House Passes Obama Stimulus Package
Washington Post
January 29, 2009

The House approved an $819 billion stimulus package on a near party-line vote yesterday, a plan breathtaking in size and scope that President Obama hopes to make the cornerstone of his efforts to resuscitate the staggering economy.  But Obama’s personal salesmanship effort failed to secure a single Republican supporter for the spending plan, which passed on a 244 to 188 vote.

Fed Adopts Program To Stem Foreclosures
Washington Post
January 28, 2009

With its bailouts of Bear Stearns and American International Group, the Federal Reserve took a vast portfolio of mortgages onto its books. Now, it is trying to use its control of billions of dollars worth of home loans to help prevent foreclosures.  The Fed will seek to renegotiate mortgages it owns that might otherwise enter foreclosure, Chairman Ben S. Bernanke told congressional leaders in a letter yesterday.

As Freezes Expire, Foreclosures to Soar
American Banker
January 29, 2009

Home foreclosures, bottled up for the last few months, could soon explode. A moratorium that Fannie Mae and Freddie Mac put on foreclosure sales and evictions by their servicers in late November is scheduled to expire next week. Freddie had 5,000 to 6,000 loans headed for foreclosure before the freeze, though some might receive streamlined modifications. Fannie said it had contacted more than 10,000 borrowers and renters before the freeze about the possibility of a property heading for foreclosure.

Almost Half of Americans Want to Live Somewhere Else
USA TODAY
January 29, 2009

Whether they favor cities, suburbs or the countryside, almost half of Americans wish they lived somewhere else, according to a new Pew Research Center survey released today. City dwellers are more likely to dream of living somewhere else, and men in rural areas are far happier living there than women. Denver, San Diego and Seattle are the top picks of the 30 largest metropolitan areas.

Look at Case-Shiller Numbers, by Metro Area
Wall Street Journal
January 27, 2009

The S&P/Case-Shiller home-price index, a closely watched gauge of U.S. home prices, showed accelerating price declines.

Obstacles Delay REO Sales
Inman News
January 27, 2009

This is the second installment in a two-part series that focuses on the waves of foreclosed, bank-owned properties (also known as real estate-owned properties or REOs) that will hit the for-sale market, and the plans and pitfalls for reducing this inventory. Part One ran yesterday.

Making Foreclosures More Orderly
New York Times
January 27, 2009

At the center of the financial maelstrom are millions of homes at risk of foreclosure. These homes are the assets that lie behind the toxic securities that have poisoned the balance sheets of the banking sector. What can be done about all those foreclosures?
That’s it for today.

Bankruptcy Fix Will Cut Foreclosures 20 Percent
Reuters
January 27, 2009

A plan to let bankruptcy judges erase some mortgage debt will help lower foreclosures by 20 percent and stabilize the troubled housing market, a Credit Suisse report concluded on Monday.

The Specter of Nationalization
The Economist
January 27, 2009

There are ways for governments to revitalize banks without taking them over.

A number of stories in today’s headlines focus on banks. In particular, some address the $700 billion in TARP funds being allocated nationwide as part of the so-called bailout which were originally intended to help stimulate the U.S. economy by encouraging banks to start making loans to would-be home buyers and current owners seeking to refinance out of their current toxic loans.

As the stories below illustrate, the Obama Administration first has to figure out where the first half of those funds have gone. So, in the meantime some small banks are stepping in where the big boys won’t tread to answer the call of American homeowners who are asking them to "Show me the money!."

TARP Watchdog Will Ask Where Money Is
Zachary A. Goldfarb, Washington Post

The Treasury Department's top watchdog for the financial bailout says it's practically impossible at the moment to tell where all the money has gone and is preparing to ask every bank and company that's received a dollar from the $700 billion financial rescue to detail how the funds were used.

Wall Street Voodoo
Paul Krugman, The Wall Street Journal

Old-fashioned voodoo economics — the belief in tax-cut magic — has been banished from civilized discourse. The supply-side cult has shrunk to the point that it contains only cranks, charlatans, and Republicans.

Delays in Bank Aid Spur Frustration
David Cho and Lori Montgomery, Washington Post

A massive backlog of bank applications for emergency federal aid has provoked widespread frustration over how the Treasury Department is allocating rescue funds and raised suspicions among executives that political connections are playing a role, industry officials and regulators say.

