Foreclosures mark pace of U.S. crisis, Every 13 seconds in America

[EddyLaing]

Foreclosures mark pace of enduring U.S. housing crisis

Thu Oct 08 15:18:09 UTC 2009
By Tom Brown

MIAMI (Reuters) - Every 13 seconds in America, there is another foreclosure filing.

That's the rhythm of a crisis that threatens to choke off hopes for a recovery in the U.S. housing market as it destroys hundreds of billions of dollars in property values a year.

There are more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending, a nonpartisan watchdog group based in Durham, North Carolina. With nearly two million already this year, the flood of foreclosures shows no sign of abating any time soon.

If anything, the country's worst housing downturn since record-keeping began in the late 19th century may only get worse since foreclosures, which started with subprime borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment.

In congressional testimony last month Michael Barr, the Treasury Department's assistant secretary for financial institutions, said more than 6 million families could face foreclosure over the next three years.

"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Barr said.

A September report by a foreclosure task force appointed by Florida's Supreme Court pointed to a shift in the root cause of foreclosures: "People are no longer defaulting simply because of a change in the payment structure of their loan. They are defaulting because of lost jobs or reduced hours or pay."

Florida had the nation's highest rate of homes -- 23 percent -- that were either in foreclosure or delinquent on mortgage payments in the second quarter, and the report said "the latest news for Florida is horrifying."

A recent pickup in sales and home prices in some regions has been heralded as a sign that the crisis in residential real estate may be close to bottoming out, after the steepest price decline since at least 1890.

But nearly half of recent sales have been attributed to foreclosures or "short sales" at bargain-basement prices.

Even as the U.S. economy seems to be recovering from its worst recession since the Great Depression, mortgage delinquencies continue to rise. And that adds risk to any relatively upbeat assessment, since foreclosures depress the value of nearby properties while eroding the net worth of homeowners and the tax base for communities nationwide.

The Center for Responsible Lending says foreclosures are on track to wipe out $502 billion in property values this year.

That spillover effect from foreclosures is one reason why Celia Chen of Moody's Economy.com says nationwide home prices won't regain the peak levels they reached in 2006 until 2020.

In states hardest-hit by the housing bust, like Florida and California, the rebound will take until 2030, Chen predicted.

"The default rates, the delinquency rates, are still rising," Chen told Reuters. "Rising joblessness combined with a large degree of negative equity are going to cause foreclosures to increase," she added.

Anyone doubting that the recovery in U.S. real estate prices will be long and hard should take a look at Japan, Chen said. Prices there are still off about 50 percent from the peak they hit 15 years ago.

Jay Brinkmann, chief economist with the Mortgage Bankers Association, said foreclosures are expected to peak in the second half of 2010. But that forecast is based on a projection that unemployment will begin falling after topping out "barely in double digits by the middle of next year."

Last week the Labor Department reported the unemployment rate rose to a 26-year high of 9.8 percent in September, in the latest evidence that a turnaround in the jobs market is the missing link in the economic recovery.

Since the start of the recession, the number of unemployed people has soared 7.6 million to 15.1 million. In Florida, unemployment is hovering at a nearly 40-year high of 10.7 percent, led by a steep decline in construction jobs.

MODIFICATIONS AND "MONSTERS"

Mortgage modifications, the centerpiece of a plan unveiled by the Obama administration in March to help as many as 9 million struggling borrowers hold onto their homes, have gotten off to a sluggish start.

The Office of the Comptroller of the Currency, which regulates U.S. banks, said in a September 30 report that banks and loan services stepped up efforts to help distressed homeowners in the second quarter, more than tripling the loan modifications that reduced principal.

"This trend represents a significant shift from earlier quarters, when the vast majority of loan modifications either did not change monthly payments or increased them," it said.

Only a relatively small number of homeowners have seen financial relief from so-called "loan workouts" so far, however, and government officials acknowledge that far more is needed to reverse the national tide of foreclosures.

Help would be more than welcome in areas like Miami Gardens where there is a pervasive sense of anger about banks and the blight caused by foreclosures in a city that once boasted one of the highest home-ownership rates in the country.

