Marketplace visits Missouri to find out how it is affected by the financial crisis

September 30, 2008

This week, Marketplace—public radio’s daily magazine show on business and economics—is visiting Missouri to explore how the deepening financial crisis and find out what’s really happening in the lives of Americans at home, at work, and in the community.

You can hear Marketplace weekdays at 6:00 p.m. on KWMU in St. Louis. But Marketplace wants to hear from you about how are you and your community dealing with the financial crisis? Click here to share your experiences with Marketplace.

Urban League hosts free financial literacy workshops

September 29, 2008

KETC community partner Urban League will host this series of workshops, which will cover topics such as financial literacy and foreclosure prevention. This event is free and open to the public.

New From the St. Louis Beacon – Anatomy of a foreclosure: (Part 3)

September 26, 2008

Anatomy of a foreclosure: Life in the aftermath…. now what? (Part 3)     

By Mary Delach Leonard, St. Louis Beacon staff    

Part 3 of 3
The collapse of some of the nation’s oldest financial institutions started on Main Street America with hundreds and thousands of homeowners such as 56-year-old Maureen McKenzie of Kirkwood who in May lost to foreclosure the small ranch house that had been in her family since it was built after World War II. How could this happen? The answer is … complicated. The Beacon will unravel the story of how Maureen McKenzie of Kirkwood, Mo., lost her 900 square feet of the American Dream. Read parts one and two.
 
Nearly five months have passed since Maureen McKenzie moved out of her little white frame ranch on Barry Court in Kirkwood, and she is still trying to find her way through life-after-foreclosure.

The house that was in her family for more than half a century now sits empty with a For Sale sign out front, while McKenzie has just moved again into her second apartment since the foreclosure. Looking back, McKenzie says, she always held out hope that her circumstances would improve and she would be able to refinance into a better mortgage.

“Maybe I was just being stubborn,” she said.

New From the St. Louis Beacon – Anatomy of a foreclosure (part 2)

September 25, 2008

Anatomy of a foreclosure:  how an adjustable rate mortgage led to crisis (Part 2)      
By Mary Delach Leonard, St. Louis Beacon staff

Part 2 of 3
The collapse of some of the nation’s oldest financial institutions started on Main Street America with hundreds and thousands of homeowners such as 56-year-old Maureen McKenzie of Kirkwood who in May lost to foreclosure the small ranch house that had been in her family since it was built after World War II. How could this happen? The answer is … complicated. The Beacon will unravel the story of how Maureen McKenzie of Kirkwood, Mo., lost her 900 square feet of the American Dream. Read part 1.

Maureen McKenzie’s father could tell she was nervous as he watched KETC-Channel 9’s “Facing the Mortgage Crisis” program that aired on July 15, but he was impressed that his daughter had stepped forward and disclosed her personal experience with foreclosure.
 
“I don’t think I could have done that,” William Burns said.

Burns, 83, said he did what he could to help his daughter save the home he bought in 1953 on Barry Court in Kirkwood. At one point, he gave her $6,000 — borrowed against her inheritance, he said — so she could catch up on her mortgage payments.

“It’s sad because it was Maureen’s dream to own the family home we had for some 50 years,” he said. “I was sad, too.”

The Language of the Credit Crisis

September 24, 2008

Welcome to a new category of postings on the Facing the Mortgage Crisis blog. The idea behind this series is to clearly explain what some of the names, terms, and words that keep popping up in the news mean. Lately, a lot of articles and interviews addressing issues that supposedly affect us all are using language that most of us don’t understand. Figuring out what these unfamiliar terms mean in everyday language has helped me make sense of what is going on, and hopefully can do the same for readers of this blog.

 

Liquidity:
This term is used in reference to a couple of things when talking about the credit crisis. One is the liquidity of firms. This refers to whether a firm has enough easily accessible assets (cash, for example) to meet its obligations. A basic example of this is if a whole bunch of people go to their neighborhood bank to withdraw money, does the bank have enough to give them all the money that the bank has been holding for them? If not, they are insufficiently liquid. The other way that the term liquidity is used is in reference to assets. In this case, liquidity means that an asset can be easily sold because a) its value is known, and b) there are ready buyers and sellers. Right now, sub-prime mortgages are said to be illiquid, because there is uncertainty as to what they are actually worth.

New From the St. Louis Beacon – Anatomy of a foreclosure (part 1)

September 24, 2008

Anatomy of a foreclosure: For Sale – A house full of memories (Part 1)     
By Mary Delach Leonard, St. Louis Beacon staff    

Part 1 of 3
The collapse of some of the nation’s oldest financial institutions started on Main Street America with hundreds and thousands of homeowners such as 56-year-old Maureen McKenzie of Kirkwood who in May lost to foreclosure the small ranch house that had been in her family since it was built after World War II. How could this happen? The answer is … complicated. Over the next three days, the Beacon will unravel the story of how Maureen McKenzie of Kirkwood, Mo., lost her 900 square feet of the American Dream.

Two months after she lost her 900-square-foot, three-bedroom ranch to foreclosure, Maureen McKenzie of Kirkwood swallowed her nerves and stood before a live studio audience at KETC-Channel 9 to address a panel of housing counselors:

“I’m Maureen. And I’m from Kirkwood. And I recently lost my house to foreclosure. And my house is still sitting empty, and I am wondering if there’s any help available to try and get my house back.”

McKenzie, 56, was on a self-imposed mission as she spoke those words during the July 15 segment of “Facing The Mortgage Crisis,” which was broadcast live throughout the St. Louis area.