By Switching Their Charters, Banks Skirt Supervision
Binyamin Appelbaum, Washington Post

At least 30 banks since 2000 have escaped federal regulatory action by walking away from their federal regulators and moving under state supervision, taking advantage of a long-standing system that allows banks to choose between federal and state oversight, according to a Washington Post review of government records.

New refinance boomlet may lift economy, a bit
Mark Trumbull, Christian Science Monitor

Record low mortgage rates aren’t proving to be an easy fix for the troubled US housing market, but they are providing a measure of much-needed stimulus to the economy.

Small Banks Move Into Mortgage Market as JPMorgan Fears to Lend
Dan Levy and Ari Levy, Bloomberg

Matthew Stubbs said the mortgage choice was easy when he bought his Seattle dream home: Pay less than 6 percent to locally based HomeStreet Bank, or a percentage point higher and $3,400 extra in fees to Wells Fargo & Co.

And here’s a couple of related stories…

Pelosi Backs Letting Courts Modify Troubled Mortgages
Renae Merle, Washington Post

House Speaker Nancy Pelosi yesterday gave her support to legislation that would allow bankruptcy judges to modify troubled mortgages, saying it is a "very high priority and should be passed as soon as possible."

Fed Likely to Keep Focus on Rates, Loans
Jon Hilsenrath, The Wall Street Journal

Federal Reserve officials are likely next week to stick closely to their approach for handling the financial crisis -- near-zero interest rates and a focus on special lending programs -- despite internal rifts about some of their tactics.

As crowds enthusiastically cheered on the new Obama Administration on Capitol Hill, investors jeered the financial mess on Wall Street, plunging bank stocks to historic lows and unnerving investors as talk spread that the government could nationalize banks and wipe out shareholders in the process.

The sell-off, triggered by anxiety in the financial sector and its effect on the overall economy, underscored the widespread fears and uncertainty that permeates the financial markets.

Consider just one of Wall Street’s financial titans: JPMorgan Chase & Co. Last week, Chase (which bought Washington Mutual last year) expanded a mortgage modification program to include investor-owned mortgages serviced by Chase. Running a series of full-page advertisements in major daily newspapers dubbed “The Way Forward,” Chase is urging investor-owned borrowers to modify their defaulting Chase loans. The move expands the program from homeowner mortgages to investor-owned mortgages.

Since October, Chase’s foreclosure prevention program has delayed foreclosure filings on $22 billion Chase-owned mortgages and has assisted 80,000 homeowners with mortgage modification, according to a Chase news release. The company claims it has prevented 330,000 foreclosures since 2007.

The problem, however, with relief programs like Chase’s is that “underwater” borrowers rarely surface for help. And when they do reach out, lenders are frequently unprepared to help upside down borrowers.

What are your thoughts on mortgage modification programs like Chase’s? Do you think they work? Or, are loan modification programs a grand game of financial roulette?

As Expected, Canada Cuts Key Rate to 1%
Reuters

OTTAWA (Reuters) — The Bank of Canada, as expected, cut its key interest rate on Tuesday by a half a percentage point to a 50-year low of 1 percent, and predicted a period of falling prices as an economic recession takes hold.

Wall Street Falls on Bank Worries
Jack Healy, New York Times

Tuesday may have marked a historic moment in American history, but it was just another down day on Wall Street.
As millions of Americans converged on the National Mall in Washington for the inauguration of Barack Obama as president, stock markets slid in New York, a reminder of the persistent troubles in the financial markets.

Obama’s Bailout Challenge
Andrew Ross Sorkin, New York Times

Another week, another bailout.

Governments in several countries are suddenly scrambling to deliver a second round of financial support to their teetering banking systems, after a first wave handed out at the height of the financial crisis failed miserably in its mission of getting credit flowing again.

Federal Home Loan Banks may have to borrow from U.S.
Binyamin Appelbaum, Los Angeles Times

Washington -- The mortgage crisis is seeping into one of the last dry corners of the mortgage business, the regional network of Federal Home Loan Banks, which provide U.S. banks with hundreds of billions of dollars in low-cost funding to support lending to home buyers.