Foreclosure Nightmare

American International Group Inc. was unprepared for the financial crisis that forced the insurer to accept a $182.3 billion bailout from the U.S. government, the company’s former general counsel said.

AIG didn’t have the “infrastructure to call upon to respond,” Anastasia Kelly said yesterday at a corporate law conference at Georgetown University Law Center in Washington. Because the company was so diverse and global, “there was no one in charge,” she said. mark Herr, a spokesman for new York- based AIG, declined to comment.

AIG agreed in September 2008 to turn over a majority stake to the U.S. after failing to get support from Warren Buffett’s Berkshire Hathaway Inc. or arrange a loan through JPMorgan Chase & co. and Goldman Sachs Group Inc. Robert Willumstad, who became AIG’s third chief executive officer in three years when he took over in June of 2008, was replaced by the government before presenting the turnaround plan he’d been preparing.

Kelly, 60, joined law firm DLA Piper this month after leaving AIG in December in protest of government-imposed pay limits. Kenneth Feinberg, the Obama administration’s special master for executive compensation, had ruled that base salaries there shouldn’t exceed $500,000, with some exceptions. Kelly was awarded more than $3 million in severance from AIG.

The company wasn’t prepared when former CEO Maurice “Hank” Greenberg departed in 2005, Kelly said in an interview. “Hank didn’t plan to leave when he left, so the normal transition when a CEO leaves that you hope happens when a CEO leaves didn’t happen.”

Greenberg ran AIG for 38 years, exiting amid regulatory probes by former new York Attorney General Eliot Spitzer. Kelly said she has “a great deal of respect for the businesses he built.” AIG, once the world’s largest insurer, had operations in more than 100 nations.

“There wasn’t focus on the fact that now that Hank’s gone, what do we need, what kind of succession planning should we have in place,” Kelly said. “A lot of companies have very robust human resource-driven succession plans, have people identified. AIG didn’t have that. maybe they would have had Hank stayed as long as he wanted to and had done it himself.”

As general counsel, Kelly was involved in lawsuits against Greenberg, 84, including a case accusing him of improperly taking $4.3 billion in stock. A federal jury later rejected AIG’s claims over the shares. The company settled all lawsuits with Greenberg in November and said it would reimburse as much as $150 million of his legal fees.

Greenberg’s successor, Martin Sullivan, told analysts in 2007 that losses tied to the housing crisis would be manageable. he started a $5 billion share buyback that year, depleting funds before the company’s investments plunged in value.

The initial bailout, an $85 billion, two-year credit line from the Federal Reserve in 2008, was expanded three times as AIG’s trading partners demanded collateral on contracts in which the insurer guaranteed mortgage-linked investments.

Willumstad submitted written testimony in October 2008 to a congressional committee in which he described the company’s attempts to secure bank loans or funding from Berkshire as only “precautionary steps.”

“Through the first week of September, we believed AIG could weather the difficulties in the financial markets,” Willumstad wrote in the testimony to the House Committee on Oversight and Government Reform.

An attempt to reach Willumstad through Brysam Global Partners, the new York-based private equity firm that he co- founded and where he is senior adviser, wasn’t successful.

‘They Needed More’

“It wasn’t very tough,” to resist an investment in AIG, Berkshire CEO Buffett said in an interview with Bloomberg Television last year. “They needed more than we could supply by far. I didn’t know the extent of it, but I knew that.”

Edward Liddy, who was named by the U.S. to replace Willumstad, won additional funds and an extension of the credit line until 2013. Liddy stepped down in August 2009 and was replaced by Robert Benmosche.

Kelly has praised Liddy, telling Fortune magazine in an interview last month that “I’d walk through a wall for Ed Liddy.”

Kelly joined AIG in 2006 to help the insurer recover from Spitzer’s investigations. Kelly had been general counsel at MCI/WorldCom, Sears, Roebuck & co. and Fannie Mae.

She was promoted to vice chairman of AIG in January 2009 and given control over the public relations and human resources departments. Those responsibilities helped her coordinate AIG’s response to the economic crisis, Kelly has said.

To contact the reporters on this story: Ian Katz in Washington at ikatz2@bloomberg.net; Hugh Son in new York at hson1@bloomberg.net.

