Student Loan Debt Bail Out? Debt Hits $1 Trillion Dollars! Where's The Student Loan Bail Out?

Student Loans: The Next Bailout?

Here’s what we do know about student loan debt: it’s roughly $1 trillion in size, greater than either auto or credit-card debt and second only to mortgage debt in the U.S.

Borrowers in their 30s today owe $28,500, on average. The debt burden has soared just as — and partly because — the recession hit, so younger graduates carrying the highest balances are hit with the double whammy of a weak job market (that still isn’t showing any sign of rapid improvement).

And this all comes as globalization and technological change have upended once-reliable career paths, wiped out many mid-level professional jobs and leave low-paying fields in health, food and beverage services, and retail as among the fastest growing job markets over the next decade.

Oh, and consider that student loan debt remains one of the most difficult types to forgive or discharge in bankruptcy, in part because the federal government (i.e. taxpayers) made or guaranteed 80 percent of all outstanding student loan debt as of last year. And finally, that once loans in deferral or forbearance are excluded, the delinquency rate on student loan debt was an estimated 27 percent as of the third quarter of 2011, according to a study by the New York Fed.

Worried? Americans should be.

Still, acknowledging the problem is perhaps the easiest step. Much more difficult is the question of what to do about it. Not surprisingly, young, heavily indebted grads are calling for forgiveness in full or in part of their student loan burdens. Petitions on advocacy website Change.org include calls for federal student loan interest rates to be capped at 3 percent or eliminated altogether. (Indeed, President Obama is currently among those urging Congress not to allow the interest rate on federally subsidized Stafford loans, which are aimed at low — and middle-class borrowers, to double to 6.8 percent on July 1, matching the rate for unsubsidized loans.)

And yet the trouble with those initiatives, or with forgiving student loan debt in whole or part, is threefold. For starters, the straight mathematics: the losses from any such debt reduction scheme will have to be borne by someone, most likely taxpayers, at a time when government finances are already stretched.

Second is the issue of “moral hazard,” that is, rewarding and implicitly encouraging imprudent behavior rather than punishing it. (Of course, it is easier for the public at large to demand that over-leveraged banks be punished for imprudence than 24-year-olds trying to further their education.)

And third is the question of how to keep future graduates from accumulating a mountain of student loan debt just as large, if not larger, than the one just leveled.

It is this third issue which perhaps is most pressing — and most vexing —and which also offers the most opportunity for innovation. Levying an “education tax,” making college free and assigning students to institutions based on a lottery system? Abolishing “college” altogether for more specialized trade institutions instead, while at the same time requiring a “gap year” of liberal arts prior to entry? Offering high-school grads the choice between student loans or business loans to fund new ventures? These all seem ridiculous, but then so too is our current state of affairs.

Our current system, in fact, has so failed that it may now be exacerbating income inequality (by saddling low-income students with high loan balances and shaky job prospects), economic malaise (by keeping would-be homebuyers stuck in costly rentals because of already high debt loans and/or poor credit histories, thereby damaging both the housing market and potential consumer spending), and long-term economic vitality (by hampering household and family unit formations with a higher share of 20- and 30-somethings currently stuck at home with mom and dad).

This, in fact, is why it may be far less costly for taxpayers in the long run to forgive as much of the current student-loan burden as possible. Before doing anything like that, however, there must be systematic reform to ensure debt loads simply won’t start to pile up again. (Not to mention the need for repercussions for those borrowers who most benefit from any such initiative, for the sake of fairness.) That is why the need for innovation or overhaul is so pressing.

One thing is certain: if we do nothing to alter the status quo, we will have no one to blame but ourselves for the bleak outcome.




I'll continue to ask Pres. Obama & Congress, where is the Bail Out for Students Loan Debt? Wall Street was Bailed Out. Why NOT College Students?






How Student Debt Impacts Students of Color

On July 1 the interest rate on federally subsidized Stafford Loans will double from 3.4 percent to 6.8 percent if Congress doesn’t act. Though this rate hike will have devastating consequences on more than 7 million students nationwide who currently hold a Stafford Loan, change will hit students of color especially hard.

The facts below show how students of color depend on financial aid to finance their college education and how they are uniquely impacted by student debt.

1.) Students are having trouble paying back their college loans. Studies show that only 37 percent of students are able to repay their loans on time. Students of color are more likely to depend on financial aid to attend college and have higher trends of student debt.

2.) For the first time, student loan debt has surpassed credit card debt in the United States. Student college loan debt is now higher than all credit card debt in the country put together. Nationwide, student debt is at $867 billion compared to credit card debt at $704 billion.

3.) People of color, particularly African Americans, are graduating with more student debt. African American students in particular are graduating with much more debt than white students. A 2010 study by the College Board Advocacy & Policy Center found that student loan debt levels of $30,500 or higher were more common among 27 percent of black bachelor's degree recipients compared to 16 percent of their white counterparts.

4.) Youth unemployment (ages 16 to 24) is higher for people of color, making student debt a significant financial burden. Youth unemployment is highest among youth of color, with rates for African American youth at 30 percent and Latino youth at 20 percent, compared to the white youth unemployment rate of 16 percent.

