http://www.nypost.com/seven/02062009/bus....
Now, we will get the details Mon at 12, but I don't see how this can be done without taking full control of FNM and FRE to make these decisions to pay off the older higher-principal mortgage. Just a guess from me, though.From the NY Post of all places. More info than I've seen from anywhere else:http://www.nypost.com/seven/02062009/bus....A cornerstone of the economic recovery plan that President Barack Obama is expected to unveil Monday will be modifying problem mortgages, The Post has learned.In a nod to Main Street over Wall Street, sources familiar with the plan say Treasury Secretary Tim Geithner plans to allocate almost half of the remaining $350 billion in funds from the Trouble Asset Relief Program to the so-called "Mo Mod," or mortgage modification, platform."Mo Mod" is an algorithmic mortgage processing program that can rewrite up to 500,000 loans a month, and will be a major part of Treasury's plan to help repair tattered bank balance sheets.The 21-day "Mo Mod" program works by structuring a new mortgage that more accurately reflects a home's worth so that a troubled borrower no longer owes more on their home than the property is worth.The process then enables a lender to pool these new mortgages together into securities that reflect more accurately a home's value, which makes them less risky for investors.As outlined, this plan will be much broader in scope than the Federal Deposit Insurance Corp.'s plan with IndyMac, which was initiated by FDIC Chairman Sheila Bair and has only been able to rework about 5,000 mortgages since last summer.But it will also bail out borrowers who helped trigger the housing crisis by taking out loans they were unable to pay back from the outset, something that has drawn criticism because it effectively rewards the bad behavior of rogue borrowers and lenders.The "Mo Mod" platform relies on proprietary technology developed by a Ponte Vedra Beach, Fla.-based real-estate appraisal firm Smithfield & Wainwright, which built the system over 20 years and uses it for banking clients looking to liquidate mortgage holdings.A spokesperson for Smithfield & Wainwright declined to comment on the plan. The Treasury Department did not return calls.Stopping the slide in housing prices is a priority for the Obama administration, which is also considering providing government guarantees for home loans that have been modified by their servicers in order to stem a surge of foreclosures that's hammering property values.The "Mo Mod" plan comes as a record 19 million US houses stood empty at the end of 2008, and, according to real-estate Web site Zillow.com, US homeowners lost a record $3.3 trillion in equity last year.About one-third of owners whose home values drop 20 percent or more below their loan principal will "hand the keys back to the bank," said Norm Miller, director of real estate programs for the School of Business Administration at the University of San Diego."When you're underwater and prices continue to fall, you tend to walk," Miller said in an interview. "It's a downward spiral that's tough to stop because it feeds on itself. Foreclosures encourage other foreclosures and falling prices discourage buying."
Sunday, February 8, 2009
COUNTRYWIDE LOSSES NEXT FOR BOFA
http://www.nypost.com/seven/02082009/bus....
So far Merrill Lynch has been a well-publicized nightmare merger for Bank of America's Ken Lewis.However, it's the CEO Lewis' slapdash acquisition of mortgage giant Countrywide Financial for $4.1 billion that could haunt the financial giant in the future.Charlotte, N.C.-based BofA may wrack up cumulative mortgage losses stemming from its Countrywide purchase of as much as $33 billion, according to financial analyst Paul Miller at Friedman, Billings, Ramsey & Co.That's $10 billion more than the roughly $23 billion BofA set aside to reserve against future losses in its entire mortgage portfolio. BofA agreed to buy Countrywide two years ago last month for $4.1 billion after a $2 billion cash injection months prior didn't help the subprime-laden lender stay afloat - or independent.The projected losses BofA may face also are double the whopping $15 billion fourth-quarter loss that Merrill Lynch's CEO John Thain laid at Lewis' feet.Across Countrywide's entire loan book, FBR estimates that losses in home-equity loans could hit $17 billion, losses in option-adjustable rate mortgages may touch $11.4 billion and losses in hybrid first-lien loans could reach $5 billion."[Countrywide] was a horrible deal," Miller told The Post.Many speculate those future losses that BofA will face by virtue of Countrywide and its other exposures to consumer debt - like its massive credit-card operation - have already been factored into its performance by investors.Perhaps.However, Miller believes that many banks have to be sanguine about their views on such things as the unemployment rate, which hit 7.6 percent last week."A lot of the executives I speak to are projecting unemployment of 8 or 9 percent. But when I ask what happens [to losses on their consumer loan portfolios] if we see double digit [unemployment] they go blank," Millers notes.In a CNBC interview on Friday Lewis said BofA's maintains that the unemployment rate could hit 8 percent or 8.5 percent but also allowed for the possibility that it could reach 9 percent.Ballooning jobless claims over the next several quarters will only place more pressure on BofA's portfolio of mortgages as well as its exposures to credit cards and other consumer debt.And for BofA exposures to commercial real estate loans may also prove a thorn in its side through its purchase of LaSalle Bank in October 2007 from ABN-AMRO.Indeed, on Friday credit-rating agency Fitch lowered BofA's credit outlook on concerns about its home-equity loans, credit-card portfolio and commercial loan book, despite Uncle Sam agreeing to backstop $118 billion in assets and offering up a $20 billion lifeline.To be sure, BofA's Countrywide investment could be a huge success, especially given the fire sale price the financial giant paid to acquire the nation's largest mortgage originator.In his CNBC interview, Lewis noted low-interest rates and a steady consumer push to re-fi mortgages has been a huge positive for BofA's Countrywide purchase so far."Countrywide is on fire at the moment because of re-fis and the lower rates. And so I'm hopeful that we'll prove that was a very good [acquisition] as well," Lewis said.At this point, Wall Street's fretting surrounding BofA is based on the view that the institution will become overwhelmed by bad consumer debt and need to return hat-in-hand to the government.Lewis attempted to put those fears to rest during his CNBC interview adding that BofA will not need another infusion from Troubled Asset Relief Program and, in fact, hopes to pay back its government rescue package "within three years."Investor concerns on Friday dragged BofA down to a multiyear low of $3.77 in Friday morning trading.However, the financial giant's stock gained on Lewis' assurances that he wouldn't need to go back to the government well and on word that the Obama Administration was readying a huge mortgage-modification program.BofA's shares ended up 26.6 percent to close at $6.13 on Friday.Lewis has made BofA into a powerhouse since he took over for Hugh McColl eight years ago.Since then the CEO has been on a merger rampage, scooping up banks such as US Trust, mortgage companies and credit-card outfit MBNA as his competitors including cross-town rival Wachovia Bank withered (Wachovia was acquired by San Francisco-based Wells Fargo).Last year, his maneuvering earned him kudos as Banker of the Year by trade publication American Banker but the twin collapses of Merrill Lynch and the potential implosion of Countrywide has turned him into a goat.
