Tens of thousands lose stimulus-subsidized jobs, Tami Luhby, Money.cnn.com

Tens of thousands of low-income workers lost their jobs Thursday as a stimulus-subsidized employment program came to an end.

About a quarter of a million people in 37 states were placed in short-term jobs thanks to a $5 billion boost to the Temporary Assistance for Needy Families program, according to the Center on Budget and Policy Priorities. States used about $1 billion to provide subsidized employment, with the remaining funds going to cash grants, food programs, housing assistance and other aid.

About half the jobs were summer employment for youth and the rest were for disadvantaged parents. Each state configured its initiative differently. Some covered all the workers’ wages for a few months, while others paid for a portion of their salary.

With the program expiring, many of the adults have been told not to report to work anymore. And it won’t be easy for them to find a new position at time when the unemployment rate continues to hover at 9.6%

“They are just joining the millions of other people looking for permanent work,” said Elizabeth Lower-Basch, senior policy analyst at the Center for Law and Social Policy, an advocacy group known as CLASP.

The TANF jobs initiative was one of several stimulus initiatives that ended Thursday. Also running out are a $2 billion subsidized child care program and a $2.1 billion boost for Head Start, an early learning program for needy children.

Limping along

State officials and advocacy groups have been lobbying Congress to extend the jobs program and other Recovery Act measures, but federal lawmakers have shown little appetite to do so.

A handful of states will continue to operate the programs for another few months, but most of those will be downsized considerably.

Illinois announced earlier this week that it will continue the program with state funds for up to two months in hopes that Congress will provide more money for it. The state has placed more than 26,000 workers at more than 5,000 private, non-profit and government employers.

“The best way to make our economy stronger is to put people to work,” said Gov. Pat Quinn. “It is good for families, small business owners and businesses.”

The TANF jobs program is among the few stimulus initiatives that have been embraced by Republican governors. Mississippi’s Haley Barbour, who headed the Republican National Committee in the mid-1990s, praised the effort.

The “program will provide much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities,” Barbour said when the initiative launched last year.

South Carolina, Texas and Minnesota — all headed by Republican governors — plan to continue their programs either in a smaller form or for a few months, according to the Center on Budget and Policy Priorities.

IRS Offers Tax Break for Homeowners With Defective Drywall, Joaquin Sapien, Propublica.org

The federal government has made a modest step toward offering some financial relief to homeowners dealing with contaminated drywall. The Internal Revenue Serviceannounced Thursday that it will allow homeowners to write off expenditures they have or will incur trying to fix their homes.

The Consumer Product Safety Commission has recommended (PDF) that homeowners remove all the drywall, along with the electrical, gas and fire safety systems — essentially gutting the homes. The drywall, most of it imported from China, emits high amounts of hydrogen sulfide, which can corrode wiring and other electronic appliances, causing refrigerators and air conditioners to fail. Homeowners also have complained that the drywall triggers respiratory problems, nosebleeds and severe headaches.

According to the new IRS policy, homeowners can treat the amount they paid for these repairs as a “casualty loss in the year of payment.” Casualty losses are typically reserved for repairs homeowners have made after a natural disaster or sudden event.

The policy includes some important caveats. For example, if a homeowner has filed a claim with an insurance company, the homeowner can write off only 75 percent of the amount the insurance didn’t cover. Homeowners also must itemize their federal tax returns. Deductions will be granted only for amounts that exceed 10 percent of the taxpayer’s adjusted gross income for the year the claim is filed and for amounts that exceed $500.

Taxpayers who have already filed tax returns for the year in which they paid to fix their houses have three years to amend their returns and claim the deduction.

Most insurance companies are not reimbursing homeowners for drywall problems. In fact, some homeowners say their insurers canceled their policies after they filed a claim.

The tax deduction helps only those homeowners who can afford to repair their homes, which can be very expensive. Ridding a house of its drywall and wiring, as the product safety commission recommends, can cost $100,000 or more.

Three U.S. senators — Bill Nelson, D-Fla. and Virginia Senators Mark Warner and Jim Webb — along with Virginia Congressman Glenn Nye first began asking the IRS to offer such a deduction in June 2009, and have written additional joint letters since then. Webb also filed amendments to two separate bills that would have required the IRS to offer the casualty loss deduction — but the amendments weren’t included in the final legislation.

“This is welcome and long overdue news,” Nelson said. “This tax relief is just another important step to help drywall victims piece their lives back together.”

On Wednesday, the day before the IRS made its announcement, Warner called Commissioner Doug Shulman and urged him again to take action, Warner’s spokesman said.

