Last Thursday the big news was Obama’s Loan Modification program, Making Home Affordable. The first target the program set out for itself, reaching 500,000 trial loan modifications by November was reached nearly a month early.

Critics stated that the target was of little importance in the big picture of things with foreclosures continuing to affect more and more homeowners. Mark Zandi, chief economist for Moody’s Economy.com said the help provided by HAMP was a help on the margin. “But it is not going to end the foreclosure crisis”.
So what should we think of Obama’s HAMP? Is it a success or failure story?

The Good.
Reaching the target was no mean feat. The first months were painfully slow in reaping loan modifications and many did not think even this first target would be met. The fact that it was is proof of Obama’s administration skill at cajoling and bullying banks and providers into meeting their expectations.

Whatever we think of the “Big Picture” 500,000 families have lower monthly mortgage payments, that has to be good news, right?
According to Timothy F. Geithner mortgage payments are now being lowered faster than homes are being sold in foreclosure proceedings and 40 percent of eligible homeowners (1.2 million of them) have been helped. Here the figures vary, other put this figure at 16% of eligible homeowners, but that just represents differences on the definition of what an eligible homeowner it.

The Bad.
Economists say the program and its current success will not be enough to prevent many millions from losing their homes before the Great Recession ends.
By Mr. Zandi’s calculations from this year to the next over 4 million households will go through foreclosure or short sales.

The 500,000 loan modifications are only trial loan modifications. If the homeowners fail to pay one of the first 3 months in the trial, the modification is void. Even if the homeowner completes the trial period they then have to supply more paperwork which opens the doors for loans not being modified due to bureaucratic slips.

We don’t know how many of the loan modifications actually modified the principal balance of the loan and how many simply lengthened the loan or reduced the interest rate to reduce mortgage payments. Reducing the principle is an important factor if you want to reduce the rates of re-default on mortgage payments.

The problem HAMP was designed to attack, subprime mortgages that cannot benefit from current low interest rates because the value of the home has dropped is no longer the main type of mortgage going through foreclosure. It is not only subprime mortgage that are suffering now. Prime mortgages with 30 year fixed interest at low interest rates are also defaulting because of the increase in unemployment. Loan modifications cannot help much on good mortgages with owners that cannot afford any payment because they are out of work.

So whatever your view is, this issue is still far from being solved and playing with loans is just not going to fix it. The question is do you try to use tax dollars to bail people out of the mess or just let the economy weed itself out of bad loans?

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Related posts:

1. Loan Modification Success Report, The Truth Is Far Worse
2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
3. Loan Delinquencies Fall As Banks Get Serious With Loan Modifications

Related posts:

1. Loan Modification Success Report, The Truth Is Far Worse
2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
3. Loan Delinquencies Fall As Banks Get Serious With Loan Modifications

Source [blownmortgage]

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Last week’s big news in loan modifications was that HAMP, Obama’s administration’s program to get troubled (i.e. 60 days behind their payments) loans back in line with “aggressive” modifications made its first target of 50,000 trial loans before November. That is what the government hoped anyway.

The big news this week could be that foreclosures seem to be slowing down as well as loan delinquencies fall from peak. That is an interesting way of saying that things aren’t as bad as when they were at their worst. But, hey, when you are in a world credit crisis you have to make the most of good news.

Why are things getting better? Is the Government’s program proving its worth?

You will get a whole lot of opinions on that. Let’s try and hang on to a few important facts to get some perspective on the whole issue.

- A target few thought possible was achieved through sweat, blood and tears.

- Foreclosures are no longer only coming from subprime mortgages that need the help of HAMP to lower interest rates but are increasingly coming from prime mortgages with good interest rates. This is because the current crisis is not only a mortgage interest crisis but a credit crisis. People have over borrowed not only on their homes but on their cars, their credit cards and when they lose their high paying jobs they are in trouble and of course mortgage payments are right at the top of the loans they are trying to pay back.

- Banks are starting to work hard to meet the targets set by the administration. One example is the First Federal Bank of California a subsidiary of FirstFed Financial Corp has modified more than 1.4 billion dollars worth of home mortgages, averting 3,000 mortgages from foreclosure. In fact this relatively small local bank is doing very well when compared to banks nationally. The great results in loan modifications at First Federal Bank of California are strongly linked to good results in other related areas like loan delinquencies which have also declined significantly from previous peak levels. For instance loans that were 30 to 59 days behind payments were 55 percent lower than in January.

How did First Federal Bank of California pull this off?

I don’t know. They will happily say it is there interest in their client’s real needs that allow them to provide realistic modifications to their loans which provides sustainable loan payments for borrowers. What can’t be argued is that this bank is meeting and exceeding government’s expectations.

