From the New York times, found via yahoo finance:
Pay Garnishments Rise as Debtors Fall Behind

PHOENIX — When the bank sued Leann Weaver for not paying her credit card balance, her reaction was typical for someone in that situation. Personal and financial setbacks weighed her down, and she knew she owed the $2,470. So she never went to court to defend herself.

She was startled by what happened next. When she swiped her debit card at the grocery store, it was declined. It turned out Capital One Bank had taken $224.25 from her paycheck, a quarter of her wag

“They’re kicking somebody who’s already in the dirt,” she said.

One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases.

Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on.

After winning, creditors can secure a court order to seize part of the debtor’s paycheck or the funds in a bank account, a procedure called garnishment. No national statistics are kept, but the pay seizures are rising fast in some areas — up 121 percent in the Phoenix area since 2005, and 55 percent in the Atlanta area since 2004. In Cleveland, garnishments jumped 30 percent between 2008 and 2009 alone.

Debt collectors say they are being forced into the action by combative debtors who dodge attempts to settle. “I think there’s a lack of accountability among debtors, and a lack of interest in reaching out to their creditors to resolve things amicably,” said Fred N. Blitt, president of the National Association of Retail Collection Attorneys.

Bankruptcy can clear away most debts. Yet sweeping changes to federal law in 2005 — pushed by the banking lobby — complicated that process and more than doubled the average cost of filing, to more than $2,000. Many low-income debtors must save for months before they can afford to go broke.

In some states, courts allow creditors to charge high interest rates for years after a lawsuit is decided in their favor. In others, creditors can win lawsuits by default and seize wages and bank accounts without a case ever appearing before a judge.

Lack of participation is the most fundamental problem. Some consumers do not even know they are being sued; the people who are supposed to serve them with formal notice have sometimes been caught skipping that step and doctoring the paperwork.

In far more cases, consumers are served but still do not offer a defense. Few can afford lawyers; others are intimidated or confused. In their absence, judges can offer little relief.

In the rare event that a consumer battles back, creditors frequently lack the documentation to prove their claim, and cases are dropped. That is because many past-due debts are owned not by the banks that issued them, but by debt collectors who bought, for cents on the dollar, a list of names and amounts due.

“If the consumers were armed with more education about how to defend against these debts, they’d be successful,” said Jeffrey Lipman, a civil magistrate in Des Moines.

The case of Sidney Jones shows how punishing the system can be. In January 2001, Mr. Jones, 45, a maintenance worker from California Crossroads, Va., took out a $4,097 personal loan from Beneficial Virginia, a subprime lender now owned by HSBC, the big bank.

He fell behind, and Beneficial sued. Mr. Jones did not appear in court. “I just thought they were going to take what I owed,” he said.

By default, Beneficial won a judgment of $4,750, plus $900 in lawyers’ fees, with the debt accruing interest at 27.55 percent until paid in full. The bank started garnishing his wages in March 2003.

Over the next six years, the bank deducted more than $10,000 from Mr. Jones’s paychecks, but he made little headway on his debt. According to a court order secured by Beneficial’s lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount.

Mr. Jones, who did not graduate from high school, was baffled. “Where did all this money go that I paid them?” he said.

Dale Pittman, a consumer law lawyer in Petersburg, Va. , took Mr. Jones’s case without charge, and found that all but $134 of his payments had gone toward interest, fees and court costs. “It’s a perfectly legal result under Virginia law,” Mr. Pittman said.

HSBC said it ceased collection shortly after Mr. Pittman took the case, but declined further comment. “We are confident we are treating our customers fairly and with integrity,” Kate Durham, a spokeswoman for HSBC North America, said in an e-mail message.

The rare debtors who press their claims, and catch a sympathetic judge, have a shot at a result more to their liking.

Ruth M. Owens, a disabled Cleveland woman, was sued by Discover Bank in 2004 for an unpaid credit card. Ms. Owens offered a defense, sending a handwritten note to the court.

“After paying my monthly utilities, there is no money left except a little food money and sometimes it isn’t enough,” she wrote.

