The Federal Housing Finance Agency (FHFA) has filed suit against the city of Chicago, challenging a new ordinance that makes mortgage lenders responsible for the upkeep of vacant homes on which they hold mortgages, including homes on which they have not yet foreclosed.
Because this update covers the economy and not the presidential campaign, the big news for this month is the November unemployment rate, which fell “unexpectedly” from 9.1 percent to 8.6 percent. It is worth nothing that an increasing number of economic reports have been labeled “unexpected or “better than expected,” but more of that later.
Massachusetts Attorney General Martha Coakley has filed suit against five major mortgage servicers because of their allegedly shoddy foreclosure practices, and one of them – GMAC Mortgage —has retaliated by announcing it will no longer purchase mortgages originated in the state.
The continuing debate over the future of Fannie Mae and Freddie Mac will look familiar to anyone who has tried unsuccessfully to lose weight: The more legislators agree on the need to slim down the two government services enterprises (GSEs) and reduce their domination of the secondary mortgge market, the larger and more influential they become.
A psychologist graphing the stock market’s performance of late might diagnose manic-depressive disorder, or the behavior of a particularly moody teenager — up one day, down the next, catapulted instantly (and often with little provocation) into euphoria and then dragged back into deep depression, responding with equal intensity to political and economic hiccoughs large and small, real and imagined, anticipated and feared.
Bank of America, one of the first banking giants to announce that it would charge consumers a fee for using their debit cards was one of the last to back away from that plan in the face of a ferocious backlash from consumers and withering criticism from politicians and media commentators.
The robo-signing mess has just gotten messier in Massachusetts. The state’s Supreme Judicial Court ruled that a buyer who purchased a home on which the lender had foreclosed improperly did not have legal title to the property.
The scheduled reduction in the “conforming loan limit,” determining the maximum size of mortgages Fannie Mae and Freddie Mac can purchase from originating lenders, won’t have nearly the devastating impact on borrowers and the housing market that industry executives and consumer advocates have predicted.
There is no question that economic reports have been gloomy of late, but they have also been perverse. It’s almost as if malevolent spirits bent on confounding the experts are producing streams of data that seem to establish a pattern, and then releasing just enough contradictory data to challenge the pattern they’ve set.
There’s more than one way to hold lenders accountable for the questionable policies and procedures that contributed to the financial meltdown and the collateral damage that continues to plague the housing market. While state and federal regulators continue to hammer out the details of an agreement targeting the foreclosure-related abuses of loan servicers, the Federal Housing Finance Agency (FHFA) has filed suit against 17 banking giants, accusing them of fraud (among other things) in the sale of more than $190 billion in mortgage-backed securities to Fannie Mae and Freddie Mac.
Economic mood swings of late have followed the trajectory of a rubber ball bouncing on an uneven surface – up a little, down a lot, skittering to one side then another, forward and then back, the direction altered (and sometimes skewed) both by economic turbulence and gale force political winds.
Negotiations to resolve the robo-signing mess have hit another stumbling block – the latest in a series of them – further complicating efforts to forge an agreement mortgage lenders and the state attorneys general investigating them can accept and prompting several trade publications to ask in recent headlines: “Are the…mortgage settlement talks falling apart?”
Economists are beginning to talk about America’s “lost decade.” The poverty rate has reached its highest level in 52 years and median household incomes for middle-class wage earners have fallen to their lowest point since 1997, according to statistics compiled by the Census Bureau.
The home mortgage interest deduction is in the political cross-hairs once again, as lawmakers seek cost-cutting measures that can win bipartisan support in a divided Congress and make a significant dent ($2.4 trillion is the target) in the federal budget deficit lawmakers are trying to tame.
The housing crisis, which was supposed to sort itself out over time, has lingered and deepened instead, spewing a continuing stream of foreclosures into already burgeoning inventories, depressing home prices and, in the view of many economists, impeding the economic recovery. That consensus view has led the Obama Administration and Congress to refocus attention on efforts to keep struggling homeowners in their homes and streamline the foreclosure process, hoping, at a minimum, keep an already grim situation from getting worse.
Housing, the engine that has propelled the economy out of past recessions, has become a dead weight in this one, keeping the recovery stuck somewhere between neutral and first gear and threatening to hurl it into reverse.
Polite requests, urgent pleas, public shame and threats haven’t worked, so the Obama Administration has pulled out heavy — or at least heavier —artillery in its efforts to boost the success rate of the beleaguered Home Affordable Modification Program (HAMP).
Economists who have been speculating nervously about the prospects for a double dip in home prices are becoming even more concerned that the economy as a whole – not just one troubled component of it – may be slipping back into the recessionary bog from which it has not entirely escaped.
Wells Fargo has joined a growing list of financial institutions that are withdrawing from the reverse mortgage arena. Bank officials cited “unpredictable home values” and new restrictions on the loans that make it difficult to assess a borrower’s ability to meet payment obligations” as their primary reasons for shedding this product line.
Slamming the door on “liar loans” and other shoddy underwriting practices that contributed to the financial meltdown, the Federal Reserve has proposed new rules requiring mortgage lenders to verify that borrowers have the ability to repay the loans they obtain. The rules implement a provision of the Dodd-Frank financial reform legislation that established the ability-to-repay requirement but left it up to regulators to craft the details.
State attorneys general are still trying to hammer out an agreement with lenders and loan servicers to resolve complaints about their questionable foreclosure procedures, but rifts among the AGs and a side-settlement crafted by federal bank regulators appear to be impeding those efforts.
If the report on the financial crisis published by the Senate Permanent Subcommittee on investigations were a photograph, it would require a wide-angle lens to encompass all the villains it identifies.
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