So far Merrill Lynch has been a well-publicized nightmare merger for Bank of America's Ken Lewis.However, it's the CEO Lewis' slapdash acquisition of mortgage giant Countrywide Financial for $4.1 billion that could haunt the financial giant in the future.Charlotte, N.C.-based BofA may wrack up cumulative mortgage losses stemming from its Countrywide purchase of as much as $33 billion, according to financial analyst Paul Miller at Friedman, Billings, Ramsey & Co.That's $10 billion more than the roughly $23 billion BofA set aside to reserve against future losses in its entire mortgage portfolio. BofA agreed to buy Countrywide two years ago last month for $4.1 billion after a $2 billion cash injection months prior didn't help the subprime-laden lender stay afloat - or independent.The projected losses BofA may face also are double the whopping $15 billion fourth-quarter loss that Merrill Lynch's CEO John Thain laid at Lewis' feet.Across Countrywide's entire loan book, FBR estimates that losses in home-equity loans could hit $17 billion, losses in option-adjustable rate mortgages may touch $11.4 billion and losses in hybrid first-lien loans could reach $5 billion."[Countrywide] was a horrible deal," Miller told The Post.Many speculate those future losses that BofA will face by virtue of Countrywide and its other exposures to consumer debt - like its massive credit-card operation - have already been factored into its performance by investors.Perhaps.However, Miller believes that many banks have to be sanguine about their views on such things as the unemployment rate, which hit 7.6 percent last week."A lot of the executives I speak to are projecting unemployment of 8 or 9 percent. But when I ask what happens [to losses on their consumer loan portfolios] if we see double digit [unemployment] they go blank," Millers notes.In a CNBC interview on Friday Lewis said BofA's maintains that the unemployment rate could hit 8 percent or 8.5 percent but also allowed for the possibility that it could reach 9 percent.Ballooning jobless claims over the next several quarters will only place more pressure on BofA's portfolio of mortgages as well as its exposures to credit cards and other consumer debt.And for BofA exposures to commercial real estate loans may also prove a thorn in its side through its purchase of LaSalle Bank in October 2007 from ABN-AMRO.Indeed, on Friday credit-rating agency Fitch lowered BofA's credit outlook on concerns about its home-equity loans, credit-card portfolio and commercial loan book, despite Uncle Sam agreeing to backstop $118 billion in assets and offering up a $20 billion lifeline.To be sure, BofA's Countrywide investment could be a huge success, especially given the fire sale price the financial giant paid to acquire the nation's largest mortgage originator.In his CNBC interview, Lewis noted low-interest rates and a steady consumer push to re-fi mortgages has been a huge positive for BofA's Countrywide purchase so far."Countrywide is on fire at the moment because of re-fis and the lower rates. And so I'm hopeful that we'll prove that was a very good [acquisition] as well," Lewis said.At this point, Wall Street's fretting surrounding BofA is based on the view that the institution will become overwhelmed by bad consumer debt and need to return hat-in-hand to the government.Lewis attempted to put those fears to rest during his CNBC interview adding that BofA will not need another infusion from Troubled Asset Relief Program and, in fact, hopes to pay back its government rescue package "within three years."Investor concerns on Friday dragged BofA down to a multiyear low of $3.77 in Friday morning trading.However, the financial giant's stock gained on Lewis' assurances that he wouldn't need to go back to the government well and on word that the Obama Administration was readying a huge mortgage-modification program.BofA's shares ended up 26.6 percent to close at $6.13 on Friday.Lewis has made BofA into a powerhouse since he took over for Hugh McColl eight years ago.Since then the CEO has been on a merger rampage, scooping up banks such as US Trust, mortgage companies and credit-card outfit MBNA as his competitors including cross-town rival Wachovia Bank withered (Wachovia was acquired by San Francisco-based Wells Fargo).Last year, his maneuvering earned him kudos as Banker of the Year by trade publication American Banker but the twin collapses of Merrill Lynch and the potential implosion of Countrywide has turned him into a goat.
