The Housing Bubble

The institutional collusion between mortgage lenders like Countrywide and “failed” insurance behemoth, AIG (which if you ask its well-compensated executives, has actually succeeded quite spectacularly–for them,) has never been a closely-guarded secret. After all, the whole housing bubble was one giant insurance scam designed by Wall Street and abetted by an unwitting American public. To say that “no one could have known” that lending vast amounts of money to people with no conceivable hope of ever paying it back might turn out badly, is quite simply, a lie. WE all knew what a mess they were making; how could the very people defining and manipulating the process NOT have “seen it coming?” Let alone made elaborate plans to profit from its inevitable collapse?

All those about–to-foreclose mortgages were backed by derivative (up to 27-1,) credit default swaps, and a whole lot of folks got obscenely rich for a couple of years by leveraging them against the ever-expanding Ponzi scheme unfolding in the housing, foreign exchange, and commodities markets.

And if the foundation of that scheme should start to crumble? Why, that’s why AIG was there to make them whole again. Mark-to-market. 100 cents on the dollar. At worst, they thought, that toxic exposure will be bought up by Credit Suisse, or spun off to Lehmans…. Then Lehman Brothers failed, and that’s when the banksters really went to town.

The big question these days seems to be “Why didn’t Geithner, knowing that AIG’s counter parties were at his mercy, at least try to negotiate with them before the government stepped in and guaranteed the losses?” When you’re holding all the cards, you don’t have to be Mr. Nice Guy. And having paddled in this pond for most of his career, surely Geithner knew that he was in a position to garner a better deal for those of us average Joes who would actually be paying for this bailout? Instead, he rolled over for his erstwhile masters at Goldman Sachs and the Federal Reserve. Why all the secrecy about who got what? Just who is this guy protecting?

We may be about to find out. Thanks to the dogged efforts of Congressman Darrell Issa (R-CA) of the House Committee for Oversight and Government Reform, AIG’s true function as an international money laundering fund may finally come to light—as will all those 100% payoffs to its numerous shadowy counterparty risks. Should Issa’s efforts be successful, expect to see some of those heretofore undisclosed “risks” turn out to be sovereign wealth funds, an oligarchy or two, the Forex investment fund of a large Asian manufacturing base, and such notable private parties as former senior members of a past presidential administration. Given some of these entities’ ties to private security concerns—who also profited directly or indirectly from the bailouts—it’s no wonder Geithner, Bernanke, Paulson et al have been stonewalling the Committee for so long.

The cat and mouse game between Issa and the Fed has been going on since Issa first questioned Hank Paulson’s sudden announcement—two weeks before Geithner tried to take over the problem of the credit default swaps—that money was being loaned to the nine largest US banks, whether they wanted it or not. On October 13, 2008, Paulson informed these banks that they must take $125 billion in government funds he was offering. No accountability required.

Around this time, Goldman Sachs, which received $85 billion in taxpayer subsidies, let it be known that they had adequately hedged their firm against counterparty risk. This counterparty risk was essentially a series of margin calls by a London-based AIG subsidiary that had been set up specifically to offload AIG’s toxic mortgage “assets” during the subprime meltdown. As demand for MBS’s declined, the margin calls increased and AIG was unable to come up with the collateral. Bail-out time.

What Goldman wasn’t telling people was that they had also purchased credit default swap insurance on AIG’s going under. The Fed, in buying up that paper as well, (at 100%,) essentially made good on both eventualities for GS—another $12.9 billion handout courtesy of the American Taxpayer.

This didn’t set well with a certain segment of the electorate, and Issa kept plugging away trying to get some answers about who might have had a hand in this chicanery, and who was trying so hard to keep it quiet. After all, firms which had received TARP funds had indirectly been funneled some $100 billion more through AIG counterparty payouts, receiving full value for their derivatives contracts—with taxpayers picking up the tab.

Recently, a series of incriminating emails from Ben Bernanke’s office surfaced, seemingly implicating the Fed chair in efforts to cram through the AIG bailout over his staff’s objections. More letters were exchanged with the good Congressman.

After counsel for the Fed informed Issa on January 8, 2010, that his questions about their handling of the AIG bailout “didn’t warrant (Geithner’s) attention,” Issa upped the ante. In a semi-open letter to Oversight Committee Chairman Edolphus Towns, Issa all-but called for Timothy Geithner’s head on a platter…with Bernanke’s served as a garnish (PDF). “I am writing to request that you issue a subpoena to the Federal Reserve for these documents as soon as possible.”

