Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-62137 Tue, 25 Apr 2017 01:51:44 GMT Wells Fargo Boardroom Showdown Looms, Pitting Ever-Smug Buffett vs. Public Pension Funds http://implode-explode.com/viewnews/2017-04-24_WellsFargoBoardroomShowdownLoomsPittingEverSmugBuffettvsPublicPe.html Giant pension funds -- like Calpers, which manages the retirement funds of California's public employees, and its New York City counterpart -- are planning to vote against most of Wells's 15 board members, saying they failed in their duties to oversee the company.

The bank does have one influential ally: Warren Buffett, whose firm, Berkshire Hathaway, owns about 10 percent of the company's shares. He has signaled that he intends to back the incumbent board, and his support could ultimately carry more weight than that of investors like pension funds, which tend to be more vocal in their criticism.

As of late Monday, a few large shareholders were leaning toward voting against some board members. (Two people joined the board in February, after the scandal had been widely exposed.)

"If there is a serious failure in oversight, directors need to be held accountable," said Scott M. Stringer, the New York City comptroller. He helps oversee the city's pension funds, which are planning to vote against nine of the bank's 15 directors.''

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The vote is not only a serious challenge for Wells, one of the nation's largest banks. It is also a test for a decades-long movement among certain shareholders who have been pushing to hold corporate leaders more accountable.

"If we're serious about board accountability in this country, it's hard to understand the case for keeping these directors," said Robert J. Jackson, a professor at Columbia Law School and the director of the school's program on corporate law and policy.

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Yet for all the scandals that have rattled corporate America over the past decade -- such as those in the mortgage market and the media industry -- it is extremely rare for a board to take the fall.

In related news, the Fed and the FDIC have approved Wells' "living will" plans.

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iehi-feed-62136 Tue, 25 Apr 2017 00:32:18 GMT Miami Is Spelling Doom for the Real Estate Market http://implode-explode.com/viewnews/2017-04-24_MiamiIsSpellingDoomfortheRealEstateMarket.html ... more than 11,000 new condos [are] scheduled to hit Miami's market by 2018. That's about 70% more condo units than Miami already has. This is going to be like pouring jet fuel on a raging fire. And yet speculators continue to "flip" condos across the city.''

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It's happening all across Florida, Las Vegas, and Atlanta. It's also happening in small U.S. cities like Fresno, California and Tacoma, Washington.

According to real estate site Trulia, more than 6% of home sales last year were "flips." These are properties that have sold at least twice in the past years.

That's up 5.3% from a year ago. More importantly, we're now seeing the highest level of flipping activity since 2006...which was the peak of the last housing bubble. This is a big deal. It tells us that the U.S. housing market is likely in the late stages of a bull market.

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iehi-feed-62135 Mon, 24 Apr 2017 23:22:57 GMT What of Suburban Real Estate With Millennials Favoring Cities? http://implode-explode.com/viewnews/2017-04-24_WhatofSuburbanRealEstateWithMillennialsFavoringCities.html ... if Millennials aren't earning enough to buy pricey homes, who is going to buy the tens of millions of houses Baby Boomers will be selling as they downsize/move to assisted living? As for inheriting Mom and Dad's house--that's not likely if Mom or Dad need the cash to fund their retirement/assisted living.

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Anecdotally, I can't think of a single individual in their 20s or 30s that I know personally who has bought a house in a distant suburb. Everyone in this age group has bought a house in an urban zone. Not a highrise condo in the city center, but a house in a ring city near public transport.

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iehi-feed-62134 Mon, 24 Apr 2017 21:08:58 GMT Mayor to subsidise 'naked' homes solution to London housing crisis http://implode-explode.com/viewnews/2017-04-24_MayortosubsidisenakedhomessolutiontoLondonhousingcrisis.html ... the Enfield homes would be about 15% cheaper to build than standard new homes because of their basic design.

"They will have a functioning sink and bathroom, but what they won't have is every interior wall or things like fitted coffee machines [which housebuilders often include]," he said.

Costs will be cut further because buyers will not have to pay for the land in the purchase price. The freehold will be retained by the council and owners will pay annual ground rent.

The plan is to ensure that the homes are cheap enough that buyers will only need to spend a third of their gross income on mortgage payments -- a widely used definition of "genuinely affordable" housing. Subject to planning consent, the apartments could be ready for occupation in 2020.

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The austere designs fit with a trend for minimal living among millennials forced upon them in part by a lack of disposable income because of high rents and property prices.