Driven down by debt, Dubai expats give new meaning to long-stay car park
http://business.timesonline.co.uk/tol/business/markets/the_gulf/article5663618.ece
For many expatriate workers in Dubai it was the ultimate symbol of their tax-free wealth: a luxurious car that few could have afforded on the money they earned at home.Now, faced with crippling debts as a result of their high living and Dubai’s fading fortunes, many expatriates are abandoning their cars at the airport and fleeing home rather than risk jail for defaulting on loans.Police have found more than 3,000 cars outside Dubai’s international airport in recent months. Most of the cars – four-wheel drives, saloons and “a few” Mercedes – had keys left in the ignition.Some had used-to-the-limit credit cards in the glove box. Others had notes of apology attached to the windscreen.Related Links* With no oil, desert economy is built on shifting sand * Dubai millionaires' beach becomes cesspool * Dubai lifts veil of secrecy to assuage fears “Every day we find more and more cars,” said one senior airport security official, who did not want to be named. “Christmas was the worst – we found more than two dozen on a single day.”When the market collapsed and the emirate’s once-booming economy started to slow down, many expatriates were left owning several homes and unable to pay the mortgages without credit.“There were a lot of people living the high life, investing in real estate and a lifestyle they couldn’t afford,” one senior banker said.Under Sharia, which prevails in Dubai, the punishment for defaulting on a debt is severe. Bouncing a check, for example, is punishable with jail. Those who flee the emirate are known as skips.The abandoned cars underscore a worrying trend. Five years ago the Emir, Sheikh Mohammed bin Rashid Al Maktoum, embarked on an ambitious plan to transform Dubai into a hub for business and tourism. A building boom fuelled double-digit growth, with thousands of Westerners arriving every day, eager to cash in on the emirate’s promise of easy living and wealth.Many Westerners invested in Dubai’s skyrocketing real estate market, buying and reselling homes before building was even complete. But, as the recession took effect, property and financial companies made thousands of workers redundant and banks tightened lending. Construction companies have delayed or cancelled projects and tourism is slowing.There are increasing signs that the foreigners who once flocked to Dubai are leaving. “There is no way of tracking actual numbers, but the anecdotal evidence is overwhelming. Dubai is emptying out,” said a Western diplomat.International schools are having to be flexible on fees as expatriate parents run out of cash. Louise, a single mother from Britain, said that her son’s school had allowed her to pay a partial fee until she found a new job after her redundancy in December. “According to the headmaster, a lot of people had come into the school saying they had lost their jobs so the school was trying to be a bit more flexible,” she said.Most of the emirate’s banks are not affiliated with British financial institutions, so those who flee do not have to worry about creditors. Their abandoned cars are eventually sold off by the banks at weekly auctions. Those recently advertised include BMWs, Porsches and Mercedes.Simon Goldsmith, a spokesman for the British Embassy in Dubai, said that that there were approximately 100,000 Britons living in Dubai last year. However, the embassy has no way of tracking how many have fled back to the UK. “We’ve heard stories, but when somebody makes that kind of decision, they generally keep it to themselves,” he said.Police have issued warrants against owners of the deserted cars. Those who return risk arrest at the airport.Heading home3.62 million expatriates in Dubai864,000 nationals8% population decline predicted this year, as expatriates leave1,500 visas cancelled every day in Dubai62% of homes occupied by expatriates 60% fall in property values predicted50% slump in the price of luxury apartments on Palm Jumeirah25% reduction in luxury spending among UAE expatriates
For many expatriate workers in Dubai it was the ultimate symbol of their tax-free wealth: a luxurious car that few could have afforded on the money they earned at home.Now, faced with crippling debts as a result of their high living and Dubai’s fading fortunes, many expatriates are abandoning their cars at the airport and fleeing home rather than risk jail for defaulting on loans.Police have found more than 3,000 cars outside Dubai’s international airport in recent months. Most of the cars – four-wheel drives, saloons and “a few” Mercedes – had keys left in the ignition.Some had used-to-the-limit credit cards in the glove box. Others had notes of apology attached to the windscreen.Related Links* With no oil, desert economy is built on shifting sand * Dubai millionaires' beach becomes cesspool * Dubai lifts veil of secrecy to assuage fears “Every day we find more and more cars,” said one senior airport security official, who did not want to be named. “Christmas was the worst – we found more than two dozen on a single day.”When the market collapsed and the emirate’s once-booming economy started to slow down, many expatriates were left owning several homes and unable to pay the mortgages without credit.“There were a lot of people living the high life, investing in real estate and a lifestyle they couldn’t afford,” one senior banker said.Under Sharia, which prevails in Dubai, the punishment for defaulting on a debt is severe. Bouncing a check, for example, is punishable with jail. Those who flee the emirate are known as skips.The abandoned cars underscore a worrying trend. Five years ago the Emir, Sheikh Mohammed bin Rashid Al Maktoum, embarked on an ambitious plan to transform Dubai into a hub for business and tourism. A building boom fuelled double-digit growth, with thousands of Westerners arriving every day, eager to cash in on the emirate’s promise of easy living and wealth.Many Westerners invested in Dubai’s skyrocketing real estate market, buying and reselling homes before building was even complete. But, as the recession took effect, property and financial companies made thousands of workers redundant and banks tightened lending. Construction companies have delayed or cancelled projects and tourism is slowing.There are increasing signs that the foreigners who once flocked to Dubai are leaving. “There is no way of tracking actual numbers, but the anecdotal evidence is overwhelming. Dubai is emptying out,” said a Western diplomat.International schools are having to be flexible on fees as expatriate parents run out of cash. Louise, a single mother from Britain, said that her son’s school had allowed her to pay a partial fee until she found a new job after her redundancy in December. “According to the headmaster, a lot of people had come into the school saying they had lost their jobs so the school was trying to be a bit more flexible,” she said.Most of the emirate’s banks are not affiliated with British financial institutions, so those who flee do not have to worry about creditors. Their abandoned cars are eventually sold off by the banks at weekly auctions. Those recently advertised include BMWs, Porsches and Mercedes.Simon Goldsmith, a spokesman for the British Embassy in Dubai, said that that there were approximately 100,000 Britons living in Dubai last year. However, the embassy has no way of tracking how many have fled back to the UK. “We’ve heard stories, but when somebody makes that kind of decision, they generally keep it to themselves,” he said.Police have issued warrants against owners of the deserted cars. Those who return risk arrest at the airport.Heading home3.62 million expatriates in Dubai864,000 nationals8% population decline predicted this year, as expatriates leave1,500 visas cancelled every day in Dubai62% of homes occupied by expatriates 60% fall in property values predicted50% slump in the price of luxury apartments on Palm Jumeirah25% reduction in luxury spending among UAE expatriates
Saturday, February 7, 2009
Five reasons to buy a home this year
http://www.marketwatch.com/news/story/five-reasons-buying-house-now/story.aspx?guid=01DA1B93-91D1-49E4-A1B1-0ACA9CE66FF4
Five reasons to buy a home this year
Affordability returns to housing, and buyers have loads of negotiating power
By Amy Hoak, MarketWatch
Last update: 12:15 a.m. EST Feb. 6, 2009
CHICAGO (MarketWatch) -- People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you're brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime.
Ask for price reductions, improvements, closing costs -- whatever -- and the seller, desperately trying to get a contract, is very likely to work with you, said Jay Papasan, one of the authors of the book "Your First Home." When the market starts improving, your negotiating power starts to diminish, he added.
"People can get a lot of what they need and almost all of what they want today," Papasan said. "Once a few people get off the fence, there's safety in numbers and you lose your leverage."
If you're qualified to buy a home now, the purchase makes sense for your situation and you're prepared to live in that home for at least five years, there are five reasons why you may be headed for a great deal:
1. Affordability is better than ever
According to the National Association of Realtors' housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970. The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income.
John and Julie Chilman, for example, recently have been able to stretch their dollars in the Las Vegas area. The listing price for the five-bedroom home they're buying was $265,000; they offered $250,000.
