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Monday, December 20th, 2010

Bureau of Consumer Financial Protection Overseer Named

The New York Times reported last week that the newly created Bureau of Consumer Financial Protection now has an overseer of enforcement. Richard Cordray, former attorney general of Ohio, was reportedly hired to the post by presidential appointee Elizabeth Warren, who is currently in charge of the bureau.

So what will Mr. Cordray’s responsibilities be in the new post? According to the Times, he’ll be focused on overseeing enforcement actions for a variety of consumer-related financial issues, including the following:

  • Foreclosure fraud: Recent financial news like the robo-signing scandal and other questionable foreclosure practices would fall under Mr. Cordray’s purview, it seems. And, as sources note, he ought to be prepared to fight against such questionable bank behavior, since his position as Ohio’s AG included fighting certain kinds of foreclosure fraud.
  • Abusive payday lenders: As many debt-laden Americans know, payday lenders can charge outlandish fees and interest rates and lead ordinary consumers into a crippling cycle of debt. As part of his position in the Bureau of Consumer Financial Protection, Mr. Cordray would be responsible for making sure that regulations and laws for payday lenders are sufficient, followed and enforced.
  • Questionable bank behavior: On a grander scale, Cordray’s responsibilities may reach as far as making sure larger financial entities like banks and other lenders follow laws designed to keep them from engaging in the sort of risky, fast-and-loose behavior that led to the crash of the housing market and touched off the current recession.

Cordray’s Past Consumer Protection Actions

So how did Cordray get the job? It seems his résumé includes a variety of consumer-friendly moves, including:

  • Lawsuits against big financial firms: The Times reports that Cordray managed to squeeze $2 billion from major names in the finance world, including American International Group (AIG), Merril Lynch and Marsh & McLennan.
  • Bold strikes at government overseers: Another notch on Cordray’s belt, the Times notes, is that he called out the Securities and Exchange Commission (SEC) for falling down on the job and thus enabling many of the abuses in the finance world that led to our current financial mess.

Role of the Consumer Financial Protection Bureau

Many consumer advocates lauded the creation of the Consumer Financial Protection Bureau, which was outlined in the financial overhaul bill passed early in Obama’s tenure as president. When it is fully up and running, the bureau, headed by former Harvard bankruptcy professor Elizabeth Warren, will be responsible for making sure consumer interests are taken into consideration when lawmakers consider regulatory changes for financial and other matters.

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Posted in Economic News: How Are We Doing?, Finance 101: Secure Your Future | 1 Comment »

Monday, October 25th, 2010

Foreclosure News: Record Repossessions and the Scandal

Since news of the so-called “robo-signer” scandal broke a few weeks ago, a lot has happened in the foreclosure business in this country. Here’s a look at some of the latest developments and what they might mean for individual homeowners and the nation’s housing market.

Record Number of Home Seizures

Bloomberg news reports that mortgage foreclosures in the United States reached record high levels in September, just before the robo-signing story pushed many mortgage lenders to pause their home repossessions. Here are some details (before you read on, we want you know that Chapter 13 bankruptcy is designed to stop foreclosure and repossession. Ok, that's it. Have fun reading on!):

  • More than 100,000 homes foreclosed: In September alone, according to figures from RealtyTrac, lenders repossessed 102,134 U.S. properties. This figure apparently represents the highest monthly total ever recorded (going back to 2005). The previous high came a month earlier, in August of this year.
  • Foreclosure filings at record high: In addition to actual lender repossessions, other steps in the foreclosure process (including notices of default and auction) reportedly occurred at high levels last month: 347,420 total foreclosure notices, which means that one in every 371 U.S. homes was in some stage of foreclosure.
  • Sales of foreclosure properties high: While the record foreclosure levels aren’t exactly good news, there seems to be a small bright spot: Bloomberg notes that one-third of all home sales in the U.S. in September were sales of foreclosed properties, meaning that at least people are buying houses again.
  • National foreclosures halted: Of course, Bank of America, JPMorgan Chase & Co. and Ally Financial Inc., three major mortgage lenders, have paused foreclosure proceedings in some or all of the country to address the legal issues raised by the alleged improprieties of robo-signers. While a pause to foreclosures might be good news for families in danger of losing their homes, it could have a negative impact on home sales.