A predominantly African-American community of 111,000 people, just north of Miami, it now has a 13 percent foreclosure rate -- the second highest in Florida -- and a glut of shuttered or boarded-up homes.

"The banks were bailed out first. We all assumed that they were going to turn around and help other people but that didn't happen," said Ruby Milligan, 61, a teacher who took early retirement after suffering a mild stroke several years ago.

She received a foreclosure notice from Deutsche Bank in August last year, but still lives in her Miami Gardens home, fearing a knock on the door with an eviction order any time.

Her retiree income is considered insufficient to qualify her for any modification of the adjustable-rate home-equity loan that she took out when the property was worth far more than it is today, she said.

"I feel that the banks should write these mortgages down," Milligan said. "They wrote these bad mortgages, they created these monsters."

One way of easing the crisis would be so-called "cramdowns," a measure giving bankruptcy judges authorization to write down the principal on homeowners' mortgages.

A similar measure helped curtail family farm foreclosures in the 1980s, but Representative Brad Miller, a North Carolina Democrat, said the banking lobby killed it when it came up for approval by Congress earlier this year.

"We fought that fight before and lost it," Miller said. "The industry will continue to oppose it."

[EddyLaing]

Nine U.S. banks seized in largest one-day haul

Sat Oct 31 09:44:11 UTC 2009
By Sam Mircovich and Edwin Chan

LOS ANGELES (Reuters) - U.S. authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation's banking industry are being crippled by bad loans.

The move brought the total number of failed banks in 2009 to 115 -- their highest annual level since 1992 -- with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.

The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.

U.S. Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4 billion in assets and $15.4 billion of deposits.

Visibly worried employees lined up to file into Cal National's head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers' fate explained to them, regulators said.

"We're getting ready to turn everything over to U.S. Bank," said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which helped supervise the transfer of FBOP's assets. "They will continue to operate as normal in the interim," she added, referring to lenders acquired from FBOP.

U.S. Bancorp -- which has been buying up distressed assets this year -- is picking up the lenders once owned by FBOP, a private Illinois group with over $18 billion in assets that owned banks in Texas, Illinois, Arizona and California.

Cal National is FBOP's largest bank by branches. Others that will now go under the U.S. Bancorp umbrella included BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, and the Community Bank of Lemont.

"This transaction is consistent with the growth strategy that we have outlined many times in the past, which includes enhancing our existing franchise through low-risk, in-market acquisitions," said Rick Hartnack, vice chairman of consumer banking for U.S. Bancorp.

"This transaction adds scale to our current California, Illinois and Arizona footprints."

NEXT BIG HEADACHE

In the "near future," all nine lenders' branches will be re-branded U.S. Bank, which is the California-focused unit of U.S. Bancorp's that operates a network of more than 770 branches across Illinois, Arizona and California.

U.S. Bancorp did not specify what would happen to the new employees it inherits.

Cal National operates 68 branches across Southern California with more than $7 billion in assets. As of June 30, the lender maintained five times as much foreclosed property on its books and twice as many non-current loans as it had a year earlier, according to the Los Angeles Times, which first reported news of its evening takeover on Friday.

Cal National lost about $500 million on heavy investments in Fannie Mae and Freddie Mac preferred shares, the newspaper added, referring to securities rendered nearly worthless by the government takeover of the mortgage firms last year.

According to FDIC data, Cal National was the fourth biggest bank failure this year in terms of assets, just edging out Corus Bank, seized Sept 11 with a flat $7 billion of assets.

A bank official who answered the main number at Cal National's headquarters said they could not talk at the time.

Banks are still cleaning up their balance sheets from the recent credit boom that fueled banks' appetite to extend loans, many with poor underwriting and triggers that caused borrowers' payments to spike to unaffordable levels.

More lenders are expected to go under this year as the industry tries to get a handle on commercial real estate loans that will continue to worsen, as more strip malls go vacant and residential developments stall.

Banks held about $1.7 trillion in commercial real estate loans at the end of September, according to Federal Reserve data, or about 15 percent of their total assets. But to the extent these loans weaken, small banks are likely to be hit the hardest because larger banks were better diversified.

