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Tuesday March 4, 2008
Washington Post Staff Writer
Tuesday, March 4, 2008; Page D01 
Fannie Mae and Freddie Mac's revenues are related to the volume of
loans they buy and guarantee. More loans and bigger loans can generate
greater revenue from guarantee fees and mortgage interest. But if their
loans are based on inflated real estate values, Fannie Mae, Freddie Mac
and the investors who buy their securities have less collateral than it
appears, magnifying losses in the event of foreclosure. Fannie
Mae and Freddie Mac were always able to set appraisal requirements for
the loans they buy or guarantee, said financial services analyst Josh
Rosner of Graham Fisher & Co. "So if this is really needed, it
suggests that their models have failed. If this is not really needed,
then it's nothing more than public relations." A survey last
year by October Research, a publisher of real estate industry
newsletters, found that 90 percent of appraisers said they had been
pressured to change appraisals. Appraiser Peter M. Scalise of Bruce W. Reyle & Co. in Fairfax
said that he had not encountered pressure but that he can remember
"some instances of begging." Scalise said he could not tell from the
new code of conduct what criteria lenders would use when choosing
appraisers. The conflicts of interest in the appraisal
business have been much like those that have affected other financial
gatekeepers, such as Wall Street
analysts who rated stocks that their investment banks underwrote and
outside auditors responsible for acting as watchdogs over the companies
that hire them. The government tried to assure the
independence of appraisers through legislation adopted in response to
the savings and loan crisis of a generation ago, but the provision
wasn't enough or wasn't enforced well enough, said John Taylor, president of the National Community Reinvestment Coalition. Monday's agreement is subject to a period of public comment and would not take effect until Jan. 1, 2009. Staff writer Carrie Johnson contributed to this report.
By JEANNINE AVERSA The Associated Press
Tuesday, March 4, 2008; 9:26 AM
WASHINGTON -- Federal Reserve Chairman Ben Bernanke called Tuesday for
additional action to prevent more distressed homeowners from falling
into foreclosure. "This situation calls for a vigorous response," Bernanke said in a speech to a banking group in Florida. Even
with some relief efforts under way by industry and government,
foreclosures and late payments on home mortgages are likely to rise
"for a while longer," Bernanke warned. Rising foreclosures
threaten to worsen the problems in the housing market and for the
national economy, which many fear is on the verge of a recession or in
one already. "Reducing the rate of preventable foreclosures
would promote economic stability for households, neighborhoods and the
nation as a whole," Bernanke said. "Although lenders and servicers have
scaled up their efforts and adopted a wider variety of loss-mitigation
techniques, more can, and should be, done," the Fed chief said. One
of the suggestions Bernanke made was for mortgage and other financial
companies to reduce the amount of the loan to provide relief to a
struggling owner. "Principal reductions that restore some equity for
the homeowner may be a relatively more effective means of avoiding
delinquency and foreclosure," Bernanke said. With low or
negative equity in their home, a stressed borrower has less ability _
because there is no home equity to tap _ and less financial incentive
to try to remain in the home, he said. Bernanke acknowledged
this idea might be a tough sell to lenders. Lenders, he said, are
reluctant to write down principal. "They said that if they were to
write down the principal and house prices were to fall further, they
could feel pressured to write down principal again," Bernanke said. Still,
Bernanke suggested such longer-term permanent solutions may work better
than shorter-term and temporary ones, where the distressed homeowner
could find himself in trouble again. "When the mortgage is `under
water' a reduction in principal may increase the expected payoff by
reducing the risk of default and foreclosure," he said. To
date, permanent home mortgage modifications that have occurred have
typically involved a reduction in the interest rate, while reductions
of the principal balance of the loan have been quite rare, he said. "Measures
that lead to a sustainable outcome are to be preferred to temporary
palliatives, which may only put off foreclosure and perhaps increase
its ultimate costs," Bernanke said Lenders last year were on
pace to initiate roughly 1.5 million home foreclosure proceedings, up
from an average of fewer than 1 million new foreclosures in the
preceding two years, the Fed chief said. More than one half of the
foreclosures started in 2007 were on subprime loans givens to borrowers
with blemished credit histories or low incomes. The housing
collapse dragged down home values, especially clobbering these subprime
borrowers. Many were left with mortgages that exceeded the value of
their homes. They were further socked by low introductory rates on
their adjustable mortgages resetting to higher rates, making their
monthly payments difficult or impossible to afford. Problems in the
credit markets have made refinancing a mortgage harder.
