Yesterday’s Bank Talk entry examined how NetSpend once served as a retail storefront for internet gambling sites.  Online gambling requires some kind of access to the payments system.  The rulers that be in our financial world are thrust into a new role of deciding how to best respond to the age old issue of addiction to gambling.

The means through which gamblers can utilize the banking system for their gambling is evolving.  US regulatory agencies (Office of Thrift Supervision, Federal Deposit Insurance Corporation, Treasury, Federal Reserve) have remained quiet on this topic.  In the fall of 2009, Treasury and the Federal Reserve issued a joint statement, in response to outside concern. They took the dramatic step of announcing that they would delay any action on this issue until 2010.

Congress appears to be the likely location for any new reforms.

How online gambling is changing

My research tells me that banks are still an agent for deposits on gambling accounts.  US banks have largely left this market.  They have been replaced by willing European banks.  The Financial Services Authority (FSA), a UK bank regulator, appears to oversee some of the new institutions that are working with those gambling firms.

Gambling sites such as PokerStars.Com or FullTiltPoker.Com need a way for their customers to bring money to the game. Until the US established the Unlawful Internet Gambling Enforcement Act (UIGEA), consumers could use NetSpend to put money on debit cards at US banks, with the benefit of FDIC insurance.

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The Mortgage Banker’s Association of America, unable to make good on its mortgage, has entered into a short sale on its commercial loan outstanding on its Washington, DC headquarters.  The MBAA is selling to CoStar for $41.3 million, a sum far short of the $75 million in debt that they took out in 2007.

The MBAA announced their intentions back in October to sell 1331 L. St. because they couldn’t make payments on their $79 million headquarters. The MBA had a whopper of a mortgage – a variable-rate loan mortgaged at 94.9 percent (more…)

No other situation prompts a greater chance of foreclosure than when borrowers find themselves with negative equity.  Being “under water,” as it is known, refers to the instance when a borrower has more mortgage debt out against their home than the underlying appraised value of that home.  Negative equity is always an estimate, because appraisals are an inexact science.  Nonetheless, even a back-of-the-envelope calculation with a modest degree of error still yields a reliable gauge on the nominal status.  A borrower is either in the money, or in the red.  it doesn’t make a huge difference if you are down by 30 percent or 20 percent – the negative equity is still hanging over your head and the implications, from a behavioral economics point of view, are still stark.

FirstAmerican Core Logic publishes its own estimates of negative equity.  The state-by-state data is free.  They make their money selling the data on a more narrow basis.  Even the state-level data is informative, though. Here are some interesting findings:

• Average outstanding loan-to-value in Nevada: 114 percent! That means that it is the exception to the rule when a borrower with a mortgage in Nevada is not “under water.” Indeed, FACL reports that 65 percent of all mortgages are in negative equity.
• The Northeast and the Upper Plains are the least likely places for this problem.  In New York, Washington, DC, Rhode Island, Connecticut, Nebraska, and Montana, average outstanding loan-to-value is less than 57 percent. In New York, the figure is less than 50 percent. There is no data on South Dakota, although it seems possible that this is another state that would the lowest ratios.
• More than 47 percent of homeowners in Arizona are in negative equity.
• In Michigan, more than 37 percent are in negative equity.
• Nationwide, more than 10.5 million borrowers owe more on their home than it is worth today.
• Markets with the highest loan-to-value ratios for outstanding mortgages: Las Vegas-Paradise (122 percent), Riverside-San Bernardino-Ontario (103 percent), Orlando-Kissimmee (96 percent) and Phoenix (96 percent).
• High LTVs are in areas with lots of subprime mortgage origination, but also in areas where home prices are depressed by long term job loss: Detroit (89 percent) and Warren-Troy (86 percent).

This data only includes homes with mortgages.

There are pigs, and then there are capitalist pigs.  And among the capitalist pigs, Maurice “Hank” Greenberg can rut like none other.

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As much as C.V. Starr deserves genuine credit for founding and developing AIG, his close friend Hank Greenberg is often thought of as the man who built AIG.  Greenberg has been on the sidelines, at least by his own standards, since he was ousted from AIG in 2005 over violations of accounting rules.  Since then, he has been battling AIG in court.  He was able (more…)

CRA-NC is organizing a tour to the nation’s capital.  We’re bringing housing counselors from all over the state.  The counselors are angry.  They are tired of getting the run-around from servicers.  They see the press about HAMP’s 500,000 loan modifications.  They aren’t seeing that on the ground.  Maybe that is because they are trying to get real modifications – not ones that merely extend the life of a loan, or reach a modification agreement that actually results in a higher monthly payment.

We’re going to bus people from Durham, Rocky Mount, Winston-Salem, and Rich Square.  The Durham bus holds 55, and the other buses are taking about 15 people.

The Modify This Tour takes place October 29th.

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