"Our Realtor was like 'Yeah, pipe dream. Like they're going to take that,'" John Chilman said. "And all they did was counter $255,000... and they're paying all closing costs." The home had lingered on the market, and was listed for $310,000 just six months ago, he said.
In Las Vegas, prices have fallen 50.7% from their peak and are now where they were in the second quarter of 2002, according to data from Clear Capital, a real estate valuation and data provider for banks and investment firms.
Video: Home Buyers Remain Cautious
Housing prices are down and mortgage rates remain low, but home buyers should be aware that they're in it for the long haul. MarketWatch's Amy Hoak reports. (Feb. 5)A report from Moody's Economy.com, released this week, predicted that house prices will stabilize by the end of this year, even though the Case-Shiller house price index will fall another 11% from the fourth quarter of 2008. By the end of the real-estate downturn, prices will have fallen by double digits, from peak to trough, in almost 62% of the nation's 381 metro areas, according to the report. In 10% of the areas, declines will be more than 30%.
Not all markets have experienced huge drops, however, so it's wise to take a look at how far prices have fallen in your area. The Office of Federal Housing Enterprise Oversight's Web site has a house price calculator that can help.
2. You have a large inventory to choose from
In many places it is taking months to sell a home, creating loads of inventory -- from new homes to existing homes to foreclosures. There was a 12.9-month supply of inventory in December given that month's sales pace, according to NAR.
A large selection gives buyers more choices and drives down prices. And home sellers have gotten the picture.
It's fair to say that home sellers have become "increasingly desperate," Papasan said. "People who have had for-sale signs in the yard for six months are starting to become in tune with the reality of the situation," he said. Buyers can take advantage.
But if you put off a purchase until inventory shrinks substantially, you might not get as good a price, said Eddie Fadel, author of the book "Don't Rent, Buy!" And be forewarned: It's nearly impossible to time the exact bottom of the housing market and even if you do there's no guarantee you'll make a killing.
"You buy for quality of life... don't buy on speculation," said Duane Andrews, CEO of Clear Capital. "I wouldn't buy a home expecting the housing market to rebound quickly in the next 10 years," he said, adding that he expects moderate gains in values when the turnaround does happen.
Historically, real estate appreciates about 5% a year over the long term, said Nancy Flint-Budde, a Salem, N.Y.-based certified financial planner. But as the country crawls out of a recession, many markets probably won't see huge home-price gains any time soon.
3. Builders are offering big discounts
Home builders are getting even more aggressive with their pricing
In fact, Fadel recommends looking at completed new homes first because builders are offering such steep discounts. Plus, you'd have a warranty not only on the home itself, but also on the home's appliances, he said.
"[Builders] want to save their credit, save their brand, save their reputation and clear out inventory," he said. "They can go buy cheap land today with that cash."
His advice: Walk in with a preapproval for a mortgage, make an offer, then walk away without making a deal if you have to. Chances are, a builder will call back and reconsider that offer rather than let a potential buyer get away.
4. Mortgage rates are historically low
It's not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. These days, rates are very attractive for conforming loans, those that can be purchased by mortgage agencies Fannie Mae and Freddie Mac. (The current limit is $417,000, although that can rise as high as $625,500 in high-cost markets.)
Earlier this year, rates on the popular 30-year fixed-rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks. This week, the 30-year fixed-rate mortgage averaged 5.25%, according to Freddie Mac's weekly mortgage survey. More mortgage help could also be on the way. Last week, President Obama said that his new economic plan, which Treasury Secretary Timothy Geithner is set to unveil Monday, would help lower the cost of mortgages for home buyers, although he did not give specifics.
But low rates don't mean lenders are handing out mortgages easily. You'll need good credit, a substantial down payment and a willingness to document your income in order to qualify for those great rates, if you can qualify at all.
5. You can get a federal tax credit
There's currently a federal credit of up to $7,500 for home buyers who haven't owned a home in at least three years. The credit needs to be paid back, although the repayment feature is removed in the economic stimulus plan that passed in the House of Representatives.
That extra cash will come in handy: The average first-time home buyer spends about $6,000 in the first six months of owning a home, said Flint-Budde.
The National Home Builders Association is pushing for more help for home buyers, including an even bigger tax credit -- the Senate in its version of the economic stimulus bill is proposing a $15,000 credit. And both NAHB and the National Association of Realtors want the incentive to help all buyers, not only those who are becoming homeowners for the first time.
Waiting for further federal developments, however, might sap a buyer's negotiating power, as more people get back into the market and competition returns, Fadel said.
"The more Washington gives, demand will increase," he said.
Amy Hoak is a MarketWatch reporter based in Chicago
Five reasons to buy a home this year
Affordability returns to housing, and buyers have loads of negotiating power
By Amy Hoak, MarketWatch
Last update: 12:15 a.m. EST Feb. 6, 2009
CHICAGO (MarketWatch) -- People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you're brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime.
Ask for price reductions, improvements, closing costs -- whatever -- and the seller, desperately trying to get a contract, is very likely to work with you, said Jay Papasan, one of the authors of the book "Your First Home." When the market starts improving, your negotiating power starts to diminish, he added.
"People can get a lot of what they need and almost all of what they want today," Papasan said. "Once a few people get off the fence, there's safety in numbers and you lose your leverage."
If you're qualified to buy a home now, the purchase makes sense for your situation and you're prepared to live in that home for at least five years, there are five reasons why you may be headed for a great deal:
1. Affordability is better than ever
According to the National Association of Realtors' housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970. The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income.
John and Julie Chilman, for example, recently have been able to stretch their dollars in the Las Vegas area. The listing price for the five-bedroom home they're buying was $265,000; they offered $250,000.
"Our Realtor was like 'Yeah, pipe dream. Like they're going to take that,'" John Chilman said. "And all they did was counter $255,000... and they're paying all closing costs." The home had lingered on the market, and was listed for $310,000 just six months ago, he said.
In Las Vegas, prices have fallen 50.7% from their peak and are now where they were in the second quarter of 2002, according to data from Clear Capital, a real estate valuation and data provider for banks and investment firms.
