Bank of America (BOA) said that it paid nearly $1.3 billion to Freddie Mac and more than $1.3 billion to Fannie Mae on Dec. 31 to resolve a faulty mortgage loan dispute involving Countrywide Financial Corp. The $2.6 billion worth of payments to Freddie and Fannie, combined with potential losses on future repurchases from government-sponsored enterprises, adds up to $3 billion in expenses, according to BOA. Bank of America also expects to take an additional $2 billion charge to fourth-quarter results from the decline in the mortgage business, bringing the total impact to the company to $5 billion.
"Our goals remain the same: put these issues behind us; focus on serving customers and clients; and continue to help distressed homeowners facing difficult times," said Bank of America Chief Executive Brian Moynihan. The deals with Freddie Mac and Fannie Mae don't cover loan servicing obligations, other contractual obligations or loans contained in private label securitizations. But the agreements are a sign that the bank is working quickly to deal with buyback claims. Fannie Mae said in a statement that the Bank of America deal was a "fair and responsible resolution" of the outstanding claims. The company said the agreement accounts for about 44% of the $7.7 billion in repurchase requests outstanding with all of its seller servicers as of Sept. 30, 2010.
2011 - boom in hiring?
After three years of economic pain, a growing number of economists think 2011 will finally bring what everyone's been hoping for: More jobs and a self-sustaining recovery. "We're looking at some leading indicators on employment, and they're all flashing green lights," said Bernard Baumohl of the Economic Outlook Group, a Princeton, N.J. research firm. Baumohl and some other economists forecast between 2.5 million and 3 million jobs being added to U.S. payrolls in 2011, about triple the gains likely to be recorded in 2010 and what would be the best one-year jump since the white hot labor market of 1999. That wouldn't be enough to climb out of the 8-million job crater created by the Great Recession and won't bring down the unemployment rate by a significant amount. An improved job market could even bring a short-term rise in the jobless rate, as those discouraged from job hunting resume looking for work and are once again counted as unemployed. But the forecasted hiring boo
m could get the economy back into gear and provide real relief for many Americans.
Those projecting better hiring in 2011 point to a number of factors. Among them, job openings by employers rose 17% from June to October of this year, the most recent reading available from the Labor Department, and are up by about a third compared to a year earlier. And there has been a downward trend in newly laid-off workers filing for initial jobless claims, which fell below 400,000 in the most recent reading for the first time since the summer of 2008. That might have been distorted by the holiday season and bad weather, but the four-week average is also at a two-plus year low. On the business front, capital expenditures -- typically followed by expansion and hiring -- have been on the rise. Baumohl says another non-traditional employment indicator, the number of day-care workers, has been edging up for four months and is now about 2% higher than a year ago. "People need more day care when they've got jobs to go to."
WSJ - year end report and outlook
For housing markets, the past year was another bumpy ride. Home prices stabilized in the first half of 2010 as the government offered tax credits to spur sales, but transactions plunged to 15-year lows after that stimulus expired. Sales have rebounded only modestly and at the current pace, it would take 9½ months to work through the volume of existing homes listed for sale. The market dodged a bullet in March when the Federal Reserve ended its purchases of $1.25 trillion in mortgage-backed securities. Many analysts expected rates to rise, but they defied expectations by falling to 60-year lows, thanks first to the European debt crisis and later as the U.S. recovery faltered. (As the year ended, rates were rising but they remained historically low.)
Tail winds to spur a recovery are gathering. Large price declines have made housing more affordable than at any point in the last decade. New housing construction is stuck at its lowest levels in more than 40 years. "That will help absorb supply in ways that a lot of people underestimate," Mr. Lawler said. But sellers also still will have to chop prices. Overall, prices are down 29.6% from their July 2006 peak to October 2010, according to the Standard & Poor's/Case-Shiller price index. Many analysts expect home prices to decline by an additional 5% before stabilizing later this year.
"We're bouncing along a bottom," said Ivy Zelman, chief executive of housing research firm Zelman & Associates. Moreover, credit standards are still tight. And while mortgage delinquencies peaked in February 2010, foreclosures could remain at an elevated level for years as banks work through a huge backlog. The most realistic "best case" scenario for 2011 would "simply be a year in which things do not get worse," wrote Morgan Stanley housing analysts in a research report. One of the most stubborn problems is the 10.8 million homeowners who owe more than their homes are worth, or 22.5% of all mortgage borrowers, according to CoreLogic Inc. These so-called underwater borrowers can't easily sell their homes, and they are at risk of defaulting if they lose their jobs. Housing faces additional uncertainty because the government is set to reconsider how aggressively to support homeownership. Deficit hawks have their sights set on scaling back the mortgage-interest deduction, and
the Obama administration later this month will put forth a proposal on how to revamp Fannie Mae and Freddie Mac and the broader mortgage market.
