Economy

The Battle Over Housing the Poor

A July/Aug. Atlantic Monthly article by Hanna Rosin about how a recent rise in crime in Memphis neighborhoods was linked to the demolition of public housing projects and the dispersal of residents with Section 8 vouchers throughout those communities prompted controversy and comments. The conclusions in the piece seemed to contradict the long-held notion that getting people out of overcrowded, run-down housing projects was the best option for fighting poverty and crime, and for improving their lives. As Miriam Axel-Lute explains in Rooflines.org, a blog published by the National Housing Institute, the article sounds "like fighting words to all low-income advocates, fair housing advocates, and people who don't believe that the poor are inherently criminal." Some of the criticism turned political, charging Rosin with demonizing public housing residents and giving the right wing new ammunition.

When Loan Workouts Don't Really Work

Can we just stop the madness now and come out and say it - voluntary loan workouts aren't doing much of anything to stem the mortgage crisis? Hope Now, a private sector group assembled by the Bush administration, released its latest numbers on Wednesday and, although they were, well, kind of awful, the Hope folks did their best to spin them. Sure, the number of workouts declined in May, the group said. But they're on track to complete a total of about 520,000 workouts in the second quarter, the highest since the program began.

Of course it all depends on how you define "workout." If you earn a modest income and you've got an interest only loan that recently reset so that your mortgage payment totals close to $4,000 or so - something not atypical these days - you need your loan modified entirely, the terms changed from top to bottom. You've got to convince the lender to reduce the interest rate on the loan or to convert it to a fixed-rate mortgage. That's a true loan workout.

The FDIC Finally Figures Out that Banks Don't Play Fair

HousingWire reports that the FDIC sent letters to the banks it regulates, warning them over their handling of properties that they've foreclosed on and still own. The FDIC reminded banks of the importance of developing and putting into place policies to handle their bank-owned real estate, known as REOs. If I can translate for a second, the agency basically was telling banks they still have to pay taxes and other bills on the properties they have foreclosed on but cannot sell.
Here's are more interesting details, from HousingWire:

A New Name for the Pain

If you've been wondering how, exactly, to describe the current state of economic pain we're experiencing, John Kay at the Financial Times has the answer.

Kay launched a contest for readers to come up with the pithiest term for an anti-bubble. Going cute wasn't the answer, Kay said, so right away "elbubb" was tossed off the table. But anything too complicated wouldn't fit, either; Kay said specifically that "the word must be short enough to be part of the vocabulary of Jim Cramer of CNBC."

Kay liked "trubble," especially for the Shakespeare allusion, but felt it didn't go far enough. I might have suggested the Great Depression, except that it's already taken.
Readers who didn't win the contest still came up with ways to explain the current mess far more succinctly than experts have, Kay noted:

Did Schumer Cause a Bank Run?

Since we're on the subject of IndyMac today, it seems the troubled lender - the subject of a scathing report just issued by the Center for Responsible Lending over its lending practices and the target of speculation that it's about to implode - also experienced a minor bank run over the weekend. IndyMac's not blaming the run on the fact that it lost $184.2 million in the first quarter of this year, compared to a profit of $52.4 million just a year earlier. Nope, that has nothing to do with it, the bank says. There's another culprit -  Sen. Charles Schumer of New York.

A posting on the bank's internal blog says letters that Schumer sent to federal regulators last week, urging them to monitor the lender closely and warning of risks to taxpayers should bank collapse, spurred the bank run. Depositors withdrew about $100 million on Friday and Saturday after Schumer's letter to regulators became public, the bank's communication director wrote. Customers lined up at San Gabriel Valley branches to get their money, the Los Angeles Times said:

Required Reading in Subprime Land

Here's a fascinating look into just how IndyMac Bankcorp., a once-hot mortgage lender now on the verge of collapse, really worked. It's just out from the Center for Responsible Lending, and it's important because it documents something long suspected but not always proven in the subprime market - that orders to mislead borrowers and push risky loans came straight from the top.

There Are No Children Here

Here's a part of the foreclosure crisis that hasn't gotten much attention: What happens to children in families forced to move because they've lost their homes?

At creditslips.org, bankruptcy expert Elizabeth Warren finds some clues in a new report by the American Bankruptcy Law Journal. It concluded that among economically distressed families, those with children were twice as likely to try to hold on to their homes, both before and during bankruptcy. Parents would struggle to make expensive mortgage payments for as long as possible, putting aside other pressing financial needs. For them, losing a home was particularly painful, because they feared the lifetime effect it might have on their children.

Moving Right or Dodging Bullets?

Housing advocates criticize Democrats for watering-down or cutting proposals that would curb predatory lending and push banks to refinance troubled loans.

Addington and Yoo Put Under Oath

Making a special guest appearance, House Judiciary Committee Chairman Rep. John Conyers (D-Mich.) -- who says "I've come here to give you the benefit of the doubt" and fools no one -- puts on the monitor a clip of Sen. Lindsay Graham (R-SC) at last week's Senate Armed Services Committee hearing saying that Addington and Yoo's legal guidance was "some of the most irresponsible and shortsighted legal analysis ever provided to our military and intelligence communities." Addington looks even less pleased than he did five minutes ago.

