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Banks foreclosing on churches in record numbers
(Reuters) – Banks are foreclosing on America’s churches in record numbers as lenders increasingly lose patience with religious facilities that have defaulted on their mortgages, according to new data.
The surge in church foreclosures represents a new wave of distressed property seizures triggered by the 2008 financial crash, analysts say, with many banks no longer willing to grant struggling religious organizations forbearance.
Since 2010, 270 churches have been sold after defaulting on their loans, with 90 percent of those sales coming after a lender-triggered foreclosure, according to the real estate information company CoStar Group.
In 2011, 138 churches were sold by banks, an annual record, with no sign that these religious foreclosures are abating, according to CoStar. That compares to just 24 sales in 2008 and only a handful in the decade before.
The church foreclosures have hit all denominations across America, black and white, but with small to medium size houses of worship the worst. Most of these institutions have ended up being purchased by other churches.
The highest percentage have occurred in some of the states hardest hit by the home foreclosure crisis: California, Georgia, Florida and Michigan.
“Churches are among the final institutions to get foreclosed upon because banks have not wanted to look like they are being heavy handed with the churches,” said Scott Rolfs, managing director of Religious and Education finance at the investment bank Ziegler.
Church defaults differ from residential foreclosures. Most of the loans in question are not 30-year mortgages but rather commercial loans that typically mature after just five years when the full balance becomes due immediately.
Grant Williams On The Simplicity Of Owning Gold
As we enter a week in which the expectations are high for yet another large expansion of central bank balance sheets, and ever more extreme monetary policy (thanks to the LTRO 2), we thought it appropos to listen to Grant Williams, of the famous “Things That Make You Go Hhhhm” newsletter, explain in its simplest terms, why it is still a good time to own gold. In two excellent and succinct presentations, Williams discusses the ‘simplicity’ of investing through the last four decades but ends by focusing specifically on the rotation to Gold at the start of the last decade (2000) and why the reason for rotating out of the precious metal has not occurred yet. Seeing the world of Gold as a battle between Too Much and Not Enough (and drawing on global supply, demand, and holdings flow) Williams lays out the reasons for owning gold, and how to know when to cover – as he narrows the five reasons to reconsider Buffett-and-Roubini’s Barbarous Relic down to one simple rule – Central Bank Monetary Policy Changes.
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Fannie, Freddie Charge Taxpayers For Legal Bills
Fannie And Freddie: Key players in the subprime bubble continue to run up bills for the taxpayers. The latest outrage is a $100 million-plus tab for defending executives in fraud cases.
Say what you will about the big banks and the wisdom of propping them up with federal money back in 2008.
The fact is, their time at the trough has come and gone. The Treasury has actually turned a bit of a profit — $13 billion — from the funds it injected into the banking sector.
Wall Street may be a convenient political target. But it’s not sapping the public’s wealth.
Fannie Mae and Freddie Mac are quite a different story. These enablers of the mid-2000s mortgage bubble have racked up losses of $183 billion since the government stepped in to rescue them.
The Obama administration’s new budget projects that total investments from the Treasury will reach $221 billion by the fall of 2013.
By 2022, should Fannie and Freddie still be around, the administration expects a net loss of $28 billion on the taxpayers’ investment.
With any luck, these two troublemakers will be long gone. But until then, we can expect a string of would-you-believe-it stories like the one this week, detailing how taxpayers are paying the legal fees of former Fannie and Freddie executives charged with securities and accounting fraud.
Schneiderman MERS Suit and HUD’s Donovan Remarks Confirm That Mortgage “Settlement” is a Stealth Bank Bailout
In case you had any doubts about what the mortgage settlement was really about and why banks that were so keenly opposed to it are now willing to go ahead, the news of the last two days should settle any doubts.
As we had indicated earlier, one of the many leaks about the settlement showed that there had been a major shift its parameters. Of the $25 billion that has been bandied about as a settlement total for the biggest banks, comparatively little (less than $5 billion) is in cash. The rest comes in the form of credits for principal modifications of mortgages.
Originally, that was to come only from mortgages held by banks, meaning they would bear the costs. The fact that this meant that whether a homeowner might benefit would be random (were you one of the lucky ones whose mortgage had not been securitized?) was apparently used as an excuse to morph the deal into a huge win for them: allowing the banks to get credit for modifying mortgages that they don’t own.
The first rule of finance (well, maybe second, “fees are not negotiable” might be number one) is always use other people’s money before your own. So giving the banks permission to modify loans they don’t own guarantees that that is where the overwhelming majority of mortgage modifications will take place, ex those the banks would have done anyhow on their own loans. And the design of the program, that securitized loans will be given only half the credit towards the total, versus 100% for loans the banks own, merely assures that even more damage will be done to investors to pay for the servicers’ misdeeds.
Let me stress: this is a huge bailout for the banks. The settlement amounts to a transfer from retirement accounts (pension funds, 401 (k)s) and insurers to the banks. And without this subsidy, the biggest banks would be in serious trouble
Why? As leading mortgage analyst Laurie Goodman pointed out in a late 2010 presentation, just over half of the private label (non Fannie/Freddie) securitizations have second liens behind them (overwhelmingly home equity lines of credit). Moreover, homes with first liens only have far lower delinquency rates than homes with both first and second liens. Separately, various studies have found that defaults are also correlated with how far underwater a borrower is. If a borrower is too far in negative equity territory, it makes less sense for them to struggle to stay current, no matter how much they love their home.
The Federal Reserve’s Explicit Goal: Devalue The Dollar 33%
The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.
An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.
But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.
The Fed’s zero interest rate policy accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits. In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years.
Worse Than 2008
There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again?
No, it’s worse. Much worse.
In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms.
Anyone who has paid attention knows that those “magic potions” proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time.
As always, we have no idea exactly what is going to happen and when, but we can track the various stresses and strains, noting that more and wider fingers of instability increase the risk of a major event. Heading into 2012, there’s enough data to warrant maintaining an extremely cautious stance regarding holding onto one’s wealth and increasing one’s preparations towards resilience.
