Oklahoma crafts its own mortgage settlement
Oklahoma Attorney General Scott Pruitt reached his own settlement
with top mortgage servicers. Pruitt was the only Attorney
General (AG) not to sign the $26 billion multistate deal that
included the Justice Department and the Department of Housing and
Urban Development. The negotiations launched in October 2010
after evidence surfaced of foreclosure documents signed en masse
and filings on borrowers being considered for modifications. As
details emerged of a preliminary settlement in 2011, Pruitt and
three other Republicans Florida AG Pam Bondi, Texas AG Greg
Abbott, and Virginia AG Kenneth Cuccinelli sent a letter to lead
AG Tom Miller of Iowa saying any deal that involved principal
reduction would only promote strategic default. "We had concerns
that what started as an effort to correct specific practices
harmful to consumers, morphed into an attempt by President Obama
to establish an overarching regulatory scheme, which Congress had
previously rejected, to fundamentally restructure the mortgage
industry in the United States," Pruitt said yesterday.
Pruitt's $18.6 million settlement will resolve claims of any
unfair and unlawful practices he found. His public protection
unit will process relief applications from borrowers. "Oklahoma
is fortunate to have a stronger housing market and economy than
many other states that are struggling. This settlement will
provide damages to those Oklahomans who did fall victim to unfair
and unlawful misconduct of mortgage servicing companies, while
not exceeding the appropriate role and authority of state
attorneys general," Pruitt said.
US trade deficit leaps
The monthly trade gap swelled to $48.8 billion as goods imports
climbed to the highest level since July 2008, just before the
financial crisis caused world trade to plunge, a report from the
Commerce Department showed today. Analysts surveyed before the
report had expected the December trade deficit at $48.0 billion,
up from a revised estimate of $47.1 billion in November. US
exports grew slightly in December, with records set for
petroleum, services and advance technology goods. For the year,
the US trade gap rose 11.6% to $558.0 billion, the highest since
2008. Exports last year rose 14.5% to a record $2.1 trillion,
keeping the United States on pace to meet President Obama's goal
of doubling exports in five years. Imports grew 13.8% to a
record $2.7 trillion, with records set in several categories.
Auto imports rose to the highest since 2007 and petroleum the
highest since 2008. The average price for imported oil in 2011
was a record high $99.78 per barrel.
The record trade deficit last year with China is certain to
reinforce concerns in Congress about Beijing's currency and trade
practice ahead of a meeting next week between Obama and the Asian
giant's expected next leader, Vice President Xi Jinping. US
exports to China jumped 13.1% to $103.9 billion. But that was
overwhelmed by a 9.4% increase in imports from China, which
pushed the tally to a record $399.3 billion. Last year, the
Democratic-controlled Senate passed legislation to pressure China
to raise the value of its currency, but that bill hit a dead end
in the Republican-controlled House of Representatives. Many
lawmakers believe that China deliberately undervalues its
currency to give its companies an unfair price advantage,
contributing to the huge bilateral deficit. The US trade
deficits with the European Union and Canada also expanded in
2011.
Olick - robo-deal about lowering principal
"It took more than a year to strike a deal, but here it is, the
biggest government-industry settlement in history, surpassing
even big tobacco. Five of the nation’s largest servicers will
cough up more than $25 billion, the bulk of which will go toward
lowering mortgage principal for borrowers who are behind on their
mortgage payments. Wait a minute. What does that have to do
with faulty foreclosure documents? Nothing. But that’s how it
started, and now that government got what it wanted, i.e.
mortgage principal reduction for about a million borrowers, they
are likely, quietly whispering a big thank you to all those
so-called 'robo-signers.' Let’s take a step back for a second
to remember the fall of 2010, when 'robo-signing' came to light.
The idea that one low-paid guy sitting in a room was signing his,
or perhaps somebody else’s, name to thousands of foreclosure
documents was appalling. It is appalling, no question. But let us
not forget that the vast, vast majority of those foreclosures
being processed were in fact legitimate foreclosures; it was the
documentation process that was fraudulent. Banks didn’t
foreclose on borrowers for no reason, they foreclosed because
borrowers weren’t paying their mortgages.
