Another guest post from MG Dungan who went from Wharton to Wall St. to real estate to Blown Mortgage.

Hedge funds are continuing to lose big bucks, suspending redemptions and, in a number of cases, liquidating. They all cite difficult market conditions. Which markets, though? Derivatives have been under the radar lately, yet there have been many events that would force mark-to-market accounting. Recent changes in SEC rules allow banks to defer mark-to-market and keep off balance sheet certain assets. Hedge funds too?

From the Nobel Prize-winning asset managers who brought us Long Term Capital Management, Bloomberg today reports that Platinum Grove Asset Management LP has suspended investor withdrawals from its largest fund after a 29% loss in the first half of October. That’s right, 29% in 15 days. The year to date is higher.

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Have you seen Robert Wagner recently? Chances are you have and he’s been talking about reverse mortgages. Reverse mortgages have been touted as a solution for cash strapped seniors allowing them to keep and live in their home while still enjoying a comfortable lifestyle. Comfort has lately taken a back seat to surviving the current economic chaos.

Reverse mortgages can help seniors weather some financial disruptions. On November 1, lower origination fees and higher loan limits were introduced on Home Equity Conversion Mortgages (HECMs), the federally insured reverse mortgage program. HECMs account for most (99 percent) of the reverse mortgages being made today although only an estimated 1 percent of those eligible for the program are participating, according to the Christian Science Monitor.

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A guest post by Chris Hynes, an indpenedent financial writer.

Now that election season for the presidential candidates has officially concluded, voters will be looking forward to some sort of meaningful resolution to the issues facing our economy, particularly in the housing sector. In the final weeks of the campaign, both candidates have called for relief to be given to homeowners, rather than corporations. This kind of populism goes far with voters, with Obama’s agenda clearly making the biggest impression. However, the idea of the government purchasing bad mortgages, or stopping banks from foreclosing on loans smacks of a government attempt to control the market, rather than to regulate it. However you interpret the meanings of these proposals, they will allow the new president to take the side of the homeowners, rather than the much-maligned bankers.

Ironically, the first real step to provide assistance to homeowners since early last year, when the Hope Now Alliance and Project Lifeline4 were announced, comes from those same corporations who have born the brunt of public criticism. The Wall Street Journal reported today that several major banks will be using some of the government cash they have sat on for the past few weeks for homeowner relief. The article reports that JP Morgan Chase will begin a massive program to shore up its mortgage portfolio by modifying, rather than foreclosing on loans made to borrowers who are unable to keep up with payments. Other banks are likely to follow suit. Bank of America is mentioned in the article as having two loan modification programs ready to be implemented, largely as a result of their purchase of CountryWide Financial.

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Another guest post from MG Dungan who went from Wharton to Wall St. to real estate to Blown Mortgage.

Economies worldwide are in recession and it’s getting worse. The momentum on the downside is too strong and the losses too pervasive to expect bailouts or interest-rate cuts to have more than a temporary effect. At best, government can slow down the rate of decline or perhaps delay a crash, but at a great future cost.

In the US, what started out as a housing problem in a few states has now become a full-fledged recession, with a majority of states (30) now in or dangerously close (19) to recession. The single exception is Alaska, according to Moody’s Economy.com.

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A guest post by Jay C. Hammond, freelance journalist and researcher.

There are plenty of candidates for blame in the current mortgage meltdown. Yet the ability of the Federal Bureau of Investigation (FBI) to investigate mortgage fraud and other financial crimes is increasingly being called into question. The FBI and the Department of Justice are the agencies primarily responsible for pursuing criminal charges against lenders and financial firms.

Mortgage fraud is blamed for annual losses of between $4 and $6 billion, according to statistics published on the FBI website at www.fbi.gov/hq/mortgage_fraud.htm, By September, the FBI had already received more than 62,000 reports of suspicious activity representing losses of $1.4 billion in 2008. There were 1,569 active investigations underway as of August 2008. Compare that to only 462 in 2007 and 295 in 2003.

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A guest post by Jay C. Hammond, freelance journalist and researcher.

There are plenty of candidates for blame in the current mortgage meltdown. Yet the ability of the Federal Bureau of Investigation (FBI) to investigate mortgage fraud and other financial crimes is increasingly being called into question. The FBI and the Department of Justice are the agencies primarily responsible for pursuing criminal charges against lenders and financial firms.

Mortgage fraud is blamed for annual losses of between $4 and $6 billion, according to statistics published on the FBI website at www.fbi.gov/hq/mortgage_fraud.htm, By September, the FBI had already received more than 62,000 reports of suspicious activity representing losses of $1.4 billion in 2008. There were 1,569 active investigations underway as of August 2008. Compare that to only 462 in 2007 and 295 in 2003.