Video: Home Buyers Remain Cautious
Housing prices are down and mortgage rates remain low, but home buyers should be aware that they're in it for the long haul. MarketWatch's Amy Hoak reports. (Feb. 5)A report from Moody's Economy.com, released this week, predicted that house prices will stabilize by the end of this year, even though the Case-Shiller house price index will fall another 11% from the fourth quarter of 2008. By the end of the real-estate downturn, prices will have fallen by double digits, from peak to trough, in almost 62% of the nation's 381 metro areas, according to the report. In 10% of the areas, declines will be more than 30%.
Not all markets have experienced huge drops, however, so it's wise to take a look at how far prices have fallen in your area. The Office of Federal Housing Enterprise Oversight's Web site has a house price calculator that can help.
2. You have a large inventory to choose from
In many places it is taking months to sell a home, creating loads of inventory -- from new homes to existing homes to foreclosures. There was a 12.9-month supply of inventory in December given that month's sales pace, according to NAR.
A large selection gives buyers more choices and drives down prices. And home sellers have gotten the picture.
It's fair to say that home sellers have become "increasingly desperate," Papasan said. "People who have had for-sale signs in the yard for six months are starting to become in tune with the reality of the situation," he said. Buyers can take advantage.
But if you put off a purchase until inventory shrinks substantially, you might not get as good a price, said Eddie Fadel, author of the book "Don't Rent, Buy!" And be forewarned: It's nearly impossible to time the exact bottom of the housing market and even if you do there's no guarantee you'll make a killing.
"You buy for quality of life... don't buy on speculation," said Duane Andrews, CEO of Clear Capital. "I wouldn't buy a home expecting the housing market to rebound quickly in the next 10 years," he said, adding that he expects moderate gains in values when the turnaround does happen.
Historically, real estate appreciates about 5% a year over the long term, said Nancy Flint-Budde, a Salem, N.Y.-based certified financial planner. But as the country crawls out of a recession, many markets probably won't see huge home-price gains any time soon.
3. Builders are offering big discounts
Home builders are getting even more aggressive with their pricing
In fact, Fadel recommends looking at completed new homes first because builders are offering such steep discounts. Plus, you'd have a warranty not only on the home itself, but also on the home's appliances, he said.
"[Builders] want to save their credit, save their brand, save their reputation and clear out inventory," he said. "They can go buy cheap land today with that cash."
His advice: Walk in with a preapproval for a mortgage, make an offer, then walk away without making a deal if you have to. Chances are, a builder will call back and reconsider that offer rather than let a potential buyer get away.
4. Mortgage rates are historically low
It's not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. These days, rates are very attractive for conforming loans, those that can be purchased by mortgage agencies Fannie Mae and Freddie Mac. (The current limit is $417,000, although that can rise as high as $625,500 in high-cost markets.)
Earlier this year, rates on the popular 30-year fixed-rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks. This week, the 30-year fixed-rate mortgage averaged 5.25%, according to Freddie Mac's weekly mortgage survey. More mortgage help could also be on the way. Last week, President Obama said that his new economic plan, which Treasury Secretary Timothy Geithner is set to unveil Monday, would help lower the cost of mortgages for home buyers, although he did not give specifics.
But low rates don't mean lenders are handing out mortgages easily. You'll need good credit, a substantial down payment and a willingness to document your income in order to qualify for those great rates, if you can qualify at all.
5. You can get a federal tax credit
There's currently a federal credit of up to $7,500 for home buyers who haven't owned a home in at least three years. The credit needs to be paid back, although the repayment feature is removed in the economic stimulus plan that passed in the House of Representatives.
That extra cash will come in handy: The average first-time home buyer spends about $6,000 in the first six months of owning a home, said Flint-Budde.
The National Home Builders Association is pushing for more help for home buyers, including an even bigger tax credit -- the Senate in its version of the economic stimulus bill is proposing a $15,000 credit. And both NAHB and the National Association of Realtors want the incentive to help all buyers, not only those who are becoming homeowners for the first time.
Waiting for further federal developments, however, might sap a buyer's negotiating power, as more people get back into the market and competition returns, Fadel said.
"The more Washington gives, demand will increase," he said.
Amy Hoak is a MarketWatch reporter based in Chicago
Five reasons not to buy a home this year
http://www.marketwatch.com/news/story/five-reasons-buying-home-2009/story.aspx?guid=%7B22185FBD-7F44-4A49-A604-A29D4225E122%7D&tool=1&dist=bigcharts&
Five reasons not to buy a home this year
Homes are more affordable, but don't rush -- prices won't skyrocket soon
By Amy Hoak, MarketWatch
Last update: 12:15 a.m. EST Feb. 6, 2009
CHICAGO (MarketWatch) -- The unemployment rate is creeping up and home prices keep falling: Two great reasons why it might be best to put your home buying plans on hold.
After all, your own job could be the next on the chopping block. Plus, why not wait until home prices have reached their bottom and you can safely buy knowing your new house won't depreciate like a car coasting out of the dealership?
"It may be 2010 or 2011 before the general public believes it's safe to go back into housing," said Steve Fifield, president of Chicago-based Fifield Companies, a firm that builds condominium, apartment, and office buildings. "You don't want to be the first guy to go back in."
Keep in mind, for some Americans buying won't even be an option due to stricter mortgage underwriting standards that require bigger down payments and higher credit scores.
But if you think you might qualify and you're tempted to test the market, consider these five reasons for staying on the sidelines instead:
1. Prices are still dropping
Data shows that prices are still dropping in many markets. If you buy today, your home could be worth less in a year or even two.
"People don't like to buy depreciating assets," said David Berson, chief economist for The PMI Group. According to PMI's most recent U.S. Market Risk Index, reported last month, the risk of lower prices two years from now has increased across the country. Half of the country's 50 largest cities had an elevated or high probability of seeing lower house prices by the end of the third quarter of 2010, compared with the third quarter of 2008.
Other home price measures haven't painted a rosy picture either. According to the Case-Shiller home price index, values in 20 major U.S. cities fell 18.2% in November, compared with November 2007. Prices are down 25% from their peak in 2006, according to the index.
Steep discounts in some of the hardest hit housing markets have some people wondering if prices could be starting to bottom. But some markets saw price drops later on than others -- and it could take longer for those latecomers to improve, Fifield said.
