Posts Tagged ‘federal government’

Federal Mortgage Modification Program Hits Target

Thursday, October 29th, 2009

Federal Mortgage Modification Program Hits TargetThe federal government’s program to help homeowners facing foreclosure has reached its target of 500,000 mortgage modifications by November 1.  “There is a lot of work left to do,” said Shaun Donovan, Secretary of Housing and Urban Development.  “Today’s announcement is a good step forward, but we are nowhere near the finish line.”  The long-term goal is to help 3,000,000 to 4,000,000 homeowners over the next three years.

Currently, 63 servicers are participating in the program, an increase over the 47 reported at the end of August, according to Treasury Department data.  JP Morgan Chase has started the most modifications, with 117,000 underway, representing 27 percent of their eligible delinquencies.  Bank of America increased its modifications by 62 percent during September, with nearly 95,000 trial modifications covering 11 percent of eligible loans underway.

Mortgage Bankers Association statistics note that, as of August, one in 7.6 mortgages was late with payments or in foreclosure.  The poor economy and declining real estate prices are the primary reason for these foreclosures.  Additionally, 25 percent of homeowners owe more on their house than it is currently worth.

A September report on loan servicer performance found that 19 percent of eligible homeowners had been offered loan modifications, though problems persist.  For example, Bank of America – the servicer with the most eligible loans – had started modifications on just seven percent of its mortgages during September.

Listen to our podcast on solving the foreclosure crisis.

Local Banks Facing Significant CRE Losses

Monday, June 15th, 2009

Toxic commercial real estate loans could create losses up to $100 billion for small and mid-size banks by the end of 2010 if the economy worsens.  According to a Wall Street Journal report – which applied the same criteria used by the federal government in its stress tests of 19 big banks — these institutions stand to lose up to $200 billion.  In that worst-case scenario, 600 small and mid-sized excedrin1banks could see their capital contract to levels that federal regulators consider troubling, possibly even surpassing revenues.  These losses would exceed home loan losses, which total approximately $49 billion.

The Journal, which based its analysis on data mined from banks’ filings with the Federal Reserve, are a grim reminder that the banking industry’s troubles are not confined to the 19 giants that have already completed the Treasury Department’s stress tests.  More than 8,000 lenders nationwide are feeling the dual impacts of the recession and commercial real estate slowdown.

The banks analyzed by the Journal include 940 bank-holding companies that filed financial statements with the Fed for the year ending December 31.  They range from large regional banks to mom-and-pop banks in small towns, as well as American-based subsidiaries of international banks.

Smaller banks are unlikely to appeal to bargain-hunting investors who are starting to recapitalize the industry’s giants.  As a result, these institutions must boost their capital by selling assets and making fewer loans – which could make the recession last even longer than anticipated.

Green Buildings Impacted by the Credit Crunch, Recession

Tuesday, December 23rd, 2008

The credit crunch and sluggish return-on-investment environment are impacting green commercial real estate development – and not in a good way.  Even on projects where dirt actually gets moved, it will be more difficult to incorporate sustainable design principles as companies become more cost conscious.  The greening of the workplace should pick up once again if the high cost and availability of capital eases during 2009.  Already, the Federal Reserve Board’s two half-point interest-rate cuts, which slashed the overnight Fed funds rate to one percent, are having a measured but positive influence. According to National Real Estate Investor magazine, the credit freeze is not the only stumbling block to green projects right now.  Moderating fuel prices, currently at their lowest level in four years, are making renewable power sources – such as solar and wind – seem expensive at a time when people want to save money.  Still, companies with a serious commitment to green principles are motivated by a willingness to minimize their carbon footprint and conserve resources, rather than to just save a few dollars on utilities.

The bad news for sustainable-design proponents is that the recession may frustrate the federal government’s plan to offer tax credits to promote green design.  The reason is that tax credits cut a company’s tax bill; they offer little motivation to firms whose earnings are likely to be flat or suffer net losses during 2009.  Looking on the bright side, the credit crunch may stimulate awareness of sustainability by businesses looking for ways to control expenses over the long term.

The economy shouldn’t put green in the tank, and people should recognize that deflation is always temporary.  The options and futures market will bring energy costs up again.