So fast-forward to 2011 when the housing market is still in deep
despair. Home prices are still falling, eleven million borrowers
owe more on their mortgages than their homes are worth, home
construction sees its worst year ever, and government relief
programs are doing very little to help. Cries arise that the only
way to help housing is to reduce the principal on all those
underwater mortgages, give borrowers their equity back! But how
does government force the banks to do that? Robo. The last thing
the banks need are fifty state lawsuits over bad foreclosure
documents, plus they need to be able to get all these legitimate
foreclosures through the courts, so they can stem some losses by
reselling the homes. The 'robo' scandal has ground foreclosure
processing to a veritable halt in much of the county and slowed
it everywhere else. Borrowers are sitting in their homes paying
nothing. So the banks agree to the deal, any deal, because they
have no other choice. You can hear it in their statements
today:
'We believe this settlement will help provide additional support
for homeowners who need assistance, brings more certainty to the
housing market and aligns to our ongoing commitment to help
rebuild our neighborhoods and get the housing market back on
track.' -- Bank of America.
'Today’s agreement represents a very important step toward
restoring confidence in mortgage servicing and stability in the
housing market.' -- Wells Fargo Home Mortgage.
Getting the housing market back on track. Restoring stability in
the housing market. That’s what they want. They’ve already
stopped 'robo-signing' long ago. Now what they need is closure.
Move the foreclosure process along again, so that the housing
market can clear all the distress and move ahead. Let the bank
black eye begin to heal. Sure, they will get hit with plenty more
lawsuits over mortgage securitizations, but that has little to do
with their customers on the street, the average consumers. That
has to do with investors, and federal regulators and all kinds of
complicated Wall Street products that are lost on average
Americans. Robo-signing was more personal; it had to do with real
people’s mortgage papers that they signed at their kitchen
tables."
Trail going cold at MF Global
When commodities brokerage MF Global imploded, the FBI and
federal prosecutors were quick to launch an investigation to
pursue what seemed obvious to outspoken regulators and lawmakers:
laws were broken and crimes were committed. More than three
months later, it is far from clear that anyone will face criminal
charges over the disappearance of more than $600 million in
customer money as MF Global spiraled towards bankruptcy in the
brokerage's final, frantic days in the last week of October. So
far, the MF Global investigation is not tracking the early
progress of other high-profile financial scandals such as RefCo,
where former Chairman Phil Bennett was arrested within days of
the disclosure that the futures firm had been hiding losses for
years.
Lawyers and people familiar with the MF Global investigation of
the firm that was run by former Goldman Sachs head Jon Corzine
say that even though the hunt is still on to find out whether or
not officials at MF Global intended to pilfer customer money in a
desperate bid to keep the brokerage from failing, the trail at
this point is growing cold. To date, scant evidence of criminal
intent has emerged in company emails, no former or current
employees have sought to cut a deal to provide testimony about
potential wrongdoing and seasoned defense lawyers say they are
not seeing the tell-tale signs of a hot criminal investigation.
Ellen Davis, a spokeswoman for the office of the Manhattan US
Attorney, declined to comment. Randall Samborn, a spokesman for
the office of the US Attorney in Chicago, also declined to
comment.
MBA statement on foreclosure deal
The Mortgage Bankers Association (MBA), issued the following
statement upon news of an agreement between state and federal
officials and five large residential mortgage servicers.
"A final agreement can play an important role stabilizing and
providing certainty and confidence to the housing and mortgage
markets. With all the rumors and speculation surrounding these
negotiations behind us, it is now imperative that policymakers,
lenders, servicers and other stakeholders work together on
policies and initiatives that will allow us to get the housing
market on the road to recovery. I would caution, though, that,
while a positive step, this will not be a panacea for all that
ails housing. There are a number of other issues that we need to
resolve. This includes striking the appropriate balance between
consumer protection and access to affordable credit for qualified
borrowers in the QM and QRM rulemakings, and facilitating the
return of private capital to the mortgage market by
comprehensively addressing the future of the GSEs and the
government's role in the secondary market." - David H. Stevens,
President and CEO of MBA.
Debra W. Still, CMB, Chairman of MBA's Council on the Future of
Residential Mortgage Servicing in the 21st Century added: "The
standards in this settlement can provide a framework for a
national servicing standard that would provide borrowers with
equal protections, regardless of where they live, and would give
lenders a single set of rules governing how they interact with
their customers. If done properly, and in recognition of
different business models, a nationwide standard would provide
renewed confidence in the system and encourage qualified
borrowers to jump back into the housing market."