2. This sale will be on for a while
From a pure investment standpoint, you'd probably be better off investing in stocks, said Nancy Flint-Budde, a Salem, N.Y.-based certified financial planner. In a normal market, real estate appreciates about 5% a year, she said. But even if prices stop falling this year, as Moody's Economy.com is predicting, price appreciation could be weak for a while.
In fact, while some recoveries resemble a "V"-shaped pattern, this housing recovery could look like an "L" -- once a bottom hits, prices will flat line, said Jay Papasan, one of the authors of the book "Your First Home." Prices likely won't rocket to housing-boom levels soon, as conditions are exacerbated by rising unemployment and foreclosure inventory.
The lesson: This housing sale could go on for a while, so there is no need to rush.
"Even if in December of 2009 the first stories appear that sellers aren't lowering prices any more... you need that uptick and information showing that not only are sales increasing, but prices have stabilized and are starting to go up," Fifield said.
3. You may not stay put
If prices continue to drop, you might have to be in that home for longer than you thought in order for the investment to make financial sense.
In any market, it's best to buy a home with the intention of staying there five to 10 years, said Flint-Budde. This guideline is even more important today, when you might have to absorb more price drops and weather a couple years of slow price growth.
Video: Home Buyers Remain Cautious
Housing prices are down and mortgage rates remain low, but home buyers should be aware that they're in it for the long haul. MarketWatch's Amy Hoak reports. (Feb. 5)First-time buyers must be listening to that rule of thumb: According to research from the National Association of Realtors, the typical first-time home buyer in 2008 planned to stay in their new for 10 years, up from seven years in 2007.
Brian Rayhack, for example, is renting an apartment in Chicago because he's just not sure how long he'd be living in the city. "If I was going to be here more than five years I definitely would have bought," he said. For the flexibility that comes with renting, it's was worth it for him to wait.
4. Your job could be the next to go
Maybe you're spooked by the headlines of job cuts. Perhaps you have friends who have recently been laid off. If you think your own job might is in danger, stop right there -- and stay put.
But even if you're comfortable with your own job security, investigate how your future neighbors are faring.
Your real-estate agent will tell you to pay attention to local market conditions instead of national trends. But don't stop by only looking at neighborhood home prices; the health of the local job market is also important to consider.
Have there been many layoffs in the area recently? What are the largest employers, and are they in industries that are suffering severely? Is the local economy diversified?
"What is the state of the job market in my area, and my metro area in general? That's going to impact overall demand," said Richard Moody, chief economist with Mission Residential. At the very least, get a sense of what the local inventory situation is like, relative to demand, to anticipate the pressures on prices over the coming months or years, he added.
It's best to get a broad picture of the housing market, rather than simply asking yourself "can I afford it or not," Moody said.
5. Your cash reserves will be eaten up
Given the recession and the fragile economy today, even if you feel confident about your job it's wise to have a cushion to land on in the event you get hit with a financial broadside, a divorce or a major health bill, for instance. If your down payment would deplete your rainy day fund, keep saving for a while before house hunting.
"Even if you feel like you're secure in your job, it's much smarter to have five or six months of expenses to have aside. A reserve is a wise thing in this economy today," Papasan said.
Amy Hoak is a MarketWatch reporter
Five reasons not to buy a home this year
Homes are more affordable, but don't rush -- prices won't skyrocket soon
By Amy Hoak, MarketWatch
Last update: 12:15 a.m. EST Feb. 6, 2009
CHICAGO (MarketWatch) -- The unemployment rate is creeping up and home prices keep falling: Two great reasons why it might be best to put your home buying plans on hold.
After all, your own job could be the next on the chopping block. Plus, why not wait until home prices have reached their bottom and you can safely buy knowing your new house won't depreciate like a car coasting out of the dealership?
"It may be 2010 or 2011 before the general public believes it's safe to go back into housing," said Steve Fifield, president of Chicago-based Fifield Companies, a firm that builds condominium, apartment, and office buildings. "You don't want to be the first guy to go back in."
Keep in mind, for some Americans buying won't even be an option due to stricter mortgage underwriting standards that require bigger down payments and higher credit scores.
But if you think you might qualify and you're tempted to test the market, consider these five reasons for staying on the sidelines instead:
1. Prices are still dropping
Data shows that prices are still dropping in many markets. If you buy today, your home could be worth less in a year or even two.
"People don't like to buy depreciating assets," said David Berson, chief economist for The PMI Group. According to PMI's most recent U.S. Market Risk Index, reported last month, the risk of lower prices two years from now has increased across the country. Half of the country's 50 largest cities had an elevated or high probability of seeing lower house prices by the end of the third quarter of 2010, compared with the third quarter of 2008.
Other home price measures haven't painted a rosy picture either. According to the Case-Shiller home price index, values in 20 major U.S. cities fell 18.2% in November, compared with November 2007. Prices are down 25% from their peak in 2006, according to the index.
Steep discounts in some of the hardest hit housing markets have some people wondering if prices could be starting to bottom. But some markets saw price drops later on than others -- and it could take longer for those latecomers to improve, Fifield said.
2. This sale will be on for a while
From a pure investment standpoint, you'd probably be better off investing in stocks, said Nancy Flint-Budde, a Salem, N.Y.-based certified financial planner. In a normal market, real estate appreciates about 5% a year, she said. But even if prices stop falling this year, as Moody's Economy.com is predicting, price appreciation could be weak for a while.
In fact, while some recoveries resemble a "V"-shaped pattern, this housing recovery could look like an "L" -- once a bottom hits, prices will flat line, said Jay Papasan, one of the authors of the book "Your First Home." Prices likely won't rocket to housing-boom levels soon, as conditions are exacerbated by rising unemployment and foreclosure inventory.
The lesson: This housing sale could go on for a while, so there is no need to rush.
"Even if in December of 2009 the first stories appear that sellers aren't lowering prices any more... you need that uptick and information showing that not only are sales increasing, but prices have stabilized and are starting to go up," Fifield said.
3. You may not stay put
If prices continue to drop, you might have to be in that home for longer than you thought in order for the investment to make financial sense.
In any market, it's best to buy a home with the intention of staying there five to 10 years, said Flint-Budde. This guideline is even more important today, when you might have to absorb more price drops and weather a couple years of slow price growth.
