Get your parachutes ready 'cause it's a long way down from here!!

Foreclosure auctions hit new record

RealtyTrac says 372,445 foreclosure auctions were scheduled in July, August and September, while 288,345 properties were repossessed by lenders over the same time period. Overall foreclosure filings edged up to 930,437 in the third quarter, a 4% increase from the previous quarter. One in every 139 homeowners received a foreclosure filing during those three months. Bank repossessions, or REOs, also are on the rise. In September, a record 102,134 homes were taken back by banks. It's the first time repos have topped 100,000 in a single month. The uptick is not expected to last, RealtyTrac CEO James Saccacio said in a statement, because several major loan servicers have halted foreclosure sales pending a review of documents. Nevada had the nation's highest foreclosure rate, up 1% from earlier, for the 15th quarter in a row.

One in every 29 Nevada homes received a foreclosure filing during the third quarter. Looking at total numbers of foreclosures, neighboring California was worst, with 191,016, followed by Florida, Arizona, Illinois and Michigan. Combined, the five states accounted for half of all foreclosures last quarter. Of course, once the moratorium ends, we can expect a new tidal wave of foreclosures. John McGeough, a broker, said that the current foreclosure freeze may give distressed homeowners extra time to do a short sale and avoid having their homes repossessed by the banks. "Foreclosure should be the last resort."

Jobless claims rise

There were 462,000 initial jobless claims filed in the week ended Oct. 9, up 13,000 from an upwardly revised 449,000 the previous week, according to the Labor Department's weekly report. Economists surveyed by Briefing.com were expecting 450,000 new claims. The 4-week moving average of initial claims -- a number that tries to smooth out week-to-week volatility -- was 459,000. This number is up 2,250 from the previous week. The government said 4.399 million people continued to file unemployment claims for their second week or more, during the week ended Oct. 2, the most recent data available. That's down 112,000 from an upwardly revised 4.511 million the week before.

Economists were expecting 4.450 million people to file ongoing claims. The 4-week moving average for ongoing claims fell by 34,500 to 4.488 million. Jobless claims in two states declined by more than 1,000 in the week ended Oct. 2, which is the most recent state data available. Claims in California dropped the most, by 6,131. The state attributed the drop to fewer layoffs in the trade and service industries. Claims jumped by more than 1,000 in three states. They rose the most in Pennsylvania, by 2,869, due to layoffs in layoffs in the rubber/plastics, food, construction, and service industries.

Government gets involved in foreclosure fiasco

The top prosecutors in all 50 states announced a coordinated probe into improper foreclosures by the nation's largest loan servicers, but stopped short of calling for a freeze on all foreclosures. The group of attorneys general and bank regulators says it will work to put an immediate stop to improper mortgage foreclosure practices, and review past and present practices by loan servicers and come up with potential remedies. The inquiry will be led by Iowa Attorney General Tom Miller. "This group has the backing of nearly every state in the nation to get to the bottom of this foreclosure mess, and we plan to work together as thoroughly and expeditiously as possible," said Miller.

Alabama was not included in the original coalition of 49 states, but Attorney General Troy King indicated Tuesday afternoon that his state would end its holdout and join the investigation. In addition to action at the state level, the Federal Housing Finance Agency on announced Wednesday directed servicers to review documents and remediate problems when found. The agency, which regulates Fannie Mae and Freddie Mac, also requested that servicers proceed quickly in foreclosure cases where no problem are found, in order to avoid unnecessary vacancies.

Fannie and Freddie, which are supported by the government, own or back the vast majority of the country's mortgages. Some Democratic congressional leaders, including Senate Majority Leader Harry Reid of Nevada, have voiced support for a foreclosure moratorium while an investigation is conducted. But those Democrats have found themselves at odds with top members of the Obama administration, including Treasury Secretary Tim Geithner, who argue that a nationwide freeze would undermine an already fragile housing market and prolong vacancies. Hey, if even Obama is against more government intrusion, it's got to be a bad idea.

NRF says VAT would cost almost a million jobs

The National Retail Federation (NRF) said a study it commissioned estimates a European-style Value Added Tax (VAT) would result in the loss of 850,000 jobs in its first year, reduce the US gross domestic product for three years, and cut retail spending by $2.5 billion over its first decade. The study, which was conducted by Ernst and Young and economic research firm Tax Policy Advisers, concluded that although lower deficits would have positive long-run effects for the economy, most Americans would be worse off due to the VAT. Talk of a VAT has surfaced in recent months as a way of dealing with the rising federal deficit, which is currently at its highest share of GDP since World War II.

Although policymakers who are considering such a measure have not offered specifics about what a VAT would look like, the calculations in the study were based on a "narrow-based" VAT similar to VATs in other countries. In order to achieve the goal of reducing the annual federal deficit by 2 percent of GDP, the VAT would need to be 10.3 percent. The study also assumed the VAT would be applied to most consumer goods and services but would exempt sales of homes, rent, groceries medicine, health care, financial services and education to ease the tax's regressive impact on low-income families. "In the face of an economy that continues to struggle, immediate enactment of an add-on VAT would pose serious risk. The drop in retail spending, jobs, and GDP under an add-on VAT has the potential to further weaken the economy in the near term, rather than strengthen it," the study's authors wrote. The study also notes that other countries have reduced, not increased, their VATs in the f
ace of the recent economic downturn.

Wells Fargo adds to crisis

Legal documents obtained by the Financial Times suggest that Wells Fargo, the second-largest US mortgage servicer, also used a “robo signer”. Unlike its rivals, Wells Fargo has not halted foreclosures. The San Francisco-based bank said on Tuesday it was reviewing some pending cases, but it has maintained that it has checks and balances designed to prevent serious procedural lapses. In a sworn deposition on March 9 seen by the FT, Xee Moua, identified in court documents as a vice-president of loan documentation for Wells, said she signed as many as 500 foreclosure-related papers a day on behalf of the bank. Ms Moua, who was deposed as part of a foreclosure lawsuit in Palm Beach County, Florida, said that the only information she verified was whether her name and title appeared correctly, according to the document.

Asked whether she checked the accuracy of the principal and interest that Wells claimed the borrower owed — a crucial step in banks’ legal actions to repossess homes — Ms Moua said: “I do not.” Ms Moua nevertheless signed affidavits that said she had “personal knowledge of the facts regarding the sums of money which are due and owing to Wells Fargo”. The affidavits were used by the bank in foreclosure proceedings. Ms Moua added that before reaching her desk, it was her understanding that the foreclosure documents had been reviewed by outside lawyers. Wells declined to comment on the deposition but said its records show its “foreclosure affidavits are accurate”.