Fannie to help renters stay in foreclosed homes

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Monday December 15, 11:42 am ET

Mortgage giant Fannie Mae unveils plan-in-works to help renters stay in foreclosed properties

NEW YORK (AP) -- Fannie Mae said Monday it's finalizing a plan to help renters stay in their homes even if their landlord enters foreclosure.

The mortgage giant said it's working on a national policy to allow renters living in foreclosed properties -- and who can make their rental payments -- to sign new leases with Fannie while the property is up for sale or get cash to help move into a new home.


Last month, Fannie and sibling company Freddie Mac suspended foreclosure sales on occupied single-family homes and evictions from those properties through the holidays until Jan. 9, 2009. Fannie said these actions helped an estimated 7,000 to 10,000 families to remain in their homes.

The company said the new renter policy will go in effect before Jan. 9.

Last week, New Haven Legal Assistance Association Inc. in Connecticut, which represents several tenants facing eviction on properties held by Fannie Mae, raised the concerns about renter evictions and discussed the situation with Fannie on Friday.

"Fannie Mae had the tendency to empty these properties with no attempt before or after the foreclosure to contact these tenants," said Amy Marx, an attorney at the legal aid group. "A lot of these renters are low-income and an eviction wreaks havoc on their lives due to moving costs and the lack of affordable housing."

Despite the suspension on foreclosure sales and evictions, some Fannie evictions were still going forward, Marx said. Fannie said Monday it contacted its lawyer and broker network to halt those evictions.

Fannie and sibling company Freddie Mac own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. The government seized control of the pair in September.

Company spokesman Brad German said Monday that Freddie Mac also aims to have a similar plan in place by early January.

"Clearly, renters are caught in the crossfire," German said. "The goal is to provide them some stability and not evict them as a result of another's foreclosure."

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FDIC chief Sheila Bair sees housing pain into 2010

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Thursday December 11, 9:25 pm ET By Marcy Gordon, AP Business Writer

WASHINGTON (AP) -- The housing crisis will drag on at least until 2010, time needed for credit markets to revive and government rescue programs to make an impact, the head of the Federal Deposit Insurance Corp. said Thursday.

FDIC Chairman Sheila Bair said regulators were bracing for a difficult year ahead as the economy staggers under the worst crisis since the 1930s and mounting job losses push new multitudes of struggling home borrowers into default.

"We think we're going to have a tough year next year, and we're preparing for that," Bair said in an interview with The Associated Press. "But we'll work through it."

"By 2010 we'll be seeing the light at the end of the tunnel," Bair said.

She spoke as industry reports showed the number of U.S. homeowners dragged into the housing crisis fell in November to the lowest level since June as new state laws lengthened the foreclosure process.

More than 259,000 homes nationwide received at least one foreclosure-related notice last month, down 7 percent from October, but 28 percent higher than a year ago, according to RealtyTrac.

Bair stressed that the preponderance of U.S. banks and thrifts -- some 90 percent -- continue to be in strong financial condition. Twenty-three banks have failed so far this year amid the economic tumult, including Seattle-based thrift Washington Mutual Inc. in September, the biggest bank collapse in U.S. history. That compares with three failures for all of 2007 and is far more than in the previous five years combined.

The government's rescue plan includes hundreds of billions of dollars in direct federal investment in U.S. banks, as well as an FDIC program of three-year guarantees for as much as $1.4 trillion in new loans between banks.

The goal is to thaw the credit freeze gripping the economy and encourage banks to lend, Bair said.

But on action to provide struggling homeowners the ability to switch into affordable loans and help stanch the foreclosure wave, "we're still behind, very much behind, the curve," she added.

Debate on that issue has been intensifying as Democrats, including President-elect Barack Obama, insist that the government must use some of the $700 billion in bailout funds to halt rising foreclosures.

That also is the stance of Bair, an independent regulator and moderate Republican, who broke with the Bush administration in pushing her proposal to use $24 billion in government bailout funds to help 1.5 million borrowers avoid foreclosure by guaranteeing modified home loans through the end of next year.

Bair said she "wished a structured program would have gotten under way sooner" and expressed frustration several times during an hourlong interview about not having seen her plan prevail. But she said, "I think we do need to look forward. There are a lot of borrowers to help."

A change of posture could come with the new administration.

Bair said she has "a good working relationship" with Obama's designated nominee for Treasury secretary, New York Federal Reserve President Timothy Geithner, with whom she helped negotiate terms of the government's multibillion-dollar rescue of Citigroup Inc. in intense talks over the weekend before Thanksgiving.

Bair convinced Geithner and Treasury Secretary Henry Paulson in those discussions that Citigroup should be required to modify mortgages to help distressed homeowners as a condition for the government agreeing to shoulder hundreds of billions of dollars in possible losses at the bank.

"I have a lot of respect for him," Bair said of Geithner. "He's a very bright guy and he's got a real policy sense."


Senior Democrats in Congress have asked President George W. Bush to appoint Bair to a special position overseeing a government-wide effort to stem foreclosures.

