California bleeding: how the dream turned sour in the Golden State

http://www.smh.com.au/world/california-bleeding-how-the-dream-turned-sour-in-the-golden-state-20091225-lf1s.html
The economy is reeling and there is a gaping hole in the budget, writes Anne Davies.CALIFORNIA usually conjures up images of Hollywood, cosmetically enhanced beach babes, Silicon Valley, sports cars and expensive real estate.But in the past two years the Golden State has made news, not for its entrepreneurs and excess, but for scenes of poverty, riots and deprivation.In March the Governor, Arnold Schwarzenegger, announced that state fairgrounds in the capital, Sacramento, would be opened up to the homeless after an impromptu tent city sprang up in the shadow of the city centre.El Centro, a town near the Mexican border, enjoys the dubious reputation of having the highest unemployment rate in the nation: just over 25 per cent.In November students staged rowdy sit-ins at campuses of the state-funded University of California after the university administration announced plans to raise fees by 32 per cent, or $US2500 ($2840), over two years, to meet budget shortfalls.And prison canteens and gyms have been turned into seas of triple bunk beds as authorities struggle to accommodate 150,000 prisoners in 33 facilities designed to hold about 80,000.A panel of judges has ruled that to avoid breaching the constitutional prohibition against cruel and unusual punishment, 40,000 must be released. Mr Schwarzenegger is still devising a plan that will probably involve a smaller number of non-violent criminals being set free.The recession has hit California doubly hard. It was one of the states with the biggest bubble in house prices so there has been the inevitable bust. One in every 180 homes received a foreclosure notice in November.

S&P Downgrades On 5 US Mortgage Insurers; Outlook Negative

Standard & Poor's Ratings Services cut the ratings on five U.S. mortgage insurers, bringing two of them to the doorstep of junk territory, amid bigger-than-expected losses and expectations that unemployment will continue to rise through the second quarter of next year.The credit ratings company said the outlook for the mortgage insurers is negative, mostly to reflect the potential for increased losses because of the weak economy.S&P in October put seven mortgage insurers on watch for downgrade, saying claims appeared to be coming in worse that the company expected. On Tuesday, it announced the ratings cuts to the mortgage-insurance arms of Old Republic International Corp. (ORI), Radian Group Inc. (RDN), Genworth Financial Inc. (GNW), PMI Group Inc. (PMI) and United Guaranty Residential Insurance Co.Republic Mortgage Insurance Co., a unit of Old Republic, was cut three notches to BBB-, the doorstep of junk territory while Genworth Mortgage Insurance Corp. was cut two steps to BBB-. The PMI and Radian units were lowered one notch further into junk at B+ while United Guaranty was cut one step to BBB.S&P analyst Ron Joas said the economy has had a "more significant adverse impact" on most mortgage insurers than it expected in April, when it conducted it last extensive review of the sector."At that time, we had expected that mortgage insurers would likely report losses through 2010 and possibly into 2011. However, we'd also expected some loss mitigation beginning in the second half of 2009 and continuing into 2010," he said. Though there have been signs the economy is stabilizing, "we believe the recovery will be sluggish," with unemployment estimated to peak at 10.4% in the middle of next year and foreclosures to continue rising. However, S&P noted that mortgage-modification programs also have been gaining traction.The reviews on the two other companies part of the sector study, CMG Mortgage Insurance Co. and the California Housing Loan Insurance Fund, aren't complete. S&P said they should be "soon."Shares of all four of the publicly traded insurers were higher amid a broad market advance.-By Tess Stynes, Dow Jones Newswires
http://online.wsj.com/article/BT-CO-20091222-706606.html

