Tuesday, August 28, 2012

Home Prices Signal Recovery May Be Here

NEW YORK (CNNMoney) -- A sharp boost in home prices during the spring could signal a recovery in the long-suffering U.S. housing market, according to an industry report issued Tuesday.
  
The S&P/Case-Shiller national home price index, which covers more than 80% of the housing market in the United States, climbed 6.9% in the three months ended June 30 compared to the first three months of 2012.

"We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change," said David Blitzer, a spokesman for S&P, in a statement. "The market may have finally turned around."

Two other key indexes covered in the S&P/Case-Shiller report also showed gains. The 20-city index was up 6% for the quarter and the 10-city index rose 5.8%.

National prices were up 1.2% compared with a year earlier, and the 20-city and 10-city indexes also gained year over year. It was the first time all three measures showed positive annual growth rates since the summer of 2010, when generous tax credits for homebuyers were in place.

There have been several positive industry reports over the past several weeks. In July, new home sales were 25% better than a year earlier; existing home sales gained 10% year over year; and developers applied for 30% more residential building permits.
  
The steep increase in home prices "feels really good after six years of straight down," said Mark Zandi, chief economist of Moody's Analytics.
  
He cautioned that the results may overstate the case for the housing recovery a bit. The mix of homes being sold has changed lately, with fewer repossessed homes on the market. Those sell at big discounts to conventionally sold homes and had been propelling prices downward.
  
The home price improvement is expected to have a positive impact on foreclosure rates, according to Michael Fratantoni, vice president for research and economics for the Mortgage Bankers Association.
Foreclosures have already been falling and could drop some more if the upswing in home prices continues.
  
As home values increase, home equity rises, and fewer mortgage borrowers will be underwater, owing more than their homes are worth. That will give them an asset to tap should they run into a tight financial patch.
  
An improving housing market will also give homeowners more confidence in the investments they've made in their homes.
  
"There has also been a lot of concern about strategic defaults," said Fratantoni. "That should ease now. When home prices go up, people have a financial incentive to hold onto their homes and they're less likely to walk away."
  
Rising prices are likely to push potential homebuyers off the fence, where many have been waiting out the price decline, according to Doug Duncan, chief economist for Fannie Mae.
  
"Their perception that we hit the bottom takes out the risk of buying into a falling market," he said. "That should increase demand, particularly if they also believe that mortgage rates have reached a bottom as well."
  
Each of the 20 cities covered in the report recorded a gain in June, compared with a month earlier. Detroit prices jumped 6% for the month, the most of any city. Minneapolis prices climbed 4.8% and Chicago prices rose 4.6%.
  
In Phoenix. home prices were 13.9% higher in June than 12 months earlier, the highest gain of any of the 20 cities covered.
  
Several cities were still in negative territory year over year, including Atlanta, where they were off 12.1%. New York prices were down 2.1% on an annual basis, and Las Vegas prices were 1.8% lower.
  
For Zandi, all the positive news on housing carries over to the rest of the economy.
  
"Housing is beginning to act as a tailwind for the recovery," he said. To top of page


Saturday, August 18, 2012

SEC Shuts Down $600 Million Online Pyramid and Ponzi Scheme

Washington, D.C., Aug. 17, 2012 – The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze to halt a $600 million Ponzi scheme on the verge of collapse. The emergency action assures that victims can recoup more of their money and potentially avoid devastating losses.

The SEC alleges that online marketer Paul Burks of Lexington, N.C. and his company Rex Venture Group have raised money from more than one million Internet customers nationwide and overseas through the website ZeekRewards.com, which they began in January 2011.

According to the SEC’s complaint filed in federal court in Charlotte, N.C., customers were offered several ways to earn money through the ZeekRewards program, two of which involved purchasing securities in the form of investment contracts. These securities offerings were not registered with the SEC as required under the federal securities laws.

The SEC alleges that investors were collectively promised up to 50 percent of the company’s daily net profits through a profit sharing system in which they accumulate rewards points that they can use for cash payouts. However, the website fraudulently conveyed the false impression that the company was extremely profitable when, in fact, the payouts to investors bore no relation to the company’s net profits. Most of ZeekRewards’ total revenues and the “net profits” paid to investors have been comprised of funds received from new investors in classic Ponzi scheme fashion.

“The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors,” said Stephen Cohen, an Associate Director in the SEC’s Division of Enforcement. “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.”

The SEC’s complaint alleges that the scheme is teetering on collapse with investor funds at risk of dissipation without its emergency enforcement action. Last month, ZeekRewards brought in approximately $162 million while total investor cash payouts were approximately $160 million. If customers continue to increasingly elect to receive cash payouts rather than reinvesting their money to reach higher levels of rewards points, ZeekRewards’ cash outflows would eventually exceed its total revenue.

Burks has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver.

According to the SEC’s complaint, ZeekRewards has paid out nearly $375 million to investors to date and holds approximately $225 million in investor funds in 15 foreign and domestic financial institutions. Those funds will be frozen under the emergency asset freeze granted by the court at the SEC’s request. Meanwhile, Burks has personally siphoned several million dollars of investors’ funds while operating Rex Venture and ZeekRewards, and he distributed at least $1 million to family members. Burks has agreed to relinquish his interest in the company and its assets plus pay a $4 million penalty. Additionally, the court has appointed a receiver to collect, marshal, manage and distribute remaining assets for return to harmed investors.

The SEC’s investigation was conducted by Brian M. Privor and Alfred C. Tierney in the SEC’s Enforcement Division in Washington D.C. The SEC acknowledges the assistance of the Quebec Autorite des Marches Financiers and the Ontario Securities Commission.
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Wednesday, August 8, 2012

Fannie Mae Reports Net Income of $5.1 Billion for Second Quarter 2012

August 08, 2012
Pete Bakel
202-752-2034
WASHINGTON, DC – Fannie Mae (FNMA/OTC) today reported its second-quarter 2012 results and filed its quarterly report on Form 10-Q with the Securities and Exchange Commission. The filing provides condensed consolidated financial statements for the second quarter of 2012. The following documents are now available on Fannie Mae’s Web site at www.fanniemae.com: