Bear Market

How not to be a victim of foreclosure fraud

March 31, 2009 by · Leave a Comment 

As the number of struggling homeowners facing foreclosure continues to rise, so do the number of unscrupulous individuals and firms will to prey on them.

“A mortgage lender or a financial counselor can assist you in finding real options to avoid foreclosure,” said Sissy Osteen, an Oklahoma State University Cooperative Extension resource management specialist. “If someone is offering to consult with your lender and offers to arrange to stop or delay foreclosure for a fee be sure to check his or her credentials, reputation and experience. It’s important to protect yourself and not be a victim of a foreclosure scam.”

Resources for checking out a foreclosure prevention and counseling agencies include the U.S. Department of Housing and Urban Development (HUD), the National Association of Foreclosure Prevention Professionals (NAFPP) and the local Better Business Bureau (BBB). The Federal Deposit Insurance Corporation (FDIC) also recommends  NeighborWorks America, the Fannie Mae Counselor Search, the National Foundation for Credit Counseling (NFCC), and the Homeownership Preservation Foundation among others.

“Homeowners facing foreclosure need to be aware that foreclosure rescue scam artists are out there in full force and see this as a prime opportunity to make money,” said Ken Wade, CEO of NeighborWorks America in February 2009. “If you are facing foreclosure, contact a HUD-approved nonprofit housing counseling agency to receive foreclosure counseling. Nonprofit organizations do not ask for a fee to help you avoid foreclosure. Be wary of any rescue company that attempts to charge you for help.”

Osteen agrees and offers the following tips to help homeowners avoid foreclosure prevention fraud:

  • Be sure the counseling organization is on the Department of Housing and Urban Development’s (HUD) list of approved agencies.
  • Do not work with a counselor or agency that collects a fee prior to providing any service or that accepts payment only by wire transfer or cashier’s check.
  • Read all paperwork thoroughly and understand what it says in detail before signing.
  • Remember – if an offer seems to be too god to be true, it probably is.

NeighborWorks America also reminds individuals never to release financial information online or over the phone to companies or individuals you know nothing about.

The National Association of Foreclosure Prevention Professionals (NAFPP) includes contact information for 47 individuals and organizations across the nation. The NAFPP website at includes a list of 49 must-ask questions to help consumers avoid foreclosure prevention fraud and scams. The site also includes instructions for filing complaints against NAFPP members or their representatives and requesting mediation.

Those preferring to learn about their options without actually meeting with a counselor can order “Avoiding Foreclosure,” a free DVD for consumers, from the NFCC.

Osteen offers one last piece of advice to those seeking to prevent foreclosure.

“If a person offers you a guarantee, be cautious,” she said. “Reputable counselors won’t guarantee to stop the foreclosure process, no matter the circumstances. This usually involves legal action outside the abilities of a counselor. Working with a legitimate counselor can definitely increase your chances of keeping your home, just be careful of those promises. Be sure to get everything in writing.”

Read more….

New Credit Card Rules; FDIC Borrowing Limit Upped

March 31, 2009 by · Leave a Comment 

With stiff objections coming from Republicans, a Senate Panel Approves Bill Limiting Credit-Card Rates.

A Senate panel approved new restrictions on credit-card interest rates that are broader than those adopted by the Federal Reserve in December, brushing aside objections from Republicans and the banking industry.

Senate Banking Committee Chairman Christopher Dodd said the measure was needed to protect consumers from having their interest rates raised on previous balances, unless certain conditions are met. The legislation would prevent credit-card companies from unilateral changes to the terms of an agreement.

The bill, known as the Credit Card Accountability, Responsibility and Disclosure Act, also would require the signature of a parent for a borrower under age 21, unless there’s proof of independent income or completion of a financial education course. Universities that forge marketing deals with card companies would be subject to the rule.

“The list of troubling credit-card practices is as lengthy as it is disturbing,” said Dodd, a Connecticut Democrat. The measure passed on a 12-11 vote, with all the panel’s Republicans opposing it.

The legislation also would require card companies to disclose how long it would take to pay off a balance when making a minimum monthly payment and require statements to be mailed at least 21 days before the payment due date, up from 14 days.

It would also prohibit banks from charging interest on fees, such as those imposed for late payments or exceeding credit limits.

Consumers are falling behind on credit-card payments as U.S. unemployment reached 8.1 percent in February, the highest level in more than a quarter century.

Almost all of the cards studied — 93 percent — allowed the lending company to raise any interest rate at any time. Also, 87 percent of the cards allowed automatic penalty interest averaging 27.99 percent on all balances even if the account was less than 30 days past due, Pew said in a statement today.

When it comes to over limit fees, there should not be any. Banks approve the transaction so should be comfortable with it. If they do not want to authorize the amount it is simple enough to reject the transaction.

I also object to self-modifying contracts. Sadly 93% of cards issued allow rate hikes at any time for any reason upon notice. Moreover, sending a notice to someone in fine print that no one can understand even if they manage to read it hardly constitutes “notice” in my book.

