More Americans Falling Behind On Mortgages

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Mortgage defaults are rising again after nearly a year of trending downward, raising concerns about homeowners falling behind on their payments and undermining whatever nascent housing recovery may be under way.

First mortgage default rates rose to almost 2 percent in September and second mortgage default rates rose to about 1.3 percent over the same period, according to recent data from S&P Indices and Experia. The uptick in defaults is the first increase since November 2010. A mortgage is considered in default after 180 days of nonpayment.

But perhaps even more troubling are the increasing instances of mortgage delinquencies reported among the nation's largest consumer lenders. Wells Fargo said delinquencies of more than 90 days in its consumer loan portfolio rose 4 percent, according to a report in the Financial Times, prompting the bank to increase its provision for consumer-banking losses for the first time in two years.

[See why mortgages rates are rising.]

A slew of other major banks, including Citi, JPMorgan, and Capital One, also reported rising delinquencies, the Times reported, more evidence that rock-bottom mortgage rates and government efforts are doing little to help struggling American homeowners.

"It is clear that the downward trend we saw through most of 2010 has stopped," said Jay Brinkmann, Mortgage Bankers Association's chief economist, in the group's latest delinquency survey release. "Mortgage delinquencies are no longer improving and are now showing some signs of worsening." Given the stagnant economic climate and deterioration in the labor market, experts fear the rise in delinquencies could translate into more defaults, and while not cause for alarm at this point, the turnaround in consumer credit could be an inflection point. "The latest month had a blip in the upward direction and we need to watch out because it's the first time that we've seen all of the credit types—we're talking 1st, 2nd mortgages, bank loans—move up," says Maureen Maitland, vice president of Standard & Poor's Indices. "We're not entering a very comfortable period with everything that's going on in the economy and housing market in general."

That makes recent rumors of a new government-sponsored mortgage assistance program seem all the more urgent. Details remain sketchy, but state and federal officials are in talks with major banks to allow creditworthy homeowners current on their payments to refinance underwater mortgages, according to The Wall Street Journal. The negotiations are part of a larger effort to settle allegations of bad foreclosure practices.

[See how the government could help the housing market.]

Homeowners with negative equity typically aren't eligible to refinance their mortgages, but the proposal will allow homeowners who are current on their mortgage payments to do so, potentially easing the financial burden and giving consumers' budgets a break.

While this particular proposal would only affect the 20 percent of homeowners with mortgages owned by commercial banks the Journal reports—the vast majority of mortgages today are backed by government-sponsored enterprises Fannie Mae and Freddie Mac—economists project that a larger scale refinancing initiative could free up more than $70 billion for consumers to spend elsewhere. Low consumer demand and spending have been hallmarks of the weak recovery.

Even inklings of help for the housing market seem encouraging when contrasted with the government's past policy on housing, which has been, essentially, to stand on the sidelines. Banks and big corporations have received government bailouts, but struggling homeowners still haven't seen much aid from Washington. While limited in scope, a potential deal to help homeowners avoid foreclosure could ultimately help the housing market regain ground.

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Brand Behind Steve Jobs' Iconic Turtleneck Sees Sales Boost

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Did Steve Jobs' passing inspire fans to nab his famed wardrobe?

The Apple founder was infamous for wearing a black mock turtleneck, jeans and sneakers to every keynote presentation. And one company claims sales have skyrocketed because of it.

A representative for St. Croix, which makes Jobs' turtlenecks, told TMZ that the shirts have flown off shelves since the news of Jobs' death. On Thursday, the brand saw an "almost 100% increase in sales," the rep said. TMZ also reported that St. Croix is working on a plan to pay tribute to their most famous customer.

Overall, Jobs' uniform is quite easy to replicate, if you've got Steve Jobs-type money. The St. Croix mock turtleneck in black retails for $175 at stcroixshop.com. Not all is pricey, though; a pair of Levi's 501 jeans in Medium Stonewash is currently marked down to $44 on levi.com, and a pair of gray New Balance 991 sneakers are on sale for $89 on Amazon. But you'll have to fork over major cash for the glasses — Jobs' specs, Lunor's Classic Round style, go for $495.

NewsFeed suspects the sales spike is from those seeking Halloween inspiration. But we suggest you stay away from this particular costume; don't blame us if everyone you encounter yells "too soon" as you walk by.