All About Work & Financial: AIG was Unprepared for Financial …

An emerging meme on the right, one that’s being championed by the likes of Neil Cavuto and others, is that the mortgage crisis happened not because of deregulation, but because brokers were pressured into making loans to “minorities and risky folks,” as Cavuto tastefully put it.

But guess who actively sought to boost minority homeownership? John McCain’s campaign manager, Rick Davis.

As The New York Times reported today, Davis was president for several years of the Homeownership Alliance, an industry advocacy organization formed mainly by Fannie Mae and Freddie Mac. the Alliance’s core mission is to boost the number of mortgages granted.

But take a look at this picture from the alliance’s annual report in 2004, unearthed by a reader, showing Davis at a Congressional reception praising minority homeownership (click to enlarge):

“We have an opportunity in the next decade to increase minority homeownership and significantly reduce the minority homeownership gap,” Davis is quoted saying here. “The future of the housing market rests heavily on the economic success of minorities. Homeownership is likely to grow faster among minority Americans in the next decade if all the stakeholders in the housing industry work together to make it happen. the Homeownership Alliance is working toward this goal.”

Hmmm. Wingers agree McCain’s campaign manager helped cause mortgage crisis?

Sorry, Wingnuts: McCain's Campaign Manager Pushed for Boost

Is it time to rush out and buy a house before mortgage rates go up?

As the Federal Reserve winds down its intervention in the mortgage market, rates on home loans are generally expected to rise at least modestly during the rest of this year from today’s unusually low levels. Some analysts believe mortgage rates will jump to around 6% by year end from 5% in recent weeks, while others see only a slight increase.

Meanwhile, federal tax credits available for some home buyers are due to expire at the end of April, adding to the sense of urgency many shoppers feel.

“I’d hate to miss out on really low [mortgage] rates” or the tax credit, says Jennifer Hale, a veterinarian who is looking for a new home near Minneapolis with her fiance, Lawrence Nystrom.

If rates do go up sharply, that will have a big effect on home buyers. , a mortgage adviser at all California Mortgage in Larkspur, Calif., offers the example of a couple with combined pretax income of $100,000 a year and debt obligations (excluding mortgage) of $500 a month. at a 5% mortgage rate, he figures, the couple could qualify for a loan big enough to buy a $590,000 house, assuming a 20% down payment. at 6%, that would fall to $540,000.

Since late 2008, 30-year fixed-rate mortgages have been available for people with strong credit records at around 5%, near the lowest levels since the 1950s, thanks to the Federal Reserve’s heavy purchases of mortgage securities. at the end of March, the Fed is due to stop buying the securities. most mortgage analysts think the immediate effect of the Fed’s withdrawal will be modest.

, a senior managing director at mortgage-bond trader Amherst Securities Group LP in new York, estimates that the Fed move will add a maximum of about 0.25 percentage point to mortgage rates. “There is a lot of private money on the sidelines,” waiting to buy mortgage securities once the Fed stops gobbling most of them up, Ms. Goodman says. she points to banks, money managers and foreign investors.

What happens to interest rates over the rest of this year depends on many factors that are hard to predict, including the strength of the economy, Fed policies and foreign investors’ willingness to buy U.S. debt.

Projections vary widely. at the lower end of the scale, analysts at Credit Suisse and FTN Financial Capital Markets forecast that mortgage rates will be in a range of roughly 5% to 5.25% at the end of 2010. Moody’s Economy.com projects about 5.7%, and Barclays Capital 6%. Barclays cites a general rise in interest rates propelled by heavy government borrowing and a strengthening economy as the main factors.

, a broker at Twin Oaks Realty of Crystal, Minn., who is helping Ms. Hale and Mr. Nystrom search for a house, says the tax credit and fear of higher interest rates are motivating buyers “to move a little faster.” but he cautions against moving too fast because of the risk of overpaying or ending up with a home you don’t really like. “Getting the right home is the no. 1 thing,” he says.

Write to James R. Hagerty at bob.hagerty@wsj.com

Nabbing a Bargain-Basement Mortgage Before Rates Rise

by Brandon Richards bio | email

LAKE CHARLES, LA (KPLC-TV) –Just one day after some surprising figures about Louisiana’s housing market were released, vendors at the Home Builders Association Home show were busy setting up shop in preparation for this weekend’s event at the Lake Charles Civic Center.

