Thursday, May 28, 2009

Foreclosures break another record in first quarter

According to the MBA's quarterly National Delinquency Survey, 1.37% of mortgages entered the foreclosure process in the first quarter, up from 1.08% in the fourth quarter.

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Total foreclosure inventory was also up, with 3.85% of all mortgages somewhere in the foreclosure process at the end of the first quarter, compared with 3.3% in the fourth quarter -- also a record jump. The delinquency rate, which includes loans that are at least one payment past due but not those in foreclosure, was a seasonally adjusted 9.12%, up from 7.88% in the fourth quarter.

The Washington-based MBA survey covers 45 million mortgages, representing between 80% and 85% of all first-lien residential mortgages outstanding in the United States.

"The increase in the foreclosure number is sobering but not unexpected. The rate of foreclosure starts remained essentially flat for the last three quarters of 2008 and we suspected that the numbers were artificially low due to various state and local moratoria, the Fannie Mae and Freddie Mac halt on foreclosures, and various company-level moratoria," said Jay Brinkmann, MBA's chief economist.

"Now that the guidelines of the administration's loan modification programs are known, combined with the large number of vacant homes with past due mortgages, the pace of foreclosures has stepped up considerably," he added, in a news release.

Until the country's employment situation improves, it's not likely that the level of mortgage defaults will begin to fall, Brinkmann added.

"MBA's forecast, a view now shared by the Federal Reserve and others, is that the unemployment rate will not hit its peak until mid-2010. Since changes in mortgage performance lag changes in the level of employment, it is unlikely we will see much of an improvement until after that," he said.

If the peak of unemployment doesn't hit until the middle of next year, it won't be until the end of 2010 or early 2011 that the foreclosure picture could improve, Brinkmann said in a telephone interview. But that timing also hinges on the local pictures in states including California and Florida, which have had an "oversized role" in the increase in foreclosures; the sooner things improve in some of the worst states, the sooner the national numbers could also start to look better. "If you work through the foreclosure numbers there... you may still see the national numbers come down," he said.

Some things change, some stay the same
While subprime, option ARM and Alt-A loans were a focus of the foreclosure problem initially, the foreclosure rate on prime fixed-rate loans has doubled in the last year.

"For the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures," Brinkmann said in the release -- evidence, he added, of the impact that the recession and drops in employment are having on the foreclosure numbers.

In some respects, these prime-loan defaults are the most difficult for lenders to address because they often indicate the loss of a job, he said. Even with a mortgage modification or refinance, borrowers might not have sufficient funds to pay their bills.

Still, in some ways the foreclosure story is the same.

"It was actually surprising to me how same the story was," Brinkmann said in the telephone interview. Just as they have in previous quarters, California, Florida, Arizona and Nevada are driving up national numbers, accounting for 46% of the foreclosure starts in the country in the first quarter.

Foreclosure actions were started on 3.4% of mortgages in Nevada, 2.8% of the mortgages in Florida, 2.5% of the mortgages in Arizona and 2.2% of the loans in California. By comparison, foreclosure actions were started on 1.5% of mortgages in Michigan and Illinois, and 1.3% of mortgages in Indiana and Ohio.

At the end of the first quarter, 10.6% of mortgages in Florida were somewhere in the foreclosure process, followed by 7.8% of mortgages in Nevada, 5.6% of mortgages in Arizona and 5.2% of mortgages in California, according to MBA statistics.

The effect of government help
It's difficult to determine how much of an effect the Obama administration's current plan to reduce foreclosures could have on the numbers, Brinkmann said. The Making Home Affordable program was announced during the first quarter.

"Just because the numbers go up, it isn't that the plan is not working," he said. Foreclosures may have been higher without the plan, he added.

That said, there are properties out there that don't qualify for the plan, he said, referring to mortgages that are drastically underwater, meaning that the mortgage is much higher than the home is currently worth.

"Prices have fallen, people are stepping in and buying homes at current prices. But there is no indication that it's setting much of a floor under prices," he said. "As long as prices stay at these levels, a number of people stay underwater."