LIST: The World Reacts to Steve Jobs' Death

LIST: Steve Jobs, from TIME's Archives

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Behind Panicky Markets, Faltering Governments

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Why now?

There's no obvious trigger to the mayhem in the stock markets over the last several weeks. Greece may default on its debts, but that's been a worry for nearly two years, and it's probably not imminent. Other European countries are overindebted, but there's nothing new about that, either. Here in the United States, high unemployment has become a given, with money tight for many families, and credit scarce. But that, too, has been going on for three years or more.

[See how to escape the middle-class squeeze.]

Some parts of the economy have even been getting better. Corporate profits remain strong and most big companies are healthy. American consumers are slowly paying down debt and improving their finances. Interest rates are at record lows. A recent uptick in home sales suggests that some buyers think the housing market may have bottomed out.

Yet stocks have been plunging, and economists worry that a double-dip recession is on the way—or maybe even here.

So what gives? Here's what: Governments are checking out. For the first time since the financial crisis of 2008, policymakers in Europe and the United States are either fumbling on economic policy, or simply backing away from helping the economy. One prominent example was the Federal Reserve's "Operation Twist"--its plan to replace short-term bonds in its portfolio with longer-term ones. The maneuver may drive long-term interest rates slightly lower, which will help home buyers and other borrowers. But it's less of a boost than investors had been hoping for. And since it simply replaces one kind of bond with another in the Fed's portfolio, it pumps no new money into the economy. To many investors, it seems like the Fed is running out of tricks and losing its stomach for risky interventions in the economy. So markets plunged following the announcement.

In fact, many of the extraordinary government measures of the last three years are winding down, including spending from the big 2009 stimulus plan. Many economists feel that a few key measures set to run out at the end of this year ought to be extended, especially payroll tax cuts for most workers and extended unemployment insurance for the jobless. But the ongoing spat between President Obama and congressional Republicans could jeopardize that and remove yet another pillar of support from the shaky economy.

[See why big companies are axing jobs.]

It's obvious that unusual government stimulus efforts need to end sooner or later. The fear weighing on markets now, however, is that politicians in Washington and Europe will yank the crutches—or simply prescribe the wrong treatment—before the economy is healthy enough to stand on its own. Forecasting firm IHS Global Insight points out that bad economic news is now coupled with "political paralysis and the risk of a serious policy mistake"—the perfect recipe for roiling the stock markets.

There are straightforward ways to provide some relief. But most of them involve policy decisions that politicians now seem to be tilting against. Economist Mark Zandi of Moody's Analytics identifies several steps policymakers could take to reassure markets and guarantee that a double-dip recession doesn't happen. In the United States, he says, the Fed needs to be much more aggressive, perhaps buying $75 billion worth of bonds per month indefinitely, until the economy starts to look better. That would add to inflation fears, but it might also compel investors to get off the sidelines and banks to lend more. Congress and the White House, Zandi says, need to maintain spending in the short term while coming up with a credible debt-cutting plan that will kick in a few years from now, when the economy is healthier.

[See 8 things missing from Obama's debt plan.]

In Europe, Zandi and others would like to see the European Central Bank cut interest rates and buy more bonds, like the Fed has done, instead of the tighter policy the ECB has pursued up till now. Europe, he believes, should also enlarge the bailout fund set aside for nations wallowing in debt, and do more to assess the health of Europe's banks and shore them up if necessary. Many investors think it would be beneficial to hasten the endgame in Greece—whether that turns out to be default or a much bigger bailout—instead of taking incremental steps that merely delay decisive action.

Some of these steps may happen eventually, but policymakers have shifted away from the kind of big-bang actions that the United States took, for example, when it bailed out the banking industry in 2008 and passed the stimulus bill in 2009. Instead, there's now more of a just-in-time approach to heading off disaster. That's how Republicans and Democrats handled the summer negotiations over extending the nation's credit limit, waiting until the government virtually ran out of money before inking a deal to allow more borrowing--a process now widely regarded as a debacle.

The same thing seems to be happening now in the battle over whether to pass a temporary budget needed to keep the U.S. government operating past the end of the month. There are many more deadlines like this looming over the next 12 months, with business owners wondering how many times Washington will hold the economy hostage to political demands. Congressional Republicans have even urged the Fed to refrain from any more monetary stimulus , because it could "erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers." (Economists aren't sure how those two developments would harm the economy, however.) Meanwhile, in the Eurozone, where action requires consensus among 17 disparate nations, there's no obvious alternative to dithering incrementalism.

