Whats coming in 2013?

Remember, everyone predicting the fall of the US dollar wants you to buy Gold and Silver, and they’re happy to sell it to you because they make a commission. Others claim it’s time to get back into financials and the auto sector. Unfortunately all these people are the one’s wanting to sell you the stocks. Be careful. The 13,000 DOW of last week (2/23/2012) is an exciting illusion that can only last so long. If you’re not able to move your money quickly, you might want to stay away.

There are few views on the US Economy that I can say I agree with 100%. Mr David Stockman has hit the nail on the head and outlined perfectly what appears to be unfolding. Many of us agree with what he is saying because it is based on facts and reality. Not emotional fantasy or wanting to sell you something.


2013 will tell


First bailout for FHA thanks to settlement

Reports indicated that hidden deep inside the 2013 federal budget showed the Federal Housing Administration (FHA) was asking for a cash bailout of approximately $688 million for the first time its 78-year history. Now conveniently it finds itself a bunch of money from the $25 billion attorneys general settlement with the nation’s five largest mortgage servicers. The FHA will now net a cool $1 billion infusion into its Mutual Mortgage Insurance fund (MMI). Add to that increased insurance premiums and the fact that the FHA’s 2010/2011 book of business are performing far better than previous books, and officials at FHA say the previous OMB estimate is, “obsolete.”

The budget calls for a 25 basis point increase in insurance premiums for higher priced loans (over $625,500). The current loan limit for FHA is far higher than it has been historically, $729,750, thanks to Congressional action to keep mortgage capital flowing. HUD Secretary Shaun Donovan said in a conference call today with reporters that FHA premiums, which were raised ten basis points recently to pay for the extension of the payroll tax cut, will be raised even beyond the budget proposal in order to strengthen the FHA fund, “as well as to insure that private capital continues to return to the housing market,” Donovan added.

In addition to the existing Attorney Generals settlement, there could be additional similar settlements with other servicers that could net the FHA even more cash. Had the settlement not happened, or happened on a smaller scale, FHA would arguably have been deeper in a financial hole.


Fannie Mae and Freddie Mac, the mortgage giants under government conservatorship, together owned 182,212 foreclosed properties as of the end of September. While they aggressively market and sell these homes to investors and owner-occupants alike, the numbers are still too high; these numbers could go far higher, as foreclosures previously stalled by paperwork issues come back into process. That’s why the federal regulator overseeing the two is launching a bulk sale program, offering investors the chance to buy foreclosed properties at a discount, as long as those investors turn the properties into viable rentals for a specified number of years.

“This rental period could provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets,” according to a release from the regulator, the Federal Housing Finance Agency (FHFA). REALLY? So instead of letting a cycle run its course, we again have to deal with the involvement of the federal government.

The FHFA just started the pre-qualification process. Investors must prove they have “(a) the financial wherewithal to acquire the assets; (b) sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity; and (c) agreement to keep certain information about the REO [Real Estate Owned, i.e. bank owned] and related matters confidential.” That last part is pretty darn sketchy if you ask me. Again “we the people” get the actual data hidden from us.

It has been said by some involved that “Giving investors the opportunity to help clear the massive amount of distress in the housing market is crucial”. “The inventory of foreclosed properties is large, getting larger, and making it impossible for the overall market to achieve price stability”. Witness a report today from CoreLogic which shows that home prices in December fell 4.7 percent year-over-year including sales of distressed properties. Excluding those properties, home prices fell less than one percent.

Some, however, poo poo the program:

“People are brainwashed to think foreclosures are a bad thing for the housing market. Perhaps four years ago when a million loans all went into default and Foreclosure at the same time but not today. Today, 1st timers and investors — with an insatiable appetite for foreclosures, REO resales, and short sales — are the bedrock of this housing market.” – Mark Hanson, a Mortgage Analyst said.

