Political pressure is growing for lenders to cut mortgage principal. Executives from the nation's four largest banks pushed back against that pressure Tuesday, arguing to lawmakers that a large-scale principal forgiveness program could have dire ramifications for the future of housing finance. It's estimated that some 11 million borrowers owe more on the mortgage than their home is worth. JPMorgan Chase projects it would cost $700 billion to $900 billion to bring these underwater borrowers "even."
A newly enacted California law provides a tax break to borrowers whose mortgage debt was forgiven through a foreclosure, short sale, or loan modification. The bill landed on Gov. Schwarzenegger's desk and he inked his approval just days before the April 15th tax deadline. The state's Franchise Tax Board says the new provision will cost California about $34 million in tax revenue, but will provide relief to approximately 100,000 borrowers in the hard-hit state.
In another win for Standard & Poor's and Moody's Corp., U.S. District Judge Jed Rakoff dismissed a lawsuit claiming the companies defrauded investors who relied on their ratings before buying $63 billion of investment-grade mortgage-backed securities. This isn't the first lawsuit investors have filed against the two credit ratings agencies. And it isn't the first one to be dismissed either.
Integrated Asset Services, LLC (IAS) said Tuesday that its benchmark for national house prices fell 0.6 percent in February. The drop marked the seventh straight monthly decline reported by the collateral valuation firm and pushed its home price gauge to April 2004 levels. IAS says that by now, the normal seasonal upturn should have begun, but the company isn't seeing the typical forces at work.
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