The Dow rose by almost 500 points today on the strength of financial stocks. Today's strong showing came on the heels of an unexpected rise in existing home sales and Treasury Secretary Geithner's announcement in the Wall Street Journal that the government will offer a plan to encourage private investors to help buy banks' toxic assets. JP Morgan Chase, Bank of America, and Citigroup all saw strong gains.
Got a buck in your piggy bank? Then you can buy a home in Detroit. Investors worldwide have been scooping up Detroit homes in bulk for a fraction of their value; many under $10,000 and some for as low as a dollar. Detroit has been targeted due to a large volume of single home dwellings and home values that have plummeted much more than other areas in the country. The effect of these large scale investor purchases is that Detroit now has the lowest home ownership rate of the 20 largest cities in the country. The positive of all of this is that many previously run down homes have been repaired and neighborhoods have been revitalized. The negative is that non-foreclosed homes can't sell and owners have seen their home values sink.
Things have been great for PennyMac. PennyMac was formed by former Countrywide president Leo Gerald and several ex-Countrywide executives. Their business model: buy foreclosures for pennies on the dollar and then resell them. Nice gig if you can get it. Never mind that most analysts believe it was Mr. Gerald and company that in large part contributed to the subprime mess and that many of these homes were lost due to this crew. In fact John Lawrence, head of loan servicing for PennyMac is practically gloating. Business has been "off the charts good" he gleefully declares. Others are not so gleeful. As Gail Collins of the New York Times notes in her column, “It’s like Jeffrey Dahmer selling body parts to a clinic.”
The program hopes to assist up to 9 million Americans in lowering their mortgage payments. The plan offers refinancing options for homeowners who have less than 20% equity in their home or owe more than their home is worth and also gives at risk homeowners an opportunity to modify their loan terms in an attempt to lower their monthly payments. Only homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac are eligible and borrowers must be current on their loan. The program runs through June 2010.
It's your FICO score, but you're no longer allowed to see it. Although the FICO score is used by 90% of the largest U.S. lenders in determining whether or not you qualify for a mortgage, Experian has decided that your score is none of your business. Experian has backed out of its agreement with myFICO.com, which had been the only place where consumers could get their true FICO scores (other scores, such as the Experian's PLUS or VantageScore are not true FICO scores and use different formulas). Of course lenders still have full access to your FICO score. How can a score that lenders use extensively to evaluate credit worthiness be kept from consumers? At a time when it already seems like a Herculean task to even qualify for a mortgage, this is a slap in the face to consumers trying to stay afloat.
