7. August 2008 by admin.

The current mortgage crisis in US has affected the profits of the top European insurers. The DJ Stoxx European insurance sector has fallen around 21 percent so far this year, broadly in line with a similar decline in the FTSE Eurofirst 300 index. Only RSA Insurance Group, British commercial insurer, managed a first-half profit increase among the top European insurers. Allianz, Europe’s biggest insurer, posted a lower second-quarter net profits this week. Net profit at AXA, the second-biggest insurer in Europe, fell 32% to $3.35 billion, due to loss stemming from write-downs on fixed incomes assets.

Certain Asia Pacific stock markets dipped as earnings from mortgages dropped. The MSCI Asia Pacific Index was 0.7 per cent lower at 128.27 by late afternoon in Tokyo. The Nikkei 225 average closed 1 per cent lower at 13,124.99 and the broader Topix index ended 1.4 per cent lower at 1,258.81. In South Korea, the Kospi closed 0.9 per cent lower at 1,564.00, off the day’s lows. China’s markets fared better as the Hang Seng index closed 0.7 per cent higher at 22,104.20 while the main sub-index of mainland companies listed in Hong Kong was almost unchanged at 11,943.85 and Shanghai composite index closed 0.3 per cent higher at 2,727.58. In India, the Sensex was 1.3 per cent higher by mid afternoon in Mumbai at 15,274.81.

Spending is down in Britain as the probability of recession, increasing cost of living and falling house prices in Britain have hurt consumer confidence. Consumer confidence plummeted by 18% last month and Nationwide’s House Price. Although leading lenders have reduced the cost of fixed-rate mortgages, expectations index predicts a 4.8% drop in housing growth over the next six months and the Centre for Economic and Business Research expects property prices to drop by 8% this year and four per cent next year.

In odd news:
The mortgage crisis in Sydney affects even the rich. A former millionaire defaults on his harbor-front home.

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6. August 2008 by admin.

Subprime and Alt-A loans, which accounted for nearly 40% of loans during the peak of housing boom, have disappeared as lenders are imposing stricter rules for financing that require increased down payments and premiums on loans in “declining markets.” Lenders have become more thorough in verifying income and scrutinizing the ability of borrowers to afford the mortgage, taxes and insurance. New buyers complain, however, that lending rules change too fast. In some parts of the country, such as Reno, up to one-third of the deals that are in the final stages of closing have still not closed after 90 days — three times as long as closings typically take as a greater number of closings are falling through, often because lending regulations tighten up after the borrower has been pre-approved.

Freddie Mac posted its fourth straight quarterly loss of $821 million, or $1.63 cents per share compared to a profit of $729 million, or 96 cents per share a year earlier. The second-quarter loss follows a $151 million loss in the first quarter and brings its cumulative loss over the past four quarters to more than $4.6 billion. With losses larger than expected by many analysts, Freddie Mac shares plummeted by more than 17 percent from yesterday’s closing price of $8.04. Freddie Mac’s CEO, Richard Syron, said that Freddie will remain committed to raising $5.5 billion of new capital.

Governor of New York, David A. Paterson, signed into law a critical subprime lending reform bill that would immediately help protect people from losing their homes and require reforms to help avoid a similar crisis in the future. The bill also calls for a balance between consumer protection and the availability of affordable credit.

In shorter news:
First Priority Bank of Bradenton, Florida is first bank to fail in FL since 2004 and the eighth bank to fail this year in the US.

Mortgage application volume rose 2.8% during the week ending Aug.1, refinance volume increased 4.4% and purchase volume grew 1.8%.

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5. August 2008 by admin.

In 2004, Freddie’s CEO, Richard F. Syron, was cautioned by high ranking executives against financing questionable loans that would “pose an enormous financial and reputational risk to the company and the country.” He was also told that there was a need for expansion of its capital cushion. However, Syron told his executives that Freddie “couldn’t afford to say no to anyone.”

The new and bigger wave of defaults is predicted to come from homeowners with good credit, with defaults on alternative-A mortgages quadrupling to 12 percent and defaults on prime loans doubling to 2.7 percent in April from a year earlier. Homeowners are also faced with a struggling economy that includes another drop in home prices and a rise in unemployment rate in July that reached a four-year high.

