nathan jurewicz

What the foreclosure settlement does

The $26 billion foreclosure settlement has finally been given the green light, making it possible for roughly two million of the nation’s hardest hit borrowers to see a significant reduction in their mortgage payments.  Agreed to between the nation’s five largest banks and attorneys general from 49 states and the District of Columbia, the deal settles charges of foreclosure processing abuses dating back to 2008.  The settlement, the details of which were first announced in early February, has been in the works for more than a year. Here’s what the banks agreed to and what borrowers can expect in the days ahead.

The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments.  The amount of principal reduction will average about $20,000 per borrower in the cases of four of the banks. The Bank of America reductions will be even steeper, averaging $100,000 or more, according to spokesman Rick Simon.  Another $3.7 billion will go toward refinancing mortgages for borrowers who are current on their payments. This will enable them to take advantage of the historically low interest rates that are currently available.  The banks will pay $5 billion to the states and the federal government, the only hard money involved in the deal. Out of that fund will come payments of $1,500 to $2,000 to homeowners who lost their homes to foreclosure.

Other funds will be paid to legal aid and homeowner advocacy organizations to help individuals facing foreclosure or experiencing servicer abuses.  Another $1 billion will be paid directly by Bank of America to the Federal Housing Administration to settle charges that its subsidiary, Countrywide Financial, defrauded the housing agency.  In addition, the banks agreed to eliminate robo-signing altogether and to use proper and legal procedures when putting homeowners through the foreclosure process. They also agreed to end servicer abuses, like harassing delinquent borrowers for payments, and to include principal reductions more often in their mortgage modifications programs.

Iran sanctions to cost 25 cents a gallon

Twenty-five cents a gallon — that’s about how much some international energy experts say the tough US sanctions on Iran’s oil industry are costing Americans at the pump.  As US consumers cope with gas prices that are approaching an average of $4 a gallon, some international trade experts say the cost of the sanctions the US imposes — as in the case of the Iran measures — is something political leaders should discuss more openly. Instead, they say, most politicians act as if sanctions affect only the country targeted — something these experts say isn’t true.  Energy experts say it’s difficult to pinpoint precisely how much sanctions on Iran are costing consumers as they filter down to the gas pump. But Lucian Pugliaresi, president of the Energy Policy Research Foundation, a Washington nonprofit organization that studies energy economics, says it’s possible to make an estimate.  The sanctions the US and other countries have slapped on Iran’s energy sector and on its central bank (aimed at curtailing its oil exports) are costing Iran about 300,000 barrels a day in exports, Mr. Pugliaresi estimates. When added to other factors affecting the international oil market, that decrease in exports may have added about $10 to the current price of a barrel for crude, he says.  And that $10 increase translates roughly to about a 25-cent increase in the cost of a gallon of gas in the US, Pugliaresi says.

FHA delays collections rule

The Federal Housing Administration (FHA) rescinded and will delay a rule that as of April 1 prohibited borrowers with more than $1,000 in disputed collections accounts from getting a federally backed mortgage, according to a notice sent late Friday.  FHA postponed the rule until July, and will take public comment from lenders, builders and others in the industry until then to clarify guidance.  “There is clearly a bigger ripple effect here than the Department of Housing and Urban Development might have anticipated going into this revision,” said Lisa Jackson, senior vice president of research and business development with John Burns Real Estate Consulting. “Any measure that impacts even 10% of sales is meaningful and our analysis shows it would be far greater in some markets.”  The FHA attempted to ease the original proposal, allowing borrowers to provide written documentation on “life event” disputed accounts with them, such as bills stemming from illness, divorce or unemployment in order to obtain an exemption.  Borrowers could previously show the lender they arranged a payment plan to settle other accounts too in order to qualify, including credit card and utility bills.  According to the alert sent Friday, the FHA ensured lenders they would not be in violation of the new rule for loans written between April 1 and April 8.  Until July, the old guidance will be put back into place.