5.) Students of color rely on other forms of financial aid, such as Pell Grants, which are also facing significant cuts. Students who will lose eligibility or be cut from the Pell Grant program—a means of access to higher education and social opportunity for low-income families—will likely turn to loans to make up the difference. At a majority of historically black colleges and universities in particular, two-thirds or more of all enrolled students receive Pell Grants, with more than 90 percent of students receiving these grants at eight such institutions of higher learning.

6.) While educational attainment increases among Latinos, the achievement gap continues. From 2001 to 2011 the number of Latinos with a bachelor’s degree or higher education increased 80 percent from 2.1 million to 3.8 million. But there’s still an achievement gap: By 2012 only 14 percent of all U.S. Latinos over the age of 25 had bachelor’s degrees, compared to 34 percent of whites. A 2009 Pew Hispanic Center survey found the most common reason for the gap was pressure to support their families financially, forcing them to choose between college and their families. This means that low-interest-rate loans are that much more important to Latino youth in completing their college careers.

7.) More students of color are taking out private loans, exposing them to more financial risk. There was an approximate 16 percent increase and 12 percent increase among black and Hispanic students, respectively, that took out private loans, from the 2003­–04 to 2007­–08 school years. While federal loans have lower interest rates than private loans, doubling the rate will bring the two closer together, making students of color more vulnerable to defaulting on their loans.

8.) Students of color are more likely to enroll in for-profit schools, which currently account for nearly half of student loan defaults. For-profit colleges and universities tend to have higher tuition, increased dropout rates, and insurmountable debt for students. This puts economic and academic barriers on students of color, making it more difficult for them to graduate.

9.) Students of color with higher student debt are left with fewer options. Deferments and forbearances often provide short-term debt relief, but the interest on the loans may accrue and capitalize during the forbearance or deferment period, making the loans more expensive in the long term.

10.) Student debt hinders students of color from homeownership. Past-due payments hinder borrowers due to lower credit scores and having their wages used for loan repayment. According to the Federal Reserve, fewer young people are getting mortgages—just 9 percent of 29-to-34-year-olds got a first-time mortgage from 2009 to 2011, compared to 17 percent in 2001.

Allowing Stafford Loan interest rates to double would make the cost of college skyrocket—the cost of college for those relying on Stafford Loans would increase by 20 percent. Given that students of color are more likely to rely on financial aid to finance their college education and graduate with higher student debt, increasing these interest rates would disproportionately impact them. We need to focus on making college more affordable, particularly at a time when students need a good education to be competitive in the international economy.


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Sources: American Progress, NBC News, NY Times, Youtube, Google Maps

Financial Crisis History Documentaries: Deep Cuts Cause Recessions (Videos)

"I am a most unhappy man.

I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men.

We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men."

-Woodrow Wilson


Sources: Famous Quotations On Banking, PBS, Rescue America, Youtube

Standard & Poor's Role In 2008 Market Crash Possibly Criminal; Investigation Needed!

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Senate report on Wall Street crash: The criminalization of the American ruling class

The US Senate Permanent Subcommittee on Investigations released a voluminous report last Wednesday on the Wall Street crash of 2008 that documents the fraud and criminality that pervade the entire financial system and its relations with the government.

The 650-page report is the outcome of a two-year investigation that involved over 150 interviews and depositions as well as the examination of subpoenaed emails and internal documents of major banks, government regulatory agencies and credit rating firms. The report, entitled “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” establishes that the financial crash and ensuing recession were the result of systemic fraud and deception on the part of the mortgage lenders and banks, carried out with the collusion of the credit rating corporations and the complicity of the government and its bank regulatory agencies.

The World Socialist Web Site will analyze the contents of this important document in detail in the coming days. However, its basic thrust is clear. As the executive summary states: “The investigation found that the crisis was not a natural disaster, but the result of high-risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”

At a press conference Wednesday and in subsequent interviews, Senator Carl Levin (Democrat from Michigan), the chairman of the subcommittee, was even more explicit. “Using emails, memos and other internal documents,” he said, “this report tells the inside story of an economic assault that cost millions of Americans their jobs and homes, while wiping out investors, good businesses and markets. High-risk lending, regulatory failures, inflated credit ratings and Wall Street firms engaging in massive conflicts of interest contaminated the US financial system with toxic mortgages and undermined public trust in US markets.

“Using their own words in documents subpoenaed by the subcommittee, the report discloses how financial firms deliberately took advantage of their clients and investors, how credit rating agencies assigned AAA ratings to high-risk securities, and how regulators sat on their hands instead of reining in the unsafe and unsound practices all around them. Rampant conflicts of interest are the threads that run through every chapter of this sordid story.”

Levin went on to say that the investigation had found “a financial snake pit rife with greed, conflicts of interest, and wrongdoing.” He told the New York Times: “The overwhelming evidence is that those institutions deceived their clients and deceived the public, and they were aided and abetted by deferential regulators and credit ratings agencies who had conflicts of interest.”