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iehi-feed-62127 Sun, 23 Apr 2017 20:32:32 GMT Trump Has To Pay For Tax Cuts -- But Will He Touch Real Estate Give-Aways? http://implode-explode.com/viewnews/2017-04-23_TrumpHasToPayForTaxCutsButWillHeTouchRealEstateGiveAways.html "Trump said he knows where the loopholes are, but so far he hasn't proposed closing any of them," Mr. Rosenthal said. "Maybe he will. But so far he hasn't made any of the hard decisions that would show he's willing to close the loopholes that benefit him in order to make the tax code more fair and efficient."

... it is hard to see a path toward reducing overall corporate tax rates -- the crucial element in making any overhaul palatable to a wide swath of businesses -- without the added revenues from eliminating the interest deduction.

(Individuals generally cannot deduct interest payments -- with the major exception of mortgage interest, another boon to the real estate industry, albeit one that also benefits millions of homeowners. Mr. Trump has said eliminating the mortgage deduction is off the table.)

Then there is the ability of "active" real estate investors such as Mr. Trump (but virtually no other group) to deduct their real estate losses against other income. That loophole was eliminated for most investors -- including real estate investors -- in the landmark tax legislation in 1986. But because of aggressive lobbying by the powerful real estate industry, including Mr. Trump himself, Congress passed legislation in 1993 restoring the tax break for so-called active real estate developers.

... Another loophole for real estate developers is the so-called like-kind exchange provision, which allows real estate investors to defer or even eliminate capital gains tax by using the proceeds from a sale to reinvest in a similar property (which does not have to be all that similar -- just about any real estate can be exchanged, even an apartment complex for vacant land).

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iehi-feed-62123 Sun, 23 Apr 2017 13:37:38 GMT Doug Noland: Liquidity Supernova and the Big Ugly Flaw http://implode-explode.com/viewnews/2017-04-23_DougNolandLiquiditySupernovaandtheBigUglyFlaw.html iehi-feed-62114 Fri, 21 Apr 2017 01:27:53 GMT Ocwen Sued, Shut Down in Multiple States http://implode-explode.com/viewnews/2017-04-20_OcwenSuedShutDowninMultipleStates.html There are bad days, and worse days, and there are days like Ocwen Financial Corporation (OFC) had on Thursday. The company was not only sued on multiple grounds by both the Consumer Financial Protection Bureau (CFPB) and the State of Florida, but saw its operations effectively shut down by the North Carolina Commissioner of Banks.

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First, the North Carolina commissioner, Ray Grace, issued a cease and desist order against the company after a determination that it "has engaged in, or is engaging in, or is about to engage in, acts of practices constituting violations of state and federal law and applicable regulations."

... On February 28, 2015, Florida, Maryland, Massachusetts, Mississippi, Montana, and Washington conducted a multi-state examination of the company covering operations from January 1, 2013 to the examination date. That examination identified several violations of state and federal law including consumer escrow accounts that could not be reconciled and willful and ongoing unlicensed activity in certain states. The examination also found that the company's financial condition was deteriorating.

The order alleges the company subsequently failed to respond to requests for information on its apparent unlicensed activity and company executives were warned the violations were unacceptable and would not be tolerated. OFC partially addressed these violations after a lapse of two years, but the Commissioner's order states that unlicensed activity is believed to continue in some jurisdictions.

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In December 2016 OFC and state regulators entered into a Memorandum of Understanding (MOU) which required OFC to retain an independent auditing firm to perform a comprehensive audit and reconciliation of all escrow accounts with a report submitted to and approved by the MMC by January 13, 2017.  On that date, the company informed the MMC that the $1.5 billion cost of that audit was beyond its financial capability and asked to sample 457 accounts out of the 2.5 million it had serviced over the initial audit period.  The company has also failed to provide a suitable going-forward business plan to address its financial condition.

The Cease and Desist Order requires OFC to immediately cease acquiring new mortgage servicing rights and acquiring or originating new residential mortgages until it provides a sufficient analysis of its financial condition and provides state regulators with a reconcilement of its escrow accounts showing that consumer funds are appropriately collected, accounted for, and distributed.  OFC has 20 days in which to request a hearing.

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iehi-feed-62111 Thu, 20 Apr 2017 17:44:49 GMT Ontario Set to Unveil Its Plan to Cool Toronto Housing http://implode-explode.com/viewnews/2017-04-20_OntarioSettoUnveilItsPlantoCoolTorontoHousing.html Ontario is expected to impose a tax on "non-resident speculators" when it announces new measures Thursday to cool the red-hot housing market in Toronto, according to people familiar with the plans.

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Ontario Premier Kathleen Wynne, Finance Minister Charles Sousa and Housing Minister Chris Ballard are scheduled to make an announcement at 9 a.m. The Globe and Mail reported Thursday, without saying where it got the information, that the tax rate could be 15 percent and that rent control will be expanded to buildings constructed after 1991.