| | Posted by alfred at 10:00 AM - | |
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By JEANNINE AVERSA The Associated Press
Tuesday, March 4, 2008; 9:26 AM
WASHINGTON -- Federal Reserve Chairman Ben Bernanke called Tuesday for
additional action to prevent more distressed homeowners from falling
into foreclosure. "This situation calls for a vigorous response," Bernanke said in a speech to a banking group in Florida. Even
with some relief efforts under way by industry and government,
foreclosures and late payments on home mortgages are likely to rise
"for a while longer," Bernanke warned. Rising foreclosures
threaten to worsen the problems in the housing market and for the
national economy, which many fear is on the verge of a recession or in
one already. "Reducing the rate of preventable foreclosures
would promote economic stability for households, neighborhoods and the
nation as a whole," Bernanke said. "Although lenders and servicers have
scaled up their efforts and adopted a wider variety of loss-mitigation
techniques, more can, and should be, done," the Fed chief said. One
of the suggestions Bernanke made was for mortgage and other financial
companies to reduce the amount of the loan to provide relief to a
struggling owner. "Principal reductions that restore some equity for
the homeowner may be a relatively more effective means of avoiding
delinquency and foreclosure," Bernanke said. With low or
negative equity in their home, a stressed borrower has less ability _
because there is no home equity to tap _ and less financial incentive
to try to remain in the home, he said. Bernanke acknowledged
this idea might be a tough sell to lenders. Lenders, he said, are
reluctant to write down principal. "They said that if they were to
write down the principal and house prices were to fall further, they
could feel pressured to write down principal again," Bernanke said. Still,
Bernanke suggested such longer-term permanent solutions may work better
than shorter-term and temporary ones, where the distressed homeowner
could find himself in trouble again. "When the mortgage is `under
water' a reduction in principal may increase the expected payoff by
reducing the risk of default and foreclosure," he said. To
date, permanent home mortgage modifications that have occurred have
typically involved a reduction in the interest rate, while reductions
of the principal balance of the loan have been quite rare, he said. "Measures
that lead to a sustainable outcome are to be preferred to temporary
palliatives, which may only put off foreclosure and perhaps increase
its ultimate costs," Bernanke said Lenders last year were on
pace to initiate roughly 1.5 million home foreclosure proceedings, up
from an average of fewer than 1 million new foreclosures in the
preceding two years, the Fed chief said. More than one half of the
foreclosures started in 2007 were on subprime loans givens to borrowers
with blemished credit histories or low incomes. The housing
collapse dragged down home values, especially clobbering these subprime
borrowers. Many were left with mortgages that exceeded the value of
their homes. They were further socked by low introductory rates on
their adjustable mortgages resetting to higher rates, making their
monthly payments difficult or impossible to afford. Problems in the
credit markets have made refinancing a mortgage harder.
| | Posted by alfred at 9:46 AM - | |
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Tuesday, March 4, 2008; Page D04 It's the start of budget season on Capitol Hill.
Congressional budget committees begin writing their fiscal 2009
spending plans this week, no doubt tossing out and reshaping many of President Bush's
priorities. Democrats and Republicans -- especially because it's an
election year -- will be jousting over spending, taxes, health care,
Social Security and other entitlements. It's uncertain where federal employees will end up in this debate. Take
next year's federal pay raise. The president has proposed a 2.9 percent
raise for federal employees and a 3.4 percent raise for the military,
knowing that Congress prefers to provide equal pay raises to both
groups. In letters to budget committees, Reps. Henry A. Waxman (D-Calif.) and Thomas M. Davis III (R-Va.) and Sen. Susan Collins (R-Maine) reiterated that Congress traditionally supports parity in pay adjustments between civilian and military personnel. Waxman, chairman of the House Oversight and Government Reform Committee,
called it "unfortunate that the president has not embraced Congress's
longstanding policy of pay parity for military and civilian employees."
Davis, the committee's ranking member, said he was "highly discouraged
the president has chosen to abandon the principle of pay parity." Neither Waxman nor Davis made a specific pay recommendation to the House Budget Committee.