“This is a key step forward in our efforts to provide some measure of relief to homeowners who have been struggling financially due to contaminated drywall issues,” Warner said in a statement after the IRS announcement. “Our office continues to work individually with Virginia families, including intervention with their mortgage lenders, and we will continue to look for ways we might be helpful to these families.”

Webb said the IRS action was “an important step forward for thousands of American families whose homes have been contaminated with Chinese drywall.”

“I have heard directly from my constituents about the emotional, physical, and financial hardship they continue to face as they struggle to maintain payments on houses that have been rendered uninhabitable, while also paying for a place to live and often dealing with corresponding health issues,” Webb said in a statement. “I will continue working to ensure that those affected receive the necessary federal attention.”

Wells Fargo Curtailing Short Sale Extensions, by Kate Berry, Americanbanker.com

In a move that will expedite some foreclosures, Wells Fargo & Co. has stopped granting extensions for certain distressed homeowners to complete short sales.

The change last month preceded recent revelations of faulty documentation at two major mortgage servicers — JPMorgan Chase & Co. and Ally Financial Inc. — that suspended thousands of foreclosure actions to review their processes. Wells said it does not have the same problems as those servicers.

The company said it changed its policy on short sales at the behest of investors for whom it services mortgages, including the government-sponsored enterprises.

Early last month, Fannie Mae told its servicers to stop unnecessarily delaying foreclosures. The GSE said it would hold servicers responsible for unexplained delays to foreclosures with fines and on-site reviews.

In a memo e-mailed to short sale vendors last month and obtained by American Banker, Wells said it will no longer postpone foreclosure sales for those who do not close short sales by the date in their approval letter from the company. Only extension letters dated Sept. 14 or earlier would be honored, Wells said.

Mary Berg, a spokeswoman for Wells, confirmed that the memo was genuine. But she said it had “caused confusion,” and stressed that Wells still grants extensions on loans in its own portfolio (including those it acquired with Wachovia Corp.) and in cases where investors allow it. For those two categories, Berg said, Wells allows one foreclosure postponement, provided these conditions are met: a short sale has been approved by Wells, by junior lienholders and by mortgage insurers; the buyer has proof of funds or approved financing; and the short sale can close within 30 days of the scheduled foreclosure sale.

Berg would not say how often Wells’ investors allow extensions.

The new policy on short sales was put in place “over the past couple of months … in response to various investor changes,” Berg said. Those investors “would include the GSEs, HUD and those investing in private-label” mortgage-backed securities.

In a short sale, a home is sold for less than the amount owed on the mortgage and the lender accepts a discounted payoff. The transactions are often less costly to the lender than seizing and liquidating the home.

“As long as there is a short sale possibility, the loss will always be less,” said Rayman Mathoda, the president and chief executive of AssetPlan USA, a Long Beach, Calif., provider of short sale training and education. “Basically foreclosure sales should be delayed for any responsible homeowner that has a real buyer available.”

Wells’ decision also follows efforts by the Obama administration to encourage short sales for borrowers who do not qualify for loan modifications.

“It makes no business sense why they are doing this, since it’s wrong for the borrowers and for the government,” said Eli Tene, the CEO of IShortSale Inc., a Woodland Hills, Calif., firm that advises distressed borrowers.

But experts on short sales said that in recent months servicers have been reluctant to approve the transactions out of concern that they will fall through, further prolonging the process.

“There is also a growing issue with the new buyer and financing issues, either losing their jobs ahead of closing or the new lender not being ready to close, which then gives rise to the buyer running out of patience and walking,” said Jim Satterwhite, executive vice president and chief operating officer of Infusion Technologies LLC, a Jacksonville, Fla., provider of short sale services.

Satterwhite said many servicers have reached the point where they know which borrowers do not qualify for a modification and are moving those borrowers through to foreclosure to deal with the backlog of inventory. “A lot of servicers are just falling in line with Fannie,” he said.

Moreover, the expectation that housing prices will fall further is forcing servicers — and the GSEs — to push for a quicker resolution through foreclosure, since short sales can involve further delays. “Values are dropping faster and that also means the losses on short sales are going up,” Satterwhite said.

Of course, the recent reports of “robo-signing” at Ally Financial’s GMAC Mortgage and at JPMorgan Chase could gum up the foreclosure works again. For example, on Friday, Connecticut Attorney General Richard Blumenthal asked state courts to freeze all home foreclosures for 60 days to “stop a foreclosure steamroller based on defective documents.” The day before, Acting Comptroller of the Currency John Walsh said he had told seven major servicers, including Wells, to review their foreclosure processes.

Another Wells spokeswoman, Vickee J. Adams, said the company’s “policies, procedures and practices satisfy us that the affidavits we sign are accurate.”