Will You Have to Pay Your Legal Fees?

The New York Times reported this week on a new state law in New York that will require lenders to pay the legal fees of homeowners who triumph in foreclosure proceedings. Here’s the scoop:

  • Not a national law: While the law currently only applies to New York residents, it may gain popularity elsewhere, depending on the effect it has on foreclosure cases there.
  • Correcting an imbalance: Currently, in most states, mortgage lenders apparently include a provision in loan papers that requires borrowers to pay lenders’ legal fees in the event of foreclosure.
  • A better shot for homeowners: With the potential of higher payments (because lenders tend to have more capital than individuals facing foreclosure), consumers looking to fight foreclosure cases may have an easier time getting lawyers to take on their cases and thus fare better in court.

Considering the hubbub in the news concerning foreclosure right now, it will likely be an interesting few months or years to see if and how the foreclosure process changes in the United States.

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Posted in Bankruptcy News and Events, Economic News: How Are We Doing?, The Law and Your Money | No Comments »

Friday, September 3rd, 2010

Mortgage Foreclosures & Delinquencies

In light of some mixed news about housing and foreclosure for the second quarter of this year, the outlook isn’t too rosy for the short-term future of the nation’s real estate market, a recent New York Times article notes.

Here’s a look at some of the numbers released recently by the Mortgage Bankers Association and various government organizations and what they might mean for the housing market:

  • According to the MBA, the number of homes currently in some stage of foreclosure fell in the second quarter of 2010, marking the first such decline since 2006.
  • Sources note that foreclosures on subprime loans may have already peaked and are likely now dropping off; however, it seems that prime loans are now in danger of default, partly because of continued high unemployment.
  • Mortgages that are 90 days past due (considered to be in “serious default”) accounted for 9.11 percent of all loans in the second quarter, a drop from 9.54 percent in the first quarter of this year.
  • Sources note that existing home sales in July 2010 were 26 percent lower than they were in July 2009.
  • Sales of new homes, it seems, were down 32 percent in July 2010, compared to a year earlier, apparently making the month the slowest on record (with stats going back to 1963).
  • As many as seven million households were behind on mortgage payments in July, according to sources (down from the high of eight million, reached about eight months ago).
  • Numbers suggest that banks and lenders are starting to clear the foreclosure logjam: in July, 279,685 foreclosures were started, an increase from 225,700 in June.

Clearly, these numbers don’t exactly point at recovery in the housing market—and some analysts have reportedly predicted that as many as four million American families could lose their homes to foreclosure before the crisis eases.

And such a high rate of foreclosures could have a seriously detrimental effect on the overall economy:

  • Less money, less spending: Consumers who are struggling to make mortgage payments are likely to spend less in other areas, meaning that consumer-supported economic growth may be weak.
  • More foreclosures, more houses: As banks start foreclosing on homes, more vacant properties will flood an already saturated market.
  • More houses, lower prices: This inundation of homes will mean that supply is far higher than demand, and could lead to further drops in housing prices.
  • Lower prices, more underwater mortgages: As home values continue to decrease, more borrowers will likely find that they owe more on their homes than those properties are currently worth.

There is no clear end in sight for this cycle of foreclosure.

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Posted in Economic News: How Are We Doing? | No Comments »

Monday, June 28th, 2010

Congressional Disputes Hamper Unemployment Extensions

Despite some signs of economic recovery across the United States, the nation's unemployment level remains near 10 percent and, according to recent reports, concerns in the Senate over the country’s budget deficit and expansive recovery spending could prevent unemployed Americans from seeing extensions to their benefits.

So how large are the ramifications of Congress’s failure to act? Sources indicate that:

  • As many as 900,000 people have already seen some decrease in the unemployment benefits they receive
  • If no congressional action is taken, an estimated 1.2 million people will lose some or all of their unemployment benefits by the end of June
  • If Congress doesn’t act by the end of July, more than 2 million could be affected

The lack of action —or rather, lack of productive action—:on this matter in Congress will likely mean only temporary halts to unemployment support, but those affected could see their finances take a serious hit, particularly because so many Americans are in financial situations that mean they’re only a few late bills away from default, foreclosure or filing for bankruptcy.