The report is divided into four sections, each focusing on a different contributor to the network of fraud and abuse: the mortgage lenders, the regulators, the credit rating firms and the Wall Street investment banks. The first section takes Washington Mutual (WaMu) as its case history, detailing the predatory and deceptive lending practices and accounting and reporting subterfuges that led, following the implosion of the subprime mortgage market, to the bank’s collapse and takeover by JPMorgan Chase in September of 2008.

The second examines the corrupt role of the federal Office of Thrift Supervision (OTS), which oversaw three of the biggest financial failures in US history—Washington Mutual, IndyMac and Countrywide Financial. “Over a five-year period from 2004 to 2008,” the report states, “OTS identified over 500 serious deficiencies at WaMu, yet failed to take action to force the bank to improve its lending operations and even impeded oversight by the bank’s backup regulator, the FDIC.”

The third section documents the systematic manner in which the rating firms Moody’s and Standard & Poor’s gave top credit ratings to collateralized debt obligations (CDOs) and other complex securities backed by subprime and other toxic mortgages, enabling the banks to make billions of dollars by palming off these junk securities as top-grade investments. In return, the rating companies raked in huge profits for their services.

As the report states: “Credit rating agencies were paid by Wall Street firms that sought their ratings and profited from the financial products being rated… The ratings agencies weakened their standards as each competed to provide the most favorable rating to win business and greater market share. The result was a race to the bottom.”

The final section examines the fraud and deception perpetrated by the major investment banks as they profited first from the inflation of the US housing market and then from its implosion. It takes as its examples Goldman Sachs and Deutsche Bank. Goldman began betting heavily in 2007 that the housing market would collapse, packaging and selling subprime mortgage-backed CDOs even as it secretly bet that the same securities would plummet in value.

The report cites emails by Deutsche Bank’s top global CDO trader, Gregg Lippman, calling risky mortgage securities marketed by the bank “crap” and “pigs” and the bank’s operations a “CDO machine,” which he characterized as a “Ponzi scheme.”

The document points to the central role of the big Wall Street banks in promulgating the fraud, stating: “Investment banks were the driving force behind the structured finance products that provided a steady stream of funding for lenders originating high-risk, poor-quality loans and that magnified risk throughout the US financial system. The investment banks that engineered, sold, traded and profited from mortgage-related structured finance products were a major cause of the financial crisis.”

The overall picture is one of criminality on the part of the entire financial establishment that, with all levels of government serving as its co-conspirator, systematically looted the economy in order to further enrich itself. The result is a social tragedy for tens of millions of people in the US and many millions more around the world. And yet, the result of this historic crime is that the bankers and speculators are richer and more powerful than ever.

Not a single senior executive at a major US bank, hedge fund, mortgage firm or insurance company has gone to jail. Not one has even been prosecuted.

There is every indication that none will be criminally indicted in the future. As with the similarly damning report released in January by the US Financial Crisis Inquiry Commission, the Senate report has been largely buried by the mass media. It was reported perfunctorily on the inside pages of some of the major newspapers and barely mentioned by the broadcast and cable networks, and then dropped.

One day after the release of the Senate report, the New York Times published a long article on the failure to prosecute any of the Wall Street criminals. It recounted a private meeting between the then-president of the Federal Reserve Bank of New York (now Obama’s treasury secretary) Timothy Geithner and then-New York Attorney General Andrew Cuomo in October 2008 at which Geithner urged Cuomo to back off on investigations of the banks and rating agencies.

The article contrasted the absence of criminal charges against bankers today with the aftermath of the savings and loan debacle of the late 1980s, when government task forces referred 1,100 cases to prosecutors and more than 800 bank officials went to jail. It noted the precipitous decline in referrals by bank regulators to the FBI, from 1,837 cases in 1995 to 75 in 2006. Over the ensuing four years, at the height of the financial crisis, an average of only 72 a year have been referred for criminal prosecution.

The Office of Thrift Supervision has not referred a single case to the Justice Department since 2000, and the Office of the Comptroller of the Currency, a unit of the Treasury Department, has referred only three in the last decade.

How is this to be explained? Why are Goldman CEO Lloyd Blankfein, JPMorgan CEO Jamie Dimon, the former CEO of Washington Mutual, Kerry Killinger, as well as Treasury Secretary Geithner and his predecessor, Henry Paulson (previously CEO of Goldman), not in prison?

Such financial manipulators are being shielded while workers are being stripped of their jobs, wages, homes and basic social services to pay for the debts resulting from the transfer of trillions in public funds to the banks. Collective resistance to this attack is being criminalized in the form of anti-strike laws, imposing fines and jail terms for workers who fight back.

One reason for the absence of prosecutions is the power of the individuals involved, all of whom wield immense influence over politicians, the media and the legal system. But it goes deeper than the status of individuals, just as the sordid state of affairs as a whole arises not from individual greed, but rather from a profound crisis of the entire system.

The criminalization of the American ruling class is the outcome of more than three decades in which the accumulation of wealth by the corporate-financial elite has become increasingly separated from real production. In its pursuit of profit, the ruling class has dismantled huge sections of industry and turned ever more decisively to financial manipulation and speculation.