Also irritating is the practice of banks mailing out statements a mere 14 days before payment is due such that anyone on two week’s vacation is bound to be late, triggering late fees and interest. Another thing banks do is require payment by 10:00AM when the mail for the day does not come in until Noon. This effectively cheats customers out of one of the days.

The credit card industry is getting what it deserves for their practices, even though a case can be made that such things ought to be left to the “free market” to solve. Then again self-modifying contracts under such terms hardly seems to be a “free market construct”.

Moreover, the reason people can get credit lines way bigger than they deserve stems from the Bankruptcy Reform Act of 2005 whose sole purpose was to make people debt slaves forever. That act is now blowing up, just as I predicted it would.

Geithner’s Heist America Plan

In a galling move that has nothing to do with credit card reform at all, the Senate slipped in a provision to allow the “FDIC to borrow up to $100 billion from the U.S. Treasury, an increase from $30 billion now. The FDIC has said the additional borrowing authority may reduce a special one-time fee imposed on banks to replenish the deposit insurance program.

This tactic has nothing to do with replenishing deposit insurance, but rather is a move to cater to more bank implosions and to provide a cushion for Geithner’s Heist America Plan (GHAP). Please see Geithner’s Plan Can Succeed for details about Heist America.

Mike “Mish” Shedlock
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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Oversight Office Redacts Contract Terms With Outside Consultants

March 31, 2009 by · Leave a Comment 

Despite a stated policy of transparency, the main government watchdog over the $700 billion Troubled Asset Relief Program has redacted key information from its contracts with two outside consultants assisting with the oversight.

The Office of the Special Inspector General for TARP, headed by former federal prosecutor Neal M. Barofsky, blacked out portions of the contracts before posting them on its website.

The inspector general’s office in January hired accounting firm Deloitte and Touche to help track and analyze data related to the TARP program.

Although the posted contract shows the deal is worth as much as $4.13 million, sections detailing the firm’s hourly rates and the potential fees for a second year of work are redacted. So is information about the firm’s designated contract manager and the names of key personnel working on the assignment.

The inspector general’s office also hired Concentrance Consulting Group this month to provide “audit support services.” That contract, which has a maximum value of $441,556, is similarly redacted so as to make it impossible to know the hourly rates being charged.

Without knowing how much the taxpayer is being charged per hour, it is impossible for outsiders to determine whether these are good deals.

The redactions follows identical decisions by the Treasury Department to black out or omit parts of its own contracts with the law and accounting firms advising it on the implementation of the TARP program.

Although the hourly rate information also was redacted from the Treasury Department contracts, many of its documents still showed the names of the key employees assigned to the job.

That information is helpful in determining whether the people representing the outside contractors have any potential conflicts of interest.

The redactions by the inspector general’s office appear to contradict the spirit of its own transparency policy, as well as the spirit of oversight in general.

On the webpage featuring its contracts with Deloitte and Touche and Concentrance, the inspector general’s office notes its “goal of promoting transparency in the administration of TARP-related programs includes acting as transparently as possible in its own activities, including the contracts that it enters into with outside vendors and other Governmental agencies to obtain goods and services.”

The redactions in the contracts awarded by the inspector general’s office are accompanied by handwritten notations citing the exemptions in the Freedom of Information Act under which the redactions were made.

It should be noted, however, those sections simply permit redactions. They do not require them.

Read more….

Treasury completes 14 more bank investments

March 31, 2009 by · Leave a Comment 

The Treasury Department has completed investments in 14 more banks, using a total of $192 million from the $700 billion Troubled Asset Relief Program.

Of the banks that sold preferred shares to the government, 11 were new to BailoutSleuth’s running tally of TARP participants.

Alpine Banks of Colorado, which is based in Glenwood Springs, Co., got $70 million, nearly twice as much as any other recipient in the latest round. Alpine has 25 branches serving the mountain and ski communities on the western slope of the Rocky Mountains.

Alpine reported profits of $32.7 million last year, down about 19 percent from 2007, partly because of higher loan-loss provisions.

As  BailoutSleuth previously reported, Trinity Capital Corp., of Los Alamos, N.M., got $35.5 million in TARP money, and Spirit Bankcorp Inc., of Bristow, Okla., got $30 million.

CBS Banc-Corp, which is based in Russellville, Ala., got $24.3 million. It is the parent company of CB&S Bank, which operates 42 branches in Alabama, Mississippi and Tennessee.

MS Financial Inc., of Kingwood, Texas, sold $7.72 million in preferred shares to the government. It operates Main Street Bank in Kingwood, which is northeast of Houston.