Robert Triozzi, a judge at the time, heard the case. He found that over a period of several years, Ms. Owens had paid nearly $3,500 on an original balance of $1,900. But Discover was suing her for $5,564, mostly for late fees, compound interest, penalties and other charges. He called Discover’s actions “unconscionable” and threw the case out.

Discover defended its actions. “This account was placed with an attorney only after all other efforts to reach the card member were exhausted,” Matthew Towson, a bank spokesman, said in an e-mail message.

Going to court is no guarantee of victory, of course. Consumers who do go are sometimes intercepted by collection lawyers, who press them to sign papers settling without a trial. These settlements may be against the interests of debtors, but they sign anyway.

“We’re signing off on a lot of settlement agreements where we shake our heads and ask, ‘Why is this person settling to this?’ ” Judge Lipman said.

For the working poor, losing a lawsuit can mean disaster. A 1968 federal law exempts 75 percent of a worker’s wages, or 30 times the minimum wage per week, from being taken in garnishment — whichever is less. But increases in the minimum wage have failed to keep up with inflation. As federal law stands now, just $217.50 a week is exempt from seizure. (A few states set higher cutoffs.)

The working poor “have difficulties maintaining payments on life’s necessities with their full paycheck,” said Angela Riccetti, a lawyer with Atlanta Legal Aid who represents indigent clients whose wages are being garnished. “You lose 25 percent of it and everything folds.”

For Leann Weaver, the woman at the grocery store, Capital One’s lawsuit made a bad situation worse. After being evicted from her apartment, she moved in with her grandparents. Without them, she might have ended up on the street or in a shelter, she said.

Capital One declined to comment on Ms. Weaver’s case. “We encourage anyone facing difficulties meeting their financial obligations to contact us right away,” Tatiana Stead, a bank spokeswoman, said in an e-mail message.

Ms. Weaver said she repeatedly asked Capital One for more time to pay her $2,470 debt, but last year the bank filed suit. She failed to show up in court, and a judgment was entered against her, swollen by $1,800 in interest and lawyers’ fees. Then the garnishment began, almost $500 a month, or a quarter of her pay.

“I can’t even look at my paychecks any more,” she said.

From yahoo news / Reuters

Hedge fund managers set new payout records in 2009

BOSTON (Reuters) – Seven of the world’s top hedge fund managers earned 10-figure paychecks and one set a record for the highest-ever payout last year due to a stock market rally that pushed returns to their highest levels in a decade.

Together, the industry’s 25 best-paid managers collected a record $25.33 billion, more than double the amount they took home in 2008 when the financial crisis left many prominent funds nursing heavy losses.

In 2007, the top 25 set a record by taking home $22.3 billion.

The annual ranking, featuring the heads of the some of the industry’s oldest and biggest hedge funds, was released by Institutional Investor’s AR: Absolute Return + Alpha on Thursday.

Analysts had expected the overall increase after the average hedge fund gained 20 percent and investors began putting new money into the loosely regulated $1.5 trillion industry in 2009.

Hedge fund managers typically earn management fees plus performance fees that can be has high as 50 percent, helping cement conventional wisdom that it can be extremely lucrative to run a hedge fund.

Some funds delivered dramatically better returns than the average which helped their managers take home billions, again.

David Tepper’s Appaloosa Management gained more than 130 percent on his bet that certain bank shares would recover. Tepper earned a $4 billion payout that toppled John Paulson as the industry’s record payout holder. Paulson’s bet that housing prices would fall earned him $3.7 billion in 2007.

Paulson, however, still made the list of top earners, ranking in fourth position with a $2.3 billion paycheck.

He followed philanthropist George Soros whose $3.3 billion put him into the No. 2 spot and James Simons who earned $2.5 billion to rank as No. 3. Simons, a former mathematics professor announced his retirement from Renaissance Technologies last year.

SAC Capital Advisors’ Steven Cohen ranked as the fifth- highest earner with $1.4 billion. He was followed by Icahn Capital’s Carl Icahn, ESL Investment’s Edward Lampert, Citadel Investment Group’s Kenneth Griffin, Centaurus Advisors’ John Arnold and Harbinger Capital Partners’ Philip Falcone.

(Reporting by Svea Herbst-Bayliss; Editing by Derek Caney)

NEW YORK (Reuters) – Foreclosures were once the turf of the most aggressive investors, but these days ordinary home buyers can hunt for fire-sale house prices on a wealth of Internet sites.

Large real estate sites such as PropertyShark.com and RealtyTrac.com showcase a growing number of U.S. properties in pre-foreclosure and foreclosure, a phenomenon that is becoming far more common with the U.S. subprime mortgage meltdown.

They pull together thousands of listings based on public information, adding photos or aerial images of the houses and eliminating the need to sift through court documents. In some cases, they offer phone numbers of homeowners and court dates.

In March, Yahoo Real Estate opened a comprehensive site on foreclosures together with RealtyTrac, expanding the reach of such data to its nearly 500 million global users.

“The goal for you as a buyer is to purchase a property at least 20 percent below full market value, although better deals are often possible,” Yahoo’s site tells the uninitiated.

Perhaps the most significant change is that ordinary home buyers are making more use of these sites, less hesitant to capitalize on the financial misfortune of others.

They will find many more opportunities, as the U.S. foreclosure rate by the end of 2007 had risen nearly 80 percent from a year earlier.

“It is what it is. I’m not going to sit here and tell you otherwise,” said Bill Staniford, partner at PropertyShark. “This is a debacle going down from the top of government to the mortgage brokers. There’s lots of blame to go round, but the more people in this industry there are, the better off the homeowner.”

WAIT FOR THE GAVEL

Potential buyers are also getting involved earlier in the process, finding a way to speak directly to owners on notice for default rather than wait for the gavel to come down.

“Many people think about the auction when they think about foreclosure. They get fixated on it,” said Staniford. “But most of the transactions are getting done before the auction.”

RealtyTrac says traffic to its site has tripled to about 3 million unique visitors every month from 1 million just two years ago. It estimates as many as 40 percent of visits come from first-time home buyers rather than investors or brokers.

Yahoo Real Estate saw a fivefold increase in traffic to its foreclosure listings since it expanded the site last year.

“There are a lot of people who have been priced out of the market and they’re seeing their rents go up,” said Rick Sharga, vice president of marketing at RealtyTrac. “Probably until next year, the level of foreclosure activity will remain at historically high levels.”

RealtyTrac is seeing increased interest in its site from overseas investors, fueled by a weak U.S. dollar. The company aims to expand its subscription U.S. listings service to foreign nationals as early as 2008, and may eventually offer foreclosure information from markets abroad.

“The challenge is that there isn’t something exactly like U.S. foreclosure laws in every country,” Sharga said.

Fresh data from PropertyShark shows the number of scheduled foreclosures in four large metropolitan areas — New York City, Miami, Los Angeles and Seattle — reached two-year highs in January. The number of foreclosures more than doubled in Miami and nearly quadrupled in Los Angeles in that time.

For Web users, a simple search shows how popular the term “foreclosure” has become, but the quality of many sites is unclear.

FLIP SIDE

Foreclosure.com this week cited more than 362,000 pre-foreclosure listings, nearly 39,000 sheriff sales and almost 281,000 bankruptcies.

ForeclosureUniversity.com aggregates news articles on the topic, while other sites give information on home auctions on a state-by-state basis.

On the flip side, the U.S. Department of Housing and Urban Development offers advice on how to avoid foreclosure if one can’t make mortgage payments. Their recommendation: Don’t ignore your lender (http://www.hud.gov/foreclosure/index.cfm).

Buyers interested in foreclosures should be wary of everything from hidden liens on a property to navigating their first approach to an owner.

“This is not something we recommend people get into without educating themselves,” Steve Schultz, director of product management at Yahoo Real Estate, told Reuters.

“There are a lot of pitfalls,” Schultz said. “You may end up getting into a situation where you’re going to upset a particular buyer. You’re going to make a phone call and they’re not really ready to get into a sales conversation.”

If there is a silver lining, experts say, it’s that regular home buyers may be less aggressive in the discounts they seek, offering some maneuvering room for people out of luck.

Sharga said the worst of the foreclosure growth could end by June, after a huge wave of adjustable subprime loans resets. Barring other economic upsets, the real estate market could take six more months to stabilize, he said.

