being delayed with good intentions, to protect consumers, but it’s really just delaying the inevitable,” says John Burns, a real estate consultant in Irvine,Calif. “They’re delaying the eventual housing recovery.”
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Extend and pretend — FOREVER!

Foreclosure freeze shakes battered home market
By Chris Isidore, senior writerOctober 8, 2010: 6:50 PM ET

NEW YORK (CNNMoney.com) — Get ready for a bumpy ride in the housing market.

The growing number of freezes on home foreclosures is likely to shake up the struggling U.S. housing market. Experts say home prices could rise in the short term, but the eventual glut of foreclosure sales could hurt the market in the long run.

The move by some major lenders such as Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Ally Financial to put some of their foreclosures on hold could help temporarily lift prices, by removing the inventory of bargain-basement foreclosed properties from the market.

“Home prices are likely to be firmer than otherwise would be the case in the fourth quarter and into early next year,” said Mark Zandi, chief economist at Moody’s Analytics.

While that’s good news for the economy, the effects might be short lived. That’s because the foreclosure freezes are also likely to delay sales of the huge inventory of foreclosed properties, which would hinder a long-term recovery in prices.

“It’ll probably push out the distressed sales into 2011 and 2012,” said Zandi.
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Posted on Friday, 10.08.10
Foreclosure freeze widens as fears grow

Bank of America halted foreclosure sales nationwide, and more drama is expected in a crisis that has rattled South Florida’s market.

The Business Show: Real Estate
By TOLUSE OLORUNNIPA AND INA PAIVA CORDLE
tolorunnipa@MiamiHerald.com

Thousands of foreclosure sales — which have become the engine of South Florida’s housing market — have been thrown into a tailspin by jarring testimonies of bank employees who signed legal documents by the thousands without properly reviewing them.

The result: Allegations of fraud and forgery are surfacing daily, and the ramifications of banks’ shoddy bookkeeping are beginning to manifest in what has become an uncharted foreclosure environment.

Banks have frozen foreclosure proceedings, title insurers are blacklisting bank-owned properties, judges are denying summary judgments and distressed homeowners are arming themselves with attorneys in attempts to delay or stave off foreclosure.

“This is going to change everything,” said Shari Olefson, Fort Lauderdale attorney and author of Foreclosure Nation: Mortgaging the American Dream.

On Friday, Bank of America announced it would be halting all foreclosure sales nationwide, the aftermath of revelations by so-called “robo-signers.”

Other lenders — JPMorgan Chase and GMAC — have also suspended their foreclosure operations, and some potentially tainted Fannie Mae foreclosure sales are being delayed as well. Together, these lenders own more than 3,000 properties for sale in South Florida — more than two-thirds of the inventory.

There is mounting speculation that more lender suspensions are yet to come.

While the nation’s other top residential mortgage lenders — Wells Fargo and Citibank — have maintained that their foreclosure processes are clean, recent depositions show more lenders may soon be facing the same allegations that have hampered other banks.
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I know an even better way for banks to eliminate paperwork than using MERS services: Just loan any amount of money to anyone who can breath, no questions asked. If they stop repaying the loan, foreclose, and sell the home to somebody else. No paperwork = no servicing costs!

* OCTOBER 10, 2010, 8:49 P.M. ET

Little-Known Record Firm Faces Foreclosure Challenges

By Matthias Rieker
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–Challenges to the role of a little-known but influential mortgage-record service are emerging as the latest headache for banks in the battle over foreclosure proceedings.

Mortgage Electronic Registration Systems, or MERS, is owned by some of the nation’s biggest banks and mortgage companies, including Bank of America Corp. (BAC), Citigroup Inc. (C), HSBC Holdings plc (HBC), Fannie Mae (FNMA) and Freddie Mac (FMCC). It was created to streamline legal record keeping for mortgage sales and securitization.

Now, critics and homeowners facing foreclosure are increasingly challenging, among other things, MERS’ role and legal standing in home foreclosures where it acts as legal representative of the mortgage holder. MERS has fought and won legal challenges in the past to its role. But the nationwide epidemic of foreclosures in the wake of the housing collapse will present it with a wave of challenges unlike any it has seen previously.

“It is predictable that” MERS and the banking industry “is bound to lose some” of the cases against it, said Kip A. Weissman, who advises banks as a partner with law firm Luse Gorman Pomerenk & Schick PC in Washington, D.C.

Trouble for MERS could add risk to banks by slowing down the securitization process, and creating uncertainty during a time when banks are struggling to reassure shareholders and customers. One hedge fund investor said Friday questions around MERS are adding to his concerns about banks in the mortgage business and are keeping him from investing in the sector.

