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According To Critics The Bailout Offers Little Help For Homeowners

By Christopher Solomon, MSN Real Estate

The financial rescue plan approved by Congress and signed into law by President Bush aims to prop up Wall Street but may not do much for Main Street.

The historic $700 billion bailout of the American financial services industry signed into law Friday provides few solid assurances of help to struggling U.S. homeowners, housing observers and advocates agreed.

"We feel that this bill does nothing for homeowners," says Kathleen Day, spokeswoman for the Center for Responsible Lending, a nonprofit research and advocacy group. "This is what homeowners will get out of this bill: higher taxes and a continued erosion of home values because this bill does nothing to address the root cause of this problem, which is falling home prices, and they're being caused by the unprecedented tidal wave of foreclosures.

"It's a bailout for Wall Street." Bill Apgar, senior scholar at the Joint Center for Housing Studies at Harvard University, mostly agrees. "Other than trying to stave off the worst recession in 50 years, there's no help for homeowners" here.

Vague language

After the initial bill failed, a new version of the rescue package, with several additions, was passed by the Senate Wednesday and was approved by the House Friday morning.

The law directs the Treasury Department to "maximize assistance for homeowners." But Brenda Muñiz, legislative director of the Association of Community Organizations for Reform Now, or Acorn, was disappointed by the vagueness of such language.

"I think more could have been spelled out in terms of forcing the hand of these financial institutions" to make them assist homeowners, Muñiz says. Treasury Secretary Henry Paulson might be able to use the bill to facilitate loan modifications for homeowners who are in financial straits, she says, "but it also allows for a very passive response. (It) doesn't really have a lot of teeth to it."

Trying to make lenders voluntarily help homeowners with loan modifications won't work, for several reasons, Day says. Those reasons are as varied as the fact that the troubled mortgages are bundled in securities and owned by many different entities to the fact that there are about 6.5 million loans that need modification, Day says. "They don't have the manpower to modify these loans," she says.

A bright spot?

Muñiz says she saw a potential bright spot in an overlooked, one-sentence provision in the 451-page law that permits the Treasury Department to provide credit guarantees and enhancements on entire loans. It reads, "In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures."

According to an article published Friday in American Banker, this means, at least in theory, that the Treasury could guarantee certain types of loans in exchange for lenders first making loan modifications.

A tool like this won't solve the underlying problem, says Acorn's Muñiz, but she's anxious to see how far the Treasury will go to help homeowners. "Again, the question is, will the Treasury use all the tools at its disposal?" she asks.

No bankruptcy reform

One of the biggest concerns of observers and homeowner advocates was about a provision that was left on the cutting-room floor. "We wanted a change to the bankruptcy laws," Day says. Today, when a person faces foreclosure "a judge can modify a mortgage on a vacation home, a luxury home, a yacht – but they cannot modify the mortgage on a primary residence." That's ridiculous, she says.

Language to modify this was cut as the bill changed over the past week, Muñiz says. "That would've been one big provision that would've provided some real relief."

Apgar, of the Joint Center for Housing Studies, points out that many of the “no” votes on the Republican side were because the bill was already festooned with $110 billion in tax breaks. Asking the bill to do even more, right now, would have invited another defeat.

"Congress is in triage mode," he says. "I think we move through this and live to advocate another day for additional things that need to happen."

"Don't Worry, This Is Good for You"

Bush Speaks To Nation About Historic $700 Billion Bailout Bill He Signed Into Law!

House Passes Historic Bailout Bill

Q2 Mortgage Delinquency and Foreclosures Rates: A Mix of Good & Bad News

Written by George Ratiu, Research Economist

There was good news and bad news on the home mortgage delinquency and foreclosure front earlier this month. Data for the second quarter of 2008 from the National Delinquency Survey by the Mortgage Bankers Association shows an increase in delinquency and foreclosure rates. On the positive side, however, the figures also point to some marked improvements. Delinquency rates for subprime, FHA and VA loans dropped from last quarter. Foreclosure inventory rates for FHA loans also declined on a quarterly basis. Furthermore, the data also recorded decreases in foreclosure rates for several states.

