California homeowners sue Capital One over short sales
Homeowners say in a class action that Capital One illegally made
them pay thousands of dollars in deficiency contributions after
short sales of their homes, though the state prohibited that in
2010. Then-Gov. Arnold Schwarzenegger signed Senate Bill
931 into law in late 2010 to reduce foreclosures and boost short
sales. Before the law took effect in January 2011, homeowners
had no incentive to short sell their homes because while lenders
could not obtain a deficiency judgment on foreclosed properties,
they could go after homeowners who sold short.
"However, it quickly became apparent that where there was a
second mortgage, the junior lien holder often refused to release
the lien and the short sale never went through," according to the
complaint. "In February 2011, SB 458 was introduced, and on July
15, 2011, it was signed into law on an emergency basis. Section
(a) of SB 458 expanded SB 931's prohibition on obtaining a
deficiency judgment to junior lien holders. Additionally, Section
(b) of SB 458 further mandate that a 'holder of a note shall not
require the trustor, mortgagor, or maker of the note to pay any
additional compensation, aside from the proceeds of the sale, in
exchange for the written consent to the sale.'...Capital One has
refused to comply with SB 458. In clear violation of the
statute's unambiguous prohibition, Capital One has illegally
required California borrowers to pay the deficiency on their
mortgages, in addition to 'the proceeds of the sale, in exchange
for [Capital One's] written consent to the sale.' As a result,
Capital One has generated substantial revenues from the
collection of deficiencies from California-based borrowers in
connection with completing short sales".
The plaintiffs are represented by Mary Blasy with Scott+Scott of
San Diego. They seek damages for violations of California's Code
of Civil Procedure, violations of California's Business and
Professional Code, conversion and unjust enrichment. A Capital
One spokeswoman would not comment on the lawsuit.
Job claims and layoffs down, hiring up
The news is all good for the jobs market so far in 2012: Separate
reports Thursday showed a surge in private-sector job creation, a
sharp drop in weekly unemployment claims and planned layoffs at
their lowest level in six months. Private-sector jobs surged by
325,000, according to ADP and Macroeconomic Advisors, while the
government said weekly jobless claims fell 15,000 to 372,000 —
still at an elevated level but consistent with recent data
showing a consistent if grudging turnaround. Goods-producing
businesses created 176,000 positions in the month, according to
ADP's payrolls count, while the goods-producing sector rose
52,000 and manufacturing increased 22,000. For the government's
weekly claims tabulation, it was the fourth drop in five weeks.
The four-week average, which smooths fluctuations, declined to
373,250, the lowest level since June 2008. Applications have
declined steadily over the past three months. The four-week
average fell 11% in 2011, evidence that companies are laying off
fewer workers. But many employers have been slow to add jobs.
The reports come a day ahead of the Labor Department's monthly
report expected to show 150,000 total jobs created in the public
and private sectors. In a related report, the number of planned
layoffs at US firms declined to its lowest level since June,
suggesting ongoing improvement in the labor market although
unemployment remains historically high, a report on Thursday
showed. Employers announced 41,785 planned job cuts last month,
down 1.6% from 42,474 in November, according to the report from
consultants Challenger, Gray & Christmas. But December's job
cuts were up from the same time a year ago, rising 31% from the
32,004 job cuts announced in December 2010. For all of 2011,
employers announced 606,082 cuts, up 14% from the 529,973 layoffs
in 2010. The 183,064 government job cuts in 2011 represented a
record high for that sector since Challenger began tracking it in
2002. And while the financial sector did not come close to its
record high, annual cuts for the sector were 63,624, up 165% from
2010. The report showing a further decline in job cuts comes one
day ahead of the US Labor Department's key US jobs report, which
is forecast to show a 150,000 increase in non-farm payrolls.
Challenger said planned hirings in December totaled 14,074, down
from 63,527 in November but up from 10,575 a year earlier. For
all of 2011, announced new jobs totaled 537,572, up from 402,638
in 2010.