Video: Home Buyers Remain Cautious
Housing prices are down and mortgage rates remain low, but home buyers should be aware that they're in it for the long haul. MarketWatch's Amy Hoak reports. (Feb. 5)First-time buyers must be listening to that rule of thumb: According to research from the National Association of Realtors, the typical first-time home buyer in 2008 planned to stay in their new for 10 years, up from seven years in 2007.
Brian Rayhack, for example, is renting an apartment in Chicago because he's just not sure how long he'd be living in the city. "If I was going to be here more than five years I definitely would have bought," he said. For the flexibility that comes with renting, it's was worth it for him to wait.
4. Your job could be the next to go
Maybe you're spooked by the headlines of job cuts. Perhaps you have friends who have recently been laid off. If you think your own job might is in danger, stop right there -- and stay put.
But even if you're comfortable with your own job security, investigate how your future neighbors are faring.
Your real-estate agent will tell you to pay attention to local market conditions instead of national trends. But don't stop by only looking at neighborhood home prices; the health of the local job market is also important to consider.
Have there been many layoffs in the area recently? What are the largest employers, and are they in industries that are suffering severely? Is the local economy diversified?
"What is the state of the job market in my area, and my metro area in general? That's going to impact overall demand," said Richard Moody, chief economist with Mission Residential. At the very least, get a sense of what the local inventory situation is like, relative to demand, to anticipate the pressures on prices over the coming months or years, he added.
It's best to get a broad picture of the housing market, rather than simply asking yourself "can I afford it or not," Moody said.
5. Your cash reserves will be eaten up
Given the recession and the fragile economy today, even if you feel confident about your job it's wise to have a cushion to land on in the event you get hit with a financial broadside, a divorce or a major health bill, for instance. If your down payment would deplete your rainy day fund, keep saving for a while before house hunting.
"Even if you feel like you're secure in your job, it's much smarter to have five or six months of expenses to have aside. A reserve is a wise thing in this economy today," Papasan said.
Amy Hoak is a MarketWatch reporter
Thursday, February 5, 2009
Geithner to Announce Financial-Rescue Plan Feb. 9
Geithner to Announce Financial-Rescue Plan Feb. 9
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3x1RI4a9BYY&refer=home
By Rebecca Christie and Robert Schmidt
Feb. 5 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner will in four days unveil the administration’s financial-recovery plan, aiming to shore up the nation’s banks and restart lending to households and businesses.
Geithner will make a speech Feb. 9 in Washington, a Treasury official said. Hours later, President Barack Obama will hold a news conference that will address the stimulus package Democratic leaders predict will win congressional approval.
Officials plan a combination of approaches for their overhaul of the $700 billion Troubled Asset Relief Program. Along with further injections of taxpayer funds into major financial firms, the strategy is likely to include guarantees for illiquid assets on banks’ balance sheets and possibly some form of a so-called bad bank that would purchase toxic investments, people familiar with the matter have said.
“Our agenda is to begin to shape the architecture of a financial recovery plan that’ll help get credit flowing again and help reinforce the recovery and reinvestment plan now working its way through the Congress,” Geithner said before a meeting of the President’s Working Group on Financial Markets.
The group includes Federal Reserve Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.
January Job Cuts
Geithner’s announcement next week will come on the heels of indications that economists predict will show the U.S. recession is deepening.
A Labor Department report tomorrow may show the U.S. lost 540,000 jobs in January, according to the median estimate of economists surveyed by Bloomberg News. The unemployment rate may rise to 7.5 percent, a 16-year high.
The S&P 500 Financials Index has dropped for six straight months and fallen about 27 percent so far this year. Shares of Citigroup Inc. have plunged 87 percent from a year ago and Bank of America Corp. is down 89 percent.
Earlier today, Senate Banking Committee Chairman Christopher Dodd urged the Obama administration to redesign the financial-rescue program to ensure that banks receiving aid increase lending and restrict salaries.
“For the sake of our economy and the public’s confidence in our ability to address this crisis, we must see a sharp change in the direction of this program under new management,” Dodd, a Connecticut Democrat, said in an opening statement at a hearing in Washington.
Dodd also said he wants to see a long-term plan for using TARP funds, “stricter limits” on executive pay and bonuses, “clear guidelines” for banks to boost lending and a foreclosure prevention program.
To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net Robert Schmidt in Washington at rschmidt5@bloomberg.net. Last Updated: February 5, 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3x1RI4a9BYY&refer=home
By Rebecca Christie and Robert Schmidt
Feb. 5 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner will in four days unveil the administration’s financial-recovery plan, aiming to shore up the nation’s banks and restart lending to households and businesses.
Geithner will make a speech Feb. 9 in Washington, a Treasury official said. Hours later, President Barack Obama will hold a news conference that will address the stimulus package Democratic leaders predict will win congressional approval.
Officials plan a combination of approaches for their overhaul of the $700 billion Troubled Asset Relief Program. Along with further injections of taxpayer funds into major financial firms, the strategy is likely to include guarantees for illiquid assets on banks’ balance sheets and possibly some form of a so-called bad bank that would purchase toxic investments, people familiar with the matter have said.
“Our agenda is to begin to shape the architecture of a financial recovery plan that’ll help get credit flowing again and help reinforce the recovery and reinvestment plan now working its way through the Congress,” Geithner said before a meeting of the President’s Working Group on Financial Markets.
The group includes Federal Reserve Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.
January Job Cuts
Geithner’s announcement next week will come on the heels of indications that economists predict will show the U.S. recession is deepening.
A Labor Department report tomorrow may show the U.S. lost 540,000 jobs in January, according to the median estimate of economists surveyed by Bloomberg News. The unemployment rate may rise to 7.5 percent, a 16-year high.
The S&P 500 Financials Index has dropped for six straight months and fallen about 27 percent so far this year. Shares of Citigroup Inc. have plunged 87 percent from a year ago and Bank of America Corp. is down 89 percent.
Earlier today, Senate Banking Committee Chairman Christopher Dodd urged the Obama administration to redesign the financial-rescue program to ensure that banks receiving aid increase lending and restrict salaries.
“For the sake of our economy and the public’s confidence in our ability to address this crisis, we must see a sharp change in the direction of this program under new management,” Dodd, a Connecticut Democrat, said in an opening statement at a hearing in Washington.