So far AIG has received in excess of $152,000,000,000 from once and future taxpayers, (more than the stimulus funds given all fifty United States combined) with no accountability to any of us. The parties responsible for this largesse have steadfastly refused to disclose to Congress where all that money ended up—and likely for good reason. Just as the 911 Commission Report was heavily redacted to hide all references to BushCheneys’ personal financial ties to Saudi Arabian oil interests, so likely are the Fed’s records of the TARP/EESA funds final destinations.

Now, I don’t know about you, but I’m certainly not seeing a lot of that money up here in my neck of the woods. And other than a few unnecessary highway patch-up gigs, I’m not seeing it anywhere in the county. Yet AIG just gave out another $100 million in bonuses, and has spent (presumably,) millions more to retain snotty attorneys to tell inquiring Congressmen to go pound sand.

Wouldn’t it be fun to turn on CSPAN one morning and hear our newly- subpoenaed officials saying, “Well, Darrell, we gave Citigroup $25 Billion and then they gave $8 billion of that to DubaiWorld…which as you may recall, recently defaulted (read: absconded with it,) sticking American taxpayers with Mr. Cheney’s rounding errors. Again.”

Or, “Well, Congressman, you remember that $132 billion in Kennedy bonds (documents accessible only by high-ranking US Treasury officials) that those two Japanese mobsters were caught trying to “smuggle” over the Italian-Swiss border two days before Tim Geithner arrived for the World Economic Summit in Beijing? Uh, me neither….”

Or, “You do realize, Mr. Issa, that AIG was basically comprised of the average Chinese citizen’s life savings, don’t you? And that those savings are pegged to the USD? That would be our Treasury?”

Or, “Ever heard of Takaful (sharia,) Insurance Plans? The fundamentalist Islamic AIG counter party? No? Good.”

Or, “So why shouldn’t Citibank be able to borrow from the Fed at a taxpayer-subsidized 0% and lend it back to them at 25% interest on their credit cards? It’s a free market….”

Given the delicate nature of some these inconvenient coincidences, Mr. Issa may be a long time picking away at the Fed’s ramparts. But like that other Grand Inquisitor, Henry Waxman (D-CA) he seems determined to get at the truth—no matter whose backyard it leads into.

A list of TARP fund recipients.

To egg Congressman Issa on.

by Allena Hansen

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

This is a guest post, followed by some articles I’ve added for commentary.

I am a long time blurker who has enjoyed and learned much from HBB. Many thanks to Mr. Ben Jones and his loyal posters. I went so far as to start The North Idaho Real Estate Blog in the Coeur d’Alene Press ( now defunct) in 2006 using the nom de plume ‘Ben Daere’ in his honor..sort of. A number of posters said that they had been “converted” to seeing real estate reality. So, HBB saved the fiscal bacon of a number of folks in my area for which I feel rewarded in “good vibes.”

During this period, my favorites out of the many excellent posters have been the late, great Oly and the inestimable Allena Hansen, even though I’m probably diametrically opposite in political philosophy, as will be shown soon.

Such is the nature of HBB.

We live in interesting times. The same logical analysis of the housing bubble and siren warning given by the HBB gang should be applied across the board to all aspects of our so-called government. I tend to believe less government is more as I don’t need a whole lot of “governing.” Having worked as an administrator for the Community Services Administration in the ‘70’s taught me that 99+% of people are victims of their own circumstances and that many of those whose plans fall through don’t have any problem demanding that their fellow citizens (taxpayers) pick up their slack.

Concurrent with that experience I began my political experience with haranguing my elected officials to pass a balanced budget amendment; institute term-limits; phase out Social Insecurity and medicare and to downsize our costly foreign commitments. In general, shift power not only from Federal to State, but to the COUNTY level. As Tip O’Neill’s father told him, ‘All politics is local.’ I have trouble enough keeping track of the featherbedding hucksters in my burg, so I don’t have any way of knowing what the politutes in the district of corruption at the south side of Baltimorgue are doing.

Obviously, my efforts were in vain. Now, I just have to lay back and watch the wheels spin off the wagon. I’m like a guy in a kayak going over a waterfall…at first the view’s interesting and it’s pretty exciting but the conclusion is very questionable.

We are rapidly approaching the ‘conclusion’ of our national fiscal nightmare. The $12+Trillion national debt, the $trillion deficits as far as the eye can see, the ‘boomers’ hitting the emaciated SS and medicare programs, the impending collapse of the Pension Benefit Guarantee Corporation and the imploding industrial base that even the counterFIAT money presses can’t keep up with should raise the hair on every taxpayer’s neck. Not to mention that not one cent has been saved for the massive military and civil service pensions.