Those who are underwater, in particular, are vulnerable to foreclosure when faced with events such as a job loss or divorce, he said

Attorney: Rihanna will come to court

Rihanna's attorney says she will appear at a hearing next month as a possible witness in the assault case against Chris Brown.

Donald Etra says prosecutors have told him Rihanna will receive a subpoena to testify during a preliminary hearing in Los Angeles on June 22. He says she will comply with the order.

A judge on Thursday rejected a motion by Brown's attorneys to receive police and investigative records in the case. The judge told attorney Mark Geragos the motion was premature and he could file it again after the preliminary hearing, which will determine whether there is enough to continue a case against Brown.

Brown hasn't been in court since entering a not guilty plea in April.

Season's 1st tropical depression forms in Atlantic

National Hurricane Center forecasters in Miami say a tropical depression has formed off the mid-Atlantic coast, but it's not expected to threaten land.

The National Weather Service counts the depression as the first of the 2009 Atlantic hurricane season, which officially begins June 1.

The depression's maximum sustained winds are near 35 mph. It is expected to become a tropical storm in the coming days.

Forecasters expect the depression to stay over the Atlantic and move toward the northeast near 17 mph over the next day or two.

At 11 a.m. EDT Thursday, the depression was centered about 310 miles south of Providence, R.I., and about 635 southwest of Halifax, Nova Scotia.

New York DA says Sotomayor no radical

-- New York District Attorney Robert Morgenthau says political pundits are incorrect when they call U.S. Supreme Court nominee Sonia Sotomayor a radical.

Morgenthau said in a New York Daily News opinion piece Thursday Sotomayor, who sits on 2nd U.S. Circuit Court of Appeals, is by no means a radical legal figure as some pundits have labeled her.

"To be sure, she is in favor of civil rights, in the sense that she believes there should be fair treatment for all. But that is, of course, the law," Morgenthau said. "And she understands poverty, and does seem willing to accept government action that provides a safety net to the poor. But that is not exactly 'radical.'"

Sotomayor was nominated to the Supreme Court this week by President Barack Obama. She would be the first Hispanic and only the third female Supreme Court justice if confirmed.

Morgenthau said those who use Sotomayor's gender or race to criticize her are making a mistake.

"She may be a woman, and she may be a Latina. But Sonia Sotomayor possesses an abundance of wisdom, intelligence, collegiality and good character. Sotomayor is where she is today because of her talent," he wrote.

AT&T's faster 3G network could signal video chat coming with new iPhone

Faster data speeds would be welcomed regardless of video, however

If the next iPhone model supports video chat, as some rumors say it will, AT&T Inc.'s plan to expand to a faster wireless network called HSPA 7.2 later in the year would enrich the experience of iPhone users who take advantage of that feature.

And even if video chat is not coming in the expected July release of the next-generation iPhone, faster network speeds with the 3G upgrade would still be welcome news.

An AT&T spokeswoman wouldn't comment today about whether the new iPhone would offer HSPA 7.2 support, although she said "multiple" HSPA 7.2-compatible laptop cards and smartphones will be introduced later in 2009. AT&T is the exclusive carrier for Apple Inc.'s iPhone in the U.S.

Some analysts said that they believe AT&T's HSPA 7.2 plans are part of a general trend among wireless carriers to support smartphone wireless traffic of all kinds, and don't necessarily make room for video chat. But it's inevitable that video streaming will keep growing, even if the video isn't real-time and moving in two directions, as is the case with video chat.

"Smartphones are growing like crazy, and the networks are rushing like crazy to upgrade to meet the choking demand," said independent analyst Jeffrey Kagan.

Some analysts said they don't believe a video chat feature on the next iPhone would be used very much. However, based on the usage trends of some other phones with that capability, Cisco Systems Inc. and Polycom Inc. are expecting a burgeoning market for wireless video chat on handhelds.

One CIO who supports a large college IT infrastructure endorsed the concept of video chat on the iPhone. "One feature I would love to have [in the next iPhone] is two-way videoconferencing," said Jorge Mata, CIO for the Los Angeles Community College District, by e-mail.

"You would have a small kickstand in the back of the device and you could set it down on a table and have a videoconference (Skype-like) with others," he wrote. "That would be great for collaboration, especially if it ties into enterprise unified messaging systems."

