Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-60059 Thu, 23 Jun 2016 18:40:10 GMT Credit Suisse Tries to Overhaul Its Image, but Problems Remain http://implode-explode.com/viewnews/2016-06-23_CreditSuisseTriestoOverhaulItsImagebutProblemsRemain.html In March, in an effort to right the ship on the credit side of the investment bank, Credit Suisse named Brian Chin, the chief of structured finance, and David Miller, the chief of credit products, to be co-chiefs of Credit Suisse's global markets credit division. This is yet another big job for Mr. Miller, with lots of responsibility and high pay, but his appointment sends exactly the wrong message about the values and behavior that a Wall Street bank should be rewarding.

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Mr. Miller, you may recall, was the bank's architect, starting in 2004, of a new syndicated loan product -- called a dividend recapitalization loan -- that allowed big-time real estate developers in the Western half of the United States to borrow based on the inflated valuation of their projects, pocket hundreds of millions of dollars in the form of dividends and lay the risk at the doorstep of new investors whom Mr. Miller and his team had lined up.

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In the end, all of the loans blew up, and investors lost billions. Soured deals include $375 million in loans to the Yellowstone Club, an hour outside of Bozeman, Mont.; $250 million to the Tamarack Resort in Idaho; $540 million to Lake Las Vegas, a 3,592-acre golf community in Nevada; $275 million to Promontory, a 10-square-mile second-home resort outside Park City, Utah; $400 million to the Turtle Bay Resort in Hawaii; and $675 million to the Ginn resorts in Port St. Lucie, Fla.; Naples, Fla.; Boone, N.C.; and the Bahamas.

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After each of the developments ended up in Bankruptcy Court, a federal bankruptcy judge admonished the Credit Suisse bankers by calling the loans "doomed to failure" from the outset... In September, Highland Capital won a $287.5 million judgment against Credit Suisse related to losses stemming from its participation in a refinancing of Lake Las Vegas before it went into bankruptcy; Credit Suisse is appealing the ruling, and the judgment has not yet been paid pending the appeal. Highland Capital affiliates are also suing Credit Suisse in New York State over additional losses related to other deals.

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iehi-feed-60057 Thu, 23 Jun 2016 15:39:42 GMT Some mortgage servicers break U.S. rules, mostly due to technology: CFPB http://implode-explode.com/viewnews/2016-06-23_SomemortgageservicersbreakUSrulesmostlyduetotechnologyCFPB.html Some mortgage servicers are failing to follow federal rules intended to help struggling borrowers avoid foreclosure, often because they use faulty technology, the U.S. agency charged with protecting consumers' finances said on Wednesday.

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"Mortgage servicers can't hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules," said CFPB Director Richard Cordray in a statement.

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According to Wednesday's report, examiners for the CFPB, found misrepresentations of terms, fees and deadlines for loans and modifications in recent communications from servicers. The CFBP said loss mitigation and transfers were the primary problem areas, and that servicers "continue to use failed technology that has already harmed consumers."

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iehi-feed-60056 Thu, 23 Jun 2016 15:38:18 GMT Homeownership slumps, remains elusive for many Americans, study finds http://implode-explode.com/viewnews/2016-06-23_HomeownershipslumpsremainselusiveformanyAmericansstudyfinds.html Homeowners who lost their homes to foreclosure are still struggling to clear their credit records so they can buy another home. Meanwhile, some big banks have moved away from offering subprime and government-backed loans and have significantly tightened credit requirements despite low mortgage rates, making it that much harder for some potential homebuyers to get their foot in the door. "How much house can I afford?" is no longer the main question potential homebuyers need to consider; it's "How will I afford it?"

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Although mortgage rates have remained well under 4% this year, it's not enough to drive homebuying to the levels that industry analysts had predicted. A shortage in inventory, tightened lending requirements and slow income growth are keeping many potential homebuyers on the sidelines, Zigas says, adding that high levels of student debt and a challenging job market for young people are dragging on demand for homes.