So, what to do? As the Boy Scouts say, “Be Prepared.”

Rather than hunkering down with an AR-15 and jars of stale flour, I’d rather be proactive and look to how we can make this country a better place. I see that I’ve exceeded 500 words of windy diatribe so I’ll leave it to the cavernous vat of wisdom collectively known as the Housing Bubble Blog to offer up solutions, should it be willing.

Humbly submitted,

Zeus M.

From Bloomberg. “The U.S. investment in Fannie Mae and Freddie Mac may be too deep to effectively transition the mortgage-finance companies out of government control and back into the hands of private investors, their former regulator said. ‘I would love to figure out how to get there, but I think we may be too far along the line of government involvement,’ James B. Lockhart III, who ran the Federal Housing Finance Agency and its predecessor agency from 2006 until August 2009, said in a Bloomberg Television interview.”

“Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, were seized by FHFA 17 months ago because of their risk of failing and have since survived on $110.6 billion in taxpayer- funded aid. ‘Most of that money will never be seen again,’ said Lockhart. ‘They were just allowed to leverage themselves so dramatically.’”

The DC Mortgage Examiner. “Local GSEs, Fannie Mae in northwest Washington, D.C. and Freddie Mac in Tyson’s Corner, Virginia will have diminished roles in buying mortgages until they put their books in order. The week before they were taken over by our Federal Government, their stocks were trading around $21.00. Today both trade around $1.00 and often less. Unless another infusion is granted by Congress, it is likely their share prices will near zero.”

“This poses a serious problem for the Obama Administration as it tries to steer the economy into the calmer waters of fiscal solvency. Without the two leviathans (FNMA and FHLMC) buying mortgages from banks originating loans, lending institutions will have to keep them on their books. A situation such as this bodes poorly for those with less than perfect credit hoping to get a loan that is not directly underwritten by the government, such as FHA loans.”

“Representatives Barney Frank (D-Mass.) and Maxine Waters (D- CA)…have proposed legislation to reduce the inventory of houses by having local governments purchase them to prevent unfair competition with other homes not in the dire straights of mortgage default.”

“There is another choice yet to be offered. How about banning ownership of private property? Oh, that’s right.! Someone already tried that one.”

The Vancouver Sun. “U.S. housing prices are headed for a double-dip decline that will hurt related equities which have already priced in a recovery in the sector, warns Benjamin Tal, senior economist of CIBC World Markets. The reason, he said, is that any current stabilization in U.S. housing is more a function of a badly damaged market and the distorting affect of temporary tax incentives than evidence of a sustainable rebound.”

“‘We anticipate further weakness ahead as supply continues to outpace demand, mortgage rates head higher and the government’s generous homebuyers’ tax credit finally expires,’ Tal said.”

“The ’shadow inventory’ of housing is what worries Tal most, and has him calling for another decline in prices of five to 10 per cent over the next two years. While conventional inventories are trending lower, there are close to two million mortgages that are more than 90 days delinquent, nearly half of which will end up in foreclosure. Add another 2.3 million properties that are already in foreclosure to existing properties on the market, and you have inventory totalling more than eight million units, a record high 16 months of supply.”

“Even more staggering is the fact that 10 million households now find themselves in a ‘negative home equity’ position of worse than minus 20 per cent. Considering the ease with which U.S. homeowners can walk away from their mortgages, ’strategic defaults’ — or failing to pay when one could — are a very real option, Tal said. ‘In six months from now nobody will be asking what a strategic default is. Everyone will know.’”

“With 24 million Americans now out of work or underemployed, ‘it’s crazy to call for a recovery in the housing market in this kind of environment,’ Tal said.”

The Orange County Register. “Are all these loan modifications we keep hearing about actually helping homeowners avoid foreclosure, and thus helping the housing market and economy? Tom Mitchell, a senior analyst who covers financial stocks at Miller Tabak & Co., agreed that banks’ modified loans may be skewing the picture.”

“‘We now have to consider the [modified loans] as a kind of shadow group of nonperforming assets,’ Mitchell said. ‘It’s reasonable to say that for most banks, if the loans had not been [restructured], they would have been nonperformers.’”

The Pacific Coast Business Times. “Economist Mark Schniepp thinks the lowest point in the recession has passed and that 2010 will be a transition year for Ventura County. ‘Last year we were predicting the end of the world,’ Schniepp said. ‘2009 was horrendous. 2010 is going to be a transition year.’”

“Housing inventory levels are now back to where they were at the peak of late 2005, but Schniepp said the increase is likely due to distressed properties and government incentives for homebuyers. ‘It’s very hard to predict this market because it’s been tampered with … it’s not a free market anymore,’ Schniepp said.”

