Housing defaults soar in Palm Beach County, Treasure Coast

Jeff Ostrowski, Palm Beach Post

Foreclosure activity skyrocketed in Palm Beach County and the Treasure Coast in February, fanning fears that the housing market still faces strong headwinds.

About 4,490 homes in Palm Beach County received a foreclosure filing during the month, up 63 percent from January to February and 68 percent from a year ago, RealtyTrac, an information provider in Irvine, Calif., said today.

Martin County foreclosures were up 52 percent from the previous month and 13 percent from a year ago, while St. Lucie County defaults jumped 69 percent from January and 39 percent since February 2009.

Statewide, foreclosures rose 15 percent from January, while foreclosures nationally dipped 2 percent, RealtyTrac said.

For investors like Myles Minns, head of Continental Properties in West Palm Beach, the wave of defaults creates a “land of opportunity.” After snapping up five foreclosures a week, Minns said he’s taking a breather.

“We had to slow down, because we made offers not thinking people would accept them, and they accepted them,” Minns said.

He plans to fix most of the properties and resell or rent them.

Minns said he has noticed an increase in foreclosures in Palm Beach County, a trend he attributes in part to lenders growing more assertive about taking properties.

Read more here:  http://www.palmbeachpost.com/money/real-estate/foreclosures-housing-defaults-soar-in-pbc-tcoast-340709.html

Way Too Big to Save

Simon Johnson, Huffington Post

Listening to US officials, talking to legal experts, and waiting for an intense Senate debate on financial reform to begin, you can easily form the impression that “too big to fail” adequately describes our most serious future systemic banking problems. It does not.

In September 2008, the large banks and quasi-banks at the heart of our financial system faced failure — and they were saved in the most immediate sense through actions taken by the Federal Reserve, but TARP (passed by Congress and run Treasury) also played a significant supporting role.

The Bush administration threw a small fiscal stimulus into the mix in early 2008, hoping to stave off recession; the Obama administration committed a much larger package at the start of 2009, aiming to prevent anything like a Second Great Depression. This fiscal policy response was in direct reaction to problems caused by the overextension and near failure of the financial system

Do not make the mistake — for example of Secretary Geithner, talking to the New Yorker — of thinking (or implying) that “saving the financial system” did not involve spending a lot of taxpayer money to support the real economy. Remember that if the economy crashes, asset prices fall, and banks’ problems become even more severe.

And try to avoid three further mistakes that are currently common.

Read more hear: http://www.huffingtonpost.com/simon-johnson/way-too-big-to-save_b_491325.html

Smart Banks With Dumb Customers Don’t Exist

March 8 (Bloomberg) — Republicans and Democrats in Congress have been squabbling about whether the new financial consumer-protection agency should be housed within the Federal Reserve or as part of an independent body.

The new watchdog, wherever it goes, is the linchpin of the emerging financial-reform bill, and its premise is that greedy bankers exploiting dumb consumers essentially caused the credit crisis. Stop bankers from selling toxic mortgages and other harmful loans and we won’t have any more meltdowns.

Even though bankers were greedy, and many borrowers were naive, this is a simplistic way of viewing the financial crisis and one that misses its underlying cause. Since mortgage bankers make money from loans, it’s tempting to think of them as parasites that prey on customers. But there is no such thing as a smart bank with a dumb customer; if the loan turns sour, the banker was dumb, too. And in the mid-2000s, scads of them were.

Foreclosures by consumers heavily weighed on the economy, but what triggered the credit crunch was the failure (or near- failure) of the banks that issued (or acquired) the mortgages. In short, the root cause of the meltdown wasn’t that customers borrowed too much; it’s that banks lent too much.

This isn’t to deny that many subprime loans were exploitative, and that customers often didn’t understand repayment terms. Nor is it a bad idea to police banks, preventing them, for instance, from charging unreasonable fees.

Bank Self-Harm

Yet a sound economy needs healthy financial institutions. Rather than stop lenders from hurting consumers, the first priority should be to keep the banks from harming themselves. In the short run, solvency is often at odds with what consumers want (or with what they think they want). We should remember that for every mortgage customer that was hosed, others were willingly grabbing all the unsound mortgages they could get.

Before the bust, champions of the new consumer agency, such as Representative Barney Frank, were consistent advocates of more loans to subprime borrowers. That’s hardly surprising; it’s in the nature of folks to want more credit. As Warren Buffett once reminded a person in his employ, it’s the job of the banker to screen out loans with a low probability of repayment.

The aim of regulators should be to force banks to do what is in their own and society’s interests: to practice sound banking. No consumer watchdog can do this because systemic risk aggregates at the level of the lender. The surest solution is to limit the leverage of financial institutions. Regulators have already moved against dicey products such as no-documentation mortgages (“liar loans”), and ones in which borrowers get 100 percent financing. And well they should.

Read more here: http://www.bloomberg.com/apps/news?pid=20601039&sid=a2y1wcOYyFQc

Home-Saving Loans Afoot

James Hagerty, Wall Street Journal

Pressure is growing on U.S. banks to ease terms for distressed homeowners on home-equity loans and other second-lien mortgages.

Rep. Barney Frank, chairman of the House Financial Services Committee, last week sent a letter to the four biggest U.S. banks demanding “immediate steps to write down second mortgages.” The Massachusetts Democrat sent the letter to the chief executive officers of Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. Meanwhile, the Obama administration is preparing to launch long-planned initiatives aimed at addressing these obstacles.

Rep. Frank said banks’ reluctance to write down second mortgages is blocking efforts to reduce the first-lien mortgage balances of many borrowers who owe far more on their loans than the current values of their homes. Because such “underwater” borrowers often feel little incentive to keep paying, “homeowners are increasingly deciding to walk away and thus foreclosures continue to mount,” he said.

Read more here: http://online.wsj.com/article/SB10001424052748704706304575107770265900644.html?mod=wsj_share_twitter

Next Page »