Liput Group Financial News Blog

Foreclosure Epidemic Causing More Than Financial Damage as Some Homeowners Choose Suicide Over Leaving Their Homes

The foreclosure crisis in Philadelphia is now becoming a matter of life and death. Eyewitness News has learned that in the past month, two homeowners took their own lives before sheriff's deputies arrived to tell them that they were being evicted.

On March 5, deputies arriving to post an eviction notice on Lynda Clark's South Philadelphia home found she had hanged herself.

"It's devastating for everyone. We're not even family members and it's just devastating to us," Captain Albert Innaurato of the Philadelphia Sheriff's Office said.

Less than three weeks later, owner Gregory Bellows shot and killed himself shortly before deputies arrived to evict him from his Roxborough home.

Court records show Clark, whose debt topped $100,000, lost her home at a Sheriff's Sale last October. Bellows, owing more than $240,000, had his home sold at a Sheriff's Sale in 2008.

While the numbers are clear, it most likely will never be known when the homeowner's huge debts turned into despair.

"They really don't understand that it's imminent, it's going to happen. Take some sort of proactive steps to stop it from happening," foreclosure prevention director Darrel K. Stewart said.

Credit: Philly 57 News

Home Sales Drop for Third Straight Month, Average Sales Price Down 2%; No Sign of Recovery

Sales of existing homes fell for a third straight month in February, pushing sales down to the lowest level since last July. There is concern the fragile housing rebound is faltering, making it harder for the overall economy to recover.

The National Association of Realtors said Tuesday that sales of previously occupied homes dropped 0.6 percent in February to a seasonally adjusted annual rate of 5.02 million.

The weakness in sales depressed prices with the median home price dropping almost 2 percent from a year ago to $165,100.

Sources: Associated Press, National Association of Realtors

CBO Report Says Obama Policies Will Result in $20 Trillion Plus Deficit in 10 Years

The Congressional Budget Office has released its assessment of President Obama's budget, and the results aren't pretty. According the analysis, deficits in the next decade will be worse than what the White House has projected, much higher than they would be if we were to follow current law, and even higher than what CBO had forecast last year. Between 2011 and 2020, the nation will accumulate $9.8 trillion in deficits under the Obama budget, according to the CBO, ending the decade with $20.3 trillion in public debt.

Credit: CBO, American Spectator

Another 36,000 Jobs Lost in February as Unemployment Rate Remains at 9.7%, Those Seeking Work 16.7%

The U.S. unemployment rate held at 9.7 percent and payrolls fell less than forecast, indicating the labor market strengthened even as East Coast snowstorms forced some employers to temporarily close.

Payrolls dropped 36,000 last month after a revised 26,000 decrease in January, figures from the Labor Department in Washington showed today. Manufacturers added workers for a second straight month, the first back-to-back gain since 2006, while construction companies fired workers.

Sources:  US Department of Labor, Bloomberg News

Feds May Halt All Foreclosures Unless First Screened for HAMP Loan Modification Program

The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”

Credit: Bloomberg News

 

The problem with this proposal is that HAMP is only a guideline and banks do not have to follow it, but can make up their own rules.  As long as the banks have their bad loan losses covered by taxpayer dollars they do not care, and in fact can earn more interest and fees, if a home goes into foreclosure.

As Unemployment Rate Steadies at 9%, Percentage of Americans Underemployed Hits 20%

According to a recent Gallup Poll, 19.9% of the U.S. workforce was underemployed during the month of January, translating to close to 30 million Americans who are working less than their desired capacity.

When combined with Department of Labor data reflecting unemployment, the total percentage of Americans who are considered seeking new jobs is almost 30%.

Source: US Department of Labor, Gallup

Fed Raises Discount Rate for Banks, Says No Plans to Enact Hikes for Consumers...Yet

The Federal Reserve decided Thursday to boost the rate banks pay for emergency loans. The action is part of a broader move to pull back the extraordinary aid it provided to fight the worst financial and economic crisis since the 1930s.

The move won't directly affect borrowing costs for millions of Americans. But with the worst of the financial crisis over, it brings the Fed's main crisis lending program closer to normal.

The Fed decided to bump up the so-called "discount" lending rate by one-quarter point to 0.75 percent. The increase takes effect Friday.

The central bank said the action should not be viewed as a signal that it will soon boost interest rates for consumers and businesses.

Credit: Associated Press

Jobless Claims Rise Higher Than Expected, Indicate Continued Sluggish Economy

The number of U.S. workers filing new applications for unemployment insurance unexpectedly surged last week, while producer prices increased sharply in January, raising potential hurdles for the economic recovery.

Initial claims for state unemployment benefits increased 31,000 to 473,000, the Labor Department said on Thursday. That compared to market expectations for 430,000.

Credit: US Department of Labor, CNBC

Next Threat to Economic Recovery: Commercial Loan Defaults

Over the next several years, failed commercial real estate loans could litter American cities with empty stores and office complexes, cause hundreds of bank failures and weaken the economy, a watchdog report says.

Banks face up to $300 billion in losses on loans made for commercial property and development, according to a report released Thursday by the Congressional Oversight Panel. The panel monitors the government's efforts to stabilize the financial system.

The report says the defaults could lead to reduced lending and cause the eviction of families from rental properties. Bank failures also could contribute to job losses and hurt the economic recovery.

Smaller banks are more vulnerable to the losses than their larger Wall Street counterparts. That's because commercial real estate makes up a larger portion of their portfolio.

The Federal Deposit Insurance Corp., which manages bank failures and insures deposits, is under stress that will intensify over the next few years, panel chairwoman Elizabeth Warren said in a call with reporters.

Small- and mid-size banks have been failing at the fastest rate since the savings and loan crisis of the 1980s and 1990s. The failures are due mostly to bad loans they made for commercial projects.

Banks often lent too much for land and buildings whose prices were inflated by a real estate bubble. They also relied on rosy assumptions about the profitability of retail and office projects and did not consider the possibility of a severe recession.

Commercial property values have fallen more than 40 percent in the past three years, the report notes.

Some have been unable to pay the loans. Others have stopped paying because they now owe more than the properties are worth. Losses are mounting for banks, more of which will close. That could spell trouble for the economic recovery, said Warren, a Harvard law professor.

"If hundreds more community banks go under, the effect would be to ... dump sand in the gears of the economic recovery," she said.

Credit: Associated Press

1 in 5 US Homeowners Upside Down, Facing Threats of Foreclosure and Unable to Refinance

One of every five U.S. homeowners owed more on their mortgage than their home was worth in the fourth quarter, a trend that poses a serious threat to the US housing market's recovery, real estate Web site Zillow.com said on Wednesday.

Homeowners with "underwater'' mortgages are more prone to defaults and foreclosures. They typically do not qualify for refinancings and are unable to sell their homes because they would need to cough up cash at closing time to pay off their mortgage.

Credit: Reuters, Zillow.com