Boomer’s Blog

CNN article highlights the psychological factors that influence the ups and downs of the market and suggests that those who do stay in the market will reap the benefits of any future rebound.

“Hritz is just one example of an American who has lost confidence in the stock market, which has plummeted in recent months. Confidence among investors as a whole is a key factor in determining how the market behaves, economists say; when investors collectively lose confidence in the market, it is more likely to drop.”

Read the Article

A huge, largely underestimated and under-reported glut of foreclosed, real estate owned (REO) inventory is clogging up the U.S. housing market, and the majority of doesn’t seem to appear on the MLS. The size of this “ghost inventory” is unknown, but its effects cold be chilling for cash-strapped lenders. What does this mean to real estate investors? Tons of cash if you know how to buy right and stay on top of the real estate marketing curve.

Inventories, Foreclosure Filings Skyrocket
In November, the National Association of Realtors (NAR) reported an 11.2-month inventory of existing homes on the market, up from a 10.3-month in October. But now it seems those sky-high numbers statistics could continue rising dramatically, which is likely to lower home sales prices, and slow overall U.S. economic recovery.

Foreclosure filings were reported on 2.3 million U.S. properties in 2008, and an 81 percent hike from 2007, and a whopping 225 percent surge from 2006, according to RealtyTrac’s U.S. Foreclosure Market Report released in mid-January.

These inventory and foreclosure statistics are interesting enough to raise a few eyebrows among hungry real estate investors. But when RealtyTrac compared NAR’s MLS data with its foreclosure data they raised more than a few eyebrows: they raised the question of whether a vast “ghost inventory” is lingering in REO lender clutches, and if so, is it poised to deliver another hard blow to the U.S. housing market?

Piecing together the “Ghost Inventory” Puzzle
RealtyTrac recently examined the MLS listings in four states, including California, Maryland, Florida and Wisconsin, and found that they contained only a third of the foreclosures it has in its database. Research and analysis by Mr. Mortgage points to an even more widespread problem. There are several possible reasons for this apparent disparity and none of them are good for lenders.

At a minimum, preliminary data suggest that only one-third of foreclosures are reaching the MLS database, and it’s entirely likely that this is a conservative estimate.

The value of REO property on the books of FDIC-insured banks at the end of the Q3  rose 21 percent from the previous quarter, to $23 billion. That total represents a 134 percent increase over last year, according to the latest quarterly report released by the FDIC.

Since there is no reliable way to track these data and existing systems are likely overwhelmed by the high volumes of foreclosures working their way through the system, all we have at this point are estimates as to the number of houses that are haunting  REO’s “ghost” or “shadow”  inventory, as it also is coming to be known.

According to CNNMoney, current U.S. housing market declines are likely to sharpen dramatically as a result of this situation because so many foreclosed homes are lingering in bank possession without representation in the MLS.  Regardless of how the government and lenders approach the problem, averting a tidal wave of foreclosures appears to be impossible.

What’s the Holdup?
What could explain this Grand Canyon-sized gap between the numbers of foreclosures that are recorded vs. the number that has appeared on the MLS? Here are a few explanations that immediately come to mind:

• Inventories of foreclosed and REO properties has grown so fast and in such high volumes that the banks can’t keep up with processing demands, which could delay the MLS listing process.
• Federal and state government attempts to slow the foreclosure tide and Fannie Mae and Freddie Mac’s holiday moratoria on foreclosures are contributing to MLS listing delays for many of these properties.
• Because it’s taking longer to process the foreclosures, the REO properties are getting vandalized or suffering natural damage as a result of what’s becoming long-term neglect. Getting these properties on the MLS is further delayed while banks grapple with making necessary repairs.
• It’s also possible that lenders are lagging in submitting these distressed property listings to the MLS in hopes of deferring their losses as long as possible in hopes of protecting their institutions from insolubility.
• Many of these REO properties might already be listed as short sales.

What does the Ghost Inventory Mean to Your Business?
REO housing inventories are expected to shatter more records in 2009 as more of them hit the market and banks continue their struggle to stay afloat. These market conditions are ideal for real estate investors who deploy sound purchasing strategies and stay on top of the game with effective real estate marketing.