The news from Realtytrac, a group that keeps track of foreclosed homes across the nation, found nearly 1,400 Louisiana homeowners received some type of foreclosure-related notice last month, a 106% increase from February of 2009.

One way to judge the local housing market is to see what business has been like for the vendors at the home show. After all, the housing market has a direct impact on their sales.

Phyllis White with Budget Blinds said her business could have seen a drop in sales thanks to the housing market last year, however her company managed to avoid this.

“When the new construction slowed down, people started remodeling [and] redecorating,” said White. “So we’ve been very fortunate. We’ve stayed busy.”

Jim Mitchell and Christine Bailey with State Farm Insurance, believe there was definitely some change in the housing market last year, but said this year things are beginning to turn around.

“We’re just starting to see an increase in people buying more cars and the home owners market seems to be picking up,” said Bailey. “People are starting to buy more homes.”

Wayne Fender with Fender Homes, a residential construction company, reported similar news. Fender credits the availability of jobs in Southwest Louisiana as the main reason the housing market is outperforming most of the country.

Copyright 2010 KPLC-TV. All Rights Reserved.

Home show vendors say local housing market is solid

By Michael Corkery

The Washington Post reports today that Congress and the White House have shelved proposals to overhaul Fannie Mae and Freddie Mac. In short, that means the same problems that led to the near collapse of the mortgage giants and resulted in their $125 billion bail out the largest of all financial crisis bail outs are still unresolved.

The biggest problem: How to shrink Fannie and Freddie so they are still large enough to keep funding the trillion dollar mortgage market, but not large enough to again threaten the financial system. In other words, how can the government prevent these quasi-government agenciesor an agency that might replace them–from again getting too big to fail.

The Post article points out that the Obama Administration doesnt want to do anything to disrupt the fragile housing market which is showing signs of stability. Of course, that sounds a lot like the stance some Democrats made earlier in the decade when they fended off attempts at overhauling Fannie and Freddie. Then it was because they were afraid of disrupting the rise home ownership. (That rise, of course, was fueled by subprime lending, facilitated by Fannie and Freddie.)

Ironically, the loudest call now for a quick revamp is coming from Rep. Barney Frank, once Fannie and Freddies staunchest defender. Frank has called for Fannie and Freddie to be abolished and has scheduled a hearing on the matter this month, according to the Post.

But hearings are easy. the real challenge is figuring out how to nationalize Fannie and Freddie without subjecting the government to endless risk and expense, or to privatize them in a way that can provide mortgage liquidity while keeping rates low. and there seems to be near-zero political will to actually restructure Fannie and Freddie, from either the political left or right. that is especially true now, in an election year, when the historically low mortgage rates the mortgage giants are providing play well with nearly all voters.

Home sales have been stabilizing for nearly a year. Today data provider RealtyTrac said foreclosures slowed for the second consecutive month. but it is anyone guess when the market will have stabilized enough in the minds of politicians for them to take the difficult, but necessary steps to restructure Fannie and Freddie. They didn’t when times were good, wouldn’t during the depths of the recession and housing crisis, and won’t now that things have stabilized.

If not now, when? the answer may be never.

Fannie and Freddie's Future: What will Barney Frank do?

AUSTIN, Texas, March 8

AUSTIN, Texas, March 8 /PRNewswire-USNewswire/ — in celebration of Texas Public Schools Week (March 8 – 12), the Texas State Affordable Housing Corporation (TSAHC) would like to remind public school educators of a homeownership program created by the Texas Legislature to honor the important work they do every day.

The Professional Educators Home Loan Program helps educators purchase their first home. The Program offers a 30-year fixed rate mortgage loan of 5.25% and a grant for down payment and closing cost assistance (3% of the mortgage loan amount) to eligible Texas public school educators. Since the inception of the Program in 2002, over 1,700 Texas educators have become homeowners utilizing this program.

“Affording the dream of homeownership is a growing concern for many. this especially is true for our teachers,” said State Representative Joe Farias of San Antonio and a member of the House Public Education Committee. “That’s why I applaud this program that helps make a career in teaching more attractive for new teachers, while also helping to retain the effective teachers already serving our children.”