Freddie Mac are expected to post quarterly loss of $388 million, or 60 cents a share, according to an average of 11 analysts surveyed by Bloomberg while Fannie is expected to post a loss of $763 million or 74 cents a share. Both are expected to report net losses through the first quarter of 2009. Credit Suisse analyst Moshe Orenbuch rates both mortgage companies as “underpeform”. Orenbuch expects Freddie to have second-quarter loss of $1.9 billion and Fannie’s loss to be around $2.4 billion.

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25. July 2008 by admin.

Wachovia Bank reported losses of $8.9 billion Tuesday and future layoffs of more than 6,000 workers while Regions Financial Corp reported a 55 percent drop in earnings in the second quarter and layoffs of 600 positions in June. Despite reporting massive drops in second-quarter earnings Tuesday, Wachovia Bank and Regions Financial Corp. stocks climbed on Wednesday since many investors believe that the it can’t get much worse and that Washington will not let such large banks fail.

Mortgage rates rose this week with 30-year mortgages climbed from 6.26% last week to 6.63% this week, the highest level since the week of August 1 of last year. Rates on 15-year fixed-rate mortgages rose to 6.18 percent, up from 5.78 percent last week. Economists believe that this is reflective of concerns in financial markets about the mortgage losses at corporate giants Fannie Mae and Freddie Mac.

Due to falling U.S. home prices, write-downs by financial firms will rise to $1 trillion, an astounding figure that will probably curb bank lending and increase sales of assets if not matched by capital raising. According to Gross of Pacific Investment Management Co., a total of $5 trillion of mortgage loans, or almost half of the nation’s home loans, belong to “risky asset categories” such as subprime and Alt-A, with 25 million U.S. homes being at risk of negative equity. This situation could lead to more foreclosures and a further drop in prices.

In odder news:
“Extreme Makeover” homeowners default on a $450,000 loan they took out on their gifted house.

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24. July 2008 by admin.

A federal grand jury in Los Angeles has begun investigations for fraud and other crimes by Countrywide Financial Corp., New century Financial copr. and IndyMac Federal Bank and their executives that may have contributed to the mortgage crisis. Some believe that this could be the the biggest financial fraud case since the savings and loan crisis of the 1980s. The FBI has also started investigations on 21 cases against corporate and other large entities, which include securities firms, hedge fund operators, credit ratig agencies and mortgage brokers and lenders, related to the subprime market collapse.

American Housing Rescue and Foreclosure Prevention Act was passed today in the House, which will allow families to refinance into more affordable lower-cost government-insured mortgages, provide tax breaks to encourage home buying, and providing the Treasury with emergency and temporary financing authority for Fannie Mae and Freddie Mac.

Both existing-home sales and median price of homes continued to fall in June. Home resales slid to a 4.86 million annual rate, a 2.6% decrease from May’s unrevised 4.99 million annual pace, the National Association of Realtors said Thursday. The median home price was $215,100 in June, down 6.1% from $229,000 in June 2007. The median price in May this year was $207,900. The beleaguered US economy also met news of the rise in number of U.S. workers filing new claims for unemployment benefits last week, matching a three-year high.

In sadder news:
Carlene Balderrama, 53-year-old Tuanton, MA resident, committed suicide ninety minutes before her foreclosed home was to be sold at auction. Balderamma faxed a letter to her mortgage company in which she wrote, “By the time you foreclose on my house I’ll be dead.”

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22. July 2008 by admin.

The CEOs of Fannie Mae and Freddie Mac made a combined $30 million in salary plus perks last year, despite the mortgage lenders’ financial problems.  Fannie and Freddie, which hold or guarantee nearly half of the $12 trillion U.S. mortgage market, have seen their stock prices tumble from over $60 a share in 2007 to under $10.  Such high salaries have angered some who believe that executives should be punished for their poor management.  Instead they receive high salaries and government bailouts when trouble arise. 