Dodd also said he wants to see a long-term plan for using TARP funds, “stricter limits” on executive pay and bonuses, “clear guidelines” for banks to boost lending and a foreclosure prevention program.
To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net Robert Schmidt in Washington at rschmidt5@bloomberg.net. Last Updated: February 5, 2009
Bank of America tumbles on nationalization worries
http://finance.yahoo.com/news/Bank-of-America-tumbles-on-rb-14256843.html
Bank of America tumbles on nationalization worries
Wednesday February 4, 2009, 5:31 pm EST .
By Elinor Comlay
NEW YORK (Reuters) - Bank of America Corp (NYSE:BAC - News) shares fell below $5 for the first time since 1990 on speculation that spiraling losses at newly acquired Merrill Lynch & Co might lead to government control of the largest U.S. bank, wiping out shareholders.
Shares fell more than 11 percent, marking the fifth straight decline, as rumors persisted that mounting losses on mortgages and corporate loans might lead to the nationalization of the Charlotte, North Carolina, lender, or even the ouster of Chief Executive Kenneth Lewis. Bank of America and Merrill Lynch ended 2008 with $2.49 trillion of assets.
"Until we get some clarity that even the largest banks will remain in shareholder hands, this downward spiral is just going to continue," said Nancy Bush, an analyst with NAB Research.
A spokesman for the Office of the Comptroller of the Currency and a spokesman for Bank of America declined comment.
Bank of America shares fell 60 cents to $4.70 and slipped as low as $4.62 during trading. The cost of protecting the bank's debt against default with credit default swaps rose 0.3 of a percentage point.
But according to the Charlotte Observer, Lewis in a memo to employees said the bank's board "unanimously" supported Bank of America's business model last week in "the longest board meeting in anyone's memory."
Lewis has come under fire from shareholders as the once-lauded Merrill Lynch acquisition has unraveled, leaving Bank of America dependent on government support to battle mounting losses and evaporating shareholder value.
"Part of what's going on with the stock price is reflecting the uncertainty of Lewis' position," said Michael Nix, portfolio manager at Greenwood Capital Associates.
Nix discounted the board's support of Lewis, noting he would not expect the board to be other than supportive and that board support has proved fleeting for bank chief executives in the recent past.
A FIASCO
Bank of America last month posted its first quarterly loss in 17 years, and said Merrill's $15.31 billion quarterly loss was so much worse than expected that Lewis needed help from the government to complete the acquisition.
The government, which had already given Bank of America $25 billion in October under the Troubled Asset Relief Program (TARP), agreed to inject $20 billion more, and to share in losses on $118 billion of residential and commercial mortgages, derivatives and corporate debt.
"This Merrill Lynch deal has become a fiasco for Ken Lewis," said Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon. "His whole reason for grabbing Merrill Lynch was getting the brokers, and what he ended up with was gigantic writedowns from the part of the business he didn't even want."
Lewis had coveted Merrill for its brokerage force, often known as the "thundering herd," which he called the "crown jewel" of the roughly $19.4 billion takeover.
Bank of America shares have fallen 67 percent this year, compared to a 41 percent decline in the broader KBW Banks Index (Philadelphia:^BKX - News).
Shares in Citigroup Inc (NYSE:C - News), which has also received a large cash injection and a government guarantee of assets, were up as much as 10 percent at $3.82 before falling back to close at $3.49 -- a gain of 0.9 percent, or 3 cents.
Bank of America tumbles on nationalization worries
Wednesday February 4, 2009, 5:31 pm EST .
By Elinor Comlay
NEW YORK (Reuters) - Bank of America Corp (NYSE:BAC - News) shares fell below $5 for the first time since 1990 on speculation that spiraling losses at newly acquired Merrill Lynch & Co might lead to government control of the largest U.S. bank, wiping out shareholders.
Shares fell more than 11 percent, marking the fifth straight decline, as rumors persisted that mounting losses on mortgages and corporate loans might lead to the nationalization of the Charlotte, North Carolina, lender, or even the ouster of Chief Executive Kenneth Lewis. Bank of America and Merrill Lynch ended 2008 with $2.49 trillion of assets.
"Until we get some clarity that even the largest banks will remain in shareholder hands, this downward spiral is just going to continue," said Nancy Bush, an analyst with NAB Research.
A spokesman for the Office of the Comptroller of the Currency and a spokesman for Bank of America declined comment.
Bank of America shares fell 60 cents to $4.70 and slipped as low as $4.62 during trading. The cost of protecting the bank's debt against default with credit default swaps rose 0.3 of a percentage point.
But according to the Charlotte Observer, Lewis in a memo to employees said the bank's board "unanimously" supported Bank of America's business model last week in "the longest board meeting in anyone's memory."
Lewis has come under fire from shareholders as the once-lauded Merrill Lynch acquisition has unraveled, leaving Bank of America dependent on government support to battle mounting losses and evaporating shareholder value.
"Part of what's going on with the stock price is reflecting the uncertainty of Lewis' position," said Michael Nix, portfolio manager at Greenwood Capital Associates.
Nix discounted the board's support of Lewis, noting he would not expect the board to be other than supportive and that board support has proved fleeting for bank chief executives in the recent past.
A FIASCO
Bank of America last month posted its first quarterly loss in 17 years, and said Merrill's $15.31 billion quarterly loss was so much worse than expected that Lewis needed help from the government to complete the acquisition.
The government, which had already given Bank of America $25 billion in October under the Troubled Asset Relief Program (TARP), agreed to inject $20 billion more, and to share in losses on $118 billion of residential and commercial mortgages, derivatives and corporate debt.
"This Merrill Lynch deal has become a fiasco for Ken Lewis," said Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon. "His whole reason for grabbing Merrill Lynch was getting the brokers, and what he ended up with was gigantic writedowns from the part of the business he didn't even want."
Lewis had coveted Merrill for its brokerage force, often known as the "thundering herd," which he called the "crown jewel" of the roughly $19.4 billion takeover.
Bank of America shares have fallen 67 percent this year, compared to a 41 percent decline in the broader KBW Banks Index (Philadelphia:^BKX - News).
Shares in Citigroup Inc (NYSE:C - News), which has also received a large cash injection and a government guarantee of assets, were up as much as 10 percent at $3.82 before falling back to close at $3.49 -- a gain of 0.9 percent, or 3 cents.
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