Fed - foreclosure is not the best solution
More than four years into the housing crisis, and after millions
of Americans have lost their homes, Federal Reserve Chairman Ben
Bernanke is finally taking a stand. Bernanke sent a Federal
Reserve paper to the leaders of the House of Representatives'
Committee on Financial Services arguing that relying heavily on
foreclosures to deal with mortgage borrowers that can't meet
their obligations is "costly and inefficient" for the housing
market because they can lead to deteriorating homes and weigh on
the property values in the surrounding community. Instead, the
paper encourages lenders to "aggressively" pursue loan
modifications and for servicers to be given more incentives to
seek alternatives to foreclosure. Foreclosures "can result in
'deadweight losses,' or costs that do not benefit anyone,
including the neglect and deterioration of properties that often
sit vacant for months (or even years) and the associated negative
effects on neighborhoods," the paper said. "These deadweight
losses compound the losses that households and creditors already
bear and can result in further downward pressure on house
prices."
The paper mirrors findings from regional Fed banks indicating
that foreclosures can be detrimental to more Americans than just
those who are losing their homes. Properties that are occupied,
but in foreclosure, drive down the surrounding property values
twice as much as vacant properties, an October study from the
Cleveland Federal Reserve found. And with millions of foreclosed
properties already in the pipeline, the foreclosure process is
already taking longer than in recent memory -- a situation that
may only be exacerbated if lenders don't take the Fed's advice.
The average foreclosure process now takes 674 days, almost triple
the time necessary in 2007.
Sales mixed in December
Although analysts were expecting sales at stores open at least 12
months to rise an average of 3.3%, according to Thomson Reuters
Same-Store Sales Index. There were plenty of headwinds including
mild winter weather and high levels of unemployment that
retailers grappled with during December. The results were a
mixed bag, with retailers such as Macy's Limited and Zumiez,
posting solid results and raising their earnings forecast. But
the results were different for others such as discounter Target,
which fell short of analysts' expectations and cut its outlook
for the fourth quarter. Target said same-store sales rose 1.6%,
far short of the 3.1% average analyst estimate from Thomson
Reuters. As a result of its weak sales, Target cut its
fourth-quarter earnings estimate to a range of $1.35 to $1.43 a
share, from a prior estimate of $1.43 to $1.53 a share.
"December sales were below our expectations as growth in grocery
and beauty offset softness in electronics and music, movies and
books," said Gregg Steinhafel, chairman, president and chief
executive officer of Target, in a press release. "Sales and
traffic were strongest in the week leading up to Christmas as
guests waited to shop for last-minute gifts." Others who posted
weak results blamed the mild winter temperatures, which hurt
sales of winter apparel and other winter merchandise.
Olick - Richard Cordray appointment to have big impact
"Barely a few hours after the White House confirmed that
President Obama would use a controversial recess appointment to
install former Ohio Attorney General Richard Cordray as the
director of the Consumer Financial Protection Bureau (CFPB), both
Obama and Cordray were sitting at the dining room table of Endia
and William Eason; the Easons, both in their 90s, nearly lost
their home due to 'trickery and abuse' by a non-bank mortgage
broker. 'The Easons need someone who will stand up for them,'
President Obama told a crowd later at a Cleveland high school.
'Millions of Americans need someone who will look out for their
interests. They need someone like Richard.' Part of Richard
Cordray’s job will be to increase oversight of mortgage
brokers, which has already started with new underwriting
standards mandated by the Dodd-Frank financial reform
legislation. His appointment will finally allow the CFPB to start
regulating non-depository firms (non-bank lenders), which up to
now it could not. 'And that could have a big impact,' says Guy
Cecala, CEO and Publisher of Inside Mortgage Finance. 'A lot of
these firms – ranging from mortgage brokers to large lenders
like PHH – have effectively escaped regulation in the past. Now
they will not only have to submit to reporting but also lending
regulations previously only extended to depository
institutions.'
