Archive for July, 2010
Hypo Real Estate Holding AG, the commercial-property lender rescued by the German government following the financial crisis, failed a Europe-wide banking stress test, two people familiar with the results said.
The state-owned bank didn’t pass a stress scenario on its capital that assumes an economic slowdown and sovereign-debt losses.
Government funding for a scheme aimed at helping those facing home repossessions in England is to be cut, the housing minister has announced.
Grant Shapps said that the government grant for each home bought under the Mortgage Rescue Scheme would be reduced although the total kitty was unchanged.
Home affordability remains near 10-year highs, according to the second edition of the Administration's Housing Scorecard released today by the US Department of Housing and Urban Development (HUD) and the Treasury Department.
The July scorecard (download here) is the second aggregate of housing initiative reports, updated since the July scorecard showed 340,459 Home Affordable Modification Program (HAMP) modifications had become permanent so far. HAMP servicers added 51,000 permanent modifications — before cancellations — in June, according to the new scorecard.
"The housing market is performing better than the predictions made over a year ago," said HUD assistant secretary Raphael Bostic, in a statement. "We're absolutely not claiming victory, but due to the Obama Administration's efforts, improved home affordability is continuing to provide opportunities for prospective, qualified, homebuyers, while promising neighborhood stabilization efforts are helping hard hit neighborhoods start to recover."
More than 7.2m homeowners refinanced under historic low mortgage rates since April 2009, saving a total estimated $12.9bn, according to the scorecard. Nearly 3m borrowers restructured their mortgages — including through modification — since April 2009, twice the rate of 1.24m foreclosures during the same time period:
"The Administration's programs to stabilize the housing market have helped many across the country weather this crisis," said Treasury assistant secretary Herb Allison. "Our initiatives continue to offer responsible homeowners the chance to avoid the often painful process of foreclosure."
The second scorecard adds the impact of $6bn of Neighborhood Stabilization Program (NSP) funds on hardest-hit communities. These efforts have fueled local investments and help jurisdictions address the foreclosure crisis by allowing grantees to acquire foreclosed homes and renovate them to sell to low- and moderate-income households, the administration said in the scorecard.
But uncertainty remains in the housing market, as weak new and existing home sales data in May indicated recovery in remains fragile, according to the scorecard. Analysts have said the plunge in sales data indicate a "vacuum of demand" left by the expired first-time homebuyer tax credit will likely pull down housing data further in the near-term.
Write to Diana Golobay.
First mortgages led an overall decline in credit defaults in June, according to the Standard & Poor's/Experian indices today.
First and second mortgage default rates declined to 3.3% and 2.4%, respectively in June, based on information from Experian's consumer credit database. First mortgage default rates slipped 5% from May and 45.2% from a year earlier, while second mortgage default rates were down 0.03% from May and 44.54% from a year ago.
Similarly, bank card and automotive default rates inched down from May:
"The consumer credit picture shows encouraging progress as default rates continue to fall across major categories and in the highlighted cities," said S&P managing director and chairman of the index committee David Blitzer.
Overall default trends slipped in five major metropolitan statistical areas (MSAs) highlighted for the index. The New York MSA consumer default rate fell to 3.46% in June, down 12.11% from a month ago. Miami defaults fell 8.12% from a month earlier to 8.53%, while Chicago defaults are down 6.98% from May to 3.63% in June.
"The data are consistent with reports that people continue to eschew debt and as the slow recovery from recession and financial turmoil continues," Blitzer added. "For the economy this is mixed news — better credit quality, as seen in this report is clearly positive. However, as reported earlier by the Federal Reserve, consumers credit use is declining, dampening the outlook for spending."
Lending to consumers continued to decline in April and May, according to June meeting minutes from the Federal Open Market Committee (FOMC). Additionally, spending in May dropped in both home furnishings and building materials, as the Commerce Department reported that retail numbers fell for the second straight month as consumers hold onto cash.
Write to Diana Golobay.
A lot of people complain when a governmental body, made up of professional men and women who cannot possibly know about all of the industries that they are called upon to regulate, makes rules to govern businesses it doesn't understand.
It's not a perfect system. Somewhere along the line, someone realized this and made a suggestion that probably sounded really good at the time. If our elected representatives didn't know enough to govern certain industries or issues that needed governing, why not set up a department of professionals who could do it for them, a bureau that would specialize in that area. We could have one for defense, treasury, education, even housing.
Nice idea, in theory. Today, when someone mentions bureaucracy, however, it's never a positive reference. Bureaucracy, it turns out, is evil. While there are plenty of good folks working in government jobs, there seem to be inherent barriers built into the system that effectively filter out any effort that rises above some very low threshold, making it almost impossible to produce above-average results regardless of the amount of funding thrown at a bureau. Not that there's ever enough funding to expect anything more.
So why is building out the bureaucracy the only tool in the US legislative tool box?
Lawmakers on Capitol Hill have now finalized new financial reform legislation and sent it to the president to sign. When he does so, he'll create a new federal agency, the Consumer Financial Protection Bureau. Like the other agencies in the federal government, this bureau will likely only have access to information critical to its mission, which in this case is your financial information. It will be years before all of the problems with this come to light.
…I have tried three times to write a paragraph that succinctly explains how bad an idea I believe this to be and cannot get it done, so I'll move on.
I hate it when people complain without offering a real solution in the place of whatever has them riled up. I hear so many people talking about "burning down the system" like it's actually an option. It's not. The system itself must survive. I'm just not sure all of the players within it need to.
I suppose, if we really wanted to see some change in a hurry, we could accomplish it by taking the next $550m settlement offer a Wall Street firm tosses across the table to the Securities and Exchange Commission (SEC) and treat it a bit differently. Financial reform might be a lot easier if big companies didn't think that the cost of making $13bn was half a billion. I mean, how many times would you hand the federal government half a billion if it let you keep $12.45bn for yourself? I'd probably do it until my arms fell off.
No, a better approach might be to take an offer like that and look at it closely for a moment, as if you were seriously considering it, and then throw your head back and laugh long and hard. Then, after you've wiped the tears from your eyes, gingerly hand the paper back, as if it were printed on gold foil (and it might be, given some of these companies), and then utter these words:
"I'm afraid we're going to have to make an example out of you. Just so another big firm doesn't think they can mislead investors into buying products that are designed to fail, you understand. It's just a lot easier for us to take all of your money than it is to spend billions of taxpayer dollars on a new federal agency that will just make things more complicated and probably not protect anyone anyway. We're sure you understand that it's nothing personal."
Then, when journalists write about the settlement, they mention that it's the biggest in SEC history, but don't really talk about how its a drop in the bucket compared to what the company made last quarter. Or that the new one-off UK bank tax cost more than this one-off penalty. They'll just write, "Remember Sodom and Gomorrah? Well it happened again today on Wall Street."
I bet it wouldn't have to happen very often. It won't happen at all, of course. But some very interesting things will happen over the course of the next two years or so. With sweeping legislation always come unintended consequences. It will be interesting to see how the industry copes with them.
Rick Grant is veteran journalist covering mortgage technology and the financial industry.
Follow him on Twitter: @NYRickGrant