The ascendancy of the most parasitic sections of the capitalist class has been accompanied by a sharp decline in the living standards of the working class. The richest and most powerful layers have acquired staggering levels of wealth by plundering society.

The ruling class itself senses that to prosecute any of the leading figures in the defrauding of the American people (and the rest of humankind) would rapidly expose the criminality of the entire system. It would mean putting the capitalist system itself on trial.


Sources: AP, MSNBC, World Wide Socialist

BOFA & Wells Fargo Top Recipients Of Fed's Term Auction Facility Bailout Funds

Bank of America & Wells Fargo (Wachovia) Among Top Users Of Fed's Term Auction Facility Program


Bank of America Corp., Wachovia Corp. and Wells Fargo & Co. were among the top borrowers from the Term Auction Facility, one of the Federal Reserve's first and longest-lasting efforts to combat the financial crisis.

Bank of America had three loans for $15 billion each outstanding from the facility as of Jan. 15, 2009, while Wells Fargo had three loans for $15 Billion each on Feb. 26, 2009, according to documents released Wednesday by the Fed to comply with orders from Congress to identify recipients of emergency aid.

Charlotte-based Wachovia, which agreed to be bought by Wells Fargo at the peak of the financial crisis in fall 2008, was one of the first banks to tap the program in December 2007. It took out its last loan in February 2009. Other N.C. banks that used the program included Winston-Salem-based BB&T Corp. and Raleigh-based RBC Bank.

Fed Chairman Ben Bernanke created the TAF in December 2007 to let banks obtain cheaper funding without risking the stigma of loans from the central bank's discount window. Under the program, banks bid for Fed loans at a rate determined through auctions. Borrowing peaked at $493.1 billion in March 2009 and began declining until the TAF closed in April 2010.

Because the program lent to banks, the Fed didn't invoke an emergency legal clause allowing borrowing by nonbanks in "unusual and exigent circumstances." The central bank used the provision in 2008 to set up loan facilities for investment banks, money-market mutual funds and corporations.

"The funding and guarantee programs were an example of a successful government initiative at no taxpayer expense," said Bob Stickler, a spokesman for Charlotte-based Bank of America. "The programs enabled the U.S. financial system to continue to operate, preventing a recession from becoming much more severe."

Wells Fargo spokeswoman Mary Eshet declined to comment.

In another program, Bank of America and Merrill Lynch & Co. sold $22.9 billion of commercial paper to the Fed in October 2008, days after the two companies received $25 billion in U.S. bailout funds.

The Fed bought $7.96 billion of three-month notes from Merrill on Oct. 27, then purchased $14.9 billion from Bank of America two days later, according to data on the Commercial Paper Funding Facility.

Investor demand for commercial paper, an unsecured short- term loan typically issued to finance inventories and accounts receivable, evaporated in mid-2008 amid concern that the largest U.S. banks might fail.

The purchases add to the tally of bailouts for Bank of America, the biggest U.S. lender by assets, which took a total of $45billion from the Troubled Asset Relief Program. That included an extra $20 billion after losses surged at Merrill Lynch, which it agreed to buy in September 2008.

Bank of America has "repaid, with interest, all of the borrowings except some of those whose terms have not expired," Stickler, the bank spokesman, said.





Data Shows Far-Reaching Fed Bailout



Lifting the veil on its $3 trillion emergency rescue of the financial industry, the Federal Reserve Wednesday revealed the names of U.S. and foreign banks that benefited hugely from nearly a dozen programs to stem panic and keep money moving.

The 21,000 transactions show that the Fed not only stretched the limits of its authority by lending tens of billions of dollars to Goldman Sachs and other giants of Wall Street, but that it also aided British, German and French banks, other big businesses and smaller banks from Puerto Rico to North Carolina and Washington state.

In some instances, the Fed made loans to banks that were in shaky condition, even lending to investment firm Lehman Bros. on the brink of its 2008 bankruptcy.

Defending themselves against mounting Republican criticism over the Fed's contribution to the rising national debt, officials at the central bank said the data proves that they acted responsibly during the crisis. They said most of the loans have been repaid, and taxpayers have suffered no credit losses.

The Fed's actions were taken as large global investment banks were operating outside the direct reach of regulators. Economists have widely praised Fed Chairman Ben Bernanke for saving the global economy with bold, unprecedented actions that saved investment banks and thawed frozen credit markets.

But anger that the Fed helped Wall Street while Main Street struggled fueled a backlash against the Fed, and many newly elected members of Congress campaigned on platforms to rein in the central bank's freedom to act independently.

Some experts said the newly released data probably would give critics new fodder.

Disclosure of all the loans to big banks "could be interpreted as actions to protect the connected, and the Fed has to be nervous about that," said Vincent Reinhart, who directed the Fed's Division of Monetary Affairs from 2001 to 2007."If you want to channel voter anger, there's got to be stuff in that document drop."

The data revealed that the Fed made massive loans to Charlotte-based Bank of America and the firms it acquired, including Wall Street investment bank Merrill Lynch. Investment bank Morgan Stanley, which sustained big losses in the subprime mortgage market, borrowed up to $47.6 billion in late September 2008 under a Fed overnight loan program for major securities dealers, the data showed.

