Fannie Mae (FNMA) and Freddie Mac (FMCC) said Monday that they will suspend some foreclosures during the holidays.
From December 19 through Jan. 2, 2013, Fannie will halt evictions of homeowners in a single-family property and in apartments with up to four units that are financed by a mortgage from the government-sponsored enterprise. Freddie, the nation’s other main provider of government-backed housing loans, will stop foreclosures for the same the type of homes from December 17 through Jan. 2, 2013.
“We’re taking this step in support of families who have faced financial challenges and gone through a foreclosure,” said Terry Edwards, an executive vice president in Fannie Mae’s credit management division, in a statement. “The holidays are a chance to be with loved ones and we want to relieve some stress at this time of year.”
Edwards said borrowers who are struggling with their house payments should contact Fannie as soon as possible.
U.S. Attorney Preet Bharara said Wednesday his office will sue the big bank for crisis-era procedures that allegedly allowed it to process thousands of fraudulent loans.
Fannie and Freddie were essentially destroyed by the financial crises, and the subsequent freak out that resulted. As it turns out, the dysphoria began much deeper
(AP) - The top federal prosecutor in Manhattan says he’s suing Bank of America for $1 billion for mortgage fraud against Fannie Mae and Freddie Mac.
U.S. Attorney Preet Bharara says Countrywide, which was later bought by Bank of America, had procedures designed to process loans at high speed and generated thousands of fraudulent loans.
Mr. Bharara says it’s the first civil fraud suit brought by the Justice Department concerning loans that were later sold to Fannie and Freddie.
The suit against Bank of America is the first brought by the Justice Department concerning loans that were later sold to Fannie and Freddie.
JUDY WOODRUFF: We turn to the impact of government bailouts here in the U.S. and questions that continue to surround those decisions.
It was September 15, 2008, when the investment bank Lehman Brothers filed for bankruptcy protection.
RAY SUAREZ: Lehman Brothers’ collapse sent employees packing and the stock market plummeting. The Bush administration had decided it wouldn’t rescue Lehman.
The Treasury Department had taken over mortgage giants Fannie Mae and Freddie Mac that same month, and saved Bear Stearns earlier that year.
Treasury Secretary Henry Paulson told reporters he was drawing a line in the sand.
HENRY PAULSON, former U.S. treasury secretary: I never once considered that it was appropriate to put taxpayer money on the line with — in resolving Lehman Brothers.
RAY SUAREZ: The decision helped trigger a credit and liquidity crisis, fueled by deep doubts about the health of financial institutions.
WOMAN: The motion is adopted.
RAY SUAREZ: Weeks later, Congress and President Bush passed the $700 billion Troubled Asset Relief Program, or TARP. Through TARP, the government disbursed money to hundreds of banks, and propped up firms like Citigroup and Bank of America. Money also went to General Motors and Chrysler.
The program, along with the Federal Reserve, also provided new help to insurer American International Group. AIG was exposed to risky securities and provided insurance on credit swaps around the world. If it went down, the fear was other firms would follow.
In October 2008, I asked Edward Liddy, who was the newest head of AIG, whether the lifeline would save the company.
Do you think that’s going to be enough, though, the $120 or so billion, or might you need more?
Goldman Sachs has disclosed that it was cleared of wrongdoing after an investigation into a $1.3 billion subprime mortgage deal, a surprising victory for the bank.
The Securities and Exchange Commission’s decision to forgo action is an about-face for the federal regulator. In February, the SEC notified Goldman that it planned to pursue a civil enforcement action over the deal, a package of subprime mortgages in Fremont, Calif., that the bank sold to investors in 2006.
The SEC was examining whether Goldman misled investors into thinking the mortgage securities were a safe bet. At the time, Goldman said it would fight to convince regulators that they were mistaken.
On Monday, the bank learned that it was successful. Goldman was ”notified by the SEC staff that the investigation into this offering has been completed,” the bank said in a quarterly filing released Thursday, ”and that the staff does not intend to recommend any enforcement action.”
The announcement is the latest indication that federal investigations into the financial crisis are petering out as the deadline to file cases approaches. While the SEC has brought more than 100 financial crisis-related cases, including a major action against Goldman in 2010, the agency was aiming to take a final crack at punishing Wall Street for its role in the crisis.
After President Obama announced the creation of a special task force in January to investigate the residential mortgage mess, the SEC and other authorities vowed to hold the banks accountable. Wall Street packaged and sold subprime mortgages to investors, as well as the government-owned mortgage finance giants Fannie Mae and Freddie Mac, which suffered billions of dollars in losses.
Lenders like Bank of America Corp and Wells Fargo & Co say they are facing mounting pressure to buy back bad mortgages they sold to investors, signaling that banks’ home-loan headaches could continue for years.
Investors like Fannie Mae and Freddie Mac have been pressing banks to buy back bad mortgages for years, but in recent months those requests have intensified, the banks have said in recent second-quarter earnings reports.