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iehi-feed-62105 Thu, 20 Apr 2017 02:42:38 GMT Talks of Wider Punitive Taxes Grow As Impact of B.C.'s foreign buyer tax wanes http://implode-explode.com/viewnews/2017-04-19_TalksofWiderPunitiveTaxesGrowAsImpactofBCsforeignbuyertaxwanes.html iehi-feed-62103 Thu, 20 Apr 2017 02:38:58 GMT U.S. bank regulator was suspicious about Wells Fargo's sales practices but did little about it http://implode-explode.com/viewnews/2017-04-19_USbankregulatorwassuspiciousaboutWellsFargossalespracticesbutdid.html The Office of the Comptroller of the Currency said its oversight of the San Francisco bank was lax, and examiners missed numerous opportunities to address the wrongdoing prior to a $185-million settlement with Wells Fargo in 2016, according to a report released Wednesday.

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The 15-page document noted that problems with the bank's sales practices had been mentioned in OCC reports since at least 2010 and the bank had been warned about its handling of complaints as early as 2009.

OCC bank examiners also didn't seek to understand the root causes of those or other problems, which allowed them to fester, according to the report.

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iehi-feed-62096 Tue, 18 Apr 2017 14:01:23 GMT UK will never build enough homes to keep prices down  http://implode-explode.com/viewnews/2017-04-18_UKwillneverbuildenoughhomestokeeppricesdown.html iehi-feed-62094 Mon, 17 Apr 2017 23:11:35 GMT Canada's Housing Bubble Could Be Next Financial Market Trigger http://implode-explode.com/viewnews/2017-04-17_CanadasHousingBubbleCouldBeNextFinancialMarketTrigger.html iehi-feed-62091 Mon, 17 Apr 2017 22:05:53 GMT Consumer Debt Bubble Growth Since '08 Masks Weak Household Wealth; Default Risks http://implode-explode.com/viewnews/2017-04-17_ConsumerDebtBubbleGrowthSince08MasksWeakHouseholdWealthDefaultRi.html .. the mortgage debt of $10 trillion is actually borne by only 59% of the homeowners. And many of them have paid down their mortgages to a large extent. So a much smaller percentage of Americans carry the lion's share of that $10 trillion in mortgage debt. That's where the risks are.

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Default rates for mortgages overall are still low, though they're inching up. According to S&P/Experian First Mortgage Default Index, the default rate rose from 0.64% in May 2016 to 0.74% in February 2017. And they will remain low as long as home prices continue to rise, as they have been in the US over the past years. In an environment of soaring home prices, homeowners, if they get in trouble, can usually sell the home for enough to pay off their mortgage. Hence defaults are not necessary.

Defaults soar after home prices have started to sink from the lofty peaks that in many cities have already shot way past the highs of the prior crazy house price bubble. At that point, the proceeds from the sale of a home may fall far short of covering the mortgage.

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iehi-feed-62080 Sat, 15 Apr 2017 23:50:26 GMT Seattle's median home price hits record: $700,000, double 5 years ago | The Seattle Times http://implode-explode.com/viewnews/2017-04-15_Seattlesmedianhomepricehitsrecord700000double5yearsagoTheSeattle.html "We just have one of the largest pent-up demands we've ever had, in terms of numbers of buyers out there," said John Deely, principal managing broker in Seattle for Coldwell Banker Bain, and the listing service's board chairman. "The demand is so high, it's hard to say that (prices) are going to stop going up. My thought would be they're (eventually) going to stop going up so fast as they have been."

Demand -- propelled by rising employment numbers, growing salaries and tenants desperate to escape soaring rents -- has far outstripped a supply of homes for sale that reached an all-time low in February, creating intense competition and driving up prices.

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The number of homes for sale across the Seattle metro area has plummeted 67 percent in the last five years, the second-biggest decline in the country behind the Salt Lake City region, according to Trulia.

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iehi-feed-62065 Thu, 13 Apr 2017 14:34:41 GMT Wells Fargo high costs, weak mortgages weigh in Q1 - MarketWatch http://implode-explode.com/viewnews/2017-04-13_WellsFargohighcostsweakmortgagesweighinQ1MarketWatch.html Wells Fargo & Co. said its first-quarter profit was flat as the nation's third-largest bank contends with lower mortgage banking revenue and rising costs alongside its sales practices scandal.

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Wells Fargo faces an potentially contentious shareholder meeting on April 25, with influential proxy advisory firm Institutional Shareholder Services Inc. recommending shareholders vote against 12 of 15 directors, including Chairman Stephen Sanger.

Earlier this week the bank's board put out the results of its independent investigation, placing much of the blame on two former top executives. It also faces a spate of state and federal investigations, including by the Department of Justice and the Securities and Exchange Commission.

