Monday, April 29, 2013

Today's links

1---Inflation Nation Not, P Krugman, NYT

Hey, does anyone remember the great inflation panic of 2011? All the usual suspects were issuing dire warnings about soaring inflation, and ridiculing the Fed for focusing on core inflation rather than headline changes. So, how’s it going?
Actually, at this point the Fed is worried that inflation is too low.

2---Earnings Crunch, WSJ

More from the WSJ:
With earnings reports in from more than half the companies in the Standard & Poor's 500-stock index, first-quarter revenue for the group is expected to shrink 0.3% from a year earlier, according to Thomson Reuters. That would cut short the sales improvement reported at the end of last year and mark the third quarter out of the past four in which revenues have failed to grow by 1% or more.

The sales figures are a troubling sign that business and consumer demand remain weak nearly four years after the recession. They are also evidence that a soft patch is developing in the U.S. economy, as optimism earlier in the year gives way to more sobering data on growth in gross domestic product, retail sales and manufacturing. In response, many companies are cutting jobs and curbing investments in an effort to prop up profits, moves that could make it harder for demand to recover.

3---It keeps getting crazier and crazier, DS News

Starting July 1, large numbers of non-paying borrowers will have the opportunity to modify existing mortgages through a more streamlined process. process.

This sounds like a good way to reduce foreclosures and prop up home prices, but as we will shortly see, the proposed program is oddly risky and likely to encourage additional defaults.
According to the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac will offer “a new, simplified loan modification initiative” to borrowers who are at least 90 days late with their mortgage payments. Modifications can include a lower rate, a loan term stretched to 40 years and principal forbearance in some cases.
“The loan,” says FHFA, “must be owned or guaranteed by Fannie Mae or Freddie Mac. Homeowners must be 90 days to 24 months delinquent, and have a first-lien mortgage that is at least 12 months old with a loan-to-value ratio equal to or greater than 80 percent. Loans that have been modified at least two times previously are not eligible...

No-Doc Modifications
FHFA says the “key difference is that borrowers will not be required to document their hardship or financial situation, but will be able to accept a Streamlined Modification Offer by simply making the trial period payments and agreeing to the terms of the modification.” 

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