From the Milwaukee Journal Sentinel: (ht Michael) Rodney Lass figured his days as a homeowner were over when he was hit with a foreclosure judgment more than a year ago. He stopped rehabbing his two-story Bay View home and moved on. But what Lass didn't realize until recently is that the house remains in his name today. He's still responsible for the taxes, upkeep of the property and the mortgage, leaving Lass perplexed. "Why would I pay for something that I don't own anymore?" Lass said. The foreclosure, however, failed to go through after the California-based lender decided it didn't want the gutted house. Lass said he found out for certain that he still owned it from the Journal Sentinel. Today, the house at 703 E. Lincoln Ave. sits condemned ... The home represents a growing phenomenon known as walkaways - properties for which lenders sue for foreclosure but never take the title. We've heard this story before - the lender starts foreclosure, and then discovers the house is worthless (or in this case has a negative value because the house is condemned). In this case, the foreclosure went through, but the lender never recorded the deed with the court leaving the property in the previous owner's name. No one wants the property now, and the city will probably bear the costs of demolition. Meanwhile the abandoned house is a nuisance for the neighbors - even the won't live there.

The WSJ reporting that the lender to over 1 million small sized businesses has hired Skadden Arps in preparation of a bankruptcy filing. The formerly largest competitor to GE Capital for any and every semi- and fully-toxic loan imaginable, has been so far outright denied a bailout by an administration that has rarely professed a non-socialist approach to corporate demise. Unfortunately for the company, whose new HQ office lobby on 42nd street looks more like a club out of Meatpacking, flashing either a blue or deep purple colored decor, may be Obama's first Guinea pig in financial failure since Lehman.

July 10, 2009 TG-203 Treasury Announces $486 Million in Recovery Act Funds to Create Jobs, Provide Affordable Housing With Funds from Fourth Award Round, More Than $1 Billion Obligated to Date under Innovative Recovery Program to Help Local Communities WASHINGTON – As part of the Obama Administration's effort to create jobs and ease pressures on the housing market, the U.S. Department of the Treasury today announced $486 million in American Recovery and Reinvestment Act (Recovery Act) funding to spur the development of affordable housing units in Alabama, Arkansas, Connecticut, Georgia, Louisiana, Maryland, Massachusetts, Montana, New Hampshire, New Mexico, the Virgin Islands, and Vermont. "Today's announcement of housing funds demonstrates how the Recovery Act is putting our nation on the path to economic stability, one community at a time," said Treasury Deputy Secretary Neal Wolin. "This initiative will help spur construction and development, create much needed jobs, and increase the availability of affordable housing for families around the country." The labor and housing crises in this country are deeply inter-connected. Since their peak level at the beginning of 2006, housing starts have fallen almost 80 percent. Houses currently under construction are at a 13-year low, down more than 60 percent from the peak in the first quarter of 2006. This collapse has led to severe job losses in the residential building and specialty trades sector related to housing, with employment down by nearly one-third -- a loss of over one million jobs. Such losses not only indicate significant problems in the residential construction sector, but also suggest that the need for affordable housing has risen markedly during the recession. In response, the Treasury Department and the Department of Housing and Urban Development have been implementing new efforts designed to help families while providing important assistance to homebuilders. Specifically, Treasury...

One of the reasons I've argued this recovery will be slow is that we cannot simply bounce back to where we were before the problems started as we could in some past recessions. We need to move resources out of housing, out of finance, and out of autos, and those resources need to find productive employment elsewhere in new or growing industries, and that is not very likely until things improve. Consumers need to save more and consume less, as they are starting to do, and this too will require adjustment. So does this mean we should expect a U-shaped recovery instead of a V-shaped recovery? Robert Reich says it's neither, this is an X-recovery: : The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape. Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. ... That's where the more sober U-shapers come in. They predict a more gradual recovery... Personally, I don't buy into either camp. In a recession this deep, recovery ... depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped. Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings...

The housing bubble was a fully rational response to a set of distortions in the free market—distortions created primarily by the public sector.

James A. Kahn. Productivity Swings and Housing Prices. Federal Reserve Bank of New York Current Issues in Economics and Finance , Volume 15, Number 3, July 2009.