Goldman Sachs, the goliath of Wall Street, faced months of controversy over its receipt of more than $43 billion in federal aid. Wednesday's data showed, however, that Goldman also borrowed up to $24 billion under the program for dealers in fall 2008 and got an additional $7.5 billion from the Fed for its unmarketable securities.

Goldman spokesman Michael DuVally said that, at a time when "many of the U.S. funding markets were clearly broken ... the Federal Reserve took essential steps to fix these markets, and its actions were successful."

Citigroup, beneficiary of a massive Treasury Department bailout, held up to $18.6 billion in loans under the Fed program for primary dealers, while Bank of America's securities division borrowed up to $11 billion. Merrill, acquired late that year by Bank of America, had loans totaling up to $27.5 billion in mid-October 2008.

Bank of America spokesman Bob Stickler called the Fed programs "an example of a successful government initiative at no taxpayer expense."

"The programs helped our customers such as borrowers, auto dealers, depositors and money market fund investors continue to do business as usual despite virtually unprecedented disruptions in the financial markets," Stickler said.

Peak lending under each of the programs combined to total $3.3 trillion, though the Fed said much less was extended at any one time. Still on the Fed's books are more than $1 trillion in securities backed by home mortgages.

The data drop came at the last moment before a congressional deadline for disclosure, adopted as part of a revamp of financial regulation by Congress earlier this year called the Dodd-Frank Act. The Fed, an independent and autonomous agency, successfully skirted attempts to require that it be audited, and the information released did not answer all questions about the Fed's activities.

Independent Sen. Bernie Sanders of Vermont, who succeeded in inserting the transparency requirement in the massive bill, cited Bernanke Wednesday for refusing to open the books.

"Today ... we finally learn the truth - and it is astounding," Sanders said in a statement. "We now know that Fed loaned trillions of dollars at zero or near-zero interest rates not only to the largest financial institutions in this country, but also to many of our largest corporations - including GE, McDonalds and Verizon. Most surprising, the Fed also lent huge sums of money to foreign private banks and corporations."

Reinhart, now a senior researcher with the free market-leaning American Enterprise Institute, said the growing size of the Fed's balance sheet suggested as much.

However, he said, "when you see the number of loans being rolled over day after day (by big Wall Street investment banks), it's pretty striking."

He pointed to Bank of America, which borrowed up to $15 billion under the Term Auction Facility that provided short-term loans at rates lower than what was available in the panicked marketplace.

"Bank of America had lots of really lowly rated securities as its collateral," said Reinhart, who added that the amount of loans being rolled over suggests a subsidy involved to keep Wall Street from fracturing further.

The government also told Bank of America to take $45billion to shore up its balance sheet, which the bank later repaid.

Small banks also were helped under the Term Auction Facility, which doled out $493 billion in one- to three-month loans.

For example, the Cascade Bank of Everett, Wash., borrowed up to $162 million from the program between Valentine's Day 2008 and last January. Lars Johnson, who worked at the bank and is now chief financial officer of the Washington Business Bank in Olympia, Wash., said the loans "helped the banking system in general."

"It took pressure off us, knowing it was there," he said. "You could use it in the shorter term or the longer term."


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Sources: Bloomberg, CNBC, McClatchy Newspapers, Wikipedia, Youtube, Google Maps

Foreclosure Rate Is Highest In 5 Years, TARP Not Used To Help

Visit msnbc.com for Breaking News, World News, and News about the Economy

Foreclosure Rates Surge, Biggest Jump In 5 Years



A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.

RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago.

In addition, households facing Foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009.

More homes were taken over by banks and scheduled for a foreclosure sale than in any quarter going back to at least January 2005, when RealtyTrac began reporting the data, the firm said.

"We're right now on pace to see more than 1 million bank repossessions this year," said Rick Sharga, a RealtyTrac senior vice president.

Foreclosures began to ease last year as banks came under pressure from the Obama administration to modify home loans for troubled borrowers. In addition, some states enacted foreclosure moratoriums in hopes of giving homeowners behind in payments time to catch up. And in many cases, banks have had trouble coping with how to handle the glut of problem loans.

These factors have helped slow the pace of Foreclosures, but now that trend appears to be reversing.

"We're finally seeing the banks start to process the inventory that has been in foreclosure, but delayed in processing," Sharga said. "We expect the pace to accelerate as the year goes on."

In all, more than 900,000 households, or one in every 138 homes, received a foreclosure-related notice, RealtyTrac said. The firm based in Irvine, Calif., tracks notices for defaults, scheduled home auctions and home repossessions.

Homeowners continue to fall behind on payments because they've lost their job or seen their mortgage payment rise due to an interest-rate reset. Many are unable to refinance because they now owe more on their loan than their home is worth.

The Obama administration's $75 billion foreclosure prevention program has only been able to help a small fraction of troubled homeowners.

About 231,000 homeowners have completed loan modifications as part of the Obama administration's flagship foreclosure prevention program through March. That's about 21 percent of the 1.2 million borrowers who began the program over the past year.