Citigroup takes $50 million loss
Citigroup was forced to write off $50 million after two traders
accused of attempting to influence global lending rates left the
bank, according to people familiar with a worldwide investigation
that is gathering pace. Nine separate enforcement agencies in
the US, Europe and Japan have been probing whether US and
European banks manipulated the London Interbank Offered Rate or
Libor, the benchmark reference rate for $350 trillion worth of
financial products, and other interbank lending rates. So far,
only Japan’s Financial Services Agency has formally sanctioned
banks in connection with the probe. In December, regulators found
that two former Citigroup employees in Tokyo attempted to
pressure colleagues and employees at other banks involved in the
rate-setting process for the Tokyo Interbank Offered Rate, or
Tibor. While the regulator did not publicly name the traders
involved, people familiar with the case identified them as Thomas
Hayes, a trader of yen-related products, and Christopher Cecere,
his former boss.
According to those people, the alleged attempts to influence
Tibor were uncovered after another Citi employee in London
reported the activity. Citi took a $50 million loss when it
unwound the traders’ positions and reported the matter to
regulators, according to people familiar with the case. However,
other Citi sources suggested the losses were significantly in
excess of that amount. The investigation into possible
manipulation of global interbank lending rates has accelerated in
recent weeks, with more than a dozen traders at various banks
fired, suspended or placed on administrative leave. A former
Barclays trader, Philippe Moryoussef, is being investigated in
connection with the setting of Euribor, the rate at which banks
lend euros, according to people familiar with the case. Mr.
Moryoussef left Barclays in 2007, long before US, European and
Japanese regulators launched their probe into interbank lending
rates and now works in an unrelated position for Nomura in
Singapore. Barclays took the information to European Commission
officials, who are now investigating and declined to comment.
NAR - prices boost affordability
Housing affordability conditions improved in most metropolitan
areas from softer existing-home prices and record-low mortgage
interest rates in the fourth quarter, with rising sales and lower
inventory creating more balanced conditions, according to the
latest quarterly report by the National Association of Realtors
(NAR). Introduced with this release is a new annual metro-level
housing affordability index, with historically favorable
conditions dominating across the country.
The median existing single-family home price rose in 29 out of
149 metropolitan statistical areas (MSAs) in the fourth quarter
from a year earlier; two were unchanged and 118 areas had price
declines. The national median existing single-family home price
was $163,500 in the fourth quarter, down 4.2% from $170,600 in
the fourth quarter of 2010. The median is where half sold for
more and half sold for less. Distressed homes – foreclosures
and short sales which sold at discounts averaging 15 to 20% –
accounted for 30% of fourth quarter sales; they were 34% a year
earlier. Total existing-home sales, including single-family and
condo, increased 5.9% to a seasonally adjusted annual rate of
4.42 million in the fourth quarter from 4.17 million in the third
quarter, and were 9.2% above the 4.04 million pace during the
fourth quarter of 2010. All regions rose from the third quarter
and from a year ago. At the end of the fourth quarter there were
2.38 million existing homes available for sale, which is 21.2%
lower than the close of the fourth quarter of 2010 when there
were 3.02 million homes on the market.
NAR’s national Housing Affordability Index rose to a record
high 184.5 in 2011, based on the relationship between median home
price, median family income and average mortgage interest rate.
The higher the index, the greater the household purchasing power;
recordkeeping began in 1970. An index of 100 is defined as the
point where a median-income household has exactly enough income
to qualify for the purchase of a median-priced existing
single-family home, assuming a 20% down payment and 25% of gross
income devoted to mortgage principal and interest payments. For
first-time buyers making small down payments, the affordability
levels are relatively lower. Metro areas with the greatest
housing affordability conditions in 2011 include the
Detroit-Warren-Livonia area of Michigan, with an index of 383.4;
Toledo, Ohio, at 242.9; and Decatur, Ill., at 236.8. Only 24 out
of 152 metros measured had an affordability index below 100 in
2011.
