We start 2010 with some early signs of stabilization in the housing market, with house prices and home sales likely nearing the bottom sometime in 2010. We expect that low mortgage rates, relatively high affordability and the homebuyer tax credit will help continue to fuel the recovery. Still, the housing recovery remains fragile, with significant downside risk posed by high unemployment and a potential large wave of foreclosures.
A second mortgage credit crunch that will send UK house prices into a new tailspin is looming, economists and credit experts have warned.
Non-performing loans in China have risen into the “trillions of renminbi” because of poor lending practices, an insolvency lawyer said.
“We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference yesterday. “At some point there’s going to be a reckoning for that.”
The debt crisis sweeping southern Europe has deepened after US credit-rating agency Moody’s downgraded €112bn (£100m) of Spanish mortgage debt and slashed the ratings of Catalunia and a raft of regions with ballooning state deficits.
The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
WASHINGTON (Reuters) - The federal government and states are girding themselves for the next foreclosure crisis in the country’s housing downturn: payment option adjustable rate mortgages that are beginning to reset.
The FHA does not plan to raise mortgage insurance premiums, he said. Instead, it is trying to reduce its risk of future losses. The agency proposed new rules that include requiring lenders to have at least $1 million in cash and other assets, up from $250,000, to limit losses passed on to the FHA. It will cap refinancings at 125% of the current home value and stop certifying mortgage brokers to issue FHA-backed loans. The agency also will appoint its first chief risk officer.
FHA’s Risky Loans Point to Bailout in Future
Fannie Mae announced plans Thursday to access another $10.7 billion in government aid. The move follows a second quarter earnings report that showed the mortgage giant lost $15.2 billion during the period.
The US economy is now dying a slow and painful death because it had become based on activities that had nothing to do with producing real wealth. Instead, it became dependent on rackets, that is, behavior geared to getting something for nothing. These rackets are often summarized under the acronym FIRE (for finance, insurance and real estate), a system set up to strip-mine profits from the wish commonly labeled “the American Dream” — itself largely a product of televised advertising and propaganda. The end product of all that was the doomed economy of suburban sprawl, an infrastructure for daily life with no future in a world defined by fossil fuel scarcity. The unraveling of debt at every level now is directly related to the mis-investments made in that way of life.
James Howard Kunstler (via azspot)
A big story that got a little lost in all the earnings and healthcare headlines this week comes to us out of California. The California Public Employees’ Retirement System (aka CalPERS) - the nation’s largest pension fund - is suing Wall Street’s top three credit rating agencies.
Almost a year after A.I.G.’s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what toppled the insurance giant. The author decides to ask the people involved—the silent, shell-shocked traders of the A.I.G. Financial Products unit—and finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the U.S. economy, and the global financial system to their knees.
Almost a year after A.I.G.’s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what toppled the insurance giant. The author decides to ask the people involved—the silent, shell-shocked traders of the A.I.G. Financial Products unit—and finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the U.S. economy, and the global financial system to their knees.
If enough people believe the economy will get better, it will get better. This seems to be the underlying premise of many actions these days. Yet, an overwhelming sense that good times are ahead marks the tops of bubbles, not the bottoms of busts. Hiding losses isn’t going to fix things.it’s the “i think i can, i think i can” economic theory. also known as hoping in hope.
He suspected Joe Cassano didn’t understand what he had done, but even so Park was shocked by the magnitude of the misunderstanding: these piles of consumer loans were now 95 percent U.S. subprime mortgages. Park then conducted a little survey, asking the people around A.I.G. F.P. most directly involved in insuring them how much subprime was in them. He asked Gary Gorton, a Yale professor who had helped build the model Cassano used to price the credit-default swaps. Gorton guessed that the piles were no more than 10 percent subprime. He asked a risk analyst in London, who guessed 20 percent. He asked Al Frost, who had no clue, but then, his job was to sell, not to trade. ‘None of them knew’, says one trader. Which sounds, in retrospect, incredible. But an entire financial system was premised on their not knowing — and paying them for their talent!
Michael Lewis in his Vanity Fair article The Man who Crashed the World (via quotingthecrisis) (via financegeek)
Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading.
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