Unemployment Benefits and Extensions

Because of the country’s unusually high unemployment rate and difficult job market, the federal government has extended the 26-week state- and employer-sponsored unemployment insurance programs with three other forms of assistance, all of which could expire without Congressionally approved extensions. The forms of unemployment insurance in jeopardy include:

  • Extension of benefits: This program allows those on unemployment to receive benefits for between 60 and 99 weeks, rather than the half-year state standard.
  • Extra weekly money: Another program offers an additional $25 weekly to certain unemployment beneficiaries.
  • Extension of COBRA benefits: The third program allows those who have lost their jobs to continue the health coverage they had at their last job and subsidizes the cost of that coverage, paying 65 percent for up to 15 weeks.

As some analysts have pointed out, for the millions of Americans unable to find a paying job, these extended benefits can mean the difference between good health and unmanageable medical bills.

Perhaps unsurprisingly, Senate Republicans are reportedly concerned that these extensions, while giving invaluable aid to many American families, are contributing ever more to the United States’ budget deficit, which is skyrocketing thanks in part to recovery efforts.

Though the situation may be sticky for some families, sources note that Congress still has time to act to renew the extensions.

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Posted in Unemployment | No Comments »

Tuesday, May 25th, 2010

The Latest in Unemployment & Consumer Prices

The Labor Department has released unemployment data for May and the numbers suggest no significant improvement in the nation’s employment landscape—in fact, last week’s numbers marked the largest rise in unemployment since February.

Here’s a look at some of the numbers and how they relate to previous weeks.

  • Initial claims: For the week ending May 15th, initial unemployment claims rose to 471,000 from 446,000, an increase of 25,000 from the previous week. The four-week average, too, rose by 3,000.
  • This time last year: In this week of 2009, 540,925 initial unemployment claims were made; this year, that number was down slightly, to 407,940, suggesting that the employment situation has improved somewhat since a year ago.
  • High & low claim rates: States reporting the highest rate of initial unemployment claims include California, Michigan, New Jersey, Georgia and Puerto Rico; the lowest reported rates came from New York, Kentucky, Connecticut, Missouri and New Hampshire.

The numbers surprised some analysts, who reportedly expected job growth last week. The increase in unemployment rates points to continued uncertainty in the job market, even as the economy generally seems to be recovering. Because unemployment is often an indicator of bankruptcy filings, these statistics can have long-reaching effects.

Possible Explanations

The news may not be all bad, though. In April, as the economy expanded, the official unemployment rate actually grew, not because more jobs were lost, but because more people began actively looking for work, as they perceived the job market was strengthening.

Consumer Price Index for April

The Bureau of Labor Statistics released data this week that show the Consumer Price Index for April 2010 decreased by 0.1 percent, largely fueled by a 1.4 percent decrease in the energy index. Here’s how some other sectors fared:

  • The food index rose by 0.2 percent in April, spurred by rises in the price of meat, fish, poultry and eggs.
  • The index for all items excluding food and energy remained unchanged.
  • The indexes for recreation, airline travel and medical care rose last month, but were balanced by decreases in the indexes for apparel, household furnishings and services.

During the last year, the index for all goods and services has risen by a modest 0.9 percent, which the BLS reports is the smallest 12-month increase seen since 1966.

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Monday, May 17th, 2010

Consumer Borrowing, Retail & Median Home Prices Boost Economy

Government groups have published numbers for various economic indicators for March and April (such as unemployment and bankruptcy data), giving a little insight into how our nation’s economic situation is changing. Here’s a summary of a few of these telling figures.

Consumer Borrowing Up in March

Since February of 2009, consumer borrowing in the U.S. has reportedly been falling, as we collectively try to claw our finances out of the red.

But March 2010 showed a surprising increase in consumer borrowing—a $1.95 billion increase, according to sources, which far outstripped the $3.85 billion loss many experts expected.

The increase could be a fluke, but it could equally be a sign that American households are becoming more optimistic about spending money.

