Posts Tagged ‘banks’
Monday, February 6th, 2012
Posted by Leonard Steinberg on February 6th, 2012
A deal is about to be agreed upon for the Obama led multibillion-dollar mortgage relief settlement to address foreclosure abuses by large banks between 2007 and 2011. The potential support from California and New York comes in exchange for tightening provisions of the settlement to preserve the right to investigate past misdeeds by banks, and stepping up oversight to ensure that the financial institutions live up to the deal and distribute the money to the hardest-hit homeowners.
The settlement would require banks (not the government, although new fees will probably be levied on all of us to pay for this) to provide billions of dollars in aid to homeowners who have lost their homes to foreclosure or who are still at risk, after years of failed attempts by the White House and other government officials to alter the behavior of the biggest banks.
The banks — led by the five biggest mortgage servicers, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — want to settle an investigation into abuses set off in 2010 by evidence that they foreclosed on borrowers with only a cursory examination of the relevant documents, a practice known as robo-signing. Four million homeowners have lost their homes to foreclosure since the beginning of 2007.
The deal would set aside up to $17 billion specifically to pay for principal reductions and other relief for approximately a million borrowers who are behind on their payments but owe more than their houses are currently worth. I think allowing for re-financing at lower rates makes more sense personally.
The deal would also provide checks for about $2,000 to roughly 750,000 who lost homes to foreclosure.
If banks fall short of the multibillion-dollar benchmarks set out for principal reduction and other benefits for homeowners, they will have to pay the difference plus a penalty of up to 40 percent directly to the federal government.
The settlement, if all states participate, will also include $3 billion to lower the rates of mortgage holders who are current. Banks will get more credit for reducing principal owed and helping families keep their homes, and less for short sales or taking losses on loans that were likely to go bad, like those that were severely delinquent.
The big questions I have are: if the banks acted fraudulently, why just a slap on the wrist? Surely much larger fines or worse, jail-time would be appropriate? Then again, what if a good chunk of these foreclosed homeowners simply got in over their heads and are not taking any responsibility for their actions? What about the vast majority of responsible homeowners and credit worthy propspective home buyers who are not in default and are hurt by perpetuating uncertaintly and the rationing of credit? Cleaning up the housing mess is critical to the full recovery of our economy. Hopefully this is not another example of how the corrupt get away with crimes, or those who gamble escape accountability for their irresponsible actions….maybe its a bit of both?
Monday, January 23rd, 2012
Posted by Leonard Steinberg on January 23rd, 2012
A recovery is under way. And now there is absolutely no doubt about it. I hear it from my very wealthiest clients most of whom are scrambling to put deals together before prices rise. I even heard one say the other day he was willing to pay more on a deal he was structuring because he felt the markets were improving enough to give him confidence. I believe many of the buyers in this busier-than-normal January are buying because they believe a hard asset like prime real estate is poised for gains, and may be a safe-haven for wealth in inflationary times.
The housing bubble began deflating almost six years ago; house prices across the US are back to 2003 levels, yet in many areas of the New York luxury real estate market they have surpassed the highs of 2007/2008. After a protracted slump in housing starts, we now look seriously underprovided with apartments and houses, at least by historical standards. In Manhattan this shortage is fueling pricing escalation, which I feel may be a bit artificially inflated in certain areas because of acute shortages.
This January, already we are witnessing the New York luxury real estate market booming: So why aren’t there more buyers out buying across the country? Because the depressed state of the economy leaves many people who would normally be buying homes either unable to afford them or too worried about job prospects to take the risk. This affects the lower end of the market mostly, although the more recent financial markets philosophy of trimming back and cutting costs could affect the higher end too.
The economy is depressed mostly because of the housing bust, which immediately suggests the possibility of a virtuous circle: an improving economy leads to a surge in home purchases, which leads to more construction, which strengthens the economy further, and so on. If you analyze the recent data, it looks as if something like that may be starting: home sales are up, unemployment claims are down, and builders’ confidence is rising.
Furthermore, the chances for a virtuous circle have been rising, because we’ve made significant progress on the debt front. There are four things that stand in the way of a strong recovery:
1) The oil price is very high: this is a form of high taxation on the masses, making an essential monthly expense (transportation) a bigger chunk of their income.
2) The banks are impossibly incoherent with some of their demands. They blame the government, but where did the government require banks to hire incompetent appraisers to provide valuations that simply do not make sense? I have written on this subject before, but no bank read what I said or cared.
3) Politicians who are committed to power over and above the welfare of the country will continue to fuel divisiveness and claim the economy and country are down the toilet: no-one ever wins an election by saying things are getting better.
4) If the economy improves too rapidly, the Fed will raise rates to curb inflation, and the governments may be too eager to cut spending. Spending needs to be trimmed, and government needs to be made more efficient, but it would be better to fuel this recovery through growth as the priority.
