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Report: 75% of Top Metro Areas See Higher Foreclosure Activity

2010-07-29T22:22:34Z

In the first half of 2010, 75 percent of the nation’s top metropolitan areas reported increasing foreclosure activity compared to the same period last year – that’s 154 of the 206 metro regions with a population of 200,000 or more, according to RealtyTrac.

Meanwhile, foreclosure activity decreased in nine of the 10 metro area’s with the highest foreclosure rates, RealtyTrac said in a new report released today.

Filing trends through mid-year puts the U.S. on a pace to exceed 3 million properties hit by foreclosure filings in 2010, which would set a new high, RealtyTrac reported earlier this month.

Four states — Florida, California, Nevada and Arizona — represented all top 20 metro foreclosure rates, today’s report said.

Florida was No. 1, with nine of the top 20 metro foreclosure rates, followed by California with eight, Nevada with two and Arizona with one.

“While we’re seeing early signs that foreclosure activity may have peaked in some of the hardest-hit markets, foreclosures continued to rise…” said James J. Saccacio, chief executive officer of RealtyTrac. “The fragile stability achieved in many local housing markets hinges on improvements in the underlying economy, specifically job growth.”

If unemployment remains high and foreclosure prevention efforts by the Obama Administration “only delay the inevitable,” Saccacio said there will be higher foreclosure activity and “a corresponding weakness in home prices in many metro areas.”

Las Vegas is still the metro area with the highest foreclosure rate. In the first six months of 2010, 6.60 percent of housing units in Las Vegas received a foreclosure filing — more than five times the national average.

But Las Vegas may have peaked. A total of 53,525 properties received a foreclosure filing through June, a decrease of nearly 15 percent from the previous six months and a decrease of nearly 9 percent from the first half of 2009.

While Vegas claimed the highest foreclosure rate, South Florida held the top spot in the number of foreclosure filings.

A total of 94,466 properties in the Miami-Fort Lauderdale area received a foreclosure filing during the six-month period, a decrease of 8 percent from the previous six months, but up nearly 11 percent from the first six months of 2009.

See RealtyTrac’s ranking of the top 20 metro foreclosure rates.

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FTC Rule Bans Upfront Fees on Some Debt Relief Services

2010-07-29T21:07:04Z

A new telemarketing sales rule prohibits for-profit companies that sell debt relief services over the telephone from charging an upfront free, according to the Federal Trade Commission.

Starting Oct. 27, these companies must settle or reduce a customers’ credit card or other unsecured debit before collecting a fee.

The new rule does not cover non-profit firms, “but does cover companies that falsely claim non-profit status,” the FTC said.

Over the past decade, the FTC and state law enforcement agencies have brought a combined 259 cases against debt relief providers for using deceptive and abusive practices,

The advance fee ban carries specific requirements for debt relief providers or counselors. They cannot collect payment until:

the debt relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s debts;
there is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it; and
the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” said FTC Chairman Jon Leibowitz. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”

Three other telemarketing sales rule provisions take effect on September 27, 2010. Those provisions will:

require debt relief companies to make specific disclosures to consumers;
prohibit them from making misrepresentations; and
extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

Here’s the FTC fact sheet on the new advance-fee rule.

Visa Profit Slips But Beats Estimates; Reform Impact Unclear

2010-07-29T03:08:35Z

Visa Inc., the top credit and debit card payment network, posted its third-quarter profit at $716 million, or 97 cents a share, slipping 2 percent compared to a year ago but beating Wall Street estimates.

For its quarter ended June 30, the transactions processing giant exceeded analysts’ expectations of 93 cents per share.

Revenue jumped 23 percent to $2.03 billion from $1.65 billion a year ago. Total processed transactions totaled 11.7 billion, a 14 percent increase over the prior year.

But uncertainty dominates the outlook for Visa and smaller competitor MasterCard as first-ever regulator oversight of “interchange fees” looms under a provision of the recently-enacted Wall Street reform bill.

The Federal Reserve will now determine if those fees charged merchants for every debit card transactions – and whose costs are passed on to consumers – are “reasonable and proportional.” Banks will assume most of the regulatory scrutiny under the new law, but Visa and MasterCard is expected to feel an indirect impact.

“It goes without saying, the United States debit market will undergo changes following implementation of the Wall Street Reform and Consumer Protection Act next year,” said Joseph Saunders, Visa’s chairman and CEO. “While it is too early to fully and accurately gauge the impact of the legislation, Visa has demonstrated an ability to manage our business through periods of change.”

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Low Rates, But Few Takers as Mortgage Refinance Apps Sink

2010-07-28T20:10:47Z

A closely-watched index of mortgage applications for home purchases managed a 2.0 percent increase last week, but a measure of refinance applications sank 6 percent despite historically low interest rates.