"What goes on in Washington will be of critical importance to housing," said John Burns, an Irvine, Calif.-based home-building consultant. Another wild card: Regulators and prosecutors could uncover sloppy practices from the heyday of the housing boom. In September, some of the nation's largest banks, including units of Bank of America Corp. and J.P. Morgan Chase & Co., were forced to suspend foreclosures due to potentially fraudulent document-handling procedures. Banks say they haven't evicted anyone who hasn't defaulted, but the foreclosure machinery has been slow to restart nonetheless. Some real-estate lawyers warn that problems could be worse if it turns out that loans weren't properly recorded or transferred during the process of bundling mortgages and selling them as securities. Banks already face rising costs as foreclosures become more time-consuming. Investors, meanwhile, are pursuing new efforts to force banks to buy back money-losing mortgage bonds.
Greenback in for a wild ride?
Say what you want about the current state of the American economy, when investors seek a safe harbor in which to ride out an economic storm, it is the venerable greenback that continues to offer the most comfort. The greenback has gained more than 8% against the Euro since January. In June, the euro tumbled to a four-year low against the dollar, when the near-collapse of the Greek economy caught the market by surprise. Progress was made in repairing the global economy in 2010 but Europe is still under pressure, and that could be a big plus for the U.S. dollar. No one wants to be caught holding euros right now for fear another round of insolvency rumors will drag the troubled currency even lower. Ultimately, investors seek the greatest level of certainty possible, and this is as true for central banks as it is for individuals. China and Russia alone hold nearly two trillion in U.S.-denominated assets.
Aside from Europe's risks, there are a number of domestic factors which will likely have an impact on the value of the dollar over the next 12 months. Analysts are pretty much in agreement that the current fed funds rate of just 0% to 0.25% -- intended to support consumer spending by making loans more affordable -- will remain in effect for the duration of the year. The fed funds rate is the rate at which banks lend excess funds overnight to one another. In addition to its low interest rate policy, the Fed has just kicked-off a second round of quantitative easing, known as "QE2". Seen by many as a last ditch, 'bet everything on the farm' act of desperation, the scheme calls for the Fed to purchase $600 billion in bank-held assets to increase the supply of cash in the economy. If the combination of low interest rates and increased liquidity encourages a wave of lending and gets consumers spending again, that could strengthen the dollar.
While the tea-leaf readers are predicting a much slower recovery period than those following recessions of the past, recent signs suggest that the job market is showing signs of life. In ordinary times, a U.S. dollar outlook based on growth and employment alone would suggest the dollar is due for further devaluation. These are not, however, ordinary times, and as bad as it appears in America, the short-term prognosis for Europe and Great Britain is even more challenging. Japan is also dealing with a slowing economy teetering on the point of deflation. In this era of financial uncertainty, it is easy to make the case for a 'flight to safety' to the dollar.
MLN - Pace of Florida foreclosures "flabbergasting"
The average Florida homeowner who went into foreclosure in November hadn't paid his mortgage in 10 months. The 307 day delay between the first late payment and a foreclosure referral, reported in a study released this week, was called ``flabbergasting'' by one financial expert who said mortgages typically go to foreclosure by the third delinquent payment. Jacksonville-based LPS Applied Analytics, which tracks home loans nationwide and issued its November Mortgage Monitor report, ranks Florida among the top states for the average length of time it takes to refer a home to foreclosure. The average Maryland home doesn't go to foreclosure until 358 days following the first late payment. New York is at 344 days. California tops the list at 367 days.
"I am absolutely, utterly flabbergasted that this could be true,'' said Skip McDonough, a broker with Family Mortgage in Jupiter. "It flies in the face of prudent management and due diligence on the part of the lender.'' Herb Blecher, senior vice president of LPS Applied Analytics, said it's the first time the company has done a state-by-state measure of pre-foreclosure loan delinquency. The data include homes that are in foreclosure for a second time, possibly following a loan modification or short-sale attempt. Those loans, which Blecher said are not a majority, would extend the time to foreclosure because the report measures from the first late payment to the most recent foreclosure referral. The report also found that 18% of loans nationwide with 24 or more missed payments are not in foreclosure. About 15% of loans with 18 months of no payments remain out of foreclosure.
"We are looking at a very large pool of very delinquent loans,'' Blecher said. Many struggling homeowners undoubtedly see delays in the foreclosure process as a benefit. But for homeowner associations trying to collect late fees and neighbors of vacant properties, foreclosure postponements can mean lower home values and a reduction in maintenance. Bob Clinton, president-elect of the Florida Association of Mortgage Professionals, Palm Beaches chapter, said the banks are ``notoriously'' unprepared to handle the millions of foreclosures nationwide, as well as the loan modifications. ``They don't have the staff or depth of talent that this economy calls for,'' Clinton said. ``It used to be foreclosure was a big, big deal. Nowadays, it's like someone turned on a faucet and they can't stop it.''