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iehi-feed-60039 Mon, 20 Jun 2016 17:12:46 GMT Suntrust Concedes $200K Principal Write Down To MFI-Miami Client http://implode-explode.com/viewnews/2016-06-20_SuntrustConcedes200KPrincipalWriteDownToMFIMiamiClient.html iehi-feed-60024 Sat, 18 Jun 2016 01:12:11 GMT Angelo Mozilo Will Not Face U.S. Charges for Mortgage Fraud http://implode-explode.com/viewnews/2016-06-17_AngeloMoziloWillNotFaceUSChargesforMortgageFraud.html The Justice Department's pursuit of Angelo R. Mozilo, one of Wall Street's most recognizable names tied to the subprime mortgage crisis, is ending with a whimper.

After dropping a criminal investigation of Mr. Mozilo earlier, federal prosecutors recently decided against filing a civil fraud case against him, his lawyer, David Siegel, confirmed on Friday.

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The decision by federal prosecutors to not proceed with a civil fraud case under the Financial Institutions Reform, Recovery and Enforcement Act is not too surprising, given the length of the review process.

The possibility of the Justice Department filing a so-called Firrea lawsuit against Mr. Mozilo came to light when Bank of America reached a $16.65 billion settlement of its own Firrea case in August 2014. The inquiry by the Justice Department of Mr. Mozilo was seen by some legal critics as a way for prosecutors to address complaints that little had been done to hold individuals accountable for the financial crisis.

Bank of America acquired Countrywide and assumed its liabilities in 2008, as the financial crisis erupted.

But lawyers for Mr. Mozilo argued a civil fraud case would duplicate the efforts of the Securities and Exchange Commission, which sued Mr. Mozilo and two other former Countrywide executives in 2009. On the eve of the trial in 2010, Mr. Mozilo and the other defendants reached a settlement that required the mortgage financier to pay $67.5 million in fines and restitution.

Over the last few years, federal prosecutors used the threat of a Firrea civil fraud lawsuit to extract tens of billions of dollars in settlements from other big banks. The law proved to a be a useful tool for prosecutors because of its 10-year statute of limitations for bringing a case -- much longer than the standard three- or five-year statute of limitations for most civil fraud lawsuits.

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iehi-feed-60019 Fri, 17 Jun 2016 14:16:46 GMT America's Dying Shopping Malls Have Billions in Debt Coming Due http://implode-explode.com/viewnews/2016-06-17_AmericasDyingShoppingMallsHaveBillionsinDebtComingDue.html iehi-feed-60018 Fri, 17 Jun 2016 14:14:49 GMT Why there's a new kind of housing crisis http://implode-explode.com/viewnews/2016-06-17_Whytheresanewkindofhousingcrisis.html iehi-feed-59986 Sun, 12 Jun 2016 12:07:47 GMT Housing values push Americans' total wealth to record $88T http://implode-explode.com/viewnews/2016-06-12_HousingvaluespushAmericanstotalwealthtorecord88T.html iehi-feed-59968 Tue, 07 Jun 2016 20:12:11 GMT This Fannie-Freddie resurrection needs to die http://implode-explode.com/viewnews/2016-06-07_ThisFannieFreddieresurrectionneedstodie.html iehi-feed-59947 Sat, 04 Jun 2016 00:00:18 GMT A Suburban Experiment Aims for Energy Grid-Independent Homes http://implode-explode.com/viewnews/2016-06-03_ASuburbanExperimentAimsforEnergyGridIndependentHomes.html Since 2013, the Energy Department has certified about 700 homes as "zero-energy ready," meaning that the addition of a renewable energy system, generally solar, would offset most or all of its annual energy consumption.

With thousands more in the pipeline, said Sam Rashkin, chief architect of the building technologies office, the department expects to certify roughly 1,000 this year and 3,000 in 2017.

"We're on that inflection point on the growth curve," he said. "We're proving the business case to a growing number of builders in key pockets of construction around the country. It takes some really good examples by leading builders to showcase just how cost-effective and technically achievable these specifications are."

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[Electric Power Research Institute, a nonprofit utility-funded group that is conducting the study on zero-energy homes] found a willing collaborator in Meritage, a leading builder of energy-efficient homes, and are expanding the test program to additional subdivisions in Southern California, the Central Valley and the Bay Area.

For buyers, part of the appeal of a home built to be zero-energy is that they do not have to change their behavior to save energy.