The Credit Crisis Explained (No Finance Degree Required)

September 23, 2008

 

Still don’t quite get what’s going on with the credit crisis? You’re not alone. The recent financial news may have made it off the business page and onto the front page, but that doesn’t mean that the financial jargon has been left to the business section. On top of the insider’s lingo often used to explain the crisis, the issue is complex and ever-changing, making staying abreast of the news feel like a full-time job. Below are a few of the articles and stories that I’ve found most useful in understanding the root of current problems, and where we stand now.

 

For an entertaining, easy-to-understand, yet not overly simplified explanation of the roots of the housing crisis, listen to This American Life: The Giant Pool of Money, or download a transcript of the show on the same site.

 

To feel less alone in your confusion and get answers about the most recent developments with the bailout, check out the New York Times article, Can’t Grasp Credit Crisis? Join The Club

First draft of $700 billion bailout offers no concrete solution for troubled homeowners

September 23, 2008

Over the past two weeks, market-rattling changes on Wall Street such as Lehman Brothers’ bankruptcy and the government’s $85 billion rescue of AIG shook investor confidence and saw stocks at their lowest since trading resumed post 9/11. Last week, Treasury Secretary Henry Paulson proposed a $700 billion bank bailout to revive the economy during what many are calling the worst decline since the Great Depression, citing the mortgage crisis as its “root cause”.

Without the bailout, Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee at today’s congressional hearing, “…unemployment rates will rise, more homes will be foreclosured upon…the economy will not be able to recover.”

Paulson said multiple times that tax payer interest is a top priority, but Senator Chris Dodd, banking committee chair, insisted the bill include these three conditions:

1. Taxpayer investments are protected
2. Those responsible for bad banking decisions are held accountable
3. More assistance is provided for homeowners facing foreclosure

Though the rate of foreclosures is expected to rapidly increase within the next year, Paulson had no concrete answer as to why his $700 billion bill doesn’t address foreclosure prevention. At this point, help for homeowners under this bill is purely speculative. If the government buys up the bad debt backed by their mortgages it could help speed up loan workout processes, but there are no guarantees.

“Unfortunately, not every home will be saved,” said Paulson. “If a person can afford to stay in their home, we plan to do whatever we can to help them stay in their home.”

Fortunately for troubled homeowners, it is unlikely this bailout will pass as it presently exists. “What they have sent us is unacceptable,” said Senator Dodd of the Treasury’s proposal. Alternative plans have been mentioned, but their details have not been released.

Read more about today’s congressional hearing:

Bloomberg coverage

Associated Press coverage

The Devil in the Details: what Congress adds to bailout proposal could make the difference for homeowners

September 23, 2008

Over the weekend, Treasury Secretary Henry Paulson could be seen on TV screens everywhere, trying to sell the American public on the $700 billion bailout plan he’s given to Congress. So how does this bill affect people struggling to pay their mortgage, taxpayers, and everyone feeling the “credit crunch”?

What is the bailout plan?
As it stands, the bailout plan Treasury Secretary Paulson is pitching to Congress is a brief but far-reaching three page proposal. It asks for permission to spend $700 billion to buy up distressed mortgages from financial institutions (To put this into context, that’s more than this year’s spending on social security). It will then try to resell those mortgages to investors. It’s possible that the Treasury will not have to use all $700 billion, if the market rebounds. But it’s also possible that it will need to spend more than that, some say up to a trillion dollars. It also asks Congress to raise the ceiling on national debt to $11.3 trillion.

What is the significance?
Paulson’s plan would amount to the biggest government bailout in U.S. history. The Secretary believes that the future ability of Americans to borrow, and the ability of the U.S. to finance future economic expansion, depends on this intervention. His logic is that financial institutions will only be able to get a true sense of their assets and liabilities if the government buys up their bad mortgages. When they are more certain of where they stand, they will once again be willing to lend money for things like college, small businesses, etc.

What about Main Street?
Secretary Paulson and President Bush are both urging Congress to approve the proposal by week’s end. They argue that the more quickly the proposal is passed, the more quickly markets will stabilize. No one seems to be disagreeing that it is urgent that some sort of bailout be passed quickly. But there is less agreement over the details of the bill. Some points of contention include:

• Oversight: as it stands, the proposal gives the Secretary of the Treasury virtually unlimited power, asking only that they report to Congress twice a year on their progress.
• Executive Compensation: Some Democrats are demanding that executive pay be limited at companies whose bad debt is bought up by the government. They say it is unfair that taxpayers should be bailing out companies while their executives continue to profit.
• Direct help for homeowners: There are proposals to add clauses to the bill that would directly help homeowners having trouble with their mortgages.
• Giving judges the power to modify mortgages: Some members of Congress would like to allow bankruptcy court judges to modify the terms of loans on primary residences.

The bottom line?
Any plan that is passed will be intended to help address the mortgage crisis, but whether this is through more of a trickle-down effect from a looser credit market or through more direct assistance for homeowners will depend on whether Congress alters the current proposal.

 Read more about the initial plan

 Read more about the bailout’s progress in Congress

Unanswered Questions: Poverty and Political Solutions

September 19, 2008

Over the last three months, KETC’s Facing the Mortgage Crisis initiative has focused on how the crisis affects the entire community. We’ve addressed issues like foreclosure related crime, mortgage scams and the ripple effect.

Now we’d like to invite you to be part of a conversation about an issue that truly ripples out and affects every one of us—poverty.

On September 24, join community and religious leaders, academic experts and media professionals to discuss poverty and its root causes—health care, education, jobs and housing. This event is held at the Missouri History Museum and is free of charge.

Read the event details here: http://www.ketc.org/mortgagecrisis/CAPflyer.pdf