Important News - Dec. 02

National debt not long ago hit $12 trillion and now has already hit $12.1 trillion? Look here and here.

• 1) Yen Drops After Hatoyama Says Its Strength Can’t Be Tolerated

“The yen fell against all of its major counterparts after Japanese Prime Minister Yukio Hatoyama was cited by the Nikkei newspaper as saying the currency’s strength can’t be left as it is.”

………..1A) Kamei Says Japan Should Seek Joint Intervention

“Japan has lent the U.S. about 200 trillion yen ($2.3 trillion), and that could become waste paper,” Kamei said. “It’s not just currencies. Each country has to take economic stimulus steps too.”

• 2) European Banks Growing Bigger ‘Sowing the Seeds’ of Next Crisis

“Fifteen European banks now have assets larger than their home economies, compared with 10 lenders three years ago.”

• 3) NJ debt climbs to $33.9 bln in FY09-report

“TRENTON, New Jersey, Dec 1 (Reuters) - New Jersey’s official state debt rose to $33.9 billion in the fiscal year ended June 30, from $31.86 billion in the previous year, according to an official report obtained on Tuesday.

The annual Debt Report by the state Treasury shows that when obligations such as pensions and health benefits are included, the state’s total debt load increased to $51.25 billion at the end of fiscal 2009 from $44.5 billion a year earlier.”

• 4) (Commercial) Loan Defaults Could Top 5% in 2010

“By Q4 of this year, commercial mortgage defaults are expected to rise to 4%, nosing up further to 5.2% by the end of 2010, and then finally topping out at 5.3% in 2011. The report says that by ’11 and 2012, the larger share of commercial mortgages originated at the peak of the asset cycle in 2006 and 2007 will mature. Ultimately, that means those mortgages will require balance adjustments in larger numbers as a consequence of high loan-to-value ratios and weak debt service coverage that fails to meet prevailing criteria.”

• 5) Ross: Commercial Real Estate Crash Is Here

You wouldn’t call billionaire investor Wilbur Ross a bull on commercial real estate now. He says a “huge crash” has begun in the sector. “All of the components of real estate value are going in the wrong direction simultaneously,” Ross, CEO of WL Ross & Co, told Bloomberg. “Occupancy rates are going down. Rent rates are going down, and the capitalization rate – the return that investors are demanding to buy a property – is going up.”

• 6) Predictions 2010: Real Estate (CNBC)

“1. The residential housing market will dip again in mid-2010 before settling into a recovery in the back half of the year. ”

“2. Foreclosure inventory will be a lot higher than some predict.”

“3. No more historic lows on the 30-year fixed.”

“4. Commercial real estate will continue to suffer the ills of low vacancy rates, low rents and high default rates.”

• 7) Global office rents in downward spiral

“Average cost to lease space falls by 7.7 per cent in past year as companies around the world slash staff and consolidate offices”

• 8) NC Medicaid dealing with cost-control delays

“North Carolina is breaking the Medicaid budget lawmakers approved this summer because more people need health insurance coverage after losing their jobs and are getting treated for swine flu, an agency official said Tuesday.

State spending for the government health insurance program for low-income families and senior citizens — along with the disabled — is $160 million over budget so far this fiscal year as expenditures have surged nearly 9 percent compared to a year ago, Health and Human Services Secretary Lanier Cansler said.”

• 9) Revenues $56 million short for first quarter (Nevada)

“Revenues collected from the 10 major taxes which make up the General Fund totaled $665.8 million for July, August and September. They were budgeted at $722.4 million for that period.

The three largest revenue producers — the sales tax, gaming percentage collections and Modified Business Tax — were also the biggest problems, accounting for $41.5 million of that deficit.

Director of Administration Andrew Clinger said the first quarter of the fiscal year was expected to be the worst, but that the new numbers aren’t showing signs of turning around as quickly as his economists had projected.”

• 10) Health uninsured ranks to rise

“HUNTSVILLE, Ala._ A new wave of formerly employed Americans, including many in Alabama, will soon join the growing ranks of people without health insurance.

Tuesday, many of the millions of laid off workers and their dependents who received federal subsidies to pay for extended health coverage began losing that help.

Without the assistance - a product of the American Recovery and Reinvestment Act that began in March - ationwide COBRA premiums for family coverage will consume the lion’s share of their unemployment income. In nine states, including Alabama, COBRA premiums will exceed monthly unemployment income assistance, leaving most families no other choice but to drop health coverage.

That in turn will further strain state Medicaid programs as more and more families are forced to look for public medical services.”

• 11) BUDGET DEFICITS: City seeks 8 percent pay cuts (Las Vegas)

“Las Vegas faces $69 million shortfall in 2011

City of Las Vegas employees are being asked to accept 8 percent wage cuts in each of the next two fiscal years to help the city fill an ever-growing budget hole.