Asked her view on such a "housing czar" position in the new Obama administration, Bair said Thursday, "I think if you create a job and give that person real power to do something, that might be a good thing."

She allowed, however, that it could be difficult to achieve and for that official to have an "overarching" function above the various federal agencies that deal with housing and mortgage issues, including the Treasury and the Federal Reserve.

"I am very happy right where I am," said Bair, whose term extends to 2011. "But I do want to accommodate the new administration in whatever capacity."

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Foreclosure activity drops to June levels

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Thursday December 11, 1:12 am ET By Alan Zibel, AP Real Estate Writer

New foreclosure filings fall to lowest level since June

WASHINGTON (AP) -- The number of American homeowners dragged into the housing crisis fell last month to the lowest level since June as new state laws lengthened the foreclosure process, RealtyTrac reported Thursday.

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"We're going to have a pretty significant spike in January," said Rick Sharga, RealtyTrac's vice president for marketing. Plus, as job losses mount, "increases in foreclosure activity follow that pretty directly," he added.

Nationwide, more than 259,000 homes received at least one foreclosure-related notice in November, down 7 percent from October, but 28 percent higher than a year ago, RealtyTrac said.

The report comes as Democrats, including President-elect Barack Obama, insist that the government must use some of the bailout funds to halt rising foreclosures.

Last week, the Mortgage Bankers Association reported that a record one in 10 American homeowners with a mortgage was either at least one month behind on their payments or in foreclosure at the end of September.

RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 78,000 properties were repossessed by lenders last month, said the Irvine, Calif.-based company.

The worst recession in decades, falling home values and stricter lending standards have ensnared millions of U.S. households. The Federal Reserve predicts that new foreclosures this year will reach about 2.25 million, more than double pre-crisis levels.

In RealtyTrac's report, Nevada, Florida and Arizona had the nation's top foreclosure rates. In Nevada, one in every 76 homes received a foreclosure filing last month. Florida saw one in every 173 properties receive a foreclosure filing, and in Arizona it was one in every 198 homes. Rounding out the top 10 were California, Michigan, Georgia, Ohio, Colorado, Utah and Idaho.

Among metro areas, the Cape Coral-Fort Myers area in Florida was first, with one in every 59 housing units receiving a foreclosure filing. It was followed by Las Vegas, and the California cities of Merced, Modesto and Stockton.

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Obama: Economy to get worse before it improves

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Sunday December 7, 11:23 am ET By David Espo, AP Special Correspondent

Obama says economy to get worse before it gets better; priority is on recovery plan

WASHINGTON (AP) -- President-elect Barack Obama said the economy seems destined to get worse before it gets better and he pledged a recovery plan "that is equal to the task ahead."

Obama also said in an interview broadcast Sunday that the survival of the domestic car-making capacity is important, yet any bailout must be "conditioned on an auto industry emerging at the end of the process that actually works."

Less than six weeks before he takes office, Obama said that help for homeowners facing foreclosure is an option as part of his plan. He sidestepped a question about when he plans to raise taxes on wealthy Americans.

Obama's interview on NBC's "Meet the Press" was his most extensive since winning the White House more than a month ago.

In the intervening weeks, the economy has showed clear signs of worsening. Employers said they eliminated more than 500,000 jobs in November alone and retailers reported disappointing holiday-season sales.

"The economy is going to get worse before it gets better," he said twice in the early moments of the interview, taped Saturday in Chicago.

The president-elect announced on Saturday he would call for the most massive spending on public works since the creation of the interstate highway system a half-century ago. In a word of caution to powerful lawmakers, he said the first priority would be "shovel-ready" projects -- those that could create jobs rights away.

"The days of just pork coming out of Congress as a strategy those days are over," he added.

Obama said repeatedly that his economic advisers are at work on an economic aid package, but he has largely stayed out of the public debate over bailout aid to the Detroit automakers. Congress and the Bush administration are at work on a plan for roughly $15 billion for General Motors Corp., Ford Motor Co. and Chrysler LLC. Congressional leader hope to pass the measure this week.

Obama suggested he would support such a plan, so long as it was accompanied by conditions to "keep the automakers' feet to the fire in making the changes that are necessary" for longer-term survival. He also indicated he did not believe bankruptcy is an acceptable course of action for any of the companies.

The president-elect sidestepped a question about the pace of a troop withdrawal from Iraq, saying he would direct U.S. generals to come up with a plan "for a responsible drawdown." He said in the campaign he wanted most U.S. troops withdrawn within 16 months, but did not say then, nor has he now, how large a deployment should be left behind.

Obama also spoke about his latest Cabinet selection, retired Gen. Eric Shinseki to head the Veterans Affairs Department. Shinseki was forced into retirement by the Bush administration after he said the original invasion plan for Iraq did not include enough troops.

"He was right," Obama said.

The president-elect declined to comment on the possible appointment of Caroline Kennedy to New York Sen. Hillary Rodham Clinton's seat in the Senate. Obama tapped Clinton recently as his secretary of state.