Delinquencies
The overall delinquency rate increased from 6.35 to 6.41 percent. However, the increase was driven by a jump in prime loan delinquencies - an increase of 22 basis points, up from 3.71 percent to 3.93 percent.

However, seasonally adjusted delinquency rates provided some positive highlights. The delinquency rates for all other loans dropped. Rates for subprime loans decreased 12 basis points (from 18.79 to 18.67 percent). The decline follows a 148 basis point increase reported in the first quarter. Declines were also noted for loans guaranteed through the two major government mortgage programs. Delinquency rates fell 40 basis points for VA loans (from 7.22 percent to 6.82 percent), while the rates for FHA loans declined from 12.72 to 12.63 percent.
Still, on a year-over-year basis, delinquency rates increased across the board. Seasonally adjusted delinquency rates moved up 120 basis points for prime loans, 385 basis points for subprime loans, five basis points for FHA loans, and 67 basis points for VA loans from the second quarter of 2007.

Foreclosures
Nationally, the rate of foreclosures started was up 20 basis points compared with that reported in the first quarter of 2008. In the second quarter of this year, the foreclosure starts rate increased from 0.54 percent to 0.67 percent for prime loans from a year ago. Foreclosures on subprime loans rose from 4.06 percent to 4.70 percent and from 0.50 percent to 0.65 percent for VA loans. FHA loans also posted an increase of 16 basis points in foreclosure starts -- from 0.87 percent to 1.03 percent. That increase follows a decline posted in the first quarter rate.
The foreclosure inventory rate also increased nationally for all loans, from 2.47 percent in the first quarter of 2008 to 2.75 percent in the second quarter of 2008. On a year-over-year basis, the foreclosure inventory rate increased 135 basis points (from 1.40 percent in the first quarter of 2008). The foreclosure inventory rate rose for all loans except FHA loans. The foreclosure inventory rate rose 20 basis points for prime loans, 107 basis points for subprime loans, and nine basis points for VA loans. Foreclosure inventory rates for FHA loans actually experienced a 16 basis point drop.

Mixed Regional Results
There were differences in delinquency and foreclosure rates by state. While delinquency rates rose across the country from the first quarter to the second quarter of 2008, not all states experienced the same pattern.

The top five states with the highest quarter-over-quarter increase in delinquency rates were Delaware (104 basis points), Mississippi (103 basis points), Massachusetts (100 basis points), Maryland (96 basis points), and Indiana (92 basis points). On the flip side, the states with the smallest change in delinquency rates were South Dakota (20 basis points), North Dakota (27 basis points), Wyoming (32 basis points), Colorado (33 basis points), and Oregon (34 basis points).

In terms of foreclosure rates, the national numbers masked surprising quarter-over-quarter regional changes. The rate of foreclosure starts dropped in 12 states from the first to the second quarter of 2008. Massachusetts recorded the largest decline-33 basis points - followed by Maryland (a 9 basis point decline) and Mississippi (7 basis point decline). The other states with declines in foreclosure starts were Nebraska, Arkansas, Texas, South Dakota, Missouri, Colorado, Montana, Michigan, and Louisiana.

Meanwhile, foreclosure inventory rates also dropped in 17 states over the first two quarters of 2008. Wyoming posted the greatest drop-24 basis points - followed by Massachusetts (declining 21 basis points), and Mississippi (a decline of 20 basis points). Foreclosure inventory rates also declined in Alabama, Arkansas, Indiana, Iowa, Kansas, Louisiana, Michigan, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, and Texas.

