The Changing Face of Foreclosures

Interest rates for a 30 year mortgage are the lowest they have been in decades. Yet, stress among homeowners continues.  Obama has tried to help out these homeowners by creating a program to change the payment plans on some their loans. However, banks are unwilling to alter loans because they fear this will cause more people to come forward claiming to be unable to pay their loan and asking for changes as well. Still, for the few loans that were changed as a result of Obama's program, homeowners are still having trouble making the payments.

Plus, foreclosures are effecting people in large metropolitan areas such as Seattle, Chicago, and Houston. These are not areas typically associated with foreclosures.

Holding Banks Accountable

Interview with Peter Swire, law professor at Ohio State University:
Peter Swire says that a way to hold banks more accountable so a bailout is not needed again in the future is to have top officials in banks sign their names to say that they have the system back under control and operating smoothly. The idea is that if they have them personally certify the banks operations, they will be more diligent to see that the bank is operating appropriately.

(What would the penalty be if an official signed their name and did not have the banking under control for their company? They're needs to be a harsh penalty to for this to work.)

Foreclosure Mess

Gist: President Obama will not pass a bill that both the House and the Senate passed. It is a bill that would require state courts to recognize foreclosure documents that were notarized in other states. This would make it harder to challenge foreclosures when the documents were put together out of state--as they often are.

Furthermore, more than half of the mortgages in this country are in an electronic tracking system called MERS (Mortgage Eletronic Registration System). It was set up by banks who wanted to be able to trade mortgages more easily. MERS' role in the foreclosure process is now in doubt. The legal system will be tested on whether MERS has the authority to foreclose on a home, or not.

Mortgage Companies Review Foreclosures

According to realty market, a research firm, 1 of every 4 houses sold in the 2nd quarter of this year is in some stage of the foreclosure process. J.P. Morgan is stopping the foreclosure process on 50,000 homes to check on paperwork. They say employees may have signed documents that they were not authorized to sign. Other mortgage companies are doing this as well. The review should only take a few weeks and most likely, any errors that may be found will be minor and no one will get their homes back if they were foreclosed on.

(Depending on how long this actually takes and how many mortgage companies do this, could this make the recovery of the property market to take longer than necessary?)

Labor Market Turning Around?

Gist: The average number of new unemployment claims have been on the decline since mid-August, where it peaked.

Nigel Gault, Group Managing Director of the North American Macroeconomics Service of Global Insight, says that economists want a much larger decline in new unemployment claims to declare this as the economy recovering. Companies are still adding jobs slowly.

James Galbraith, American economist, says the economy lost over 8 million jobs in this recession. This is more than twice the number lost in the previous two recessions. The rate of job creation will have to increase dramatically to get us out of that hole.

With companies pursuing increased productivity so much it does not seem likely that they are looking to hire a lot of people.

(Why are companies so hesitant to hire more people? Labor too expensive? Not enough sales? What is the real cause of new unemployment claims?)

Interview with Ellen Zentner

Gist:  There is dissension within the Federal Reserve. The chairman Ben Bernanke has 12 regional Federal Reserve presidents all voicing different opinions on what he should do about the economy. They need to come to a group consensus. Ellen Zentner is a senior economist at the bank of Tokyo Mitsubishi.

Zentner:
1) Confusion reigns the day. As a result, markets are confused as well. If the Fed moves with confidence, the markets are more confident.
(Red Flag: Is this always true?)
2)The Fed has had to do some unprecedented things to try to get the economy moving again. Naturally, there will be some dissension within the Fed on how monetary policy should be conducted. They are essentially just shooting the dark.
3)Bernanke has come out and said he wants to lower the rate the Fed pays banks in order to hold excess reserves at the Federal Reserve. By lowering the rate, his idea is that the banks would then start to lend money. This would actually be a disincentive for banks to lend when the banks can borrow from the Fed at .25% interest and dump it into treasuries at 2.5-3%. This essentially ties up 1 trillion dollars in available credit.
(Red Flag: How was the 1 trillion dollars calculated? Even if it was not tied up, would banks be willing to lend it out?)

HP and Dell bid for 3PAR

Gist:  HP and Dell, although traditionally computer manufacturers, have identified the importance of secure data storage on the cloud.  3PAR is a leader in this area, and has attracted a $1.6B bid from HP to purchase the company--1/3 more than Dell's bid last week.

Cloud computing enables rental of data storage space so that people and firms don't have to buy it.  Cloud storage also allows people and firms to store and retrieve from almost anywhere.  According to Karan Mehandru, an early stage VC (Trinity Ventures), it would take five years for HP or Dell to develop 3PAR's product.