Between 2010 and 2011, in markets where comparisons are
available, all but 2 out of 148 areas showed improvement in
housing affordability, and 69 MSAs had double-digit increases in
affordability conditions. The share of all-cash home purchases
in the fourth quarter was 29%, unchanged from the third quarter;
they were 30% in the fourth quarter of 2010. Investors, who are
drawn by bargain prices and account for the bulk of cash
purchases, accounted for 19% of transactions in the third
quarter; they were 20% in the third quarter and 19% a year ago.
First-time buyers purchased 33% of homes in the fourth quarter;
they were 32% in both the third quarter and the fourth quarter of
2010. In the condo sector, metro area condominium and
cooperative prices – covering changes in 54 metro areas –
showed the national median existing-condo price was $160,800 in
the fourth quarter, which is 1.7% below the fourth quarter of
2010. Ten metros showed increases in their median condo price
from a year ago, one was unchanged and 43 areas had declines.
Regionally, existing-home sales in the Northeast rose 6.3% in the
fourth quarter and are 3.7% above the fourth quarter of 2010. The
median existing single-family home price in the Northeast fell
4.6% to $229,200 in the fourth quarter from a year ago. In the
Midwest, existing-home sales increased 7.0% in the fourth quarter
and are 14.1% higher than a year ago. The median existing
single-family home price in the Midwest declined 3.3% to $134,100
in the fourth quarter from the fourth quarter in 2010.
Existing-home sales in the South rose 3.8% in the fourth quarter
and are 9.1% above the same quarter in 2010. The median existing
single-family home price in the South was $146,500 in the fourth
quarter, down 3.8% from a year earlier. Existing-home sales in
the West increased 8.1% in the fourth quarter and are 8.4% higher
than a year ago. The median existing single-family home price in
the West declined 4.2% to $205,200 in the fourth quarter from the
fourth quarter of 2010.
Greece still not bailed out
Stock markets fell Friday after Greece's crucial international
bailout was put on hold by its partners in the 17-nation
eurozone, a day after it seemed that the country's tortuous
journey to pacifying its creditors had reached a conclusion.
Greek Prime Minister Lucas Papademos and heads of the three
parties backing his government agreed to deep private sector wage
cuts, civil service layoffs, and significant reductions in
health, social security and military spending. Investors
breathed a sigh of relief that the agreement would allow Greece
to get a euro130 billion ($173 billion) bailout package and avoid
a bankruptcy next month that could send shockwaves around the
financial markets. But finance ministers from the other 16
eurozone states threw a spanner in the works late Thursday and
insisted that Greece had to save an extra euro325 million ($430
million), pass the cuts through a restive parliament and
guarantee in writing that they will be implemented even after
planned elections in April.
Amherst - foreclosure deal penalizes investors
The $26 billion settlement between government officials and the
five largest mortgage servicers will exacerbate servicer conflict
of interest by allowing the banks to use investor dollars to foot
the bill, according to Amherst Securities Group. The analysis
comes as representatives from mortgage banks, trade groups and
organizations expressed relief as the settlement with state
attorneys general and federal prosecutors finally arrived. By
receiving credit for principal write downs on the loans owned by
investors, servicers can settle their liability claims with
private investor money, Laurie Goodman and her team of analysts
at Amherst noted. The settlement includes $17 billion in
required credits for principal reduction and other foreclosure
initiatives, including short sales, anti-blight measures and
borrower transition efforts. These credits are put toward loans
both in bank portfolios and in private label securitizations.
"We believe that this settlement will further exacerbate the
conflicts of interest in the foreclosure process, highlighting
the fact that first liens are often poorly treated," the analysts
said. "We are deeply concerned that such a settlement will
significantly raise the cost and delay the return of private
capital to the US single-family mortgage market." They compare
the settlement to charging a patient, or investor, an extra fine
when his doctor, or bank, is found guilty of malpractice. The
already wounded patient is hurt again, and the doctor does not
have much incentive to change his behavior. "The settlement has
missed the opportunity to correct some of the huge conflicts of
interest that are embedded in the foreclosure process," the
analysts said.
It's not all bad news, however. "On the positive side, we are
pleased to see that the changes in servicing practices address
the fact that servicers often own companies that provide
ancillary foreclosure services, or mark-up third-party services
with no disclosure to borrowers or investors," they said. The
increased foreclosure timeline due to robo-signing issues is
likely to extend further because of the settlement, Amherst
analysts said, and the costs of will fall disproportionately on
private investors.
