Republicans may trade Unemployment Benefits for extension on Tax Cuts

Unemployment benefits extensions are set to expire on Tuesday, Nov. 30. At the moment, there doesn't seem to be many on Capitol Hill overly concerned that another two million people, many of whom seem the extensions as their only financial lifeline in a flat economy, will soon see their unemployment benefits disappear. According to OpenCongress.org, there is nothing about unemployment benefits scheduled for introduction or debate in Congress on the last two days of November.

The lame duck House of Representatives is in session. For Republicans, that means that anything they oppose can be delayed, voted against, tabled, shelved, or sent on to the Senate to be filibustered. The lame-duck Congress is not only in session, it is in season -- and Republicans are loaded and prepared to kill off as much of the Democratic legislation as they can push through in the next few weeks before the Republican-heavy 112th Congress convenes.

Part of that lame-uck legislation is emergency unemployment benefits and the Tier unemployment extensions. Republicans already knocked down a proposal to extend unemployment benefits through February 2011. They argued that the Democratic proposal did not pay for the extensions and would therefore increase the deficit and the national debt. Instead of compromise or finding the means to pay for the unemployment benefits extensions, Democrats simply fell back on the argument that the unemployment extensions were necessary for a sluggish economy and that there had never been an instance where the unemployment rate was above 7 percent and the U. S. Congress had denied unemployed Americans emergency benefits.

In short: the Republicans are crying fiscal and future expenditure responsibility (something their record indicates they know little about) to deny benefits while the Democrats cry economic and humanitarian necessity (while ignoring fiscal responsibility and therefore playing into Republicans' hand).

But as the last unemployment benefits extension package reaches expiration, there are rumblings of a deal in which Republicans, who are exceptionally interested in continuing the Bush tax cuts to all Americans (including the 2-3 percent of the income earners that are among the wealthiest in the nation), might be open to a compromise with Democrats, who only want to extend the Bush tax cuts for those making less than $250,000 per year. Some believe that Republicans might find leeway in their opposition to the unpaid-for unemployment benefits extensions if the Democrats allow the passage of continuation legislation for the Bush tax cuts, which will expire at the end of the year. This deal would include President Obama's signature of approval.

In order for millions that might see homelessness, financial ruin, and/or another financial lifeline extinguished in the next few weeks (or months, if benefits remain unextended through January and so on), Congress will be working on a December deal where the richest and those able to afford the cessation of the Bush tax cuts, not to mention adding nearly a trillion dollars to the national deficit over the next decade.

Sounds like a deal being negotiated by people who have the time and money to do so. While millions are watching their unemployment benefits (which average -- with an emphasis on average -- around $300 per week) expire in an economy that is producing only one job (and usually one that underpays the unemployed prospective job seeker) for every individual looking for work, a group of legislators that count amongst themselves 261 millionaires (according to OpenSecrets.org) will try to reach a compromise on legislation that will extend benefits to the jobless and extend tax cuts to the nation's wealthiest.

Having plenty of money and receiving a paycheck that exceeds $3,346 per week (which is the current regular salary of each member of Congress -- $174,000 per year) apparently dulls one's senses to the urgency of those struggling to simply maintain their household and find meaningful employment. As the Bush tax cuts expiration date nears, it will be interesting to note how quickly Republicans and Democrats come together to get something passed in the lame duck Congress. Because there is little doubt that the Bush tax cuts -- all of them -- will now be extended in order for both parties to get what they want. It is now just a matter of negotiating the terms of compromise.

And how lame the Democrats really are will be seen in the number of months of unemployment benefits extension they command in order to give the Republicans (and the wealthy) their precious tax cuts. Given the economic expectations of the coming year (unemployment to remain relatively level with its current rate) and the damage to the national debt the Bush tax cuts will incur in the next decade, anything less than a year of unemployment benefits extensions would be lame indeed.

New Unemployment Claims Drop

New U.S. claims for unemployment benefits last week dropped to their lowest level in more than two years while consumer spending rose in October, pointing to a moderate strengthening in economic activity.

Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 407,000, the Labor Department said on Wednesday, the lowest since mid-July 2008. That was well below economists' expectations for a fall to 435,000.

The news was tempered by a surprise drop in new home sales last month, a reminder that growth would remain sluggish.

Small investors permanently soured on stocks?

In 2008, $234 billion flowed out of equity mutual funds; the selling really intensified in the fourth quarter. In 2009, some thought the worst was over, but $9 billion still flowed out of equity funds. In 2010, the outflows picked up again.

As of the end of August, about $19 billion had left stock mutual funds.

So, what to make of this?   Reuters suggests that the break between retail investors and the stock market is deep and lasting. The worry now is that a Lost Decade will create a Lost Generation of investors who avoid the market in a way not seen since the Great Depression.

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3 banks may be nearing deal on foreclosures

Three big U.S. banks are nearing a settlement in which they would compensate borrowers whose homes were improperly foreclosed upon, according to a CNBC report.

Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. would also agree not to start foreclosure proceedings until they have exhausted all efforts to modify a borrower's mortgage, CNBC is reporting. Many borrowers have complained of receiving foreclosure notices while they're negotiating to lower their loan payments.

CNBC attributes its report of the potential settlement to officials at the banks and among state attorneys general investigating foreclosure practices. It comes as Bank of America and JPMorgan are testifying on the topic to a hearing of the Senate Banking Committee.

Actions in the foreclosure / modification puzzle

The attorney general of Florida has wrapped up his meeting with five lenders and mortgage servicers, Ally, PNC, Bank of America, JPMorgan Chase and Goldman Sachs' Litton Loan Servicing, which has also put foreclosures on hold temporarily. Florida Attorney General Bill McCollum sought the meeting way back on October 12, according to Bloomberg, to "discuss ways to promptly and effectively redeem the integrity" of foreclosures.

Elsewhere, Iowa Attorney General Thomas Miller is moving the 50-state investigation task force forward, but there's also a lot of specific activity by states.

Other meetings between banks and AGs have already been wrapped up. Colorado's AG met with several. Maine may join a class action suit against Ally/GMAC. Ohio's AG has already sued Ally/GMAC.

So it remains unclear exactly how the AGs will move toward a solution. FOX Business has reported, however, that a settlement is coming in December, one that will require judge-driven modifications, better processes and perhaps a fine. You do get the sense that solutions rather than punishment is a priority. But I am not sure if forced modifications will speed up the process. The current modification wave has hardly been inspiring.

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Time is right to buy a retirement home

Money Magazine is urging people a few years from retirement who plan to move when they quit work to consider buying now while home prices and mortgage rates are low.

Buyers who intend to use the place as a second home will pay the same rate as they would pay for a primary residence. If they intend to rent the property out until they retire and they need the rental income to qualify for the mortgage, lenders will consider that an investment property and charge a half to a full percentage point more.

Before foreclosing, judges must hear out homeowners?

In a ruling likely to create more headaches for lenders, a state appeals court ruled that judges can't give banks the go-ahead to foreclose until they respond to defenses raised by homeowners.

A three-judge panel of the 4th District Court of Appeal said that Broward Circuit Judge Peter Weinstein erred when he granted Deutsche Bank a $337,000 summary judgment against Margate residents Judith Alejandre and Sergio Terron, even though the bank ignored their defenses. His decision allowed Deutsche to take title to the couple's property and evict them in February. The case has been sent back to the trial court.

Like many other homeowners fighting foreclosure, the couple raised several defenses. But in what lawyers say has become customary in South Florida courts, the bank didn't answer the defenses, and Judge Weinstein allowed the bank to take title to the house.

The decision comes amid accusations that lenders, servicers and foreclosure law firms are falsifying affidavits and forging signatures to speed the foreclosure process.

Many of the issues raised by Alejandre and Terron in defense of Deutsche's foreclosure suit are similar to ones other homeowners have asserted against other lenders.

The couple said Deutsche failed to attach the original note and assignment of mortgage to its complaint; that it collected payments but failed to credit the homeowners; that it deceived the couple when they tried to modify their delinquent loans; and that it "participated in a full-scale venture to induce the homeowners to borrow funds at exaggerated rates."

It's the process of the motions for summary judgment that the banks have been using to foreclose en masse, even though there exist file defenses. It's the rocket docket.

There's hope the 4th DCA decision will help reform the process. From now on, according to the law.  If the defendant raises affirmative defenses, and there are factual disputes, the defendant deserves a trial.

The ruling gives Alejandre and Terron hope they may be able to get their home back. They are living in a rental apartment in Margate with their four children.

"I would love to get it back if I could," Terron said. "We can pay the mortgage if they lower our payments," he said. "We tried to work that out before, but the lender wouldn't call us back."

Terron paid $95,000 for the house in 1997. In 2005, he refinanced the home for about $200,000 and was paying about $1,500 per month. Things began to go wrong in 2006 when he took out two mortgages with First NLC Financial Services, a Deerfield Beach subprime wholesale lender.  NLC provided Terron and his wife with a first mortgage of $292,000 and a second mortgage of $73,000. The couple's monthly payment jumped to $2,500.  Terron said he refinanced the house to try to keep his struggling restaurant business afloat. But he had to shut down the restaurant and could no longer afford the payments. In 2008, Deutsche Bank, acting as a trustee for a securitized mortgage trust, filed a foreclosure action.

The couple's home is listed for sale for $129,000 with Altisource.

Terron and Alejandre may be lucky that their house has not sold, but that won't be the case with many foreclosure cases that could end up being appealed and sent back to a trial court.  The 4th DCA has typically refused to put foreclosure sales on hold while a case is being appealed.  That was the case with Terron's foreclosure.

"What we commonly saw is the court would condition a stay upon the payment of a large bond," Bleil said. "If the homeowner had the ability to pay this large bond, they wouldn't be in foreclosure in the first place, so in essence it was a denial of the stay."

The ruling could change how judges look at the cases. While the circuit court judges were thinking they could push these things through without getting reversed, they weren't as worried, but this case is going to change things.

Link to the ruling

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