Retail Rises Slightly in April

Retail sales blossomed in March, thanks in part to an early Easter. April’s numbers represent smaller growth, but growth nonetheless:

  • March retail sales saw a 7.9 percent increase over sales in March of 2009.
  • April retail sales grew only 0.5 percent compared with those a year earlier; however, in April 2009, sales decreased 2.7 percent from the previous year.
  • Combined sales in March and April increased by 4.8 percent; January and February sales increased by only 3.3 and four percent.

While the slower growth in April may seem like cause for concern, many analysts are not worried, pointing to the fact that some growth occurred and that this year’s early Easter likely shifted people’s shopping patterns.

And, as one commentator in a recent New York Times article notes, economic recoveries don’t always happen linearly.

Median Home Prices

NPR reported this week that median home prices are on the rise in about 60 percent (91 out of 152) of the country’s cities surveyed.

This marks significant improvement from the final quarter of 2009, when only about 40 percent of median home prices were rising. Here’s a look at some of the hard numbers:

  • 36 percent of all first-quarter sales were foreclosures and other distressed properties;
  • Nationally, the median price was $166,100, about 0.7 percent below the median price in the first quarter of 2009;
  • Prices jumped significantly in Saginaw, MI; Akron, OH; and Cleveland, OH; and
  • Prices fell significantly in Orlando, FL; Ocala, FL; and Cumberland, MD.

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Saturday, April 17th, 2010

This Week in the Economy

The week of the nation’s tax filing deadline saw some important financial news. Here’s a summary of what happened and what it might mean for you.

Recession’s End Unclear

The Business Cycle Dating Committee of the National Bureau of Economic Research, the group responsible for determining official start and end dates for recessions based on analysis of various economic indicators, announced this week that it cannot yet declare an end to the recession.

The press release indicates that, though many economic indicators have improved in recent months (including subprime mortgage defaults and retail sales), it is still too early to say whether or not the recession has officially ended.

Interestingly, though, one member of the committee disagreed with the committee’s final decision and issued a memo indicating as much, citing the following two indicators as primary reasons why he believes the recession has already ended:

  • Real Gross Domestic Product (GDP), which measures the market value of all goods and services produced inside a country in a given year, has reportedly improved since June of 2009, from what’s called the “trough;” and
  • Real Gross Domestic Income (GDI) has also apparently improved, though not for so long a period – the memo indicates it started its upswing in the final quarter of 2009.

He also notes that the economy’s recovery should not surprise anyone, suggesting that, because we “fell” so hard, our “bounce” back should be swift and forceful.

Unemployment Benefits Extension in Congress

Though some economic indicators may be on the upslope, unemployment still hovers close to 10 percent, meaning that millions of American families may not feel the recession’s end for a while.

But there may be hope for such families: a report from the New York Times notes that the Senate has voted 60 – 40 in favor of extending unemployment benefits to out-of-work Americans.

The measure, should it pass both houses of Congress and get signed into law, would apparently cost somewhere in the neighborhood of $18 billion, which seems to be a point of contention for many Senate Republicans.

Unemployment is often considered a strong indicator of bankruptcy filings, so keeping an eye on the unemployment numbers can be a good prediction of Americans filing bankruptcy.

The (Higher) Future of Taxes

Newsweek reported this week that, thanks to serious budget deficits at the federal level and an aging American populace, there’s a good chance taxes will increase – even sharply – in coming years.

While this may not seem like the best news, take this year to enjoy your current tax level!

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Wednesday, October 28th, 2009

GMAC May Get Third Bailout

GMAC Financial Services,the former financing arm of General Motors Corp., may be in talks with the U.S. Treasury to receive a third financial lifeline, according to the Wall Street Journal.

GMAC has received $12.5 billion in bailout funds since December, 2008, and could receive an additional $2.8 billion to $5.6 billion in a third injection.

As part of the initial bailout, GMAC, which finances three-fourths of General Motors car loans and provides mortgages, insurance and other services, transformed into a bank holding company, which enabled it to receive Treasury aid. After the May, 2009 bailout, the U.S. government became the majority shareholder in the company.

Because GMAC backs so many new auto loans, it plays a vital role in revitalizing the auto industry, in which the government has already invested $25 billion.

