Mortgage Foreclosures Re-sales Slowing
Arizona State University research released this week shows the rate of foreclosure sales is ping. ASU reports 11,500 foreclosure re-sales in July 2009. This figure is down from the 11,820 recorded re-sales in June. Foreclosure activities in July 2009 were 37% of all sales. This is down considerably from the 51% sale of foreclosed homes in February 2009. The median price for foreclosed properties today is $148,045.00 which is down from $159,200 in July 2008. Low interest rates that encourage interest in buying homes are offset by the increased underwriting standards banks have for granting loans. The ASU report states that the current market is very similar to the market in 2003-2006 market as it is populated by investors looking for a great deal with the potential of large appreciation.
Business Foreclosures
The Federal Deposit Insurance Corporation (FDIC) closed regional banks in the states of Maryland, Minnesota and California Friday, August 28th. The combined cost of Friday’s closures to the FDIC is an estimated $446 million. With the latest closures the number of banks shut this year is more than three times the number of banks that failed in 2008. The majority of this year’s failures have been small, regional banks that collapsed due to losses on real estate and consumer loans. Thursday FDIC reported that their list of “problem banks” had reached 416 in the last quarter which is the highest it has been in 15 years. The amount of losses due to failures of insured institutions over the next 5 years is expected to be approximately $70 billion. The agency reported that the trust fund is currently $10.4 billion.
Financial Services Legislation Changes
The Financial Industry Regulatory Authority (FINRA) has launched a pilot program that will allow certain consumer cases against brokers to be heard by a panel with no industry arbitrator present. This is a break from industry arbitration norms in the consumers favor. As it stands when a consumer becomes a customer of a brokerage house they sign an agreement to settle any dispute in private arbitration. The bear market has generated an increase in the number of arbitration filings from 3,238 in 2007 to a projected 7,750 by the end of 2009.
For claims involving more than $100,000 the case is heard by three arbitrators, which are agreed upon by the consumer and the brokerage’s lawyers. At this time at least one of the three must have worked in the securities industry. Plaintiffs’ lawyers have been complaining that this configuration is like having a doctor on a jury in medical malpractice suits. The brokerages have a built-in advantage when one of their own is on a panel of three. Despite this unfavorable setup more consumers have been winning their cases when inappropriate investments or there is misrepresentation of the risk of the products being sold. The arbitration process starts with a complaint to the state regulator and to FINRA and then go to arbitration.
The number of financial advisors, brokers and brokerage firms being brought to arbitration and the complaints about the system has prompted the pilot program.
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