Analysts from JPMorgan Chase said the rule would affect many first-time homebuyers the most, those most likely to carry such debt. The analysts estimated the rule could cut FHA demand by up to 20%, and the damage would affect homebuilders differently depending upon how much of their business hinged on these borrowers.  Many questioned the timing and the murkiness of the rule. The FHA previously said it adopted the rule in order to reduce default risk for newer books of business. Mortgages written during the housing bubble continue to haunt the agency. The FHA emergency Mutual Mortgage Insurance fund dropped to nearly 0.2% last year was in danger of needing a bailout from the Treasury Department if insurance premiums were not hiked and some lucrative settlements were not struck.  “There are two positives to this latest decision: HUD is willing to analyze the real implications of the housing market before they put a new measure in place, plus they are engaging feedback on the issue,” Jackson said.

Stock market on a cliff?

For the stock market, it was a triumphant first quarter. But for earnings growth, the past three months were just ho-hum.  Analysts are expecting earnings for companies in the Standard & Poor’s 500 index to decline 0.1% compared to a year ago, according to FactSet. It’s a tiny number but a significant turning point. Earnings growth was on a winning streak for the previous nine quarters. Year-over-year earnings growth has been at least 10% for all but the most recent period, when it was 6%.  The reasons for the expected slowdown range from global (a weak Europe hurts everybody) to mathematical (it’s hard to top double-digit quarters). Whatever the cause, the stagnation in earnings growth is a stark reminder that the economy’s problems are far from solved. Just three months ago, analysts were predicting 3% earnings growth for the first quarter.  We’ll soon see if the expectations are on target. Earnings season gets under way Tuesday when the aluminum producer Alcoa becomes the first major US company to release its first-quarter results.  Should this batch of earnings contain a lot of bad surprises, it could upend a stock market rally that pushed the S&P 500 index up 12% in the first three months of the year.

63% of HAMP-eligible second liens modified

Mortgage servicers started modifications on 63% of eligible second liens under the Home Affordable Modification Program (HAMP), according to Treasury Department data released Friday.  Through February, servicers participating in 2MP started 71,133 second-lien workouts of the 113,774 eligible loans. More than 15,600 of them have been fully extinguished. More than one-third of the second-lien mods occurred in California, according to the Treasury.  Of the $29.9 billion allocated for HAMP, roughly $2.7 billion is set aside for modifying second liens, according to the Special Inspector General for the Troubled Asset Relief Program.  In January, the Treasury boosted incentives to investors who allow the workouts, doubling the pay from earlier in the program.  In order for a loan to be eligible for the second-lien program under HAMP, the servicer must receive notification of a match with a permanent first lien modification, according to program guidelines. The Treasury said roughly 315,000 HAMP first-lien mods have been matched to a second, but many are deemed ineligible because of a redefault on the first lien, an extinguishment before it entered HAMP.  In some cases, the Treasury said some homeowners with an eligible second decline to participate in 2MP.  Bank of America has nearly 40,000 eligible second-liens, the most of any servicer, and has started modifications on 62% of them.  Wells Fargo started workouts on 71% of its 16,300 eligible seconds, the highest percentage of any servicer.  Overall, servicers start modifications on between 2,000 and 5,000 second-liens under 2MP. The median monthly payment reduction was $161 for borrowers.  Servicers started 1.8 million trial modifications and completed 974,000 permanent workouts under the first-lien program through February.

Half a decade into the deepest US housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end.  House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.  But a painful part two of the slump looks set to unfold: Many more US homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.  “We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010,” said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio.  “Last year was an anomaly, and not in a good way,” he said.  In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.  Five major banks eventually struck that settlement with 49 US states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.

 Mortgage servicing provider Lender Processing Services reported in early March that US foreclosure starts jumped 28% in January.  More conclusive national data is not yet available. But watchdog group, 4closurefraud.org which helped uncover the “robo-signing” scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash.  Although foreclosure starts were 50% or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47% from 2011. Those of Wells Fargo’s rose 68% and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment. 

Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.  Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64%), Chicago (43%) and Miami (53%).  RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it’s mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.  “The subprime stuff is long gone,” said Michael Redman, founder of 4closurefraud.org. “Now the folks being affected are hardworking, everyday Americans struggling because of the economy.”