Chicago Shuts Down To Save Cash

The City of Chicago will be shutting down early for the Christmas holiday, as part of Mayor Daley's plan to save the cash-strapped city money.City Hall, public libraries, health clinics and most other city offices will be closed on Christmas Eve as those city workers are being forced to take the day off without pay.Police and Fire Department operations are not affected and will remain fully staffed. Any other worker needed to provide for the public's safety will also be on the job.As part of the 2009 budget, three reduced-service days were planned for 2009: Aug. 17, the Friday after Thanksgiving; and Christmas Eve. The city expects to save $8.3 million. "Every dollar we save from these measures helps to save jobs, and in the long-term, maintain services for Chicagoans," Mayor Daley said in a statement. "This plan relies on most of our civilian employees to be part of the solution to our very serious budget challenges. I want to thank them again for their efforts."In addition to the reduced service days, all non-union employees were asked to take a series of furlough days and unpaid holidays in 2009, which are expected to continue throughout 2010. Most non-sworn union employees agreed to take similar unpaid time off. There are no reduced-service days scheduled for 2010.
http://cbs2chicago.com/local/chicgo.shut.down.2.1384151.html

NIA's Top 10 Predictions for 2010

http://inflation.us/top10predictions2010.html
December 21, 2009 NIA's Top 10 Predictions for 2010The National Inflation Association is pleased to announce its top 10 predictions for 2010.1) We will learn the 2009 holiday shopping season was a bust.The Commerce Department reported seasonally adjusted November retail sales up 1.3% from October. However, if you apply the average seasonal adjustments that were used during the years 2006 and 2007, which account for a normal spike in November sales due to the holiday shopping season, retail sales were actually down 1.3% in November.NIA believes any year-over-year increase in 2009 holiday season retail sales will be bottom bouncing from 2008 and not an indication of an economic recovery. Most likely, adjusted for inflation, retail sales will be flat over a year ago. We expect to see a sharp sell off in many retail stocks, as a full economic recovery appears to be already priced into their share prices.2) We will see a major decline in the Dow/Gold ratio.The Dow/Gold ratio is currently 9.3, having bounced from the low of 7 it saw in early 2009. We are likely to see a decline in the Dow/Gold ratio to below 7 in 2010.Many people who have bought U.S. stocks on the bet of an economic recovery, will soon realize the economy is not recovering and stocks have been rallying only due to inflation. Although some people selling stocks may once again mistakenly move to the U.S. dollar as a safe haven, we believe an increasing amount of people will avoid the U.S. dollar and buy gold as a safe haven.3) We will see a sharp decline in the Gold/Silver ratio.The Gold/Silver ratio is currently 64, above the average of the past 100 years of 50. Between the years 1,000 and 1,873 when silver was used as real money, the Gold/Silver ratio traded between 10 and 16. In recent history, the Gold/Silver ratio dipped below 20 on two occasions, once in 1968 and once again in 1980.NIA believes silver prices will continue to outperform gold in 2010, as the world once again begins looking at silver as money, instead of just an industrial metal. The Gold/Silver ratio could decline to below 50 in 2010.4) The U.S. Dollar Index will see short-term bounce, then huge crash.We are at a point where there are more people who are bearish on the U.S. dollar than ever before, which means from a technical standpoint it is overdue for a short-term bounce. However, we would not consider going long the dollar even as a trade. A huge crash in the U.S. dollar could occur at any time.The world has become flooded with U.S. dollars. Foreigners currently hold over $10 trillion in dollar-denominated assets that can be dumped at any time. With the Federal Reserve continuing to expand its monetary base to record highs, as soon as banks begin lending their excess reserves we could see a spike in consumer prices and a rush to get out of U.S. dollars.5) Oil will rise back above $100 per barrel.We expect oil's next rise above $100 per barrel to be fueled almost entirely by inflation. This time around, it won't matter if there's another substantial decline in oil demand from the U.S. We expect oil prices to rise regardless of if Americans can afford it or not.NIA believes any decrease in demand from the U.S. will be more than made up for by increasing demand from China and India. There hasn't been any major new oil discoveries made in decades and the Federal Reserve's printing of money will surely outpace the discovery of new oil fields.6) There will be a move towards a Libertarian third-party.Americans are waking up to the charade that has been taking place in Washington. Power has been going back and forth between two political parties who do nothing but multiply each other's mistakes. Both the Democrats and Republicans are equally responsible for the economic mess our country is in today.In the last Presidential election, Americans had a choice between two candidates who both supported the government's destructive stimulus plans and bailouts. In the next Presidential election, we believe a third-party candidate will have a serious chance of being elected for the first time in history. We anticipate seeing a new leader emerge and a Libertarian movement begin in 2010.7) Peter Schiff and Rand Paul will both win Republican primaries and be elected to U.S. Senate.We are huge supporters of Peter Schiff and Rand Paul who are seeking the Republican nominations for U.S. Senate in the states of Connecticut and Kentucky respectively. They are both Libertarians at heart but realize their best chance to be elected is to run under the title of a Republican.We need Peter Schiff and Rand Paul to join Ron Paul in Washington so that we at least have three elected representatives that understand the truth about our economy and the need to reverse the hyperinflationary course our country is currently on. Although they may be underdogs because they don't have the support of special interest groups, Peter Schiff and Rand Paul will have huge grassroots support from educated Americans who will travel from all states to volunteer for their campaigns.8) Large 'End the Fed' Protests.In 2009, hundreds of people gathered for several 'End the Fed' protests in front of Federal Reserve buildings nationwide. However, the turnout for these events paled in comparison to the millions of Americans who participated in health care protests and town hall meetings.In 2010, more Americans will realize that it is the Federal Reserve that is the cause of most of our nation's economic problems. While the health care debate divided our nation 50/50, we believe 100% of all Americans will want to end the Federal Reserve as prices of food and other goods needed to live start rising through the roof.9) Major Food Shortages.For the past several decades, most Americans went to college to get a non-productive job on Wall Street and nobody went to school to become a farmer. There is currently a major lack of farmers in the U.S. and to make matters worse, the Real Estate bubble destroyed immeasurable amounts of farmland to build houses we didn't need and couldn't afford.Inventories of agricultural products are the lowest they have been in decades yet the prices of many agricultural commodities are down 70% to 80% from their all time highs adjusted for real inflation. Catastrophic food shortages are possible in 2010, not just in the U.S. but all around the world.10) Paul Volcker Resigns.This may be a long shot but Paul Volcker, Chairman of President Obama's Economic Recovery Advisory Board, could become frustrated with the Obama administration and resign in 2010. Paul Volcker, as former Chairman of the Federal Reserve, was responsible for getting our economy out of the inflationary crisis of the 1970s by raising the federal funds rate up to a peak of 20%.With interest rates currently being held by the Federal Reserve at an artificially low level of 0%, we believe Paul Volcker must know that a currency crisis is coming that will make the inflation of the 1970s look miniscule. If Paul Volcker wants to preserve his reputation and legacy, he must leave the Obama administration, which is unlikely to seriously consider any of his advice.