For a quick  video detailing how and why this “ghost inventory” is likely to unleash a mighty wave of foreclosure inventory on the U.S. Housing market, check out this Mr. Mortgage interview on CNBC’s Faber Report.

SalesTeamLive Tows Your REI Bottom Line
As housing markets evolve, so must your marketing strategies. If you want your business to thrive, especially in a challenging economic landscape, you’ve got to set your priorities. If marketing doesn’t top your list, you’re cramping your growth and potential for profits in this business.
If you’re looking for cost-effective strategies that are designed to conquer today’s markets and build a stronger future for this business, SalesTeamLive’s Done-for-You marketing campaigns deliver results you can bank on.

To learn how you can leverage quick-fire market developments such as the REO “Ghost Inventory” to generate tons of cash for your real estate investing business, check out SalesTeamLive or call us directly at 1-877-STL1 (that’s 877-438-7851).

In your mind’s eye, pile up all the money you made last year on your dining room table. Take a long, hard look at it and think of all the hard work you put into building that pile. Just enjoy the vision of your accomplishments, and try not to not think about the chunk that’s going out for taxes.

Now ask yourself, and answer honestly: Are you following up on your warm leads?

Whatever amount of money you made last year, if you’re not following up on your warm leads, you might as well take half of it out to the BBQ and set it on fire. Sound crazy? Consider the facts.

Only 2 percent of deals take place after your first conversation with a prospect. The remaining 98 percent of real estate sales transactions take place after a dozen or so contacts with once warm and even some cool conversations with prospects.

More than ever before, this detail is critical to meeting the challenges of today’s rapidly changing real estate markets. Why? There are nearly as many reasons as there are absurd corporate bonuses being doled out on Wall Street. But for many real estate investors, the reasons are glaring in the recent headlines.

Real estate research and analysis firm HousingPredictor.com predicts that U.S.  housing prices will slip as much as 12.5 percent this year, compared to last year’s estimated 11 percent nosedive.

Even homeowners with equity are starting to feel the pain amid unemployment surges and credit market constrictions. For many, cost of living hikes are their only regular source of cardiac exercise.

And as we know, folks looking to downsize and rebuild their nest eggs after Wall Street’s collapse last year are finding that their homes are staying on the market like so many jars of tainted peanut butter.

Given these crushing variables, once-optimistic sellers who scoffed at your presentation even as recently as few months ago may be ready to roll out the red carpet if you can get them out of the red.

If you’re not following up on warm leads, you’re missing out on 80 percent of your deal potential. Think about it, if you’re just focusing on the 20 percent that your business’ front end brings to your plate, you’re throwing away $4 for every $1 you make.

The writing’s on the wall and by now, the song should be playing in your head: The real estate times they are a changin’.

Not too long ago, it seems that a real estate investor worth his or her weight in bandit signs couldn’t jiggle a lock box without finding a killer deal. The deals are still out there, but nailing them down may require a change in perspective, some new best practices and an action plan that meets current market demands.

Your solution could  be as simple as  a little yellow real estate marketing postcard — and you don’t even have to lick a stamp!

Ponder that. And if you’re interested in all the details that  easily can add $100,000 to your table in 2009, join us here at GaryBoomershine.

Just sign in using the yellow fields on the right side of this page or on the main page at GaryBoomershine.com and you’ll get access to the information you need to refine your approach and maximize your resources on the road to extreme real estate investing profits. Act soon and you’ll get your copy of my monthly report exclusively for real estate investors.

As the economy, troubled job markets and the credit crunch push a growing number of homeowners towards foreclosure, pressure has mounted for policymakers to implement home loan modification programs and policies to curb the foreclosure epidemic’s spread. So far, top-level efforts to help homeowners avoid foreclosure appear to be failing, but bad news for homeowners and banks may trigger a short sale renaissance for real estate investors in the New Year.