Tuesday, January 10th, 2012
Posted by Leonard Steinberg on January 10th, 2012
Bloomberg reported to-day that large banks are considering freezing the pay of junior bankers in light of diminished profitability of their institutions. What this really equates to is that the more senior bankers will do whatever it takes to maintain the quality of their incomes: Banks face a huge problem if they do not pay their top people top dollars…..this current state of affairs is the prime environment for banks to steal the best talent from competitors. And the best will always be tempted by the best financial packages.
As much as OCCUPY WALL STREET complained about society’s 99% being disadvantaged, in the banking system too there is a very small percentage of employees who earn the really big bucks.
How does this relate to New York real estate? I think it will further strengthen the higher end of the market at the expense of the lower end. Corporate profits surged in 2011, often because of labor and cost cuts: the top always figures out how to make money. It’s a cruel reality of a capitalist society we live in.
Saturday, January 7th, 2012
Posted by Leonard Steinberg on January 7th, 2012
Banks will start posting results for the fourth quarter and year end starting next week, and the results are poised to be weak. Weak results result in many things, so here is my evaluation:
1) Bonuses will probably be down rather sharply from last year, I would estimate about 25% on average, although with the large volume of layoffs the smaller bonus pool will be spread out amongst a smaller pool of recipients. I have also heard that those at the very top will get very solid bonuses, and while off their peaks, will be designed not to lose the best people to competing banks.
2) Lower bank profits + lower bonuses and lower banker incomes = lower tax revenues. That’s not good for New York City and State’s tax coffers. Unless there is a turnaround in the first quarter of 2012, expect City Hall and Albany to institute further cuts…..or worse, raise taxes although that would be highly unlikely in an election year.
3) Fewer banker dollars will also equate to fewer banker buyers of New York real estate, although the very high end will not be affected too badly as those buyers are not that reliant on their bonuses. There will be fewer nouveau riche banker buyers for sure.
4) Lower banker incomes will make banking less attractive to some as a career path, and already we have witnessed many bankers who have switched careers altogether. Then there are those bankers who are leaving the large blue-chip banks for smaller financial institutions. We are amazed at the number of ‘alternative’ financial institutions popping up to provide financing traditionally only provided by the larger banks.
THE Leonard Steinberg OPINION: While lower banker income is a negative for Manhattan real estate, these lower incomes may actually translate to healthy BANKER PR: The country is anxiously seeking some punishment for bankers after the huge wave of resentment spurred buy the Occupy Wall Street movement. A year’s hiatus of excessive pay may in fact bode well for the industry. And while there are many that will be earning less, I feel certain a strong group, especially on the high end, are doing rather well. I suspect there is a small club who made small fortunes in 2011 amid all the turmoil and volatility. Looking forward, old model banking is no longer a model for huge, excessive profits anymore, but I am confident bankers will soon find alternative models for doing business that are hugely profitable. Fortunately, Manhattan is no longer entirely reliant on banker bonuses for a healthy real estate market.
Wednesday, June 29th, 2011
Posted by Leonard Steinberg on June 29th, 2011
Some banks are being like governments right now: stupid. When banks do not want to lend to highly qualified, super-reliable, well educated, credit worthy clients, we should conclude that we have a MAJOR problem. When these same banks make everything in the application process so difficult, cumbersome, illogical and painful, they cease being real banks in my opinion.
When banks willfully hire inept appraisors that appraise property stupidly (without a detailed understanding of the market, often citing comparable sales that have little or no bearing on the property at hand) we all lose. The economy loses. The taxpayer loses. Governments lose. Job growth stalls. The process grinds. Transfer tax revenue slows. Income tax revenue slows. Home improvement and renovation stalls. The list goes on.
Another bank stupidity: Why would banks wait endlessly (in the hopes of a default that would lead to foreclosure?)and not renegotiate the rate of a loan to make the monthly payment manageable for a property owner experiencing difficulty?
When you hear about some banks reliance on excessive punitive fees to create the bulk of their profits, one cannot be surprised at their inability to create smart profits through real banking practices.
Obviously this stupidity does not apply to all banks: there are exceptions. One has to hope that banks that are acting prudently now destroy those banks that are not and rid our society of this dirty, stupid element of society.
Saturday, August 28th, 2010
The economy is experiencing a unique problem: unemployed people who are able to find good jobs in alternative cities are unable to take the jobs as they cannot sell their homes as many mortgages are worth more than the homes in this current market.
Why not introduce a NATIONAL HOUSE-TRADE BANK/DATA BASE, whereby someone could trade their home and mortgage for someone else’s similar home/mortgage value in the City they need to move to? Whereas both properties would still retain an inflated value in to-day’s market, over time this will correct itself, but more importantly, it will minimize the significant expense of foreclosure to the economy and speed up hiring.
“This could boost the economy by helping those un-employed to take a job, thus reducing stress on the government funding, and also reduce the number of foreclosures and sales happening below market values,” says Leonard Steinberg, managing director of Prudential Douglas Elliman and leader of the LUXURYLOFT team. “An employed person spends more, thereby boosting the economy a third way. It’s time for politicians and banks to get creative and practical!”