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Posts Tagged ‘mortgage meltdown’

Credit Card Payment More Important Than House Payment?

In an unprecedented shift, for some consumers having a credit card in good standing appears to have taken priority over having a roof over one’s head, experts said.

While overall consumer debt rose unexpectedly in January, consumers continued to pay off their credit cards that month — a record 16th straight month of lower credit-card debt — with such debt dropping about $1.7 billion to $864.4 billion, according to the Federal Reserve on Friday.

But a small slice of those consumers are paying down credit cards to the detriment of their mortgage loan. The number of consumers delinquent on their mortgages but current on their credit cards rose to 6.6% in the third quarter of 2009 from 4.3% in the first quarter of 2008, according to a TransUnion study of 27 million anonymous consumer records pulled randomly from its database. Meanwhile, the portion of those who fell behind on credit-card payments but paid their mortgage dropped to 3.6% from 4.1%.

The trend is more common among consumers with the lowest credit scores. The percentage of consumers with low scores who paid credit cards rather than home loans shot up to 29% in the third quarter of 2009 from 19.1% in the fourth quarter of 2007, according to TransUnion. And in that low-credit-score group, consumers falling behind on credit cards but keeping pace with mortgage payments declined to 14.5% in 2009 from 18.1% in the first quarter of 2008.

GMAC Loses $5 Billion in Fourth Quarter

NEW YORK (Reuters) – GMAC Financial Services, a lender that has received more than $16 billion from the U.S. government across multiple bailouts, said it lost $5 billion in the fourth quarter after writing down bad mortgage assets.

GMAC, one of the largest car loan makers in the United States, said in December that it did not expect to record more major losses from its mortgage unit. Home loans fueled GMAC’s growth earlier this decade but have since triggered billions of dollars of losses for the company.

The fourth-quarter loss compares with net income of $7.5 billion in the fourth quarter of 2008.

That 1937 Feeling

Here’s what’s coming in economic news: The next employment report could show the economy adding jobs for the first time in two years. The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.

But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths.

This shouldn’t be happening. Both Ben Bernanke, the Fed chairman, and Christina Romer, who heads President Obama’s Council of Economic Advisers, are scholars of the Great Depression. Ms. Romer has warned explicitly against re-enacting the events of 1937. But those who remember the past sometimes repeat it anyway.

During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.

What’s left? A boom in business investment would be really helpful right now. But it’s hard to see where such a boom would come from: industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space.

Will the Fed realize, before it’s too late, that the job of fighting the slump isn’t finished? Will Congress do the same? If they don’t, 2010 will be a year that began in false economic hope and ended in grief.

America is Being Governed by Callous Children

The new economic statistics put growth at a healthy 3.5% for the third quarter. We should be dancing in the streets. No one is, because no one has any faith in these numbers. Waves of money are sloshing through the system, creating a false rising tide that lifts all boats for the moment.

The tide will recede. The boats aren’t rising, they’re bobbing, and will settle. No one believes the bad time is over. No one thinks we’re entering a new age of abundance. No one thinks it will ever be the same as before 2008. Economists, statisticians, forecasters and market specialists will argue about what the new numbers mean, but no one believes them, either.

Among the things swept away in 2008 was public confidence in the experts. The experts missed the crash. They’ll miss the meaning of this moment, too.

The biggest threat to America right now is not government spending, huge deficits, foreign ownership of our debt, world terrorism, two wars, potential epidemics or nuts with nukes.

The biggest long-term threat is that people are becoming and have become disheartened.

Home Foreclosures Jump 23%

Oct. 15 (Bloomberg) — U.S. foreclosure filings climbed to a record in the third quarter as lenders seized more properties from delinquent borrowers, according to RealtyTrac Inc.

A total of 937,840 homes received a default or auction notice or were repossessed by banks, a 23 percent increase from a year earlier, the Irvine, California-based seller of default data said today in a report. One out of every 136 U.S. households received a filing, the highest quarterly rate in records dating to January 2005.

“The problem is prime loans going into foreclosure and people being underwater and losing their jobs,” Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles, said in an interview. “It’s a really bad number.”

Mounting foreclosures mean U.S. home prices probably will resume falling, analysts from Amherst Securities Group LP in New York said Sept. 23. A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005, they said.

FDIC Chief, Says More Help is Needed to Prevent Foreclosures

NEW YORK (CNNMoney.com) — The nation’s top banking regulator warned Tuesday that help for troubled homeowners is failing to keep pace with the foreclosure crisis.

“We’re definitely behind the curve, and we fall further behind the curve every day,” FDIC Chairwoman Sheila Bair told an audience at the Fortune 500 Forum in Washington, D.C.

According to Bair, the nation’s financial system would be in much better condition today if earlier warnings she made about mortgage modification had been heeded.

Bair began sounding the alarm more than two years ago, warning that lenders had to shore up capital reserves to offset non-performing loans. In October 2007, she told lenders that they should start modifying more at-risk mortgages so borrowers could afford to stay in their homes.

Meanwhile the mortgage mess has ballooned, expanding beyond the housing market into the entire financial sector and the overall economy.

Both the government and the banking industry have tried to slow the mortgage meltdown. Hope Now, the Bush-administration led coalition of banks, loan servicers and community advocacy groups created to tackle the foreclosure problem, says it has has helped 2.7 million homeowners keep their homes since July 2007.

Lenders like JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) have all recently implemented new loan modification programs.

She told the Fortune 500 Forum that it’s not too late to step up foreclosure prevention initiatives.

“The sooner we do it the better,” she replied. “I see higher delinquencies growing through 2010.”

Acting now would help many families who would otherwise lose their homes. And that would benefit everyone.

“Attacking the financial problem at its roots is the fiscally responsible and smart thing to do,” she said.

Massive Effort by J.P. Morgan to Save Mortgages

J.P. Morgan Chase & Co. launched an ambitious plan Friday to modify the terms of $70 billion in mortgages for borrowers who are behind on their payments or soon could be.

The move by the New York bank will cover as many as 400,000 borrowers. They’ll be moved into loans carrying lower interest rates, smaller principal amounts and other more-affordable terms.