Crackdown on tax havens

As regulators clamp down on money flows around the globe, governments, even those that prided themselves on the strength of their secrecy laws, like Switzerland, are facing pressure to share banking information and change their policies.  Now, private banks and wealth managers are scrambling to convert so-called black money — assets that have not been disclosed — into accounts that are above board.  The shift may provide opportunities for the industry. As more funds become legitimate, analysts say financial institutions will be able to sell extra wealth management products to affluent people and enter markets that had previously been off limits.  “There’s much less black money now than three years ago,” said Jean Schaffner, head of the Luxembourg tax practice at the law firm Allen & Overy. “It’s in the banks’ interests for clients to come forward with their money.”  For decades, Western governments tolerated offshore tax havens, places where the wealthy could park millions away from the gaze of their domestic authorities. Switzerland, in particular, developed a reputation as a place where the wealthy could rely on secrecy laws.  But the tide began to turn in 2008, particularly after the financial crisis prompted many governments to act in concert.  As Switzerland and other locales tightened their financial controls, many people initially flocked to other tax havens like Singapore and Hong Kong, which still offer some of the world’s most secret accounts. But these places, too, are facing new pressures.

NAHB – 101 improving housing markets

The list of housing markets showing measurable improvement expanded slightly to include 101 metropolitan areas in April, according to the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI), released today. Thirty-five states (including the District of Columbia) are now represented by at least one market on the list. The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. The 101 markets on the April IMI represent a net gain of two from March, with 13 metros being added and 11 markets slipping from the list while 88 markets retained their places on it. Among the new entrants, areas as diverse as Rome, Ga.; Coeur d’Alene, Idaho; Greenville, N.C.; Brownsville, Texas; St. George, Utah; and Huntington, W.Va., are now represented on the IMI.  The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas.

The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the US Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.  A complete list of all 101 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in April, is available at: www.nahb.org/imi.

Job improvement slows

US payrolls rose far less than expected in March, keeping the door open for further monetary policy support from the Federal Reserve, even as the unemployment rate fell to a three-year low of 8.2%.  Employers added 120,000 jobs last month, the Labor Department said on Friday, the smallest increase since October.  Economists polled by Reuters had expected nonfarm employment to increase 203,000 and the unemployment rate to hold at 8.3%.  The slowdown in employment growth last month likely reflected the fading boost from unseasonably warm winter weather. It supported the caution on the labor market from Fed Chairman Ben Bernanke last week.  Bernanke expressed doubts the recent job gains could be sustained, and March’s weak report was in line with expectations that economic growth slowed to an annual pace of 2% in the first quarter from the 3% rate in the October-December period. 

The weakness in hiring last month was concentrated in the vast private services sector, which added only 90,000 after increasing payrolls by 204,000 in February. Retail employment fell dropped 33,800 after falling 28,600 the prior month.  Construction hiring fell 7,000, the second straight monthly decline. Temporary help fell 7,500 after rising 54,900 in February.  However, manufacturing enjoyed another month of strong job gains, with factories adding 37,000 new positions, helped by carmakers trying to meet pent-up demand for motor vehicles. Factory jobs increased by 31,000 in February.  Government employment edged down 1,000 after rising 7,000 in February. Despite the weak employment gains last month, average hourly earnings rose 5 cents.  The workweek dipped to 34.5 hours from 34.6 hours in February.

WSJ – Fed in favor of the banks’ foreclosure-rental approach

Last month, Bank of America Corp. announced a plan to allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate.  In addition, Fannie Mae is selling 2,500 homes in eight metropolitan areas around the country. The government-controlled mortgage firm is selling the $320 million portfolio to investors, who would be required to turn them into rental properties.  The Federal Reserve set out new polices for banks that decide to rent out foreclosed homes, endorsing a strategy for managing the huge number of distressed properties that have piled up during the housing bust. The central bank said in a six-page policy statement Thursday that the Fed’s regulations permit the rental of foreclosed properties to tenants “in light of the extraordinary market conditions that currently prevail.” The policy clarified that banks that would otherwise be required to sell off the properties more quickly can turn to rental as a strategy. 

