New fed rules to aid more underwater homeowners
Washington, DC, United States (AHN) – Monday morning the Federal Housing Finance Agency announced new rules that will allow many more “underwater” homeowners, those who owe more than their properties are worth, to refinance at current historical low mortgage rates.
Up to a million borrowers are expected to take advantage of the new program, the FHFA estimates. Originally rolled out in early 2009, the program has fallen far short of the number of people it was expected to help.
Prior to the new rules, only borrowers who owed more than 25 percent more than their homes are worth could participate in the program. The new rules have no cap on how much a borrower owes.
Only mortgages backed by Fannie Mae and Freddie Mac will be eligible under the new rules.
Officials hope the new rules will help the ailing housing market and the flailing economy. By reducing monthly payments, more homeowners will hopefully avoid foreclosure and have more cash to spend, giving a much-needed boost to the depressed economy.
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U.S. lawmakers aim to lure foreigners to buy American homes
Washiington, DC, United States (AHN) – The ailing housing market in the United States has not been able to recover even with historic low interest rates, bargain-hunting American consumers or U.S. government intervention. So, the Senate is proposing a bill that would give foreigners a part in bailing out the industry.
U.S. Sens. Charles Schumer (D-NY) and Sen Mike Lee (R-UT) have introduced a bill that would permit foreigners who shell out at least $500,000 on U.S. residential property to obtain visas allowing them to live in the United States.
The plan might be the boon the U.S. real estate market needs, especially in states particularly hard hit such as California and Florida, which often attract wealthy Chinese and Canadian buyers.
The National Association of Realtors reported that in the 12-month period that ended March 31 residential sales nationwide to foreigners and recent immigrants totaled $82 billion, an increase from $66 billion in the same period a year earlier.
The bipartisan proposal, part of a package that would make it easier for international tourists to visit and vacation in the United States, is similar to an existing program that puts foreigners on a fast track to a green card if they invest at least $500,000 in an American business that creates at least 10 jobs.
There are restriction in the new proposed bill. The purchase must be in cash, with no mortgage or home equity loan. And, the property would have to be purchased for more than its most recent appraised value. In addition, the buyer must live in the home at least 180 days a year, which would require paying U.S. income taxes on any foreign earnings.
The buyer would be able to bring a spouse and minor children to live in the U.S., but would need to apply for a work visa to hold a job. Neither the buyer nor the dependents would be eligible to receive Medicaid, Medicare or Social Security benefits.
Schumer and Lee, who have already secured backing for the bill from the U.S. Chamber of Commerce, the U.S. Travel Association and the American Hotel & Lodging Association, are working to get support from the Obama administration, which received details of the bill Thursday.
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Spain gets one-notch downgrade from S&P
Madrid, Spain (AHN) – Standard & Poor’s downgraded Spain’s credit rating by one notch on Thursday over growth challenges for the country’s private sector as Madrid seeks fresh external financing to roll over its external debt.
With the downgrade, Spain’s new rating is AA-, which is three steps below the AAA rating. S&P also gave a Spain a negative outlook.
S&P said Spain’s economy will likely grow at 1 percent in real terms in 2012, down from the rating agency’s February forecast of 1.5 percent expansion.
It was the third credit rating cut for Spain in three years. Fitch Ratings gave Madrid a similar level of rating on Oct. 7 when it cut the country’s debt rating.
S&P said the financial profile of Spain’s banking system will further weaken as problematic assets rise.
Spanish, Italian and Greek bonds continued to fall over concerns that the eurozone will struggle to contain the debt contagion that may trigger another global financial crisis. To prevent that scenario, International Monetary Fund officials hinted the IMF may seeks more funds to protect nations such as Spain and Italy.
On news of the downgrade, the main Ibex 35 index declined 0.5 percent in Madrid trading. Yield of 10-year Spanish bonds also went up to 5.26 percent from 5.21 percent, which means Spain will pay more than twice what Germany pays to borrow for the next 10 years.
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U.S. banks start to demolish foreclosed properties
Cleveland, OH, United States (AHN) – Some U.S. banks have started to demolish foreclosed properties and are even paying for the cost, which saves the financial institutions from maintenance, taxes and real estate marketing expenses.
