State and federal regulators have shut the doors on three more financial institutions in Florida, Kansas, and Arizona, bringing the total number of failed banks so far in 2009 to 133. This year has seen the most institutional collapses in recent history, outmatched only by the clean-up following the savings and loan crisis, and it's taken its toll on the FDIC's insurance fund. These latest closures will cost the agency another quarter-billion.
The House of Representatives approved sweeping new legislation Friday to reform the nation's financial regulatory system. The Wall Street Reform and Consumer Protection Act, passed the chamber by a narrow margin, 223 to 202. The legislation creates a single agency to oversee mortgages, outlaws predatory lending, and puts and end to "too big to fail" and taxpayer bailouts. One thing it doesn't do - allow bankruptcy judges to rewrite mortgages. Lawmakers voted 241 to 188 not to include the bankruptcy cramdown amendment in the overall reform package.
As many exotic adjustable rate mortgages (ARMs) are set to recast in 2010, the Consumer Mortgage Audit Center (CMAC) is projecting a mortgage crisis in 2010 as large as the subprime. According to the center, only a few option ARMs in existence have been modified, and looming resets will undoubtedly lead to another wave of foreclosures as payments begin to double and triple. When principal balances go up and house values continue to plummet, CMAC says refinancing will no longer be an option for homeowners in negative amortization.
In a break from historical precedent, U.S. consumers rank credit cards as a higher repayment priority than mortgages, according to a study by Auriemma Consulting Group (ACG). The company attributes the shift, in part, to the proliferation of foreclosures and the growing number of consumers who are underwater on their mortgage.
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