Free Republic

WASHINGTON (Reuters) – Treasury Secretary Timothy Geithner on Thursday told Republican lawmakers that they would shoulder the blame if the country got too close to defaulting on its debt and roiled markets worldwide by not approving a debt limit increase. In yet another warning about the perils of not allowing the U.S. to borrow more to fund already spending already approved by Congress, Geithner said it would be deeply irresponsible for lawmakers to use debt limit negotiations for political gains. Congress must agree to raise the $14.3 trillion debt ceiling or the legal amount that the country can borrow. But...

Federal Reserve Chairman Ben Bernanke on Friday ruled out a central bank bailout of state and local governments strapped with big municipal debt burdens, saying the Fed had limited legal authority to help and little will to use that authority. "We have no expectation or intention to get involved in state and local finance," Mr. Bernanke said in testimony before the Senate Budget Committee. The states, he said later, "should not expect loans from the Fed."The $2.9 trillion municipal-bond market has been stung recently by worries that some cash-strapped cities or states won't be able to pay off or roll...

Budget shortfalls and subsequent muni bond defaults "could derail the recovery, cost a million public employees their jobs and require another big bailout package that no one in Washington wants to talk about," ... Gov. Christie does an excellent job of framing this discussion by pointing out the huge disconnect between the benefits of public sector employees vs. their private-sector counterparts. "I think the general public thinks, 'I can't believe anybody gets a pension anymore. I've got a 401(k). It got killed in the stock market. I don't know what I'm gonna do for my retirement. I can't believe people...

The Legacy Of The Current Recession By Bill Bonner 09/29/10 Baltimore, Maryland – Epithet for a doomed economy…What will they say? How will they describe the ’00s and ’10s? Irish Prime Minister Brian Cowen was accused of being drunk when he gave a “croaky” radio interview two weeks ago. He denied it. But we’d be tempted to turn to the bottle too if we were in the fix Ireland is in. Ireland’s banks got into trouble. So the government threw them a lifeline…forgetting that the line was tied to its own neck. It guaranteed bank liabilities equal to four times...

Strategic Defaults Threaten All Major U.S. Housing Markets Keith Jurow 09/30/10 8:00 AM EST In my last article, we examined the shadow inventory to determine how many distressed properties (not on MLS) were almost certain to be forced onto the market in the not-to-distant future. For a sensible follow up, let's take an in-depth look at so-called "strategic defaults" to see how many homeowners are likely to "walk away" from their mortgage debt although they might be financially able to continue paying it. Strategic Default Defined According to Wikipedia, a strategic default is "the decision by a borrower to stop...

For years, America has bought into the idea that college degrees are not only badges of honor but must-have tickets that miraculously open doors for the recipients and practically guarantee lucrative careers. Of course, they were told, you’ll have to pay off your student loans, but consider this as “good” debt – investment debt that creates value – as opposed to “bad” debt,” i.e. those car payments or travel expenses. If that’s true, then we’re on the verge of suffocating from good debt these days. “From where I’m sitting, the buildup of the national student loan balance looks like a...

Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task. The for-profit industry has grown at an extreme and unusual rate, driven by easy access to government sponsored debt in the form of Title IV student loans, where the credit is guaranteed by the government. Thus, the government, the students and the taxpayer bear all the risk, and the for-profit industry reaps all the rewards. This is similar...

For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of. Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino. “Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.” A growing number of the people whose homes are in foreclosure are...

In areas hardest hit by plunging real-estate values - including the San Joaquin Valley - some people who can afford their mortgage are opting to walk away from their loan and let their bank repossess the house. "It's very stressful to get to that point," said James Graham, a 48-year-old power-plant worker who walked away from his home in Bakersfield last fall. "You're raised up to do the right thing and pay your mortgage, pay your bills." "But when you get to that point where it's time to walk, it's time." It's called "strategic default," and experts say it stems...

Florida Default Law Group filed this foreclosure case based on a defaulted promissory note. Keeping in mind that I am not an attorney, is there a legal basis for deeming an unsigned note a negotiable instrument secured by a mortgage? I know the banks are all gung ho on "aggressive redeeming of collateral". I have learned that forgery and fabrication of legal documents is apparently fine and dandy in the eyes of many judges. I get that the greedy homeowners deserve to be dispossessed of their homes because they were naughty enough to sign a document that was pre-planned to...