To qualify for the program, a homebuyer must be:

• A full time Classroom Teacher, Teacher’s Aide, School Librarian, School Nurse or School Counselor employed by a public school district in Texas; or a full time faculty member of either an undergraduate or graduate professional nursing or allied health program in Texas.

Additionally, the homebuyer must:

• Be a first-time homebuyer who has not had an ownership interest in a residence during the last three years, or purchasing a home in a targeted area;
• Reside in Texas;
• Meet the income and home purchase price limits;
• Meet standard mortgage underwriting requirements which demonstrate credit worthiness;
• Occupy the purchased home as their primary residence; and
• Complete a HUD approved homebuyer education course prior to closing on the home loan.

Eligible educators can apply directly through an approved participating mortgage lender. The lender list is available at www.tsahc.org or by contacting TSAHC directly at 1-888-638-3555. this program is available statewide on a first come, first-served basis, to homebuyers who wish to purchase a newly constructed or existing home with a 30-year fixed rate FHA, VA or USDA mortgage loan. Funding for this Program is made possible through a partnership between TSAHC, the U.S. Treasury, FannieMae and FreddieMac.

Contact: Janie Taylor (512) 477.3563

SOURCE Texas State Affordable Housing Corporation

Contact

Janie Taylor of the Texas State Affordable Housing Corporation, +1-512-477-3563

Texas Public Schools Week; Homeownership Program Honors Texas …

A bad credit mortgage gives borrowers with a poor credit history the opportunity to not only buy a home or refinance their current mortgage but the best opportunity to raise their credit rating over time. in most instances, whenever you apply for any type of financial product like a mortgage, the lending institution will pull your credit report.

In a nutshell, your credit rating is a compilation of your history of how timely you’ve paid your bills. Anytime money may be lent it’s used because it’s the best way for a lender to determine the risk involved for a particular borrower.

Tip – The online lending industry is very competitive. you will find many lenders who specialize in bad credit mortgage services.

Making the decision to issue or approve a bad credit mortgage is primarily determined using the credit score of the borrower(s). Credit scores can range from 400 to 800 with anything lower than a 620 poor and anything over a 720 very good. on the other hand, even if you have a credit score as low as 580 there are many lenders with mortgage programs that will finance up to 100% of the loan amount. Of course, the lower your credit score the higher interest rate you will pay and in most instances you will only be offered an ARM (Adjustable Rate Mortgage) that has a 2 or 3 year fixed interest rate and then it goes up.

Tip – most states have lending laws that state a lender can only charge interest rates a certain percentage above the retail or normal market interest rate for borrowers with bad credit. Normally this rate is 5% – 8% higher but even that in many instances is extreme.

A myth about credit reports is that each time your credit report is pulled it negatively affects your credit score. this is true only if you apply for credit products like credit cards and only if you apply for a large number of them in a short period of time. however, this does not apply in the case of mortgage lenders, unless you applied for a mortgage from a very large number (i.e. like 15 or 20) of lenders within 30 or 45 days. only then would it be slightly affect but in general when a lender pulls your credit report it will not be negatively affected.

Tip – for options in finding the best lender for you, check out the links below.

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1. Refinancing Mortgage Loans for Bad Credit If you decide on refinancing your mortgage, however, you…
2. Refinance Home Mortgage Loan with Poor Credit – 3 Tips on Getting Approved Refinancing your home mortgage is the cheapest type of…
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A Bad Credit Mortgage may Be Just What The Doctor Ordered | Daily …

An emerging meme on the right, one that’s being championed by the likes of Neil Cavuto and others, is that the mortgage crisis happened not because of deregulation, but because brokers were pressured into making loans to “minorities and risky folks,” as Cavuto tastefully put it.

But guess who actively sought to boost minority homeownership? John McCain’s campaign manager, Rick Davis.

As The New York Times reported today, Davis was president for several years of the Homeownership Alliance, an industry advocacy organization formed mainly by Fannie Mae and Freddie Mac. the Alliance’s core mission is to boost the number of mortgages granted.

