Brian Vanderhoff's North Fulton Real Estate Blog

In yet another effort to prevent more foreclosures, Fannie Mae (FNM: 0.67, -0.05, -6.95%), Freddie Mac (FRE: 0.83, -0.05, -5.69%) in conjunction with U.S. government officials, are speeding up the modification of home loans held by financial companies.

Sources told FOX Business Network that Fannie Mae, Freddie Mac and U.S. government officials will announce later Tuesday that they will hasten efforts to modify hundreds of thousands of loans that are past due. The goal is to bring the ratio of household debt to income for the borrowers down to 38%. U.S. government officials also plan to encourage large banks that hold loans to take similar steps.

The program will be an extension of HOPE NOW alliance, which was announced last year and is designed to prevent foreclosures by reworking the terms of mortgages.

The Wall Street Journal reported the announcement will come at a 2:00 p.m. press conference at the Federal Housing Finance Agency.

Financial industry sources told FOX Business Network that the White House rejected the FDIC’s proposal to prevent foreclosures for up to 3 million home owners. That more ambitious proposal would have provided some type of loan guaranteed for hundreds of billions of restructured mortgages.

Labels: fannie mae, federal housing agency, Feds, freddie mac, Georgia, hope now alliance, loan modifications, us government

Department of Energy Approves Request for Release of Crude from Strategic Petroleum Reserve

U.S. Secretary of Energy Samuel Bodman approved a request Wednesday from Gov. Sonny Perdue for additional releases from the Strategic Petroleum Reserve (SPR) to refineries in the Gulf Coast region.

"Today the Department approved an additional release of up to 900,000 barrels of crude oil from the SPR for two refiners that have not been able to obtain adequate supplies due to the ongoing disruptions," Secretary Bodman wrote. "With this additional release, the total amount provided from the SPR to refineries will be approximately 5.7 million barrels since Sept. 3, 2008."

Perdue asked for the additional releases on Monday after hearing that refineries may have excess capacity as they restart their operations.

"These crude releases will help ensure that the Southeast continues to receive consistent fuel supplies as we continue to see more stations receive fuel and lines shorten," Perdue said. "I appreciate the administration's quick response and their concern for the fuel shortages we have experienced."

Out-of-state haulers

After Tuesday's announcement that the Department of Revenue will grant temporary waivers for out-of-state haulers to bring in supplies to Georgia, the state has identified new suppliers that are bringing in at least 150,000 additional gallons of fuel per day. That number could grow as additional suppliers are identified in other states that have excess capacity that they can bring to Georgia.
These supplies include both regular fuel and diesel, and will be distributed throughout the state based on identified acute shortages. Diesel will be directed to any first responders and school systems that are seeing low supplies and to the state's major agriculture centers so that farmers continue to have a strong supply available.

The DOR temporary waiver allows out-of-state haulers that do not hold a current Georgia motor fuel license to bring supplies into Georgia as long as they apply for a Georgia license within 72 hours. These haulers would normally have to apply and be granted a license before coming into the state.

DOE Update

The Department of Energy also released an update on the recovery of fuel production in the Gulf Coast.

Power outages – Outages are now down to just 35,000 people without power in Texas. Crews are making rapid progress restoring power – about 154,000 people were reported without power on Monday.

Percent "shut-in" – The U.S. Department of Energy reports 57.1 percent of crude oil production capacity in the Gulf of Mexico is offline. This is a slight improvement from Monday, when 57.4 percent of capacity was out.

Refineries – Only one refinery remains completely shut down, and only three refineries are considered "restarting". This is significant progress as almost all refineries are either back to normal or seeing reduced production.

These figures above come from the Department of Energy's daily situation report. The complete report is available at: http://www.oe.netl.doe.gov/docs/2008_SitRep_21_Ike_100108_12PM.pdf .

Labels: crude oil, Feds, Georgia, governor sonny perdue, strategic petroleum reserve

Federal Reserve Chairman Ben Bernanke warned Congress that the nation is in for a period of sluggish business growth and sent a fresh signal Wednesday that interest rates will again be lowered to steady the teetering economy.

"The economic situation has become distinctly less favorable" since the summer, the Fed chief told the House Financial Services Committee.

Since Bernanke's last such comprehensive assessment last summer, the housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that the confluence of these factors has turned people and businesses alike toward a more cautious attitude toward spending and investment. This, he said, has further weakened the economy.

Incoming barometers continue to "suggest sluggish economic activity in the near term," Bernanke told lawmakers. At the same time, he added, the Fed must keep a close eye on inflation given the recent run-up in energy and other prices paid by consumers and businesses.

Were energy prices to continue to rise at a sharp clip -- which the Fed doesn't anticipate -- it would "create a very difficult problem" for the economy. It would spread inflation and would put another damper on growth, Bernanke said. If that happened, he added, it would be a "very tough situation."

For now though, the No. 1 battle is shoring up the economy.

Bernanke pledged anew to slice a key interest rate to help the wobbly economy, which many fear is on the verge of a recession -- or possibly has already toppled into one.

The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said, hewing closely to assurances he offered earlier this month.

The central bank, which started lowering a key interest rate in September, has recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points -- the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting on March 18.

There are dangers that the economy will weaken even further. "The risks include the possibilities that the housing market or labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further," Bernanke cautioned.

As Bernanke began his first day of back-to-back appearances on Capitol Hill to discuss the economy, there was more bad news on the housing and manufacturing fronts.

-- Sales of new homes fell in January for a third straight month, pushing activity down to the slowest pace in nearly 13 years, the Commerce Department reported. The median price of a new home dropped to the lowest level in more than three years.

-- And, orders to U.S. factories for big-ticket manufactured goods dropped in January by the largest amount in five months.