Without the concessions, city workers will be laid off, according to letters from City Manager Betsy Fretwell that were sent to the city’s four collective bargaining units.”

• 12) Warning: L.A. May Lay Off Thousands Of City Workers

“There’s no other way to avoid financial disaster than to layoff employees: City Councilman”

“The city faces a $408 million deficit next year and a $98 million deficit this year.

“Everything we’ve done over the past few years have been one time fixes. They’re not going to help this year,” said Councilman Parks.”

• 13) Property tax relief due for California property owners

“The state Board of Equalization, relying on federal statistics, estimated this week that deflation could reduce what many property owners owe — a new twist for the annual formula that caps tax increases based partly on the rate of inflation.

For the owner of a home assessed at $400,000, that would amount to a savings of about $11 in next year’s tax bills. Toss in the fact that rates usually rise by at least 2 percent a year, and the savings works out to nearly $100 on a $4,400 tax bill.

Although that may bring a small smile to the faces of home- owners, it’s downright bad news for the local governments that rely on property taxes to fund everything from police services to holiday parades.

In Santa Clara County, the blow could translate to millions less for already-strapped cities, counties and school districts.”

“At stake in the calculations is millions of tax dollars for deficit-riddled cities such as San Jose, which is struggling to close a $90 million budget gap by July. On Tuesday, Mayor Chuck Reed’s office said it was too soon tell what the latest blow to city revenues might be.

But with reassessments due for big-dollar commercial and industrial properties, Stone wasn’t shy about sounding the alarm: “There’s not a possibility,” he said, “the hit won’t be a record.”"

• 14) Minnesota deficit projected at $1.2 billion

“The Minnesota state budget deficit for 2010-11 could mushroom to $5.4 billion in 2012-13, according to a revenue forecast that will be released later this morning.”

• 15) State comes to Waltham for ideas on $3 billion deficit (MA)

“The state is facing a near $3 billion budget shortfall in the next fiscal year, as “rainy day” funds and federal stimulus dollars continue to dwindle.”

• 16) California Hemorrhaging Money At Record Pace

“Levy explained that California’s unemployment insurance fund is now $7.4 billion in the red. California is spending an average of $20 million more each day than it is taking in. And those numbers are likely to get worse, climbing to an estimated $18 billion deficit next year, while ballooning to $27 billion in the hole by 2011. California is in fact, so broke, the state has had to borrow money from the federal government to pay unemployed workers. ”

“But California’s unemployment fund will continue sinking deeper into debt, until the Legislature comes us with a permanent solution. The state will have to pay the federal government $730 million in interest for the billions we’ve borrowed to keep the unemployment fund afloat. That loan comes due in 2011 and the state is already drowning in a sea of red ink. ”

• 17) Treasury Releases Guidance for Making Home Affordable Short Sales

“To entice servicers to accept a sale on defaulted properties for less than the outstanding mortgage balance, Treasury is offering incentive payments of $1,000 per completed short sale. Servicers will also receive $1,000 for each deed-in-lieu of foreclosure.

Subordinate lien holders will be paid to release their claims on defaulted properties, up to $3,000 of the short sale proceeds as long as the primary investor agrees to share the earnings, and for this concession, the investor will also receive up to $1,000 from the Treasury.”

• 18) FHA to toughen rules for borrowers

“The Federal Housing Administration is proposing to increase the up-front cash paid by borrowers as part of an effort to shore up the agency’s finances, which have been staggered by rising defaults in its flagship mortgage insurance program, according to FHA officials.”

“A recent audit shows that the FHA’s financial cushion already has eroded below the level required by law.”

“By requiring that borrowers bring more cash to the table, the agency is seeking to ensure they have “more skin in the game and a stronger equity position in their loans,” Donovan says. But he does not specify the size of the proposed increase. FHA officials said they have yet to determine how much cash will be required.

“There are several ways to accomplish this, and so we are currently analyzing various options to determine which is the most effective and consistent with our mission,” Donovan says.

Up-front cash can include down payments as well as other payments. For now, FHA borrowers can put down as little as 3.5 percent, a level that many FHA critics say is too low. One lawmaker has introduced legislation that would boost the minimum down payment to 5 percent.”

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“To protect itself against the riskiest borrowers, the agency has decided “for the time being” to raise its minimum credit score requirements for new borrowers. Again, FHA staff are still analyzing what the new threshold should be, Donovan’s prepared testimony says.

The minimum credit score requirement is now so low — 500 out of a possible 850 — that it’s basically irrelevant.”

“These measures are meant to build on other actions the FHA has taken to curb its risk and beef up its eroding cash reserves.

An audit released last month found that the agency’s cash reserves have shrunk to a level far below what is required by law, and the agency could need taxpayer funding if worst-case scenarios play out.”

…………Here’s what happened to the writer of that  FHA article.