Oklahoma Attorney General Scott Pruitt reached his own settlement
with top mortgage servicers. Pruitt was the only Attorney
General (AG) not to sign the $26 billion multistate deal that
included the Justice Department and the Department of Housing and
Urban Development. The negotiations launched in October 2010
after evidence surfaced of foreclosure documents signed en masse
and filings on borrowers being considered for modifications. As
details emerged of a preliminary settlement in 2011, Pruitt and
three other Republicans Florida AG Pam Bondi, Texas AG Greg
Abbott, and Virginia AG Kenneth Cuccinelli sent a letter to lead
AG Tom Miller of Iowa saying any deal that involved principal
reduction would only promote strategic default. "We had concerns
that what started as an effort to correct specific practices
harmful to consumers, morphed into an attempt by President Obama
to establish an overarching regulatory scheme, which Congress had
previously rejected, to fundamentally restructure the mortgage
industry in the United States," Pruitt said yesterday.
Pruitt's $18.6 million settlement will resolve claims of any
unfair and unlawful practices he found. His public protection
unit will process relief applications from borrowers. "Oklahoma
is fortunate to have a stronger housing market and economy than
many other states that are struggling. This settlement will
provide damages to those Oklahomans who did fall victim to unfair
and unlawful misconduct of mortgage servicing companies, while
not exceeding the appropriate role and authority of state
attorneys general," Pruitt said.
US trade deficit leaps
The monthly trade gap swelled to $48.8 billion as goods imports
climbed to the highest level since July 2008, just before the
financial crisis caused world trade to plunge, a report from the
Commerce Department showed today. Analysts surveyed before the
report had expected the December trade deficit at $48.0 billion,
up from a revised estimate of $47.1 billion in November. US
exports grew slightly in December, with records set for
petroleum, services and advance technology goods. For the year,
the US trade gap rose 11.6% to $558.0 billion, the highest since
2008. Exports last year rose 14.5% to a record $2.1 trillion,
keeping the United States on pace to meet President Obama's goal
of doubling exports in five years. Imports grew 13.8% to a
record $2.7 trillion, with records set in several categories.
Auto imports rose to the highest since 2007 and petroleum the
highest since 2008. The average price for imported oil in 2011
was a record high $99.78 per barrel.
The record trade deficit last year with China is certain to
reinforce concerns in Congress about Beijing's currency and trade
practice ahead of a meeting next week between Obama and the Asian
giant's expected next leader, Vice President Xi Jinping. US
exports to China jumped 13.1% to $103.9 billion. But that was
overwhelmed by a 9.4% increase in imports from China, which
pushed the tally to a record $399.3 billion. Last year, the
Democratic-controlled Senate passed legislation to pressure China
to raise the value of its currency, but that bill hit a dead end
in the Republican-controlled House of Representatives. Many
lawmakers believe that China deliberately undervalues its
currency to give its companies an unfair price advantage,
contributing to the huge bilateral deficit. The US trade
deficits with the European Union and Canada also expanded in
2011.
Olick - robo-deal about lowering principal
"It took more than a year to strike a deal, but here it is, the
biggest government-industry settlement in history, surpassing
even big tobacco. Five of the nation’s largest servicers will
cough up more than $25 billion, the bulk of which will go toward
lowering mortgage principal for borrowers who are behind on their
mortgage payments. Wait a minute. What does that have to do
with faulty foreclosure documents? Nothing. But that’s how it
started, and now that government got what it wanted, i.e.
mortgage principal reduction for about a million borrowers, they
are likely, quietly whispering a big thank you to all those
so-called 'robo-signers.' Let’s take a step back for a second
to remember the fall of 2010, when 'robo-signing' came to light.
The idea that one low-paid guy sitting in a room was signing his,
or perhaps somebody else’s, name to thousands of foreclosure
documents was appalling. It is appalling, no question. But let us
not forget that the vast, vast majority of those foreclosures
being processed were in fact legitimate foreclosures; it was the
documentation process that was fraudulent. Banks didn’t
foreclose on borrowers for no reason, they foreclosed because
borrowers weren’t paying their mortgages.