That will likely take a while, as Cordray settles in, but there
are more near-term implications of the appointment, like that he
could potentially help finalize a deal with the state attorneys
general and the big banks over the so-called 'robo-signing'
scandal. 'As a former AG, he could use that to his advantage in
the ongoing negotiations with the AGs,' notes Edward Mills,
policy analyst at FBR. 'Beyond a settlement, what we would be
looking for are updated disclosure documents that are easier for
consumers to understand and a definition of what is a 'qualified
mortgage' – which sets in place new consumer protections on all
mortgages.' And even beyond the short and long term implications
of Cordray’s new role at the CFPB is the significance of the
recess appointment itself on something even more crucial to
housing: The Federal Housing Finance Agency (FHFA), overseer of
Fannie Mae and Freddie Mac. The FHFA has been run by an acting
director, Edward DeMarco, for several years. DeMarco has stood
in the way of various government attempts to use Fannie Mae,
Freddie Mac and the FHA to help troubled borrowers and
resuscitate the overall housing market. He has consistently
argued that his job is to protect the books of these mortgage
giants, not to ameliorate the dyspeptic housing market. If the
President can use the recess appointment for Cordray, then he
could potentially use it to replace the very controversial
DeMarco. 'A different FHFA director might take a more expansive
view of what is needed to help housing,' notes Jaret Seiberg,
financial services policy analyst at Guggenheim Securities. 'That
opens the door to much bigger refinancing programs than what have
been adopted so far. For borrowers, that means lower rates which
helps the economy, helps housing and helps the President’s
re-election effort.'"
Regional banks to improve in 2012?
This year should be a better one for regional banks than 2011,
Barclays Capital banking analyst Jason Goldberg said yesterday.
Goldberg, who predicted in October that the banks will improve as
long as the US economy improves, said that last year was "clearly
disappointing" since 2011 started with expectations of 3% gross
domestic product growth and ended with only a 1.7% rise. There
was also uncertainty about how the international Basel 3 bank
solvency requirements and the US Dodd-Frank financial services
law would affect regionals, plus the concerns about Europe's
solvency. Goldberg expects those factors to have less of an
impact on the banks in 2012. He is "overweight" on regional
banks that "used the economic downturn to improve their
franchises," including bigger Wells Fargo, US Bancorp and PNC
Financial. These banks, he said, "made acquisitions to improve
their franchise and took market share from their struggling
peers." Goldberg also likes Capital One, which "clearly
benefited in 2011 from a much improved environment, in terms of
credit quality for credit cards." He says it will see a "modest
pickup in growth" this year, thanks to two pending acquisitions.
Housing starts to rise in 2012?
Housing starts have hit their low point and will gradually pick
up this year, Goldman Sachs chief economist Jan Hatzius said
yesterday. "We're pretty confident that housing starts have
bottomed at this point," he said. "It’s going to gradually pick
up as the still large amount of vacancies and excess supply comes
down." Housing prices, however, will continue to fall until
hitting bottom in the second half of the year, according to
Goldman's forecast. Hatzius said the price bubble of 2006 has
finally disappeared, and housing is now "fairly valued," but
there will be "some small declines in house prices for most of
this year basically because of the excess supply that’s still
out there. But we’re pretty confident that we’re pretty close
to the bottom here."
Hatzius is also confident the Federal Reserve will have some form
of quantitative easing later this year. "We think they’re
still missing their dual mandate significantly on the weak side,
even with all the policy measures that they’ve already taken,"
he said of the Fed. There is still a "big gap" between the
current unemployment rate of 8.6% and the Fed's estimate of
"sustainable unemployment" of 6%, Hatzius said. "We don’t
think that gap is going to significantly diminish in the course
of this year, so I think they’re going to target that." He
also thinks inflation is going to go below the Fed's target by
the end of the year. The Fed said in November it was comfortable
with the current inflation level of 3.9%, which includes food and
energy prices, or 2% excluding them. Hatzius also reiterated
Goldman's forecast for a still sluggish recovery of 2% or so in
2012. the year "won't look that different from 2011," he said,
with the first half of this year slower than the second half of
last year.
Factory orders up in November
Orders to US factories rose sharply November on a surge in demand
for airplanes. But demand for goods that signal business
investment plans fell for the second straight month. The
Commerce Department said orders to US factories rose 1.8% in
November, following two months of declines. It was the best
showing since a 2.1% gain in July. But orders for so-called core
capital goods, such as computers and electronic equipment,
dropped 1.2% following a 0.9% decline in October. The category is
closely watched because it is a good proxy for business
investment. Manufacturing has been one of the bright spots in
this sub-par recovery but there is concern that US exports could
falter if debt problems in Europe push that region into a severe
recession.