These positive changes were nonetheless offset by foreclosure rate increases in states like Florida, Nevada, Arizona, California and New Jersey. These states experienced significant increases from the first to the second quarter of 2008, both in terms of foreclosure starts and foreclosure inventory rates. Florida posted the highest figures, with a 139 basis point jump in foreclosure inventory and a 35 basis point increase in foreclosure starts. The changes were similar in the other four states-Nevada (80 basis point change in inventory, 31 basis point change in starts), Arizona (68 basis point change in inventory, 29 basis point change in starts), California (73 basis point change in inventory, 23 basis point change in starts) and New Jersey (39 basis point change in inventory, 14 basis point change in starts).

Impact of Fannie/Freddie Takeover
Events in the capital markets during September have clearly overshadowed the mortgage delinquency and foreclosure report, which came out prior to the news about the federal government takeover of Fannie Mae and Freddie Mac. The obvious question arising from these events centers on the impact that this move will have upon the mortgage industry and the performance of existing and future loans.

While there are still a large number of details left to be resolved, much depends on the government's degree of involvement in Fannie and Freddie. Assuming that the Treasury and the Federal Housing Financed Agency (FHFA) increase liquidity in the two enterprises, we can expect mortgage rates to decline in the short run. FHFA can accomplish this through its authority to purchase a larger amount of mortgages, including the newly conforming jumbo loans (up to $625,000). In the long run, the performance of the mortgage market will likely be conditioned by the restructuring of Fannie and Freddie and the recovery of the housing market.

This "In Focus" article is from the September Edition of Real Estate Insights - A National Association of Realtors publication published monthly.

Home Sold On Ebay for $1.75

This article was written by The Associated Press and posted on Yahoo News Wednesday October 1, 2008 6:03pm.

SAGINAW, Mich. - With a winning bid of just $1.75, a Chicago woman has won an auction for an abandoned home in Saginaw. Joanne Smith, 30, recently was the top bidder for the home during an auction on eBay, The Saginaw News reported. Her bid was one of eight for the home.

"I am going to try and sell it," she told the newspaper. "I don't have any plans to move to Saginaw."

Smith said she hasn't seen the property or visited Saginaw, which has been hard-hit by economic troubles in recent years.

There's a notice on the door of the home saying a foreclosure hearing is pending, the newspaper said. She must pay about $850 in back taxes and yard cleanup costs.
The Saginaw News said it could not reach the seller, Southern Investments LLC, for comment.

The story and photo herein are both from the Associated Press

Ironman Trailer Remix

Ironman, one of the best action and comic-book based movies of the last few years, was just released on DVD. Here's a great remix of the trailer showing a few highlights. Buy it, rent it, and enjoy. Don't forget the popcorn. It's really a guy flick, but chicks might like it too!

The Beatles Sing About Our Current Economic Woes

Enjoy this timeless tune which has new meaning given our current situation.

Debate About Merits of Bailout Plan - Part 2

Debate About Merits of Bailout - Part 1

This video is 2 days old and dated; however, it is an excellent discussion of the whole debate highlighting the good and bad points of a government bailout. It also features Lawrence Yun, the Chief Economist of The National Association of Realtors (rated the 5th most reliable Economist by USA Today).

Bailout Passes Senate, House Foes Soften

By JULIE HIRSCHFELD DAVIS and CHARLES BABINGTON, Associated Press Writers

WASHINGTON - After one spectacular failure, the $700 billion financial industry bailout found a second life Wednesday, winning lopsided passage in the Senate and gaining ground in the House, where Republicans opposition softened.

Senators loaded the economic rescue bill with tax breaks and other sweeteners before passing it by a wide margin, 74-25, a month before the presidential and congressional elections.
In the House, leaders were working feverishly to convert enough opponents of the bill to push it through by Friday, just days after lawmakers there stunningly rejected an earlier version and sent markets plunging around the globe.

The measure didn't cause the same uproar in the Senate, where both parties' presidential candidates, Republican John McCain and Democrat Barack Obama, made rare appearances to cast "aye" votes.

In the final vote, 40 Democrats, 33 Republicans and independent Sen. Joe Lieberman of Connecticut voted "yes." Nine Democrats, 15 Republicans and independent Sen. Bernie Sanders of Vermont voted "no."

