Florida foreclosure limbo
Banks that made reckless home loans in south Florida have been
tiptoeing away from foreclosures in a tactic designed to cut
their losses. The result: Orphaned, dilapidated homes dot the
landscape from Kendall to Lake Worth. There are no owners
willing to claim and care for them. A months-long Sun Sentinel
investigation of property code violations involving abandoned
homes uncovered case after case in which banks launched
foreclosure lawsuits but then stalled or avoided taking
ownership. In effect, the banks legally sidestepped
responsibility for the empty homes, causing great harm to
neighborhoods. The real estate industry calls such properties
"bank walkaways." They are no longer maintained by their legal
owners, whether they were investors bailing out of unwise deals
or families in financial ruin who decamped. Nor are they being
tended to by lenders, which have halted foreclosure proceedings
because the remaining equity in the properties is deemed
inadequate to cover the banks' costs to reclaim title and
maintain, refurbish and sell them. The practice has contributed
to South Florida's foreclosure "limbo" problem in which thousands
of vacant homes are stuck in unsettled court proceedings for
years.
Spending down, income up
A Commerce Department report showed that personal spending
increased 0.3% in the month, well down from the 0.9% jump in
spending the month before. That was much weaker than the 0.5%
gain in spending forecast by economists surveyed by Briefing.com.
Income increased a little faster, rising 0.4%, which was an
improvement from the 0.2% rising the previous month. It was the
first time since December that income growth outpaced spending
increases, as consumers dipped into savings the previous two
months in order to deal with rising prices, such as increases in
gasoline prices. But inflation moderated in March, and it
allowed consumers to increase their savings again. The report
showed that the savings rate, which compares after-tax income to
the level of spending, edged up to 3.8% from 3.7% in February.
That means the average family was saving $38 out of every $1,000
in take-home pay in the month.
ResCap bankruptcy could cost $1.2 billion
A bankruptcy filing on the ResCap mortgage unit could cost parent
company Ally Financial between $400 million and $1.25 billion,
according to a financial disclosure by the bank Friday. "If a
ResCap bankruptcy were to occur, we could incur significant
charges, substantial litigation could result, and repayment of
our credit exposure to ResCap could be at risk," according to the
filing. On April 17, Ally disclosed the troubled mortgage unit
missed an interest payment on its debt and would be considered in
default if it wasn't made within 30 days. More than $473 million
on the debt is outstanding. The unit actually forged a $191
million profit in the first quarter. But according to the filing
Friday, Ally estimates the losses from litigation matters and
repurchase obligations could reach as high as $4 billion over
time. Barclays Capital analysts predicted the unit could be
placed into bankruptcy within one to two months, and outlined why
selling the servicing rights would be critical for investors in
ResCap issued mortgage-backed securities. The unit has stopped
lending to real estate developers and homebuilders in the US,
according to the Ally filing Friday.
Student loans are a hot potato
In the political campaigns still taking shape, President Barack
Obama, Republican challenger Mitt Romney and lawmakers of both
parties say they want to protect college students from a sharp
increase in interest rates on federally subsidized loans. Agree,
they might, and act they surely will. But first, they settled
effortlessly into a rollicking good political brawl. In less
than 72 hours, what might have looked like a relatively simple
matter mushroomed into a politically charged veto showdown that
touched on the economy and health care, tax cuts and policies
affecting women. Accusatory campaign commercials to follow, no
doubt. "This is beneath us. This is beneath the dignity of this
House and the dignity of the public trust that we enjoy,"
protested House Speaker John Boehner, R-Ohio as Democrats
maneuvered for position on the student loan bill.
"It shouldn't be a Republican or a Democratic issue. This is an
American issue," Obama said in North Carolina last week as he
broached the topic of legislation in a move to gain support
students in the fall election. He urged his listeners to tweet
their lawmakers and urge them to block an increase in interest
rates on federally subsidized loans issued beginning July 1.
There was partisan pop behind Obama's message, though. Over two
days of campaign-style appearances on college campuses, he quoted
one unnamed Republican lawmaker as saying she had "very little
tolerance for people who tell me they graduate with debt because
there's no reason for that." Another GOP lawmaker likened student
loans to "stage three cancer of socialism," he said. Both
Republicans quickly said they had been quoted out of context.