“A lot of the properties in foreclosure are there for really bad financing,” he said. “You’re actually offering a sort of life raft for home owners in a sea of distress.”

(Editing by Brian Moss)

Wednesday, 12/19/07
Fed endorses plan to curb shady mortgage lending
Consumer advocates say it falls short in protecting borrowers

By JEANNINE AVERSA
Associated Press

WASHINGTON — Activist or cautious regulator? Either way, Federal Reserve Chairman Ben Bernanke appears to be willing to go much further than his predecessor, Alan Greenspan, in cracking down on shady home-lending practices.

Bernanke and his colleagues endorsed a broad plan on Tuesday to give homebuyers new protections against dubious practices — their most sweeping response to a mortgage meltdown that has forced record numbers of people from their homes.

The Fed has been under attack for not doing more to stem the crisis as hundreds of thousands of people lost the roof over their head.

The situation raised the odds the country will fall into recession, unhinged Wall Street, racked up multibillion-dollar losses for financial companies and resulted in political finger-pointing over who was to blame.

The proposed rules, endorsed by the Federal Reserve Board in a 5-0 vote, would crack down on a range of shady lending practices that has burned many of the nation’s riskiest “subprime” borrowers — those with spotty credit or low incomes — who have been hardest hit by the housing and credit debacles. The rules also would curtail misleading ads for many types of mortgages and bolster financial disclosures to borrowers.

“Unfair and deceptive acts and practices hurt not just borrowers and their families, but entire communities, and indeed, the economy as a whole. They have no place in our mortgage system,” Bernanke said. “We want consumers to make decisions about home mortgage options confidently, with assurance that unscrupulous home mortgage practices will not be tolerated,” he said.

If ultimately adopted, the plan would apply to new loans made by thousands of lenders of all types, including banks and brokers. It would not cover loans already made.

The proposal would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower’s income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower’s ability to repay a home loan from sources other than the home’s value.

It offers Bernanke, who took over the helm in February 2006, an important opportunity to put his imprint on the Fed’s regulatory powers. Some critics have complained that Greenspan, who ran the Fed for 18½ years, failed to act as a forceful regulator, especially during the 2001-2005 housing boom.

Bernanke plan disappoints

The Bernanke plan, however, disappointed supporters and opponents of tougher home-lending regulations.

Mortgage lenders worried that the Fed plan was too tough and could crimp customers’ choices.

“We worry that some of the product restrictions could make it harder for bankers to tailor products for their customers and communities and result in some creditworthy customers not being able to obtain a loan,” said Edward Yingling, president of the American Bankers Association.

Consumer groups and Democrats in Congress complained that the proposal doesn’t provide sufficiently strong safeguards for borrowers.

“The Fed has done too little, too late,” said Kathleen Day, spokeswoman for the Center for Responsible Lending, a group that promotes homeownership and works to curb predatory lending.

“We don’t think it is strong enough to protect people in the future and does nothing to help people left holding the bag now,” she said.

Consumer advocates wanted an outright ban on prepayment penalties. These penalties, they say, deter homeowners from refinancing on more favorable terms. The penalties can be hard on borrowers who want to get out of adjustable-rate mortgages that reset from a low introductory rate to a much higher one they have trouble paying off.

Another disappointment to consumer groups: To make a case for a possible violation, the lender has to have engaged in a pattern of making loans without considering the borrowers’ ability to repay.

An individual incident would not be sufficient by itself.

Before taking effect, the public, industry and others can weigh in. The Fed will then vote again, and the rules could be revised.

Senate bill is pending

The House has passed legislation that would put into law some tougher provisions than contemplated by the Fed. A similar bill is pending in the Senate.

For risky and not-so-risky borrowers, the Fed also proposed:

• Prohibiting certain types of misleading or deceptive advertising for home mortgages. For instance, it would bar using the term “fixed” to describe a rate that is not truly fixed over the life of the entire loan.

• Requiring lenders to provide financial disclosures to borrowers early enough for them to use while shopping for a mortgage. Lenders could not charge fees — except for a fee to obtain a credit report — until after the consumer receives the disclosures.