Federal Reserve Chairman Ben Bernanke and other central bank officials have spoken publicly about the need to encourage banks to rent out foreclosures. “With home prices falling and rents rising, it could make sense in some markets to turn some of the foreclosed homes into rental properties,” Mr. Bernanke said in a February speech.  The central bank said that banks holding large numbers of foreclosures should establish detailed policies for renting foreclosures, including a process to determine whether the properties are safe to occupy and meet local building code requirements.  The Fed said banks should set up criteria by which properties are picked to be rental properties. The banks should establish plans that “describe the general conditions under which the organization believes a rental approach is likely to be successful,” the central bank said.

WSJ – report slams banks on maintenance

A consumer-advocate group said in a report Wednesday that a study of foreclosed properties found that banks have higher standards for properties they own in wealthy, predominantly white, neighborhoods than low-income ones, raising a new civil-rights challenge against the mortgage industry.  The report by the National Fair Housing Alliance examined more than 1,000 foreclosed properties in nine cities: Atlanta; Baltimore; Dallas; Dayton, Ohio; Miami; Oakland, Calif., Philadelphia; Phoenix and Washington, D.C.  “This report offers evidence that banks responsible for peddling unsustainable loans to communities of color and triggering our current foreclosure crisis are continuing to damage those communities by failing to properly maintain and market the properties they own,” Shanna L. Smith, the housing alliance’s chief executive, said in a statement. The group said it is planning legal action against two banks, which it didn’t name.  The group and four of its members scrutinized foreclosed properties for problems like broken windows, trash, water damage and unkempt lawns.  The report found that properties in minority neighborhoods were 42% more likely to have shoddy maintenance than those in majority-white neighborhoods. Trash and other debris were 34% more likely to be found in foreclosures in minority neighborhoods than in white ones.

Jobless claims down this week

Initial claims for state unemployment benefits fell 6,000 to a seasonally adjusted 357,000, the lowest level since April 2008, the Labor Department said today.  The prior week’s figure was revised up to 363,000 from the previously reported 359,000. Economists polled by Reuters had forecast a claims reading of 355,000 for last week.  The four-week moving average for new claims, a measure of labor market trends, declined 4,250 to 361,750.  The number of people still receiving benefits under regular state programs after an initial week of aid fell 16,000 to 3.338 million in the week ended March 24, the lowest since August 2008.  A total of 7.05 million people were claiming unemployment benefits during the week ended March 17 under all programs, down 107,760 from the prior week.

WSJ – ownership gains appeal

Climbing rents for apartments are combining with a continued decline in home prices to push once-reluctant home buyers into finally taking the plunge, say economists and real-estate agents, helping what appears to be a good start to the housing industry’s all-important spring selling season.  Average apartment rents rose by 2.7% last year while the national vacancy rate dropped below 5% for the first time since 2001, according to a quarterly survey to be released Wednesday by Reis Inc., a real-estate research firm.  The broad and sustained growth of the apartment market contrasts sharply with an uneven and tentative housing recovery. During the first quarter, average apartment rents rose and vacancy rates fell in all 82 metropolitan areas tracked by Reis, when compared with a year ago.  The largest rent increases came in San Francisco and San Jose, Calif., which saw increases of 5.9% and 4.9%, respectively. Even boom-to-bust Las Vegas, which has struggled with falling rents in previous quarters, saw average rent rise 1.8% from a year earlier.  Such increases are one reason why analysts at Zelman & Associates believe 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year. “The equation of renting versus owning is becoming much more favorable for owning,” said Ivy Zelman, the firm’s chief executive. Unless the economy worsens, there is little sign that rent growth will slow until hundreds of thousands of new apartment units currently under construction hit the market over the next few years.