In recent weeks, Bank of America, J.P. Morgan Chase & Co. (JPM) and Ally Financial Inc. agreed to more closely examine documents used in states where a court’s approval is required to foreclose on a home. On Friday, Bank of America imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes until it could resolve documentation problems.

R.K. Arnold, chief executive of MERS, told Dow Jones in an interview on Sunday, “There is no doubt there will be more litigation” against his organization. But MERS, he said, has already won thousands of cases challenging its legal standing (only losing some due to procedural slips.) Of the new suits, “We will win them all,” Arnold said. “What we won’t do is settle; that’s our firm’s policy.”

MERS saves banks money because it eliminates paperwork. When mortgages or mortgage servicing rights change hands, as happens frequently in the mortgage business, MERS stands in for the owners and servicers in county land records. About half of the nation’s mortgages are under such arrangement with MERS, Arnold said.
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Foreclosure Freeze Could Have Mixed Results

As many of you have doubtless read over the past week or so, it seems that some loan servicers have been a bit lax in following those pesky “rules” when processing foreclosures.

In some states, California not among them, the foreclosure process requires that servicers sign an affidavit swearing that they have confirmed certain facts about the loan to be foreclosed upon. In their efforts to blaze through all the piled-up foreclosures, some servicers signed such forms in bulk without having actually confirmed the individual facts. This puts the legitimacy of some foreclosures into question.

Some servicers had already halted foreclosure proceedings in the states that require these forms. Today, industry giant Bank of America announced that it would freeze foreclosures in all fifty states pending a review of its processes. Politicians are pressuing others to follow suit.

At first glance this might appear to help the housing market by keeping homes with delinquent loans off the market, at least for a while. But the breakdown of the foreclosure-processing machinery creates some potential headwinds as well.
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This Realtor with a two-year college degree proved far more prescient about the housing market than the former chair of Princeton’s economics department and the former CEO of Goldman Sachs. How embarrassing for Princeton and Goldman Sachs!

Posted on Sunday, 10.10.10
FARK it!

Real estate agent’s warnings of housing bubble unheeded
By GREG GORDON
McClatchy Newspapers

WASHINGTON — Former Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and other top government officials have said they didn’t notice the dangers that Michael Blomquist saw in the runaway California housing market until five years after he did.

As home prices and loan amounts in California’s Silicon Valley, one of the nation’s hottest markets, began mushrooming in late 2003, Blomquist said, lying, scheming and recklessness were becoming everyday occurrences.

Blomquist, a San Jose real estate and mortgage broker, was sure that the inflated incomes on loan applications and the tricky loans would lead to a housing bubble with disastrous consequences.

Refusing to commit “felony mortgage fraud,” he closed his offices in January 2004, long before the housing meltdown, and began a sort of one-man crusade to expose what he calls “a criminal conspiracy to turn the housing market into a giant Ponzi scheme.”

Over the next four years, Blomquist futilely tried to dissuade clients and friends from putting their life savings into pricey homes. He wrote letters warning federal regulators and members of Congress that mortgage fraud was creating “a perfect storm” in the housing industry.

Acting as his own attorney, he even waged a federal court fight against some of the biggest subprime players, as well as Paulson and other top federal regulators, accusing them of conspiring to fraudulently inflate home prices and asking the court to bar the issuance of one widely used type of risky mortgage.

Responding to Blomquist’s letter on Sept. 1, 2005, Democratic Sen. Dianne Feinstein of California assured him that she was “monitoring the situation closely.” Suzanne Killian, an assistant director of the Federal Reserve’s consumer unit, advised him later that month that his concerns would be considered.

In the end, however, his warnings brought no serious action until the bubble began to burst.

Did Blomquist, with his inside view of the market, have a better understanding than did Bernanke and his predecessor at the Fed, Alan Greenspan, who failed to rein in subprime mortgage lenders? Could Blomquist, with a two-year college degree, have a better grasp of the danger than did Paulson, who oversaw Wall Street giant Goldman Sachs’ investment in subprime mortgage securities and was the treasury secretary when the market crested?

That’s hard to know.

What’s clear is that Blomquist set himself apart from tens of thousands of real estate agents nationwide who rode the mania and kept selling properties for spiraling prices until they crashed.