Banks that analysts say could risk big losses include Salt Lake City's Zions Bancorp, Columbus, Georgia's Synovus Financial Corp and Dallas-based Comerica Inc.

Before FBOP, U.S. Bancorp bought Downey Savings of Newport Beach and PFF Bank & Trust of Pomona when those thrifts failed last November, the newspaper said. Just this month, U.S. Bancorp bought 20 Nevada branches from BB&T Corp, which had acquired them as part of its deal to buy Colonial BancGroup Inc, it added.

[EddyLaing]

U.S. jobless rate surges to 10.2 percent

Fri Nov 6, 2009 4:45pm EST
By Lucia Mutikani

WASHINGTON (Reuters) - The U.S. jobless rate unexpectedly jumped to 10.2 percent last month, a 26-1/2-year high, adding to pressure on the Obama administration to do more to tackle unemployment even as signs of recovery mount.

The Labor Department said on Friday that employers cut 190,000 jobs in October, more than the 175,000 markets had expected but fewer than the 219,000 jobs lost in September.

Job losses for August and September were revised to show 91,000 fewer jobs were lost than previously reported, taking some of the sting out of the report.

While the revisions hinted at some improvement, economists had expected the jobless rate to rise to 9.9 percent from September's 9.8 percent. A wider gauge of labor-market slack that includes unemployed Americans who have given up looking for work hit a record 17.5 percent.

Speaking at the White House, President Barack Obama said the administration was considering infrastructure investments and business tax cuts to aid the economy's recovery.

"I can promise you that I won't let up until the Americans who want to find work can find work and all Americans can earn enough to raise their families and keep their businesses open," he said. For a graphic of the jobless rate over time, please see: here

Stocks on Wall Street ended higher after initially falling as investors looked past the jump in the jobless rate and focused instead on the moderation in payroll losses.

U.S. Treasury debt prices rose as traders saw the data as supporting a prolonged period of low interest rates.

"Unfortunately, the problem is becoming deeper and more protracted," Mohamed El-Erian, chief executive of bond giant Pacific Investment Management Co (PIMCO) told Reuters.

"It's not just the increase in the headline number," he said. "It's also about the longer-term nature of unemployment, the increase in underemployment and the prospect for only a very gradual recovery," he said.

While Obama sees job creation as his top priority, the scope for further steps to boost the economy is limited by record budget deficits.

Rising unemployment could pose problems for the Democrats who control Congress as they head into elections in November 2010. This week, Republicans wrested control of two state governorships away from Democrats in races where the weak economy figured prominently.

"President Obama promised jobs during his campaign for president and the elections in Virginia and New Jersey on Tuesday were a clear referendum on his failure to deliver on this promise," Republican National Committee Chairman Michael Steele said in a statement reacting to the jobs report.

ECONOMY GROWING, LABOR MARKET LAGS

The U.S. economy grew at a 3.5 percent annual rate in the third quarter, likely ending the most painful recession [n.b. !!!] in 70 years, but the jobs data suggested employers are wary of the prospects for a strong, sustained recovery.

A report from the Federal Reserve showed households again cut their debt rather than spend in September, pushing down total consumer credit for an eighth straight month. That is the longest downward streak since 1943.

The U.S. central bank on Wednesday held overnight interest rates close to zero and said it expected to keep them low for an "extended period."

Short-term interest rate futures prices showed the implied chances of a rate hike by mid-2010 slid to about 66 percent on Friday from 84 percent late on Thursday.

"I don't know how in the heck the Fed could justify tightening policy with the unemployment rate over 10 percent unless we have an imminent inflation danger," said Keith Hembre, chief economist at First American Funds in Minneapolis.

The U.S. Labor Department conducts two separate surveys. Economists generally place more faith in the survey of employers, which found the loss of 190,000 jobs.

The unemployment rate, however, is based on a smaller household survey. That survey showed 589,000 jobs were lost, while few Americans left the labor force, leading to the big jump in the jobless rate.

Employer payrolls have declined for 22 consecutive months now and 7.3 million people have lost their jobs since December 2007, when the recession started. In October, 35.6 percent of the unemployed had been out of work for six months or more.

