Jun. 30, 2011: View on how to fix the economy; More settlement news – and CW has cost BofA how much so far?

Jun. 30, 2011: View on how to fix the economy; More settlement news – and CW has cost BofA how much so far? Rob Chrisman

[I am away from the computer on a daily basis, and my access to e-mail is sporadic and not timely. In my place are daily commentaries from a series of very knowledgeable mortgage industry people with different backgrounds, and they have been given very little direction about what to write about – the latest is below. Our views may or may not coincide, but I thank them for their time in volunteering and helping out.]   This IS the economy, stupid…   Over the past three and a half years as I’ve watched my career get annihilated, my savings accounts dwindle, waiting for the Great Punkin’ as it were, it finally dawned on me a little over a year ago, this is the economy, stupid!  It has been mildly amusing to fairly sickening to watch the City of San Jose not unlike other municipalities whine and fuss over a 10% pay cut while many of us have easily taken a 75% haircut and counting.  It hasn’t escaped me either that we are about forty six months into this financial crisis and we are just now hearing and reading the call for emergency pay cuts not to mention the budget cuts that have been littering the headlines of late. Not without notable mention the most recent headline on June 22, 2011 where the California State Controller Chiang threatened to withhold California lawmaker’s paychecks for not producing a balanced budget, and without much fanfare unlike times in the past a short time later, June 28, 2011 (ahem!) the Mercury News reported Governor Brown had a budget in hand he was sure to approve!  Amazing that our “public servants” can get along so well and settle their differences now that is it their money that is being withheld.   Without going through all of the blame and rhetoric that we’re all nauseated hearing one more time, I do believe that if we cannot stimulate the economy, first through some sort of renewed confidence that isn’t spelled QE3, with said confidence in fact it may lead to new jobs and then the American public into at least considering buying a home our lifestyles might JUST change as in a downgrade and maybe change for the foreseeable future and possibly beyond. My personal opinion, I look for home values to continue to deteriorate another 10% at the minimum and up to 30% or worse should we continue in this downward holding pattern we cannot seem to shake. With Americans continuing to lose equity in their homes, some losing half, or most of their savings riding out their unemployment situation how can our lifestyles that we’ve become so accustomed to stay at status quo when our resources are tapped leaking like a sieve at unprecedented levels?  Especially since we’ve been in an uptrend with regard to the American lifestyles upgrading over the past few decades?  Some things or a lot of things for that matter have got to give.   It is one thing to complain, so what is the solution? Run to the mirror and deem yourself accountable, we the American public are responsible for the politicians we vote into office and allow, yes I said allow to make laws that are not in our best interests but their own.  We as the voting public need to consider that MAYBE WE AS A NATION CANNOT AFFORD THE PRIVILEGE OF THESE “PUBIC SERVANTS” SERVICES AND starting immediately elect officials:   #1. Have to ask the American people IF they can have a raise and not vote their own raise in, automatic pay increases no less. #2. Have the EXACT same retirement program we have, no more lifelong pensions, are you KIDDING me??? #3. Have the EXACT same Health Care Program that they prescribe for all Americans #4. Consider increasing our expectations of said politicians and kick out the candidates with DUI’s, Domestic Violence history, accepting any favor whatsoever, ANY perverted behavior, there is never just one cockroach, ANY cheating spouse, if you don’t have any more self- control than that OR the nuts to tell your spouse you want out, don’t try to run our country or your municipality clean up your home front First! #5. Any and all laws said elected officials enact have the exact same consequence for themselves as they vote to give to Americans   I received a call from a former client that had a home paid for in another state, took money out of that house and paid cash for another, upgraded home they purchased and now are letting the first house which they took cash proceeds from go back to the bank.  I’m not a huge fan of the banks but that is just not right, we as Americans HAVE to find it in ourselves to do the right thing even in the face of watching our corporation owned and operated government do exactly to us and others the same thing I am describing here in varying degrees, this HAS to stop somewhere and it starts with us as individual Americans.  My father’s generation, he’s 74 with all its foibles did a lot of things right and to this day if you shake my dad’s hand, whatever he shook on he’d rather die than not keep his word. For us to get back the former reputation, respect and dignity of our once pristine nation we need to act accordingly and make sure our corporations and government are in line with OUR values as a nation.  Your vote does count, what you say and do does too, everyone is watching, your kids, family, neighbors, friends and colleagues!   Finally, some unintended benefits came from this gut wrenching time and I can say I’m better for it –       I appreciate my family more than ever, all of them, even Uncle Art… –       I appreciate my four year old car and don’t understand my previous obsession with driving a newer one than my new one –       I may not ever be able to buy Diesel brand jeans again, so I love the one’s I have –       I’m still in this business and I thank God for every client, like my jeans I love the one’s I have!   My boyfriend and I were sitting at a table at his high school reunion, and he kept staring at a drunken woman slugging down her drink as she sat alone at a nearby table. I asked him, “Do you know her?” “Yes”, he said, “She’s my old girlfriend.  I understand she took to drinking right after we split up those many years ago, and I hear she hasn’t been sober since.” “My God!” I said, “Who would think a person could go on celebrating that long?” Hee! Haw!   Lisa Melby Firestone Financial Group www.lisamelby.com   Editor’s note:   Yesterday the press was filled with accounts of the massive, partial, Bank of America settlement. But companies involved in other potential liabilities are closely following progress/resolution between other companies.   For example, Ally Financial Inc. said it expects to incur a $100 million second quarter charge to cover mortgage losses posted by securitization trusts, and that it received subpoenas from regulators related to “certain mortgage activities” according to a filing with the SEC. In an updated prospectus filed with the Securities and Exchange Commission, Ally said it made payments to such trusts of $152 million in the second quarter.   And returning to Bank of America briefly, it has set aside $14 billion to meet investors’ claims that loans packaged in mortgage-backed securities before the financial crisis failed to meet promised underwriting standards. As you might expect, this should eliminate any profits during the 2nd quarter. The $14 B is the $8.5 billion non-agency settlement plus another $5.5 billion in charges to cover additional claims from government-owned mortgage companies as well as other private investors. In addition, BofA said it could eventually face as much as $5 billion in additional claims over its underwriting standards from other banks. So far, Countrywide has accounted for more than $25 billion in losses at BofA – the gift that keeps on giving.   Freddie Mac has entered into a proposed settlement with whatever is left of Taylor, Bean & Whitaker Mortgage and the creditors’ committee appointed in the lender’s bankruptcy proceeding. Freddie Mac told the SEC that it will be granted an unsecured claim in the TBW bankruptcy estate in the amount of about $1 billion, which represents its exposure to past and future loan repurchases, but the mortgage financier estimates that it will only see between $40 million and $45 million from that claim – about 4 cents on the dollar! Freddie will also be entitled to approximately $203 million on deposit in certain TBW bank accounts relating to the company’s mortgage loans. The FDIC as receiver of Colonial Bank, which went under in 2009 as a direct result of the fraudulent activity going on at TBW, has already handed over $150 million of this amount to Freddie. In addition, the GSE will receive other mortgage loan receipts estimated to be $6 million, but Freddie must pay a total of $61 million to TBW and the trade creditors represented by the creditor’s committee to settle their potential claims against the GSE. If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com . The current blog takes a look at near-term news for non-agency securities, such as jumbo residential loans. If you have both the time and inclination make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.