The other banks and holding companies getting taxpayer capital were:

Naples Bancorp Inc. (Naples, Fla.) — $4 million

SBT Bancorp Inc. (Simsbury, Conn.) — $4.0 million

Pathway Bancorp (Cairo, Neb.) — $3.73 million

Triad Bancorp Inc. (Frontenac, Mo.) — $3.7 million

Clover Community Bancshares Inc. (Clover, S.C.) — $3.0 million

CSRA Bancorp (Wrens, Ga.) — $2.47 million

IBT Bancorp Inc. (Irving, Texas) — $2.29 million

Maryland Financial Bank (Towson, Md.) — $1.7 million

Colonial American Bank (West Conshohocken, Pa.) — $574,000

Read more….

Comparison: OECD and "More Adverse" Scenarios

March 31, 2009 by · Leave a Comment 

The Organisation for Economic Co-operation and Development (OECD) released an Interim Economic Outlook today. I thought it would be interesting to compare their forecast with the “more adverse” scenario from the Stress Test.

Stress Test and OECD GDP Forecasts Click on graph for larger image in new window.

The first graph compares the quarterly OECD U.S. GDP forecast with the quarterly stress test scenario (more adverse).

Clearly the OECD is more pessimistic than the more severe stress test scenario for the U.S. banks.

Stress Test and OECD Unemployment Rate ForecastsThe second graph compares the OECD unemployment rate forecast with the more severe scenario.

Once again, the OECD is slightly more pessimistic.

Earlier I compared both the baseline stress test scenario and the more adverse scenario with forecasts from Northern Trust and Goldman Sachs. At this point I think we can just ignore the old baseline scenario.

The “more adverse” scenario is the new baseline.

Read more….

Market and Misc

March 31, 2009 by · Leave a Comment 

First, the graph from Doug …

Stock Market Crashes Click on graph for larger image in new window.

The first graph is from Doug Short of (financial planner): “Four Bad Bears”.

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

And a few misc notes …

Almost a ‘Half Off’ sale (the auction has closed): Hancock Tower sells for $660m at auction

The John Hancock Tower was sold today for $660.6 million at a foreclosure auction in New York City. … the Hancock’s previous owner, Broadway Partners of New York, defaulted on some of the loans it used to buy property for $1.3 billion in late 2006.

More Vegas disaster: Riviera misses interest payment, warns of possible bankruptcy (ht Howard)

“The deteriorating trends in revenue and earnings experienced during the first three quarters of 2008 continued as evidenced by our fourth quarter results and accelerated during the first quarter of 2009. We expect this situation to continue as long as competitors in the Las Vegas market follow a strategy of sacrificing ADR (average daily room rate) to maximize room occupancy and the decline in convention business is unabated.”

Yeah, blame your competitors for cutting prices!

And from an analyst on Case-Shiller and housing:

The acceleration in the rate of decline in the US Case-Shiller 20-city house price index is a bit disappointing given that other evidence suggested conditions in the housing market may have stabilised since the turn of the year. The annual growth rate fell from 18.6% in December to a new record low of 19.0% in January. Although the monthly data need to be treated with a great deal of caution (this series is not seasonally adjusted) …

I forgot to mention CS is not seasonally adjusted (an important point), but I think the first sentence is incorrect. There will probably be two bottoms for housing – the first for single family starts and new home sales, and the 2nd – later, perhaps much later – for existing home prices. The Case-Shiller price declines are not “disappointing” with regards to the other data. Even if starts bottom sometime this year, I expect house prices to continue to fall. See More on Housing Bottoms.

Read more….

Huff TV: Arianna Discusses Banks and the Economy with Nouriel Roubini on CNBC’s Squawk Box

March 31, 2009 by · Leave a Comment 

Arianna and the Squawk Box team talked with Nouriel Roubini on CNBC this morning. Hear Roubini’s opinion on the latest plan to deal with toxic assets and his bearish economic outlook below.

Read more….

Four Banks Are First To Repay TARP Money

March 31, 2009 by · Leave a Comment 

Iberiabank Corp., Signature Bank, Old National Bancorp and Bank of Marin Bancorp became the first banks to repurchase shares of preferred stock sold to the U.S., exiting a program that imposed restrictions on recipients.

Iberiabank, the first to apply to return the money, redeemed the shares for $90 million, will record a $2.2 million first-quarter charge and a $1.1 million dividend tied to the capital, the Lafayette, Louisiana-based lender said in a statement today. Old National said it redeemed $100 million, Signature Bank bought back $120 million and Bank of Marin paid $28 million.

Read more….

What Will be the Next World Reserve Currency?

March 31, 2009 by · Leave a Comment 

What exactly is a “reserve currency”?
Replace the dollar as the world’s reserve currency?
Why the dollar will remain the most important reserve currency.
What are the Chinese really up to?

Read more….

New Credit Card Rules; FDIC Borrowing Limit Upped

March 31, 2009 by · Leave a Comment 

With stiff objections coming from Republicans, a Senate Panel Approves Bill Limiting Credit-Card Rates .
A Senate panel approved new restrictions on credit-card interest rates that are broader than those adopted by the Federal Reserve in December, brushing aside objections from Republicans and the banking industry.

Read more….

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