On Wall Street, stocks fluctuated at first, then moved higher after the release of Bernanke's prepared comments.

The Fed chief was hopeful that previous rate reductions along with a $168 billion stimulus package of tax rebates for people and tax breaks for business will energize the economy in the second half of this year.

Bernanke has come under some criticism for not acting sooner in cutting rates to respond to the economy's problems. However, Rep. Spencer Bachus, R-Ala., offered the Fed chief some sympathy. "There is perhaps no other public figure in American who has been subjected to as much Monday morning quarterbacking as you have over the past six months," Bachus said.

The panel's chairman, Rep. Barney Frank, D-Mass., suggested that the economy is not suffering through a garden-variety slowdown.

"I don't want to appeal to you to use the word recession, because I'm not going to be responsible for the nervous people at the stock market who overreact when you twitch your nose," Frank told Bernanke. "But the problems we now have are different."

Even as the Fed tries to shore up the economy, it must remain mindful of inflation pressures, Bernanke said.

Record high oil prices -- topping $100 a barrel -- are pushing consumer prices upward. That's shrinking paychecks, and with people feeling less well off because the values of their homes have dropped, consumer spending "slowed significantly" toward the end of the year, the Fed chief said.

The Fed forecasts that inflation will moderate this year compared with last year. But the Fed's recently revised inflation projection of an increase between 2.1 percent and 2.4 percent is higher than its old forecast from the fall.

Bernanke said there are "slightly greater upside risks" that inflation could turn out to be higher than the Fed currently anticipates, given the recent run-up in energy and food prices.

"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored," Bernanke warned. If people, companies and investors think inflation will move higher, they will act in ways that could turn inflation even worse, a sort of self-fulfilling prophecy. And Bernanke said that could complicate the Fed's job of trying to nurture economic growth while also keeping inflation under control.

With the economy slowing and prices rising, fears are growing that the country could be headed for a bout of stagflation, a dangerous economic brew not seen since the 1970s.

The Fed for now is focused on bolstering the economy through interest rate reductions. To combat inflation, the Fed would raise rates.

At some point over the course of this year, the Fed will need to "assess whether the stance of monetary policy is properly calibrated" to foster the Fed's objectives of price stability "in an environment of downside risks to growth," Bernanke said.

With home foreclosures at record highs, the Fed has proposed rules to crack down on a range of shady lending practices that has burned many of the nation's riskiest "subprime" borrowers -- those with spotty credit or low incomes -- who have been hardest hit by the housing and credit debacles. The rules also would curtail misleading ads for many types of mortgages and bolster financial disclosures to borrowers.

The effectiveness of the regulations will depend on strong enforcement, Bernanke said. To that end, the Fed is working with other federal and state regulators.

Bernanke said consumers need to be financially savvy -- understanding mortgages, credit cards and other financial products.

"Well they certainly need to know the interest rate and how it varies over time and what that means to them in terms of payments," Bernanke said.

Labels: Fed Chairman, Federal Reserve, Feds, Rate Cut, Rates

The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible.

The Fed action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.

The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.

In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."

The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed's Dallas regional bank, dissented, preferring no change in rates.

The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.

The latest Fed action was expected to be quickly followed by cuts in banks' prime lending rate, the benchmark rate for millions of consumer and business loans. The Fed's hope is that by making credit cheaper, it will encourage more borrowing, giving the economy a needed boost.

The Fed's half-point move met expectations of financial markets and was a bolder move than the smaller quarter-point cut that many economists had been expecting.

In its statement, the Fed said that "downside risks to growth remain" and pledged to "act in a timely manner as needed to address those risks." That was seen as a pledge to cut rates further if the economy continues to weaken.

On inflation, the Fed officials said that they expected inflationary pressures to moderate in coming quarters but they also pledged to monitor price developments closely.

The GDP report showed that a key gauge of core inflation, which excludes energy and food, jumped at an annual rate of 2.7 percent in the final three months of last year, the fastest increase in a year and up sharply from a 2 percent increase in the July-September quarter.

The economy has been dealt a series of blows from a two-year slump in housing to a severe credit squeeze as banks faced with billions of dollars in losses from mortgage defaults have cut back on their lending and tightened standards.

The GDP report showed that the housing collapse had depressed economic growth last year by the largest amount in a quarter-century. Policymakers are worried that the slump could intensify this year as millions of subprime mortgages rest at higher rates.

To combat the threat of a recession in an election year, the Bush administration has been negotiating with congressional leaders for an economic stimulus package of around $150 billion, focused on tax rebates for households and business tax breaks to spur investment. The House passed its version of the proposal on Tuesday but Senate action could be delayed by efforts to expand the relief to senior citizens and the unemployed.

The Fed move Wednesday occurred at the first regularly scheduled meeting of 2008 for the Federal Open Market Committee, the group of Fed governors in Washington and regional Fed bank presidents who set interest rates.

The Fed's three-quarter-point cut on Jan. 22 was taken after an emergency video conference held by Bernanke and other members of the FOMC.

That rate cut, the biggest reduction in the funds rate in more than two decades, was seen as an effort to boldly demonstrate that the central bank was prepared to do whatever necessary to keep the country from slipping into a recession -- or at least make the downturn milder than it would have been otherwise.

Financial markets had complained that once the credit crisis hit in August, the Bernanke-led Fed had been too tentative in its responses until last week's move.

Many private economists believe the central bank will keep cutting rates through the spring, especially if the unemployment rate keeps rising. The jobless rate jumped from 4.7 percent to 5 percent in December, the biggest one-month increase in five years.

Labels: Fed Chairman, Feds, Key Rates, Mortgage Rates, Rates