Happy New Year everyone!
The United Arab Emirates plans to restrict mortgages for foreigners to 50 percent of the property’s value, threatening to derail a nascent recovery in Dubai home prices after more than three years of declines.
U.A.E. citizens can get as much 70 percent of the value of a first house and 60 percent for a second, according to guidelines issued by the central bank and obtained by Bloomberg News. Foreigners can get mortgages of as much as 40 percent of the value of a second property, according to the document. The central bank’s public relations department declined to comment when contacted by Bloomberg News today.
Banking regulators are close to a $10 billion settlement with 14 banks that would end the government’s efforts to hold lenders responsible for foreclosure abuses like faulty paperwork and excessive fees that may have led to evictions, according to people with knowledge of the discussions.
Under the settlement, a significant amount of the money, $3.75 billion, would go to people who have already lost their homes, making it potentially more generous to former homeowners than a broad-reaching pact in February between state attorneys general and five large banks. That set aside $1.5 billion in cash relief for Americans.
Most of the relief in both agreements is meant for people who are struggling to stay in their homes and need the banks to reduce their payments or lower the amount of principal they owe.
The $10 billion pact would be the latest in a series of settlements that regulators and law enforcement officials have reached with banks to hold them accountable for their role in the 2008 financial crisis that sent the housing market into the deepest slump since the Great Depression. As of early 2012, four million Americans had been foreclosed upon since the beginning of 2007, and a huge amount of abandoned homes swamped many states, including California, Florida and Arizona.
The state-backed bank has already warned traders that bonuses are likely to be slashed far more deeply than planned this year to pay the fine. Clawbacks have also been threatened if it is found that former awards were made out of inflated profits.
Banks have been instructed by regulators to rein in bonuses this year to build up a cushion of capital to cover potential fines and compensation for past malpractices. Barclays is also believed to be looking at clawbacks.
Dropping a heavy hint that lenders should trigger the rule, the Financial Services Authority has warned that “ex-post risk adjustment will be a major area of focus in our 2012 review of the firm’s remuneration policies”.
According to Zacks Equity Research, JPMorgan is not the only bank shutting down its operations in Asia.
KUALA LUMPUR: JPMorgan Chase & Co, a leading global financial services firm with assets worth US$2.3 trillion (RM7 trillion), is planning to shut down its retail banking operations in Malaysia, according to Zacks Equity Research.
According to the investment research house, JPMorgan is aiming to limit its retail banking operations worldwide with a major focus on domestic markets, but is willing to continue with its wholesale banking operations globally.
“The Malaysian retail banking is JPMorgan’s only retail presence in Asia. However, the closure of this unit is unlikely to affect the company’s overall business in the region, given its small size,” Zacks said.
Besides retail banking, JPMorgan offers a wide range of other banking services in Malaysia, including investment banking, equities trading, treasury and security services, as well as corporate banking.
Under the proposal eligible borrowers must be severely underwater, with a loan to value ratio of 125 percent or higher and must be current with their payment. These borrowers would be given current market interest rates, replacing the 6 percent rates they’ve been unable to refinance out of (because they don’t have any equity in the home) and giving them a lower overall monthly payment. The Treasury Department, probably with leftover TARP funds, would pay investors the difference between the old interest rate and the new for five years.But the American Securitization Forum, which represents investors in residential mortgage backed securities, is balking at the idea, arguing that while underwater borrowers are at greater risk for default it’s not clear reducing their monthly payment will change that. It figures $120 billion worth of loan principal would qualify. Taxpayers would kick in $11.5 billion to make up for the reduced interest payments for the first five years and investors would subsequently lose $9.7 billion for the following years.
“The key question from the policy side for both investors and taxpayers is would providing this reduction in monthly interest payments provide any benefit either to the investors or to the public at large by reducing foreclosures? Our answer is we don’t think it will appreciably reduce people walking away from their homes,” said Tom Deutsch, executive director of ASF.
From its record, it seems unlikely that the Obama Administration would heed investors’ concerns. On a side note: taxpayers would be on the hook for almost $12 billion over the next five years. But, who would benefit? Not the investors but the government which is why investors are miffed at this proposal.
Robert Pollin: The Fed breaks ground with unemployment target but pushing more money into banks without requiring more lending won’t solve the problem.
Paul Jay of the Real News Network interviews Robert Pollin, Professor of Economics at the University of Massachusetts in Amherst and founding co-Director of the Political Economy Research Institute (PERI).
This paragraph caught my eye:
OLLIN: The corporations are sitting on somewhere on the order of $2 trillion in cash and other liquid assets because they don’t want to invest. There is an issue here which also gets back to another question of financial regulation, which is, people who are hoarding cash who don’t see any opportunities also think that around the corner there may be another financial bubble, and they want to be primed to take part in the bubble, that is, when asset prices go up very, very quickly, for example, prices of oil or prices of food, or a stock market bubble. That’s where they think they’re going to make their big killing. They don’t want to put money into these investments that mean small expansions of business, you know, normal returns. And so they think that the financial system is still capable of generating another bubble. That’s because we haven’t established strong enough regulations to prevent bubbles from happening that then lead to another round of crashes.