Easier to pay down debt

Timely repayments improved on all 11 of the consumer loan categories tracked by the American Bankers Association (ABA) in the final quarter of last year, the first time that has happened since 2004, according to the organization’s chief economist.  The ABA said delinquency rates still remain high as the economy slowly recovers but the fourth quarter showed a marked improvement from the prior quarter in consumers’ ability to make payments on auto loans, credit cards and other debts.  It does not, however, track delinquency rates for traditional mortgage payments.  The broad delinquency category that tracks eight types of loans fell to 2.49% from 2.59%.  Delinquencies on payments for credit cards provided by a bank fell to 3.17% from 3.25%.  The delinquency rate for home equity loans fell to 4.08% from 4.12%.

FHFA to decide on write downs in April

Federal Housing Finance Agency (FHFA) head Edward DeMarco said the agency will likely make a decision regarding mortgage principal forgiveness sometime in April.  DeMarco, in a speech Wednesday before the Boston Security Analysts Society, said the FHFA continues to evaluate added incentives from the Treasury Department to write down loan principal under the Home Affordable Modification Program.  The Treasury announced in January that it would triple those incentive payments for mortgage investors, and Freddie Mac CEO Charles “Ed” Haldeman signaled the change could push the government-sponsored enterprises to cut mortgage principal.  But DeMarco continued his wary stance toward write-downs Wednesday, and said principal forbearance “produces the same, lower monthly payment.” That’s the main reason to modify a loan, he said.  More than three in four “deeply underwater” borrowers on the GSEs’ books are current on their loans, DeMarco said.  “Indeed, we have found that payment reduction, not loan-to-value, is the key indicator of success in loan modification,” DeMarco said in prepared remarks. “If the borrower remains successful in this modified loan, this approach preserves for taxpayers an ultimate recovery on the debt.”

Others, including many House and Senate Democrats, want DeMarco to go forward with write-downs, while the less patient have called for his ouster.  Thirty senators, in a letter Wednesday, asked DeMarco to revise how the FHFA conducts its principal reduction analysis. The FHFA’s previous report, which said write-downs would cost the GSEs $100 billion, had “several critical flaws,” they said.  “We seek an accurate analysis, but not a particular result,” the senators said in the letter. “Conducting an accurate analysis of this issue is not only part of your responsibility as conservator to conserve taxpayer assets, but also part of your statutory responsibility to maximize assistance for homeowners to minimize foreclosures.”  Sen. Richard Shelby, R-Ala., who is the ranking member of the Senate Banking Committee, came out in defense of DeMarco, questioning Democrats’ own efforts.  “Democrats should stop blaming FHFA for their failure to craft bipartisan legislation to address the housing crisis,” Shelby said in an emailed statement. “FHFA has refinanced over 10 million mortgages since 2009. What have the Senate Democrats accomplished during that same time frame?”

Corelogic – home prices down

CoreLogic released its February Home Price Index (HPI) report, the most current and comprehensive source of home prices available today. Excluding distressed sales, month-over-month prices increased 0.7% in February from January.  The CoreLogic HPI also showed that year-over-year prices declined by 0.8% in February 2012 compared to February 2011. Distressed sales include short sales and real estate owned (REO) transactions.  The report also shows national home prices, including distressed sales, declined on a year-over-year basis by 2.0% in February 2012 and by 0.8% compared to January 2012, the seventh consecutive monthly decline. 

Highlights as of February 2012:

-  Including distressed sales, the five states with the highest appreciation were:  West Virginia (+8.6%), Michigan (+5.8%), Florida (+4.7%), Arizona (+4.5%) and South Dakota (+4.1%).

-  Including distressed sales, the five states with the greatest depreciation were: Delaware (-11.2%), Connecticut (-7.9%), Rhode Island (-7.8%), Illinois (-7.1%) and Georgia (-6.6%).

-  Excluding distressed sales, the five states with the highest appreciation were: South Dakota (+5.9%), West Virginia (+5.6%), Maine (+4.5%), Utah (+3.7%) and Montana (+3.6%).

-  Excluding distressed sales, the five states with the greatest depreciation were: Delaware (-8.7%), Connecticut (-4.9%), Nevada (-4.6%), Vermont (-4.0%) and Minnesota (-3.3%).

-  Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to February 2012) was -34.4%.  Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -24.6%.