In addition, the Fed proposed barring lenders from paying mortgage brokers a fee that exceeds the amount the would-be borrower had agreed to in a dvance that the broker would receive.

The Fed also proposed banning certain practices, such as failing to credit a mortgage payment to a borrower’s account when the company servicing the mortgage receives it. And it would prohibit a broker or other company from coercing or encouraging an appraiser to misrepresent the value of a home.

I think this may be going a bit too far. It’s like they are trying to shift blame and force a lot of changes that could be overbearing. I would hate to see restrictions put on low doc or no doc loans, when there are many entrepreneurs, small business owners and self employed people that would befit from the availability of these types of programs. It seems that an effort to fix a problem may create more. Let’s hope that some of these are temporary.

Thursday, 12/20/07
Nonprofit to offer ‘micro-loans’ to needy

By KEVIN WALTERS
Staff Writer

FRANKLIN — Franklin non-profit agency Community Housing Partnership of Williamson County announced today it will use a $5,000 grant to make mico-loans for the needy.

Residents facing difficult situations such as domestic violence or drug court who need money to help pay fines, make security deposits on utilities or obtain transportation can apply for a micro-loan from CHP.

The agency said the loans will be repaid at no interest “over a period that is economically feasible for the citizen” which may be from six months to one year, officials said.

The grant is made available through the Community Foundation of Middle Tennessee, which has distributed more than $1 million in grants to 203 nonprofit organizations as part of The Foundation’s annual grant making process.

For more information, contact the Community Housing Partnership at 129 W. Fowlkes St., Suite 128, in Franklin, Tenn. 37064 at (615) 790-5556.

This is nice, I wonder if the program will expand to include more education about finances and offer gateways to money management, additional educational resources and small business start up info like the SBA. I’d love to see programs like this expand and incorporate more from other agencies as well.

WASHINGTON — If lenders temporarily freeze low introductory interest rates on home loans made to risky borrowers before they soar, it would be a modest fix for the country’s fractured housing market.

The problems are so far-reaching, analysts say, that an emerging Bush administration-backed plan — nicknamed “teaser-freezer” by one economist — won’t spare many borrowers, or bankers, from the pain of escalating foreclosures and defaults.

Edward Yardeni, an economist who runs Yardeni Research in Great Neck, N.Y., called the plan “better than doing nothing,” but added that it is “not necessarily going to make a big dent in the foreclosure problem that’s facing us” because thousands of borrowers still might not be able to make their monthly payments.

As a result, the plan, which could be announced as soon as this week, is unlikely to quell worries that the housing market’s ongoing problems will drag the economy into a recession.

Treasury Secretary Henry Paulson has been hashing out the plan’s details with other top regulators, loan servicing companies and banks, including JPMorgan Chase & Co. and Wells Fargo & Co.

Some indications of the outlines of the proposal may come Monday morning, when Paulson is scheduled to speak at a housing forum in Washington.

As it stands, loan servicers are being asked — but not mandated — to give extensions of two to five years for subprime mortgages made to borrowers with weak credit that are due to reset at higher rates in the coming years.

The freezes would apply only for borrowers who are current on mortgage payments but unable to afford loans when they adjust to higher interest rates — and sometimes dramatically higher monthly payments. The Federal Deposit Insurance Corp. estimates that 1.1 million borrowers are in that situation.

But for an estimated 400,000 borrowers already late on payments before loans reset at higher rates, “there may be no alternative except for foreclosure,” Michael Krimminger, an FDIC special policy adviser, said last week at a congressional hearing.

Nevertheless, Krimminger said, borrowers who are current on their loan payments after two years are likely to be able to repay at that rate over the long run.

It isn’t just the resetting of rates that’s problematic. FDIC officials note that many subprime borrowers received starter rates that were not especially low at the time: typically around 7 percent to 9 percent, when rates as low as 5 percent were common for borrowers with strong credit.

The plan hatched by government and industry is also intended to benefit investors who purchased these risky mortgages. Agency officials counter criticism from investors concerned the plan will deny them potential profits by arguing they will be better off in the long run through the loan modifications. It spares them the cost of a foreclosure, which can run around $50,000, and decreases the likelihood of default.