60 Minutes Runs Feature On Walking Away From Your Mortgage, And Now EVERYONE Wants To Know How They Can Do It Joe Weisenthal May. 10, 2010, 9:09 AM Did 60 Minutes prompt a big cultural and economic moment last night? The weekly TV news show ran a big feature on strategic defaults, and from what we gather it made strategic defaults look pretty sympathetic. It also acknowledged that it could undermine the recovery.Either way, we know LOTS of folks decided they want in on the action. How do we know? Because all of the sudden we got flooded with search...

Capital One Financial Corp's U.S. credit-card defaults rose in March in a sign that consumers may still be under stress. In a regulatory filing, Capital One said the annualized net charge-off rate -- debts the company believes it will never collect -- for U.S. credit cards rose to 10.87 percent in March from 10.19 percent in February. However, accounts at least 30 days delinquent -- an indicator of future loan losses - declined to 5.30 percent from 5.51 percent. For U.S. auto loans, Capital One's charge-off rate was 2.10 percent in March, down from 2.50 percent in February, and the...

Big real estate developers do it all the time - like yesterday, when the owner of New York City's Stuyvesant Town complex decided to stop paying its $3 billion mortgage. So why are you still writing a check every month on that mortgage that's much bigger than your home is actually worth? Good question, University of Chicago economist Richard Thaler says. Thaler tells New York Times readers that it's not just alright to walk away from one's over-sized mortgage -- it may actually be a moral imperative. (An earlier Times article, by Roger Lowenstein, said much the same thing.) After...

Sovereign Government Debt Defaults Come Full Circle Economics / Global Debt Crisis Dec 15, 2009 - 10:58 AM By: Jim_Willie_CB The continuation of the bank dominoes took 14 months, but it occurred. The initial destructive impact craters were carved in the United States and England. To be sure, major damage was done to assets in Spain and Greece and other smaller nations in the last year, but their banks had remained insulated. The discredit and death of the central bank franchise system showed first clear evidence in September 2008 on Wall Street. The unique mysterious aspect of banking systems is...

The Richmond Fed produced a report that provides some useful information on the issue of non-recourse mortgage loans and their default rates. The report includes a State-by-State breakdown of the rules for defaulting. This report was over my head. For example, the following calculation describes the probability of a short sale in a Recourse State: The conclusions are easier to read. I found this interesting: “For homes appraised at $300,000 to $500,000, borrowers in non-recourse states are 59% more likely to default than borrowers in recourse states. For homes appraised at $500,000 to $750,000, borrowers in non-recourse states are almost...

"Payment-option ARMs are about to explode," Iowa Attorney General Tom Miller said, according to a Reuters report."need for immediate change in the loan modification process is particularly acute at this time because a very large number of payment-option ARMs in Arizona is scheduled to reset in the near future."

In the second quarter, the number of homeowners behind on payments or in foreclosure rose along with the jobless rate, with California among states leading the way. Widespread joblessness is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation's economic recovery. A mortgage trade group reported Thursday that more than 13% of the nation's mortgage holders were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That's the highest figure since tracking began...

Interesting piece from Deutsche Bank on rapidly deteriorating Construction loans. DB predicts that “construction loans will be the epicenter of bank loan problems” • By far the riskiest type of loan product in bank portfolios; • Substantial portion represents loans to homebuilders; • Market currently penalizing properties with vacancy issues extremely severely; • Newly constructed (or only partially constructed) properties are the poster children for vacancy problems in CRE; • Values of most newly constructed properties are down massively; • Expect extremely high default rates and extremely high loss severity rates, both likely to be in excess of 50%; •...

Richard Parkus of Deutsche Bank has updated his Commercial Real Estate outlook with Q2 data. Check out how much the situation has deteriorated since the end of Q1. First, here's where things stood at the end of Q1. The lines on the chart are the percentage of loans that are delinquent, measured by length of delinquency (the black line is the average). Deutsche Bank (bearish) was looking for 3.5% average delinquency by the end of the year. . And here's where they were at June 30. Deutsche Bank is now looking for 6%-7% delinquency by the end of the year....

Another shoe is about to drop with a thud on banks...from the condo market. In addition, commercial real estate problems are building. This is not surprising, but begs the question how the Federal Reserve threaded this variable into the highly publicized bank stress test, due out at 5pm today. ... Defaults in nonresidential construction loans went from 6.6% in the 4th quarter of 2008 to 8.9% in the 1st Quarter of this year.