The rescue package lets the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions. If successful, advocates say, that would allow frozen credit to begin flowing again and prevent a deep recession.

Even as the Senate voted, House leaders were hunting for the 12 votes they would need to turn around Monday's 228-205 defeat. They were especially targeting the 133 Republicans who voted "no."

Their opposition appeared to be easing after the Senate added $110 billion in tax breaks for businesses and the middle class, plus a provision to raise, from $100,000 to $250,000, the cap on federal deposit insurance.

They were also cheering a decision Tuesday by the Securities and Exchange Commission to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.

There were worries, though, that the tax breaks would cause some conservative-leaning Democrats who voted for the rescue Monday to abandon it because it would swell the federal deficit.

"I'm concerned about that," said Rep. Steny Hoyer, D-Md., the majority leader.
As revised by the Senate, the package extends several tax breaks popular with businesses. It would keep the alternative minimum tax from hitting 20 million middle-income Americans and provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.

It doesn't designate a way to pay for many of the tax cuts, though, angering the House's band of conservative "Blue Dog" Democrats.

Leaders in both parties, as well as private economic chiefs everywhere, said Congress must quickly approve some version of the bailout measure to start loans flowing and stave off a potential national economic disaster.

"This is what we need to do right now to prevent the possibility of a crisis turning into a catastrophe," Obama said on the Senate floor. In Missouri, before flying to Washington to vote, McCain said, "If we fail to act, the gears of our economy will grind to a halt."

Critics on the right and left assailed the rescue plan, which has been panned by their constituents as a giveaway for Wall Street, and has little obvious direct benefit for ordinary Americans.
Sen. Jim DeMint, R-S.C., a leading conservative, said the step was "leading us into the pit of socialism."

Sen. Bernie Sanders of Vermont, an independent who's a self-described socialist, said the rescue was fundamentally unfair.

"The masters of the universe, those brilliant Wall Street insiders who have made more money than the average American can even dream of, have brought our financial system to the brink of collapse," Sanders said, and are demanding that the middle class "pick up the pieces that they broke."

Still, proponents argued that the financial sector's woes were already being felt by ordinary people in the form of unaffordable credit and underperforming retirement savings and without the bailout would soon translate into even more economic pain for working Americans, including more job losses.

"There will be no balloons or bunting or parades," when the rescue becomes law, said Sen. Chris Dodd, D-Conn., the Banking Committee chairman. But lawmakers will have "the knowledge that at one of our nation's moments of maximum economic peril, we acted — not for the benefit of a particular few, but for all Americans."

The Senate specializes in high-stakes legislating by enticement, and the long list of sweeteners it added was designed to attract votes from various constituencies.

Tax cuts new and old are favorites for most House Republicans, the main target of intense lobbying to gain support for the measure. Help for rural schools was aimed mainly at lawmakers in the West, while disaster aid was a top priority for lawmakers from across the Midwest and South.

Another addition, to extend the deductibility of state and local taxes for people in states without income taxes, helps Florida and Texas, among others.

Increasing the deposit insurance cap was a bid to reassure individuals and small businesses that their money would be safe in the event their banks collapsed. It was particularly geared toward small banks that fear customers will pull their money and park it in larger institutions seen as less likely to fold.

The FDIC would be allowed to borrow unlimited money from the Treasury Department through the end of next year as a way to cover the increased insurance limit. If used, it would be the first time the agency has tapped Treasury for a loan since the early 1990s.

Raising the limit — along with the SEC's decision to ease accounting rules on valuing assets — helped House Republicans claim credit for some substantive changes.

And with constituent feedback changing dramatically since Monday's shocking House defeat and the corresponding market plunge, lawmakers' comfort level with the package increased markedly.

Wall Street Worries Prior to Senate Re-Vote of Bailout Plan

I Dedicate This Song to Our Leaders in Washington

This song says it all - "Staying Alive". That's what we are doing until we get out of this multi-dimensional economic mess we're in. The lyrics go on to say "I'm going nowhere, somebody help me, somebody help me yeah!"

