Irene affects home financing Damage from Hurricane Irene could
make it difficult for homeowners in the Northeast to close on
pending home refinancing and mortgage purchase applications.
"What has to happen — or what is required — is that they need to
have a re-inspection completed on the property by the original
appraiser to verify no damage has been done and the value of the
home has not been affected," by the storm, according to John
Walsh, president of Total Mortgage Services, a lender based in
Connecticut. Walsh said the re-appraisal issue will impact
homeowners who had pending home purchase and refinancing
applications in FEMA-designated disaster areas before the
hurricane.
The FEMA website names at least 11 states and Washington as
federal disaster areas impacted by last weekend's storm. Walsh
said somewhere between 15% to 50% of his firm's pending mortgage
application pipeline requires a new inspection. At the same
time, he stresses a required re-inspection does not mean all of
those properties were actually damaged by the storm. Even still,
he sees costs and delays as a problem. "There are going to be
homes that are uninhabitable," Walsh said. "One house that I
know of ended up with oil all over it." He said in situations
where the damage runs deep, a financial institution is not going
to lend on the property once the new appraisal shows the impact
of the storm. Walsh sees this paradigm as being particularly
difficult in situations where a person has yet to close on a
mortgage for a home damaged by the storm, especially if the
buyer has already sold his or her existing residence. "If I'm
buying that house and I can no longer purchase it, and I've
already sold my own home, the domino effect of that could be a
big problem," he said.
Andrew Wilson, a spokesman for Fannie Mae, said it's too early
to tell how many refinancing and purchase applications will be
impacted by Hurricane Irene, which swept up the coast hitting
every state between Virginia and Vermont. "If there has been
damage to a home that was looking to refinance, they indeed have
to seek a reappraisal," Wilson said. He said the larger issue
for the GSE is letting impacted homeowners with Fannie Mae loans
know that if they are facing flooding and other damages they can
qualify for a loan forbearance. "I don't know if we have
received requests for this from lenders yet," Wilson said.
However, he said lenders are empowered under GSE guidelines to
grant those forbearances in natural disaster situations.
No jobs created Economists had been expecting the Friday job
report to show a net of 75,000 jobs created, an unusually low
number considering the US is technically more than two years
removed from the end of the last recession. Instead, no jobs
were created and the unemployment rate moved higher at 9.1% in
August, fueling concerns that the US is heading for another
recession. Private payrolls actually rose 17,000, but that was
offset by continued shrinkage in government. The number of
people unemployed remained unchanged at 14 million. The
unemployment rate that counts those not looking for work rose to
16.2%, tied for the highest in 2011. The average duration of
unemployment edged lower to 40.3 weeks from its previous record
high of 40.4 weeks in July. However, the median level spiked
from 21.2 to 21.8 weeks.
Among the more disturbing numbers: the amount of people
"marginally attached to the labor force" rose to 2.6 million
from 2.4 million. These are workers not included in the
unemployment count because they had not sought work in the past
four weeks but have looked in the past year. Health care and
mining saw more jobs in the month, but telecommunications and
government both posted substantial losses. It was unclear how
much impact the Verizon strike, where 45,000 walked off their
jobs for two weeks, had on the total count. Many of those
workers likely received paychecks during the Labor Department's
counting period and may not be included in the number released
Friday. Manufacturing lost 3,000 jobs, construction dropped
5,000 and retail lost 8,000. Average hourly earnings slid 3
cents to $23.09 while average weekly hours edged lower to 34.2.
Unemployment rates held steady across the major categories, with
whites at 8.9%, Hispanics at 11.3% and blacks at 16.7%. The rate
for women is a comparatively low 8.0%. There were 331,000 more
people working in August than July. But 430,000 more were in the
category of working part-time for economic reasons.
WSJ - flood insurance fund Across the nation, program officials
refer to tens of thousands of houses, mostly older ones, as
"repetitive-loss properties"—and some others as "severe
repetitive-loss properties." In the 43-year history of the
flood-insurance program, they account for a disproportionately
large share of flood claims—157,000 properties with 462,000
claims totaling $11.1 billion since 1978, according to a report
this summer by the Congressional Research Service.