“Foreclosed homes are already meeting strong demand from investors when they come to market. We think these buyers are willing to pay a relatively full price, as they know the specific locations, and a large number of buyers have the ability to bid on the individual homes (doesn’t require significant capital)… Additionally, it will be difficult/expensive for investors to scale up operations given the broad geographic dispersion of properties vs. more traditional rental units, potentially limiting participation.” – Dan Oppenheim, Credit-Suisse. Oppenheim also asks a valid question as to why the government would offer discounts to large investors buying in bulk, but not to individual investors buying perhaps a single property. There are plenty of Americans out there salivating over incredibly low-priced homes; rental income could be as much of a boon to them as perhaps a tax cut or a refinance.

It was interesting yesterday, during his speech touting a proposed new government mortgage refinance program, President Obama, caught up in the moment, exclaimed, “No more renting!” Putting aside the public relations blunder that was, given the fact that the FHFA had announced its REO to rent program not two hours before, it just drove home the conflict our government has between what it thinks Americans want to hear and what our economic reality dictates.

A few simple facts: There is not enough buyer demand to meet the number of homes for sale. A huge number of the homes for sale are empty, foreclosed properties. Too many Americans either cannot afford to buy a home or do not have the credit necessary to finance a home. Too many Americans cannot afford to sell their current homes in order to move or step up to a larger home. Rental demand is therefore strong and getting stronger.

While homeownership may be a tenet of the “American Dream,” renting is today’s actuality for a growing number of Americans. Whether it is large bulk investor program, or single investor incentive adding to rental supply while clearing the market of foreclosed properties, is a win. No doubt all these huge bailouts and involvement from our government will certainly change the landscape some. It appears that the firms with the money will again benefit as they swoop in with our governments approval (and help) buying low and selling high and lining their pockets with profits. The Occupy movement has more ammunition every day!

Breaking Down the $26 Billion Bank Foreclosure Settlement

Let me start by reminding everyone that “nothing” is what it appears to be, even on the evening news. All the major news outlets are quoting things like, “The deal would be the largest payout to date from banks in the wake of the financial crisis. And, “The settlement, 16 months in the making, could bring significant relief to those in danger of losing their homes and also much needed stability to the long-suffering housing market”. This is not entirely accurate!

Lets begin with some key statements in the press.

1. Those who already lost their home, would receive just the smallest fraction of the money: a one-time cash payment of about $1,800 as compensation. “Their entire lives have been turned upside down and changed,” said Philip Robinson, the acting executive director of Civil Justice, a Baltimore-based nonprofit that has worked with thousands of Maryland families fighting for their homes. “Does $1,800 sound fair? Does that seem like compensation for a financial and emotional tragedy?”

2. The Department of Housing and Urban Development, one of the Obama administration’s lead negotiators on the deal, could not be reached for comment.

3. The deal between federal officials, the state attorneys general and Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial is an attempt to close the book on a scandal that erupted in 2010, freezing the housing market as the legality of thousands of bank-initiated foreclosures were called into question. The announcement is expected to crank up the pace of bank foreclosures, which has slowed as government officials investigate whether some institutions have forfeited their right to repossess homes after forging key real estate documents.

4. As part of the deal, participating states would agree not to pursue a variety of independent lawsuits against the banks.

5. Some consumer advocates argue that the deal is inherently too lenient on banks because the administration chose to negotiate a settlement without first conducting a full investigation into the nature and magnitude of the banks’ alleged fraud.

6. “Any partial settlement is fraught partly because we don’t know the scope of the damages,” said Robert Borosage, founder and president of the Institute for America’s Future, a left-leaning nonprofit organization. “If the banks get broad immunity, homeowners get screwed because the next investigation won’t be able to get around that.”

7. Under the terms of the settlement, the banks would pay $25 billion to participating states. California is reportedly receiving a total of $6 billion to $15 billion in the settlement.

Potentially more significant, the banks would agree to forgive some mortgage debt owed by struggling borrowers through what’s called “principal reduction.” The remedy is nearly universally hailed by economists on the right and left as a way to revive the ailing housing market and rescue the nation’s struggling underwater borrowers: More than 20 percent of mortgage holders in the United States owe more on their loan than their home is worth. Citigroup, Wells Fargo and Ally Bank declined to comment while requests for comment from JPMorgan Chase went unanswered. Bank of America declined to discuss the terms of the deal, instead saying, “We’re interested in finding a path forward with a comprehensive settlement that benefits homeowners and communities.”

