Early Briefing: Budget Troubles and Foreclosures
*In the year since Maryland launched a series of foreclosure prevention programs, the state has helped just 88 troubled borrowers get into new loans or keep up with their payments, at a cost of about $17.9 million. State officials say their efforts have been hamstrung by borrowers who wait too long to ask for help or are disqualified by low credit scores. Negotiations with lenders to expand the programs have stalled.
*Virginia officials said the state budget shortfall may be as wide as $3 billion, triple what they estimated a month ago, while District officials said they are facing a gap of $131 million after years of surpluses. Those forecasts, along with a projected shortfall of almost $1 billion in Maryland, mean that Virginia and Maryland are considering cutting services they usually increase, including funding to state and local agencies, schools and colleges. State and local governments across the country are struggling to balance budgets in the face of an economic slowdown, a weakening housing market and rising unemployment, all key factors in the revenue they collect.
*The FBI is investigating whether fraud played a role in the troubles at Fannie Mae, Freddie Mac, Lehman Brothers and American International Group, bringing to 26 the number of bureau investigations of institutions tied to the mortgage debacle, according to two sources familiar with the developments. At the same time, the Securities and Exchange Commission has opened more than 50 investigations into disclosure and valuation of housing-related investments at banks, insurers and credit rating agencies, Chairman Christopher Cox told the Senate Banking Committee yesterday. The wide-ranging probes are operating at different stages of development and no charges are imminent, according to sources, who spoke on condition of anonymity because they are not authorized to discuss the issue.
Also, the federal regulator overseeing Fannie Mae and Freddie Mac said the firms would play a smaller role this year in supporting affordable housing across the country than they have in the past. The companies missed government-mandated affordable-housing goals in 2007, and "the miss will be larger in 2008," James B. Lockhart III, director of the Federal Housing Finance Agency, told the Senate Banking Committee.
Separately, Freddie Mac yesterday revamped its compensation practices in the same way that Fannie Mae did last week. The company said it was ending performance-based cash bonuses, which had rewarded employees when the company met certain financial targets. The company said it would introduce new cash rewards designed to retain employees as it tries to recover.
September 24, 2008; 5:00 AM ET
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