“When fraud becomes the competition, anybody who has any ethics is driven out of business,” he said. “As a fiduciary, I felt I couldn’t do my job. Your role is to be aware of market conditions. … You’re supposed to put clients’ interests ahead of your own.
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* OPINION
* OCTOBER 11, 2010

The Fed Compounds Its Mistakes
Talk of increasing inflation to reduce unemployment is dangerous and unnecessary.

By ALLAN H. MELTZER

The Federal Reserve seems determined to make mistakes. First it started rumors that it would resume Treasury bond purchases, with the amount as high as $1 trillion. It seems all but certain this will happen once the midterm election passes.

Then the press reported rumors about plans to raise the inflation target to 4% or higher, from 2%. This is a major change from the Fed’s quick rejection of a higher target when the International Monetary Fund suggested it a few months ago.

Anyone can make a mistake, but wise people don’t repeat the same one. Increasing inflation to reduce unemployment initiated the Great Inflation of the 1960s and 1970s. Milton Friedman pointed out in 1968 why any gain in employment would be temporary: It would last only so long as people underestimated the rate of inflation. Friedman’s analysis is now a standard teaching of economics. Surely Fed economists understand this.

Adding another trillion dollars to the bank reserves by buying bonds will not relax a constraint that is holding back spending. There is no shortage of liquidity in the economy—banks already hold more than $1 trillion of reserves in excess of their legal requirements, and business balance sheets show an unprecedented amount of cash and near-cash assets. True, increasing bank reserves means mortgage rates will decline, at least temporarily; they already have in anticipation of the bond purchases. But neither the Fed nor the public should expect much stimulus as a result.

The most important restriction on investment today is not tight monetary policy, but uncertainty about administration policy. Businesses cannot know what their taxes, health-care, energy and regulatory costs will be, so they cannot know what return to expect on any new investment. They wait, hoping for a better day and an end to antibusiness pronouncements from the White House. President Obama could do more for the economy by declaring a three-year moratorium on new taxes and new regulation.

Homebuilding is a major employment industry. Lowering mortgage rates helps a bit, but it is small beer when the supply of unsold houses remains large. The only lasting solution for housing is to let prices fall to a new equilibrium. Painful, yes, but necessary. Temporary palliatives such as lower interest rates delay that adjustment.
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Foreclosure alarms rang months ago
By Zachary A. Goldfarb
Washington Post Staff Writer
Sunday, October 10, 2010

Consumer advocates and lawyers warned federal officials in recent years that the U.S. foreclosure system was designed to seize people’s homes as fast as possible, often without regard to the rights of homeowners.

In recent days, amid reports that major lenders have used improper procedures and fraudulent paperwork to seize properties, some Obama administration officials have acknowledged they had been aware of flaws in how the mortgage industry pursues foreclosures.

But the officials said they could take only limited action to address the danger. In part, this was because they wanted lenders’ help carrying out federal programs to modify mortgages that had fallen into default or were poised to do so.
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I’m surprised and encouraged by the Obama administration’s decision to withhold support from Megabank, Inc’s collusive attempt to shut down the entire U.S. used home market through a national foreclosure moratorium. Now if only someone on high would invoke the Sherman Antitrust Act to break up monopoly mortgage lenders, we might get somewhere towards healing the housing market. Perhaps with persistent effort, we could return to an era where one could once again accurately say that “All Real Estate is Local.”

Obama administration does not support U.S. moratorium on foreclosures
By Ariana Eunjung Cha and Dina ElBoghdady
Monday, October 11, 2010

The Obama administration does not support a nationwide moratorium on foreclosures at this time, Federal Housing Administration Commissioner David Stevens said Sunday in an e-mail response to questions.

“We believe freezing foreclosures for all banks in all states, whether we have reason to believe them to be in error or not, is simply not the prudent step to take in this fragile housing market,” he said.

With approximately one in four homes sold in the second quarter in foreclosure, administration officials worry that a moratorium could have a significant impact on the economic recovery.

“While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse,” he added.

Stevens’s comments echoed those made earlier in the day by White House senior adviser David Axelrod, who on CBS’s “Face the Nation” outlined the administration’s current thinking about the issue as pressure from Congress, labor unions and consumer groups mounts for the federal government to take action.

Calling the growing evidence that lenders have used inaccurately prepared and even fraudulent documents to foreclose on homes a “serious problem,” he said it had already “thrown a lot of uncertainty into the housing market that is already fragile.”

“I’m not sure about a national moratorium, because there are, in fact, valid foreclosures that probably should go forward, and where the documentation and paperwork is proper,” Axelrod said.

He said the administration is “working closely” with mortgage companies so that they “expedite the process of going back and reconstructing these and throwing out those that don’t work.”
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