The Credit Crisis of the last two to three years has changed the whole face of the economic landscape. The knee jerk reaction of the government didn’t take long to appear in the form of HARP, HOPE and other cute acronyms.

A program that hasn’t received half as much attention has been TARP. Maybe because the acronym is not as cute or because TARP is not as linked with reducing loan payments as with cleaning the mess when things don’t work out.

This article deals with what TARP is and what it means for homeowners as well as providing a short analysis how Loan Modifications have fared so far. TARP stands for Troubled Assets Relief Program which sounds nearly as bad as TARP which sounds like something you would paint on your fence to keep woodworm away, which is kind of what TARP is designed to do for Banks and foreclosures.

Enough bad illustrations, what is TARP all about and how is it linked to Loan Modifications?

Troubled Assets Relief Program (TARP) was established by the Secretary in consultation with the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation and the Secretary of Housing and Urban Development. What did such a venerably group of people prepare?

Well, Tarp is designed to provide lenders and loan servicers with compensation to cover administrative costs for each loan modified according to a set of standards. This was an important factor in cajoling banks into accepting the whole Loan Modification program. Banks and other loan servicers are designed to provide loans and receive payments not modify loans.

The government offered compensation in exchange of lenders re-tuning their administration to allow for faster loan modifications. This hasn’t quite worked as the government hoped, but more on that later. The second “job” of TARP is to provide loss sharing guarantees for certain losses incurred if a modified loan were to re-default. This is a kind of insurance for banks and other loan providers. This of course costs money. The government has set aside up to $100,000,000,000 for these purposes.

So what has been the result of all this investment, not only in TARP but also HARP, HOPE and other government sponsored programs? There is no doubt the government in the United States and other governments alike around the world have put a lot of energy and money into it. The results have been disappointing to say the least.

Many would say that the government is dealing with the wrong issues, that this is a credit crisis not a mortgage crisis. Others will grant that loan modification programs take time to prove themselves.

What are the figures so far? Nearly one in four loan modifications in the fourth quarter actually increased the monthly payments of homeowners. Which is a pretty bad result for loan modifications that are designed to make loan payments more affordable.

The re-default rate was about 50 percent where the monthly payments remained the same or increased, while it was 26 percent when monthly payments dropped.

That means that people are more likely to meet their monthly payments if they are cheaper… mmm, no surprises there.

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Related posts:

1. The Obama Loan Modification Aid Program, What Are The Benefits?
2. TARP, Capital Purchase Program…Making It Up As They Go Along?
3. Loan Modifications, 3 Nightmare Stories You Don’t Want To Copy

Related posts:

1. The Obama Loan Modification Aid Program, What Are The Benefits?
2. TARP, Capital Purchase Program…Making It Up As They Go Along?
3. Loan Modifications, 3 Nightmare Stories You Don’t Want To Copy

Source [blownmortgage]

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Filed under: Earnings reports, Forecasts, Hasbro Inc (HAS)

Hasbro Inc. (NYSE: HAS), the toy and game maker whose brands include Transformers, Playskool, Milton Bradley, and Wizards of the Coast, is scheduled to discuss its third quarter 2009 financial results in a webcast Monday at 8:30 AM ET. You can catch the webcast live or replayed on the company’s website.

The three months that ended in September included Comic-Con, the release of the G.I. Joe movie, and the introduction of the Hasbro Studios management team. Analysts surveyed by Thomson Reuters expect this Pawtucket, R.I.-based toy maker to report that earnings grew 4.3% from a year ago to $0.93 per share. Sales for the quarter are expected to be 1.7% higher to $1.3 billion.

Continue reading Hasbro earnings preview: Mild growth expected in Q3

Hasbro earnings preview: Mild growth expected in Q3 originally appeared on BloggingStocks on Sun, 18 Oct 2009 15:40:00 EST. Please see our terms for use of feeds.

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Filed under: International markets, Forecasts, China

One of the world’s leading investors is cautioning investors large and small not to expect the world’s largest economy to be the primary engine of growth for the world, as it has in previous, post-World War II expansions.

Billionaire investor George Soros said the United States will be a drag on global growth, Reuters reported Friday.

Further, Soros, speaking at a forum sponsored by The Economist magazine held at the New York Stock Exchange, said if market fundamentals determined it, the U.S. dollar should be falling against China’s currency, the yuan, which would allow the U.S. to contain its current account deficit, Reuters reported.

Continue reading Soros: U.S. economy will be a drag on global growth

Soros: U.S. economy will be a drag on global growth originally appeared on BloggingStocks on Fri, 16 Oct 2009 16:20:00 EST. Please see our terms for use of feeds.

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Filed under: Newsletters, Mutual funds, ETF Investing, Stocks to Buy

“It’s time to take some profits and play defense for a while,” says Glenn Rogers, adding, “Fortunately, we can hedge our bets by taking some profits and building cash reserves and reinvesting in more defensive securities.”

In The Internet Wealh Builder, the advisor suggests, a trio of conservative dividend-focused exchange-traded funds.