One of the factors that might be contributing towards this is that smaller banks can modify and fine tune their management faster and more efficiently. Smaller can be better in business and banks have complained about the difficulty of changing the cogs of their corporations to provide fast loan modifications.

What is amazing is that after 6 months we know the government is on target (at least their first target) but we’re not sure if it is aiming for the right target, subprime mortgages.

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1. Loan Modifications, Story Of Struggle For Banks And Borrowers Alike
2. Loan Modifications: Why Is Citigroup Optimistic About Future Loan Delinquencies
3. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed

Related posts:

1. Loan Modifications, Story Of Struggle For Banks And Borrowers Alike
2. Loan Modifications: Why Is Citigroup Optimistic About Future Loan Delinquencies
3. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed

Source [blownmortgage]

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I have been covering the option ARM fiasco for a very long time now and as I have highlighted before, this is very much a California problem.  Apparently I’m not the only one that has realized that option ARMs are a ticking time bomb just waiting to go off.  None other than our own […]

I have been covering the option ARM fiasco for a very long time now and as I have highlighted before, this is very much a California problem.  Apparently I’m not the only one that has realized that option ARMs are a ticking time bomb just waiting to go off.  None other than our own attorney general, Jerry Brown is going after the top option ARM banks and servicers.  He has a few of the same questions that we have.  How in the world are banks going to deal with the coming recasts?  Have banks done anything since the crisis has started in addressing these loans?  Inquiring minds would like to know.

The AG has been busy in the last year.  He went after toxic mortgage poster child Countrywide successfully and recently, has gone after State Street.  Jerry Brown recently came on CNBC regarding State Street:

Source:  Zero Hedge

If anything, the AG is one of the few people that is actually going after the crony bankers and Wall Street for their financial robbery against the U.S.  We should be saluting the AG for this.  Instead, CNBC with their typical pandering and cheerleading for Wall Street tries to make a mockery out of the interview:

“I don’t dispute that $56 million is a lot of money, I don’t dispute the merits of the suit but you had a big press conference, you’re coming on C….N….B….C…. all this surrounding publicity over this $56 million, what do you say to people who look at this and say this is a perfect example of the demagoguery that attorney generals [sic] use when they want to run for governor.”

This is precisely what is fundamentally wrong with the financial press.  Here we have a public official who has gone after Countrywide, is going after State Street, and is now openly questioning the practice regarding option ARMs that are arguably the worst loan products ever devised and CNBC has the gall to mock him for “$56 million” because in their journalistic circles, this is a tiny amount that only the proletariat would worry about.  Contrary to their comrade circles, $56 million is a lot of money plus, there is the need to stop the financial thievery that has engulfed this country.  Who else is going after these institutions legally?  I realize that next year is a big election year and Jerry Brown is the front leading Democrat but come on financial press, we should be seeking out folks like this and Elizabeth Warren who are actually on the side of the consumer.

So what is in the letter you ask?

As I just recently noted and the AG recognizes, most of the options ARMs are here in California.  We also recognize that nothing has really been done to remedy this issue.  The AG is merely asking the top 10 bank and servicers of these loans to answer what they have been doing in regards to option ARMs.  They have until November 23^rd to respond which is plenty of time for them to type in corporate legalese “we haven’t dun a damn thing AG!”  It’ll be interesting to see what happens since it appears the AG is diverting from the White House and Wall Street plan of extend and pretend and is actually pushing toward principal reductions.  In other words, something banks have been fighting against vehemently.

I appreciate the AG understanding the issue before it implodes and recognizing that this is a major issue for the state.  Sure, some realtor and housing cheerleaders have been ignoring shadow inventory and these toxic mortgages but I’ll side with the AG on this one.  Instead of CNBC thinking $56 million is chump change, I’ll side with people who seem to be fighting on the right side instead of shilling for Wall Street.

And if you think the actual housing insanity is done in California, you have got to get out and smell the roses.  Or if you prefer, you need to get your self into a 400 square foot condo.  Today we salute you Santa Monica with our Real Homes of Genius Award.

Santa Monica – The Westside Miniaturized

The coveted Westside is on the radar of many SoCal blogger readers.  Many forget that SoCal is a gigantic region with over 20 million people.  Some forget that in the Inland Empire, it is easy to find homes between $100,000 to $200,000 yet evidently prices haven’t collapsed in their tiny niche markets so therefore the housing correction never happened.  If we look at the Westside in terms of overall SoCal sales, it is but a tiny fraction of the overall market.  And in this niche online force of readers, many are secretly lusting over their piece of Santa Monica real estate.  Well the wait might be over for you my friend!