The Real Reason The Bailout Plan Failed to Pass In Congress

An array of forces lined up against bailout
By JIM KUHNHENN – 21 hours ago

WASHINGTON (AP) — In the end, the financial markets didn't stand a chance against voter antipathy, partisanship and election year politics.

The defeat of the extraordinary $700 billion financial rescue package represented a perfect collision of the forces of modern politics — a fast-moving Internet campaign, vulnerable incumbents, a weakened and unpopular president, and a roiling presidential campaign — all working against the so-called Titans of the Universe.

Polls showed widespread public opposition to the plan — the biggest federal intervention in financial markets since the Depression — and many Republicans saw such an enormous set-aside of taxpayer money as an unnecessary intrusion into free markets. Of the 19 most-endangered House incumbents, 13 voted no.

"This is one of those scenarios where nobody really wanted to do it," said House Republican Whip Roy Blunt of Missouri, who played a leading role in the final negotiations.

Such a roaring confluence of opposition could only have been overcome with strong party discipline and presidential power. But a weakened and unpopular President Bush and lawmakers forced to weigh the vote against their political careers conspired against success.

Outside Congress, however, furious pressure built up against the bill in e-mail campaigns and on Internet Web sites. The Club for Growth, a conservative free-market oriented group, warned lawmakers that it would count a vote in favor of the legislation against lawmakers seeking the group's support. Club for Growth is viewed with apprehension by many Republicans because it has been known to support challengers running against GOP incumbents.

Longtime conservative activist Richard Viguerie warned that lawmakers who voted for the rescue package would be targeted for defeat. "Republicans and Democrats alike who support this monstrosity will face the wrath of the voters if they stand side-by-side with predatory politicians and bureaucrats and their greedy friends who got us in this mess," he said.

The opposition on the House floor came from an unlikely coalition of conservatives and liberals. The progressive grassroots group MoveOn.org aired an ad blaming the financial crisis on John McCain and his allies.

All those forces worked against powerful special interests. The U.S. Chamber of Commerce and a diverse group of industry lobbying organizations ranging from the National Association of Realtors to the American Hotel and Lodging Association pressed Congress to back the bill, pointedly noting that they too would consider this a key vote when ranking members.

The vote also represented an extraordinary rejection of Bush, who personally called wavering lawmakers and delivered a last-ditch public appeal Monday morning, as well as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

"Despite days of negotiating, this is still the same bailout bill, written by a Wall Street guy with a Wall Street solution to a problem created on Wall Street," said Rep. Mike Rogers, R-Mich. "This bill was still a blank check to Henry Paulson."

The vote also did nothing for the presidential contenders, Democrat Barack Obama and Republican John McCain. Both stepped into the fray last week and boasted of exercising leadership in the negotiations. Not only did a majority of McCain's Republican colleagues vote against it, so did all his fellow Arizona lawmakers. Obama was unable to sway many House liberals, including a majority of the Congressional Black Caucus.

House Republican leader John Boehner of Ohio, in a crowded Capitol corridor after the vote, accused House Speaker Nancy Pelosi of delivering a partisan pre-vote speech that caused some Republicans to refuse to back the proposal.

Blunt said the speech could have cost the bill about 12 Republican votes. He did not identify those lawmakers.

Pelosi earlier had delivered a tough attack on Bush economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets — a pointed critique not much different than what she has been saying for days.

But Boehner said Pelosi's speech "poisoned our conference, caused a number of members that we thought we could get, to go south."

House Banking Committee Chairman Barney Frank, D-Mass., known for his quick, often acerbic wit, said the GOP leaders' complaints meant that some Republicans "decided to punish the country" because their feelings were hurt.

"Give me the names of those 12 people and I'll go talk uncharacteristically nice to them," he said.
Associated Press writers Andrew Taylor and Tom Raum contributed to this article.