But another 158,000 homeowners who signed up have dropped out — either because they didn't make payments or failed to return the necessary documents. That's up from about 90,000 just a month earlier.

Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.

The states with the highest Foreclosure rates in the first quarter were Nevada, Arizona, Florida and California, with Nevada leading the pack, RealtyTrac said.

Rising home prices and speculation fueled a wave of home construction there during the housing boom. But now the state, particularly around the Las Vegas metropolitan area, is saddled with a glut of unsold homes.

Still, the number of homes in Nevada that received a foreclosure filing dropped 16 percent from the first quarter last year.

All told, one in every 33 homes in Nevada was facing foreclosure, more than four times the national average, RealtyTrac said.

Foreclosure filings rose on an annual and quarterly basis in Arizona, however.

One in every 49 homes there received a foreclosure-related notice during the quarter.

Florida, meanwhile, posted the third-highest foreclosure rate with one out of every 57 properties receiving a foreclosure filing.

California accounted for the biggest slice overall of homes facing foreclosure — roughly 23 percent of the nation's total. One in every 62 properties received a foreclosure filing in the first quarter.


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Sources: CNBC, MSNBC, Rachel Maddow Show, Realty Trac, Red Tape Chronicles, Whitehouse.gov, Youtube, Google Maps

Obama To Launch Principal Reduction Program For Unemployed Homeowners

Mortgage Modification: Principal Reduction Program For Struggling Homeowners


After months of criticism that it hasn't done enough to prevent foreclosures, the Obama administration is expected to announce Friday a plan to reduce the amount some troubled borrowers owe on their home loans.

The effort will let people who owe more on their mortgages than their properties are worth get new loans backed by the Federal Housing Administration, people briefed on the plan said. It would be funded by $14 billion from the administration's existing $75 billion foreclosure-prevention program.

The people briefed on the plan asked Thursday that they not be identified because the details had not yet been announced.

The plan will also require the more than 100 mortgage companies participating in the administration's existing foreclosure prevention program to consider slashing the amount borrowers owe. They will get incentive payments if they do so.

It also will include three to six months of temporary aid for borrowers who have lost their jobs. And there will be additional payments designed to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans – a problem that has blocked many loan modifications.

The changes "will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own," an administration official said.

To date, the administration's $75 billion foreclosure-prevention program has been a disappointment. Critics have complained the program does little to encourage banks to cut borrowers' principal balances on their primary loans. Nearly one in every three homeowners with a mortgage are "under water" – they owe more than their property is worth – according to Moody's Economy.com.

An expansion of the foreclosure-prevention program has long been expected because only 170,000 homeowners have completed the process out of 1.1 million who began it over the past year.

The program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms up to 40 years. To complete the program, homeowners need to go through a three month trial period and provide proof of their income, plus a letter documenting their financial hardship.

Though $75 billion in funding is available to the more than 100 lenders who have signed up, only a tiny fraction has been spent. Lenders had received $58 million in incentive payments as of last month, according to the Government Accountability Office.

Meanwhile, one long-delayed piece of the government effort is getting off the ground.

Citigroup Inc. on Thursday joined the government's program to modify second mortgages such as home equity loans. With Citi on board, now four big owners of second mortgages have joined. The others are Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co.




Obama readies steps to fight foreclosures, particularly for unemployed


The Obama administration plans to overhaul how it is tackling the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed, senior officials said Thursday.

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.

The new push, which the White House is scheduled to announce Friday, takes direct aim at the major cause of the current wave of foreclosures: the spike in unemployment. While the initial mortgage crisis that erupted three years ago resulted from millions of risky home loans that went bad, more-recent defaults reflect the country's economic downturn and the inability of jobless borrowers to keep paying.

The administration's new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.

The problem of "underwater" borrowers has bedeviled earlier administration efforts to address the mortgage crisis as home prices plunged.

Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said.

The measures have been in the works for weeks, but President Obama is finally to release the details days after his watershed victory on health-care legislation. Following that bruising battle on Capitol Hill, his administration is now welcoming a chance to change the subject and turn its attention to the economy and, in particular, the plight of the unemployed -- concerns that are paramount for many Americans.

The administration has been facing increasing pressure from lawmakers and housing advocates to overhaul its foreclosure prevention efforts. So far, fewer than 200,000 borrowers have received permanent loan modifications under its $75 billion marquee program, known as Making Home Affordable. In the meantime, there is a growing backlog of distressed borrowers awaiting help from their lenders, which threatens to undercut efforts to stabilize the housing market.

Challenges unmet

Assistant Treasury Secretary Herbert M. Allison Jr. told a House panel Thursday that "we did not fully envision the challenges that we would encounter" when the earlier program was launched.

The efforts have been hampered by the difficulty of helping unemployed homeowners, who struggled to qualify for the government's mortgage relief plan. In requiring temporary relief for jobless borrowers, known as forbearance, officials are hoping to give them time to find a new job. Some will still need more assistance after the six-month period while others will ultimately lose their homes, administration officials said.

"We certainly support a forbearance opportunity for unemployed borrowers," said John A. Courson, chief executive of the Mortgage Bankers Association. He said he had not seen full details of the program.