-  The five states with the largest peak-to-current declines including distressed transactions are Nevada (-60.2%), Arizona (-49.8%), Florida (-48.6%), Michigan (-44.0%) and California (-43.7%).

-  Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 67 are showing year-over-year declines in February, nine fewer than in January.

Private sector adds 209,000 jobs

The private sector created 209,000 jobs in March, continuing the slow but steady rise in employment that has characterized the employment market for months.  Services again led the job creation, according to a report from ADP and Macroeconomic Advisors.  The service sector increased 164,000 in March, though the rate of job creation slowed a big from the upwardly revised 183,000 in February.  Job creation in goods-producing businesses rose 45,000 for the month, while manufacturing rose 23,000 and construction grew 13,000.  The financial sector added 8,000 positions for the month.  Small businesses —defined has having fewer than 50 employees — led the way in job creation, adding 100,000 positions. Medium-sized firms added 87,000, while large businesses with 500 or more employees lagged with 22,000 new positions added.  Financial markets reacted modestly to the report, with stock market futures edging up a bit from their lows of the morning, while Treasurys cut a bit of their price gains. The ADP release traditionally sets the stage for the government’s nonfarm payrolls report to be released Friday. Economists expect the payrolls number to grow by about 207,000 and the unemployment rate to hold steady at 8.3%.  ADP’s numbers were a shade below consensus though unlikely to generate any substantial revisions to the nonfarm number.  The March numbers could be tricky in that unseasonably warm weather this winter may have played havoc with the usual seasonal adjustments government economists use to gauge employment trends.

MBA – mortgage applications up

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 4.8% in the week ended March 30.  The MBA’s seasonally adjusted index of refinancing applications climbed 4%, while the gauge of loan requests for home purchases jumped 7.2%.  “Applications to buy a home picked up last week, and are running more than two% above the level reported at this time last year,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement. “Home purchase applications for conventional loans are now about 10% above last year’s level.”  The refinance share of total mortgage activity slipped to 71.2% of applications from 71.9% the week before.

Paul Ryan strikes back – “we need a new president”

Following a hyperbolic criticism of his federal budget proposal by President Obama, Republican Congressman Paul Ryan lashed back yesterday.  “Disguised as deficit-reduction plans, it is really an attempt to impose a radical vision on our country. It is thinly veiled social Darwinism,” Obama said earlier in the day, calling the Ryan budget “a Trojan horse” that would increase inequality.  “You would think that after the results of this experiment in trickle-down economics, after the results were made painfully clear, that the proponents of this theory might show some humility, might moderate their views a bit,” Obama said. “Instead of moderating their views – even slightly – the Republicans running Congress right now have doubled down and have proposed a budget so far to the right, it makes the Contract With America look like the New Deal.”

On “The Kudlow Report,” Ryan defended against the president’s claims.  “Virtually none of the claims he makes about our budget are actually true,” the Wisconsin Republican said. “He’s distorting the truth, he’s dividing the country, and he’s becoming more bitter and partisan by the day. Frankly, it’s kind of sad to see.”  Ryan took Obama to task for what he characterized as wavering on the Simpson-Bowles plan.  “Our tax reform plan goes in the same exact direction that Simpson-Bowles goes, which is: Broaden the base, lower the rates. Get rid of loopholes and tax shelters so we can lower everybody’s tax rates,” Ryan said.  The congressman also criticized what he saw as a lack of action in the face of an economic cliff that the United States is facing.  “We need somebody in the White House who’ll actually see this problem for what it is and get this debt under our control before it gets out of our control,” he said. “And that’s why I’m just saying we need a new president.”