Is “Hope for Homeowners” Hopeless?
In July, Congress passed a $300 billion Hope for Homeowners program which was supposed to help an estimated 300,000 homeowners avoid foreclosure when it took effect in October. Fortune reports that only 321 applications to the “Hope for Homeowners” program have been completed. And the Department of Housing and Urban Development says that the costly program has so far produced zero loan workouts. Some say that the heavy stakes for banks has crippled the plan.

Loan Modifications Lead Homeowners to Speedy Re-Defaults
Although a lot of folks are saying that reworking mortgage terms is the silver bullet in stemming the foreclosure tide, but prevailing evidence to the contrary shoots that idea down with a vengeance.  If loan modifications are anything in today’s rough and tumble real estate markets, they’re a boon to pre-foreclosure and short sale investing.

U.S. Currency Comptroller John Dugan announced in December some interesting data from the latest quarterly Mortgage Metrics report from the U.S. Office of Thrift Supervision which tracks mortgages and modifications for Nearly 35 million loans worth more than $6 trillion, or about 60 percent of all first-lien mortgages including prime, Alt-A, and subprime mortgages, and using standardized definitions for loan modifications.

Here are some remarkable data from the U.S. Office of Thrift Supervision’s 2008 Mortgage Metrics reports:

• More than half of the mortgages that were modified in Q1 2008 again became delinquent within six months.
• Three months after individual loan modifications, nearly 40 percent of the borrowers’ mortgages were more than 30 days past due.
• Within six months of modification, the re-default rate hit 53 percent.
  Eight months following mortgage modification, the number of re-defaults rose to nearly 60 percent.

Policymakers Continue to Target Foreclosure Epidemic in 2009
State and federal lawmakers — and other officials convening in the New Year are gearing up to take action to slow the foreclosure process. These efforts, combined with a heightened sense of cooperation from banks who’ve been hard-hit in the economic crisis will shine a new light on pre-foreclosure and short sale deals as we move into the new year.

Massive Profit Potential for Short Sale Investors
Amid so much shifting activity in other real estate market segments in 2008, popular investor focus strayed briefly from pre-foreclosure and short sale deals. But with the current national trend towards slowing and perhaps suspending foreclosures, all levels of pre-foreclosure and short sale deals are likely to generate millions of dollars for savvy real estate entrepreneurs in 2009.

Don’t Be a Sucker: Get the Facts Before you Invest
To get the lowdown on safe strategies for investing in short sale and pre-foreclosure real estate, join GaryBoomershine.com using the yellow fields on the right side of this page or on the main page of GaryBoomershine.com.

Will Wall Street ever learn?! I just read yet another disturbing report about INSANE  Wall Street excesses - - all on the taxpayers’ tab. I just wanted to kick off the holidays and get some last-minute gifts sent when I spotted this article. It really got my egg nog boiling!

Here’s an excerpt and a link to the full text this amazing story. Happy Holidays, Everyone!

$700 Billion Bailout Celebrated With Lavish $800 Billion Executive Party

“GEORGE TOWN, CAYMAN ISLANDS—Amid the bleak backdrop of imminent economic collapse, worried observers got some good news last October when executives from the nation’s top 10 failing companies celebrated the historic $700 billion government bailout with an ultra- extravagant $800 billion party aimed at restoring confidence and bolstering their resolve.

“Three thousand guests were reportedly flown on 750 separate private jets to the Caribbean, where they commemorated the last-minute financial aid package—which saved their companies from the subprime mortgage crisis that has left thousands of Americans without homes—with 4-tons of Beluga caviar, $250,000 bottles of vintage Dom Pérignon served over precious gems, a 36-hour fireworks display, an additional loan of $200 billion to cover the costs of the gala, and a private concert for each attendee with rock legend Rod Stewart.

“Held October 4–7 on all three of the Cayman Islands, the historic economic-stimulus celebration, spokespeople said, sent an important signal to the world that Wall Street was weathering the crisis in style.”

The trend heading into the holidays seems to be one of growing unemployment and a rising tide of homeowners drowning in mortgage debt.

