Posts Tagged debt
Big Banks Easing Terms on Loans Deemed as Risks
Posted by Oksana Grebenjuk in Banks, Favourites on Июль 6th, 2011
As millions of Americans struggle in foreclosure with little hope of relief, big banks are going to borrowers who are not even in default and cutting their debt or easing the mortgage terms, sometimes with no questions asked.
Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.
Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.
Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it.
Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.
Before Chase shaved $150,000 off her mortgage, Ms. Giosmas owed much more on her place than it was worth. It was a fate she shared with a quarter of all homeowners with mortgages across the nation. Being underwater, as it is called, can prevent these owners from moving and taking new jobs, and places the households at greater risk of foreclosure. Read the rest of this entry »
Euro Area Backs Greek Aid, Looks to New Bailout
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Июль 4th, 2011
The euro area approved its share of a 12 billion-euro ($17.4 billion) aid payment for Greece and pledged to complete work in the coming weeks on a second rescue package for the cash-strapped nation to prevent a default.
Finance ministers agreed to disburse 8.7 billion euros of loans under last year’s 110 billion-euro bailout by July 15, rewarding Greek Premier George Papandreou for pushing an extra austerity plan through parliament. The International Monetary Fund is due to provide the rest of the July aid installment, the fifth under the 2010 package.
The spotlight now turns to a second bailout to which banks and insurers plan to contribute following German demands for taxpayer relief. Euro-area governments and investors will provide 70 percent of new aid that may total as much as 85 billion euros, with the IMF offering the rest, Thomas Wieser, an Austrian Finance Ministry official, said on June 30.
“The Greek authorities provided a strong commitment to adhere to the agreed fiscal adjustment path,” the 17 euro-area finance chiefs said in an e-mailed statement yesterday after a conference call that was joined by the IMF’s acting chief, John Lipsky, and European Central Bank President Jean- Claude Trichet. “The precise modalities and scale of private- sector involvement and additional funding from official sources will be determined in the coming weeks.” Read the rest of this entry »
Wall St higher as investors bet on Greece plan
Posted by Oksana Grebenjuk in Fund Markets on Июнь 27th, 2011
Stocks rebounded from three days of losses on Monday as investors bet there would be a near-term resolution to some of the uncertainty over Greece’s fiscal crisis, but the absence of a firm plan could limit the market’s upside.
The Greek parliament will begin to debate a deeply unpopular austerity program that must be approved in order to get the next bailout payment. A Greek minister warned of «catastrophe» if the measure is not passed in a vote later this week.
French President Nicolas Sarkozy said his government had an agreement with French banks on rolling over Greek debt into new 30-year bonds, which helped ease tensions around the region.
Traders see a Greek sovereign default as unlikely, and the S&P 500 holding its 200-day moving average was viewed as a sign of technical support following two months of heavy selling that brought the index down about 7 percent.
«There’s still a lot of fear out there, but the absence of bad news over the past few days, coupled with the selloff late Friday, is creating a bounce now,» said Mitch Rubin, chief investment officer at RiverPark Advisors in New York. Read the rest of this entry »
Why a Greek Default Would be Worse Than Lehman Brothers’ Collapse
Posted by Oksana Grebenjuk in Investing on Июнь 3rd, 2011
If Greece defaults on its debt, the direct secondary effects on financial institutions could be much worse than what we saw after the collapse of Lehman Brothers.
The collapse of Lehman Brothers sent shockwaves through the global financial system—in part because it revealed that the United States government was willing to let a large, interconnected, complex financial company go bankrupt. Panic erupted, threatening the financial stability of other companies.
But the actual direct effects were few. Lehman had some 600,000 derivatives contracts and hundreds of billions in outstanding bonds, but Lehman’s institutional creditors were generally required to reserve some capital against Lehman’s collapse. This greatly diminished the direct knock-on effects of Lehman’s bankruptcy. Capital cushions actually cushioned.
There is roughly 270 billion Euros in outstanding Greek sovereign debt. Banks—mostly European banks—hold around 100 billion Euros of Greek bonds. Insurance companies, pensions funds and central banks hold most of the other 170 billion. For the most part, these holders of Greek debt have not had to reserve any capital against losses. This means that most of the holders of Greek debt will feel the full brunt of the losses, which raises the question of whether they are adequately capitalized to take the loss.
European bank capital regulations treat Eurozone sovereign debt as riskless. This was, in effect, a subsidy to the riskier Eurozone governments—allowing them to borrow at far lower costs than they other would have faced. The spread between German and Greek debt fell to 20 basis points in 2004, thanks largely to this subsidy. Read the rest of this entry »
The Stupidity of Hope: Greece Is Still Going to Default
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Июнь 2nd, 2011
Keeping in mind that the words “hope” and “Greece” should almost never be used in the same sentence, here would be the one exception: Let’s “hope” markets aren’t rallying on “hope” for “Greece.”
Hope, apparently, does spring eternal, however, and it seems as though despite all the evidence to the contrary, there are still people out there with money to spend who believe that Greece can be rescued yet from its seemingly intractable fiscal position.
How else to explain Monday’s surge in the euro and drop in the US dollar, which had been rallying on well-placed hopes that the periphery of Europe was sliding further into the debt abyss and ready to implode?
Irrationality, we now can conclude, comes in many forms. The latest form is in some weakly substantiated murmurs out of Germany that the core of the core of euro zone nations might be softening its stance towards a Greek bailout and is ready to ease its demands that the nation speed up its ultimately unavoidable debt restructuring.