At Meritage, the company insulates every house with spray foam, sharply reducing the amount of heating and cooling needed, and allowing smaller or fewer units to be installed. Making the homes even more efficient are dual-pane windows that help retain or keep out heat (depending on the need), LED lighting and advanced water heaters that work by funneling heat from the ambient air into the water.

All of the test homes have SunPower rooftop solar systems, which are among the most efficient on the market. And because they were designed along with the houses, the arrays can be oriented for maximum production.

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iehi-feed-59940 Fri, 03 Jun 2016 03:50:24 GMT BofA Banker Fired After Epic Racist Facebook Rant http://implode-explode.com/viewnews/2016-06-02_BofABankerFiredAfterEpicRacistFacebookRant.html iehi-feed-59939 Fri, 03 Jun 2016 00:06:53 GMT OECD Warns Of "Disorderly Housing Market Correction" In Canada http://implode-explode.com/viewnews/2016-06-02_OECDWarnsOfDisorderlyHousingMarketCorrectionInCanada.html iehi-feed-59937 Thu, 02 Jun 2016 22:34:34 GMT Banks' Embrace of Jumbo Mortgages Means Fewer Loans for Blacks, Hispanics http://implode-explode.com/viewnews/2016-06-02_BanksEmbraceofJumboMortgagesMeansFewerLoansforBlacksHispanics.html The biggest U.S. banks are tilting toward these high-dollar mortgages as they overhaul loan operations. And jumbo loans, which were less important during the subprime-loan boom, are helping banks take on less risk, as mandated by regulators in the postcrisis era.

These loans, however, could put banks at odds with another federal regulatory mandate--one that says lenders should serve a racially diverse set of customers. As they approve relatively more jumbos, major banks are granting fewer mortgages to African-Americans and Hispanics than just before the crisis, a Wall Street Journal analysis found.

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Jumbos, loans above $417,000 in most markets, are attractive because they typically feature high credit scores, big down payments and low default rates. And they aren't linked to the government programs that cost banks tens of billions of dollars in fines related to the subprime-loan debacle.

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Just as the subprime customer was the ideal borrower for some banks before the crisis, the jumbo borrower is most appealing for many banks now. While the jumbo uptick isn't solely responsible for lending declines to some minorities, these loans epitomize the direction banks are turning their mortgage operations--toward safer, more-affluent customers who tend to be white or Asian.

The WSJ found that between 2007 and 2014 the proportion of all loans that went to Asian and White borrowers went from 70% to 75% of the total; the proportion going to Hispanic and Black borrowers fell by exactly the same 5% -- from a bit under 19% to about 12.5%.

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iehi-feed-59907 Sun, 29 May 2016 19:02:55 GMT Last Time this Happened, the Housing Market Collapsed http://implode-explode.com/viewnews/2016-05-29_LastTimethisHappenedtheHousingMarketCollapsed.html According to the Times: "Many say the sudden surge in hyperprice homes -- often built and sold by speculative investors -- is the ultimate bubble signal." And when was the last time this sort of pile-up happened? In 2007 and 2008, just as the housing market was beginning to spiral down and as the Financial Crisis was beginning to mature. So now, the same signs are popping up once again.

While overall home prices were still soaring in the first quarter, at the top 5% of the housing market, the bubble has begun to deflate, with prices down 1.1%, according to Redfin. In some cities, the very top end is starting to take some hits, including in Manhattan where a luxury condo boom has turned into a glut, and where prices have begun to sag.

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iehi-feed-59894 Fri, 27 May 2016 15:40:36 GMT Essence of BofA "Hustle" Ruling: Sign A Contract And LATER Decide To Commit Fraud, and It's Not Fraud http://implode-explode.com/viewnews/2016-05-27_EssenceofBofAHustleRulingSignAContractAndLATERDecideToCommitFrau.html The judges based their ruling on the contracts that Countrywide had reached with Fannie and Freddie, pledging to provide those government-sponsored firms with "investment quality" mortgages. There was no evidence, the appellate judges found, that the executives who signed those contracts intended at the time to stuff the pipeline with toxic junk. It just turned out that way. Because there was no intent to defraud when the contracts were signed, the judges ruled, this whole affair is merely a case of breach of contract, not fraud...