An Ironic Twist on a Familiar Story
The U.S. Bureau of Labor Statistics’ October report finds that unemployment last month soared to a 14-year high of 6.5 percent, as 240,000 jobs were slashed. Yet the Orange County Register’s Mortgage Insider, Matthew Padilla has made an interesting observation. He sifted through the data to report that in September,  352,200 workers were making a living in the mortgage business — that’s up from 349,300 in August.

Negative Equity Plagues Homeowners
But the recent real estate statistics that really capture the real estate investor’s eye come from  First American CoreLogic: 2.1 million mortgages are within 5 percentage points of being in a negative-equity position and 7.5 million mortgaged properties are carrying more mortgage debt than they’re worth. That means that nearly 20 percent of properties with mortgages have plunged into the powerful waves the economic undertow.

Rising Percentage of Underwater Mortgages in the States
See how the mortgages currently in negative equity break down among the states listed below (Note: percentages have been rounded off and the states are listed in descending order starting with the highest reported rate of negative equity.):

1. Nevada: 48%
2. Michigan: 39%
3. Arizona: 29%
4. Florida: 29%
5. California:  27%
6. Georgia: 23%
7. Ohio: 22%
8. Colorado: 18%
9. Arkansas: 16%
10. New Hampshire: 17%
11. Texas: 17%
12. Virginia: 16%
13. Tennessee: 15%
14. Kansas: 15%
15. Iowa: 15%
16. Alaska: 14%
17. Wisconsin: 14%
18. Nebraska: 13%
19. Kentucky: 13%
20. Missouri: 13%
21. Minnesota: 12%
22. Maryland: 12%
23. Rhode Island: 12%
24. Louisiana: 11%
25. Idaho: 11%
26. Utah: 11%
27. Oklahoma: 10%
28. South Carolina: 10%
29. Indiana: 10%
30. North Carolina: 10%
31. Illinois: 10%
32. Delaware: 10%
33. Washington D.C.: 10%
34. Massachusetts: 10%
35. New Jersey: 9%
36. New Mexico: 8%
37. Washington: 8 %
38. Oregon: 8%
39. Alabama: 7%
40. Connecticut: 7%
41. Montana: 7%
42. Pennsylvania: 6%
43. Hawaii:  6%
44. New York:  4%

Source: First American CoreLogic

Notes: Data were unavailable for Maine, Mississippi, North Dakota, South Dakota, Vermont, West Virginia and Wyoming. These data are based on 42 million properties that had a first or second mortgage, accounting for at least  80 percent of U.S. mortgages.

Claim Your VIP Pass to Moneymaking Real Estate News, Marketing, Strategies & Tips
At GaryBoomershine.com, our focus is on delivering the the most timely real estate news, resources, tools and systems that build stronger real estate investment decisions and boost your bottom line.

Sign up either here or on the main page at GaryBoomershine.com and you’ll get the best this industry has to offer in real estate news, real estate marketing, real estate training systems, and all the creative real estate ideas that drive success in this business. Members also get exclusive access to compelling multimedia content and jaw-dropping discounts!

Don’t miss out on this opportunity to Make Tons of Cash in Real Estate! Join us today and get ahead of the pack!

I just read a brilliant article in Forbes. I say that of course, because it echoes what I’ve been saying about investing in real estate, but also because of the insightful comments that reporter Stephane Fitch gathered from some of the richest and most talented men to ever make their fortunes in this business.

Don’t Just Take it From Me!
The consensus is almost deafening. This is the time to invest in real estate, there’s no doubt about that. But there are three questions that you must be able to answer before choosing your strategy and plunging into the icy waters of today’s real estate markets, I want you to keep these in mind as you read this post:

• What to buy?
• Where to buy?
• What strategies are working best in today’s markets?

Here are some of my favorite quotes from the article. I encourage you to check it out for yourself. It’s one of the best mainstream media accounts of the current state of real estate I’ve seen since Lehman Brothers executives had expense accounts.

Investors Need Expert Strategies
Spencer Rascoff, Zillow.com: “Yes I do think this is a great time to be buying residential real estate, with two caveats. First, you need financing, which is much more difficult than in the past. Second, you need to be smart about it. The good old days when anyone could make millions flipping homes in their spare time are over…. Back then, it was a good time for anyone to buy. In 2008-2009, it’s only a good time for sophisticated real estate investors. The market is too turbulent for novices to succeed as real estate investors right now.”