The Mortgage Bankers Association update on their two key indices painted a mixed picture for the still sluggish housing market.

The MBA’s seasonally adjusted purchase index nudged upward to its highest level since the end of June.

But its refinance index decreased 5.9 percent from the previous week. The refinance share of mortgage activity decreased to 78.0 percent of total applications, down from 79.4 percent the previous week.

Meanwhile, interest rates on long-term mortgages are still in a historically-low range.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent, from 4.59 percent last week, the MBA said. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.12 percent from 4.05 percent.

On Monday, housing market observers desperate for some positive news got a glimmer of hope. The Commerce Department reported that newly built, single-family homes rose 23.6 percent to a seasonally adjusted annual rate of 330,000 units in June

However, analysts expressed caution against expectations of a turnaround. The June new home sales figure represented a 24 percent jump from a May – when new home sales are dismal following the April 30 expiration of homebuyer tax credits.

The National Association of Home Builders was nonetheless encouraged by the June sales figure.

“It’s worth noting that some of the new-home sales in June were due to move-up buyers who were able to sell their previous home to a tax-credit-eligible buyer while that program was active,” said NAHB Chief Economist David Crowe. “Also, while sales activity is still far from robust, it has picked up some momentum as positive factors such as historic low mortgage rates, great selection and attractive prices help draw potential home buyers back to the market.”

Chevrolet Volt Priced at $41K; But Lease at $350/month

2010-07-28T02:19:29Z

The Chevrolet Volt from General Motors – the first mass-produced electric vehicle from a U.S. carmaker – will sell for $41,000, but consumers will have a more attractive lease deal if they get too much of a jolt from the sticker price.

The Volt’s price does not include up to $7,500 in federal tax credits for the four-door sedan which has a range of about 340 miles on a full charge and a back-up gasoline engine. The battery carries an eight-year/100,000-mile warranty.

Chevrolet today also announced plans to offer a lease program on the Volt with a monthly payment as low as $350 for 36 months, in addition to $2,500 due at lease signing.

The lease deal would make the Volt more competitive with gasoline-powered vehicles in the same sedan class.

But General Motors also will have competition from Nissan’s Leaf, an electric vehicle to also make showrooms this year, and which will also qualify for the same $7,500 tax credit. The Leaf will sell for $32,780, but that does not including other state and local incentives which could bring its price down to just above $20,000.

Nissan will also offer a lease deal with similar terms to that announced today for the Volt.

But GM is touting the Volt’s versatility.

The Leaf is an all-electric vehicle with a range of 70 to 120 miles, but that depends on driving conditions, with zero emissions.

The Volt is powered by an electric motor that is also dependent on a lithium-ion battery. But the Volt also has a 1.4-liter four-cylinder gasoline engine. When the car runs out of electricity, the gas engine kicks in and works to generate electricity to the motor.

“The Chevrolet Volt is the only electric vehicle that can operate under a range of weather climates and driving conditions with little concern of being stranded by a depleted battery,” General Motors said in a statement.

The downside for the Volt is that it burns gasoline after the 40-mile range of the electric engine, possibly causing defections to Nissan by emission-free purists.

“The Chevrolet Volt will be the best vehicle in its class…because it’s in a class by itself,” said Joel Ewanick, vice president of U.S. marketing for General Motors, who made the Volt price announcement at the Plug-In 2010 conference. “No other automaker offers an electrically driven vehicle that can be your everyday driver, to take you wherever, whenever. The Volt will be packed with premium content and innovation, standard.”

Treasury: Overhaul Plan for Fannie, Freddie Set for January

2010-07-27T17:34:54Z

The Obama Administration is six months away from presenting Congress with a “comprehensive” reform of the much-troubled and maligned mortgage financing system – primarily driven by Fannie Mae and Freddie Mac, according to a White House blog post by a Treasury official.

The administration has been under pressure from Republicans and some Democrats to overhaul Fannie and Freddie, which combined have siphoned $145 billion in bailouts – an amount that could reach $300 billion by some estimates.

Republicans have denounced the Wall Street financial reform bill signed by President Obama this month for leaving out any plan for restructuring Fannie and Freddie. Republican leaders have been pushing for phasing out the two government-sponsored entities, and shifting most of mortgage financing to the private sector.

But Fannie and Freddie have been under U.S. conservatorship since September 2008, in the wake of massive losses tied to acquisitions of private-label and subprime-mortgage backed securities. Those faltering mortgages backed by Fannie and Freddie fueled the housing bubble and subsequent financial crisis.