Additionally, language also states that “The settlement has the potential to prevent future wrongdoing through new bank guidelines that have been crafted as part of the deal. The effectiveness of these new rules will rely heavily on whether the states can enforce them”. This is the KEY, there is no one watching the banks!

We here at 360 Group agree that splitting a $26 billion deal between five banks, however, will amount to little more than the cost of doing business and is too small a penalty for the wrongdoing done. Many housing advocates say”. “Compared to what these [banks] literally stole, it’s just eyewash,” said Margery Golant, a Florida-based attorney who represents homeowners and formerly served as assistant general counsel at subprime mortgage giant Ocwen Financial. “These are such serious crimes and for everybody to get a pass like this, it just encourages them to think that they always will.”

Reality Check: Only a small minority of homeowners will get this benefit (1 million of 75 million or 1.3 percent of the Homeowners who made large down payments on their homes or made the terrible mistake to pay down the principal on their mortgages do not qualify. Homeowners who made minimal or no down payments THAT QUALIFY will get the benefit of a lower principal repayment and interest rate.

Also unclear is how far the agreement can go in helping borrowers who are trying to hold onto their home. In addition to granting “some” a principal reduction, the deal would offer struggling homeowners relief by changing the terms, or refinancing, loans. Those dollars amount to a pittance when you consider the millions of homeowners in need of help, Golant said. “If you do the math, that’s a few hundred million per state. That’s not enough to change anything.”

Consumer advocates supportive of the deal argue that while the settlement dollars are small, the principal reduction piece is critical. A handful of lenders have already begun offering such assistance, but mortgage giants Fannie Mae and Freddie Mac have fiercely resisted such a move. We at 360 Group have received several Principal Reductions for clients who qualified. More often than not, a portion of principal will be put on the back end of the loan and not calculated in the interest payment. This way the lender will eventually get the money when the home sells, it’s just a balloon payment in 25 years.

“This settlement could be a starting point for principal reduction,” said Ira Rheingold, president of the National Association of Consumer Advocates. “Hopefully it will demonstrate how principal reduction can and should benefit homeowners. If it is done well, maybe it will shame Fannie and Freddie into doing what it should have been doing all along.”

Economists are excited about the potential for principal reductions to boost the housing market. “If $15 to $20 billion is devoted to principal reduction modifications over the next year, that would significantly reduce the number of properties that ultimately end up hitting the market in a distressed sale, thus supporting housing prices,” said Mark Zandi, chief economist at Moody’s Analytics.

This is lip service to get the general public excited since Principal Reductions have already been offered to the Qualifying Homeowners and that will simply remain the same. We at 360 Group have been doing this for 4 years now and we see on a daily basis that not everyone qualifies. They will request banks statements, pay stubs and tax returns from millions of Americans and then use that data against them by declining those who do not qualify and from that point forward, you are out of luck. The fact is only 1 out of 10 people qualify for their guidelines. Then they black-list you from any help in the future. That’s why you need someone like us to review your documents first before sending to the bank to be sure you are not sending something that will hurt your chances to qualify. If you qualify great, but if you don’t we will tell you and then you’re NOT crossed of their list and you may qualify in the future if something with your income changes.

The states’ ability to enforce the deal remains one of the great unknowns. Nearly four years ago, 11 states signed an $8.4 billion settlement with Bank of America over predatory lending practices by Countrywide Financial. (Bank of America acquired Countrywide in 2008.) Most housing experts agree that the deal has significantly underperformed in large part because the states didn’t have a good mechanism for holding the bank accountable.

Settlement supporters have high hopes for the deal, though success has to be measured against very narrow expectations. “In the absence of sufficient federal action, sufficient regulatory action, sufficient congressional action, what we have left is a bunch of state attorneys general saying, ‘Our homeowners are getting hurt. We have to do something.’ “But the state resources are fairly limited, so you have to look at this in terms of what the attorneys general can accomplish within their own set of powers,” Mr. Rheingold added.

What did the mortgage lenders and loan servicers agree to do?

The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments.

