On Monday, Secretary Geithner unveiled the new toxic debt plan, that could result in over $1 trillion in spending to assist in the acquiring of toxic debt. The plan was announced several weeks ago, but was unveiled in more detail on Monday, causing the stock market to rally 500 points. The plan involves creating a “bad bank” entity, that would work much like the RTC did back in the 90’s. Toxic assets will be transferred to this “bad bank” and then the Government will look to partner with private equity groups in disposing of the assets.
In order to make the assets desirable, the government is looking to offer incentives to private equity groups by financing the properties, giving tax incentives, and big discounts on the appraised value. Bank stocks rallied as the new plan hopes to provide a big boost to their balance sheets. This is big news for those seeking loan modification or a mortgage refinance. As toxic assets are reduced and able to be written off of bank’s balance sheets, this makes them more able to work with current loans. The government is continuing to offer incentives to banks in working with consumers with loan modification or refinance. Mortgage rates continue to be record low, which has made it a great time to buy or refinance a home. CLICK HERE TO BEGIN THE PROCESS OF LOAN MODIFICATION!
Big news was released earlier this week as once again the government has executed a plan to help reduce mortgage rates as well as people seeking loan modification. On Wednesday, The Fed met for their monthly FOMC meeting to discuss economic conditions and the future of the discount rate. The Fed announced that they will indeed be keeping the current discount rate at a range of 0-.25%, which was expected, but they continued to announce their new plan, which resulted in a huge upswing in trading, especially for banks.
On Wednesday, March 18th, The Federal Reserve will meet for their FOMC meeting to discuss updates with the economy, the discount rate, and other economic variables. It is expected that The Fed will leave the discount rate at its current level, which is a range between 0-.25%. This means that, most likely, interest rates for homes will remain low, especially those that have good credit.
On Wednesday, President Obama unveiled the mortgage relief program the government will be issuing, to help slow the massive trend of home foreclosures and help consumers in modifying their loan. On Wednesday, the Obama administration launched the $75 billion plan, which now includes the ability to help those who are behind on their payments and close to foreclosure to participate in loan modification. The new plan aims to reduce principal payments as well as interest rates for those who qualify for the mortgage help.
The government is requiring major US banks who are eligible for TARP funds to participate in frequent “stress tests” to show how stale the financial institution is in case of severe economic turmoil The tests will entail many scenarios of which is foreseeable in the near future if the economy continues on the trail it’s on, and show how well the bank will be able to perform in such an environment. Some aspects of the test include a scenario if:
Bank stocks experienced a strong rebound in Tuesday’s trading as the The Fed Chairman Bernanke addressed the nation and assured investors that though the recession would linger longer, banks were going to survive. In response to the remarks, Bank of America and Citi Bank’s stock shot up over 20%. This rise in stocks puts an end to the 6 day selling streak the Dow experienced as well as the slaughtering of financials we have seen the past week.
The past week, a lot of changes have been made in Washington and it looks like many more are to come in helping consumers to modify their loans. Last week, President Obama announced his initiative to get all commercial banks to work with customers and their mortgages to find a result that is fair to both the lending institution and the consumer. Considering many of the banks are receiving government aid (or will be shortly), a lot of the banks are already required by the government to work with customers in loan modification. Also, it is rumored that the recent decision for Citi bank to allow bankruptcy judges to modify loans may spread over to other lending institutions in the near future.
On Wednesday, President Obama announced his new plan to spend up to $275 billion on a plan to help fight the disease of foreclosures, which has been spreading in every market of the US. It is estimated that by 2012, over 8.1 million homes, or 16% of all houses with mortgages, could be in foreclosure. You can see why this has been on Obama’s agenda from the very beginning. A failure to come to the rescue could be catastrophic for the US markets for years to come.
Big news from Washington hit media today as it seems the Obama administration is working to put together a plan to help subsidize mortgages to help reduce the foreclosure count for homes. Their theory is that by helping to insure certain mortgage back debt, they will instill more confidence in banks and help allow them to start lending more. Just as news hit the public, the stock market shot up in its remaining 45 minutes to almost eliminate an earlier 3% deficit in the Dow.