“Lenders and investors will ultimately benefit,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said in an October speech in which she unveiled the idea to investors. “You’ll come out ahead of the game with a performing mortgage that’s being paid versus having a loan that’s in foreclosure.”

Initially, investors gave a chilly reception to Bair’s proposal. But since then, Democrats have been moving forward legislation — ardently opposed by lenders — to allow home mortgages on primary residences to be modified in bankruptcy court.

Worries that the bankruptcy proposal would gain further steam has made widespread loan modifications began to look more appealing to the mortgage industry, said Jaret Seiberg, a financial services policy analyst with Stanford Group.

Plus, “the industry realized how time-consuming and expensive it was to restructure these loans on a borrower-by-borrower basis,” he said.

While the Treasury Department-organized effort won praise from Democrats last week, some experts said it would still face resistance from investors in complex securities backed by mortgage loans.

If the Treasury Department pushes modifications that are against the interest of investors, “there will definitely be lawsuits,” said Mark Adelson, a mortgage securitization consultant.

During the sunny days of the housing boom, many buyers were banking on the prospect that they could refinance into more affordable loans as the value of their homes soared.

Now that home prices are dropping in large parts of the country, and broader economic conditions are worsening, those borrowers are likely to face trouble even with their introductory loan rates extended for a few years.

“It’s not the mortgage that’s the problem” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles.

While the market was soaring, he said, homebuyers simply paid far too much for their homes and are now facing the consequences.

Countrywide, non-profit partner to help homeowners

Tue Oct 23, 10:44 PM ET

NEW YORK (Reuters) – Countrywide Financial Corp, the largest U.S. mortgage lender, and non-profit group Neighborhood Assistance Corp. of America said on Tuesday they are partnering to help borrowers stay in their homes.

Under the plan, which aims to stem further worsening of the U.S. housing slump, homeowners would have options including a payment plan, or ways to modify, refinance or restructure their mortgages.

The plan is based on the non-profit group’s Home Save approach, which includes individual counseling and developing a budget.

Countrywide and NACA, a community advocacy and homeownership organization, said they would comment on the plan at a news conference on Wednesday.

Seems like there are huge issues with the US economy and stories like this downplay it. There are tons of people defaulting on loans, and not just title loans from crack heads, but people losing their houses. This is major news, yet stories like that just make it sound all candy coated, like, oh look how there is help, and not a big problem. Give me a break people. When you do see loan sharks setting up financial planner services for clients? When there are big freaking problems and it seems there is no other choice aside from having the entire housing market crash, which would make all of the laon sharks new property worthless. Detroit anyone?

From Reuters 

 By Thomas Atkins

ZURICH (Reuters) – UBS AG, the world’s largest wealth manager, unveiled $3.4 billion in losses, swept out senior managers and slashed jobs in one of the biggest casualties yet from the worldwide credit crunch.

UBS said on Monday it would write down a net 4 billion Swiss francs ($3.42 billion) in its fixed-income portfolio and elsewhere, resulting in a third-quarter loss of 600 million to 800 million Swiss francs, its first quarterly loss in nine years.

UBS said it would shed 1,500 jobs in its investment bank — or 7 percent of the division’s 22,300 staff — a sharp reversal of its recent build-up.

“It’s probably safe to say, UBS won’t be the last bank to announce something like this in the months ahead, but it begs the question as to how long this turmoil will continue,” said Eamonn Hughes of Goodbody Stockbrokers.

The loss underscores the depth of the crisis — in which central banks have injected record amounts of liquidity into the markets to keep the financial system functioning — and highlights uncertainties at rival banks, which may also be forced to unveil losses ahead of scheduled results.

In a separate announcement, rival bank Credit Suisse said it was also hit by the credit crunch but that it would remain profitable in the third quarter with income from continuing operations after tax of around 1.3 billion francs. The bank declined to provide further detail.

UBS’ fall from grace began earlier this year when heavy costs from its rapid U.S. expansion, a wave of key defections and then surprise losses at hedge fund Dillon Read Capital Management led to the shock departure of its chief executive, Peter Wuffli.