HUD suspends affordable housing firm
The Department of Housing and Urban Development (HUD) suspended
James Grier and Philadelphia-based Mantua Gardens East Inc., a
Section 8 apartment complex, from doing business with the
government, alleging the company improperly threatened tenants
with eviction and withdrew thousands of dollars from reserves
without permission. HUD also proposed their debarments to
prevent Grier and the company from participating in
government-related business for five years. Grier could not be
reached for comment. A phone number for Mantua Gardens East was
disconnected and a management firm connected with the apartment
complex was closed Wednesday evening when a reporter called. HUD
said Grier and MGE improperly withdrew $325,000 from reserves
without HUD approval and submitted false and misleading financial
reports to HUD. MGE also failed to provide sufficient notice to
tenants of its intention to opt out of the Section 8
project-based program, denying them adequate time to make housing
arrangements and threatening them with eviction. Section 8 is a
HUD affordable housing program. It includes housing vouchers for
low-income residents as well as project-based financing such as
that provided to MGE.
MGE agreed to a $720,000 mortgage loan in 1970 insured by the
Federal Housing Administration (FHA). As an FHA mortgagor, MGE is
required to establish and maintain a reserve account to meet
emergency needs at the apartment complex, which comprises 10
buildings in Philadelphia’s University City neighborhood. In
2008, Grier and MGE improperly withdrew reserves without HUD
approval and then refused to restore the funds, HUD said. Grier
and MGE pledged the funds, along with one of the development’s
buildings and future rent payments, as collateral for a separate
loan from a lending institution, according to HUD. MGE received
project-based Section 8 subsidies for nearly 30 years. Under the
terms of the contract, MGE was entitled to opt out of the
contract, but was first required to provide one year’s notice
to the tenants. In October 2011, MGE notified HUD that it was
opting out of the program but failed to properly notify tenants,
HUD said.
Homeowners say in a class action that Capital One illegally made
them pay thousands of dollars in deficiency contributions after
short sales of their homes, though the state prohibited that in
2010. Then-Gov. Arnold Schwarzenegger signed Senate Bill
931 into law in late 2010 to reduce foreclosures and boost short
sales. Before the law took effect in January 2011, homeowners
had no incentive to short sell their homes because while lenders
could not obtain a deficiency judgment on foreclosed properties,
they could go after homeowners who sold short.
"However, it quickly became apparent that where there was a
second mortgage, the junior lien holder often refused to release
the lien and the short sale never went through," according to the
complaint. "In February 2011, SB 458 was introduced, and on July
15, 2011, it was signed into law on an emergency basis. Section
(a) of SB 458 expanded SB 931's prohibition on obtaining a
deficiency judgment to junior lien holders. Additionally, Section
(b) of SB 458 further mandate that a 'holder of a note shall not
require the trustor, mortgagor, or maker of the note to pay any
additional compensation, aside from the proceeds of the sale, in
exchange for the written consent to the sale.'...Capital One has
refused to comply with SB 458. In clear violation of the
statute's unambiguous prohibition, Capital One has illegally
required California borrowers to pay the deficiency on their
mortgages, in addition to 'the proceeds of the sale, in exchange
for [Capital One's] written consent to the sale.' As a result,
Capital One has generated substantial revenues from the
collection of deficiencies from California-based borrowers in
connection with completing short sales".
The plaintiffs are represented by Mary Blasy with Scott+Scott of
San Diego. They seek damages for violations of California's Code
of Civil Procedure, violations of California's Business and
Professional Code, conversion and unjust enrichment. A Capital
One spokeswoman would not comment on the lawsuit.