WSJ – only 3% of eligible home owners apply for foreclosure review

Last April, federal banking regulators cracked down on alleged foreclosure abuses by announcing enforcement actions against 14 major financial companies and promising widespread reforms.  A year later, borrowers haven’t received any compensation from banks, officials haven’t agreed on penalties for errors ranging from incorrect credit-bureau reporting to wrongful foreclosure, and millions of invitations to start foreclosure reviews have received no response.  The Federal Reserve and another federal banking regulator, the Office of the Comptroller of the Currency, also haven’t agreed on whether some of those receiving aid in exchange should relinquish their right to sue the banks, people familiar with the discussions said.  Regulators say they are working to ensure that the review process is rigorous and effective, while banks have said they don’t expect the process to uncover significant evidence of financial harm to borrowers. But the hiccups point to the pitfalls facing government efforts to address alleged foreclosure abuses. In February, five major lenders agreed to a $25 billion foreclosure-abuse settlement with state attorneys general and federal officials.

So far, just 3% of borrowers have applied for the foreclosure reviews specified in last April’s consent orders. The post office has returned the banks’ own foreclosure-related mailings as undeliverable at almost twice that rate. At least one bank is struggling to get systems in place for handling and testing borrower responses.  Some people familiar with the process said the amount being spent on foreclosure reviews could far outweigh the amount provided to consumers in compensation. Three major banks are spending close to $50 million a month each on auditors, attorneys and other costs related to the review process, said one person familiar with the banks’ efforts.  One major consultant, Promontory Financial Group, has assigned more than 1,000 people to reviews for three major US banks, according to documents filed with the OCC. The fees Promontory would collect for this work are blacked out in the documents, and the company declined to say how much it is being paid.  An OCC spokesman acknowledged that the process will be costly but said it is “a necessary expense to determine whether or not there were financial injuries as a result of errors in the foreclosure process.” A Fed spokeswoman declined to comment.

Workers’ confidence up

As the unemployment rate continues to drop, however slowly, employees are feeling more confident about their prospects. That creates a new dynamic for workers and their employers, says Rusty Rueff, a career and workplace expert at Glassdoor, an online job community.  Rueff says that, based on results of Glassdoor’s most recent Employment Confidence survey, there are a number of signals business owners are giving to employees to make them feel that job security is increasing.  Glassdoor has been conducting quarterly surveys since the last quarter of 2008, as the recession was hitting its peak.  “We’ve found that employee confidence is a strong economic indicator,” said Reuff. “Employee confidence is precursor to consumer confidence.” 

The Glassdoor survey, conducted in mid-March and spanning activity in the first quarter of 2012, found that just 13% of employees worked for companies that had initiated furloughs, unpaid leave or mandatory vacations. That is down from 18% in the previous quarter.  More telling numbers: The percentage of employees who said their employers communicated bonus reductions or eliminations was down to 10%, from 17 the previous quarter. And 40% said that health or dental benefits, and pay or perks that previously were cut had been restored. That was up from 38% in the fourth quarter of 2011.  And 43% of employees said they expect a pay raise in the next 12 months, up from 38% at the end of 2011. That’s the highest number since the survey was begun in 2008.  While confidence is up, employees are not entirely convinced the recovery is in full gear. One indication: 26% of employees said that employers had reduced health or dental benefits. That number is up dramatically from 17% last quarter.  Nevertheless, Rueff says that the uncertainty caused by Obama’s Health Act is holding employers back.

CMBS delinquencies spike

Delinquencies on loans backing commercial mortgage bonds jumped 31 basis points to 9.68% in March from the previous month, according to Trepp.  It was the largest monthly increase since a 51 bps spike in July. The rate climbed above the 9.37% level in February and the 9.42% rate one year ago. Roughly $5 billion in these loans turned delinquent in March. Meanwhile, there was $1 billion in CMBS loan resolutions, dropping below levels seen in recent months. The first data for five-year loans originated in 2007 came in during the first quarter of 2012. Only 48% of the $9 billion originated paid off at or before they came due. Some of those were resolved with a loss. Of those that fell out of the CMBS pools, roughly 20% suffered some sort of loss, Trepp said, though in many cases the loss was less than 2%.  The half of that specific vintage are either categorized as nonperforming or placed in foreclosure with a special servicer.  The highest delinquency rate jump occurred in multifamily properties, which increased 74 bps to 15.39% in March.  Delinquencies on offices (9.41%) climbed 37 bps, and retail delinquencies (8.24%) increased by 24 bps from the previous month.