Within a day, Romney told reporters he agreed on the need to
prevent the rate increase, while conceding nothing to Obama in
the search for political advantage. "I support extending the
temporary relief on interest rates for students," he said, and
cited "extraordinarily poor conditions in the job market" in a
jab at the president's handling of the economy. Congressional
Democrats announced they would write legislation to prevent a
doubling of the current 3.4% interest rate, and cover the $6
billion cost by requiring more wealthy individuals to pay Social
Security and Medicare payroll tax. It was a not-so-subtle
reprise of a campaign perennial, the allegation that Republicans
want to cut programs benefiting those who aren't rich to protect
tax cuts for those who are. "Let's be honest," said Senate
Republican leader Mitch McConnell of Kentucky. "The only reason
Democrats have proposed this particular solution to the problem
is to get Republicans to oppose it, to make us cast a vote they
think will make us look bad to the voters they need to win the
next election." He then accused Democrats of wanting to pay for
the legislation "by raiding Social Security and Medicare, and by
making it even harder for small businesses to hire."
TARP exec pleads guilty to fraud
Reginald Harper, former CEO of First Community Bank of Hammond,
La., pleaded guilty to defrauding the firm out of millions of
dollars in phony mortgages. Harper faces up to five years in
prison and a $250,000 fine. His sentencing is scheduled for Sept.
13. First Community applied for and was approved for $3.3 million
in Troubled Asset Relief Program bailouts in 2008 but withdrew
its application afterward. Four years prior, Harper loaned $2
million to real estate developer Troy Foquet in 2004 to build out
parcels of real estate, according to the charges. Once it became
difficult to find qualified homebuyers, Harper would loan
potential buyers money to make it appear to the mortgage lender
the borrower had more cash than they actually did. He also used
"straw" buyers to obtain mortgages, which were used to pay off
the original loans to Foquet. Foquet also paid Harper with
insufficient checks, which were credited as a loan payment in
order to avoid reporting the delinquency. Foquet pleaded guilty
to the charges in March. Executives had the choice of writing
off losses on bad loans or covering up those losses through
fraud," said Special Inspector General for TARP Director Christy
Romero. "Harper chose the latter and concealed the status of the
loans from others at First Community Bank, from the bank's
regulators and in the bank's TARP application."
Banks that made reckless home loans in south Florida have been
tiptoeing away from foreclosures in a tactic designed to cut
their losses. The result: Orphaned, dilapidated homes dot the
landscape from Kendall to Lake Worth. There are no owners
willing to claim and care for them. A months-long Sun Sentinel
investigation of property code violations involving abandoned
homes uncovered case after case in which banks launched
foreclosure lawsuits but then stalled or avoided taking
ownership. In effect, the banks legally sidestepped
responsibility for the empty homes, causing great harm to
neighborhoods. The real estate industry calls such properties
"bank walkaways." They are no longer maintained by their legal
owners, whether they were investors bailing out of unwise deals
or families in financial ruin who decamped. Nor are they being
tended to by lenders, which have halted foreclosure proceedings
because the remaining equity in the properties is deemed
inadequate to cover the banks' costs to reclaim title and
maintain, refurbish and sell them. The practice has contributed
to South Florida's foreclosure "limbo" problem in which thousands
of vacant homes are stuck in unsettled court proceedings for
years.
Spending down, income up
A Commerce Department report showed that personal spending
increased 0.3% in the month, well down from the 0.9% jump in
spending the month before. That was much weaker than the 0.5%
gain in spending forecast by economists surveyed by Briefing.com.
Income increased a little faster, rising 0.4%, which was an
improvement from the 0.2% rising the previous month. It was the
first time since December that income growth outpaced spending
increases, as consumers dipped into savings the previous two
months in order to deal with rising prices, such as increases in
gasoline prices. But inflation moderated in March, and it
allowed consumers to increase their savings again. The report
showed that the savings rate, which compares after-tax income to
the level of spending, edged up to 3.8% from 3.7% in February.
That means the average family was saving $38 out of every $1,000
in take-home pay in the month.
