Dirty Deeds

In case you missed it, Business Week ran a cover story in early January on the community impact of foreclosures and what people are doing to preserve their neighborhoods.

http://www.businessweek.com/magazine/content/08_02/b4066046083770.htm

Wall Street takes financial hit for fueling subprime crisis

NEW YORK (Reuters) - Merrill Lynch & Co Inc (MER.N) on Thursday said it took a $14.1 billion writedown and adjustments in the fourth quarter as bad subprime mortgage bets forced the brokerage to sell pieces of the company to foreign investors to raise capital.

Analysts expected Merrill’s write-down to land anywhere from $10 billion to $15 billion. For the year, Merrill’s subprime mortgage-related losses totaled nearly $23 billion.

Merrill reported a fourth-quarter net loss of $9.8 billion, or $12.01 a share, the largest in the company’s history. The world’s largest brokerage turned a profit of $2.3 billion, or $2.41 a share, in the year-ago period.

For story see: http://news.yahoo.com/s/nm/20080117/bs_nm/merrilllynch_results_dc

NTIC Affiliate Fights Foreclosures

A subprime swing: Politicians seek answers to the US housing crisis 

By Stephanie Kirchgaessner

When Sister Barbara Busch began a community outreach programme in 1978 that taught financial literacy, it was aimed at helping families and increasing home ownership among residents in her working-class Cincinnati community. Now, the nun says, that work has been transformed into home “preservation” - the difficult task of trying to keep people in their homes following a sharp spike in foreclosures in the suburbs of the Ohio city.

“We can easily see 40 new families a week [seeking help],” Sister Busch says. Today she is playing host to a public hearing devoted to another symptom of the hard economic times plaguing citizens here: “payday lending”. The predatory cash loans, which are generally marketed as short-term advances on borrowers’ pay cheques, are not unlike subprime loans. Lenders charge exorbitant fees for the funds, which, Sister Busch says, are being used to pay for everything from mortgage bills to medical costs. The loans create their own debt spiral, with some lenders charging interest rates of 391 per cent.

 

To read full article, click on the link below:

http://www.msnbc.msn.com/id/22670288/

Devastation Coming to Your Neighborhood? Mortgage Crisis in Perspective

 

 

By Linda Cronin-Gross - The Huggington Post

The current mortgage crisis is not only destroying individual families, but whole neighborhoods too. And the neighborhoods that are being destroyed, at least in NYC, are the very neighborhoods that try so hard to “make it,” but can’t seem to catch a break for long.

That’s the very important message in a terrific story in today’s NY Times written by veteran reporter and Bronx native David Gonzalez.

Gonzalez spent “shoe leather” time in the Bronx, talking to local storeowners and residents in the Williamsbridge neighborhood (and others), and what he found was alarming: people can’t afford to fix their houses or buy more furniture because every cent, in many cases, is going to pay off a bad mortgage. This story is important because it’s one of the first stories I’ve seen that actually documents the “domino effect” that the mortgage crisis has already started to have in many neighborhoods.

The math for this is really quite simple: bad mortgages = financial crisis for families = less money spent in the neighborhood on things like furniture and home improvements = businesses and shops that have to close = neighborhoods that will soon look like they did in the “bad old days” of early 80’s.

Gonzalez also spent some time with a mortgage counselor at the North Bronx office of Neighborhood Housing Services of NYC. NHS, one of the largest non-profit housing groups in the City, is 25 years old and provides homeownership education, financial assistance and community leadership. It’s a unique groups because NHS is led by local residents and guided by local needs. And so, as you can imagine, NHS has been nearly overwhelmed by the number of people seeking assistance; some people are already in foreclosure, some are worried that soon they’ll be unable to keep up with their payments, and others come in to try to avoid trouble altogether.

And if you think this scenario couldn’t possibly happen to you or anyone you know, think again. Many of the families now caught up in the mortgage mess are solidly middle class. They have jobs as civil servants, police officers, school aides, nurses. Their only crime - pursuing the American dream and believing that those who offered them a piece of that dream, home ownership, were experts and were sincere.

Read it and weep.

To read more Linda Cronin-Gross click here.

Bet the House on It

The New York Times

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December 16, 2007

Op-Ed by LAURA TYSON

The economy faces a vicious downward spiral of foreclosures, declining property values and mounting losses on mortgage-backed securities and related financial assets.

The resetting of interest rates on more than 2 million subprime loans will prompt a large number of foreclosures, perhaps a million a year in both 2008 and 2009. These huge waves of foreclosures will depress the price of residential real estate still further. Plummeting real estate values and escalating foreclosures will cause further losses on mortgage-related securities and will further burden American consumers already dealing with higher energy prices and substantial debt.