"Our goals remain the same: put these issues behind us; focus on serving customers and clients; and continue to help distressed homeowners facing difficult times," said Bank of America Chief Executive Brian Moynihan. The deals with Freddie Mac and Fannie Mae don't cover loan servicing obligations, other contractual obligations or loans contained in private label securitizations. But the agreements are a sign that the bank is working quickly to deal with buyback claims. Fannie Mae said in a statement that the Bank of America deal was a "fair and responsible resolution" of the outstanding claims. The company said the agreement accounts for about 44% of the $7.7 billion in repurchase requests outstanding with all of its seller servicers as of Sept. 30, 2010.
2011 - boom in hiring?
After three years of economic pain, a growing number of economists think 2011 will finally bring what everyone's been hoping for: More jobs and a self-sustaining recovery. "We're looking at some leading indicators on employment, and they're all flashing green lights," said Bernard Baumohl of the Economic Outlook Group, a Princeton, N.J. research firm. Baumohl and some other economists forecast between 2.5 million and 3 million jobs being added to U.S. payrolls in 2011, about triple the gains likely to be recorded in 2010 and what would be the best one-year jump since the white hot labor market of 1999. That wouldn't be enough to climb out of the 8-million job crater created by the Great Recession and won't bring down the unemployment rate by a significant amount. An improved job market could even bring a short-term rise in the jobless rate, as those discouraged from job hunting resume looking for work and are once again counted as unemployed. But the forecasted hiring boo
m could get the economy back into gear and provide real relief for many Americans.
Those projecting better hiring in 2011 point to a number of factors. Among them, job openings by employers rose 17% from June to October of this year, the most recent reading available from the Labor Department, and are up by about a third compared to a year earlier. And there has been a downward trend in newly laid-off workers filing for initial jobless claims, which fell below 400,000 in the most recent reading for the first time since the summer of 2008. That might have been distorted by the holiday season and bad weather, but the four-week average is also at a two-plus year low. On the business front, capital expenditures -- typically followed by expansion and hiring -- have been on the rise. Baumohl says another non-traditional employment indicator, the number of day-care workers, has been edging up for four months and is now about 2% higher than a year ago. "People need more day care when they've got jobs to go to."
WSJ - year end report and outlook
For housing markets, the past year was another bumpy ride. Home prices stabilized in the first half of 2010 as the government offered tax credits to spur sales, but transactions plunged to 15-year lows after that stimulus expired. Sales have rebounded only modestly and at the current pace, it would take 9½ months to work through the volume of existing homes listed for sale. The market dodged a bullet in March when the Federal Reserve ended its purchases of $1.25 trillion in mortgage-backed securities. Many analysts expected rates to rise, but they defied expectations by falling to 60-year lows, thanks first to the European debt crisis and later as the U.S. recovery faltered. (As the year ended, rates were rising but they remained historically low.)
Tail winds to spur a recovery are gathering. Large price declines have made housing more affordable than at any point in the last decade. New housing construction is stuck at its lowest levels in more than 40 years. "That will help absorb supply in ways that a lot of people underestimate," Mr. Lawler said. But sellers also still will have to chop prices. Overall, prices are down 29.6% from their July 2006 peak to October 2010, according to the Standard & Poor's/Case-Shiller price index. Many analysts expect home prices to decline by an additional 5% before stabilizing later this year.
"We're bouncing along a bottom," said Ivy Zelman, chief executive of housing research firm Zelman & Associates. Moreover, credit standards are still tight. And while mortgage delinquencies peaked in February 2010, foreclosures could remain at an elevated level for years as banks work through a huge backlog. The most realistic "best case" scenario for 2011 would "simply be a year in which things do not get worse," wrote Morgan Stanley housing analysts in a research report. One of the most stubborn problems is the 10.8 million homeowners who owe more than their homes are worth, or 22.5% of all mortgage borrowers, according to CoreLogic Inc. These so-called underwater borrowers can't easily sell their homes, and they are at risk of defaulting if they lose their jobs. Housing faces additional uncertainty because the government is set to reconsider how aggressively to support homeownership. Deficit hawks have their sights set on scaling back the mortgage-interest deduction, and
the Obama administration later this month will put forth a proposal on how to revamp Fannie Mae and Freddie Mac and the broader mortgage market.