[See what Bernanke might say to his GOP critics.]

To some extent, the western economy is suffering from withdrawal symptoms as it struggles to function without aid it has become addicted to. It may be the ultimate irony when traders--the last defenders of unfettered capitalism—decry a lack of government support for the economy. But there's as much uncertainty now coming from political pronouncements as from the economy itself. Politicians are doing a mighty disservice to everybody dependent on a healthy economy by issuing ultimatums, refusing to compromise, making businesspeople guess what important policies will be and generally daring the markets to collapse. It's not a coincidence that markets plunged after the summer debt drama in Washington produced disappointing half-measures and a downgrade in America's credit rating.

The economy can recover without help from government, but it will take a long time and cause a lot of pain along the way. The question is, how much. Will there be a full-blown financial crisis in Europe? Or will policymakers manage to stop the bleeding? Could a big U.S. bank such as Bank of America collapse? Or will regulators make sure such a momentous event never happens? Will Congress do anything at all to help create jobs and boost the economy? If not, is there anything more the Fed can do? Or are workers and businesses completely on their own at this point?

[See what will happen if Greece defaults.]

These are the questions investors are trying to sort out, and with so little guidance from western capitals, they really have no choice but to plan for the worst. So the markets yo-yo their way to lower and lower closes. Governments may yet save the day, with last-minute moves that cheer investors. But the gravity dominating the stock markets indicates that nobody's counting on it.

Twitter: @rickjnewman

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The End Is Near for No Child Left Behind

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The nation's embattled key education policy may soon meet its administrative death. The White House today is detailing requirements for states that want to apply for waivers from essential components of No Child Left Behind, a law all sides call out-of-date and impossible. Its central provision requires every student to test at grade level in math and reading by 2014. But now, the Obama administration is providing a way to let states off the hook and hoping all states will take advantage. "This is not a competition where some states win and others are left behind," a senior administration official said on a Thursday call with reporters. "We'll encourage all states to apply, and everyone should have a chance to succeed." Several states have already indicated they plan to apply.

President Obama is scheduled to discuss the waivers in a speech this morning. "To help states, districts, and schools that are ready to move forward with education reform, our administration will provide flexibility from the law in exchange for a real commitment to undertake change," he will say.

[GOP: Obama Circumventing Congress on No Child Left Behind.]

Requiring change in return for relief irks conservative lawmakers, who are trying to address the issue with a collection of smaller education bills. When Education Secretary Arne Duncan introduced the waiver idea earlier this year, Republicans called it an end-run around Congress, a case of the Obama administration legislating by waiver.

But senior administration officials say the plan was created with bipartisan input from governors and state school officers and will be focused more on setting goals and leaving room for innovation than on dictating the means to states. "Our goal is to support their work, get out of their way wherever we can, and hold them accountable wherever we must."

Duncan's remarks today will highlight that goal. "One of my highest priorities is to help ensure that federal laws and policies support the significant reforms underway in many states and school districts," he will say, "and do not hinder state and local innovation aimed at increasing the quality of instruction and improving student academic achievement."

[Obama 'No Child' Waiver Proposals Rile Conservatives.]

States hoping for a waiver will have to do three things: First, show they are transitioning to college- and career-ready standards and assessments, something most have already initiated. Second, they must implement an accountability system to reward schools showing progress as well as high-achieving schools that serve low-income students, but also take action to improve low-performing schools or schools with large achievement gaps. The method of intervention into such schools will be decided by the states, officials say, but-low performing schools must be held accountable. Finally, states must work with local educators to find ways to evaluate and support teacher and principal effectiveness based on several proven factors, including student progress. "The purpose is not to give states and districts a reprieve from accountability," Obama will say, "but rather to unleash energy to improve our schools at the local level."

In addition to allowing states to set achievable goals free from the 2014 deadline, the waivers will give states freedom in choosing how to spend certain federal funds allocated by No Child Left Behind, as long as they protect spending for disadvantaged students.

States can begin applying in mid-November, and officials expect the first waivers will be issued early in 2012. Those that do not apply or qualify will still have to abide by No Child Left Behind until Congress puts something in its place. The law was supposed to be overhauled in 2007, but lawmakers have been unsuccessful so far, leaving school districts stuck with an increasingly unpopular policy.

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