Metro Market Fire Sale Burns into the Future
Michael Feder, Radar Logic: From the height of the bubble our data indicate that prices per square foot have declined between 5 percent and 45 percent in the 25 MSA’s we track. As our data have shown, the housing markets are being affected by various forces in different ways in different regions. In California, Nevada and Florida, increased foreclosures and the presumably resulting motivated prices are putting considerable pressure on markets.

Know a Great Deal when You See It
Donald Trump Jr.:  “Some of the biggest mistakes made over the past few years were because individuals looked at a market as a whole: i.e., ‘is now a good time to buy?’ The whole country’s real estate market is up, ergo all real estate must be a good buy–real estate never goes down, right? People looked at it too generally and forgot about the underlying asset: the real bricks and mortar. That is the way to look at real estate.

“For me I go with real estate all the time. I am not satisfied with 12 percent historic returns, especially when I look at my long-term portfolio these days. Besides, I play with real estate every day, so I am more comfortable knowing the asset I am buying is a good bet, regardless of the world around me, and I have access to or know how to find the most favorable borrowing options, etc. … I just do not have the same comfort level in the stock market, so I would always recommend to someone to stick with what they know.

“Also, it totally depends on the deal. There are deals out there now. There will definitely be a lot more coming in the near future, but people have to come to terms with the fact that the “equity” that they think they have in their homes is not even close to reality. Buyers know this and are waiting; when that gap narrows deals will be made. In many instances it may take a while because people may still feel they can carry their unit and wait for a better market. For many of them it will be a long wait, and they will eventually have to stop the hemorrhage of cash flow. That is especially when you will see deals of more commercial assets, but the underlying principals will hold true for [residential] as well.”

In Search of … The Ultimate Strategy
If you want to see the real estate truth behind the wizard’s curtain, I urge you to check out Richard Roop and Dan Doran’s Ultimate Strategy. Not only do the dynamic duo address and clarify all the most pressing questions you might have about how to approach the best deals today, their approach delivers only the highest equity deals that are guaranteed to maximize your real estate return on investment (ROI) because they target free and clear properties, or those that carry no mortgage burden.

Firm and Tone Your RE Body of Knowledge
Get the scoop on how the Ultimate Strategy’s potential to help you meet all the most pressing challenges and make you a real estate insider.  Check out my review in the resources section of GaryBoomershine.com, and you’ll catch a glimpse of your best bet to learn: What to buy, Where to buy it and What strategies are Working Best to Buy Real Estate in Today’s Markets.

Stay tuned for some free, killer audio content from Richard and Dan that’ll help you get your cardio conditioning, whether you’re in the gym or not!

Claim Your VIP Pass to Moneymaking Real Estate News, Marketing, Strategies & Tips
At GaryBoomershine.com, our focus is on delivering the the most timely real estate news, resources, tools and systems that build stronger real estate investment decisions and boost your bottom line.

Sign up either here or on the main page at GaryBoomershine.com and you’ll get the best this industry has to offer in real estate news, real estate marketing, real estate training systems, and all the creative real estate ideas that drive success in this business. Members also get exclusive access to compelling multimedia content and jaw-dropping discounts!

Don’t miss out on this opportunity to Make Tons of Cash in Real Estate! Join GaryBoomershine.com today and get ahead of the pack!

News stories about reckless excesses and outrageous “golden parachutes” for fallen Wall Street executives have punctuated wildly gyrating financial markets for the past few weeks, though for many of us, it may seem like forever.

Earlier this month, hearings on Lehman’s bankruptcy and AIG’s $85 billion bailout held by the Oversight Committee of the U.S. House of Representatives rocked the news media and diminished investor confidence, contributing to ongoing instability on the financial markets. Friday, the Dow Jones Industrial Average (DJIA) took an unprecedented 1,000-point roller coaster ride, finally closing down about 125 points.