However, the pace of layoffs has slowed sharply from early this year.

Job losses in October were widespread across almost all sectors, with education and health services and professional and business services bucking the trend.

Manufacturing employment fell 61,000 last month, while construction industries payrolls dropped 62,000. The service-providing sector cut 61,000 workers.

Offering a glimmer of hope, temporary help jobs increased by 34,000. It was the biggest gain in temporary employment since the economy fell into recession and suggested companies needed extra hands even if they were not prepared to hire permanently.

The average workweek, which yields clues as to when firms will start hiring, was steady at 33 hours. Average hourly earnings rose to $18.72 from $18.67 in September.

A separate report from the Commerce Department showed wholesalers reduced their stocks of unsold goods for the 13th straight month in September. Economists expect a rebuilding of depleted inventories to help support recovery.

[EddyLaing]

Big California bank fails, has China branches

Sat Nov 07 16:53:19 UTC 2009

WASHINGTON (Reuters) - United Commercial Bank, a big San Francisco bank with branches in China, was closed by state regulators on Friday and its banking operations were acquired by East West Bancorp Inc, also active in both nations.

East West said the transaction made it the second-largest independent bank in California. Based in Pasadena, East West has 137 U.S. branches, including offices in New York, Atlanta, Boston and Seattle, and four in China.

United Commercial Bank, with assets of $11.2 billion, was the 120th U.S. bank to fail this year. Regulators closed four other banks on Friday, in Georgia, Michigan, Missouri and Minnesota. Failures already were the highest since 1992.

Banks are struggling to clean up their balance sheets as loans made during the credit boom continue to deteriorate. The FDIC has said the pace of failures will remain elevated through next year.

Last year 25 institutions were closed by regulators, compared to three in all of 2007.

Dominic Ng, chief executive of East West Bank, said the transaction was "a transformational event" that strengthened his bank's position. East West's assets increased to $19 billion, from $12.5 billion.

United Commercial Bank had 63 U.S. branches, a branch in Hong Kong and a subsidiary, UCB-China, in Shanghai. They will reopen as part of East West Bank.

China's Banking Regulatory Commission said UCB-China had ample liquidity and capital. It said the bank had total assets of 2.667 billion yuan. With liabilities of 1.754 billion yuan, its net assets were 913 million yuan, the regulator said in a statement posted on its website, www.cbrc.gov.cn.

The CBRC said it would work closely with the Federal Deposit Insurance Corp (FDIC) to maintain the stability of UCB-China.

It said it had conducted a preliminary examination of East West Bank's fitness to take over UCB-China and was now deliberating on the matter in accordance with Chinese laws.

Minsheng Banking Corp owns 9.9 percent of UCBH Holdings Inc, the parent of United Commercial Bank, which was the biggest lender in the United States serving the Chinese community.

Minsheng, China's first listed non-state lender, raised its stake from 4.9 percent in December 2008.

East West agreed to assume $10.2 billion of United Commercial Bank's assets and entered a loss-share transaction with the FDIC on approximately $7.7 billion of the assets. FDIC estimated the bank closure will cost its deposit insurance fund $1.4 billion.

The California Department of Financial Institutions cited inadequate capital and other weaknesses in closing United Commercial Bank. The agency said the bank had been unable to increase its capital reserves sufficiently.

OTHER CLOSURES

Also closed on Friday were:

-- United Security Bank, of Sparta, Georgia, with assets of $157 million. Ameris Bank, of Moultrie, Georgia, agreed to assume all the deposits. FDIC and Ameris Bank entered a share-loss transaction on approximately $123 million of United Security Bank's assets.

-- Home Federal Savings Bank, of Detroit, with $14.9 million in assets and $12.8 million in deposits. Liberty Bank and Trust Co, of New Orleans, agreed to assume all the deposits and essentially all of the assets.

-- Gateway Bank of St Louis, of St Louis, Missouri, with $27.7 million in assets. The bank's sole office will reopen on Saturday as a branch of Central Bank of Kansas City, Missouri, which assumed Gateway's assets.