Repetitive-loss properties account for about 16% of all claims,
said a spokeswoman Thursday for the Federal Emergency Management
Agency, which runs the flood-insurance program all. Irene's
massive flood damage comes as Congress is set to debate a
possible overhaul of the debt-strapped insurance program. The
FEMA program fills a gap left in most standard homeowners'
policies, which typically exclude flood damage. But it is
weighed down by nearly $18 billion in debt to the Treasury,
mostly from Hurricane Katrina in 2005. As lawmakers seek to
improve the program's financial footing, the repeat-loss
properties are one of the trickiest elements. "There is no way
the flood-insurance program is sustainable as it is," said
Andrew Coburn, associate director of the Program for the Study
of Developed Shorelines at Western Carolina University.
Many of the government's 5.6 million policyholders enjoy deeply
subsidized rates, experts widely agree. A bill passed by the
House in July called for premium increases of up to 20% a year
for about 355,000 properties, including those with repetitive
claims. A Senate measure would allow rates to rise up to 15%
annually. Homeowners living in the highest-risk areas may pay
$5,900 a year for coverage of $250,000 for a dwelling and
$100,000 for its contents. For the same coverage, those living
in low-to-moderate risk areas may pay $365 a year. The insurance
program is scheduled to expire on Sept. 30. With so many issues
unresolved, a short-term extension is considered likely,
lawmakers said. FEMA has made several efforts over the years to
address repeat claims. An initial effort was to identify the
inventory of repeat-loss properties and work with local
officials to flood-proof them.
In recent years, FEMA has provided grants to states to help
local governments acquire properties for demolition, elevation
or other flood-proofing. The agency has several other programs
to mitigate flood risk, but critics say they haven't had much
impact. Orrin Pilkey, a Duke University emeritus professor of
coastal geology, said the grants have been "meaningless," adding
that many local governments "don't want to lose buildings and
start to shrink" their tax base. The number of new repeat-loss
properties has averaged nearly 5,200 annually since 1978,
outpacing the number removed from the list by a factor of 10 to
one, according to a 2009 report by the Department of Homeland
Security's inspector general. The total number of repeat-loss
properties currently stands at 75,920, FEMA said Thursday. The
inspector general's report noted that many communities "lack the
necessary expertise, financial resources and will" to develop
hazard-mitigation projects. A FEMA spokeswoman said it agreed
"meaningful reforms" were in order, and that repetitive-loss
properties were "one of many areas that need to be addressed
through comprehensive changes." FEMA is "committed to working
with lawmakers and all of our stakeholders," she said.
No stimulus needed
A top White House aide says the new jobs plan President Obama
will announce next Thursday will provide "meaningful" tax relief
and include a strategy for helping the nation's long-term
unemployed. With small- and medium-sized businesses making up
the lion's share of America's jobs, there are expectations
Obama's plan could include incentives to get mom and pop shops
hiring. But analysts argue incentives will provide only a
short-term boost, if any, to corporate hiring and that a broader
long-term plan to rein in budget deficits and support demand
would ultimately have more impact. The fundamental problem is
firms don't see demand for their product," said Joel Prakken,
chairman of Macroeconomic Advisers LLC, which jointly developed
the ADP private employment report. "If they don't think they can
sell the product that a new hire would produce, it would have to
be quite an amazing incentive to convince them to do otherwise."
Olick - government vs banks - housing losses
"When I first read the New York Times story on an impending
lawsuit by the Federal Housing Finance Agency (FHFA),
conservator of mortgage giants Fannie Mae and Freddie Mac,
against more than a dozen big banks, I thought, why is the
government suing banks for billions of dollars when it just
spent billions of dollars bailing the banks out? And why would
the government want to weaken the banks further, when what the
ailing housing market needs most right now is mortgage
liquidity? Unfortunately, my questions are really the tip of the
iceberg. At face value, the lawsuit makes sense; the role of the
FHFA is to limit losses to Fannie and Freddie. The two have
taken about $33 billion in losses from mortgage backed
securities they bought from the big banks. They claim the big
banks misrepresented the loans in the securities, that said
loans were poorly underwritten, using inflated or falsified
borrower incomes. Fannie and Freddie were the largest buyers of
private label mortgage-backed securities from 2004 to 2007.