So fast-forward to 2011 when the housing market is still in deep
despair. Home prices are still falling, eleven million borrowers
owe more on their mortgages than their homes are worth, home
construction sees its worst year ever, and government relief
programs are doing very little to help. Cries arise that the only
way to help housing is to reduce the principal on all those
underwater mortgages, give borrowers their equity back! But how
does government force the banks to do that? Robo. The last thing
the banks need are fifty state lawsuits over bad foreclosure
documents, plus they need to be able to get all these legitimate
foreclosures through the courts, so they can stem some losses by
reselling the homes. The 'robo' scandal has ground foreclosure
processing to a veritable halt in much of the county and slowed
it everywhere else. Borrowers are sitting in their homes paying
nothing. So the banks agree to the deal, any deal, because they
have no other choice. You can hear it in their statements
today:
'We believe this settlement will help provide additional support
for homeowners who need assistance, brings more certainty to the
housing market and aligns to our ongoing commitment to help
rebuild our neighborhoods and get the housing market back on
track.' -- Bank of America.
'Today’s agreement represents a very important step toward
restoring confidence in mortgage servicing and stability in the
housing market.' -- Wells Fargo Home Mortgage.
Getting the housing market back on track. Restoring stability in
the housing market. That’s what they want. They’ve already
stopped 'robo-signing' long ago. Now what they need is closure.
Move the foreclosure process along again, so that the housing
market can clear all the distress and move ahead. Let the bank
black eye begin to heal. Sure, they will get hit with plenty more
lawsuits over mortgage securitizations, but that has little to do
with their customers on the street, the average consumers. That
has to do with investors, and federal regulators and all kinds of
complicated Wall Street products that are lost on average
Americans. Robo-signing was more personal; it had to do with real
people’s mortgage papers that they signed at their kitchen
tables."
Trail going cold at MF Global
When commodities brokerage MF Global imploded, the FBI and
federal prosecutors were quick to launch an investigation to
pursue what seemed obvious to outspoken regulators and lawmakers:
laws were broken and crimes were committed. More than three
months later, it is far from clear that anyone will face criminal
charges over the disappearance of more than $600 million in
customer money as MF Global spiraled towards bankruptcy in the
brokerage's final, frantic days in the last week of October. So
far, the MF Global investigation is not tracking the early
progress of other high-profile financial scandals such as RefCo,
where former Chairman Phil Bennett was arrested within days of
the disclosure that the futures firm had been hiding losses for
years.
Lawyers and people familiar with the MF Global investigation of
the firm that was run by former Goldman Sachs head Jon Corzine
say that even though the hunt is still on to find out whether or
not officials at MF Global intended to pilfer customer money in a
desperate bid to keep the brokerage from failing, the trail at
this point is growing cold. To date, scant evidence of criminal
intent has emerged in company emails, no former or current
employees have sought to cut a deal to provide testimony about
potential wrongdoing and seasoned defense lawyers say they are
not seeing the tell-tale signs of a hot criminal investigation.
Ellen Davis, a spokeswoman for the office of the Manhattan US
Attorney, declined to comment. Randall Samborn, a spokesman for
the office of the US Attorney in Chicago, also declined to
comment.
MBA statement on foreclosure deal
The Mortgage Bankers Association (MBA), issued the following
statement upon news of an agreement between state and federal
officials and five large residential mortgage servicers.
"A final agreement can play an important role stabilizing and
providing certainty and confidence to the housing and mortgage
markets. With all the rumors and speculation surrounding these
negotiations behind us, it is now imperative that policymakers,
lenders, servicers and other stakeholders work together on
policies and initiatives that will allow us to get the housing
market on the road to recovery. I would caution, though, that,
while a positive step, this will not be a panacea for all that
ails housing. There are a number of other issues that we need to
resolve. This includes striking the appropriate balance between
consumer protection and access to affordable credit for qualified
borrowers in the QM and QRM rulemakings, and facilitating the
return of private capital to the mortgage market by
comprehensively addressing the future of the GSEs and the
government's role in the secondary market." - David H. Stevens,
President and CEO of MBA.
Debra W. Still, CMB, Chairman of MBA's Council on the Future of
Residential Mortgage Servicing in the 21st Century added: "The
standards in this settlement can provide a framework for a
national servicing standard that would provide borrowers with
equal protections, regardless of where they live, and would give
lenders a single set of rules governing how they interact with
their customers. If done properly, and in recognition of
different business models, a nationwide standard would provide
renewed confidence in the system and encourage qualified
borrowers to jump back into the housing market."