Given the dampening effects of these developments on both consumption and investment spending, it is increasingly likely that the economy will slip into recession next year. The Federal Reserve should continue to cut interest rates and to experiment with new ways to pump liquidity into the financial system.

The Bush administration’s plan for a voluntary freeze by lenders on interest-rate resets for a small fraction of subprime loans has been judged inadequate by the financial markets. Bolder measures — a temporary moratorium on foreclosures on subprime owner-occupied homes, a freeze on interest rate resets for subprime adjustable rate mortgages, and federal funds to help at-risk borrowers to stay in their homes and at-risk communities to reduce foreclosures — are required to contain the potential damage to the overall economy from the crisis in the housing and mortgage markets.

— Laura Tyson, a professor of business and public policy at the University of California, Berkeley, and the chairwoman of the Council of Economic Advisers from 1993 to 1995.

Moratorium on foreclosures is proposed in Cuyahoga County

Monday, December 17, 2007

Thomas Ott

Plain Dealer Reporter

This is the time of year for taking a break - and advocates for the many Cuyahoga County homeowners facing foreclosure want the county sheriff to do just that.

Representatives of nearly 20 nonprofit groups will propose today that the sheriff declare a “foreclosure holiday” and stop auctioning occupied homes for 60 days, starting Christmas Eve.

About 300 homes will be on the block at a weekly sale that day, followed by 250 others on New Year’s Eve.

NTIC Study Shows More and More Families Falling Behind

NTIC’s 2007 Foreclosure Report was release last week and shows that Chicagoland foreclosures have risen by over 40% in the first half of the year. That is on top of a 36% increase last year. The Save the American Dream Campaign is rallying community organizations across the country to hit the streets in 2008 and pressure the Administration, the Industry, and the Congress to act more boldly to keep families in their homes.

Download the NTIC Foreclosure Report here.

Subprime creep: From city to burbs

Cleveland’s wealthier suburbs are seeing an explosion in foreclosures as the crisis spreads from the city’s poorer center.

By Les Christie, CNNMoney.com staff writer

December 12 2007: 9:38 AM EST

NEW YORK (CNNMoney.com) — Cleveland’s foreclosure crisis is no longer a problem that’s just for the poor.

In the city’s central neighborhoods, it’s been common for years: Low-income homeowners living on a financial edge were also preyed on by abusive lenders during the nation’s recent housing bubble.

But now the mess has spread to Cleveland’s wealthy suburbs, where delinquency filings have exploded over the past year despite residents’ relative prosperity and supposedly higher education levels. The numbers are even beginning to eclipse those of the city.

In Shaker Heights, the model of an affluent Midwestern suburb, the problem “is huge,” said Mark Seifert, executive director of the East Side Organizing Project (ESOP), a community advocacy group in Cleveland.

To read the rest of the story click here.

Goldman CEO may break bonus record

Lloyd Blankfein is set for a 30% pay hike that will bring his payout to about $70 million this year, according to a report.

December 13 2007: 4:03 AM EST

LONDON (CNNMoney.com) — Goldman Sachs CEO Lloyd Blankfein could take home as much as $70 million this year, according to a published report.

The Financial Times, citing company insiders, said Blankfein is in line for a 30 percent pay hike. Last year, Blankfein was awarded a $54 million payout, a record for a Wall Street CEO.

Bankers at Goldman (Charts, Fortune 500), which has weathered the credit crisis better than its Wall Street rivals, are also set to benefit this year, the newspaper said.

The bank’s compensation pot - or the money used to pay employee salaries and bonuses - is estimated at $20 billion, the report said. Based on Goldman’s 29,000 full-time staff members, that would come to about $360,000 per person, the FT said.

Bush Subprime Bailout Will Help Few New Yorkers

By Eileen Markey
Village Voice

Thanks for nothing. That’s what sub-prime mortgage victims in New York’s at-risk neighborhoods are saying about the Bush administration plan to freeze interest rates for homeowners whose sub-prime loans are set to balloon next year.

The plan, which asks for voluntary participation from banks that made the mortgages, will freeze interest rates on sub-prime loans for up to five years, meaning the homeowners would get to keep paying off their mortgage at the current interest rate, not the higher ones looming. But only homeowners who are less than a month behind on repayments, receive their mortgages in 2005, 2006 or 2007 and whose interest rates will not reset until 2008 are eligible.

To read the rest of the article click here.