Form the hearings came news that Lehman likely misled investors about its losses. At least three U.S. attorney offices are probing whether Lehman misled investors before its bankruptcy filing, as pressure grows to hold individuals accountable for the financial crisis, the Wall Street Journal reports.

Bridge Loan Over Troubled Waters
Striking the chords of insanity to most taxpayers was the news that AIG executives took a luxury spa retreat to cope with the stress of receiving an emergency $85 billion bridge loan from the Fed. Then, as if to add taxpayer insult to economic injury, The Fed announced late this week that would be fronting AIG another $40 billion to help shore up the giant insurer’s operations.

New Law Won’t Stop Golden Parachute Deployment
Though we’re supposed to draw some measure of reassurance that the bailout bill was revised from Treasury Secretary Henry Paulson’s plan to ban “golden parachutes,” they’re only prohibited under certain circumstances, Namely, when the company sells more than $300 million in assets to the government or only if the employment agreement was made during the bailout period.

According to the Motley Fool, if the severance language already exists or if a golden parachute is already in place, executives will still land on their cash mattresses.

Golden Parachutes Fly over Lower Manhattan
On the eve of the $700 billion bailout bill’s enactment, Bloomberg reported that five of Wall Street’s powerhouses paid more than $3 billion over the past five years to executive staff at the helm of packaging and selling the loans that would ultimately kill the investment-banking system.

The $3.1 billion paid to the top five executives at the firms between 2003 and 2007 in fact, was nearly three times what JPMorgan paid to buy Bear Stearns.

Top executives at Goldman Sachs, Merrill, Morgan Stanley, Lehman, and Bear Stearns made $613 million combined last year. And the worst obscenely paid of them all, Lehman, AIG, and government chartered enterprises (GSEs) Fannie Mae and Freddie Mac paid out more than $1.4 billion in total compensation since 2004, Motley Fool reports. Lehman even paid $23 million to three executives, two of whom were fired, as Lehman begged for Federal aid, mere days before it fell.

Read it and Weep
Though some of the top financial institution executives who made critical decisions linked to today’s meltdowns already have left the positions that made them rich, a look at some of their compensation packages is so obscene, it may require an NC-17 rating.

According to multiple reports, here are some compensations packages what may make an office job seem almost bearable.

Bear Stearns: James Cayne
Before the company did a face plant on Wall Street and was sold to JPMorgan in June, Cayne made $161 million.

Citigroup: Chuck Prince:
Paid: $16 million, and jobless after raising Citi’s exposure to mortgage and consumer credit markets.

Merrill Lynch: Stanley O’Neal:
Paid: $66 million, terminated after the investment bank’s disclosure of $7.9 billion in unexpected losses. (Note: O’Neal was paid $172 million between 2003 and 2007.)

Merrill Lynch: John Thain
Paid $86 million, including a signing bonus, when he started working at the firm last December. Merrill was acquired by Bank of America for about $50 billion on Sept. 15.

Wachovia: Ken Thompson
Paid: $5 million, fired after several mistakes, including the  $25 billion acquisition of a California mortgage lender that caused huge losses for the Charlotte, N.C.-based bank now being acquired by Wells Fargo.

Think last week was rough on Wall Street? Expect more waste to hit the fans in the next couple of weeks as the financial industry executives continue to air their dirty laundry in these House Oversight Committee hearings. I’ve caught some of this stuff on C-Span and it’s almost like watching a soap opera unfold.

October 16: The Regulation of Hedge Funds
Five fund managers who earned over $1 billion last year have been invited to testify about the role of hedge funds in the financial markets and their regulatory and tax status. The five witnesses are John Alfred Paulson, President, Paulson & Co., Inc.; George Soros, Chairman, Soros Fund Management; Philip  Falcone; Senior Managing Director, Harbinger Capital Partners; James Simons, Director, Renaissance Technologies; and Kenneth Griffin, CEO, Citadel Investment Group.

October 22: The Breakdown of Credit Rating Agencies
The CEOs of the nation’s three largest credit rating agencies have been invited to testify about the role of the credit rating agencies in the financial excesses on Wall Street. The three witnesses are Deven Sharma, President, Standard & Poors; Raymond McDaniel, CEO, Moody’s Corp.; and Stephen Joynt, CEO, Fitch Ratings.

