Mortgage foreclosure settlement
In a historic deal after repeated delays and over a year of negotiations, the Justice Department, U.S. Department of Housing and Urban Development, and 49 state attorneys general has finalized a $26 billion civil settlement with five of the largest mortgage lenders for wrongful foreclosures through robo-signing wherein homes were foreclosed upon without human review or proper paperwork. Participating banks include Bank of America, Wells Fargo, JPMorgan Chase, Citigroup Financial and Ally Financial.
Several states were hesitant to sign on as there was a lack of clarity as to how the settlement would shake out and if each state was getting their proportionately fair share, and until New York, Nevada and California finally signed on today, the settlement looked to be much smaller than the final $26 billion. Oklahoma was the lone state that declared the settlement to be insufficient and refused to sign on – it is possible that they will continue pursuing a separate civil lawsuit against the banks to best serve wrongful foreclosure victims in their state.
“We are using this opportunity to fix a broken system,” said U.S. Attorney General Eric Holder at a news conference this morning. Most of the settlement will go to underwater homeowners for the next three years, with a strong emphasis and better incentives for relief in 2012.
Breakdown of settlement funds
The largest portion will go toward reducing the principal on underwater or delinquent mortgages, ranging from $17 billion $34 billion. Officials note this portion will help up to one million current homeowners which at the $17 billion pace could mean an average principal reduction of $17,000. Most note, however, that the majority of underwater homeowners would still not be able to afford payments, even with a $17,000 reduction, so the one million mark, like other recent programs, may come up short.
Various programs are in place to help homeowners to obtain permanent mortgage modifications at lower rates, but this settlement adds up to $3 billion more relief, offering lower rates to current homeowners without principal reductions. As rates are currently at historic lows, this could provide mortgage savings nationwide.
The only relief to wronged homeowners comes in the form of $1.5 billion set aside for homeowners whose homes were wrongly foreclosed upon between 2008 and 2011, offering up to $2,000 per homeowner. Given the intention of the settlement being to make things right after illegal foreclosures, the amount set aside for people who were wronged appears to be disproportionate and was a massive point of contention for select states’ attorneys general, but it appears the needs of the few were sacrificed for the many.
A total of $5 billion will be paid to states, some of which will be offered to foreclosure victims, most of which will likely go to currently underwater borrowers to keep them in their homes.
According to CoreLogic, 11 million underwater mortgages and 1.5 million borrowers who are at least 90 days late on their mortgage payments. The settlement funds seek to slow the hemorrhaging of foreclosures.
Next up – criminal charges
President Obama recently set up a new task unit to pursue criminal charges for mortgage crimes and while the $26 billion settlement closes civil settlements for wrongful foreclosures with these five banks, the settlement does not stop investigations into fraudulent mortgage-backed securities practices.
This historic settlement is the second largest in history, second only to the tobacco industry, and the settlement targeting the five largest servicers has paved the way for the next round of targets of several other banks.
Is the real estate industry endorsing Carson’s nomination to HUD?
(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?
NAR strongly backs Dr. Carson’s nomination
When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”
At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?
The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.
In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…
Job openings hit 14-year high, signaling economic improvement
The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.
Job openings hit a high point
To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.
The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.
Good news, bad news, depending on your profession
That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.
Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.
If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.
If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.
Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.
Gas prices are down, so are gas taxes about to go up?
Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.
Gas taxes and your bottom line
Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.
Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.
Supporters and opponents are polar opposites
Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.
Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.
While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.
The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.
Is a gas tax politically plausible?
Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”
Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”
Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.
Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”
Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.
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