ResCap bankruptcy could cost $1.2 billion
A bankruptcy filing on the ResCap mortgage unit could cost parent
company Ally Financial between $400 million and $1.25 billion,
according to a financial disclosure by the bank Friday. "If a
ResCap bankruptcy were to occur, we could incur significant
charges, substantial litigation could result, and repayment of
our credit exposure to ResCap could be at risk," according to the
filing. On April 17, Ally disclosed the troubled mortgage unit
missed an interest payment on its debt and would be considered in
default if it wasn't made within 30 days. More than $473 million
on the debt is outstanding. The unit actually forged a $191
million profit in the first quarter. But according to the filing
Friday, Ally estimates the losses from litigation matters and
repurchase obligations could reach as high as $4 billion over
time. Barclays Capital analysts predicted the unit could be
placed into bankruptcy within one to two months, and outlined why
selling the servicing rights would be critical for investors in
ResCap issued mortgage-backed securities. The unit has stopped
lending to real estate developers and homebuilders in the US,
according to the Ally filing Friday.
Student loans are a hot potato
In the political campaigns still taking shape, President Barack
Obama, Republican challenger Mitt Romney and lawmakers of both
parties say they want to protect college students from a sharp
increase in interest rates on federally subsidized loans. Agree,
they might, and act they surely will. But first, they settled
effortlessly into a rollicking good political brawl. In less
than 72 hours, what might have looked like a relatively simple
matter mushroomed into a politically charged veto showdown that
touched on the economy and health care, tax cuts and policies
affecting women. Accusatory campaign commercials to follow, no
doubt. "This is beneath us. This is beneath the dignity of this
House and the dignity of the public trust that we enjoy,"
protested House Speaker John Boehner, R-Ohio as Democrats
maneuvered for position on the student loan bill.
"It shouldn't be a Republican or a Democratic issue. This is an
American issue," Obama said in North Carolina last week as he
broached the topic of legislation in a move to gain support
students in the fall election. He urged his listeners to tweet
their lawmakers and urge them to block an increase in interest
rates on federally subsidized loans issued beginning July 1.
There was partisan pop behind Obama's message, though. Over two
days of campaign-style appearances on college campuses, he quoted
one unnamed Republican lawmaker as saying she had "very little
tolerance for people who tell me they graduate with debt because
there's no reason for that." Another GOP lawmaker likened student
loans to "stage three cancer of socialism," he said. Both
Republicans quickly said they had been quoted out of context.
Within a day, Romney told reporters he agreed on the need to
prevent the rate increase, while conceding nothing to Obama in
the search for political advantage. "I support extending the
temporary relief on interest rates for students," he said, and
cited "extraordinarily poor conditions in the job market" in a
jab at the president's handling of the economy. Congressional
Democrats announced they would write legislation to prevent a
doubling of the current 3.4% interest rate, and cover the $6
billion cost by requiring more wealthy individuals to pay Social
Security and Medicare payroll tax. It was a not-so-subtle
reprise of a campaign perennial, the allegation that Republicans
want to cut programs benefiting those who aren't rich to protect
tax cuts for those who are. "Let's be honest," said Senate
Republican leader Mitch McConnell of Kentucky. "The only reason
Democrats have proposed this particular solution to the problem
is to get Republicans to oppose it, to make us cast a vote they
think will make us look bad to the voters they need to win the
next election." He then accused Democrats of wanting to pay for
the legislation "by raiding Social Security and Medicare, and by
making it even harder for small businesses to hire."
TARP exec pleads guilty to fraud
Reginald Harper, former CEO of First Community Bank of Hammond,
La., pleaded guilty to defrauding the firm out of millions of
dollars in phony mortgages. Harper faces up to five years in
prison and a $250,000 fine. His sentencing is scheduled for Sept.
13. First Community applied for and was approved for $3.3 million
in Troubled Asset Relief Program bailouts in 2008 but withdrew
its application afterward. Four years prior, Harper loaned $2
million to real estate developer Troy Foquet in 2004 to build out
parcels of real estate, according to the charges. Once it became
difficult to find qualified homebuyers, Harper would loan
potential buyers money to make it appear to the mortgage lender
the borrower had more cash than they actually did. He also used
"straw" buyers to obtain mortgages, which were used to pay off
the original loans to Foquet. Foquet also paid Harper with
insufficient checks, which were credited as a loan payment in
order to avoid reporting the delinquency. Foquet pleaded guilty
to the charges in March. Executives had the choice of writing
off losses on bad loans or covering up those losses through
fraud," said Special Inspector General for TARP Director Christy
Romero. "Harper chose the latter and concealed the status of the
loans from others at First Community Bank, from the bank's
regulators and in the bank's TARP application."
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