There are a few problems with this analysis. One was pointed out presciently by Judge Rakoff. In a 2013 ruling in the case, he observed that under the federal mail fraud statute, that limitation [of fraud needing to occur at the moment of contract signing] doesn't apply. In any event, the bank's misrepresentations were continuous and ongoing: every time it sold Fannie or Freddie a substandard loan, it was arguably lying... Judge Rakoff anticipated and rejected [the Appeals Court's] argument, and even pointed out that Congress closed the loophole by amending the mail fraud statute -- in 1909. It's also likely that the government will appeal the latest ruling to the full 2nd circuit court, and thence, if necessary, to the Supreme Court.

Yes, this will likely get reversed again. The ruling simply seems to be in error, aside from leading to nonsensical conclusions (i.e., that anyone can now defraud the government with abandon as long as they don't show any evidence of intent to defraud at the time they sign a contract or make covenants).

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iehi-feed-59889 Fri, 27 May 2016 14:17:18 GMT Wells Fargo Reintroduces 3%-Down Mortgages http://implode-explode.com/viewnews/2016-05-27_WellsFargoReintroduces3DownMortgages.html After being called out for its deceptive practices, the bank has scaled back on FHA backed mortgage lending in recent years. Wells Fargo accounted for just 2.5% of total FHA mortgages in 2015, down from 13% in 2010, and ultimately coming to this end game where the bank has a path forward without the FHA... Wells' own mortgage origination pipeline has been slowing down in recent years, and as such the corner office of the country's largest mortgage originator is desperate to find new and innovative ways to boost lending.

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The new program partners with Fannie Mae in order to allow borrowers with credit scores as low as 620 to make as little as a 3% down payment and use income from family members or renters to qualify. Naturally, the intent is to make more loans to low and middle-income borrowers - in the process pushing up home prices countrywide - without going through the FHA.

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iehi-feed-59887 Thu, 26 May 2016 16:55:52 GMT HUD: For many poor families, housing costs are ‘out of reach' http://implode-explode.com/viewnews/2016-05-26_HUDFormanypoorfamilieshousingcostsareoutofreach.html The affordable housing situation is bleak. So bleak that "in no state, metropolitan area, or county can a full-time worker earning the prevailing minimum wage afford a modest two-bedroom apartment," according to the report.

To afford a two-bedroom apartment at the current federal minimum wage of $7.25 an hour, a worker would need to work 112 hours a week, every week, according to the report. That means workers "would have no remaining time during the week for anything other than working and sleeping."

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NLIHC proposes a formula reducing the mortgage interest tax deduction that benefits homeowners. For years, there have been various proposals to change the popular deduction. Whatever reform that might eventually be approved, the coalition wants a portion of the savings to go to affordable housing.

The main benefit of eliminating the mortgage interest tax deduction would actually be to allow home prices to fall to more affordable levels. Of course cutting a sacred "middle class" benefit (even if done so gradually that there'd be no nominal decline in home prices) is politically impossible.

Alternatively, they could make all consumer debt interest (i.e. credit card) tax-deductible. That would be fair.

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iehi-feed-59881 Wed, 25 May 2016 23:56:47 GMT Fannie And Freddie Are Mega-Frauds; Still Have Not Digested Derivatives & Accounting Losses From Crash http://implode-explode.com/viewnews/2016-05-25_FannieAndFreddieAreMegaFraudsStillHaveNotDigestedDerivativesAcco.html iehi-feed-59874 Wed, 25 May 2016 01:15:20 GMT Mortgage Borrowers Are Likely "Self-Sidelining" http://implode-explode.com/viewnews/2016-05-24_MortgageBorrowersAreLikelySelfSidelining.html "Thus, the observed decline in originations could be a result of potential applicants being either too cautious or discouraged from applying, more so than tight underwriting as the culprit in lower mortgage activity."

She suggests that this caution results in "self-sidelining" that makes it appear that credit is tightening.  This means that the policy solutions are quite different than if the cause was credit tightening and that more consumer education could be more successful in raising originations levels than introducing new lending products with lower credit standards.  

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iehi-feed-59872 Tue, 24 May 2016 17:52:21 GMT U.S. new home sales race to eight-year high, prices surge http://implode-explode.com/viewnews/2016-05-24_USnewhomesalesracetoeightyearhighpricessurge.html