Lenders reject homeowners who apply for Obama plan

Lenders reject homeowners who apply for Obama plan

By KEVIN G. HALL
McClatchy Newspapers
WASHINGTON -- Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice.
These borrowers, rich and poor, completed trial modifications of their distressed mortgage, and made all the payments, only to learn, often indirectly, that they won't get help after all.
How many is hard to tell. Lenders participating in the administration's Home Affordable Modification Program, or HAMP, still don't provide the government with information about who's rejected and why.
To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks.
In the fine print of the form homeowners fill out to apply for Obama's program, which lowers monthly payments for three months while the lender decides whether to provide permanent relief, borrowers must waive important notification rights.
This clause allows banks to reject borrowers without any written notification and move straight to auctioning off their homes without any warning.
That's what happened to Evangelina Flores, the owner of a modest 902-square-foot home in Fontana, Calif. She completed a three-month trial modification, and made the last of the agreed upon monthly payments of $1,134.60 on Nov. 1. Her lawyer said that in late November, Central Mortgage Company told her that it would void her adjustable-rate mortgage, which had risen to a monthly sum above $2,000, and replace it with a fixed-rate mortgage.
"The information they had given us is that she had qualified and that she would be getting her notice of modification in the first week of December," said George Bosch, the legal administrator for the law firm of Edward Lopez and Rick Gaxiola, which is handling Flores' case for free.
Flores, 58, a self-employed child care worker, wired her December payment to Central Mortgage Company on Nov. 30, thinking that her prayers had been answered. A day later, there was a loud, aggressive knock on her door.
Thinking a relative was playing a prank, she opened her front door to find two strangers handing her an eviction notice.
"They arrived real demanding, saying that they were the owners," recalled Flores. "I have high blood pressure, and I felt awful."
Court documents show that her house had been sold that very morning to a recently created company, Shark Investments. The men told Flores she had to be out within three days. The eviction notice had a scribbled signature, and under the signature was the name of attorney John Bouzane.
A representative in his office denied that Bouzane's law firm was involved in Flores' eviction, and said the eviction notice was obtained from Bouzane's Web site, www.fastevictionservice.com.
Why would a lawyer provide for free a document that gives the impression that his law firm is behind an eviction?
"We hope to get the eviction business," said the woman, who didn't identify herself.
Flores bought her home in 2006 for $352,000. Records show that it has a current fair-market value of $99,000. The new owner bought it for $78,000 at an auction Flores didn't even know about.
http://www.miamiherald.com/news/politics/AP/story/1391288.html