The Congressional mission of both companies is to maintain liquidity for the vital housing industry, ensuring the lenders can continue to finance mortgage loans.

The current sluggish state of the housing market is holding back a faster pace of economic recovery.

The Obama Administration will host an Aug. 17 “Conference on the Future of Housing Finance” at the U.S. Treasury Department in Washington, D.C. The event will bring together leading “academic experts, consumer and community organizations, industry groups, market participants, and other stakeholders for an open discussion about housing finance reform.”

“Work on this issue is well under way, as the Obama Administration continues to develop a comprehensive reform proposal for delivery to Congress by January 2011,” said Jeffrey A. Goldstein, Under Secretary for Domestic Finance at the U.S. Treasury Department.

But abrupt change or an uncertain reform process could be more damaging to an already fragile recover, Goldstein said.

“Continuing to provide financial support to Fannie Mae and Freddie Mac was the right decision then for the mortgage market and for our economic recovery – and it has played a critical role in stabilizing the housing industry during a period of crisis,” Goldstein said.

Read Goldstein’s blog post.

‘Deceptive’ Marketers Banned from Mortgage Fix Services: FTC

2010-07-28T02:25:07Z

In three separate actions, the Federal Trade Commission said today it has settled with marketers who sold mortgage modification or foreclosure rescue services, but did not deliver what they promised after charging thousands in upfront fees.

Under the settlements, the marketers are now banned from peddling such programs in the future.

The FTC actions are part of a larger crackdown by federal authorities against deceptive mortgage modification promotions that prey on desperate homeowners facing foreclosure.

In the case of the Federal Loan Modification Center, Steven Oscherowitz was accused by the FTC of charging consumers up to $3,000, “much of which they required up-font, but…often failed to live to the promised results, the FTC said.

The order imposes an $11.5 million judgment against Oscherowitz, which represents the amount consumers paid to the defendants while he was involved in the alleged scheme

In the case of Loss Mitigation Services, defendants Dean Shafer, Marion Anthony “Tony” Perry, and Bernadette Perry, also known as Bernadette Carr and Bernadette Carr-Perry, settled allegations that they “falsely promised that a loan modification was assured or virtually assured if consumers paid an advance fee of up to $5,500, the FTC said.

Shafer and the Perrys, who were principals of Loss Mitigation Services, Inc. (LMS) and Synergy Financial Management Corporation – doing business as Direct Lender or DirectLender.com (Direct Lender) – also allegedly misrepresented that the companies were a department of, or affiliated with, the consumer’s lender or mortgage servicer, the FTC said.

In the case of Hope Now Modifications, brothers Salvatore and Nicholas Puglia, doing business as Hope Now Modifications LLC, and Hope Now Financial Services Corporation, settled FTC charges that they “falsely claimed that they could obtain mortgage loan modifications in all or virtually all cases and would refund consumers’ money if they failed,” the FTC said.

The federal agency also charged that Hope Now Modifications falsely claimed an affiliation with, or was part of, the HOPE NOW Alliance, a free federal homeowner assistance program.

Read the FTC’s news release on these actions.

U.S. Bank Failures Pass 100 Faster Than Last Year

2010-07-26T04:56:18Z

U.S. bank failures have passed the 100 mark, hitting a tally of 103 so far in 2010 with seven more closures – reaching that milestone more than two months faster than last year.

Regulators expect bank failures to peak before year’s end, but still surpass last year’s total of 140.

The seven closures announced Friday by the Federal Deposit Insurance Corp. cost the agency’s insurance fund a total of $431 million, as banks in Florida, Georgia, Kansas, Minnesota, Nevada, Oregon and South Carolina were the latest to sustain crippling loan losses from residential and commercial real estate.

Of the seven, the largest single cost to the FDIC’s insurance fund at $242 million came from the closure of Crescent Bank and Trust Company, of Jasper, Georgia. The FDIC and Renasant Bank entered into a loss-share transaction on $617.4 million of Crescent Bank and Trust Company’s assets. Crescent reported a total of $1.01 billion.