Job claims and layoffs down, hiring up
The news is all good for the jobs market so far in 2012: Separate
reports Thursday showed a surge in private-sector job creation, a
sharp drop in weekly unemployment claims and planned layoffs at
their lowest level in six months. Private-sector jobs surged by
325,000, according to ADP and Macroeconomic Advisors, while the
government said weekly jobless claims fell 15,000 to 372,000 —
still at an elevated level but consistent with recent data
showing a consistent if grudging turnaround. Goods-producing
businesses created 176,000 positions in the month, according to
ADP's payrolls count, while the goods-producing sector rose
52,000 and manufacturing increased 22,000. For the government's
weekly claims tabulation, it was the fourth drop in five weeks.
The four-week average, which smooths fluctuations, declined to
373,250, the lowest level since June 2008. Applications have
declined steadily over the past three months. The four-week
average fell 11% in 2011, evidence that companies are laying off
fewer workers. But many employers have been slow to add jobs.
The reports come a day ahead of the Labor Department's monthly
report expected to show 150,000 total jobs created in the public
and private sectors. In a related report, the number of planned
layoffs at US firms declined to its lowest level since June,
suggesting ongoing improvement in the labor market although
unemployment remains historically high, a report on Thursday
showed. Employers announced 41,785 planned job cuts last month,
down 1.6% from 42,474 in November, according to the report from
consultants Challenger, Gray & Christmas. But December's job
cuts were up from the same time a year ago, rising 31% from the
32,004 job cuts announced in December 2010. For all of 2011,
employers announced 606,082 cuts, up 14% from the 529,973 layoffs
in 2010. The 183,064 government job cuts in 2011 represented a
record high for that sector since Challenger began tracking it in
2002. And while the financial sector did not come close to its
record high, annual cuts for the sector were 63,624, up 165% from
2010. The report showing a further decline in job cuts comes one
day ahead of the US Labor Department's key US jobs report, which
is forecast to show a 150,000 increase in non-farm payrolls.
Challenger said planned hirings in December totaled 14,074, down
from 63,527 in November but up from 10,575 a year earlier. For
all of 2011, announced new jobs totaled 537,572, up from 402,638
in 2010.
Fed - foreclosure is not the best solution
More than four years into the housing crisis, and after millions
of Americans have lost their homes, Federal Reserve Chairman Ben
Bernanke is finally taking a stand. Bernanke sent a Federal
Reserve paper to the leaders of the House of Representatives'
Committee on Financial Services arguing that relying heavily on
foreclosures to deal with mortgage borrowers that can't meet
their obligations is "costly and inefficient" for the housing
market because they can lead to deteriorating homes and weigh on
the property values in the surrounding community. Instead, the
paper encourages lenders to "aggressively" pursue loan
modifications and for servicers to be given more incentives to
seek alternatives to foreclosure. Foreclosures "can result in
'deadweight losses,' or costs that do not benefit anyone,
including the neglect and deterioration of properties that often
sit vacant for months (or even years) and the associated negative
effects on neighborhoods," the paper said. "These deadweight
losses compound the losses that households and creditors already
bear and can result in further downward pressure on house
prices."
The paper mirrors findings from regional Fed banks indicating
that foreclosures can be detrimental to more Americans than just
those who are losing their homes. Properties that are occupied,
but in foreclosure, drive down the surrounding property values
twice as much as vacant properties, an October study from the
Cleveland Federal Reserve found. And with millions of foreclosed
properties already in the pipeline, the foreclosure process is
already taking longer than in recent memory -- a situation that
may only be exacerbated if lenders don't take the Fed's advice.
The average foreclosure process now takes 674 days, almost triple
the time necessary in 2007.
Sales mixed in December
Although analysts were expecting sales at stores open at least 12
months to rise an average of 3.3%, according to Thomson Reuters
Same-Store Sales Index. There were plenty of headwinds including
mild winter weather and high levels of unemployment that
retailers grappled with during December. The results were a
mixed bag, with retailers such as Macy's Limited and Zumiez,
posting solid results and raising their earnings forecast. But
the results were different for others such as discounter Target,
which fell short of analysts' expectations and cut its outlook
for the fourth quarter. Target said same-store sales rose 1.6%,
far short of the 3.1% average analyst estimate from Thomson
Reuters. As a result of its weak sales, Target cut its
fourth-quarter earnings estimate to a range of $1.35 to $1.43 a
share, from a prior estimate of $1.43 to $1.53 a share.