First Federal Bank of California and Imperial Capital Bank of La Jolla closed

http://www.latimes.com/business/la-fi-bank-failures19-2009dec19,0,7142345.story?track=rss
First Federal Bank of California and Imperial Capital Bank of La Jolla closed
Both are sold immediately to other Southern California institutions. Regulators have closed 140 U.S. banks this year, 16 in California.
Two more loss-battered Southern California banks were shut down by regulators Friday and immediately sold to two of the largest financial institutions based in the region.Stung by defaults on tricky adjustable mortgages, 80-year-old First Federal Bank of California was closed by federal savings and loan regulators, with its 39 branches to reopen today as part of OneWest Bank. Pasadena-based OneWest, created early this year from the ashes of collapsed home lender IndyMac Bank, agreed to assume all of First Federal's deposits, so no customers will lose money, the Federal Deposit Insurance Corp. said. In Friday's other California failure, Imperial Capital Bank of La Jolla, rocked by troubled loans for apartments and commercial mortgages, was dealt off by the FDIC to City National Bank of Los Angeles, which is emerging as one of the survivors of the banking industry's near-meltdown. Like OneWest, City National agreed to assume all of the acquired bank's deposits, even amounts that exceeded the FDIC's caps on insurance coverage. Imperial Capital's nine branches -- six in California, one in Maryland and two in Nevada -- are to reopen Monday as City National offices. City National was the largest commercial bank with headquarters in Southern California until Pasadena's East West Bank agreed last month to take over a failed rival in the Chinese American niche, San Francisco's United Commercial Bank. That deal beefed up East West, giving it $19 billion in assets to City National's $18 billion. The latest combinations gives City National more than $21 billion in assets and OneWest about $24 billion, although such comparisons matter little given the fact that the acquirers will have to spend much of their time downsizing by working through portfolios of distressed loans. Indeed, OneWest's balance sheet is still stuffed with IndyMac loans that had been targeted for sale before the private market for mortgages dried up, although the FDIC is sharing losses on those loans. The failures bring to 140 the number of U.S. banks that have gone under this year as many loans made during the housing boom earlier this decade have soured. Of California's 16 bank failures this year, First Federal and Imperial Capital rank No. 3 and No. 4, respectively, based on total assets.OneWest is owned by a group of private equity investors that teamed up this year to buy IndyMac Bank from the FDIC months after the Pasadena thrift failed under the weight of defaults on lightly documented loans. The investors had said they hoped to buy nearby banks that also had run into problems with residential mortgages. First Federal, a savings and loan originally based in Santa Monica, fit that description, having booked $547 million in losses over the last seven quarters on so-called pay-option adjustable-rate mortgages. Such loans, also known as option ARMs, allowed borrowers to pay so little each month that their loan balances could increase. Babette Heimbuch, chief executive of First Federal and its parent company, FirstFed Financial Corp., tendered her resignation last week. The S&L had $6.1 billion in total assets and $4.5 billion in deposits as of Sept. 30. In addition to assuming all of the deposits of the failed bank, OneWest agreed to purchase essentially all of the assets, with the FDIC absorbing some of the losses on them.OneWest also announced that it would join in what is becoming an industry-wide moratorium on home foreclosures during the holiday season. City National, which recently moved its headquarters from Beverly Hills to Los Angeles, serves mostly wealthy individuals and small businesses. It has remained well-capitalized despite recent losses on construction and commercial lending. Imperial Capital, with $4 billion in assets and $2.2 billion in deposits, failed to meet a Dec. 14 deadline set by state regulators to raise $200 million in capital. It had lost $112 million in the first three quarters of this year. City National is taking on about $3.4 billion of Imperial Capital's assets. The FDIC agreed to assume a portion of future losses on those assets. The agency said it would keep the remainder of Imperial Capital's portfolio for now. "Imperial Capital Bank is a very good fit for City National, given that eight of its nine locations are in communities we serve," Russell Goldsmith, chief executive of the bank and its parent company, City National Corp., said in a statement. Because some of Imperial Capital's branches are close to City National locations, Goldsmith said he expected that some branches would be closed. But others, such as Imperial's San Francisco site, will be added to City National's existing 64-branch network, he said. "We haven't made any final determinations yet," he said. Neither acquiring bank released details about layoffs, which normally follow bank mergers because they tend to create overlap not only in the branches but also in back-office operations. City National said it would keep Imperial Capital's 140 employees on the payroll, with health benefits, through the holidays while studying the issue. The failure of First Federal is expected to cost the deposit insurance fund $146.3 million. Losses on Imperial Capital's failure were estimated at $619.2 million. Earlier Friday, regulators closed five banks in other states: RockBridge Commercial Bank in Atlanta; New South Federal Savings Bank of Irondale, Ala.; People's First Community Bank of Panama City, Fla.; Independent Bankers' Bank of Springfield, Ill.; and Citizens State Bank, New Baltimore, Mich