These comments from banks provide a fresh reminder of the loose ends that remain from the housing bust that started five years ago. The threat of new expenses and litigation is dampening bank share prices, and the problem could linger for some time, analysts and experts said.
“This is not done yet,” said Paul Miller, analyst with FBR Capital Markets. “There will be continued surprises in the industry.”
The most pain will likely be felt by Bank of America, which said on Wednesday its total outstanding claims from investors surged more than 40 percent to about $22 billion in the second quarter. The bank’s shares fell nearly 5 percent as investors worried about future losses and dropped again on Thursday.
At a time of low interest rates, U.S. banks are making many new loans to borrowers buying homes and refinancing, but anxiety about the costs of old loans is overshadowing some of this success.
Everyone agrees uncertainty is bad for the economy. But doing something with this observation is seriously hampered by the fact that uncertainty is almost impossible to define and measure.
Many academics count things that proxy for uncertainty, such as mentions of the word in news articles. That’s one of the components in the uncertainty index developed by Scott R. Baker, Nicholas Bloom, and Steven J. Davis whose work we wrote about it here; it links heightened policy uncertainty to weaker growth. It’s also used by Jonathan Brogaard and Andrew Detzel here; they find increased policy uncertainty leads to lower stock prices and private investment.
Establishing causality is tricky. A weak economy or a traumatic event like a financial crisis or terrorist attacks will both raise uncertainty and provoke a policy response, but it’s the economic event, not the policy, that raises uncertainty and hurts growth.
I have my own back-of-the-envelope exercise. I count mentions of the word “uncertainty” in the Federal Reserve’s “beige book.” As my nearby chart shows, uncertainty has shot up in the last month. (Some months are blank because no beige book was released then.)
The beige book is a narrative based on conversations between analysts at the Fed and business contacts throughout the country. While this means it’s not well suited to quantitative analysis such as mine, it does allow you to isolate the source of the uncertainty.
Usually, it’s the economic or sales outlook. Often, it’s an event beyond America’s control: the European crisis, higher petrol prices, Japan’s tsunami, and so on. Some months, though, the source is clearly exogenous policy decisions. In April of 2011, the federal budget was cited in three of that month’s 15 references to uncertainty. Recall that that month the government was on the verge of shutting down over Republican pressure for cuts to discretionary spending. One reference was to the future of Fannie Mae and Freddie Mac.
The housing regulator for mortgage-giants Fannie Mae and Freddie Mac on Tuesday said laws under consideration in California to halt illegal foreclosures could restrict mortgage credit and hamper necessary home seizures.
In a letter to California legislators, the Federal Housing Finance Agency disclosed concerns with a measure to increase civil penalties for so-called “robosigning” of mortgage documents and a proposal that attempts to protect delinquent borrowers from losing their homes.
The term robosigning describes the practice of bank workers signing off on foreclosure documents en masse without verifying information in the paperwork.
A federal housing program funded with taxpayer money left over from the government’s bailout of the banks and auto companies is failing to deliver on its promised relief to struggling homeowners.
The Hardest Hit Fund, a $7.6 billion initiative established by the federal government in February 2010 to help families in states most crippled by the collapsed housing market, has distributed just 3 percent of its money — or $217.4 million — to help homeowners, according to a report released Thursday by the Office of the Special Inspector General for the Troubled Asset Relief Fund, or SIGTARP.
“Look at the TARP money that goes out to the banks,” said Special Inspector General Christy Romero in an interview with The Huffington Post. “That goes out in a matter of days. This has been two years and only 3 percent of these funds have trickled out to homeowners.”
The Hardest Hit Fund has helped just slightly more than 30,000 homeowners, or 7 percent of the roughly 480,000 homeowners targeted for assistance by the end of 2017 when the program expires, according to the report. The program is funded by TARP, the 2008 legislation that has provided a $600 billion to bail out various banks and other companies in the wake of the nation’s financial crisis.
“The Hardest Hit Fund is really struggling to get off the ground and it’s a real concern about whether this money can get out to these homeowners,” Romero said.
The 76-page report reads like the autopsy of a dead housing program, placing the blame for the program’s paltry performance squarely on the Treasury Department, the government agency responsible for TARP and, in turn, the Hardest Hit program.
According to the report, Treasury initially dragged its heels in getting the largest mortgage servicers to participate in the initiative, instead relying on the individual states to broker arrangements with the servicers. Some of the states lacked the necessary clout to secure servicer participation, thus limiting the program’s ability to reach needy homeowners, concluded the report.
“These states don’t have the bargaining power that Treasury has with these large servicers,” Romero said. “Treasury is already working with these same servicers, having similar conversations with them for other housing programs, so Treasury should be using its influence to really get these servicers on board.”
The Treasury Department was similarly slow in securing support from Fannie Mae and Freddie Mac, the government-owned mortgage giants that collectively control nearly half of all outstanding loans, further curtailing the initiative’s reach. The report also blames the Treasury Department for giving states too little time to roll out the program and for failing to establish clear, specific goals that would let the government and the public measure the program’s success.