The AZ news falsely reported last night February 9th 2012 that you must be current to get help.

The amount of principal reduction will average about $20,000 per borrower and each borrower will still need to qualify. This has not changed for the last 5 years. Truth is that $20,000 for a principal reduction would have no net effect for a homeowner, and not be enough to make a significant difference in their payment if they are struggling.

Another $3 billion will go toward refinancing mortgages for borrowers who are current on their payments. This will enable them to take advantage of the low interest rates currently available ONLY IF THEY ARE NOT TOO FAR UPSIDE DOWN and can qualify.

The banks will pay $5 billion to the states and the federal government, the only hard money involved in the deal. Out of that fund will come payments of $1,800 to homeowners who lost their homes to foreclosure. Other funds will be paid to legal aid and homeowner advocacy organizations to help individuals facing foreclosure or experiencing servicer abuses. Another $1 billion will be paid directly by Bank of America to the Federal Housing Administration (FHA) to settle charges that its subsidiary, Countrywide Financial, defrauded the housing agency.

In addition, the banks agreed to eliminate robo-signing       See Blog Link Foreclosure Update for 2012. https://empoweringconsumers.wordpress.com/2012/01/27/foreclosure-update-for-2012/

The banks agreed to eliminate robo-signing and to use proper and legal procedures when putting homeowners through the foreclosure process. They also agreed to end servicer abuses, like harassing delinquent borrowers for payments, and to include principal reductions more often in their mortgage modifications programs.

I lost my home to foreclosure; how do I know if I qualify for payment? If you were foreclosed on in the calendar years 2008 through 2011, you may be eligible for a payment of up to $2,000. People who think they may qualify should notify their bank. The exact amount of the payments will depend on how many people participate in this part of the settlement. They will share equally in a pool of $1.5 billion. The U.S. Department of Housing and Urban Development expects about 750,000 former homeowners to take part.

If I take the money, what rights do I give up? Individual borrowers do not give up any right to sue.

As part of this deal, state attorneys general gave up the right to sue the mortgage servicers for foreclosure abuses arising out of the robo-signing scandal. However, they reserve the right to sue if they uncover improper acts when the loans were originated or when they were securitized. The relief for homeowners has to be completed within three years, but the state attorneys general and HUD want it to be front-loaded and completed within 12 months.

Would I have to pay taxes on the principal reductions or the pay-outs? If the principal is reduced in 2012, it will not be subject to income tax. That’s because the Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. The act is scheduled to expire at the end of this year, however. So if the act is not extended and the principal reduction occurs in 2013, borrowers may be on the hook to pay taxes on the settlement amount.

It’s not clear whether you would have to pay taxes on the $1,500 to $2,000 payout. The IRS declined to comment on the question. When they say that, you know you’ll get hit.

Which state didn’t participate and what does it mean if you live in that state? Oklahoma was the only holdout of the 50 states. Instead, it announced its own settlement with the five banks Thursday.

Under its settlement, the banks agreed to pay $18.6 million in damages, part of which would compensate homeowners who were victims of unlawful and unfair mortgage practices, according to the Oklahoma attorney general’s office. Homeowners who believe they may have been wrongly foreclosed upon should visit the Oklahoma attorney general’s website and fill out the paperwork for processing a claim.

Now the KICKER! Much of this money is going to help fund the administrative processes at the lenders. Only $5 billion of the $26 billion settlement will be a direct cost to the banks. The remainder will be the cost of modifying mortgages. Many of those modifications may be in the best interests of the banks to make as the alternative may be foreclosure, which can cost banks more in losses.

Now the banks can actually do what they were supposed to do 2 years ago and modify mortgages for struggling homeowners. It’s nice to know that more people will be able to Re-Negotiate their loans If you or anyone you know would like to find out if you qualify for a modification, please contact 360 Group Partners at 623-748-7448.


