Bo McCarver’s weekly news compilation, 4-18-2011

Special to the Texas Low Income Housing Information Service

Disclosures continue to shed light on sleazy mortgage deals by US bankers but justice is slow in coming, if at all. The Justice Department and HUD have met with the ten largest mortgage companies in an effort to reach a broad agreement as to how to reconcile malfeasance.

For a pdf version of the full articles, plus contextual stories in social, environmental and legal areas, contact Bo McCarver at bmccarver@austin.rr.com

Report: Big profits drove faulty ratings at Moody’s, S&P

By Kevin G. Hall        McClatchy Newspapers         April 13, 2011

WASHINGTON — Analysts who reviewed complex mortgage bonds that ultimately collapsed and ruined the U.S. housing market were threatened with firing if they lost lucrative business, prompting faulty ratings on trillions of dollars worth of junk mortgage bonds, a Senate report said Wednesday.

The 639-page report by the Senate Permanent Subcommittee on Investigations confirms much of what McClatchy first reported about mismanagement by credit ratings agencies in 2009.

Credit rating agencies are supposed to provide independent assessments on the quality of debt being issued by companies or governments. Traditionally, investments rated AAA had a probability of failure of less than 1 percent.

Full story at: http://www.mcclatchydc.com/2011/04/13/112138/report-market-share-drove-faulty.html

Critics: Goldman should give back $2.9 billion to taxpayers

By Greg Gordon        McClatchy Newspapers       April 13, 2011

WASHINGTON — Irked that Goldman Sachs appears to have reaped a $2.9 billion taxpayer-aided windfall on an investment of a mere $20 million, some experts and watchdogs say the Wall Street giant should return the money to the U.S. Treasury.

“It’s a very simple call to make,” said Sylvain Raynes, a frequent Goldman critic who’s an expert in the kinds of deals in which the investment bank landed an apparent jackpot. “They should never have been given this money, and they should give it back.”

The assessment by the Financial Crisis Inquiry Commission also exposed a potentially huge regulatory omission in the rescue of the insurance giant American International Group, which was the conduit for more than $90 billion in tax dollars to U.S. and European banks.

It’s now clear that the Federal Reserve Bank of New York, which quarterbacked the hurried, $182 billion bailout of AIG to avoid a meltdown of global financial markets, did little to guard against windfalls for major banks and investment banks.

Full story at: http://www.mcclatchydc.com/2011/02/15/108802/critics-goldman-should-give-back.html

Goldman executives: We made money betting against mortgage market

By Greg Gordon         McClatchy Newspapers        April 13, 2011

WASHINGTON — In an internal e-mail released Saturday, Goldman Sachs chief executive Lloyd Blankfein wrote in November 2007 that the firm “didn’t dodge the mortgage mess,” but “made more than we lost” by betting against the U.S. housing market.

Blankfein’s e-mail, which a Senate investigations panel released with three other subpoenaed company documents, appears to contradict Goldman’s denials that it profited from the subprime mortgage meltdown by secretly betting that housing prices would fall. At the same time, Goldman was selling tens of billions of dollars in risky mortgage securities.

Goldman has said that its contrary bets were largely on behalf of its clients.

Full story at: http://www.mcclatchydc.com/2010/04/24/92812/goldman-e-mails-we-made-money.html

Loan servicers reach deal to repay homeowners for faulty foreclosure

By Lorraine Woellert       Bloomberg News      April 13, 2011

The 14 largest U.S. mortgage servicers must pay back homeowners for losses from foreclosures or loans that were mishandled in the wake of the housing collapse, the first of a set of sanctions regulators are seeking against the companies.

The settlement announced Wednesday between servicers and banking regulators could help the U.S. Justice Department determine the size and scope of fines for the flawed practices, regulators said.

Officials from the Justice Department, the Department of Housing and Urban Development and 10 state attorneys general met with banks, the second such meeting to negotiate a global settlement, Associate U.S. Attorney General Tom Perrelli said. The group is discussing potential fines and whether servicers should be required to reduce the principal on some home loans.

“This has been a very broad interagency effort,” Perrelli said. “The best possible resolution for consumers, for all government entities, is a fully coordinated resolution.”

The consent decrees with banks address a “subset” of issues with mortgage servicers, Perrelli said.

Full story at: http://www.statesman.com/business/loan-servicers-reach-deal-to-repay-homeowners-for-1398137.html

Banks are foreclosing while homeowners pursue loan modifications

Lenders say ‘dual tracking’ protects their investment if the homeowner is unable to qualify for new loan terms. But regulators seeking to ban the practice say it lulls some borrowers into thinking they won’t have their homes taken away.

By Alejandro Lazo        Los Angeles Times        April 14, 2011

Mortgage lenders call it “dual tracking,” but for homeowners struggling to avoid foreclosure, it might go by another name: the double-cross.

Dual tracking refers to a common bank tactic. When a borrower in default seeks a loan modification, the institution often continues to pursue foreclosure at the same time.

Lenders contend that dual tracking simply protects their investment if the homeowner is unable to qualify for new loan terms. Mortgage servicers can lose money if they don’t foreclose in a timely manner, and repossessions often are complicated and lengthy.

