Entries in Housing Crisis (5)


New Fed Task Force Subpoenas 11 in Mortgage Fraud Probe

Mark Wilson/Getty Images(WASHINGTON) -- A new federal and state task force was created Friday to investigate mortgage fraud that contributed to the 2008 financial crisis, and the panel immediately subpoenaed 11 financial institutions.

Attorney General Eric Holder said the new unit would consist of 55 Justice Department lawyers and analysts and 10 FBI agents to work with state attorney general’s offices to investigate how mortgage backed securities were created, sold  and valued by financial institutions. The creation of the unit was announced by President Obama in his State of the Union address on Tuesday.

“The Working Group will streamline and strengthen current and future efforts to identify, investigate, and prosecute instances of wrongdoing in the packaging, selling, and valuing of residential mortgage-backed securities,” Holder said at a press conference on Friday.

Making the announcement the attorney general disclosed that the Justice Department has sent civil subpoenas to 11  financial institutions as part of the investigation. They did not identify the targets of the subpoenas.

“You can expect more to follow,” Holder said in reference to the subpoenas being sent out. “Of course, I can’t go into detail about our existing investigations.  But I can tell you that significant efforts are moving forward, by both federal and state authorities.”

The working group will be co-chaired by the heads of the Justice Department’s Civil and Criminal Division, John Walsh the U.S. Attorney from Colorado,  Robert Khuzami the SEC Enforcement Director and Eric Schneiderman the New York Attorney General.

Although the FBI, SEC and Justice Department have been investigating numerous aspects of the financial crisis, officials hope the new working group may be able to use New York State’s Martin Act, which gives investigators broad powers to investigate fraud.  The act allows New York to bring criminal and civil fraud charges without needing to show intent to commit fraud.

Copyright 2012 ABC News Radio


Little Talk of Housing Crisis on the Campaign Trail

Brand X Pictures/Thinkstock(WASHINGTON) -- When the mortgage crisis erupted in 2007, the housing industry dominated the political agenda.

Four years later, the economy remains on the forefront of Americans’ minds, but contenders for the 2012 elections have little to say about the housing industry, the future of which remains bleak.

Mitt Romney incited the ire of liberals and President Obama when he suggested Tuesday that banks shouldn’t stop the foreclosure process and instead let them “hit the bottom.”

“The idea of the federal government running around and saying, hey, we’re going to give you some money for trading in your old car, or we’re going to give you a few thousand bucks for buying a new house, or we’re going to keep banks from foreclosing if you can’t make your payments, these kind of actions on the part of government haven’t worked,” the leading Republican 2012 contender said at Tuesday night’s debate in Nevada, which has the highest foreclosure rate in the country.

But other GOP candidates have been relatively mum on the issue, even as the housing industry remains weak.

“No one has very good ideas of what to do about this situation that we’re in right now,” said Peter J. Wallison, a fellow at the conservative American Enterprise Institute who served as counsel to President Ronald Reagan. “It’s a much more complex issue than talking about the debt or defense policy or foreign policy. This is a very complicated financial problem and to try and explain it in a soundbite is very hard to do.”

The housing market is predicted to remain weak as the 2012 election cycle begins. In its Economic and Housing Forecasts for October 2011 report, Fannie Mae forecasts that home sales will continue to weaken and that mortgage applications haven’t increased despite low interest rates and government programs to jolt the market.

“In this type of environment, the housing market remains very sluggish and consumers’ willingness to dig into their savings to purchase big ticket items is very low,” Fannie Mae’s chief economist, Doug Duncan, said in a statement. “Leading indicators point to housing sales bouncing near the bottom at least through the end of 2012.”

The Obama administration has launched several programs to jolt the sluggish market, but only a handful have been met with mixed success.

The $75 billion Home Affordable Mortgage Insurance Program, launched in March 2009, didn’t attract as many distressed homebuyers as the administration had hoped. Some people who took advantage of the program ended up defaulting again on their mortgage. The Federal Housing Administration’s refinancing program has also taken heavy criticism for the same reason.

“I think the program wasn’t aggressive,” said leading economist and Yale professor Robert Shiller. “We are still in this situation that homeowners are exposed to real estate risk and there’s not much being done for them.”

Consumer confidence plays a significant role in how people perceive their elected leaders. A weak housing market, coupled with the economic crisis, could spell trouble for President Obama. Battleground states like Florida, Nevada and Ohio boast some of the highest foreclosure rates in the country. And the sluggish market is weighing generally on consumer confidence.

“It’s a drag on the economy and it’s a drag on confidence,” Shiller said. “Consumer confidence is at record lows...and it’s related to the fact that so many people are wiped out or underwater or they’re worried about being under water soon. It’s affected the mortgage portfolios of banks.”

A turnaround in the housing market would boost the economy and help Obama’s re-election chances, not dissimilar to President Roosevelt, who won a second term in 1936 despite the Great Depression. But critics say the administration has taken too long to turn back the dial.

“All of these programs have caused people to rethink what is happening in the mortgage markets and the housing markets and to be wary of the government’s involvement in those markets and the danger that the government may do something again that will cause housing prices to fall further,” Wallison said.

Copyright 2011 ABC News Radio 


Former Reagan Economist: 50% Chance of Another Recession

Creatas/Thinkstock(NEW YORK) -- Harvard University economics professor Martin Feldstein said the meager U.S. recovery that began two years ago has been losing steam.

Feldstein said in an interview on Bloomberg Television “I think there’s now a 50 percent chance that we could slide into a new recession.”

Feldstein, 71, is a former president of the National Bureau of Economic Research and a member of the NBER committee that declared the recession ended in June 2009. He also formerly served as chief economic adviser to President Ronald Reagan.

Feldstein cited continued weakness in housing and employment.

The Federal Reserve “has done everything it can,” Feldstein said, though Congress and the administration have failed to address the central problem of weak housing.

“Housing is a major drag on the economy,” he said. “The plan to deal with it has been a failure” and house prices have continued to fall.

Feldstein’s comments echoed Fed Chairman Ben S. Bernanke, who said the “economy still needs a good deal of support.”

Copyright 2011 ABC News Radio


Issa Prepares for First Oversight Hearing on Foreclosure Crisis 

Photo Courtesy - ABC News(WASHINGTON) – Darrell Issa has announced that the House Committee on Oversight and Government Reform will meet next Wednesday, his first meeting since taking over as chairman.

The hearing, “Bailouts and the Foreclosure Crisis:  Report of the Special Inspector General for the Troubled Asset Relief Program,” will focus on government oversight of the foreclosure crisis and the transparency of TARP.

“TARP was conceived by a Republican Administration, approved by a Democratic Congress, and has operated for two years under the current Administration,” Issa said. “It’s a fitting subject for bipartisan oversight in the new Congress.”

Invited to witness the hearing are Neil Barofsky, Special Investigator General of the Troubled Asset Relief Program, and Treasury Secretary Timothy Geithner.

Copyright 2011 ABC News Radio


Freddie Mac Will Not Evict Families During Holidays

Photo Courtesy -- ABC News(MCLEAN, Va.) – Lending giant Freddie Mac has announced that it will not evict families from foreclosed homes over the holidays.

The Federal Home Loan Mortgage Corporation said Wednesday it will not carry out evictions on foreclosed single family and two to four unit properties that are occupied.

"If the property is occupied, our foreclosure attorneys will suspend the eviction to provide a greater measure of certainty to families during the holidays," said Anthony Renzi, executive vice president of Single Family Portfolio Management at Freddie Mac.
The order will go into effect on December 20, 2010, and end January 3, 2011.

Copyright 2010 ABC News Radio

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