General Motors, which filed bankruptcy this year, began selling off its interest in GMAC in 2006. The automaker maintained a small interest in GMAC before transferring many of its assets to the "new GM" as part is its Chapter 11 filing.

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Sunday, September 13th, 2009

Federal Reserve Survey: Economy Stable or Improving

The results of the Federal Reserve’s Beige Book business survey, reported earlier this month, suggest that the U.S. economy has stabilized or begun improving.

This assessment comes from a survey of the 12 regional Federal Reserve Banks, 11 of which reported “signs of” an improved economic situation.

The Findings: Faint Praise?

Overall, the report isn’t exactly parade-inspiring; in fact, the anecdotal evidence provided in it may only seem positive in comparison to the dreary numbers and figures we’ve grown accustomed to seeing. For example:

  • Retail sales were generally described as “flat,” which suggests a lack of growth – but no shrinking, either.
  • Labor markets were described as “weak.”
  • Gross Domestic Product (GDP) shrank by only one percent between April and June – a consoling number only when compared to its 6.4 percent decrease from January to March.

These are the so-called “positive” findings of the survey, which is perhaps more an indicator of how badly the U.S. economy has been doing for a while than anything else.

The Exceptions

The Federal Reserve of St. Louis was apparently the only district that did not declare outright improvement in the economy; rather, the St. Louis district noted that the pace of economic contraction “appears to be moderating.”

And not every economic sector showed even hints of recovery: the commercial real estate market is apparently still suffering “very low levels” of construction and continued weak demand for space.

What About Unemployment?

The economy’s gradual recovery is expected to be tough on those looking for work, according to the opinions of several economists. Many are predicting peaks in unemployment in the next few months and slow returns to pre-recession levels.

Indeed, the most recent release of data from the Bureau of Labor Statistics shows that job openings in the U.S. have dropped by 2.4 million, a 50 percent decrease since June 2007.

These numbers have remained fairly consistent for the past several months, and show no indications of drastically changing in the near future.

And of course, the number of Americans filing bankruptcy shows little sign of slowing down, with figures from August, 2009, slightly below July's high and well above last year bankruptcy rate.

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Wednesday, August 26th, 2009

This Week in the U.S. Economy: Bernanke Second Term, Consumer Confidence & Home Prices Rise

The past seven days have been fairly significant for the United States, economy-wise.

Here’s a brief summary of three major stories you should know about.

Ben Bernanke: Nominated for a Second Term

President Obama took a break from his vacation on Tuesday to announce his re-nomination of Benjamin Bernanke as Federal Reserve Chairman.

If approved by the Senate, Bernanke will serve his second four-year term.

Since the economy hit the skids in 2007, Bernanke has:

  • Lowered the main interest rate to near zero and funneled almost a trillion dollars into U.S. banks to mobilize credit
  • Handled the financial crisis with “calm and wisdom,” according to Obama
  • Been criticized by legislators for reacting too slowly when early warning signs of trouble in the mortgage market showed themselves.

Bernanke is a Republican. Read his statement of acceptance at http://federalreserve.gov/newsevents/press/other/20090825a.htm

Consumer Confidence Rises Above Expectations

The Conference Board published numbers showing that consumer confidence in August is up substantially from July. Specifically:

  • The Consumer Confidence Index currently stands at 54.1 ---  in July, it was 47.4 (a level of 90 is required for consumers to be considered “optimistic”)
  • The Present Situation Index rose from 23.3 in July to 24.9 this month
  • The Expectations Index rose from 63.4 last month to 73.5.

Economists look to these numbers in part because the United States has a very consumer-driven economy, meaning that long-term recovery will depend largely on the behavior of the average shopper.

Home Prices Jump in First Quarter

The latest report from the S&P/Case-Schiller Home Price Index shows a 2.9% increase of housing prices in the first three months of the year.

Though a small gain, the move is an important landmark: the first increase in home prices in three years.

This is good news, but not great: home prices are still down 14.9 percent from the second quarter of 2008, but that’s better than where they stood three months ago, at 19.1 percent below.

The rise could be a sign that bad times are over, but may just be a temporary upswing.

--Even though there's some good economic news to report, many Americans are still hurting. If you're having trouble making ends meet, it may be time to think about filing bankruptcy.

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