But regulators and consumer advocates say the practice lulls some homeowners into thinking they are no longer at risk of having their homes taken away. Regulators are now aiming to curtail the practice as part of an overhaul of the foreclosure system.

Full story at: http://www.latimes.com/business/la-fi-dual-tracking-20110415,0,7480260.story

Odessa-man convicted in real-estate scheme

Odessa American      April 17, 2011

A 34-year-old Odessa man was convicted in connection with an estimated $190,000 fraudulent real estate scheme, a news release from the U.S. Department of Justice stated.

Marcus Rosenberger was convicted Thursday of one count of conspiracy to commit mail and wire fraud, one count of mail fraud and 10 counts of wire fraud, the news release stated. 

Beginning in March 2009, Rosenberger and 35-year-old Jason Heath Morrison of Midland operated a real-estate investment venture under the name Vanguard Properties, the release stated. Within a year, the two men identified 10 homes that were in residential foreclosure and approached the owners of the homes about preserving their credit rating by relinquishing ownership to them, the release stated. Rosenberger and Morrison would tell the property owners they would in return, pay off the existing property lien, the release stated.

Full story at: http://www.oaoa.com/news/stated-63630-release-rosenberger.html

Housing officials criticize 20% down-payment proposal

By Dina ElBoghdady        Washington Post       April 14, 2011

One of the leading Democratic lawmakers on housing policy and the Obama administration’s own housing agency criticized as too stringent an administration proposal that would push home buyers to come up with sizable down payments.

Under the plan, banks would have to retain a stake in the home purchase loans they make to borrowers who put down less than 20 percent. The banks say that the requirements would be costly and that those costs would be passed on to borrowers in the form of higher interest rates. That would effectively shut millions of families out of homeownership.

Full story at: http://www.washingtonpost.com/business/economy/housing-officials-criticize-20percent-down-payment-proposal/2011/04/14/AFLWpcfD_story.html?hpid=z2

$100 Million for HUD Sustainability Program Survives in This Year’s Budget

By Tanya Snyder        D.C. Street Blog       April 18, 2011

With multiple versions of two years’ worth of federal budgets flying around, some details are still emerging about what’s in and what’s out. At the end of last week we heard that the FY2011 budget, which has been sent to the president for his signature, includes $100 million for the Partnership for Sustainable Communities. According to HUD Sustainable Communities Director Shelley Poticha, the partnership was allocated $70 million for regional planning grants ($17.5 million is slated for regions with populations of less than 500,000) and $30 million for Community Challenge planning grants.

Full story at: http://dc.streetsblog.org/2011/04/18/100-million-for-hud-sustainability-program-survives-in-this-years-budget/

The New American Dream: Denser, Smaller, Closer, But Still Private

By Richard Florida       The Atlantic       April 13, 2011

Reading through the newly released 2011 Community Preference Survey, conducted for the National Association of Realtors, I’ve been overwhelmed with a sense of déjà vu. Ever since the economic collapse, I have been writing about the great reset and the rise of “a new normal”–now I’m seeing it clear as day, in the pages of this market survey. The ideal of a McMansion out in some sprawling subdivision, a long commute away from the office, is on its last legs. The idea of the car as freedom is dying too. Driving is now seen as something that is taxing if not enslaving.

When selecting a community, nearly half of the public (47%) would prefer to live in a city (19%) or a suburban neighborhood with a mix of houses, shops, and businesses (28%). Another four in ten (40%) would prefer a rural area (22%) or a small town (18%). Only one in ten (12%) say they would prefer a suburban neighborhood with houses only.

Full story at: http://www.theatlantic.com/business/archive/2011/04/the-new-american-dream-denser-smaller-closer-but-still-private/237284/

Residents continue fight against low-income housing projects

By Frank Kras        Houston Chronicle       April 13, 2011

Neighbors of two proposed apartment complexes in the Westheimer Lakes area have not let up in their opposition to the developments.

Julie Boyd, one of the leaders of the movement to oppose the projects, said about ten residents spoke against them at a state hearing last week. It was hosted by the Texas Department of Housing and Community Affairs, which will determine whether tax credits are awarded for the sites.

Boyd said she had collected about 2,100 signatures in about a month opposing the low-income and senior complex proposals. She said the signatures came from a radius of approximately five miles from Westheimer Lakes.

“It went well,” Boyd said of the hearing, reporting that no residents spoke in favor of the projects.

Full story at: http://ultimatefortbend.com/stories/241230-residents-continue-fight-against-low-income-housing-projects

Island housing program gets another year

By Amanda Casanova        Galveston County Daily News         April 17, 2011

GALVESTON — The state has agreed to give a one-year extension to the housing recovery program on the island, a program that has long been criticized for its slow pace.
 Kevin Hamby, senior counsel for the Texas Department of Housing and Community Affairs, reported to the city council Thursday that more than 200 contracts for construction were set up in the state system.

 “That extension will take you through next year and allow you to spend that money,” he said. “We are happy to keep the money here in Galveston and keep it moving.”

 Residents and the city council have been frustrated with the multimillion-dollar assistance program’s progress and have criticized the consulting firm hired to oversee the program.

 At the last council meeting in March, the firm CDM narrowly avoided having its contract terminated in a 4-3 split vote.

Full story at: http://galvestondailynews.com/story/225738