“Treasury actively and consistently engaged with servicers and [Fannie and Freddie] from the earliest stages of the program, encouraging support and addressing impediments to participation,” wrote Tim Massad, the department’s assistant secretary for financial stability, in a letter responding to the report’s findings.
At least 20 times a day, Alan Hladik walks into a fixer-upper and tries to figure out if it is worth buying.
As an inspector for the Waypoint Real Estate Group, Mr. Hladik takes about 20 minutes to walk through each home, noting worn kitchen cabinets or missing roof tiles. The blistering pace is necessary to keep up with Waypoint’s appetite: the company, which has bought about 1,200 homes since 2008 — and is now buying five to seven a day — is an early entrant in a business that some deep-pocketed investors are betting is poised to explode.
With home prices down more than a third from their peak and the market swamped with foreclosures, large investors are salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants. Nobody has ever tried this on such a large scale, and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses. Typically, landlords tend to be individuals or small firms that own just a handful of homes.
But the new investors believe the rental income can deliver returns well above those offered by Treasury securities or stock dividends. At the same time, economists say, they could help areas hardest hit by the housing crash reach a bottom of the market.
This year, Waypoint signed a $400 million deal with GI Partners, a private equity firm in Silicon Valley. Gary Beasley, Waypoint’s managing director, says the company plans to buy 10,000 to 15,000 more homes by the end of next year. Other large private equity investors — including Colony Capital, GTIS Partners and Oaktree Capital Management, in partnership with the Carrington Holding Company — have committed millions to this new market, and Lewis Ranieri, often called the inventor of the mortgage bond, is considering it, too.
In February, the Federal Housing Finance Agency, which oversees the government-backed mortgage companies Fannie Mae and Freddie Mac, announced that it would sell about 2,500 homes in a pilot program in eight metropolitan areas, including Atlanta, Chicago and Los Angeles.
And Bank of America said in late March that it would begin testing a plan to allow homeowners facing foreclosure the chance to rent back their homes and wipe out their mortgage debt. Eventually, the bank said, it could sell the houses to investors.
Waypoint executives say they can handle large volumes because they have developed computer systems that help them make quick buying decisions and manage renovations and rentals.
“We realized that there is a tremendous amount of brain damage around acquiring single-family homes, renovating them and renting them out,” said Colin Wiel, a Waypoint co-founder. “We think this is a huge opportunity and we are going to treat it like a factory and create a production line to do this.”
Mr. Hladik, who is one of seven inspectors working full time for Waypoint’s Southern California office, is one cog in that production line.
On a recent morning, he walked through a vacant three-bedroom home with a red tiled roof here about 60 miles east of Los Angeles, one of the areas flooded with foreclosures after the housing market bust. Scribbling on a clipboard, he noted the dated bathroom vanities, the tatty family room carpet and a hole in a bedroom wall. Twenty minutes later, he plugged these details into a program on his iPad, choosing from drop-down menus to indicate the house had dual pane windows and that the kitchen appliances needed replacing.
After two years of bewildering futility, John and Linda DeCaro thought they had finally found a way to hang on to their home.
They could no longer afford their mortgage payments and had slipped into delinquency. They could not refinance to take advantage of low-interest rates because they were among the nearly 11 million American homeowners who are “underwater,” meaning that they owed the bank more than their house was worth. Bank of America had already initiated foreclosure proceedings.
Then in the spring of 2011, a nonprofit lender, Boston Community Capital, presented a potential fix, one it has used to aid some 200 underwater borrowers in Massachusetts over the last two years. The bank would buy the DeCaros’ home at market value — about $87,000, which was barely half of their mortgage balance — and then sell it back to them for a little more, providing a manageable loan. Bank of America affirmed the sale price as fair value.
But one powerful obstacle stood in their way: Freddie Mac, the government-controlled mortgage giant, owned the DeCaros’ loan. Freddie has a policy of refusing to approve so-called short sales — those where the purchase price is lower than the mortgage balance — unless the buyer signs a legal document promising not to resell the property to the original homeowner. The document bars the buyer from even renting the home to the initial owner.
In short, the deal could proceed only if the DeCaros gave up the very point of the transaction. They would have to surrender their home.
Linda DeCaro, 46, absorbed this turn of events as if she were being asked to renounce her identity. More than a financial asset, her home was the center of her existence. She and her husband had bought it from her brother almost a decade ago. Her sister lives around the corner. They all grew up in a house two doors down — the same place where her parents still live, where the family gathers for dinner every Sunday evening, and where her 6-year-old daughter often plays while she is at work.
“This is my neighborhood,” Linda DeCaro said. “This is all I know. I would never want to leave here. Everything that I have is here. The church that I was baptized in — that’s the church I belong to. My daughter’s going to the same school that I went to. I don’t sleep because I’m wondering, ‘Where are we going to go?’”