Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us 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-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 iehi-feed-59863 Mon, 23 May 2016 17:43:21 GMT Bank of America wins reversal of $1.27 billion penalty in Countrywide "Hustle" mortgage case http://implode-explode.com/viewnews/2016-05-23_BankofAmericawinsreversalof127billionpenaltyinCountrywideHustlem.html A U.S. appeals court on Monday overturned a jury's finding that Bank of America Corp was liable for mortgage fraud leading up to the 2008 financial crisis, tossing a $1.27 billion penalty and dealing the U.S. Justice Department a major setback.

The 2nd U.S. Circuit Court of Appeals in New York ruled that the proof was insufficient under federal fraud statutes to establish liability in connection with a mortgage program called "Hustle" run by the former Countrywide Financial Corp.

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But U.S. Circuit Judge Richard Wesley said the evidence at most showed Countrywide breached contracts to sell Fannie and Freddie loans of a specified quality, but that no proof existed to show it intended to deceive the buyers when those contracts were executed.

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The Justice Department contended the program rewarded staff for generating more mortgages and emphasizing speed over quality and resulted in Fannie Mae and Freddie Mac being lied to about the quality of loans they bought.

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iehi-feed-59848 Sat, 21 May 2016 22:09:34 GMT Fannie, Freddie and the Secrets of a Bailout With No Exit http://implode-explode.com/viewnews/2016-05-21_FannieFreddieandtheSecretsofaBailoutWithNoExit.html with the unsealing of documents this week that were produced as part of a lawsuit filed against the government, new evidence is coming to light on how intimately the White House was involved in the Treasury's decision in August 2012 to keep all the companies' profits for the government. That move effectively maintained Fannie's and Freddie's status as wards of the state.

The newly released documents go beyond previous disclosures in the case and make clear that the Obama administration never had any intention of restoring Fannie and Freddie, which enjoyed implicit backing from the government before the takeover, to their status as stand-alone entities.

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The new materials cast further doubt on arguments made in court by government lawyers that the profit sweep came about because Fannie and Freddie were in a death spiral and taxpayers needed protection from future losses. Documents unsealed last month also served to undermine that legal stance.

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Preventing the companies from using their profits to rebuild a strong capital position was an explicit goal of the Obama administration, the newly unsealed materials show. In an email sent the day the profit sweep was announced, Mr. Parrott said diverting Fannie's and Freddie's profits would eliminate "the possibility that they ever go (pretend) private again."

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The unsealed documents indicate an intense desire to get rid of Fannie and Freddie as independent entities once and for all. They do not show any concern among Treasury officials that their actions on the profit sweep might violate the law.

Another way to view this is that the Treasury simply knew it needed whatever subsidy it could squeeze out of F&F....

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iehi-feed-59841 Fri, 20 May 2016 21:26:53 GMT Business Loan Delinquencies Spread From Energy; Spike to Lehman Level http://implode-explode.com/viewnews/2016-05-20_BusinessLoanDelinquenciesSpreadFromEnergySpiketoLehmanLevel.html iehi-feed-59838 Fri, 20 May 2016 21:12:09 GMT The U.S. Government Is [Still] Quietly Paying Billions to Wall Street Banks http://implode-explode.com/viewnews/2016-05-20_TheUSGovernmentIsStillQuietlyPayingBillionstoWallStreetBanks.html iehi-feed-59836 Fri, 20 May 2016 17:18:28 GMT Germany Strives to Avoid Housing Bubble by Forming New Policies http://implode-explode.com/viewnews/2016-05-20_GermanyStrivestoAvoidHousingBubblebyFormingNewPolicies.html iehi-feed-59797 Sun, 15 May 2016 18:35:24 GMT FBI Illegally Hid Surveillance Devices Around Courthouse Fishing For Foreclosure Sale Fraud http://implode-explode.com/viewnews/2016-05-15_FBIIllegallyHidSurveillanceDevicesAroundCourthouseFishingForFore.html iehi-feed-59789 Sat, 14 May 2016 23:39:56 GMT Millennials' Structural Economic "Shortfall": $376 Billion/yr http://implode-explode.com/viewnews/2016-05-14_MillennialsStructuralEconomicShortfall376Billionyr.html iehi-feed-59756 Thu, 12 May 2016 15:49:12 GMT The New SoCal: Multifamily Construction and International Buyers Dominate http://implode-explode.com/viewnews/2016-05-12_TheNewSoCalMultifamilyConstructionandInternationalBuyersDominate.html iehi-feed-59742 Mon, 09 May 2016 18:36:13 GMT 34% of all Americans now financially support the rest of the country http://implode-explode.com/viewnews/2016-05-09_34ofallAmericansnowfinanciallysupporttherestofthecountry.html iehi-feed-59739 Mon, 09 May 2016 14:18:29 GMT The end of American meritocracy http://implode-explode.com/viewnews/2016-05-09_TheendofAmericanmeritocracy.html Since the late 1960s both parties, in different ways, have turned a blind eye to the economic interests of the middle class. In 1972 the McGovern-Fraser Commission revamped the Democratic party's rules for selecting its nominee after the disastrous 1968 convention in Chicago. The overhaul changed the party's course. It included obligatory seats for women, ethnic minorities and young people -- but left out working males altogether. "We aren't going to let these Camelot Harvard-Berkeley types take over our party," said the head of the AFL-CIO, the largest American union federation. That is precisely what happened. Democrats cemented the shift from a class-based party to an ethnic coalition by enshrining affirmative action for non-whites. Getting a leg up to university, the ultimate meritocratic vehicle, was based on your skin colour rather than your economic situation

