JP Morgan Chase may increase Bear offer

March 23 2008 BusinessWeek.com JP Morgan Chase & Co. is discussing a deal that would increase its offer for Bear Stearns Cos. from $2 to $10 a share, The New York Times reported today. The talks Sunday were an attempt to satisfy Bear Stearns stockholders upset over JP Morgan Chase’s offer of $2 a share for the struggling investment bank, the newspaper said on its Web site, citing people involved in the negotiations. In an attempt to speed majority shareholder approval, Bears board was trying to authorize the sale of 39.5 percent of the firm to JP Morgan Chase, the Times said. State law in Delaware, where the companies are incorporated, allows a company to sell up to 40 percent without shareholder approval.

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Lying brokers and more subprime nightmares

Many homeowners who were subject to predatory lending practices - including brokers who misrepresented payments - are trying to rework their loans. Few are having any luck. The problem is that servicers don't have the power to renegotiate a loan. Because they don't actually own the loan and therefore they can't make changes to the payment plan. Most mortgages aren't owned by a single bank. Instead, they are packaged and sold to investors on the secondary market, which means that loan servicers are actually beholden to investors, not borrowers. And it's much harder for troubled borrowers to get a deal that permanently lowers their mortgage payments. The Hope Now Alliance of mortgage lenders and servicers, including Citigroup, Bank of America and JP Morgan Chase, says it has kept over one million borrowers out of foreclosure since July. But only about one quarter of them - 278,000 - have actually had the terms of their mortgages modified. With an apparent stalemate between lenders and borrowers, will people be forced to go into foreclosure or even to just walk away!

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Despite Fed rate cuts, mortgages are still elusive for some

March 21 2008 Best-Mortgage-Companies.com Given the complexity of problems in the mortgage and credit markets, Fed's rate cuts may not have a clear effect on long term fixed rate mortgages. Thus far, Fed's interest rate cuts have only lowered short term adjustable rate mortgages. However, people are hesitant to take these risky mortgage loans, prefering the safety of fixed rate mortgages. But lenders, in order to cushion against the risks of foreclosures, are keeping fixed rate mortgages high. Getting a mortgage is still a challenge for some home buyers.

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JP Morgan Chase acquires Bear for $2 a share

March 18 2008 BusinessWeek.com JP Morgan Chase, the big bank that helped bail out Bear last Friday, is paying just $2 a share to take over the investment firm, which a little over a year ago was trading for as high as $170 a share. The deal to buy Bear will avert a looming bankruptcy filing by the investment firm and potentially stave off a new crisis in the financial markets. The purchase price is an indication of just how far things have fallen at Bear, which a year ago helped spark the subprime meltdown with the collapse of its two big hedge funds. The deal values Bear at $236 million.

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FED pledges tough rules for mortgage brokers

March 13 2008 Reuters.Com Treasury Secretary Henry Paulson on Thursday issued a call for U.S. financial institutions to raise capital quickly so they can keep lending, and pledged tougher rules for the mortgage industry. "We are encouraging financial institutions to continue to strengthen balance sheets by raising capital and revisiting dividend policies; we need those institutions to continue to lend and facilitate economic growth," he said in a speech at the National Press Club. Among recommendations from a top-level Presidential Working Group that he heads, Paulson said he wanted "strong nationwide licensing standards" for mortgage brokers as part of a bid to ward off future housing crises and reassure investors.

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Fed to inject up to $200 billion into financial markets

March 11 2008 Market Watch.com The Fed announced a new temporary lending program on Tuesday that will allow participants in the bond markets to swap the mortgage-backed securities that they can't currently sell for highly liquid Treasurys that they can. The hope is that the extra money in the financial system will restore trust and keep prices of illiquid securities from plunging. Counting the latest action, the Fed will have provided more than $400 billion in Treasurys in an effort -- so far futile -- to grease the wheels of commerce that have seized up. The Fed hopes the action will give bond dealers comfort that they'll be able to find financing, Fed senior officials told reporters. The move was not an effort to prop up any particular firm, they said.

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Lawmakers near deal over alternatives to subprime mortgages

March 11 2008 Money.CNN.com By early April, both chambers of Congress are likely to tie the bow on a bill that would expand the reach of the Federal Housing Administration, which aims to provide safe loan alternatives to subprime mortgages and make homeownership more accessible. The FHA program is intended for mortgage borrowers with weak credit or little or no cash who may not be able to otherwise get an affordable mortgage. Borrowers get FHA loans from a private lender just as they would any other mortgage. But they pay a small premium to the FHA every month. The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent. That gives borrowers a better chance of keeping their homes should they fall on hard times. If a lender does have to foreclose, the FHA will pay the lender the unpaid principal on the loan, forgone interest and a portion of the foreclosure costs.

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Subprime mortgage defaults, debts are the biggest threat to the US economy

March 03 2008 CNBC.com National Association for Business Economists members are increasingly concerned over the short-term risks associated with subprime mortgages and other forms of indebtedness, while inflation is a distant third risk. The combined punch of subprime mortgage defaults and heavy debt remains the biggest risk to the health of the U.S. economy, the panel said on Monday. The conclusion was based on a survey of 259 members conducted between Feb. 1-15 and updates a poll conducted in August. Fewer respondents support monetary and fiscal policies being implemented to address the credit situation, with more than one-third saying current monetary policy is too stimulative. The most frequently cited concerns about lower interest rates, which followed the Federal Reserve’s aggressive cut of the benchmark federal funds interest rate, are the threat of inflation and the sense that lower rates might bail out investors who should have known better.

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