While the overall impact on Wells Fargo's bottom line hasn't yet been seen as dramatic, new retail banking business such as customer checking account openings and credit card applications however continue to fall, plummeting 35% and 42% in March compared with the prior-year period.

The scandal has boosted expenses, which are likely to remain high for some time. Making matters worse, this is happening as interest rates remain at relatively low levels, despite a recent uptick. The result of this combination: Wells Fargo's return on equity, while up from the fourth quarter, remains at historically low levels. It was 11.54% in the first quarter.''

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iehi-feed-62051 Tue, 11 Apr 2017 16:08:27 GMT The retail apocalypse is having a terrifying impact on one corner of Wall Street http://implode-explode.com/viewnews/2017-04-11_TheretailapocalypseishavingaterrifyingimpactononecornerofWallStr.html ``"Malls are hard to turn around once they go downhill," said Steve Jellinek, vice president of CMBS analytical services for Morningstar Credit Ratings. As a result, many CMBS investments are getting wiped out, and "retail lending has really taken a beating," he said.

About $48 billion in loans backed by mall properties are at risk of default, according to Morningstar.

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"A lot of times, these malls decrease in value so fast," he said. "There is very little the servicer can do to maintain the value once tenants start leaving."

The CMBS that backed the [Hudson Valley] property took a hit worth $42 million. In this scenario, the lowest class of bondholders will likely end up empty-handed. It could also affect the second and third classes of investors from the bottom.

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It's not just the debt market that's taking a hit. Real-estate investment trusts that own the malls are suffering, and investors are being advised to avoid them.

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Class A malls -- those in wealthy areas with high occupancy rates and upscale anchors such as Nordstrom and Neiman Marcus -- are doing fine. But class B malls and those in the C and D territories are at risk of default.

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iehi-feed-62049 Tue, 11 Apr 2017 16:02:11 GMT ‘Full-blown housing bubble' in Canada: Economist alarmed by view of never-ending price gains http://implode-explode.com/viewnews/2017-04-11_FullblownhousingbubbleinCanadaEconomistalarmedbyviewofneverendin.html Despite lofty valuations in the Toronto and Vancouver housing markets, 54 per cent of respondents to the CIBC poll say housing prices will rise indefinitely, while only 40 per cent think prices will decline over the course of the next five years.

David Madani, senior Canadian economist at Capital Economics, thinks the unbridled optimism is just one more sign the Toronto housing market is in bubble territory.

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Of those in the younger generation who are already in the housing market, more than four of every five plan to sell, with 63 per cent complaining the mortgage and housing costs are making them cash-poor.

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iehi-feed-62044 Mon, 10 Apr 2017 22:37:51 GMT Wells Fargo Rehires About 1,000 Staff in Wake of Account Scandal http://implode-explode.com/viewnews/2017-04-10_WellsFargoRehiresAbout1000StaffinWakeofAccountScandal.html iehi-feed-62042 Sun, 09 Apr 2017 19:42:22 GMT Judge Condemns BofA for a Cruel Foreclosure That Drove a Couple to the Brink of Death, Cites "Criminal" Behavior of "Senior Management" http://implode-explode.com/viewnews/2017-04-09_JudgeCondemnsBofAforaCruelForeclosureThatDroveaCoupletotheBrinko.html "The oppression of the Sundquists cannot be chalked off to rogue employees betraying an upstanding employer," Judge Klein wrote. "This indicates that the engine is driven by direction from senior management." He even added that the misconduct of the CEO's office "strayed across the civil-criminal frontier."

This unusual candor hints at executive culpability for foreclosure fraud. "The judge signaled something very important here, which every regulator knows," said Eric Mains, a former FDIC official who left the agency to fight his own foreclosure case. "This kind of corrupt culture can only be maintained with knowing approval from the top executives."

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iehi-feed-62033 Fri, 07 Apr 2017 15:36:04 GMT Americans are taking out the largest mortgages on record http://implode-explode.com/viewnews/2017-04-07_Americansaretakingoutthelargestmortgagesonrecord.html The Mortgage Bankers Association's weekly purchase loan data showed that the average size of a home loan was the largest in the history of its survey, which goes back to 1990.

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The 20% down payment is a relic: the median down payment in 2016 was 10%. For first-time buyers, it was 6%. First-timers and other buyers of less-expensive homes are more leveraged now than they were at the height of the housing bubble a decade ago.

Home loan sizes aren't the only things that have changed in the years since MBA started its survey. Back at the start of the survey, the median mortgage size was only about 3.3 times the median annual income. It's now over five times as big - though buyers get bigger homes and lower interest rates.

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