I'm not going to argue the merits of the suit, like what Fannie
and Freddie's role was in checking these securities they were
buying, given that they played a big part in crafting and
choosing them. What's more important to me is how this and the
growing ocean of litigation affect the housing recovery. Now you
have a government lawsuit hitting the big banks, just as the
government, in the form of the justice department, is trying to
negotiate a big bank settlement with the fifty state attorneys
general over so-called 'robo-signing' foreclosure practices.
That one allegedly has a $20 billion price-tag, but recent drama
over whether to include securitization issues in the settlement,
threatens to derail a big chunk of that and open the banks up to
more litigation. How ironic. If you're a big bank, facing
sizeable payment for your past sins (or as in the case of Bank
of America, sins of companies you bought, like Countrywide
Financial), what do you do now? You likely make loans more
expensive and harder to get, or you get out altogether. This
week Bank of America dropped its correspondent lending business,
a huge blow to that market. Bottom line, it hits housing.
'You're going to get liquidity withdrawn from the housing
sector. When you look at what the GSE's [Fannie and Freddie]
were set up to do, the GSE's were set up to add liquidity to the
system,' says Paul Miller of FBR Capital Markets. Meanwhile the
Obama administration is struggling for ways to try to save the
housing market, specifically a big refinance plan through Fannie
and Freddie, which would of course require cooperation from the
big banks who service so many of their loans. So is the
government, in the form of the FHFA, cutting off its nose to
spite its face? 'The problem is that there is no one set policy
by the government on housing, and the individual regulator and
government agencies are operating independently of each other,'
says Miller. 'It all goes back to Congress and the
Administration kicking the can on housing policy.
make it difficult for homeowners in the Northeast to close on
pending home refinancing and mortgage purchase applications.
"What has to happen — or what is required — is that they need to
have a re-inspection completed on the property by the original
appraiser to verify no damage has been done and the value of the
home has not been affected," by the storm, according to John
Walsh, president of Total Mortgage Services, a lender based in
Connecticut. Walsh said the re-appraisal issue will impact
homeowners who had pending home purchase and refinancing
applications in FEMA-designated disaster areas before the
hurricane.
The FEMA website names at least 11 states and Washington as
federal disaster areas impacted by last weekend's storm. Walsh
said somewhere between 15% to 50% of his firm's pending mortgage
application pipeline requires a new inspection. At the same
time, he stresses a required re-inspection does not mean all of
those properties were actually damaged by the storm. Even still,
he sees costs and delays as a problem. "There are going to be
homes that are uninhabitable," Walsh said. "One house that I
know of ended up with oil all over it." He said in situations
where the damage runs deep, a financial institution is not going
to lend on the property once the new appraisal shows the impact
of the storm. Walsh sees this paradigm as being particularly
difficult in situations where a person has yet to close on a
mortgage for a home damaged by the storm, especially if the
buyer has already sold his or her existing residence. "If I'm
buying that house and I can no longer purchase it, and I've
already sold my own home, the domino effect of that could be a
big problem," he said.
Andrew Wilson, a spokesman for Fannie Mae, said it's too early
to tell how many refinancing and purchase applications will be
impacted by Hurricane Irene, which swept up the coast hitting
every state between Virginia and Vermont. "If there has been
damage to a home that was looking to refinance, they indeed have
to seek a reappraisal," Wilson said. He said the larger issue
for the GSE is letting impacted homeowners with Fannie Mae loans
know that if they are facing flooding and other damages they can
qualify for a loan forbearance. "I don't know if we have
received requests for this from lenders yet," Wilson said.
However, he said lenders are empowered under GSE guidelines to
grant those forbearances in natural disaster situations.