Big oil investors and Asia’s central banks and sovereign wealth funds are poised to grow twice as fast as other institutional investors, underscoring how financial power is continuing to shift away from the West, from the McKinsey Global Institute found. According to MGI, the McKinsey’s economics research arm, petrodollar investors — including central banks, sovereign wealth funds, and individual magnates based mostly in the Middle East and Russia — will see the value of their foreign assets soar to at least $9 trillion by 2013, up from an estimated $5 trillion at the end of 2008. Similarly, foreign financial assets held by Asia’s sovereign investors will collectively swell to $7.5 trillion by 2013, up from $4.8 trillion in 2008. The projected rate of growth between 2009 and 2013 will be the slowest since 2000, but, as the report notes, “impressive” nonetheless. What explains these two group’s ability to sail right through financial turmoil that wrecked some of the West’s biggest and boldest investors? Mostly, it’s the nature of the assets they hold, says one of the report’s co-authors Charles Roxburgh . As the economy rebounds, oil prices will go up responding to growing demand for gasoline products tied to greater economic activity. Likewise, when global trade picks up again, Asian reserves will resume building up, reflecting those countries’ ample trade surpluses. In other words, both petrodollar and Asian investors have a hedge over other institutional investors not so much because of the investment decision they’ll make but because their existing portfolios will benefit from “structural flows that will bring money in,” as the world economy heads toward recovery, says Mr. Roxburgh. At least some of these structural advantages may wind down in the long run –China, for example, is slowly steering its economy more towards satisfying domestic demand — but in the short-term, they’ll help tick the financial power balance increasingly toward the economic power centers in...

John Preston submits: This is the first of a series that I will be posting to respond to inaccuracies, falsehoods and fabrications which permeate much of the discussion as it relates to housing and mortgage lending. There is a significant amount of chatter, even on a strong site such as Seeking Alpha, regarding the issue of down payments… the skin-in-the-game concept…and the housing/foreclosure problem. There are repeated attempts to correlate the crisis and leveraging on the part of borrowers and buyers…and, the evidence does not pass scrutiny. It is simply kool-aid served to willing readers. There is a lot of extrapolation…a nice word for an educated guess…and a lot of “bobble-head” nodding…but no real evidence.

Thorsten Beck , Berrak Buyukkarabacak , Felix Rioja , Neven Valev , 9 July 2009 How does financial development affect macroeconomic outcomes? Previous studies have relied on aggregate measures. This column introduces a data set that distinguishes between lending to enterprises and households and investigates the consequences for economic growth, income inequality, and consumption smoothing. Full Article:

More than half of potential homebuyers say they’re still not prepared to jump into the market, and fear of losing their jobs is the No. 1 reason, a new poll shows.

July 8, 2009: FHFA Launches New Integrated Accounting System

To view or print the PDF content on this page, download the free . July 8, 2009 TG-200 Joint Statement by Secretary of the Treasury Timothy F. Geithner, Chairman of the Board of Governors of the Federal Reserve System Ben S. Bernanke, and Chairman of the Federal Deposit Insurance Corporation Sheila Bair on the Legacy Asset Program To view the Letter of Intent and Term Sheets, please visit . To view the Conflict of Interest Rules, please visit . To view the Legacy Securities FAQs, please visit . The Financial Stability Plan, announced in February, outlined a framework to bring capital into the financial system and address the problem of legacy real estate-related assets. On March 23, 2009, the Treasury Department, the Federal Reserve, and the FDIC announced the detailed designs for the Legacy Loan and Legacy Securities Programs. Since that announcement, we have been working jointly to put in place the operational structure for these programs, including setting guidelines to ensure that the taxpayer is adequately protected, addressing compensation matters, setting program participation limits, and establishing stringent conflict of interest rules and procedures. Recently released rules are detailed separately in the Summary of Conflicts of Interest Rules and Ethical Guidelines. Today, the Treasury Department, the Federal Reserve, and the FDIC are pleased to describe the continued progress on implementing these programs including Treasury's launch of the Legacy Securities Public-Private Investment Program. Financial market conditions have improved since the early part of this year, and many financial institutions have raised substantial amounts of capital as a buffer against weaker than expected economic conditions. While utilization of legacy asset programs will depend on how actual economic and financial market conditions evolve, the programs are capable of being quickly expanded if these conditions deteriorate. Thus, while the programs will initially be modest in...

submits: Standard & Poor’s has increased its loss assumptions for projected losses for U.S. residential mortgage-backed securities (RMBS) transactions backed by subprime and Alternative-A (Alt-A) collateral issued in 2005, 2006, and 2007. “We are updating all of our 2005, 2006, and 2007 deal-specific subprime default projections. In aggregate, our remaining 2005, 2006, and 2007 default projections, as a percentage of the original pool balances, are approximately 11%, 30%, and 49%, respectively. As a result of our increased default and loss severity estimates, we are raising our 2005, 2006, and 2007 vintage subprime and Alt-A lifetime loss projections.” We are raising our remaining 2005, 2006, and 2007 Alt-A and subprime loss severity assumptions to reflect additional market value declines and the increasing inventory of real estate-owned properties.