He explains, “Everybody I talk to these days is nervous, although for different reasons. Some are nervous because they feel left behind. They sat on the sidelines and missed the incredible rally we’ve had since March. Now they’re afraid they won’t have a chance to participate because the market has been refusing to correct.

“Others are nervous because they made a pot of money in the rebound and they’re afraid they could lose it all in a replay of last year’s meltdown. Meanwhile, there some relatively low-risk ETFs where you could park some money while we see how all this plays out.

Continue reading Defensive bets: A trio of dividend funds

Defensive bets: A trio of dividend funds originally appeared on BloggingStocks on Fri, 16 Oct 2009 13:20:00 EST. Please see our terms for use of feeds.

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Filed under: Economic data, Personal finance, Recession

The recession is only over if you ask the right people. While some sectors are starting to see the light at the end of the tunnel, consumers remain concerned. It may be tempting to listen to the experts over the average Joe, but the former don’t control 70% of the U.S. economy. So, as long as people are worried abou unemployment (which continues to rise), the levels of debt they carry and whether they’re at risk of foreclosure, the recession will live on in the hearts of those who write checks and swipe credit cards.

Continue reading Consumer sentiment drops: savings and debt repayment are culprits

Consumer sentiment drops: savings and debt repayment are culprits originally appeared on BloggingStocks on Fri, 16 Oct 2009 17:00:00 EST. Please see our terms for use of feeds.

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You wouldn’t know it by listening to current headlines but the economy in March was inching closer and closer to its own zero bound.  Since that time the market has put together one of the fiercest rallies in U.S. history.  We would have to go back to the Great Depression to find a similar rally.  […]

You wouldn’t know it by listening to current headlines but the economy in March was inching closer and closer to its own zero bound.  Since that time the market has put together one of the fiercest rallies in U.S. history.  We would have to go back to the Great Depression to find a similar rally.  There are wildcard factors at play right now.  The U.S. dollar is inching closer to the lows of 2008.  The stock market is getting closer to the pre-Lehman Brothers days.  The U.S. Treasury and Federal Reserve have put together a ragtag package of bailouts that have no historical precedent.  We should expect the unexpected in the path ahead.

One issue rarely talked about is how the weak dollar is going to impact foreigners buying real estate.  For the most part, I’m not sure how much of an impact this will have on residential real estate.  With commercial real estate we may see a good amount of buying if the dollar continues to get pounded.  Yet it is important to look at what currencies make up the U.S. dollar index:

Source:  Akmos

By far the largest weighted currency is the Euro.  Yet many of the countries within the basket that make up the U.S. dollar index are facing their own demons.  That is why I am hesitant to think the dollar will simply fly off a cliff while every other currency goes up and foreigners suddenly get an urge to buy up every Real Home of Genius on every corner of America.

What is fascinating is how connected the U.S. dollar and stock market have become.  I was unable to find charts that overlay the S&P 500 and the U.S. dollar index so I matched them up to give you a clear perspective of what is occurring:

As the chart above highlights, the dollar had been falling hard for all of 2007.  When the market peaked late in 2007, both the dollar and stock market fell in the U.S.  This was the brief period of decoupling or belief in this misguided notion.  This lasted until the dollar bottomed out at 70 in early 2008.  But after that, the world re-coupled and the U.S. dollar soared up until the March 2009 stock market low.  For this period, the stock market was tanking but the U.S dollar was going up.  To twist your mind further, since the March low the stock market has moved lockstep in opposite directions from the dollar.  It is a near perfect match!

Unfortunately the U.S. Treasury and Federal Reserve are doing everything they can to damage the dollar.  In fact, the only reason real estate isn’t correcting faster is because of the artificial money being pumped into the system.  Forget about jobs (26 million Americans are unemployed or underemployed).  Ignore manufacturing:

Right now the market is one giant easy money casino.  In fact, saving money is now on par to stuffing it into your mattress.  For example, let me tell you about U.S. Saving I-Bonds.  I’ve bought a few of these in the past as additional diversification to my investment portfolio.  The idea with I-bonds is they will keep up with inflation and pay a fixed rate.  Well over time, that fixed rate has slowly disappeared:

Okay, well at least we have the compounded inflation rate right?

That’s right!  The CPI had deflation.  So for the first time ever the I-bonds are now paying the awesome rate of 0.00%.  Bwahahaha!  The U.S. Treasury issues these products.  If they really wanted Americans to save they could up the fixed rate.  Instead, they cut the amount of these you can buy to $5,000 a year from the previous $30,000 a year and then make the rate so unattractive that putting money in your shoes seems like a wise investment move.  Get the hint?  They don’t want you to save.  They want you to blow every penny you have on cars, homes, and every other consumer hamster gimmick you can think of.  Only problem, the consumer hamster is reaching retirement and is loaded up with Prozac and Red Bull and is about to collapse.