For anyone who uses Quickens version of Quick Books you may have noticed that they require you to contact their support desk to be sure to have the correct version of the software, and then “authorize” you to use it. This is akin to the message we hear when calling any banks customer service line when they say “this call is being recorded for quality purposes”. Quality NOT! It’s so they can record the conversation and use the dialog for whatever reason they want. Quicken’s game is that they will request that you call them to get an authorization code (which allows you to actually use the software) and then they try to upsell you with various other features that cost money and embed you deeper into their system. They say it’s for quality purposes. Ya Right. The upsell has cheap written all over it. The other issue is that over time, as you continue to run your company from Quickbooks, it is always asking you if you want to use new features to pull you deeper into the software. This way, over time, you’re more unlikely to stop using it.

Quick Books is a nice easy program and I’ve been using it for years, but I just got a very disturbing email from INTUIT that I felt compelled to share with everyone. Please pass it on.

Here is the actual email I just got from Quicken 1 month after I updated my software.

Dear Account Holder,

With a view to assure that accurate data is being kept up on our systems, as well as to be able to grant you better quality of service; INTUIT INC. has partaken in the Internal Revenue Service [IRS] Name and TIN Matching Program.

INTUIT shares your data with IRS







ARE YOU FREEKIN KIDDING ME? Now INTUIT INC. has decided to “share” my information with the IRS? I never authorized that. Just more proof that many freedoms in America are gone. In many ways this is like communist China.

Whats the harm you ask? O.K. lets say you file a tax return with $10,000 in business expenses, but your QB files show more or even less, then the IRS can compare your actual return with your QB files and if they see any discrepancies, could target you for an audit. This would make IRS audits much easier. For those of you like me who save every single receipt and keep detailed records, no biggy, but for others, this could be a real problem.

This really threw a wrench in my day because I immediately deleted all my quicken company files and backups and have begun to use a new software. I un-installed the program and tossed the $100 CD in the trash. Thanks for informing me that you have sold your soul to the US Government INTUIT/Quicken.  At least you had the decency to tell me instead of doing it behind my back . Good bye Quick Books!

Facebook IPO, In or Out?

You’ve seen all the news this week. Mr. Mark Zuckerberg is expected to finally bring his Facebook public. The company has been preparing to file for an IPO — initial public offering — through which “the public” will be able to buy shares of the social networking company.

Many of us are aware that Apple’s market capitalization is fast approaching half a trillion dollars, making it either the largest or second-largest company in the world behind Exxon Mobil – depending on the week. So when we hear that Facebook is preparing for an IPO that will likely dwarf Google’s entrance to the public markets in 2004, particularly considering that the company doesn’t sell tangible goods or services in the traditional sense, we can’t help but wonder what this will mean for the future of Facebook, its users, its competitors, and the greater economy.


FB Home page

This new form of media — social networking — will not only redefine the Internet, change human relationships, and create a new marketing landscape, but “some say” it will now rescue and alter the economy itself. Like virtual kudzu, it will infiltrate the financial markets, creating new sorts of opportunities for this peer-to-peer “social” economy to take root. I don’t think we are witnessing Facebook’s victory over the financial markets as much as its acquiescence to them. Yes, Apple challenged Microsoft for software dominance, just as Facebook now challenges Google for Internet supremacy. But there’s another operating system churning away beneath all this high tech activity, and it’s called corporate capitalism. If a company is big enough — and that means simply holding enough money — then sooner or later that money influences the rest of the company’s activities.


In Facebook’s case, it meant approaching the legal limit of 500 investors, which triggers a requirement to open the books to regulatory scrutiny. It also meant dealing with a few thousand coveted employees who took jobs at Facebook instead of Google or Apple or anywhere else because they were hoping to get in on a big thing. The promise of cashing in a few million dollars’ worth of stock options helps many a programmer make it through a late night of coding.

The same goes for those who invested in Zuckerberg five or more years ago and want to cash in before the “social web” bubble pops, if it’s going to. Facebook was taking so long to get to market that many people had begun selling their shares privately on what are known as secondary markets, putting Facebook’s valuation even further out of the company’s own hands.


Simply becoming a multi-billion-dollar company changes the essence of its goals, activities, and purpose. It becomes filled with cash, and that cash has its own agenda. Just like print, TV, or the Internet, money is a medium. It has biases, or tendencies, programmed right into it. The kind of money we happen to use  is biased toward lending. That’s why we call our system “capitalism.” It’s about the capital: Our money is designed to favor those who lend it to others who actually use it to build companies or create value. The more money a company takes in, the more obligated it becomes to function in accordance with the properties and rules of money.


