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The Federal Reserve has suggested that the worst of the US recession is over.
It said that while "economic activity is likely to remain weak for a time", it had begun to "level off".
The Federal Reserve Bank of New York bought $6.594 billion in Treasurys on Monday, the first of two operations this week.
Foreclosure activity jumped 7 percent in July from June and 32 percent from a year earlier as one in every 355 households with a loan got a foreclosure filing, RealtyTrac said on Thursday.
Make no mistake, we are going to hit another wave of pain. The commercial real estate market with $3 trillion in debt has some of the most toxic debt in the world. Empty strip malls, vacant medical offices, and parking lots with no cars. We have barely scratched the surface in this market.
The average subprime loan balance is $180,000. There are some 2.4 million loans in the U.S. that carry the proud subprime label. The large majority of these loans have as much likelihood as making it a few more years as city sewage turning into gold.
Modification don’t seem to be working with these particularly noxious loans. In the face rising payments, borrowers don’t have an incentive to keep up with their current payments for homes that are already so horrendously under water, i.e. the loan amount is far above the current value of the property. Bordia says that many of the option ARM loans that do get modified turn delinquent soon after anyway. They’ve crunched some numbers and forecast that 95% of the loans that are slated for modification will eventually default. If you think that sounds bad, get this: They say that 80% of the option ARM loans out there that are ok and up-to-date as of right now will eventually default, too.”
Despite signs that the financial system has stabilized, banks remain threatened by billions of dollars of bad loans on their balance sheets, and more could fail if the economy worsens, a congressional watchdog reports.
In its latest assessment of the $700 billion financial system bailout, the Congressional Oversight Panel warns that banks still hold many risky loans of uncertain value. If unemployment rises sharply or the commercial real estate market collapses -- as many economists fear -- the banking system could again lose its footing, the panel says in a report to be released Tuesday.
"The financial system (remains) vulnerable to the crisis conditions that (the bailout) was meant to fix," the panel wrote in a draft copy of Tuesday's report.
July 25, 2007 ”US Federal Reserve Chairman Ben Bernanke said last week that he expected “significant financial losses” from failed sub-prime real estate loans but only a limited effect on the economy.”