Your request is being processed... Fannie, Freddie: Foreclosures Suspende

http://www.huffingtonpost.com/2009/12/18/fannie-freddie-foreclosur_n_396858.html
WASHINGTON — Mortgage finance companies Fannie Mae and Freddie Mac are suspending foreclosures and evictions for about two weeks in a temporary break for borrowers during the holiday season.The suspension, announced Thursday by the government-controlled companies, runs from Saturday through Jan. 3. "No family should have to face the prospect of being evicted during the holiday season," Michael Williams, Fannie Mae's chief executive, said in a statement.Earlier Thursday, Citigroup Inc. announced a 30-day suspension of foreclosures and evictions, affecting about 4,000 borrowers. Fannie and Freddie did not estimate how many homeowners would get this grace period.Last winter, most major lenders suspended foreclosures while the Obama administration developed its $75 billion loan modification program. But foreclosures picked up again after those suspensions lifted

Citigroup: Abu Dhabi Claim 'Without Merit'

http://www.thestreet.com/story/10646825/1/citigroup-abu-dhabi-claim-without-merit.html?cm_ven=GOOGLEFI

Citigroup: Abu Dhabi Claim 'Without Merit'NEW YORK (TheStreet) -- Citigroup(C Quote) said a claim filed by the Abu Dhabi Investment Authority against the bank that seeks to either terminate an agreement to buy $7.5 billion worth of Citigroup stock or receive damages of more than $4 billion, is "entirely without merit." said Tuesday it expects to "vigorously" defend itself against the allegations. Abu Dhabi invested $7.5 billion in Citigroup in November 2007 and the fund received equity units that paid a high annual dividend. The units were to be converted into Citigroup common stock at up to $37.24 a share between March 15, 2010, and Sept. 15, 2011, giving the fund a 4.9% stake in Citigroup. But Citigroup stock has declined 89% since the end of November 2007. At $37.24 a share, the conversion price would amount to more than 10 times Citigroup's closing stock price Tuesday of $3.56. The Abu Dhabi fund alleges "fraudulent misrepresentations" in connection with the stock sale. Earlier this week, Citigroup reached an agreement with the U.S. government and its regulators to pay back $20 billion it received in bailout aid. The government also agreed to sell its 34% stake in Citigroup. Citigroup received $45 billion in aid from the U.S. government's Troubled Asset Relief Program after taking big losses on mortgages and other investments.