No jobs created Economists had been expecting the Friday job
report to show a net of 75,000 jobs created, an unusually low
number considering the US is technically more than two years
removed from the end of the last recession. Instead, no jobs
were created and the unemployment rate moved higher at 9.1% in
August, fueling concerns that the US is heading for another
recession. Private payrolls actually rose 17,000, but that was
offset by continued shrinkage in government. The number of
people unemployed remained unchanged at 14 million. The
unemployment rate that counts those not looking for work rose to
16.2%, tied for the highest in 2011. The average duration of
unemployment edged lower to 40.3 weeks from its previous record
high of 40.4 weeks in July. However, the median level spiked
from 21.2 to 21.8 weeks.
Among the more disturbing numbers: the amount of people
"marginally attached to the labor force" rose to 2.6 million
from 2.4 million. These are workers not included in the
unemployment count because they had not sought work in the past
four weeks but have looked in the past year. Health care and
mining saw more jobs in the month, but telecommunications and
government both posted substantial losses. It was unclear how
much impact the Verizon strike, where 45,000 walked off their
jobs for two weeks, had on the total count. Many of those
workers likely received paychecks during the Labor Department's
counting period and may not be included in the number released
Friday. Manufacturing lost 3,000 jobs, construction dropped
5,000 and retail lost 8,000. Average hourly earnings slid 3
cents to $23.09 while average weekly hours edged lower to 34.2.
Unemployment rates held steady across the major categories, with
whites at 8.9%, Hispanics at 11.3% and blacks at 16.7%. The rate
for women is a comparatively low 8.0%. There were 331,000 more
people working in August than July. But 430,000 more were in the
category of working part-time for economic reasons.
WSJ - flood insurance fund Across the nation, program officials
refer to tens of thousands of houses, mostly older ones, as
"repetitive-loss properties"—and some others as "severe
repetitive-loss properties." In the 43-year history of the
flood-insurance program, they account for a disproportionately
large share of flood claims—157,000 properties with 462,000
claims totaling $11.1 billion since 1978, according to a report
this summer by the Congressional Research Service.
Repetitive-loss properties account for about 16% of all claims,
said a spokeswoman Thursday for the Federal Emergency Management
Agency, which runs the flood-insurance program all. Irene's
massive flood damage comes as Congress is set to debate a
possible overhaul of the debt-strapped insurance program. The
FEMA program fills a gap left in most standard homeowners'
policies, which typically exclude flood damage. But it is
weighed down by nearly $18 billion in debt to the Treasury,
mostly from Hurricane Katrina in 2005. As lawmakers seek to
improve the program's financial footing, the repeat-loss
properties are one of the trickiest elements. "There is no way
the flood-insurance program is sustainable as it is," said
Andrew Coburn, associate director of the Program for the Study
of Developed Shorelines at Western Carolina University.
Many of the government's 5.6 million policyholders enjoy deeply
subsidized rates, experts widely agree. A bill passed by the
House in July called for premium increases of up to 20% a year
for about 355,000 properties, including those with repetitive
claims. A Senate measure would allow rates to rise up to 15%
annually. Homeowners living in the highest-risk areas may pay
$5,900 a year for coverage of $250,000 for a dwelling and
$100,000 for its contents. For the same coverage, those living
in low-to-moderate risk areas may pay $365 a year. The insurance
program is scheduled to expire on Sept. 30. With so many issues
unresolved, a short-term extension is considered likely,
lawmakers said. FEMA has made several efforts over the years to
address repeat claims. An initial effort was to identify the
inventory of repeat-loss properties and work with local
officials to flood-proof them.