Four measures

In addition to mortgage relief for unemployed borrowers, the program features four other key elements, including several steps to address the growing population of borrowers who owe significantly more than their home is worth, according to officials who spoke on the condition of anonymity because the official announcement had not been made. Underwater borrowers now make up about a quarter of all homeowners, according to First American CoreLogic. Economists consider these homeowners at higher risk of default because they cannot sell or refinance their home when they run into financial troubles.

The first key element is that the government will provide financial incentives to lenders that cut the balance of a borrower's mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.

Until recently, administration officials had been reluctant to encourage lenders to cut the principal balance, worrying that this would encourage borrowers to become delinquent. But as federal regulators have struggled to make an impact on the foreclosure crisis, those qualms have weakened.

"We would prefer to see a required principal forgiveness program. But this is helpful," said David Berenbaum, chief program officer for the National Community Reinvestment Coalition, a nonprofit housing group. "This is another tool that will help consumers weather the crisis."

Second, the government will double the amount it pays to lenders that help modify second mortgages, such as piggyback loans, which enabled home buyers to put little or no money down, and home equity lines of credit.

These second mortgages are an added burden on struggling homeowners, especially when their total debt, as a result, is greater than their home value.

Federal officials have estimated that about half of all troubled homeowners have a second mortgage and last year launched a program to encourage lenders to restructure them. That effort has struggled to get off the ground.

Third, the new effort also increases the incentives paid to those lenders that find a way to avoid foreclosing on delinquent borrowers even if they can't qualify for mortgage relief. For example, the administration is scheduled to launch a program next month encouraging lenders to have borrowers sell their homes for less than the mortgage balance in what is known as a short sale.

Fourth, the administration is increasingly turning to the Federal Housing Administration to help underwater borrowers who are still keeping up their payments. The aim is to help these borrowers refinance into a more affordable loan. The FHA will offer incentives to lenders that reduce the amount borrowers owe on their primary mortgages by at least 10 percent.

For those borrowers who have more than one mortgage on their house, the FHA will allow refinancing of the first loan only. The new loan and any second mortgage could not exceed 15 percent of the home's value. This approach is meant to benefit not only borrowers but also lenders by allowing them to offload mortgages that might otherwise fail.

Only homeowners who are refinancing their main residence, have a credit score above 500 and can document their income are eligible.

Administration official say this refinancing program should not strain the FHA's already weakened finances because the effort will be financed with up to $14 billion out of the federal bailout program.


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Sources: CBS News, Huffington Post, MSNBC, Youtube, Google Maps

John McCain Says Henry Paulson Fooled Congress & Taxpayers

John McCain Feels Duped By Henry Paulson



As the Republican presidential candidate in the fall of 2008, no one had more power to upend the Wall Street rescue package than Arizona Sen. John McCain.

But McCain now feels duped by former Republican Treasury Secretary Henry Paulson.

“We were all misled," McCain said Sunday on NBC's "Meet the Press." "What did he do? He started pumping money into the financial institutions. Now the financial institutions are fine -- Wall Street’s doing great. Main Street is in deep trouble.”

Paulson and other former Bush administration officials told Congress at the time that the $700 billion lawmakers approved would be used to buy toxic debt from the real estate market. Instead, the former Treasury secretary made direct injections into some of the biggest banks in the country, and the Obama administration even used the money to prop up major U.S. companies, like General Motors.

"Whoever thought when we passed that we would own General Motors and Chrysler, GMAC," McCain said. "It's beyond what anyone had anticipated."







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Sources: Politico, AP, CBS News, Google Maps

Obama Concedes On Jobs Funding; Won't Use TARP Money

W.H. Won't Use Repaid Bank Funds For Jobs Plan


In his State of the Union address, President Barack Obama proposed using $30 billion in bailout funds for small-business lending. He later repeated the idea in Nashua, N.H.

Both times, Obama said he would use bailout funds that were “repaid” to the government by financial firms — conjuring up the politically appealing image of taking money from a chastened Wall Street and sending it straight to Main Street.

But Obama’s description didn’t give an accurate picture of how he plans to pay for the new program. And his comments sowed controversy and confusion on Capitol Hill.

In reality, the administration is proposing taking $30 billion from the unspent portion of the Troubled Asset Relief Program to seed the new initiative, not — as Obama’s language suggested — taking the funds from the approximately $170 billion that banks have returned to government coffers.

While that distinction might seems painfully technical, it carries significant political weight on Capitol Hill. The reason: The legislation creating TARP dictates that repaid funds must go to pay down the national debt.

The program as “originally outlined” was “totally inconsistent with the law,” Sen. Judd Gregg (R-N.H.) said in an interview with POLITICO.

Earlier this week, Gregg accused Obama of trying to create a “slush fund” from the repaid TARP cash. And he tore into White House budget chief Peter Orszag based on the description that repaid TARP dollars would be used to fund it.

“You don't appear to understand the law! The law is very clear!” Gregg told Orszag during a hearing on the administration’s budget. He went on to read the TARP law to Orszag: “ ‘The monies recouped from the TARP shall be paid into the general fund of the treasury for the reduction of the public debt.’ It's not for a piggy bank because you're concerned about lending to small businesses… This money is to reduce the debt of our children!”