Unsurprisingly, swaths of the white middle class turned Republican. Forty years on, many Democrats, not least Bernie Sanders' supporters, are suffering buyer's remorse.

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Once in office, Republicans pursued tax cuts for the rich. Ignored by both parties and disproportionately hit by the downsides of globalisation, blue-collar whites fell into depression. For the first time, life expectancy among American whites is falling.

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iehi-feed-59720 Fri, 06 May 2016 18:41:32 GMT Millennials Lead the Way Toward Financial Literacy http://implode-explode.com/viewnews/2016-05-06_MillennialsLeadtheWayTowardFinancialLiteracy.html iehi-feed-59710 Thu, 05 May 2016 20:48:44 GMT L.A. sees another sharp rise in homelessness and tent, vehicle living http://implode-explode.com/viewnews/2016-05-05_LAseesanothersharpriseinhomelessnessandtentvehicleliving.html Homelessness increased in the last year in the city and county of Los Angeles, leaving nearly 47,000 people in the streets and shelters despite an intensive federal push that slashed the ranks of homeless veterans by nearly a third, according to figures released Wednesday by the Los Angeles Homeless Services Authority.

Nearly two-thirds of the homeless people tallied countywide, or 28,000, were in the city of Los Angeles, representing an 11% jump in January from a year earlier, a report from the agency stated. The county's homeless population grew 5.7%.

Homelessness has increased steadily since 2013, as local officials struggle to identify funding for billion-dollar plans they approved this year to solve one of the region's most intractable problems.

The number of homeless women across most of the county -- Long Beach, Glendale and Pasadena are counted separately -- has jumped 55% since 2013, to 14,461 from 9,348.

In that same area, the most visible form of homelessness -- tents, shantytowns and vehicles with people living in them -- climbed 20%, on top of an 85% jump in 2015... Garcetti called the increase in the "unsheltered" population -- homeless people living outdoors in tents, shanties, cars and RVs -- particularly worrisome.

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iehi-feed-59694 Tue, 03 May 2016 19:33:55 GMT Freddie Mac posts $354M "Don't Worry, It's Just Derivatives" loss; Cuts Dividend; Won't Draw on Treasury http://implode-explode.com/viewnews/2016-05-03_FreddieMacposts354MDontWorryItsJustDerivativeslossCutsDividendWo.html Mortgage giant Freddie Mac reported a net loss of $354 million for the first quarter, mostly due to losses it sustained on the investments it uses to hedge against swings in interest rates. The government-controlled company said Tuesday the January-through-March loss mainly reflected accounting measures, while its business remained strong. The loss compared with net income of $524 million in the same period of 2015.

As a result of the loss the company, based in McLean, Va., is skipping paying a quarterly dividend to the U.S. Treasury next month. Freddie previously has paid $98.2 billion in dividends, exceeding its government bailout of $71 billion.

Freddie also sustained a loss in the third quarter of last year, $475 million, also largely due to losses on derivatives used to hedge against interest-rate swings. While Freddie and Fannie have shown volatility in their quarterly earnings, the housing market's gradual recovery in recent years has made them profitable again.

Regarding the latter point from the title, see Freddie Mac: No Draw on Treasury for Now, But. . .

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iehi-feed-59675 Sun, 01 May 2016 18:19:48 GMT The Real Story Behind The True Magnitude of The New Home Sales Collapse http://implode-explode.com/viewnews/2016-05-01_TheRealStoryBehindTheTrueMagnitudeofTheNewHomeSalesCollapse.html