October 23: The Role of Federal Regulators
Former Federal Reserve Chairman Alan Greenspan, former Treasury Secretary John Snow, and current SEC Chairman Christopher Cox have been invited to testify about the role and responsibility of federal regulators in the Wall Street financial crisis.

Bank of America scooped up some great bargains when it acquired Countrywide’s assets… or did it?

BofA has agreed with 11 state Attorneys General (AG) to pay $8.5 billion to modify troubled mortgages it acquired as part of its July purchase of Countrywide.

Under the agreement, Countrywide customers may benefit from an automatic freeze or reduction in interest rates, an extension of loan terms, conversion to fixed term loans, or principal reduction. Eligible borrowers who participate will not be charged late fees, loan modification fees, foreclosure fees, or pre-payment penalties.

Terms of the Deal
As a result of today’s settlement, BofA will spend $150 million nationwide to assist homeowners who have already lost their homes. The company also will spend up to $70 million to homeowners who, despite the loan modification program, are ultimately unable to keep their homes. The settlement also requires that eligible Countrywide borrowers who have suffered foreclosure or who are unable to afford their homes even under a modified loan arrangement will be offered soft landing payments to ease re-location to another home.

The deal will enable eligible subprime and pay-option mortgage borrowers to avoid foreclosure by obtaining a modified and affordable loan. The loans covered by the settlement are among the riskiest and most default-prone  loans, which are blamed for triggering the foreclosure epidemic that now imperils Wall Street and international financial markets.

BofA says foreclosure sales will not be initiated or advanced for borrowers likely to qualify for the modifications through the program, which is expected to launch Dec. 1.

Settlement Could Rattle Investors
Analysts are saying that this settlement with state AGs is likely to damper investor enthusiasm for BofA, though the deal could help an estimated 400,000 struggling homeowners to keep their houses.  (Note: The Washington Post reports that BofA only holds only 12 percent of the 400,000 loans under discussion here.)

Attorneys General Wage War on Foreclosure
AGs in California and Illinois led the negotiations for the states that tackled Countrywide Financial Corp., Countrywide Home Loans and Full Spectrum Lending in their efforts.

California Scores the Biggest Piece of Relief
California AG Edmund (Jerry) Brown says $3.5 billion of the settlement will aid California borrowers and that the Countrywide settlement will likely become the largest predatory lending settlement in history, dwarfing the nationwide $484 million settlement with Household Finance Corporation in 2002, under which California received approximately $91 million. (Access Frequently Asked Questions about the Calif. Settlement agreement here:  and the text of the complaint here.)

Calif.  Attorney General Brown’s efforts are ongoing to separately slam former Chairman Angelo Mozilo or former Countrywide Home Loans President and COO David Sambol. (Click here for details.)

Michigan Scores Big One for Countrywide’s Borrowers
According to Michigan AG Mike Cox, Countrywide to pay nearly $10 million, to help more than 10,000 struggling Michigan homeowners. Under the terms of the settlement, Countrywide will:

• Refinance as many as 9,700 mortgages in Michigan, giving families an opportunity to keep their homes, and saving them approximately $129 million as a result of more favorable terms.
• Pay more than $9.8 million to assist Michigan homeowners who lost their homes to foreclosure. These funds will also be used for borrower education programs and neighborhood rehabilitation efforts.
• Pay relocation assistance payments to certain homeowners who go into foreclosure after the date of this settlement, costing Countrywide up to $70,000,000 nationally.
• Stop selling subprime and option ARM loans in Michigan for two years, and impose new limits on the sale of low or no-documentation loans.
• Cap the amount a broker can earn to 4 percent of the amount borrowed.
• Stop an automatic foreclosure process until certain details regarding the mortgage holder’s situation have been verified.
• Report quarterly to the Attorney General on the status of its troubled mortgages and what is doing to keep them from going into foreclosure.
• Maintain a specified number of staff focused on helping troubled homeowners avoid foreclosure proceedings.