I pulled this place up on Zillow and it is listed at 390 square feet (ZipRealty has it at 400 square feet).  Now really, are we going to argue about 10 square feet?  The only one that may have an objection to this number might be your pet cat but otherwise, we are talking a rather small location.

Officially there is no bedroom on this place.  It does have 1 bathroom which is useful in a home.  For $258,900 I think most of us would expect that at the very minimum.  But of course, this condo has the obligatory HGTV paraphernalia:

The place has been listed on the MLS for 179 days.  Now you would expect anything under $300,000 to fly off the shelf in Santa Monica but it might be hard to show that you are a certified “baller” when you bring your date back to a 400 square foot condo.  In the battle of location versus size, what will come out ahead?  Only in Westside would you have these kind of battles.

At least we know that we have a bathroom though:

I may not be doing this place justice.  Let us read the ad:

“Amazing asking price for this charming cottage style bungalow in the heart of santa monica. Subject to lende’r approval but approval is now in final stages of full approval and is imminent!! Do not miss, second & final negotiator has established this acceptance price!! Unit overflows with light and charm,bamboo floors,new eat-in kitchen with granite counters and new cabinetry.All new bath with pedestal sink & tiled floors. Huge private outdoor patio with redwood fence.Garaged parking space.”

Huge private outdoor patio?  Bamboo floors?  Granite countertops?  Where do I sign!  One small thing of course.  This is freaking 400 square feet for $258,900!  You’d get more room by getting a roommate and a regular apartment.  Let us assume we decide to buy this place with a FHA insured loan and 3.5 percent down:

Down payment:            $9,061.50

Monthly PITI:               $1,726

Now is this place worth it?  You tell me.  As a bachelor gig to show the “310” this might not be bad, but certainly no family is going into a 400 square foot place.  The price is certainly doable for Santa Monica.  Yet you have to ask whether this price will hold in the long-term.

In many other places in the country with $258,900 you’ll be getting a nice McMansion.  But this is California and as we have shown with option ARMs, we do things very differently here.

Today we salute you Santa Monica with our Real Homes of Genius Award.

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Real Homes of Genius: $258,900 for a Condo in Santa Monica? One Catch. It is 400 Square Feet. Attorney General Has Eyes Set on Option ARMs.

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Filed under: Launches, Industry, Entrepreneurs, Politics, Technology

First off, what is smart grid technology? Smart grid technology allows two-way communication between a home or business and the utility company.

Then you are probably wondering why is there so much interest in smart grid technology now? The key reason is that our electrical transmission system is outmoded and overloaded. Our present system will be unable to handle the increasing demand for electricity for much longer. Take the electric car. If thousands of these cars are on the road next year, we will need the electrical delivery system to power them.

Continue reading Which companies will profit from smart grid technology?

Which companies will profit from smart grid technology? originally appeared on BloggingStocks on Mon, 02 Nov 2009 12:00:00 EST. Please see our terms for use of feeds.

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Filed under: Options, Stocks to Buy

The Yankees are led by a core of four men — Derek Jeter, Andy Pettitte, Jorge Posada, and Mariano Rivera — who all came to the club in 1995.

They’re no spring chickens, that’s for sure. Thankfully, the players are supported by a great organization, which includes top-notch medical care, oftentimes right there in the clubhouse, which is equipped with X-ray and sonogram equipment.

Continue reading World Series trade #5: Sonosite (SONO)

World Series trade #5: Sonosite (SONO) originally appeared on BloggingStocks on Sun, 01 Nov 2009 11:00:00 EST. Please see our terms for use of feeds.

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Filed under: Earnings reports, Estee Lauder (EL), Revlon (REV), Avon Products (AVP), Procter and Gamble (PG)

Stocks suffered a scary drop on Friday. It was fitting, in a sense, since it was the day before Halloween. In fact, as this Closing Bell piece noted, there were more tricks than treats to be had on Wall Street.

There are always equities bucking the trend, however. The Estee Lauder Companies (NYSE: EL) was one of them. Bullish buyers loved the beauty company’s fiscal Q1 earnings release. As has been the case with many reports, the top line wasn’t the fun part of the document: Estee Lauder saw a decrease of 2.7% for adjusted revenues. Here’s the item of interest: net income after charges was 85 cents per share, more than three times what was made in the comparable frame.

Continue reading Estee Lauder’s earnings explode to the upside in Q1

Estee Lauder’s earnings explode to the upside in Q1 originally appeared on BloggingStocks on Sat, 31 Oct 2009 14:10:00 EST. Please see our terms for use of feeds.

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