I would show you the big bank savings rate but suffice it to say they are offering basically 0 percent.  However, banks are now making good dough on the difference between what they borrow and what they lend even with historically low mortgage rates:

Thanks to the trillions in taxpayer subsidies, banks are able to borrow for virtually zero and lend out at much higher rates.  So any rate above zero is a gain.  And since banks can now be picky regarding customers, they are experiencing some crazy yields.  If you want an idea why banks made enormous profits this decade just look at the Fed funds rate.  Yet this is now all coming at a cost.  The U.S. dollar has lost over 40 percent of its value since 2002.  How this will play out in housing will be interesting to see.
The U.S. Treasury and Federal Reserve seem to want an outcome that does the following:

a.  Slowly devalues the dollar

b.  Encourages home buying and selling putting a floor on prices

c.  Reviving the financial and real estate industries

d.  Back to happy days

I doubt that is going to happen.  So much focus has been devoted for 21 months since the recession started on the banking industry bailouts that I think the Fed and U.S. government have forgotten that you need good paying jobs to make a sustainable economy.  It is interesting to follow the rhetoric of Fed officials about pulling stimulus out of the market.  They claim success but for who?  Sure banks and their profits are back up but has the economy fundamentally corrected?  It just shows you how out of touch they are with those on the ground.

With commercial real estate and Alt-A and option ARMs coming on stage in 2010 in a big way, I still think we haven’t seen the end of this recession.  Technically we may be out of it already but that is because of the massive stimulus juice.  We are assured a double-dip with the trillions in bad debt still on the books.  If you travel the country you will find some strip malls that are simply empty.  Some newly build CRE has never been occupied.  Will it ever?  Those loses are still coming forward.

One of the many unintended consequences of the U.S. Treasury and Federal Reserve is falling rents created by the $8,000 tax credit, rising unemployment, and problems with CRE.  For example, many failed condo conversion projects are simply going back to being apartments thus adding inventory to the already saturated market.  Also, many people are consolidating households to make ends meet.  Given that owner’s equivalent of rent is the biggest component in the CPI, we may see additional pressure on the downside here.  In other words, the needed inflation won’t show up in the data.  Let us watch this closely because the reporting agencies might try to play fast and loose with the data here.

With lower rents there is less incentive to buy in today’s market.  You need to remember that over 40 years of data shows us an average 30 year mortgage rate of 9 percent or nearly twice as high as the current rate.  You might be able to buy that home at the low rate with massive tax credits but what happens when you sell in 3, 5, or 7 years?  You think the Fed can keep rates this low with the coming baby boomers drawing like crazy on Social Security, Medicare, and other entitlements?  Just saying, but zero percent seems awfully low for all that risk.

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U.S. Dollar Index and Real Estate: Foreigners Buy Commercial Real Estate not run down Residential Properties. The March S&P 500 and USD Correlation. Phase Two of the Crisis.

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Loan Modifications have been put forward as the great savior of the current credit crisis. Whether this is true or not is a matter of debate. I personally feel that dealing with a credit crisis by trying to fix mortgage issues is not going to deal with the big picture.

Nevertheless it is a fact that many are benefiting from the taxpayer subsidized loan modifications that are being grudgingly supplied by banks and other mortgage providers.

However many are not benefiting at all from this service, what is worse many have considerably worse off because they tried to get a loan modification and bumped into a scam artist or organization that duped him out of the little money he had left. Nobody wants to become a statistic, especially when it is the number of borrowers that are conned out of their homes by dishonest “loan modification consultants”.

What can you do? Here are 6 easy steps:

1)    Know the beast. Understanding what your options are and who qualifies for aid is vital. Reading www.blownmortgage.com and other mortgage help articles will provide you with inside information about loan modifications and mortgages. Other websites that should be on your list are: WWW.hud.gov www.makinghomeaffordable.gov and www.financialstability.gov . In fact wherever you go for help make sure it is free. The best help out there on loan modifications is, believe it or not, is free.

2)   Beware and be alert. If you are struggling with your mortgage you are a prime target for scams, recognize and avoid common scams.

3)  Avoid fast loan modifications. Companies who want you to sign papers immediately or who claim they can save your home if you sign of the deeds of your house to them are scam artist. Nobody can save your home except you and your mortgage provider. Organizations and individuals can provide valuable information but they can’t guarantee anything because they don’t make the decisions.

4)  Again, DO NOT sign the deed of your house to anybody unless you are working directly with the mortgage company to forgive your debt. In other words only sign off the deed of your house if you are selling it back to the bank.

5)    Only make mortgage payments to your bank. A common scam is for a “consultant” or loan modification company to ask you to pay them so they can deal directly with your mortgagee and make the payments for you. As you probably guessed this payments stay in the pockets of the scam artists while you get deeper in debt.

6)  Don’t pay anybody for advice on your loan modification or for counseling services on a delinquent loan. This is not to say they are all scam artists but even the kosher variety or not as good as the organizations that provide free counseling as a public service.

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1. Loan Modifications, lies, scams and misinformation
2. Creative Ways a Loan Modification Lowers Your Monthly Payments
3. Loan Modifications and FHA Refinance What Is The Deal

Related posts:

1. Loan Modifications, lies, scams and misinformation
2. Creative Ways a Loan Modification Lowers Your Monthly Payments
3. Loan Modifications and FHA Refinance What Is The Deal

Source [blownmortgage]

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