But it wasn’t just Republicans who had concerns. Sen. Mark Warner (D-Va.), who has been working with the administration to create a small-business program, said he sought clarification on the issue from the administration on Thursday.

“This is a major difference, particularly for some of my Republican colleagues,” Warner said. “It makes, I think, a stronger case that it fits within the footprint of the original TARP,” shoring up financial system and sending credit where it’s needed.

“And clearly one of the areas where credit is not moving is to small businesses,” Warner said.

White House officials didn’t say why Obama specifically talked of using “repaid” funds in both settings —including the State of the Union address, in which every word is carefully vetted.

But they say Obama didn’t intend to suggest that the actual repaid TARP funds would be used.

“The policy was always to transfer $30 billion of existing unused TARP authority to a new small-business lending fund, not to use repayments,” said Gene Sperling, a top Treasury adviser. “The moment we realized that there was any confusion we took immediate steps to clarify. The point the President and others were making was that the combination of repayments and increased financial stability … allowed there to be TARP funds available to have a special reserve for small banks and small businesses.”

But Greggsays he sees politics at work and that he urged Treasury not to use TARP to fund the program because it would only tempt Congress to dip into TARP for other purposes as well.

“They were trying to set up a political juxtaposition here of having [bailout] money that was used to stabilize the big banks used to help the little banks. That’s the politics, and that’s all this is about, is politics,” he said.

Gregg said he had two extensive discussions with Treasury Secretary Timothy Geithner on Wednesday and Thursday in which Geithner explained that they were using unallocated TARP authority. Gregg still believes the program is bad policy and outside the intent of TARP.

And he thinks the officials who green-lighted the original rhetoric in the State of the Union speech didn’t understand what the words meant. “I think Treasury did understand what they were doing, but there was some miscommunication somewhere along the line, and the politics of the presentation caused them to make a statement that was totally unsupportable as a practical legal act.”

Administration officials have changed the way they describe the program. On Thursday, Geithner told the Senate Budget Committee that “we will support legislation that would take existing authority that we've reserved under the TARP,” to fund the new lending program.

Obama, too, has changed his rhetoric. Speaking to a group of small business owners Friday, the president described the initiative as a lending program “that would take $30 billion of the fund originally used to rescue big banks on Wall Street, and use it to provide lending capital to community banks on Main Street.”

Warner said he plans to introduce legislation along the lines of the administration’s proposal — though not necessarily exactly the same — as early as next week. And despite the confusion on funding, he’s optimistic he can get bipartisan support.


Sources: Politico, CNN, Zimbio

Obama Urges Congress To Pass SBA Loan Expansion Bill

Obama Proposes Expansion of Small Business Loans


The President is proposing that Congress pass two temporary expansions of critical Small Business Administration (SBA) lending programs. These are both legislative proposals designed to help small businesses through what continues to be a difficult period in credit markets.

The President is proposing that Congress pass two temporary expansions of critical Small Business Administration (SBA) lending programs. These are both legislative proposals designed to help small businesses through what continues to be a difficult period in credit markets.

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1. Expand SBA’s existing program to temporarily support refinancing for owner-occupied commercial real estate loans:

Eligible small businesses will have commercial first mortgage loans or existing 504 first mortgage loans that are maturing in the next year. In order to qualify, businesses will have to be current on all loan payments for the previous year. Lenders that are refinancing mortgages for existing customers will make a loan for up to 70 percent of the current property value; and SBA will help finance the remaining 20 percent. For new lenders taking on a refinancing project, SBA will take on a greater share of financing, up to 40 percent.

SBA’s proposal for a temporary, zero-subsidy CRE refinancing program would be funded through additional fees for refinancing projects, not through a Congressional appropriation. This proposal will help refinance up to $18.7 billion each year in commercial real estate that might otherwise be foreclosed and liquidated.

2. Temporarily increase the cap on SBA Express loans from $350,000 to $1 million:

The President is proposing to temporarily increase the maximum SBA Express loan size to $1 million, which would expand the program’s ability to help a broad range of small businesses. Unlike traditional 7(a) loans, lenders can use their own paperwork for SBA Express loans, which can be structured as revolving lines of credit. Currently, these Express loans are capped at $350,000 and carry a 50 percent guarantee. Fees would cover virtually all of the added costs of this proposal.

These proposals complement the President’s broader small business agenda - a key part of his overall jobs plan. The other elements of the small business agenda include:

• Extending small business expensing and bonus depreciation for 2010. Eliminating capital gains for small businesses in 2010.

• A Small Business Jobs and Wages Tax Credit that would cut taxes for more than 1 million small businesses by paying up to $5,000 for every net new job and covers payroll taxes on overall wage increases in excess of inflation.

• A $30 billion Small Business Lending Fund to provide capital for community banks and an incentive to increase lending to small businesses.

• Additional SBA lending proposals, including an extension of the Recovery Act programs that eliminate fees and raise guarantees on 7(a) loans and permanent increases in the maximum loan sizes for major SBA programs.


Sources: Fox News, CNN