More State Settlement Details
Follow links provided below to specific state information regarding the settlement agreement reached today between AGs and BofA as a result of Countrywide’s subprime lending habits.

• Arizona: More than 13,000 Arizonans are expected to qualify for the loan modification program that will provide them up to $245 million in permanent relief, says State AG Terry Goddard.
• Connecticut: About 4,500 people in Connecticut may be affected by the settlement. Here, because Countrywide engaged in criminal behavior rates on mortgage payments to could be dropped as low as 2.6 percent with no program-participating homeowner paying more than 34 percent of income on mortgage payments, State AG Richard Blumenthal says. Also, BofA has agreed to cap mortgage amounts at no more than 95-percent of the actual value of the home.
• Florida: State AG Bill McCollum says the settlement requires BofA to pay $21 and modify home loans with an estimated 52,000 of the 73,000 subprime loans Countrywide issued in the state.
• Illinois: Approximately 10,750 Illinois borrowers are expected to receive loan adjustments, representing nearly $185 million in modifications, according to state AG Lisa Madigan.
• Iowa: Here, the settlement will require mortgage loan modifications for more than 1,100 Iowans, state AG Tom Miller says. Potential economic relief to be paid for Iowa borrowers is estimated at $11 million.
• North Carolina: The agreement by State AG Roy Cooper is expected to provide $71 million in reduced mortgage payments to more than 5,000 North Carolina borrowers
• Ohio: More than 8,000 Ohioans will receive loan modifications, says state AG Nancy Rogers. Relief to borrowers here alone is estimated to be about $97 million. Depending on the type of loan, Rogers says that nearly half of Countrywide’s subprime loans in the state are delinquent.
• Texas: Bank of America estimates that up to 30,000 Texas homeowners will qualify for the loan modification program. State AG Greg Abbott predicts that Texans will get a $350 million slice of the settlement pie.
• Washington: State AG Rob McKenna Monday announced a landmark settlement brokered by   Washington and other states requiring sub-prime lender Countrywide Financial Corp. to provide loan modifications for up to 395,000 borrowers nationwide. As a result, nearly 10,000 Washington homeowners will receive about $200 million in payment relief.

In addition to the 11 state AGs making settlement announcements today, about 8,000 borrowers in Virginia, 7,000 in Maryland and 800 in the District of Columbia could benefit, according to a Washington Post report. Those who qualify for participation in the program have subprime mortgages that are either close to or in some stage of default. More states are likely to join the settlement.

Following much debate and with no amendments, U.S. House of Representatives has approved the “Emergency Economic Stabilization Act” by a lackluster 263 – 171 vote. Though stocks rose on the bill’s approval, analysts say that Wall Street’s enthusiasm was tempered by news of record September job losses recorded by the U.S. Labor Department.

Since Treasury Secretary Henry Paulson first submitted his three-page bailout  proposal to lawmakers, amendments to the legislation have pumped it up to nearly 500 pages.

For details about how the measure has evolved as it has its way through the legislative process, see Wednesday’s blog post: “Senate Approves Emergency $700 Billion Wall Street Bailout, Slathers on $150 Billion in Sugar and Lard.”

According to the Senate Banking Committee, key features of the final version of the bill include:

• Empowering Treasury Secretary Henry Paulson to buy up to $700 billion in bad mortgage-related securities and other distressed assets.
• Authorizing the Treasury Department to modify mortgage terms to help homeowners avoid foreclosure.
• Allowing the government to receive equity in companies it helps so taxpayers may benefit from any future profits.
• Restricting executive pay and  curtailing CEO golden parachutes for companies aided by the program.
• Creating an independent oversight board to oversee the Treasury Department program.

Proponents of this near $1 trillion Wall Street Bailout package cited the record 778-point drop in the Dow Jones Industrial Average that followed the House’s 228-205 defeat of an earlier version of this legislation Monday as evidence that the banking system clearly needs some help.

For a recap of how the fallout hit Wall Street and permeated international financial markets, check out: “Worst Monday Ever: House Snubs Wall Street, Stocks Tank, Fed Subpoenas GSEs and Bank Failures Cross the Atlantic.”