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Dow plunges on news recession began in Dec. 2007

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Monday December 1, 9:11 pm ET
By Jeannine Aversa and Martin Crutsinger, AP Economics Writers

WASHINGTON (AP) -- Most Americans sorely knew it already, but now it's official: The country is in a recession, and it's getting worse. Wall Street convulsed at the news -- and a fresh batch of bad economic reports -- tanking nearly 680 points. With the economic pain likely to stretch well into 2009, Federal Reserve Chairman Ben Bernanke said Monday he stands ready to lower interest rates yet again and to explore other rescue or revival measures.

Rushing in reinforcements, Treasury Secretary Henry Paulson, who along with Bernanke has been leading the government's efforts to stem the worst financial crisis since the 1930s, pledged to take all the steps he can in the waning days of the Bush administration to provide relief. Specifically, Paulson is eyeing more ways to tap into a $700 billion financial bailout pool.

On Capitol Hill, House Speaker Nancy Pelosi, D-Calif., vowed to have a massive economic stimulus package ready on Inauguration Day for President-elect Barack Obama's signature.

That measure -- which could total a whopping $500 billion -- would bankroll big public works projects to generate jobs, provide aid to states to help with Medicaid costs and provide money toward renewable energy development. Crafting such a colossal recovery package would mark a Herculean feat: Congress convenes Jan. 6, giving lawmakers just two weeks to complete their work if it is to be signed on Jan. 20.

President George W. Bush, in an interview with ABC's "World News," expressed remorse about lost jobs, cracked nest eggs and other damage wrought by the financial crisis. "I'm sorry it's happening, of course," said Bush. The president said he'd back more government intervention.

None of the pledges for more action could comfort Wall Street investors. The Dow Jones industrials plunged 679.95 points, or 7.70 percent, to close at 8,149.09.

It was another white-knuckle day, punctuated by grim economic reports. An index of manufacturing activity sank to a reading of 36.2 in November, a 26-year low, the Institute for Supply Management reported. Construction spending fell by a larger than expected 1.2 percent in October, the Commerce Department said.

Adding to the gloom, the National Bureau of Economic Research, a group of academic economists, concluded Monday that the country has been suffering through a recession since December 2007.

With NBER's decision, the United States has fallen into two recessions during Bush's eight years in office. The first one started in March 2001 and ended in November of that year.

The economy jolted into reverse in the final three months of last year. After a short spring rebound, it contracted again in the summer. Economists say it is still shrinking and will continue to do so through at least the first quarter of next year.

Unlike past recessions, consumers are bearing the brunt of this one. Clobbered by job losses, hard-to-get credit and hits to their wealth from sinking home values and plunging portfolio investments, consumers have cut back sharply on their spending, throwing the economy into chaos.

Watching customers' appetites wane, employers have throttled back on hiring. The unemployment rate in October zoomed to 6.5 percent, a 14-year high. So far this year, 1.2 million positions have disappeared. The jobless rate is likely to climb to 8 percent or higher next year.

Against that backdrop, many economists believe the current recession will be the worst since the 1981-82 downturn.

To help ease the pain, Bernanke said additional interest-rate cuts are "certainly feasible," but he warned there are limits to how much such action would revive the economy, which is likely to stay mired in weakness well into next year.

The Fed's key interest rate now stands at 1 percent, a level seen only once before in the past half-century, and many economists predict Bernanke and his colleagues will drop the rate again at their next meeting on Dec. 15-16.

The Fed can lower its key rate only so far -- to zero -- and it's getting ever closer. Given that constraint, Bernanke said there are other ways to bolster economic activity.

The Fed, for instance, could buy longer-term Treasury or agency securities on the open market in substantial quantities, he said. This might lower rates on these securities, "thus helping to spur aggregate demand," Bernanke said.

Because the Fed can go only so low in reducing interest rates, the central bank over the past year has resorted to a flurry of other radical and often unprecedented actions with the hope of busting through credit jams and getting financial markets operating more normally.

The bracing impact of the Fed's aggressive rate reductions, however, has been somewhat stymied by the credit and financial crises, Bernanke said. Despite lower borrowing costs, skittish banks have been reluctant to lend money to people and businesses, a vicious cycle that has seriously hobbled the U.S. economy.

"Even if the functioning of financial markets continues to improve, economic conditions will probably remain weak for a time," Bernanke warned.

Paulson, meanwhile, has been working closely with the incoming administration, including New York Fed President Timothy Geithner, Obama's pick to be the next treasury secretary, to pave the way for a smooth transition.

"We are actively engaged in developing additional programs to strengthen our financial system so that lending flows into our economy," Paulson said, referring to tapping the $700 billion bailout fund. "When these programs are ready for implementation, we will discuss them with the Congress and the next administration," he added.

Paulson did not provide specifics on what type of programs the administration was weighing other than to say that it was looking at ways to boost capital injections into financial institutions.

Associated Press Writers Andrew Taylor and Deb Riechmann contributed to this report.

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