Ten top tips for investors in 2010

1. Stay out of all equities. This is a monstrous valuation bubble driven up by zero interest rates. Rates have to go up, and stock markets down. Markets will correct when something reminds them that this is the future outlook.
2. The dollar rally has further to go, and the dollar will go higher as equities fall, so keep to cash and treasuries until the dollar tops out.
3. No need to diversify into foreign currencies in 2010, except for dollar-linked currencies like the UAE dirham that offer higher interest rates and an explicit government guarantee on all deposits.
4. Buy gold and silver on price weakness when the US dollar rally tops out, and oil stocks.
5. Beware emerging markets like Brazil, Russia, China and India. What has gone up in a hurry will crash in a heap.
6. This will be the ‘Year of the Short’ so, if you want to play the market look to options or short ETFs.
7. Real estate is locked in a downtrend. Interest rates are very low, and real estate only bottoms out when rates are high.
8. Stay liquid for the lifetime buying opportunities that will follow a big crash. Then buy when Warren Buffett says.
9. Do remember to save some of what you earn for future investment opportunities which otherwise tend to occur when you have no savings.
10. Remember that in an era of low interest rates the value of a job is considerable because it would take a much higher capital sum to earn the same in interest. Look after your job

http://arabianmoney.net/category/dubai-property/

Despite Low Mortgage Rates, Homeowners Can't Refinance

http://www.cnbc.com/id/34395705
Published: Saturday, 12 Dec 2009 5:31 PM ETText SizeBy: David StreitfeldThe New York TimesMortgage rates in the United States have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government.Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out.The scarcity of credit not only hurts homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.Refinancing could save owners hundreds of dollars a month, which could be spent, saved or used to pay down debts. Extra spending would help lift the economy, and lower payments might spare some people from losing their homes to foreclosure.The plight of homeowners has become a volatile political issue. On Friday, as the House passed a series of new financial regulations, it narrowly defeated a provision that would have allowed bankruptcy judges to modify the terms of mortgages.The measure was strongly opposed by the banking industry.President Obama, in his weekly address on Saturday, placed much of the blame for the recession on “the irresponsibility of large financial institutions on Wall Street that gambled on risky loans and complex financial products, seeking short-term profits and big bonuses with little regard for long-term consequences.”The president is scheduled to meet with banking executives at the White House on Monday in another administration effort to increase the flow of loans to consumers and small businesses.Among those expected to attend are representatives from Citigroup, JPMorgan Chase, Bank of America, Wells Fargo and Goldman Sachs.An estimated six of 10 homeowners with mortgages have rates that exceed the 4.8 percent rate currently available on 30-year fixed mortgages, the least risky form of home loans.Nevertheless, only half as many refinancing applications were reported last week than were reported at the beginning of January, the peak level for the year.The total dollar volume of refinancing activity in 2009 will be about $1 trillion. In 2003, another year when rates fell, it was $2.8 trillion. (Mortgage applications to purchase houses showed modest improvement for much of the year, but recently fell sharply to their lowest level in 12 years.)“The government has succeeded in driving mortgage rates down to their lowest level in our lifetime,” said Guy Cecala, the publisher of Inside Mortgage Finance magazine. “That hasn’t been a big home run, because a lot of people can’t take advantage of it.”It is highly unusual for mortgage money to be available below 5 percent.Average rates fell as low as 4.7 percent in the 1940s, as the government held down interest rates to finance World War II, and stayed just below 5 percent until the early 1950s.Rates went above 5 percent in 1952 and stayed there — until this year. The super-low rates are not likely to last much longer.The Federal Reserve program that has driven rates to such lows, which involves buying $1.25 trillion in mortgage-backed securities, is scheduled to expire in March, and Fed leaders have said that it would not be renewed.Some analysts believe rates could jump as high as 6 percent in the spring. On a $300,000 mortgage, such a jump would cost an extra $225 a month.Andrew Knapp, a sales executive in Bartlett, Ill., has tried twice to refinance, which would save his family several hundred sorely needed dollars every month.Lenders said the house had lost value and the Knapps had too much debt.“There was no urgency for them to do anything,” Mr. Knapp said.The most recent Federal Reserve survey of lenders found that they were continuing to tighten terms for business and household loans.Banks say they are under pressure from regulators to raise their cash reserves, which means fewer loans.continue