"December sales were below our expectations as growth in grocery
and beauty offset softness in electronics and music, movies and
books," said Gregg Steinhafel, chairman, president and chief
executive officer of Target, in a press release. "Sales and
traffic were strongest in the week leading up to Christmas as
guests waited to shop for last-minute gifts." Others who posted
weak results blamed the mild winter temperatures, which hurt
sales of winter apparel and other winter merchandise.
Olick - Richard Cordray appointment to have big impact
"Barely a few hours after the White House confirmed that
President Obama would use a controversial recess appointment to
install former Ohio Attorney General Richard Cordray as the
director of the Consumer Financial Protection Bureau (CFPB), both
Obama and Cordray were sitting at the dining room table of Endia
and William Eason; the Easons, both in their 90s, nearly lost
their home due to 'trickery and abuse' by a non-bank mortgage
broker. 'The Easons need someone who will stand up for them,'
President Obama told a crowd later at a Cleveland high school.
'Millions of Americans need someone who will look out for their
interests. They need someone like Richard.' Part of Richard
Cordray’s job will be to increase oversight of mortgage
brokers, which has already started with new underwriting
standards mandated by the Dodd-Frank financial reform
legislation. His appointment will finally allow the CFPB to start
regulating non-depository firms (non-bank lenders), which up to
now it could not. 'And that could have a big impact,' says Guy
Cecala, CEO and Publisher of Inside Mortgage Finance. 'A lot of
these firms – ranging from mortgage brokers to large lenders
like PHH – have effectively escaped regulation in the past. Now
they will not only have to submit to reporting but also lending
regulations previously only extended to depository
institutions.'
That will likely take a while, as Cordray settles in, but there
are more near-term implications of the appointment, like that he
could potentially help finalize a deal with the state attorneys
general and the big banks over the so-called 'robo-signing'
scandal. 'As a former AG, he could use that to his advantage in
the ongoing negotiations with the AGs,' notes Edward Mills,
policy analyst at FBR. 'Beyond a settlement, what we would be
looking for are updated disclosure documents that are easier for
consumers to understand and a definition of what is a 'qualified
mortgage' – which sets in place new consumer protections on all
mortgages.' And even beyond the short and long term implications
of Cordray’s new role at the CFPB is the significance of the
recess appointment itself on something even more crucial to
housing: The Federal Housing Finance Agency (FHFA), overseer of
Fannie Mae and Freddie Mac. The FHFA has been run by an acting
director, Edward DeMarco, for several years. DeMarco has stood
in the way of various government attempts to use Fannie Mae,
Freddie Mac and the FHA to help troubled borrowers and
resuscitate the overall housing market. He has consistently
argued that his job is to protect the books of these mortgage
giants, not to ameliorate the dyspeptic housing market. If the
President can use the recess appointment for Cordray, then he
could potentially use it to replace the very controversial
DeMarco. 'A different FHFA director might take a more expansive
view of what is needed to help housing,' notes Jaret Seiberg,
financial services policy analyst at Guggenheim Securities. 'That
opens the door to much bigger refinancing programs than what have
been adopted so far. For borrowers, that means lower rates which
helps the economy, helps housing and helps the President’s
re-election effort.'"
Regional banks to improve in 2012?
This year should be a better one for regional banks than 2011,
Barclays Capital banking analyst Jason Goldberg said yesterday.
Goldberg, who predicted in October that the banks will improve as
long as the US economy improves, said that last year was "clearly
disappointing" since 2011 started with expectations of 3% gross
domestic product growth and ended with only a 1.7% rise. There
was also uncertainty about how the international Basel 3 bank
solvency requirements and the US Dodd-Frank financial services
law would affect regionals, plus the concerns about Europe's
solvency. Goldberg expects those factors to have less of an
impact on the banks in 2012. He is "overweight" on regional
banks that "used the economic downturn to improve their
franchises," including bigger Wells Fargo, US Bancorp and PNC
Financial. These banks, he said, "made acquisitions to improve
their franchise and took market share from their struggling
peers." Goldberg also likes Capital One, which "clearly
benefited in 2011 from a much improved environment, in terms of
credit quality for credit cards." He says it will see a "modest
pickup in growth" this year, thanks to two pending acquisitions.