The Government Accountability Office, finds that the $787 billion stimulus package is being used to "cushion" state budgets, prevent teacher layoffs, make more Medicaid payments and head off other fiscal problems. Gee, who woulda thunk? Please consider . Cash-strapped states have used federal stimulus dollars to close short-term budget gaps and avert major tax increases but generally have not directed the money toward long-term expansion, according to a new report. The report released Wednesday by the Government Accountability Office, Congress' investigative arm, found that the $787 billion stimulus package is being used to "cushion" state budgets, prevent teacher layoffs, make more Medicaid payments and head off other fiscal problems. The Congressional Budget Office estimates that only 10 percent of the Recovery Act funds have been released so far, with about half of the money expected to be spent by October 2010. That dispersed money is being used to prioritize short-term projects and needs over more ambitious goals, the GAO report states. For example, the GAO said about half the money set aside for road and bridge repairs is being used to repave highways, rather than build new infrastructure. And state officials aren't steering the money toward counties that need jobs the most, auditors found. Taxpayers have also recently complained that the federal government has wasted money by advertising stimulus-funded construction projects with road signs which costs between $500 and $1,200 to produce. Interestingly I talked about that very thing the other night on Coast-To-Coast and online in . All this talk of multipliers is nonsense. If government spends money in a manner that private industry would not, the multiplier is far less than 1, and perhaps even negative. Case in point: There are numerous road construction and repaving operations where I live. The thing is, most of the roads did not even need repair. Money came in for roads, Obama said...

WASHINGTON (Reuters) - U.S. President Barack Obama's administration is not discussing a second stimulus plan to jolt the U.S. economy out of recession, a White House budget official told Congress on Wednesday.

Falling home prices any be moderating, but they are not likely to be heading higher anytime soon. That’s according to mortgage insurer . One of the the largest mortgage insurers in the US, PMI is forecasting that home prices will be lower in 2011 than they are today, including 30 of the 50 largest metro areas. The decline is likely to spread to “all regions of the nation” from California, Florida, Nevada and Arizona, the states most affected by the housing slump. This line really grabbed me: “The 15 areas with the highest probability of lower prices in 2011 each have a 99 percent chance.” Newswire: “The report said as many as 85% of the country’s 381 metropolitan areas are facing an increased risk of lower home prices in 2011, with Florida, California and Nevada continuing to be at the highest risk. Among the country’s 50 most populated metro areas, the PMI study showed 28 to be in the highest risk category, signaling the greatest probability for lower house prices by the first quarter of 2011. The credit crisis was set off after the housing bubble deflated and popped - and that crisis only reinforced an extremely difficult dynamic in the housing market.” The charts below are not at all encouraging: US Home Prices, 1890-2009 click for larger charts > Real Home Prices, 1890-2009 > Year-Over-Year Change Home Prices, 2001-2009 > Sources: Dan Levy Bloomberg, July 7 2009 http://www.bloomberg.com/apps/news?pid=20601103&sid=aEwbzPfaEGw8 Kerry Grace Benn, Dow Jones Newswires, JULY 7, 2009 http://online.wsj.com/article/BT-CO-20090707-708983.html

submits: At the center of most efforts to provide relief to struggling homeowners is an attempt to take on a single housing paradox: Banks get a much better return on a mortgage modification than they would on a default, foreclosure, and sale, and yet banks renegotiate only a tiny share of seriously delinquent mortgages—only 3% or so. This is money left on the ground, and the key to helping homeowners would seem to be knocking down whatever is standing between banks and this opportunity for mutual gain. That whatever, in most tellings, is securitization. The pooling and chopping of mortgage payment streams that is part of the securitization process would seem to pose a significant structural barrier to loan modifications. But is this actually the case?

A U.S. government plan designed to rid banks' books of the troubled assets that exacerbated the financial crisis will do little to address a fundamental weakness of the industry or the economy, analysts say.

submits: Sellable listings in the San Diego MLS represent only 25% of the distressed loans out there. This short sentence gets right to the point, but admittedly contains some open-ended terms that vary widely by interpretation. By narrowing down the definitions of these terms, and by getting our arms around their underlying sentiment, we will shed light on some significant implications, unlock some “aha” observations, and stimulate a whole lot of thought… not so much about where things stand in today’s real estate market, but about the types of questions we should be asking.

submits: First posted by Jeff Bernstein on Urban Digs, July 6, 2009 at 2.48 PM I have noted several times in the past that the commercial real estate market decline is a continuing major challenge for the banking industry (especially regional and local banks) and, as a result, a continuing stumbling block for the economy as a whole. I have laughed along with you at the new industry maxim that "a rolling loan gathers no loss" and averred that pushing the problems out further in time is not a recovery strategy.