The Bailout Failed -So, What's Next??

U.S.News & World Report
Bailout, Take II: What the Feds Do Next
Monday September 29, 6:07 pm ET
By Rick Newman

OK, so that didn't work.

After a bunch of all-nighters in Washington and some premature back-slapping, we're right back where we were a couple of weeks ago, after Lehman Brothers declared bankruptcy and the government lent AIG $85 billion. There's no one-size-fits-all bailout plan, after all. That $700 billion in taxpayer money remains under lock and key. Glum investors are now the ones bailing out, fleeing stocks and bonds and seeking safer ground.

But there are still some levers the government can pull. Working through the mess just won't be as orderly or predictable as it would if there were a single plan and a big pot of money. Here's what's likely to happen next:

Another try at a big bailout plan. A lot of those constituents who have been calling Congress to complain about rescuing fat cats are going to rethink their indignation as they watch the stock markets--and their own portfolios--sink. Lawmakers who voted against the bailout plan are going to have to explain why they're letting the markets collapse. The more uncomfortable voters get, the more likely Congress will be to pass some kind of sweeping relief plan. This is far from over.

More piecemeal bailouts. Before the big $700 billion bailout plan even existed, the Fed and the Treasury Department were already patching leaks in the financial system--one trouble spot at a time. The idea behind an umbrella bailout plan was to overhaul the whole system, establishing public standards and treating every ailing company more or less the same, before a bunch of leaks became a gusher. That would have eliminated the guesswork over whether a struggling company meets the criteria for a rescue--like AIG--or falls short, like Lehman Brothers.

Now we're back to guessing. The feds still have the wherewithal to lend money, buy bad assets, or take other measures to keep ailing companies afloat. What they don't have is a single plan that applies to all companies and the authority to soak up vast amounts of bad assets. So those weekend meetings at the New York Fed, with supplicant CEOs pleading for help, are likely to continue.

More failed companies. Duke University finance Prof. Campbell Harvey predicts there could be 750 to 1,000 bank failures over the next six months because of billions in bad assets stemming from the housing meltdown. Scarce credit also threatens other types of companies that are already struggling and desperately need capital, such as the Detroit automakers and some of the airlines. The government will be able to deal with some of those companies one at a time, but without a comprehensive plan, others will fall through the cracks.

Manic markets. Investors were hoping that a big bailout plan would offer some predictability about how the government will deal with struggling companies. Their crystal ball is once again very dark. That means wild swings in stock prices as big investors try to get out of the market ahead of bad news, and get back in if it looks like the feds will ride to the rescue. One of the most volatile sectors is likely to be regional bank stocks as investors worry that banks like Sovereign Bancorp and National City might be the next to fail.

Patchwork regulation. There's already a system in place for dealing with failed banks--led by the FDIC--but that may not be enough to handle the damage that's unfolding. Even without a big bailout bill, Congress may have to set up a new agency to deal with dozens or hundreds of bank failures, one similar to the Resolution Trust Corp. formed in the late 1980s. We could see a whole slew of lesser regulations, too, like restrictions on certain lending practices and higher federal coverage limits on bank deposits.

Continued government intervention. The Federal Reserve continues to pump huge sums of money into the global banking system in a desperate effort to prompt banks to loosen their grip on loans to companies, consumers, and one another. For now, that seems to be having little effect as banks absorb the startling news from Washington and hunker down. That may lead the Fed to pump out even more money and take other important steps, like cutting interest rates. Sooner or later, that will probably help loosen things up. Until then, however, it's apparently up to the markets to fix themselves. Plan accordingly.

The Joker Gives His Opinion on the Bailout Plan - Brilliant!

Here's a Take On The Failed Bailout Vote

Good (But Too Short) Video About How The Financial Crisis Evolved

Do We Have A Deal?

Hmm... I hope we have a deal. I hope it makes sense and I hope it works. The American taxpayer will have to live with this for a very long time - and so will our children!