Citigroup takes $50 million loss
Citigroup was forced to write off $50 million after two traders
accused of attempting to influence global lending rates left the
bank, according to people familiar with a worldwide investigation
that is gathering pace. Nine separate enforcement agencies in
the US, Europe and Japan have been probing whether US and
European banks manipulated the London Interbank Offered Rate or
Libor, the benchmark reference rate for $350 trillion worth of
financial products, and other interbank lending rates. So far,
only Japan’s Financial Services Agency has formally sanctioned
banks in connection with the probe. In December, regulators found
that two former Citigroup employees in Tokyo attempted to
pressure colleagues and employees at other banks involved in the
rate-setting process for the Tokyo Interbank Offered Rate, or
Tibor. While the regulator did not publicly name the traders
involved, people familiar with the case identified them as Thomas
Hayes, a trader of yen-related products, and Christopher Cecere,
his former boss.
According to those people, the alleged attempts to influence
Tibor were uncovered after another Citi employee in London
reported the activity. Citi took a $50 million loss when it
unwound the traders’ positions and reported the matter to
regulators, according to people familiar with the case. However,
other Citi sources suggested the losses were significantly in
excess of that amount. The investigation into possible
manipulation of global interbank lending rates has accelerated in
recent weeks, with more than a dozen traders at various banks
fired, suspended or placed on administrative leave. A former
Barclays trader, Philippe Moryoussef, is being investigated in
connection with the setting of Euribor, the rate at which banks
lend euros, according to people familiar with the case. Mr.
Moryoussef left Barclays in 2007, long before US, European and
Japanese regulators launched their probe into interbank lending
rates and now works in an unrelated position for Nomura in
Singapore. Barclays took the information to European Commission
officials, who are now investigating and declined to comment.
NAR - prices boost affordability
Housing affordability conditions improved in most metropolitan
areas from softer existing-home prices and record-low mortgage
interest rates in the fourth quarter, with rising sales and lower
inventory creating more balanced conditions, according to the
latest quarterly report by the National Association of Realtors
(NAR). Introduced with this release is a new annual metro-level
housing affordability index, with historically favorable
conditions dominating across the country.
The median existing single-family home price rose in 29 out of
149 metropolitan statistical areas (MSAs) in the fourth quarter
from a year earlier; two were unchanged and 118 areas had price
declines. The national median existing single-family home price
was $163,500 in the fourth quarter, down 4.2% from $170,600 in
the fourth quarter of 2010. The median is where half sold for
more and half sold for less. Distressed homes – foreclosures
and short sales which sold at discounts averaging 15 to 20% –
accounted for 30% of fourth quarter sales; they were 34% a year
earlier. Total existing-home sales, including single-family and
condo, increased 5.9% to a seasonally adjusted annual rate of
4.42 million in the fourth quarter from 4.17 million in the third
quarter, and were 9.2% above the 4.04 million pace during the
fourth quarter of 2010. All regions rose from the third quarter
and from a year ago. At the end of the fourth quarter there were
2.38 million existing homes available for sale, which is 21.2%
lower than the close of the fourth quarter of 2010 when there
were 3.02 million homes on the market.
NAR’s national Housing Affordability Index rose to a record
high 184.5 in 2011, based on the relationship between median home
price, median family income and average mortgage interest rate.
The higher the index, the greater the household purchasing power;
recordkeeping began in 1970. An index of 100 is defined as the
point where a median-income household has exactly enough income
to qualify for the purchase of a median-priced existing
single-family home, assuming a 20% down payment and 25% of gross
income devoted to mortgage principal and interest payments. For
first-time buyers making small down payments, the affordability
levels are relatively lower. Metro areas with the greatest
housing affordability conditions in 2011 include the
Detroit-Warren-Livonia area of Michigan, with an index of 383.4;
Toledo, Ohio, at 242.9; and Decatur, Ill., at 236.8. Only 24 out
of 152 metros measured had an affordability index below 100 in
2011.