If the theoretical speed of HSPA is 7.2Mbit/sec., as AT&T says, the new network would help video chat, but it's not clear whether that speed is sufficient for a quality video chat experience, especially if there are many users on a single cell tower.

Earlier this year, Polycom CEO Robert Hagerty described ways that his company has enabled videoconferencing via a Palm Inc. handheld with Ericsson networking in Italy, although he didn't reveal the network speed. He said Polycom's technology supports high-quality laptop videoconferencing inside airports over Wi-Fi, which tops out at 54Mbit/sec. for 802.11g wireless networks.

So Wi-Fi will still be faster than HSPA 7.2 by far, although AT&T also touts its prowess in that realm, boasting that it supports 20,000 Wi-Fi hot spots. Publicly, the question of whether AT&T is getting ready for video chat is still a subject of speculation, but realistically it's probably a matter of when, not if, the carrier will support that capability.

Taliban group claims Pakistan blast

A group claiming to have links with the Taliban in Pakistan has claimed responsibility for a bombing in Lahore that killed at least 30 people and wounded over 200 others.

The search for survivors continued early on Thursday, with the attack raising fears that fighting between the military and Taliban fighters in Pakistan's Swat valley could be spreading to the cities.

The blast occurred on Wednesday between a police station and the offices of the Inter-Services Intelligence (ISI), Pakistan's spy agency.

Witnesses said armed men opened fire and then detonated a car bomb, which destroyed the police station and damaged the ISI offices.

A group calling itself Tehrik-i-Taliban Punjab claimed responsibility for the bombing in a Turkish-language posting on websites, saying it was related to the fight in Swat, according to the Site intelligence group that monitors such internet postings.

The claim could not be verified and the group's relationship with the Taliban was unclear.

Military campaign link

Rehman Malik, Pakistan's interior minister, said the attack was in revenge for the government's offensive against the Taliban.

"I believe that anti-Pakistan elements, who want to destabilise our country and see defeat in Swat, have now turned to our cities," he said.

In depth

Pictures: Lahore bombing
Video: Bomber hits Lahore
Diary: Imran Khan
Riz Khan: Obama's 'AfPak' strategy
Riz Khan: The battle for the soul of Pakistan
Interview: Asif Ali Zardari
Q&A: The struggle for Swat
Your views: Crisis in Swat
The fight for northwest Pakistan
Talking to the Taliban
Pakistan's war
Witness: Pakistan in crisis

Pakistan's army has for weeks been battling Taliban fighters in the Swat region of the North West Frontier Province (NWFP).

The ISI is not directly involved in the fighting in Swat, but is responsible for gathering intelligence to support the operation.

Al Jazeera's Mike Hanna, reporting from Islamabad, said that there was a fear the attack was linked to the military offensive.

"This is the first attack in Punjab province since the [military's] campaign began about a month ago," he said.

"There had been speculation that there would be some retaliation, although we don't know at this point who is responsible [for the Lahore attack]."

Wednesday's blast was the third major attack in Lahore, Pakistan's second-largest city, in recent months.

Town recaptured

Mosharraf Zaidi, a Pakistan-based political analyst, told Al Jazeera: "The speculation is that this is the Taliban, but it could be one of many other groups that have been operating in this country for the last while."

The group claimed that the blast was linked to the fighting going on in the Swat valley
He said that targeting Lahore, rather than Peshawar, the NWFP's provincial capital, could be an attempt to exploit ethnic divisions in Pakistan.

In the Swat valley, meanwhile, there has been no respite for residents from violence.

The Pakistani military claimed on Wednesday to have taken back Mingora, the valley's main city.

Hameedullah Khan, an Al Jazeera producer and one of the first journalists in the area, said: "The military are saying they have killed 268 Taliban in Mingora city and they said the militants have fled to the mountains, upwards."

While shops and buildings have been destroyed, he said the destruction did not appear to be as bad as feared by Mingora's residents - most of whom had fled the fighting.

"Mingora is totally calm now, there's no one in the city. You will find only the military men standing alert on the streets of Mingora," he said.