Collins, the ranking Republican on the Senate Homeland Security and
Governmental Affairs Committee, commended Bush's proposed raise for the
military, adding that it is "my strong view that federal civilian
employees should be equally recognized for their efforts." Sen. Joseph I. Lieberman (I-Conn.), chairman of the Senate Homeland Security Committee, did not mention the 2009 government-wide pay issue in his letter to the Senate Budget Committee. Lieberman, though, said the 43,000 passenger and baggage screeners at the Transportation Security Administration,
who are in a performance-based pay system, should not lose out on the
government-wide pay raise approved by Congress each year. "Other
DHS" -- Department of Homeland Security -- "employees in security,
protective and law enforcement-related organizations at the department
receive the annual government-wide pay increase, and there is no reason
to give TSA screeners less," Lieberman wrote. Lieberman said he opposes a White House
budget proposal to repeal legislation, signed by Bush last year, that
provides a law enforcement retirement benefit to Customs and Border
Protection officers. Even though CBP officers carry weapons and make
arrests, it was not until last year that Congress acted to provide them
with more generous retirement benefits. In his letter,
Lieberman focused primarily on the Department of Homeland Security,
pointing out what he considers to be funding shortfalls at the TSA and
the Federal Emergency Management Agency.
Waxman took issue with an array of Bush initiatives, including a pilot
project that the White House said would provide incentives for federal
agencies to sell off surplus property. Waxman said he wanted to retain
preferences that put federal agencies and homeless shelters at the
front of the line to claim surplus government property. Davis,
meanwhile, proposed expanding investment options in the Thrift Savings
Plan, the 401(k)-type program for federal employees. Any new options
should include a real estate stock investment fund, he said. Postal Nominee
Nanci E. Langley
was nominated by the president last week to become a commissioner of
the Postal Regulatory Commission, which oversees certain aspects of U.S. Postal Service operations, including postage increases.
Langley has been director of the office of public affairs and
government relations at the commission. Before joining the commission,
she served as a longtime adviser to Sen. Daniel K. Akaka (D-Hawaii)
and was deputy staff director of the Senate subcommittee on oversight
of government management, the federal workforce and the District of
Columbia. The nomination is subject to Senate confirmation. Stephen Barr's e-mail address isbarrs@washpost.com.
| | Posted by alfred at 9:41 AM - | |
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Monday March 3, 2008
Mon Mar 3, 2008 11:50am EST
By Kevin Krolicki DETROIT
(Reuters) - Ford Motor Co said on Monday it would eliminate shifts at
four U.S. plants and lay off some 2,500 workers -- or almost 5 percent
of its remaining work force -- as part of an effort to cut costs and
return to profitability next year. The
layoffs come at a time when the No. 2 U.S. automaker is offering
buyouts and early retirement incentives to all 54,000 of its U.S.
factory workers as it attempts to recover from a $2.7 billion loss in
2007. Ford said it would
run its Chicago and Louisville, Kentucky, assembly plants on one shift
rather than the current two shifts starting this summer. Ford's
Chicago plant builds its Ford Taurus and is readying to ramp up
production for the all-new Lincoln MKS luxury sedan slated to go on
sale starting this summer. The
Louisville plant builds the Ford Explorer and Mercury Mountaineer sport
utility vehicles. Taken together the two plants employ about 4,500
workers represented by the United Auto Workers union. In
addition, Ford said it would cut a shift of workers at its Cleveland
Engine Plant No. 2 in April. That plant makes a 3.0-liter engine. Plans
to restart production at Cleveland Engine Plant No. 1, which makes a
larger 3.5-liter engine, have been pushed back to the fourth quarter
from the spring. Ford said
it expected to be able to maintain planned production volumes at the
four plants by keeping them running more consistently on a single shift
and reducing down time. Ford, which
is aiming to return to profitability in 2009, has offered all of its
U.S. factory workers buyouts and early retirement incentives with
one-time payouts of up to $140,000. An earlier round of buyouts
cut almost 34,000 workers from Ford's payroll in 2006. This time, as
part of a deal with the UAW, Ford is offering richer terms for the
roughly 12,000 remaining workers eligible to take retirement packages. Later
on Monday, Ford is set to release February U.S. sales results that are
expected to show a sharp decline from year-earlier levels. Analysts
expect industry-wide 2008 U.S. auto sales to extend a downturn that
began to accelerate in the second half of last year reflecting a
slumping housing market, higher gas prices and tighter credit. (Reporting by Kevin Krolicki, editing by
| | Posted by alfred at 8:38 PM - | |
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