But Rohner’s writedowns and management sweep may prove to be the inflection point for UBS, said analysts at Bear Stearns.

“This is clearly not good news and adds to the catalogue of bad news that UBS has disclosed in the last year or so. Similarly, the air of stability has gone as management changes have come thick and fast,” Bear Stearns said.

UBS shares dipped but later rallied alongside Credit Suisse as investors breathed a sigh of relief that the bank had appeared to draw a line under the losses, revitalize reforms and provide some clarity about its exposure.

UBS was up 2.4 percent at 64.10 francs at 9:51 a.m. EDT while Credit Suisse was up 1.8 percent at 78.70 francs.

By contrast, Deutsche Bank shares eased 0.17 percent as concerns persisted about its exposure.

KITCHEN SINK

Rohner said he was removing top managers to accelerate a transformation in the investment bank and downplayed speculation UBS would seek to split the group into its two main units: investment banking and wealth management.

Investment bank head Huw Jenkins, who drove a rapid expansion in UBS’s bid to join the top five investment banks worldwide, will leave along with Group Chief Financial Officer Clive Standish.

Rohner — who was named chief executive in July to replace Wuffli — will assume control of the investment bank and risk-management expert Marco Suter will become chief financial officer.

The writedowns put the bank’s holdings at a cautious level but do not take it completely out of the woods. It will keep $19 billion in direct subprime exposure plus an additional $4 billion in indirect subprime exposure.

“The critical time will be over in the next six months,” Chief Executive Marcel Rohner said in a conference call with journalists.

STRATEGY QUESTIONS

The losses appears to exceed those reported so far by other investment banks.

“Today’s announcement came quite as a shock. The magnitude of the writedowns by far exceeds our expectations. Still, we judge today’s announcement as positive as it finally gives us more visibility,” said analyst Claudia Meier at bank Vontobel.

The fallout of the subprime crisis has varied in the United States, with Goldman Sachs Group Inc reporting a near 80 percent jump in quarterly profit last month, and rival Bear Stearns Cos posting a 61 percent drop.

Investors are increasingly concerned more banks might announce losses related to credit problems as they closed their books on a tumultuous third quarter.

A meltdown in the U.S. subprime mortgage market, sparked by growing defaults on riskier loans, has created a squeeze in credit markets around the world.

Despite signs in recent weeks that the credit tightness may be easing, some banks continue to report they are struggling to find cash on wholesale lending markets.

(Additional reporting by Louise Heavens, Michael Flaherty, and Peter Starck)

Looks like even big business is struggling in todays economy, loans for the big boys are affected as well now. All the loans from us small fries are certainly in a pinch.

 By Matt Falloon

LONDON (Reuters) – The housing market has a long way to go before stabilizing after the subprime crisis, spelling bad news for consumers in the world’s biggest economy, former Federal Reserve chief Alan Greenspan said on Monday.

Greenspan, who has been outspoken throughout the credit crunch, said more house price declines were likely given a surfeit of supply but pointed to signs the lending crisis could be coming to end as demand for more risky assets grows.

However, he warned any speculative market fever must be allowed to run its course to enable a full recovery.

“As in similar situations of inventory excess, I would expect home price declines to continue until the rate of inventory liquidation reaches its peak,” Greenspan told an audience at Reuters in London.

“There is little relevant American history to guide us in judging the ultimate extent of home price decline or the timing of a new price recovery, or by extension, the economic impact on the rest of our trading partners.”

The U.S. housing market remains extremely fragile after a crisis in low-end mortgage borrowing spread fear of a global economic slowdown and put a squeeze on lending conditions.

The Fed has slashed U.S. interest rates by half a percentage point to try and stabilize markets and encourage banks to increase their lending to each other.

CONSUMPTION WILL SUFFER

But official data shows a U.S. housing recovery is some way off with new home sales falling more than expected in August to notch their slowest rate in seven years and prices recording their sharpest annual fall since 1970.

Analysts said those figures largely reflected conditions before the mid-August market turmoil set in.

“All that I conclude is that the process of inventory adjustment has just started and we have a long way to go before residential housing and mortgage markets stabilize in the U.S,” Greenspan said.

