How Much Lower Can We Go

Home prices are not close to turning around, according to the risk index of mortgage insurer PMI Group. More than 25 percent of U.S. metropolitan areas are likely to have lower home prices two years from now, and the risk of lower prices in the third quarter of 2010 has risen in 97 percent of the 381 markets. California's Inland Empire, the greater Miami area, Lake Havasu City-Kingman, Ariz., and Cape Coral-Fort Myers, Fla., are most likely to have lower prices in two years; while the Dallas-Fort Worth area, greater Houston and Pittsburgh are l east likely to see declines.
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50% of loan modifications fail within 3 mos.

Foreclosure Mitigation Makes Little Headway Wall Street Journal (12/23/08) P. A4
Holzer, JessicaA joint Office of the Comptroller of the Currency and Office of Thrift Supervision report, based on data from nine national banks and five thrifts, shows a 2.6-percent drop in newly initiated foreclosures to 281,298 in the third quarter from the prior three-month period. Beefed up modification efforts by servicers and foreclosure moratoriums in several states are responsible for the slight decline. However, the report also shows an 11-percent jump in loans in the foreclosure process to 617,642 and an 8-percent gain in completed foreclosures to 127,738 over the same period. Additionally, it reveals deteriorating credit quality among all types of mortgages and a more than 50-percent redefault rate for modifications undertaken in the first quarter.

Surviving A Rough Economy

Be understanding to your perceived enemies.
Be loyal to your friends.
Be strong enough to face the world each day.
Be weak enough to know you cannot do everything alone.
Be generous to those who need your help.

Be frugal with that you need yourself.
Be wise enough to know that you do not know everything.
Be foolish enough to believe in miracles.
Be willing to share your joys.
Be willing to share the sorrows of others.

Be a leader when you see a path others have missed.
Be a follower when you are shrouded by the mists of uncertainty.
Be first to congratulate an opponent who succeeds.
Be last to criticize a colleague who fails.
Be sure where your next step will fall, so that you will not tumble.

Be sure of your final destination, in case you are going the wrong way.
Be loving to those who love you..
Be loving to those who do not love you; they may change.
Above all, Be yourself.
Just Be Yourself.

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Time To Start Budgeting for 2009

Many Companies Report Flat or Deteriorating Working Capital

Only 37 percent of companies had a working capital improvement program in place during the past five years.Two-thirds (67 percent) of senior financial executives said their company's working capital is flat or has deteriorated as compared to three years ago, with little relief in sight, according to a global survey by KPMG LLP, the audit, tax and advisory firm . According to the survey, which polled more than 550 companies across the United States and Europe, 83 percent of executives said managing working capital was the highest or a high priority at their companies, yet only 37 percent of those surveyed had a working capital improvement program in place during the past five years. And of those respondents who did not have a working capital improvement program, 70 percent predict their working capital will stay the same or decrease. In addition to deficient working capital management programs, an overwhelming number of companies fail to produce reliable cash forecasts. Although almost all respondents (95 percent) report forecasting their cash flows, only 14 percent of respondents report achieving accurate forecasts in the last 12 months."In turbulent times, when access to credit is curtailed, effective cash and working capital management practices can be essential to stay competitive or simply afloat," said Brad Hillier, a managing director in KPMG LLP's Advisory Services practice. "There's no doubt that companies have heightened cash management concerns today as compared to just a few months ago. Companies that have a disciplined approach to cash and working capital management are in a better position to take advantage of opportunities available in a tumultuous market–such as making acquisitions or strategic investments."Addressing forecasting, Hillier noted that accurate forecasting is critical to effectively managing a business in a difficult economy. "Not only is forecasting a necessary tool for improving working capital performance, it is especially critical in times like these for making strategic business decisions," Hillier said. "Many companies do not gather the right data to produce accurate forecasts, nor do they have the right people involved in the process. In addition to improving the forecasting and reporting processes, executives should consider using other best practices, such as targeting metrics and establishing dashboards and controls that offer better visibility into cash performance."Despite the fact that studies have shown that the best performing businesses tend to be those that link working capital performance to managerial incentives, the KPMG survey found that almost a quarter of respondents (24 percent) had not correlated working capital with compensation.

Most Americans Don’t Understand Basic Economics

And the regulators are blaming lenders for the credit crisis. Some of the blame needs to be placed on the borrowers. By placing all of the blame on the lenders and allowing all of these frivolous lawsuits will only restrict the flow of capital.



New survey shows the majority of consumers can't correctly answer questions about borrowing, interest rates and even basic math. The Center for Economic and Entrepreneurial Literacy (CEEL) recently released a new survey underscoring the need for increased education on personal finance and economic issues. The national survey shows an overwhelming number of Americans are unable to answer some of the most basic questions about borrowing, interest rates, terminology and even basic math. More troubling is that many Americans admit to making poor decisions with their own personal finances. Startling highlights from the survey include:

∙ 54 percent of respondents could not identify what a subprime mortgage was.

∙ 56 percent of respondents could not identify FICO score as the most important factor in getting a loan.

∙ 65 percent of respondents could not identify what would remain if you subtracted 25 percent from 8. One in three respondents could not identify what 1 percent of 50,000 was.

∙ 75 percent did not know that when in need of short-term emergency cash, bouncing a check costs more than wire transfers, credit card advances and short-term payday loans.

∙ Half of respondents have overdrafted their checking account at one time, while a third of respondents have paid a bill late in the past year.

∙ 35 percent of respondents admitted to not having a family or personal budget that would allow them to conceivably eliminate their credit card debt by the end of 2009.



More details can be found at http://www.econ4u.org.

$2 Trillion in Property Loss Potential

Zillow.com reports that U.S. homeowners could lose more than $2 trillion in property value this year, resulting in approximately 11.7 million households owing more on their mortgages than the real estate is worth. U.S. home values fell by $1.9 trillion this year through the end of the third quarter, surpassing the $1.24 trillion lost in all of last year. Stan Humphries, Zillow's vice president of data and analytics, states, "Nationwide, we haven't had a drop like this probably since the Great Depression, in terms of how much value has been taken out of the housing market. The amount of negative equity that you're seeing out there right now is so great that it now has its own dynamic of causing people to walk away from their homes." This year's five worst-performing housing markets are all in California.

Plan to Help Troubled Homeowners Makes Headway At the Cost of Lenders

Los Angeles Times (12/11/08); Hong, Peter Y.Rep. John Conyers Jr., D-Mich., introduced a bill in the House on Dec. 10 that would allow bankruptcy judges to modify the mortgages of struggling homeowners. The Mortgage Bankers Association, the National Association of Home Builders and other industry groups lobbied for the removal of a similar proposal from the federal financial stimulus bill, but the NAHB has signaled that it is no longer opposed to having courts reduce payments and principal for homeowners. MBA has argued that forced mortgage write-downs would inflate interest rates by as much as 2 percentage points for all home loans. In California, monthly payments would rise by hundreds of dollars, according to MBA.

My concerns are for those lenders/servicers that do everything they can in order to work with the borrower(s) and proposing modifications to have some borrowers make 2 successive payments and then fall behind again. At some point, the regulators need to identify when the borrower's financial circumstances have changed in which they can't afford their living expenses and allow the lender to force liquidiation. If the regulators keep imposing tighter controls on how lenders manage their risk, then our credit markets will continue to shrink.

At some point, the borrowers need to be included in the blame of the housing collapse as well.