SSI Payments Up, Refis Boom Amid Fears of Another Collapse

In business today, while Social Security recipients bask in a 1.7 percent  increase, the real cost of living increases by 8 to 12 percent depending on where you live. Mortgage refinance applications are on the rise as rates fall and lenders loosen rules again, while regulators worry about another mortgage meltdown.

SSI:  A Paltry Social Security Increase

The Christian Science Monitor is reporting that SSI payments will increase 1.7% to a national average of $1,322 per month, a $22 increase over the previous year. The problem facing SSI recipients, however, is that the Cost of Living Adjustment (COLA) on Social Security insurance is based on the Consumer Price Index (CPI), a commodity index that excludes such non-essential items and food and fuel. The real cost of living increase, according to the Chapwood Index, is somewhere between 8 and 12 percent depending upon where you live in the United States. In real terms, Social Security incomes are decreasing by an average of 10 percent per year in terms of relative buying power.

Refinancing Boom or Bust Cycle Booms Again

The mortgage industry cyclical boom or bust cycle is booming again as mortgage rate reductions are bringing more homeowners back into the mortgage market, according to Market Watch, which reports that refinance applications increased by 23 percent over the same period in the previous year while rates have declined by nearly one full percentage point over the same 12 month period. This reiteration of the cycle is being fueled by the recently announced loosening of mortgage qualification requirements by Fannie Mae and Freddie Mac, the federally regulated mortgage underwriters, causing some jitters in legislative circles when lawmakers remember what happened the last time that mortgage regulations were relaxed.  Many homeowners may have declared bankruptcy or lost home to foreclosure without losing their primary residences.  The combination of lower rates and relaxed qualification requirements are bringing these “once burnt, twice shy” homeowners back to the closing table for another bite of the apple, encouraged by their much higher mortgage rates on their current notes.

SEC Commissioners Fear Another Mortgage Relapse

Not everyone agrees with the relaxation of the mortgage rules, however. The Reuters News Agency is reporting that the Securities and Exchange Commission (SEC), where some members of the Commission are fearful that the relaxed regulations are setting the stage for yet another mortgage meltdown.  The Commissioners voted to recommend a rule under which the The Federal Reserve Bank will require banks to have  at least five percent of their own funds in the transaction.  This demand that lenders keep some skin in the game is intended to have a chilling effect on more aggressive lenders who often use looser underwriting guidelines than Fannie and Freddie use.

Ocwen Financial:  Tips New Iceberg?

Finance&, as if to confirm the anxieties of the regulators,published a new report today disclosing allegations by the New York State’s Department of Financial Services indicating that the subprime lender backdated documents to build foreclosure cases against  borrowers that prevented the borrowers from getting loan modifications done. At the core of the State’s allegations are charges that the lender neglected to inform borrowers that their mortgages were in default until after the grace period had expired, making it impossible for them to pay the arrears and bring their mortgages up to date.  Lenders are required to inform borrowers that  they are in default in a timely manner, and borrowers have a 90 day grace period that allows them to bring the mortgages up to date before foreclosure proceedings can be initiated. Ocwen blames the errors on faulty software, which doesn’t explain the $2 billion consent decree to which Ocwen agreed a year ago when it reduced loan balances for thousands of struggling homeowners.

File this one under:  The more things change, the more they stay the same.

Boeing is Up and Down Again

The Boeing Corporation, which builds commercial airlines, military aircraft and spaceships, is reporting a third-quarter profit of $1.37 billion, an 18% improvement on the year ago period, with the profits being generated primarily by the company’s extremely popular work-horse 737 single aisle aircraft according to The San Francisco Chronicle.  Unfortunately, some of those profits are being eaten up by losses in the military aircraft division, and there are fears that future profitability might actually be devastated by the 787 Dreamliner, the plane Boeing is banking on for future profits. The state-of-the-art carbon fiber aircraft actually costs Boeing more than it earns on each sale as it attempts to amortize the $25.2 development cost for the aircraft.  In the past year, the development cost has actually increased by some 3.5 percent. It is rare that an aircraft in production continues to rack up additional deferred production expenses, but that is what is happening in this case. The 787 competes against the Airbus 340, while the Airbus 380 competes against Boeing’s 777.

In today’s trading, Boeing lost 4.5%, closing at $121.45 afer announcing that the company had beaten the market by 20 cents a share after it was revealed that the quarterly figures did not include the increased deferred production costs on the 787, which were reported separately according to the Chicago Business Journal.