Housing starts to rise in 2012?
Housing starts have hit their low point and will gradually pick
up this year, Goldman Sachs chief economist Jan Hatzius said
yesterday. "We're pretty confident that housing starts have
bottomed at this point," he said. "It’s going to gradually pick
up as the still large amount of vacancies and excess supply comes
down." Housing prices, however, will continue to fall until
hitting bottom in the second half of the year, according to
Goldman's forecast. Hatzius said the price bubble of 2006 has
finally disappeared, and housing is now "fairly valued," but
there will be "some small declines in house prices for most of
this year basically because of the excess supply that’s still
out there. But we’re pretty confident that we’re pretty close
to the bottom here."
Hatzius is also confident the Federal Reserve will have some form
of quantitative easing later this year. "We think they’re
still missing their dual mandate significantly on the weak side,
even with all the policy measures that they’ve already taken,"
he said of the Fed. There is still a "big gap" between the
current unemployment rate of 8.6% and the Fed's estimate of
"sustainable unemployment" of 6%, Hatzius said. "We don’t
think that gap is going to significantly diminish in the course
of this year, so I think they’re going to target that." He
also thinks inflation is going to go below the Fed's target by
the end of the year. The Fed said in November it was comfortable
with the current inflation level of 3.9%, which includes food and
energy prices, or 2% excluding them. Hatzius also reiterated
Goldman's forecast for a still sluggish recovery of 2% or so in
2012. the year "won't look that different from 2011," he said,
with the first half of this year slower than the second half of
last year.
Factory orders up in November
Orders to US factories rose sharply November on a surge in demand
for airplanes. But demand for goods that signal business
investment plans fell for the second straight month. The
Commerce Department said orders to US factories rose 1.8% in
November, following two months of declines. It was the best
showing since a 2.1% gain in July. But orders for so-called core
capital goods, such as computers and electronic equipment,
dropped 1.2% following a 0.9% decline in October. The category is
closely watched because it is a good proxy for business
investment. Manufacturing has been one of the bright spots in
this sub-par recovery but there is concern that US exports could
falter if debt problems in Europe push that region into a severe
recession.
HUD suspends affordable housing firm
The Department of Housing and Urban Development (HUD) suspended
James Grier and Philadelphia-based Mantua Gardens East Inc., a
Section 8 apartment complex, from doing business with the
government, alleging the company improperly threatened tenants
with eviction and withdrew thousands of dollars from reserves
without permission. HUD also proposed their debarments to
prevent Grier and the company from participating in
government-related business for five years. Grier could not be
reached for comment. A phone number for Mantua Gardens East was
disconnected and a management firm connected with the apartment
complex was closed Wednesday evening when a reporter called. HUD
said Grier and MGE improperly withdrew $325,000 from reserves
without HUD approval and submitted false and misleading financial
reports to HUD. MGE also failed to provide sufficient notice to
tenants of its intention to opt out of the Section 8
project-based program, denying them adequate time to make housing
arrangements and threatening them with eviction. Section 8 is a
HUD affordable housing program. It includes housing vouchers for
low-income residents as well as project-based financing such as
that provided to MGE.
MGE agreed to a $720,000 mortgage loan in 1970 insured by the
Federal Housing Administration (FHA). As an FHA mortgagor, MGE is
required to establish and maintain a reserve account to meet
emergency needs at the apartment complex, which comprises 10
buildings in Philadelphia’s University City neighborhood. In
2008, Grier and MGE improperly withdrew reserves without HUD
approval and then refused to restore the funds, HUD said. Grier
and MGE pledged the funds, along with one of the development’s
buildings and future rent payments, as collateral for a separate
loan from a lending institution, according to HUD. MGE received
project-based Section 8 subsidies for nearly 30 years. Under the
terms of the contract, MGE was entitled to opt out of the
contract, but was first required to provide one year’s notice
to the tenants. In October 2011, MGE notified HUD that it was
opting out of the program but failed to properly notify tenants,
HUD said.
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