"What goes on in Washington will be of critical importance to housing," said John Burns, an Irvine, Calif.-based home-building consultant. Another wild card: Regulators and prosecutors could uncover sloppy practices from the heyday of the housing boom. In September, some of the nation's largest banks, including units of Bank of America Corp. and J.P. Morgan Chase & Co., were forced to suspend foreclosures due to potentially fraudulent document-handling procedures. Banks say they haven't evicted anyone who hasn't defaulted, but the foreclosure machinery has been slow to restart nonetheless. Some real-estate lawyers warn that problems could be worse if it turns out that loans weren't properly recorded or transferred during the process of bundling mortgages and selling them as securities. Banks already face rising costs as foreclosures become more time-consuming. Investors, meanwhile, are pursuing new efforts to force banks to buy back money-losing mortgage bonds.
Greenback in for a wild ride?
Say what you want about the current state of the American economy, when investors seek a safe harbor in which to ride out an economic storm, it is the venerable greenback that continues to offer the most comfort. The greenback has gained more than 8% against the Euro since January. In June, the euro tumbled to a four-year low against the dollar, when the near-collapse of the Greek economy caught the market by surprise. Progress was made in repairing the global economy in 2010 but Europe is still under pressure, and that could be a big plus for the U.S. dollar. No one wants to be caught holding euros right now for fear another round of insolvency rumors will drag the troubled currency even lower. Ultimately, investors seek the greatest level of certainty possible, and this is as true for central banks as it is for individuals. China and Russia alone hold nearly two trillion in U.S.-denominated assets.
Aside from Europe's risks, there are a number of domestic factors which will likely have an impact on the value of the dollar over the next 12 months. Analysts are pretty much in agreement that the current fed funds rate of just 0% to 0.25% -- intended to support consumer spending by making loans more affordable -- will remain in effect for the duration of the year. The fed funds rate is the rate at which banks lend excess funds overnight to one another. In addition to its low interest rate policy, the Fed has just kicked-off a second round of quantitative easing, known as "QE2". Seen by many as a last ditch, 'bet everything on the farm' act of desperation, the scheme calls for the Fed to purchase $600 billion in bank-held assets to increase the supply of cash in the economy. If the combination of low interest rates and increased liquidity encourages a wave of lending and gets consumers spending again, that could strengthen the dollar.
While the tea-leaf readers are predicting a much slower recovery period than those following recessions of the past, recent signs suggest that the job market is showing signs of life. In ordinary times, a U.S. dollar outlook based on growth and employment alone would suggest the dollar is due for further devaluation. These are not, however, ordinary times, and as bad as it appears in America, the short-term prognosis for Europe and Great Britain is even more challenging. Japan is also dealing with a slowing economy teetering on the point of deflation. In this era of financial uncertainty, it is easy to make the case for a 'flight to safety' to the dollar.
MLN - Pace of Florida foreclosures "flabbergasting"
The average Florida homeowner who went into foreclosure in November hadn't paid his mortgage in 10 months. The 307 day delay between the first late payment and a foreclosure referral, reported in a study released this week, was called ``flabbergasting'' by one financial expert who said mortgages typically go to foreclosure by the third delinquent payment. Jacksonville-based LPS Applied Analytics, which tracks home loans nationwide and issued its November Mortgage Monitor report, ranks Florida among the top states for the average length of time it takes to refer a home to foreclosure. The average Maryland home doesn't go to foreclosure until 358 days following the first late payment. New York is at 344 days. California tops the list at 367 days.
"I am absolutely, utterly flabbergasted that this could be true,'' said Skip McDonough, a broker with Family Mortgage in Jupiter. "It flies in the face of prudent management and due diligence on the part of the lender.'' Herb Blecher, senior vice president of LPS Applied Analytics, said it's the first time the company has done a state-by-state measure of pre-foreclosure loan delinquency. The data include homes that are in foreclosure for a second time, possibly following a loan modification or short-sale attempt. Those loans, which Blecher said are not a majority, would extend the time to foreclosure because the report measures from the first late payment to the most recent foreclosure referral. The report also found that 18% of loans nationwide with 24 or more missed payments are not in foreclosure. About 15% of loans with 18 months of no payments remain out of foreclosure.
"We are looking at a very large pool of very delinquent loans,'' Blecher said. Many struggling homeowners undoubtedly see delays in the foreclosure process as a benefit. But for homeowner associations trying to collect late fees and neighbors of vacant properties, foreclosure postponements can mean lower home values and a reduction in maintenance. Bob Clinton, president-elect of the Florida Association of Mortgage Professionals, Palm Beaches chapter, said the banks are ``notoriously'' unprepared to handle the millions of foreclosures nationwide, as well as the loan modifications. ``They don't have the staff or depth of talent that this economy calls for,'' Clinton said. ``It used to be foreclosure was a big, big deal. Nowadays, it's like someone turned on a faucet and they can't stop it.''
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