In some areas, the properties that were demolished became community parks, church extensions and parking lots.
In Ohio, the company that is charged with razing the foreclosed homes is the Cuyahoga County Land Reutilization Corporation, which was created by a 2009 state law and tasked with creating land banks.
Other states such as New York, Georgia and Philadelphia are using the Ohio model to put up similar organizations.
Lenders and mortgage firms are also donating properties to land banks. Bank of America and Well Fargo said they will donate over 100 properties to land banks. JPMorgan Chase has made regular donations and Fannie Mae donates about 30 properties monthly.
While disposing of unwanted properties on their hands, the banks are also battling lawsuits over securities fraud claims filed by states and municipalities despite the lenders having settled some of the complaints.
Bank of America and JPMorgan are negotiating an agreement with state attorneys general and federal officials that would fund loan modifications for homeowners and set requirements on how the banks should conduct foreclosures.
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Thousands of Greeks strike to protest new round of cuts
Athens, Greece (AHN) – Thousands of restive Greek workers struck on Wednesday to protest the new round of budget cuts that Prime Minister George Papandreou approved to qualify for another tranche of bailout funds.
The 24-hour industrial action paralyzed the Athens International Airport and other forms of public transportation as workers protested the planned salary cut and eventual layoff of 30,000 public employees. The job walk-off canceled 448 flights in and out of the Athens International Airport.
Protests have been going on in Greece since the government initiated austerity measures, but this is the first time this year that the country’s main gateway was closed the whole day.
Besides canceled plane, bus, rail and ferry services in Athens, schools also closed and hospitals ran on skeletal staffs.
Tiana Andreou, a trade union leader and public employee, said Greeks are now at a boiling point. She said the anger is not only over the austerity measures, but because of lives that the cost-cutting measures will destroy. The general public strike, Andreou said, is their way of telling Greek officials that they want a stop to the continuous belt-tightening since the country had its credit rating downgraded.
The Greek government has also agreed to impose a property tax as another way of increasing government revenue. Finance Minister Evangelos Venizelos disclosed on Tuesday that the government has cash sufficient to pay pensions, salaries and bondholders only until the middle of November.
Venezelos described the situation of the country as being at the worst circumstances under the worst conditions. He pointed out that Greece is dependent on international aid and loans and the embattled nation must make superhuman efforts to win what he called “the wager of history.”
The Greek government has about 750,000 public servants. It has a national debt of $477.3 billion (€358.5 billion) or 161.8 percent of its gross domestic product.
Following the 24-hour general strike, 10-year Greek bonds dipped anew on Wednesday and hiked the yield three basis points to 23.13 percent, more than twice the rate on July 21.
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German Parliament approves hike in EU loan guarantees
Berlin, Germany (AHN) – The Bundestag, Germany’s Parliament, agreed on Thursday to increase the country’s guarantees on European Union loans to $284 billion (€211 billion) from $167 billion (€124 billion).
The 523 to 85 vote gave the European Financial Stability Facility (EFSF) power to purchase bonds in secondary markets, enable bank recapitalization and offer precautionary credit lines.
The Bundestag also approved the increase in the EFSF to $599 billion (€440 billion). The measure was approved because of the support of the Christian Democrats, Free Democrats, Social Democrats and Greens.
The approval of the hike represents a victory for German Chancellor Angela Merkel, who spent weeks campaigning for approval of the July 21 agreement by eurozone leaders. Germany holds the largest amount of Greek government bonds.
However, German Finance Minister Wolfgang Schauble and Economics Minister Philipp Roster said any further increase was out of the question.
With the European Commission expecting the larger EFSF in place by mid-October, zone leaders are now focusing on how to prevent the region’s debt crisis from spreading further. One of the measures they are eyeing is the establishment of a permanent rescue fund that would provide more capital and tools to manage defaults.
However, the chairman of a private-equity firm said the newly approved bailout package would not be enough to solve the eurozone’s debt problems. He suggested that the amount should be in the trillion-euro level, not just billion.
Austria is expected to ratify the expanded rescue fund on Friday, while four other countries have yet to vote on it.
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