Greenspan said likely victims of sustained weakness in the housing market would include the consumer and, consequently, the world’s biggest economy.

“Recent declines in home prices are already eating into home equities and unless stock prices resume their pace of increase of earlier this year, U.S. consumer spending and GDP will be under pressure from declining household wealth,” he said.

But he said signs were emerging the credit crisis could be coming to an end.

“To be sure, lenders in recent days have been reaching out for longer term, lesser quality assets and that is a good sign,” he said. “Is this August-September credit crisis about to be over? Possibly.”

(Additional reporting by Michael Taylor)

At least there is some honesty coming out in the news and Greenspan talking about how the adjustable rate loans are set to bring major issues is a good thing. People need to look at the big picture when considering loans of this type, and considering what changes the future will entail with the lending institutions and jobs and prices of goods and services all play a factor in how we may or may not be able to afford the debts that we incur.

This is a many part problem. Certainly people should be aware that a variable rate can cause unexpected strain, but the job losses in Detroit and other places are another factor. Higher prices from the gas pump to milk have caused strains on many American budgets recently. Higher taxes on cigarettes and other services are adding to that strain.

Here is the article from the Tennessean:

Life woes help feed mortgage defaults
Adjustable rates may cause next lending problem

By ALEX VEIGA
Associated Press

LOS ANGELES — Here’s a scary thought about the latest bad news on housing: A surprising increase in late loan payments and defaults among homeowners with good credit is coming from traditional woes, such as divorces, job losses and unexpected medical bills.

The next and biggest wave of problem loans could come as monthly payments soar for prime and subprime borrowers who took out adjustable-rate loans with little or no documentation, or who used so-called piggyback loans on top of their first mortgages to make up for small down payments, analysts said.

These exotic loans were the only way many borrowers — even those with good incomes and sterling credit histories — could afford to get into the housing market as home prices soared in the past decade. But now those decisions are looking suspect.

That was one of the messages that sent a jolt through the mortgage industry and the stock market Tuesday after Countrywide Financial Corp. reported its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults.

Countrywide, whose shares have lost 11.7 percent of their value in the past two days, laid part of the blame for the uptick in delinquencies on borrowers with good credit who had taken out prime home equity loans.

Trend could continue

Analysts said the trend could continue, particularly in areas of the country that have been hardest hit by job losses in general or seen a decline in speculation-driven construction, such as South Florida, parts of California and Las Vegas.

“As housing values weaken broadly and the job market slows in these areas that we’re focused on, all borrowers will be touched,” said Mark Zandi, chief economist at Moody’s Economy.com.

He said subprime borrowers, those with spotty credit records, probably will show the greatest number of defaults. “But even prime, fixed-rate first mortgage borrowers will experience more credit problems,” Zandi said.

The problems are expected even though the U.S. unemployment rate is at
4.5 percent, still low by historical standards.

In reporting its earnings, Calabasas, Calif.-based Countrywide, the top U.S. mortgage lender, said it was forced to take impairment charges as it braced for the possibility of more people failing to make their mortgage payments on time. The firm said borrowers becoming unemployed or divorcing were the leading reasons why many borrowers with prime loans were falling behind on payments. And company officials told analysts on a conference call that the uptick in missed payments was not caused primarily to borrowers seeing their loans’ interest rate reset, triggering higher payments.

Still, the mortgage industry anticipates that it could face more defaults in coming months as many adjustable mortgages originated in 2005 and 2006 during the height of the housing market frenzy begin to reset to higher interest rates.

The loans, initially attractive options for buyers because of their cheaper “teaser” interest rates, can adjust higher after as little as two years. Even a small percentage increase can translate into a payment shock.

“The losses are just beginning,” said Christopher Brend ler, an analyst with Stifel Nicolaus & Co. Inc.

“Housing is increasingly a problem, prices are likely to go down, and so these loans underwritten in the best of times will now season in the worst of times,” he said.

The mortgage industry already has tightened lending standards in response to the jump in defaults by subprime borrowers.

“The same problems you saw in the subprime sector that caused the big meltdown in March is now a broader industry problem that’s hitting the prime sector,” Brendler said.