In recent years, FEMA has provided grants to states to help
local governments acquire properties for demolition, elevation
or other flood-proofing. The agency has several other programs
to mitigate flood risk, but critics say they haven't had much
impact. Orrin Pilkey, a Duke University emeritus professor of
coastal geology, said the grants have been "meaningless," adding
that many local governments "don't want to lose buildings and
start to shrink" their tax base. The number of new repeat-loss
properties has averaged nearly 5,200 annually since 1978,
outpacing the number removed from the list by a factor of 10 to
one, according to a 2009 report by the Department of Homeland
Security's inspector general. The total number of repeat-loss
properties currently stands at 75,920, FEMA said Thursday. The
inspector general's report noted that many communities "lack the
necessary expertise, financial resources and will" to develop
hazard-mitigation projects. A FEMA spokeswoman said it agreed
"meaningful reforms" were in order, and that repetitive-loss
properties were "one of many areas that need to be addressed
through comprehensive changes." FEMA is "committed to working
with lawmakers and all of our stakeholders," she said.
No stimulus needed
A top White House aide says the new jobs plan President Obama
will announce next Thursday will provide "meaningful" tax relief
and include a strategy for helping the nation's long-term
unemployed. With small- and medium-sized businesses making up
the lion's share of America's jobs, there are expectations
Obama's plan could include incentives to get mom and pop shops
hiring. But analysts argue incentives will provide only a
short-term boost, if any, to corporate hiring and that a broader
long-term plan to rein in budget deficits and support demand
would ultimately have more impact. The fundamental problem is
firms don't see demand for their product," said Joel Prakken,
chairman of Macroeconomic Advisers LLC, which jointly developed
the ADP private employment report. "If they don't think they can
sell the product that a new hire would produce, it would have to
be quite an amazing incentive to convince them to do otherwise."
Olick - government vs banks - housing losses
"When I first read the New York Times story on an impending
lawsuit by the Federal Housing Finance Agency (FHFA),
conservator of mortgage giants Fannie Mae and Freddie Mac,
against more than a dozen big banks, I thought, why is the
government suing banks for billions of dollars when it just
spent billions of dollars bailing the banks out? And why would
the government want to weaken the banks further, when what the
ailing housing market needs most right now is mortgage
liquidity? Unfortunately, my questions are really the tip of the
iceberg. At face value, the lawsuit makes sense; the role of the
FHFA is to limit losses to Fannie and Freddie. The two have
taken about $33 billion in losses from mortgage backed
securities they bought from the big banks. They claim the big
banks misrepresented the loans in the securities, that said
loans were poorly underwritten, using inflated or falsified
borrower incomes. Fannie and Freddie were the largest buyers of
private label mortgage-backed securities from 2004 to 2007.
I'm not going to argue the merits of the suit, like what Fannie
and Freddie's role was in checking these securities they were
buying, given that they played a big part in crafting and
choosing them. What's more important to me is how this and the
growing ocean of litigation affect the housing recovery. Now you
have a government lawsuit hitting the big banks, just as the
government, in the form of the justice department, is trying to
negotiate a big bank settlement with the fifty state attorneys
general over so-called 'robo-signing' foreclosure practices.
That one allegedly has a $20 billion price-tag, but recent drama
over whether to include securitization issues in the settlement,
threatens to derail a big chunk of that and open the banks up to
more litigation. How ironic. If you're a big bank, facing
sizeable payment for your past sins (or as in the case of Bank
of America, sins of companies you bought, like Countrywide
Financial), what do you do now? You likely make loans more
expensive and harder to get, or you get out altogether. This
week Bank of America dropped its correspondent lending business,
a huge blow to that market. Bottom line, it hits housing.
'You're going to get liquidity withdrawn from the housing
sector. When you look at what the GSE's [Fannie and Freddie]
were set up to do, the GSE's were set up to add liquidity to the
system,' says Paul Miller of FBR Capital Markets. Meanwhile the
Obama administration is struggling for ways to try to save the
housing market, specifically a big refinance plan through Fannie
and Freddie, which would of course require cooperation from the
big banks who service so many of their loans. So is the
government, in the form of the FHFA, cutting off its nose to
spite its face? 'The problem is that there is no one set policy
by the government on housing, and the individual regulator and
government agencies are operating independently of each other,'
says Miller. 'It all goes back to Congress and the
Administration kicking the can on housing policy.
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