Despite compelling evidence that Germany is in no political position to turn suddenly benevolent towards its free-spending weak sister to the south, the rally was on. Read the rest of this entry »
Fitch cuts Greek rating, warns over restructuring
Posted by Oksana Grebenjuk in Investing on Май 24th, 2011
Fitch cut Greece’s credit rating by three notches on Friday, pushing the country deeper into junk territory, and warned that any kind of debt restructuring would amount to default. Fitch was the second rating agency to warn that it would consider any loss imposed on bondholders as a default after Standard and Poor’s said the same earlier this month.
«An extension of the maturity of existing bonds would be considered by Fitch to be a default event and Greece and its obligations would be rated accordingly,» the rating agency said. If private sector ‘burden sharing’ is coercive, the credibility of EU/IMF policy commitments not just for Greece but also Ireland and Portugal would be severely diminished and affect financial stability across the euro area, it said.
One year into its European Union/International Monetary Fund bailout, Greece is struggling with weak revenues and a deep recession, fuelling speculation that it will have to restructure its debt to pull itself out of the fiscal mess that triggered a euro zone crisis.
«The rating downgrade reflects the scale of the challenge facing Greece in implementing a radical fiscal and structural reform program necessary to secure solvency of the state and the foundations for sustained economic recovery,» Fitch said in a statement. Read the rest of this entry »
Google enters the bond market
Posted by Oksana Grebenjuk in Favourites, Fund Markets on Май 18th, 2011
Google plans to raise cash by selling bonds for the first time in the company’s history, the Internet search giant said Monday in a filing with the Securities and Exchange Commission.
Google (GOOG, Fortune 500) declined to comment about the size of the offering but news reports peg it at roughly $3 billion in short-to-medium term notes. The bonds are expected to be priced by market close Monday.
The company said it plans to use the proceeds to fund «general corporate needs and to repay the company’s outstanding commercial paper.»
Credit rating agency Moody’s gave the offering an investment grade ‘Aa2′ rating, citing «Google’s substantial financial flexibility as well as its conservative financial philosophy.»
Google currently sits on $36 billion in cash and short-term securities. But the bulk of that cash is tied up in overseas accounts, making it expensive to tap in the United States since Google would have to transfer and pay tax on the funds. Read the rest of this entry »
Portugal Sells Debt but at a Much Higher Rate
Posted by Oksana Grebenjuk in Investing on Апрель 7th, 2011
Portugal was forced to offer higher interest rates to sell short-term debt on Wednesday, underlining concerns among investors about the country’s ability to continue financing itself without an emergency European bailout.
Portugal sold 455 million euros, or $650 million, of one-year Treasury bills at an average yield of 5.9 percent, the country’s debt management agency said. That was significantly higher than the 4.33 percent yield when Portugal last sold such bills on March 16. The auction attracted bids for 2.6 times the amount offered, compared with a bid-to-cover ratio of 2.2 two weeks earlier.
The agency also sold 550 million euros of six-month bills at an average yield of 5.12 percent, compared with a yield of 2.98 percent at a previous auction of on March 2.
The sale came after the ratings agency Moody’s cut the sovereign rating of Portugal on Tuesday for the second time in a month, which helped send yields on Portuguese government debt to their highest levels since the launch of the euro. On Wednesday, Moody’s also downgraded by one or more notches the senior debt and deposit ratings of seven Portuguese banks. Read the rest of this entry »
Six Ways to Improve Your Chances of Getting a Mortgage
Posted by Oksana Grebenjuk in Banks on Апрель 4th, 2011
Remember how Spring was always the home-buying season? Don’t count on that happening this year and you can point the finger, at least in part, at the new lending hoops buyers must jump through. According to MortgageMatch.com, one out of three home buyers will fail to get a mortgage this spring.
Understanding the mortgage process and meeting lenders’ more stringent qualification requirements have become big obstacles for applicants, according to a survey the site conducted. Most recent home buyers — 70% — described the mortgaging process as more difficult than they expected. And those who bought homes during the bubble years, when mortgage loans were given out like candy at Halloween, are especially shell-shocked by the new lending standards.
One of the biggest problems home buyers run into today concern their credit scores and how, in general, they don’t work to improve them before applying for a loan. In the same vein, a recent Fannie Mae survey found that poor credit was the top reason that renters gave for not buying a home.
(Following closely behind poor credit was the self-awareness that they couldn’t actually afford to buy or keep up a home and the perception that now is not really a good time to buy. Hooray for enlightenment on the first point, but with home prices back to 2002 levels and interest rates among the lowest ever seen, how isn’t this a good time to buy?) Read the rest of this entry »
Rising Oil Prices Pose New Threat to U.S. Economy
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Март 1st, 2011
The American economy just can’t catch a break. Last year, as things started looking up, the European debt crisis flustered the fragile recovery. Now, under similar economic circumstances, comes the turmoil in the Middle East.
Energy prices have surged in recent days, as a result of the political violence in Libya that has disrupted oil production there. Prices are also climbing because of fears the unrest may continue to spread to other oil-producing countries.
If the recent rise in oil prices sticks, it will most likely slow a growth rate that is already too sluggish to produce many jobs in this country. Some economists are predicting that oil prices, just above $97 a barrel on Thursday, could be sustained well above $100 a barrel, a benchmark.
Even if energy costs don’t rise higher, lingering uncertainty over the stability of the Middle East could drag down growth, not just in the United States but around the world.
“We’ve gone beyond responding to the sort of brutal Technicolor of the crisis in Libya,” said Daniel H. Yergin, the oil historian and chairman of IHS Cambridge Energy Research Associates. “There’s also a strong element of fear of what’s next, and what’s next after next.” Read the rest of this entry »
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