-- Prosperan Bank, of Oakdale, Minnesota, which had assets of $199.5 million and deposits of $175.6 million. FDIC entered an agreement with Alerus Financial, National Association, of Grand Forks, North Dakota, to assume all of Prosperan's deposits. It purchased approximately $173.9 million of Prosperan's assets in a share-loss agreement with FDIC.

The FDIC insurance fund's balance went negative as of the end of the third quarter, but the FDIC is careful to emphasize that it has plenty of access to cash to operate and protect bank deposits. The agency has estimated the total cost of failures will reach $100 billion from 2009 through 2013.

The FDIC board will meet next week to finalize its proposal to have banks prepay three years of industry assessments, which would give the government cash to handle the rising tide of bank failures.

During the current financial crisis, Seattle-based lender Washington Mutual became the biggest bank to fail in U.S. history. It had $307 billion in assets when it was closed in September 2008 while suffering from losses from soured mortgages and liquidity problems.

[chegitz guevara]

On Wednesday, after a month of dicking around, the Senate finally passed an extension for unemployment. It provides an additional fourteen weeks of unemployment, with six more weeks for those in states with unemployment rates of over 9.5% (like my state). So, in the worst hit states, like Michigan, California, Florida, Oregon, etc., there is now a maximum of 99 weeks of unemployment "benefits."

In the month that the Senate has been playing games with this bill, two hundred thousand people have lost their benefits.

The House passed a similar bill to the Senate's on Thursday. Obama signed the bill on Friday.

So all's hunky dory, right? No. In the states that have commented so far, Florida (and Washington, iirc), it will take four to six weeks! to start getting unemployment checks to those whose benefits have expired. So not only did we have to wait a month for the politicians, now we have to wait at least another month for the bureaucrats! AND, the bill did not contain language to make the payments retroactive. So if you haven't been getting unemployment for a month or so, you're not gonna be getting a fat check to help you catch up on your bills. (And this personally affects me, as my wife's benefits ran out in September, and we are now a month behind on rent--I will finish paying off October's rent on Monday).

As for unemployment,

The "official" unemployment rate in the United States is 10.2%. That is the government's U-3 rate, which includes those collecting benefits who have looked for work (by any means) in the last four weeks.

The government also publishes a U-6 rate (in fact, rates U-1 through U-6). U-6 is what we lefties consider the true unemployment rate. This includes workers who've run out their benefits (but are still looking for work), marginally attached workers (the underemployed and looking for full time work), and discouraged workers (those who've given up). The national U-6 was 17.5% in October. More than one sixth of the labor pool cannot find adequate work. This rate is still slightly less than the 1983 recession (though that was much shorter in duration--also, U-6 was calculated differently in '83, the current rate would be 14% using the old calculation).

Individual states have different rates. The latest data for the states is from September. The state with the least unemployment is North Dakota, with a U-3 rate of 4.2% Michigan has a U-3 of 15.3%, it's the worst hit in the country. Florida is at 11%.

The Feds do not publish U-6 rates on a monthly bases for the individual states (they do it quarterly). To find the true unemployment rate you have to do a bit of math, and the math is based on a guess. So, you take take U-6/U-3 national rate and multiply it by the U-3 of the state. That gives us an approximate U-6 for Michigan of over 26%, California 21%, Florida, 19%.

It's going to get worse.

[EddyLaing]

Hunger in U.S. at a 14-Year High

November 17, 2009
New York Times
By JASON DePARLE

WASHINGTON -- The number of Americans who lived in households that lacked consistent access to adequate food soared last year, to 49 million, the highest since the government began tracking what it calls "food insecurity" 14 years ago, the Department of Agriculture reported Monday.

The increase, of 13 million Americans, was much larger than even the most pessimistic observers of hunger trends had expected and cast an alarming light on the daily hardships caused by the recession's punishing effect on jobs and wages.

About a third of these struggling households had what the researchers called "very low food security," meaning lack of money forced members to skip meals, cut portions or otherwise forgo food at some point in the year. The other two-thirds typically had enough to eat, but only by eating cheaper or less varied foods, relying on government aid like food stamps, or visiting food pantries and soup kitchens.