Kerry says China will support UN action on NKorea

US Senator John Kerry said China will support UN Security Council action on North Korea and agrees the isolated regime must face the consequences of this week's nuclear test.

"As for the UN Security Council action on North Korea, Foreign Minister Yang (Jiechi) agreed with us that North Korea's actions were wrong and that there need to be consequences," Kerry told journalists in Beijing.

"China will support a, quote unquote, measured response that is being negotiated in New York," he said on the last day of a nearly week-long visit to China.

Kerry's comments came after Western diplomats at the UN said key powers were committed to broadening sanctions against Pyongyang after its May 25 nuclear test, but the exact nature of the punishment was still being negotiated.

Kerry, who is in Beijing to gauge China's position on upcoming global climate change negotiations, had met with Yang and other Chinese officials on North Korea.

"What North Korea has done is both reckless and counterproductive," he said of the second underground nuclear test conducted by the Stalinist nation.

"It will do absolutely nothing to advance their security interests. On the contrary their pursuit of nuclear weapons will only deepen their political and economic isolation."

Kerry further urged North Korea to return to the six-nation disarmament negotiations, which are hosted by China and include North and South Korea, the United States, Japan and Russia.

Former Yale classmates proud of Sotomayor's Supreme Court nomination

WASHINGTON – There will be at least one Dallas lawyer at Sonia Sotomayor's 30th law school reunion this fall, and like others who attended Yale with her, he was extra proud Wednesday that she might join the Supreme Court.

"I hope she comes," said Thomas Leatherbury, a Vinson & Elkins partner. "She's really an exceptional person. Very friendly, very bright. Very savvy."

Leatherbury said he's been trading messages with classmates since President Barack Obama picked Sotomayor, a New York federal appellate judge, as his first Supreme Court nominee and, if confirmed, its first Hispanic.

"There's a great number of people who have great admiration and friendship for Sonia and want to do whatever we can," he said.

Like other Yale-trained lawyers in Dallas contacted Wednesday, Leatherbury said Sotomayor has a first-rate legal mind. She even once ruled against his client, Blockbuster, in a dispute over whether a class-action suit belonged in federal or state court.

"It was well-written," said Leatherbury, who also has represented The Dallas Morning News. "I have great respect for her intellect and her accomplishments and her track record. ... She's a great, great pick."

Sotomayor would be the third Yale-trained justice. Clarence Thomas graduated five years ahead of her. Samuel Alito graduated in 1975.

Thomas has recalled his Yale years as a time of isolation and racial tension. Sotomayor's contemporaries recall no ethnic tensions or cliquishness, describing a diverse student body with blacks and Hispanics who excelled, including the up-from-poverty Bronx girl now poised to join the court.

"I grew up in Little Rock, Ark., so it was a strange new world for me. ... I imagine it was for her, too," said Stephen Good, managing partner at Gardere & Wynne, a top Dallas firm, who graduated in 1980 with Anita Hill, the law professor who played a central role in Thomas' confirmation hearing.

Good rejected Sotomayor's assertion – recycled this week by conservatives – that as a Latina, she can make better rulings than white men. But he agreed she would bring a valuable new perspective to the court.

"It's good to have that diversity. ... Unless you been some of those places, I think it's hard to think that way," he said.

With just 160 or so students per law school class, Yale is far smaller than Harvard. Graduates describe a thrillingly intellectual environment mostly devoid of cut-throat jockeying.

Sotomayor's classmates now teach law at Yale, Columbia, Cornell and Harvard. One is dean of the University of Pennsylvania law school, another at Lewis and Clark Law School in Oregon.

"There was an extraordinary collection of extremely brilliant students. ... And even in that extremely competitive environment, she excelled," said Dallas lawyer Frederick Medlin, Class of 1980, who worked with her on Yale's international law journal.

Anthony Stewart, another 1980 graduate and a partner at Jones Day in Dallas who practices international corporate law, said the campus wasn't a hotbed of activism, "but there was a lot of awareness that law is a powerful force in society."

He noted that some liberals have been grumbling, suggesting that Sotomayor will take the bench as a "narrow decider" – a judge who avoids sweeping, controversial rulings. But the Supreme Court is unique, he said, "so it's always rolling the dice. ... She'll be fantastic."