Governor Arnold Schwarzenegger of California announced the launch of the Community Stabilization Home Loan Program, a special program designed to help first-time homebuyers purchase homes in communities hardest hit by the foreclosure crisis.  Under the program, first-time homebuyers will be eligible for below-market interest rate loans to purchase foreclosed homes in ZIP codes with some of the state’s highest foreclosure rates.  $200 million have been allocated to the program.  

When asked about his plans for Fannie and Freddie, McCain was cautious and only said, “We will not allow them to fail.”  Despite his past vocal criticism of government-backed companies and “no bailout, tough love philosophy,” McCain is expected to support governmental bailout along with regulation and reform. 

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20. July 2008 by admin.

Non-whites’ loss of wealth from foreclosures and falling home values is estimated to be $164 billion to $213 billion, with blacks losing $71 billion to $92 billion and Latinos losing $75 billion and $98 billion.  The police force in Antioch, a suburb near San Francisco, is accused of harassing black renters receiving federal vouchers by pressuring landlords and housing authority officials to evict them and illegally searching their homes without search warrants.  Although Maine ranks low in states with high rates of foreclosures, one of its county, Waldo County, is experiencing an alarming increase in foreclosure rates this year, about six times that of previous years.  Some blame the financial institutions for alleged deceptive lending.  The Des Moines community in Iowa unite to inform homeowners facing foreclosures of free confidential counseling.  Research shows that 50 percent of people who are unable to pay their mortgage never contact their lender or seek assistance from a trained counselor.  Major data sources’ reports differ in their rankings of states with high foreclosure rates.  Although California, Nevada and Florida consistently ranks high in such reports.   

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16. July 2008 by admin.

US mortgage applications rose for the third consecutive week.  Lenders are making it harder on borrowers to avoid buying mortgage insurance.  However, mortgage insurers are toughening standards to make it harder on borrowers to do so.

Fannie Mae and Freddie Mac’s shares fell 17% on Tuesday despite Fed’s reassurances.  However, shares of both rose today due to a bank rally and SEC’s warnings against the spreading of false rumors and short-sales of both shares will be subject to a pre-borrow requirement.  Bush’s economic outlook is that of an “optimist,” but Bernanke’s view is more pessimistic, although he stopped short of declaring a recession.   Nouriel Roubini of New York University’s School of Business believes that we are in a midst of a recession due to a “systemic financial crisis, [and] there is no end to it.” 

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14. July 2008 by admin.

Feds imposes new rules to curb deceptive lending and borrowing practices. Among the new rules, lenders must receive proof of a borrower’s income before issuing a loan and make sure risky borrowers set aside money to pay for taxes and insurance. Lenders will also be restricted from penalizing prepayments, making a loan without considering a borrower’s ability to repay a home loan from sources other than the home’s value, and advertising “fixed” rates or payments without making clear that these “teasers” rates last for only a limited period of time. However, some believe that more regulation is needed.

After IndyMac’s failure prompted a federal seizure and a massive customer withdrawal, investors expressed their concerns on possible failures of other regional banks. Shares of banks were down, particularly those of Washington Mutual and National City, which plummeted about 30%.

Despite the Feds and Treasury’s reassurances that they would step in to help Fannie Mae and Freddie Mac, Asian markets are still worried. Asian central banks and financial institutions are major holders of US debt and both Fannie Mae and Freddie Mac. China and Japan owns $376 billion and $229 billion, respectively, of the $1.3 trillion foreign-own debt issued by the US government agencies.

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9. July 2008 by admin.

If new accounting rules go into effect, Fannie Mae and Freddie Mac would have to raise $75 billion in new capital, causing both of their shares to plummet on Monday: Fannie shares closed at 15.74 (from a peak of 70 last August) and Freddie close d at 11.91 (from a peak of 67.20 last August). 

New estimates of total credit losses from subprime mortgages could reach $1.6 trillion, with only $400 billion recognized.  

On Monday, IndyMac Bancorp, one of the largest providers of alt-A home loans, said it would stop accepting loan applications and halve its workforce from 7,200 to 3,400.  The $32 billion bank told regulators that it is no longer “well capitalized.”  

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