Here’s a recap of the most recent bank closures:

Home Valley Bank, Cave Junction, OR with $251.80 million in total assets and $229.6 million in total deposits was closed. South Valley Bank & Trust, Klamath Falls, OR has agreed to assume all deposits.
SouthwestUSA Bank, Las Vegas, NV with $214.0 million in total assets and $186.7 million in total deposits was closed. Plaza Bank, Irvine, CA has agreed to assume all deposits, excluding certain brokered deposits.
Community Security Bank, New Prague, MN with $108.0 million in total assets and $99.7 million in total deposits was closed. Roundbank, Waseca, MN has agreed to assume all deposits.
Thunder Bank, Sylvan Grove, KS with $32.6 million in total assets and $28.5 million in total deposits was closed. The Bennington State Bank, Salina, KS has agreed to assume all deposits, excluding certain brokered deposits.
Williamsburg First National Bank, Kingstree, SC with $139.3 million in total assets and $134.3 million in total deposits was closed. First Citizens Bank and Trust Company, Inc., Columbia, SC has agreed to assume all deposits, excluding certain brokered deposits.
Crescent Bank and Trust Company, Jasper, GA with $1.01 billion in total assets and $965.7 million in total deposits was closed. The Renasant Bank, Tupelo, MS has agreed to assume all deposits, excluding certain brokered deposits.
Sterling Bank, Lantana, FL with $407.9 million in total assets and $372.4 million in total deposits was closed. IBERIABANK, Lafayette, LA has agreed to assume all deposits, excluding certain brokered deposits.

Report: More Card Issuers Should Disclose Penalty Rates

2010-07-24T18:30:34Z

Federal regulators should enforce rules requiring credit card issuers to disclose penalty interest rates, and prohibit them from imposing higher rates than disclosed initially to consumers.

That was the key recommendation from Pew Health Group’s “Safe Credit Cards Project,” which recently conducted a study on the impact of the credit card reform laws that mostly took effect Feb. 22 of this year.

The Pew study found that at least 94 percent of bank cards and 46 percent of credit union cards carry provisions stating that interest rates can go up as a penalty for late payments or other violations.

And, most significantly, nearly half these warnings failed to inform the consumer of the actual penalty interest rate or how high it could climb, the report said.

“Although we applaud changes by the card industry to create a fairer and more transparent marketplace, our research shows that some challenges remain,” said Nick Bourke, director of Pew’s Safe Credit Cards Project and report co-author. “For the first time, we have seen credit card disclosures warning consumers that interest rates could go up as a penalty for certain actions, but not stating how high those rates could go.”

The Pew report found s that surcharge fees for cash advances rose sharply between July 2009 and March 2010. Bank cash advance and balance transfer fees increased on average by one-third during this period, from 3 percent of each transaction to 4 percent. Credit union cash advance fees went up by one quarter, from 2 percent to 2.5 percent.

The consumer advocacy organization, Pew Charitable Trusts, oversees the project. Its most recent analysis of credit card trends also found several positives, including:

Practices including “hair trigger” penalty rate increases, unfair payment allocation, and over-the-limit fees – without prior consent – are a thing of the past.
Less than 25 percent of all cards examined had an over-the-limit fee, which is down from more than 80 percent of cards in July 2009.
Mandatory arbitration clauses, which can limit a consumer’s right to settle disputes in court, are now found in 10 percent of cards compared to 68 percent in July 2009.
There was minimal change in the number of cards that include an annual fee (down 1 percentage point from July 2009 to March 2010).

The study, Two Steps Forward: After the Credit CARD Act, Cards Are Safer and More Transparent—But Challenges Remain, is the latest in a series of reports that has examined all credit cards trends offered online by the nation’s 12 largest banks and 12 largest credit unions.

American Express Triples Profit on Higher Card Spending

2010-07-23T15:57:56Z

Bolstered by higher card-member spending and fewer bad loans, American Express beat expectations with a second-quarter 2010 profit of $1 billion, about three times more than the $337 million in earnings a year ago.

Per share income was 84 cents, compared to 9 cents last year. Analysts were expecting 77 cents a share for the top credit card issuer by purchases.

American Express said its net income and billings were at or near pre-recession levels.

Net revenue increased 13 percent in the second quarter to $6.86 billion.

Total card spending rose 16 percent to $175.3 billion. Individual card members spent an average of $3,288, an increase of 21 percent from a year earlier.

Spending jumped across all card segments, with the largest increases coming from corporate cards, cards issued by bank partners, charge cards and premium co-brand products where many card holders tend to pay in full each month.

Helping its solid results is a significant rebound in loan losses.

Consolidated provisions for losses totaled $652 million, compared to $1.6 billion in the year-ago period, reflecting improvement in credit quality for the charge and credit card portfolios.

In June, American Express had the lowest 30-day delinquency rate among the biggest U.S. credit-card issuers.

While spending among its affluent consumers and businesses remains strong, “today’s cardmembers are borrowing less and paying down more of their outstanding debt,” said Kenneth I. Chenault, chairman and chief executive officer.

That has led to lower-interest revenue.

“We remain focused on charge – or pay-in-full – products, fee-based revenues, and on expanding our high quality cardmember base. In all, these factors have helped to improve our risk profile during the past year,” Chenault said.