Dodd Scandal No Hurdle To Housing Bill

The Senate on Tuesday voted overwhelmingly to end debate on legislation tackling the nation's housing crisis, setting the stage for final passage of the bill, which could come later today. Some conservative Republicans had pushed to delay the vote in the wake of the news that the bill's sponsor, Senate Banking Committee Chairman Christopher Dodd (D-Conn.), had received special rates on loans taken out from Countrywide Financial, which stands to benefit under the bill.

State of Play: More Bad News For the Housing Market

The housing market is still looking dreary. The average home price for 20 metropolitan areas fell 1.4 percent between March and April, according to the Standard & Poor's/Case-Shiller Home Price Indexes, which measures home prices in 20 markets around the United States. That's a 15 percent drop from March 2007.  According to The New York Times, Los Angeles and Miami have felt the pinch most acutely, with a 12-month decline of more than 26 percent. There was some good news in eight cities, including Boston, Chicago and Dallas, where home prices saw a slight increase from March to April.

Former U.S. Federal Reserve Chairman Alan Greenspan was not making anyone feel better, telling a conference in Johannesburg that the U.S. economy is on "the brink of a recession, with the chances of that happening at more than 50 percent."

Wall St. Still Hasn't Learned

The credit crisis was the result of banks using excessive leveraging. Lehman's decision shows Wall Street still doesn't get it.

Either a Bold Stand or a Conflicted Man

In the category of non-news, this Harry Reid (D-Nev.) quote is nonetheless striking coming from a guy who once headed the Nevada Gaming Commission. From an interview with Baltimore's WJZ-TV yesterday (Maryland is considering a proposal to allow slots in certain counties):

Your Credit Card Company Says, 'For Shame!'

Now this is rich: Credit card companies apparently monitor your spending and cut credit lines when they think you've gone morally astray. So if you've been to a marriage counselor, run up a bar tab, gone to a billiard hall, or visited a massage parlor, your credit issuer might limit your credit in return.

The allegations that credit firms go far beyond FICO scores for credit decisions came in lawsuit filed in federal court in Atlanta by the Federal Trade Commission against subprime card issuer CompuCredit. The FTC contended the firm didn't properly disclose these practices, BusinessWeek says, in a story entitled "Your lifestyle may hurt your credit." The FTC suit "offers a rare look inside the opaque business of credit scoring," the story explains. From BusinessWeek:

Former Subprime Hot Shots Take A Walk

For all you perp walk fans out there - yes, you have watched too many "Law and Order" reruns - here's former Bear Stearns managers Ralph Cioffi and Matthew Tannin taking their perp walks to federal court in Brooklyn, in this photo gallery from Bloomberg. The two were charged with securities fraud today stemming from their roles in the subprime mortgage meltdown. No doubt video should be available soon.
 

Subprime Players Set for Perp Walk

Dodd Fallout: GOP Senators Pushing Housing Bill Delay

The timing for Sen. Christopher Dodd (D-Conn.) could not have been worse: Just as the Senate Banking Committee chairman was finalizing a bipartisan deal on legislation aiming to stem the nation's foreclosure crisis, Portfolio magazine breaks the news that he received special rates from Countrywide Financial when he refinanced homes in Washington and Connecticut in 2003.

Dodd and the Perks of Being a VIP

At Housingwire.com, they are not impressed with the defense offered by Sen. Chris Dodd, D-Conn., over his status as a member of the VIP program at Countrywide Financial Corp. Dodd denied he received any special treatment on his two mortgage loan refinancings through Countrywide in 2003, but said he was aware he was considered a VIP, because the company told him so.

Dodd Explains His VIP Status, Bring on the Hearings

Sen. Christopher Dodd, D-Conn., weighs in today with his explanation of how he never sought special treatment from Countrywide Financial Corp. through its "Friends of Angelo" program. You might recall that Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee, explained earlier that he never asked for or received special treatment on his four mortgage refinancings, despite having called the company's CEO with a phone number supplied by former Fannie Mae CEO James Johnson. Conrad said on Tuesday he realized he got loans on favorable terms after seeing a Countrywide e-mail from former CEO Angelo Mozilo, telling a loan officer to knock off a point for Conrad, due to his position as a U.S. Senator.

State of Play: Bush to Propose Offshore Drilling

With $4 per-gallon gas in the rearview mirrors of many drivers around the country, Americans are screaming for relief. President Bush is expected to make a speech this morning urging Congress to lift the 27-year federal ban on offshore drilling. Bush plans to ask Congress to lift the drilling moratoria in more than 80 percent of the country's Outer Continental Shelf and to let states help to decide where to allow drilling, according to White House press secretary Dana Perino. The House Appropriations Committee was supposed to review legislation Wednesday that would continue the ban into late 2009, but the session was postponed to focus on disaster relief for the flooded Midwest. According to USA Today:

The 574 million acres of federal coastal water that are off-limits are believed to hold nearly 18 billion barrels of undiscovered, recoverable oil and 77 trillion cubic feet of natural gas, according to the Interior Department. The country each year uses about 7.6 billion barrels of oil and 21 trillion cubic feet of natural gas.

Headlines across the country reflected the monumental request.