By all accounts, Mr. Zuckerberg was trying to delay this IPO as long as possible. He knows that becoming the CEO of a public company will not be nearly as much fun, or as free, as running an Internet startup. No matter if we may not like his vision for our future, his primary purpose was to change the world. He wanted to create the operating system on which human social activity took place, and he succeeded. Or at least the engine he built took on such momentum that it created it’s own track.



As Facebook steals market share and makes gains on its rivals, it was said in a recent article on CNBC that Facebook delivered 28 percent of display ads in the US last year—a whopping 1.3 TRILLION display ads — up from 21 percent in 2010. The number two player has just 11 percent share. Since most companies inflate their numbers because they can, I’m not sure I believe it. Additionally it seems odd based on the metrics from IAB. Search continues to lead, followed by Display/Banners and Classifieds — Search revenue accounted for 49% of year-to-date revenues, up from the 47% reported in the first half of 2010. Display advertising showed solid growth, accounting for 37% of year-to-date revenue, up from 36% in 2010.

Is Facebook winning?

Yes, there’s the ability to target ads very narrowly using personal information from user profiles and information about how people spend their time on the service. ( you know they monitor your every move right? ) There’s also the fact that Facebook offers a rare opportunity to connect with self-professed fans, who are far more open to marketing messages than a run-of-the mill web-surfers. At least this is how the ad metrics work. I suspect that eventually this form of advertising will run its course and people will get tired of being bombarded.

So what does this mean for Wall Street? MONEY OF COURSE!

The fees on Facebook’s initial public offering are not really as low as the stories all over the mainstream media about the deal setting a “new record low”. In the first place, as an absolute number, a brokerage getting paid 1 percent of a $10 billion offering means they get $100 million. That gets split up between the various investment banks that will participate in the deal, with the largest piece going to the lead underwriters. This means that Morgan Stanley, if it does wind up in the lead position, is likely to take between $20 million to $25 million in fees. Apparently Morgan Stanley did 127 U.S. equity deals last year, with an average size of around $133 million and average fees of around $5 million. So getting paid $25 million for a single offering is a very big deal. LET’S NOT FORGET ABOUT ALL THE HYPE HERE AND ALL THE BROKERAGES THAT PARTICIPATE WILL BE TRYING TO GET PEOPLE TO OPEN ACCOUNTS TO GET IN ON THE BUYING OF FB SHARES  WHICH ALSO PUTS MONEY IN THEIR POCKET!

Analysts say that the costs of underwriting IPOs do not rise symmetrically with the size of the IPO. Small deals can involve a lot of due diligence and can be harder to sell to investors. Larger deals — such as a Facebook IPO — can be easier because everyone already understands Facebook’s business model. Similarly a little IPO requires a team of bankers to learn about a little company, Do lots of due diligence on it to avoid selling snake oil or whatever, and then convince investors to learn about and buy it. Nobody needs to learn about Facebook.

It shouldn’t really be surprising that there are economies of scale in the IPO world. The fees at Wall Street firms actually bear this out. Smaller deals command fees as high as 7 percent, medium size deals typically come in a 6 to 5 percent, while deals of more than a billion dollars land in the 4 to 2 percent deals. The $15 billion General Motors IPO had fees set at less than one percent.

Let’s break down the fees of Morgan Stanley. Imagine it takes around 90 days from the time Morgan Stanley lands the lead role until the IPO. Working 15 hours a day every day — including weekends — Morgan Stanley would be charging a rate of more than $18,500 per hour. Let’s say that there are 30 people staffed to the deal — probably too high, but there are likely to be lots of lawyers in that number. That’s an hourly charge of $617 for each person. Ridiculous!

In other words, a lot of the talk about the banks doing the deal for the sake of “prestige” is propaganda, meant to disguise the fact that the banks are making a ton of money off the deal and their all involved! As I’ve been saying since 2005, banks don’t do anything unless it benefits them!