Between 2010 and 2011, in markets where comparisons are
available, all but 2 out of 148 areas showed improvement in
housing affordability, and 69 MSAs had double-digit increases in
affordability conditions. The share of all-cash home purchases
in the fourth quarter was 29%, unchanged from the third quarter;
they were 30% in the fourth quarter of 2010. Investors, who are
drawn by bargain prices and account for the bulk of cash
purchases, accounted for 19% of transactions in the third
quarter; they were 20% in the third quarter and 19% a year ago.
First-time buyers purchased 33% of homes in the fourth quarter;
they were 32% in both the third quarter and the fourth quarter of
2010. In the condo sector, metro area condominium and
cooperative prices – covering changes in 54 metro areas –
showed the national median existing-condo price was $160,800 in
the fourth quarter, which is 1.7% below the fourth quarter of
2010. Ten metros showed increases in their median condo price
from a year ago, one was unchanged and 43 areas had declines.
Regionally, existing-home sales in the Northeast rose 6.3% in the
fourth quarter and are 3.7% above the fourth quarter of 2010. The
median existing single-family home price in the Northeast fell
4.6% to $229,200 in the fourth quarter from a year ago. In the
Midwest, existing-home sales increased 7.0% in the fourth quarter
and are 14.1% higher than a year ago. The median existing
single-family home price in the Midwest declined 3.3% to $134,100
in the fourth quarter from the fourth quarter in 2010.
Existing-home sales in the South rose 3.8% in the fourth quarter
and are 9.1% above the same quarter in 2010. The median existing
single-family home price in the South was $146,500 in the fourth
quarter, down 3.8% from a year earlier. Existing-home sales in
the West increased 8.1% in the fourth quarter and are 8.4% higher
than a year ago. The median existing single-family home price in
the West declined 4.2% to $205,200 in the fourth quarter from the
fourth quarter of 2010.
Greece still not bailed out
Stock markets fell Friday after Greece's crucial international
bailout was put on hold by its partners in the 17-nation
eurozone, a day after it seemed that the country's tortuous
journey to pacifying its creditors had reached a conclusion.
Greek Prime Minister Lucas Papademos and heads of the three
parties backing his government agreed to deep private sector wage
cuts, civil service layoffs, and significant reductions in
health, social security and military spending. Investors
breathed a sigh of relief that the agreement would allow Greece
to get a euro130 billion ($173 billion) bailout package and avoid
a bankruptcy next month that could send shockwaves around the
financial markets. But finance ministers from the other 16
eurozone states threw a spanner in the works late Thursday and
insisted that Greece had to save an extra euro325 million ($430
million), pass the cuts through a restive parliament and
guarantee in writing that they will be implemented even after
planned elections in April.
Amherst - foreclosure deal penalizes investors
The $26 billion settlement between government officials and the
five largest mortgage servicers will exacerbate servicer conflict
of interest by allowing the banks to use investor dollars to foot
the bill, according to Amherst Securities Group. The analysis
comes as representatives from mortgage banks, trade groups and
organizations expressed relief as the settlement with state
attorneys general and federal prosecutors finally arrived. By
receiving credit for principal write downs on the loans owned by
investors, servicers can settle their liability claims with
private investor money, Laurie Goodman and her team of analysts
at Amherst noted. The settlement includes $17 billion in
required credits for principal reduction and other foreclosure
initiatives, including short sales, anti-blight measures and
borrower transition efforts. These credits are put toward loans
both in bank portfolios and in private label securitizations.
"We believe that this settlement will further exacerbate the
conflicts of interest in the foreclosure process, highlighting
the fact that first liens are often poorly treated," the analysts
said. "We are deeply concerned that such a settlement will
significantly raise the cost and delay the return of private
capital to the US single-family mortgage market." They compare
the settlement to charging a patient, or investor, an extra fine
when his doctor, or bank, is found guilty of malpractice. The
already wounded patient is hurt again, and the doctor does not
have much incentive to change his behavior. "The settlement has
missed the opportunity to correct some of the huge conflicts of
interest that are embedded in the foreclosure process," the
analysts said.
It's not all bad news, however. "On the positive side, we are
pleased to see that the changes in servicing practices address
the fact that servicers often own companies that provide
ancillary foreclosure services, or mark-up third-party services
with no disclosure to borrowers or investors," they said. The
increased foreclosure timeline due to robo-signing issues is
likely to extend further because of the settlement, Amherst
analysts said, and the costs of will fall disproportionately on
private investors.
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