Well, the three big stories this week revolve around the the government and the steps it's taking to solve the mortgage crisis. Looking at these efforts as a whole, it pains me to say that there may be no stopping this recession train.
The wave got started earlier this week when the Bush Administration announced it's plan to freeze interest rates. The hope was to decrease the number of foreclosures expected over the next two years, and help to steady the economy. While some home owners will be "saved," the percentage is too small to make a real impact. And, while I recall many industry professionals calling for a rate freeze, it seems as though most of the feedback to the new plan is negative (check out some of the opinionated articles below). As I mentioned before, despite the results, I think it was at least a step in the right direction. Probably would have been better if Bush used the right 1-800 number when he announced the plan to the country, but hey, you can't have it all.
So, then Fannie and Freddie announce a new fee and surcharge structure to be associated with the loans that they buy. And apparently, even though they don't take effect until March 2008, some lenders are already charging the fees (have you been hit with any yet?). Overall, this seems like a step in the wrong direction to me. For one, I don't see how this can bring any peace to an industry that is already picking sides and playing the blame game. Plus, how can we expect to generate more home sales - and avoid a recession - by asking already struggling consumers to pay even more? I would consider this strike two.
And then, as most were expecting, the Fed cuts rates. Good news right? Well, investors hoping for a larger cut then quarter-point were not re-assured and started bailing. The Dow fell over three hundred points and the rest of the markets fell even more.
So where does this leave us? Should we just let it bottom out? In the short term investors will lose millions, people will lose their homes, businesses will close and the US economy will take a hit. It sounds bad, but it's possible that this may actually kick-start the recovery. The other option is try and continue band-aiding the problem, hoping that the combined efforts at some point resolve the situation.
Have a great week!
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Sean Fenlon |
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| This will be my first “Predictions” post, but I suspect I am as confident as a veteran prediction-blogger may be.
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Reuters |
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| The Federal Reserve said on Tuesday it will hold a meeting next week to propose changes to mortgage regulations in an attempt to address unfair and deceptive lending practices.
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CNBC |
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| Fannie Mae and Freddie Mac, the two government sponsored entities created to promote homeownership, are slapping new surcharges on loans they either buy for their portfolios or for which they provide guarantees.
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SignOnSandDiego |
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| The White House ambulance belatedly arrived at the scene of the subprime mortgage crash last week, with President Bush and some banking industry paramedics trying to stanch the bleeding of the battered housing market.
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WashingtonPost |
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| Hank Paulson ranks among the Bush administration's many disappointments. When he left the top job at Goldman Sachs to take the helm at Treasury, Washington was abuzz: This man was a problem-solver; this man had clout; the president had practically begged him to accept the job, and Mr. Fix-It hadn't acquiesced just to warm a seat around the Cabinet table.
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TheWallStreetJournal |
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| The home has long been the bedrock asset of most American families. Now, its value has become the biggest question mark hanging over the global economy and financial system.
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TheStreet |
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| The American economy has pulled through some tough times before. But until now, we were almost always pulling together -- even though only some of our citizens were directly affected by recession or economic transition.
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TheWallStreetJournal |
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| An examination of the current U.S. mortgage crisis shows that it is comparable to some of the biggest financial disasters of the past half-century. Here are excerpts from interviews about the mortgage crisis with George Soros, Paul Volcker, William Seidman and Robert Shiller.
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SFGate |
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| New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.
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AmericanChronicle |
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| The mortgage rescue plan to help subprime borrowers by President George W. Bush assures that the U.S. economy will fall into a deepening recession in 2008, perhaps even a depression, according to an in-depth analysis conducted by Housing Predictor.
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HoweStreet |
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| A number of people have all emailed me with a sensational but preposterous "Mortgage Meltdown" article by Sean Olender about the interest rate freeze.
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SeaCoastOnline |
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| If the subprime mortgage meltdown continues to erode the country's economic health one failed mortgage at a time, many policymakers, politicians and citizens may well look back at the past week and wonder why we couldn't have done better.
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Ohio |
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| An Ohio court ruling that a bank couldn't foreclose on a home because it didn't prove it owned the mortgage was the latest in a series of similar rulings that could slow the tide of foreclosures in a heavily impacted state.
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WallStreetJournal |
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| Barney Frank, the Massachusetts liberal known for his sharp tongue, was widely expected to be a scourge of business in the new Democratic Congress.
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TheSentinel |
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| Pennsylvania's U.S. senators are holding a hearing on a mortgage scam that left more than 800 homeowners owing millions of dollars more than they thought they owed.
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PennLive |
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| Less attention has been lavished on a bunch of homeowners in Lancaster and Berks counties who are in a mortgage crisis of their own after apparently being defrauded in a mortgage-based ponzi scheme.
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StarTribune |
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| Two suspects in the growing number of Twin Cities mortgage fraud investigations have been arrested on suspicion of racketeering and theft by swindle.
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