Economy Watch: Attorneys General Want Banks to Change Foreclosure Practices
State attorneys general are engaging in talks with top mortgage-originating banks over robo-signing and other nefarious foreclosure practices; a Conference Board employment index shows a pickup in jobs; and consumers are borrowing more.
By Dees Stribling, Contributing Editor
Talks are underway between all of the state attorneys general, led by Iowa Attorney General Tom Miller, and the five leading U.S. mortgage-originating banks, which comprise nearly 60 percent of the market. The talks involve the terms of a settlement for robo-signing and other nefarious foreclosure practices, and they might mean ponying up some cash by the banks, or providing mortgage modifications that actually reduce principal amounts for underwater homeowners, or maybe both.
Late last week, the state attorneys general presented a 27-page settlement proposal that would require these big lenders–Citigroup Inc., Bank of American Corp. and Wells Fargo & Co., among others–to revise the way they service mortgages. The details of the proposal haven’t been made public yet, but some media outlets have seen it, such as The Wall Street Journal, which reported on Monday that it “covers every aspect of the foreclosure process, including what fees servicers can charge borrowers and how banks must demonstrate loan ownership when proceeding to foreclosure.”
Reportedly the lenders hate the idea of writing down even one dime of any mortgage they’ve ever originated, regardless of how badly a borrower is underwater, but on the other hand, they’re eager to see the robo-signing fiasco go away. AG Miller told a press conference on Monday that there might be a settlement in about two months.
Conference Board employment index rises
The Conference Board said on Monday that its Employment Trends Index increased in February for the fifth month in a row. The index now stands at 101.7, up from January’s revised figure of 100.1. The index is up over 8 percent from a year ago.
All but one of the eight components of the index trended positive during the month, including percentage of respondents who say “jobs are hard to get;” initial claims for unemployment; industrial production; and percentage of firms with positions they are unable to fill. Only the component “job openings” trended negative.
The trend is both good news and not-quite-good news, explained Gad Levanon, associate director, macroeconomic research at the Conference Board. “The strong growth in the Employment Trends Index suggests that the pickup in jobs may accelerate in the next couple of quarters,” he notes in a statement. “However, with a shrinking government, a stagnant construction sector, and a manufacturing recovery that has only a small impact on overall employment, overall job growth will still be modest.”
Consumers borrowing more
Pent-up demand for cars, with maybe a few boats and other vehicles thrown in, continues to spur consumer borrowing. U.S. consumers borrowed more in January than in December, with credit increasing at an annualized rate of 2.5 percent during the first month of 2011, compared with 2 percent during the last month of 2010, according to the Federal Reserve on Monday.
Nonrevolving loans–car loans, but also loans for mobile homes, education, boats, trailers and vacations–led the rise, with an annualized increase of 6.9 percent. Revolving loans, mostly credit cards, took a dive during January, contracting at an annualized rate of 6.4 percent.
Wall Street took its own dive on Monday, upset by oil perhaps, with the Dow Jones Industrial Average dropping 79.85 points, or 0.66 percent. The S&P 500 was down 0.83 percent, and the Nasdaq was clobbered to the tune of a 1.4 percent loss.