Gloom Grips Consumers, and It May Be Home Prices
By BINYAMIN APPELBAUM
October 18, 2011
ORLANDO, Fla. — Ernest Markey lost his stone-cutting business in 2009. He then sold his home for half a million dollars less than its value at the peak of the housing bubble and moved with his wife, Marie, to a smaller home in a less affluent suburb. They gave up two new cars and bought one. Used.
The Markeys have since patched together a semblance of their old life, opening a new stone-cutting shop. But they do not expect that they will ever recover financially from the loss of equity in their old home.
“For two years I kept thinking that things would get better,” Mr. Markey, 51, said as he stood in his empty store on a recent weekday. “Now I think the future doesn’t look so good.”
The United States has a confidence problem: a nation long defined by irrational exuberance has turned gloomy about tomorrow. Consumers are holding back, businesses are suffering and the economy is barely growing.
California Dems blast Obama on Foreclosure Crisis
Washington -- California House Democrats ripped the Obama administration Wednesday for inaction on home foreclosures, saying the president could pass all the jobs bills he wants but that won't fix the economy until the housing sector recovers.
Led by Rep. Zoe Lofgren of San Jose, who chairs the state's Democratic House delegation, nearly all the state's 32 Democrats signed a letter to President Obama urging him to take immediate administrative actions to make it easier for homeowners to take advantage of rock-bottom interest rates, among other measures.
Delegation members said the administration should push banks to reduce the principal owed by people whose homes are worth less than the value of their mortgages, create a "homeowners' bill of rights" to streamline mortgage modifications and end a requirement that homeowners become delinquent before they qualify for a loan modification, among other things.
Lofgren said the mortgage crisis is "crippling" California, which has the second-highest foreclosure rate in the nation, behind Nevada. Oakland and the San Joaquin Valley have been hit especially hard by the collapse in housing prices, which has eviscerated consumer wealth and spending power. Economists of all stripes pin much of the blame for the current economic stagnation on the continuing depression in the housing market.
Freddie Mac's loan review process is criticized in watchdog report.
WASHINGTON (CNNMoney) -- The federal government's mortgage finance regulatory agency did a poor job of making sure taxpayers got top dollar in selling $2.87 billion in bad mortgages back to Bank of America last year, an inspector general's report said Tuesday.
The report focused on the role of the Federal Housing Finance Agency, which is the regulator as well as the conservator tasked with overseeing the troubled government-owned housing mortgage backers Fannie Mae and Freddie Mac.
In late 2010, after the worst of the financial crisis, the agency's director decided to sell back to Bank of America a large number of bad mortgages and mortgage- backed securities. Selling back bad mortgages -- in cases when the homeowner didn't actually have the income stated on the loan or if the house's value was inflated compared to the paperwork -- is the only line of defense against bad loans for Fannie Mae and Freddie Mac, the report said.
In the buyback deal, Bank of America (BAC, Fortune 500) paid $1.35 billion to Freddie Mac and $1.52 billion to Fannie Mae for a pool of mortgages. In the case of Freddie Mac, Bank of America was repurchasing some 787,000 loans from mortgage originator Countrywide Financial, which was bought by Bank of America in 2008.