But take a look at this picture from the alliance’s annual report in 2004, unearthed by a reader, showing Davis at a Congressional reception praising minority homeownership (click to enlarge):

“We have an opportunity in the next decade to increase minority homeownership and significantly reduce the minority homeownership gap,” Davis is quoted saying here. “The future of the housing market rests heavily on the economic success of minorities. Homeownership is likely to grow faster among minority Americans in the next decade if all the stakeholders in the housing industry work together to make it happen. the Homeownership Alliance is working toward this goal.”

Hmmm. Wingers agree McCain’s campaign manager helped cause mortgage crisis?

Sorry, Wingnuts: McCain's Campaign Manager Pushed for Boost

no Place Like Home

In the beleaguered housing market, “less bad” is the new good.

The latest report on foreclosures isn’t exactly good news, but it’s better than it has been in the recent past. and that’s good, right?

A new report shows that the rate of foreclosures declined 2 percent in February, to 508,324. the report from RealtyTrac, an online marketplace for foreclosed properties, said it was the second straight monthly decline, although the number of foreclosures was 6 percent higher than it was during February 2009. the report covers default notices, scheduled foreclosures, and bank repossessions among 90 percent of the U.S. population, according to RealtyTrac, which is based in Irvine, California.

There was even good news—no, make that less-bad news—from Nevada, which continues to have the highest foreclosure rate in the nation for the 38th month in a row. the state’s foreclosure rate dropped 7 percent from January and 30 percent from February 2009. yet one in 102 homes in Nevada received a foreclosure filing in February, which is four times the national average.

The absolute number of foreclosures remained highly concentrated in six states. California, Florida, Michigan, Illinois, Arizona, and Texas accounted for 60 percent of the total fillings for the month.

The leveling off in the foreclosure rate is one of several signs of better health in the housing market. Some experts believe that the market for home equity loans, which collapsed along with the housing bubble, is poised for modest growth as well. about $36 billion in new home equity loans will be issued during the next 12 months, according to a forecast from Moody’s Economy.com. Loan balances are expected to rise 4.2 percent to $903.5 billion.

Existing home sales fell in January, but are higher than they were a year ago, according to the National Association of Realtors. in other words, the news is mixed. and that isn’t so bad.

Steve Rosenbush is the blogs/industry editor for Portfolio.com.

Foreclosures Level off and Home Equity Lending Poised For Modest Growth

DENVER (AP) – The Colorado Senate approved an amendment to a mortgage regulation bill Friday that would strip Division of Real Estate Director Erin Toll of her authority to regulate mortgage lenders and replace it with a board to be appointed by the governor.

The Senate also approved an amendment that would keep complaints against mortgage brokers secret unless they are sanctioned for violating state regulations.

Sen. mark Scheffel, a Republican from Parker, said it was an issue of fairness within the division because real estate agents and appraisers are both regulated by boards.

Scheffel said he proposed the changes after talking with mortgage brokers about complaints they were being treated unfairly. He said it had nothing to do with disputes between Toll and lawmakers over her tight regulation of the industry.

“No one could come up with a good reason why mortgage lenders were treated differently,” Scheffel said.

Under the bill given initial approval Friday, Gov. bill Ritter would appoint all seven members of the board, including five from the mortgage lending industry and two public representatives not affiliated with the industry.

The board would have the authority to make rules, investigate complaints and discipline members. any appeals would be heard by an administrative law judge.

Under the current system, Toll conducts investigations and decides penalties.

Division spokesman Chris Lines said the division will follow the lawmakers’ instructions.

Toll became a target of criticism last week after she disclosed that American Home Funding, which employs state Sen. Ted Harvey as a broker, was under investigation for allegedly misleading consumers with advertising flyers that look like official tax documents.

An accompanying letter told recipients that Federal Housing Administration records indicate they have good credit that could make them eligible for FHA programs and that American Home Funding is approved by the U.S. Department of Housing and Urban Development to handle applications.

The division said Harvey was not the target of the investigation.

Derrick Strauss, president of the company, did not return a phone call seeking comment.

Jay Garten, director of the Colorado Mortgage Lenders Association, which represents 200 companies and 4,000 mortgage lenders, said a board is better than having one person regulate the industry.

“We feel it’s important we have a jury of our peers judging our performance,” he said.

Board set up to regulate Colo. mortgage lenders