"These numbers are a wake-up call for the country," said Agriculture Secretary Tom Vilsack.

One figure that drew officials' attention was the number of households, 506,000, in which children faced "very low food security": up from 323,000 the previous year. President Obama, who has pledged to end childhood hunger by 2015, released a statement while traveling in Asia that called the finding "particularly troubling."

The ungainly phrase "food insecurity" stems from years of political and academic wrangling over how to measure adequate access to food. In the 1980s, when officials of the Reagan administration denied there was hunger in the United States, the Food Research and Action Center, a Washington advocacy group, began a survey that concluded otherwise. Over time, Congress had the Agriculture Department oversee a similar survey, which the Census Bureau administers.

Though researchers at the Agriculture Department do not use the word "hunger," Mr. Obama did. "Hunger rose significantly last year," he said.

Analysts said the main reason for the growth was the rise in the unemployment rate, to 7.2 percent at the end of 2008 from 4.9 percent a year earlier. And since it now stands at 10.2 percent, the survey might in fact understate the number of Americans struggling to get adequate food. (...)

[EddyLaing]

U.S. jobless claims unchanged last week

Thu Nov 19 14:05:36 UTC 2009

WASHINGTON (Reuters) - The number of U.S. workers filing new applications for jobless insurance was unchanged last week, according to government data on Thursday that showed the labor market was slowly healing. [!!]

Initial claims for state unemployment benefits were flat at a seasonally adjusted 505,000 in the week ended November 14, the Labor Department said. However, the four-week moving average of claims dropped to its lowest in almost a year.

New applications for aid have been grinding lower in recent weeks, indicating a slowdown in the pace of layoffs. Analysts polled by Reuters had forecast new claims edging up to 505,000 last week from a previously reported 502,000.

"It is headed in the right direction. They were a little high, but the continuing claims coming down and the initial claims staying down is additional evidence that the labor market is stabilizing," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

U.S. stock index futures held their losses after the data, while prices for government bonds nudged higher.

New jobless claims are being watched for signs of when job losses might bottom. Applications have dropped significantly from March's lofty levels, but remain above the 400,000 mark that analysts say would signal payrolls growth.

Analysts noted that last week's jobless claims data, which covers the survey period for the government's November non-farm payrolls report due on December 4, suggested job losses would be smaller that month than in October, when payrolls fell 190,000.

The U.S. economy resumed growth in the last quarter, driven largely by government stimulus, and there are fears that labor market distress could hamper the recovery.

The four-week moving average for new claims fell 6,500 to 514,000 last week, the lowest since November last year and declining for the 11th straight week.

The four-week moving average is considered a better gauge of underlying trends as it irons out week-to-week volatility.

The number of workers still collecting benefits after an initial week of aid dropped 39,000 to 5.61 million in the week ended November 7, the lowest since March. This was in line with market expectations for 5.60 million.

So-called continuing claims have fallen from a peak of 6.9 million in June and the drop is likely the combination of fewer new applications for unemployment aid and many jobless workers exhausting their benefits. [NB - and thus are left out of the statistical count. - EL]

[EddyLaing]

Jobless Rate Up in 29 States, Hitting Records in 4 of Them

By BLOOMBERG NEWS
November 21, 2009

[New York Times] California, Delaware, South Carolina and Florida registered record rates of unemployment in October, the Labor Department said Friday.

Joblessness rose in 29 states last month compared with 22 in September, the agency said in a monthly state breakdown. Michigan had the highest jobless rate at 15.1 percent, followed by Nevada at 13 percent and Rhode Island at 12.9 percent.

The unemployment rate fell in 13 states, including Massachusetts, where it declined to 8.9 percent from 9.3 percent; New Hampshire, with a drop to 6.8 percent from 7.2 percent; and West Virginia, which fell to 8.5 percent from 8.9 percent.

The number of states with at least 10 percent unemployment held at 14 last month, the Labor Department’s report showed. In the states reporting record jobless rates, California was at 12.5 percent; South Carolina, 12.1 percent; Florida, 11.2 percent; and Delaware at 8.7 percent. The District of Columbia also set a high with an 11.9 percent rate.