(more…)

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A guest post by Chris Hynes, an indpenedent financial writer.

Now that election season for the presidential candidates has officially concluded, voters will be looking forward to some sort of meaningful resolution to the issues facing our economy, particularly in the housing sector. In the final weeks of the campaign, both candidates have called for relief to be given to homeowners, rather than corporations. This kind of populism goes far with voters, with Obama’s agenda clearly making the biggest impression. However, the idea of the government purchasing bad mortgages, or stopping banks from foreclosing on loans smacks of a government attempt to control the market, rather than to regulate it. However you interpret the meanings of these proposals, they will allow the new president to take the side of the homeowners, rather than the much-maligned bankers.

Ironically, the first real step to provide assistance to homeowners since early last year, when the Hope Now Alliance and Project Lifeline4 were announced, comes from those same corporations who have born the brunt of public criticism. The Wall Street Journal reported today that several major banks will be using some of the government cash they have sat on for the past few weeks for homeowner relief. The article reports that JP Morgan Chase will begin a massive program to shore up its mortgage portfolio by modifying, rather than foreclosing on loans made to borrowers who are unable to keep up with payments. Other banks are likely to follow suit. Bank of America is mentioned in the article as having two loan modification programs ready to be implemented, largely as a result of their purchase of CountryWide Financial.

(more…)

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A guest post from Constantine von Hoffman, veteran business journalist and author of the blog CollateralDamage.biz, a humorous look at marketing, business and his dog.

Popular opinion has it that Barack Obama won because he took some red states away from John McCain. Nonsense. Obama won all the red states. And McCain won all the black states. But this has nothing to do with that stupid red state/blue state dichotomy. This is about the much more tangible difference between red (ink) states vs. black (ink) states.

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Hedge funds are continuing to lose big bucks, suspending redemptions and, in a number of cases, liquidating. They all cite difficult market conditions. Which markets, though? Derivatives have been under the radar lately, yet there have been many events that would force mark-to-market accounting. Recent changes in SEC rules allow banks to defer mark-to-market and keep off balance sheet certain assets. Hedge funds too?

From the Nobel Prize-winning asset managers who brought us Long Term Capital Management, Bloomberg today reports that Platinum Grove Asset Management LP has suspended investor withdrawals from its largest fund after a 29% loss in the first half of October. That’s right, 29% in 15 days. The year to date is higher.

“The decline left Platinum Grove Contingent Master fund with a 38% loss this year through Oct. 15. Funds employing a similar approach of exploiting differences in the value of related securities fell 14 percent last month and 30 percent this year to date,” according to Hedge Fund Research. “Hedge funds are reeling from the worst financial crisis since the Great Depression, losing an average of 20 percent this year. A surge of investor redemptions forced firms such as Blue Mountain Capital Management LLC and Deephaven Capital Management LLC to freeze funds to stem the tide of withdrawals.”

Hedge funds are getting it in both directions. Investors want their money back and prime brokers are demanding higher margin requirements. Platinum is only one more of dozens of funds that have suspended withdrawals rather than sell assets at fire-sale prices, the reason given by the hedge funds themselves. Hedge funds are down 20% this year on average, as measured by the HFRX Global Index.

I thought hedge funds were supposed to make money regardless of how the market did. As Mish points out, “to collectively be down 20%, they had to have been making one-sided bullish bets on something. Where’s the hedge?” Twenty percent or more down is a lot of value lost. On the surface, there are plenty of stocks down big for the year. However, derivatives seem to be under the radar again. We know that hedge funds are big players in derivatives, which, as we also know, are worthless hard to price. Wonder how that’s going to be dealt with for year-end bonus calculations.

Anecdotal reports of 401k participants not being able to switch out of stock and bond funds—especially PIMCO— into money-market funds are increasing. Sounds like a lot of losses going into year end.

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Source [blownmortgage]

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A guest post from Frank Shump. Frank is a veteran from the financial services industry, and currently authors a blog called Thefinancecastle.com, which documents his thoughts on money-mattersand his adventures in self employment.

In the midst of the widening housing crisis, there’s been quite a lot of criticism from voters aimed at the recent efforts by the government to bail out financial institutions that are being dragged down by souring mortgage securities. After all, if the heart of the crisis lies in rising foreclosures, shouldn’t more efforts be focused on helping the homeowners themselves? Shouldn’t there be more efforts relating to modifying existing mortgages so consumers can stay in their homes? Efforts on both sides of the fence from both the government and the private sector have begun to take up the call.

The Bush administration, for it’s part, is supposedly working on a new homeowner bailout plan, Details on the plan are still few and far between, but it’ll likely involve incentivizing financial firms to change loan terms in exchange for having part of the loan guaranteed by the U.S. government. I went into further details in a previous post.

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