U.S. offers 1% second-mortgage rates via modification plan

The Obama administration is trying yet another program to stem home foreclosures -- this time by offering lenders incentives to cut payments on second mortgages.

The taxpayer-funded plan aims to slash second-mortgage interest rates to as low as 1% for the next five years for qualifying borrowers.

The Treasury said the program would work in tandem with the Making Home Affordable plan it launched in February, which focused on incentives to get lenders to modify first mortgages for people who have a fighting chance of holding on to their homes.

The problem for many distressed homeowners is that they have both first and second mortgages -- and can’t afford either. Treasury now wants lenders and loan servicers to agree to modify both loans as part of a "comprehensive" solution.

"Up to 50% of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien," Treasury said in its announcement today.

Under the new program, the government would share lenders’ cost of reducing second-mortgage interest rates. For amortizing second-mortgage loans (those with monthly payments that include principal and interest) the loan rate would be cut to 1% for five years. For interest-only loans the rate would be cut to 2%.

The fact sheet for the program is here.

Lenders also could opt to forgive a second mortgage entirely in exchange for a one-time government payment.

The Treasury estimated the plan could help up to 1.5 million second-mortgage borrowers, although it didn’t say how it arrived at that number.

In one example the Treasury provided, a homeowner with a $44,000 second-mortgage loan at 8.6% would see his monthly payment slashed from $349 to $155 with the new rate at 1%, for an annual savings of $2,336.

The risk with the new program: After five years, loan rates would step up again. This could be just another case of delaying foreclosure, not preventing it.

-- Tom Petruno

Photo credit: Brian Vander Brug / Los Angeles Times

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Still open: The First Bank of Beverly Hills in Beverly Hills

Still open: The First Bank of Beverly Hills in Beverly Hills

In a simple and rational world, a financial firm called First Bank of Beverly Hills would be located in Beverly Hills. But then, nothing in banking is simple or rational these days.

So when the Times reported on Friday that the First Bank of Beverly Hills had been seized by regulators, the blog item noted that the one-branch commercial lender, with $1.5 billion in assets, was actually in Calabasas.

Unfortunately, that point didn’t register with every customer of First Banks Inc., a privately held St. Louis company with $10.7 billion in assets, which operates 214 First Bank offices in five states. The branches include 61 in California -- two of which are in, you guessed it, Beverly Hills.

And so dozens of depositors at the healthy institution started lighting up the phones after seeing the Times headline that said First Bank of Beverly Hills had been shut down.

"We have a lot of confused customers," said Joel Schwartz, a senior vice president and Southern California regional manager for the St. Louis banking firm. "And some of the confused customers have become worried and even panicked."

The failed First Bank had moved its headquarters to Calabasas from Beverly Hills in 2000.

The larger St. Louis bank, as part of its expansion in California, purchased the Beverly Hills branch of Calabasas-based First Bank of Beverly Hills in 2006.

That’s why the now-defunct First Bank of Beverly Hills has "no location in Beverly Hills," explained Schwartz. "They had one, but we bought it."

All clear, everyone?

-- E. Scott Reckard

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Regulators shut down First Bank of Beverly Hills

Federal regulators closed First Bank of Beverly Hillslate today and said they would send checks to insured depositors at the one-branch bank -- which, despite its name, is in Calabasas.

After a planned takeover by an Illinois financial firm fell apart last week, no buyer emerged for the bank, which is owned by Beverly Hills Bancorp. It had few local depositors, according to the Federal Deposit Insurance Corp., which will take over the institution’s loans and other assets.

First Bank of Beverly Hills, a commercial lender beaten up by California’s real estate downturn, had $1.5 billion in assets at the end of last year and total deposits of $1 billion -- much of which was brought in via financial brokers. The FDIC estimated that just $179,000 of the deposits were uninsured.

The agency estimated that the bank's collapse would cost the insurance fund $349 million. First Bank is the 28th bank failure of the year and the fourth in California.

Read the FDIC’s news release on the takeover here for more about what depositors and loan customers should expect.

-- E. Scott Reckard

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'Mass layoffs' hit new high, but pace slows

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The U.S. recorded 2,933 mass layoffs in March, up 6% from February and the largest number since the government began keeping records in 1995, the Labor Department said today.

The report is another sign that employers have continued to slash jobs even amid other signs that the recession may be bottoming.

Still, there was some relative good news in the report: Although the number of jobs cut via mass layoffs was a record 299,388 last month (seasonally adjusted), that was a modest 1.3% increase from February.

By contrast, the February total of 295,477 was up 24% from January.

A "mass layoff" is the loss of at least 50 jobs at any individual employer. The government collects the data by tracking claims for unemployment benefits filed against employers.

Mass layoffs began to rise sharply in August, a month before the financial-system meltdown kicked into high gear. But the number of mass layoffs had held steady, at around 2,300 a month, from September through January â€" before soaring to 2,769 in February.

California, the largest state by population, recorded the biggest number of mass layoffs in March, at 498. That was down from 515 in February and 651 in January, but the data aren’t seasonally adjusted.

Pennsylvania ranked second last month, with 140 mass layoffs, followed by Texas (112) and Illinois and Wisconsin (tied at 109 each).

--  Tom Petruno

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Just 11.9% of Americans moved last year, a 60-year low

Another casualty of the recession and the housing bust: our national mobility.

The percentage of Americans who changed residences last year fell to the lowest since the government began keeping records in 1948, the Census Bureau reported today.

Just 11.9% of the population moved last year, down from 13.2% in 2007. The rate was as high as 16.1% as recently as 2000.

Most moves in 2008 were from one home or apartment to another in the same county. Just 1.6% of Americans moved between states, down from 1.7% the previous year and 3.1% in 2000.

With the crash in housing prices many people naturally are unable or unwilling to sell their homes. And with unemployment rising nationwide there is less incentive for people to move in search of better jobs.

But the national mobility rate has been in general decline since the mid-1980s. Americans moved much more frequently in the 1950s and 1960s, when the percentage of the population changing residences routinely was around 20% each year, Census data show.

-- Tom Petruno

9-week halt for GM's US plants

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