The Fairfax Times in Virginia. “Nobody is going to paint the current picture as rosy. There are still too many homes for sale and not enough buyers. The economy is still struggling, and many Fairfax residents remain worried about their jobs. That said, though, there are some encouraging signs.”

“It’s also worth noting that the hottest segment of our housing market — homes priced under $300,000 — has largely been fueled by the federal first-time homebuyer’s tax credit of $8,000, an artificial stimulus that’s slated to disappear in April. Rather than allowing the credit to vaporize altogether, perhaps it should be extended to all buyers through 2010. More people would be inclined to buy in the midpriced market ($300,000 to $500,000), freeing up inventory in the ultra-competitive lower end of the housing spectrum.”

“Short of that, we’ve simply succeeded in packing a whole herd of people into low-cost housing, plugging a Titanic-sized hole left by the financially irresponsible who purchased houses well beyond their means.”

“More than a few economists warn that extending or expanding these tax credits in any form is a slippery slope that caters to the ‘you can’t fix everything by throwing more money at it’ crowd.”

“To be sure, blindly writing trillion-dollar checks and adding to record deficits isn’t a long-term solution. But the current tax credit has allowed thousands of Americans to get in the home-buying game on healthy terms, pumped billions of dollars into a moribund industry and preserved tens of thousands of jobs in the process.”

“Opening that program to second-, third- and 10th-time homebuyers won’t solve all of this country’s housing problems overnight, but it is a discussion worth having.”

The Washington Examiner. “The numbers ‘clearly indicate that the rebound in housing demand observed so far has been largely supported by government programs,’ wrote Anna Piretti, senior economist at BNP Paribas.”

“Locally, sales in everyWashington suburb dropped last month, save Loudoun County. December house sales in the District dropped 16.5 percent to 518, and combined sales in Prince William County, Manassas and Manassas Park dropped 11.2 percent to 578. In Maryland, Montgomery County’s sales dropped 18.1 percent, from 923 to 756. And tony Montgomery County is facing a problem that would have been nearly unthinkable several years ago: Foreclosures.”

“Still, home sales picked up in 2009. Year-over-year sales increased 15 percent nationwide from December 2008, when 4.74 million houses were sold. For all of 2009, the 5.1 million home sales were 4.9 percent higher than the 4.9 million in 2008. ‘It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,’ said Lawrence Yun, NAR’s chief economist.”

Smith Mountain Lake. “In 2005 and 2006, the Roanoke Valley Association of Realtors listed more than 100 new members each year, from 1,418 in 2004 to 1,706 in 2006. Since then, the numbers have dropped annually to 1,404 members as of Dec. 31, 2009. In early January, membership was 1,397, said Laura Benjamin, RVAR CEO.”

“Glenda McDaniel, Realtor with Long & Foster in Moneta, said she thinks the membership numbers peaked in 2006 because people were watching the housing market take off and wanted to be a part of it. ‘What happened there, I think, was you had a lot of people that heard about all the good stuff happening in 2004 and 2005 and wanted to get on the bandwagon and join in,’ she said. ‘People were buying everything. There was a boom during that time.’”

“Business was so good, Realtors almost didn’t have to work to find buyers, said McDaniel. ‘They didn’t have to advertise, they didn’t have to do anything; everything was selling so quickly,’ she said. ‘A lot of people got into the business because it was easy … it’s not easy now.’”

“Matt White, broker for Realty World Properties in Huddleston, said the slow housing market of the last few years flushed out the inexperienced real estate agents. ‘Frankly, they weren’t doing a really good job,’ he said. ‘I think it put a bad taste in people’s mouths.’”

The Baltimore Sun in Maryland. “A Laurel man just pleaded guilty to defrauding a lender of $428,000 in a scheme that was orchestrated at the end of 2008, against a backdrop of slumping sales and tightened lending requirements. Olu Campbell said he worked up a plan with an associate to convince a lender to extend mortgages on three Baltimore homes by making the purchases appear legitimate. Campbell had worked as a loan officer and home renovator. His associate had appraisal experience. Together, they used that background to apply for loans on two of the properties — just not as themselves.”

“What was in it for Campbell? A lot of money, he admitted to investigators. In a single transaction, about $110,000 went to his contracting company, Metropolitan Housing Associates LLC, ‘for the ostensible purpose of paying a ‘contractor invoice,’ the statement of facts says.”

“‘Campbell used $20,000.00 of his proceeds to purchase a used BMW,’ it adds in an aside.”

Southern Maryland Newspapers. “It’s been four weeks since the disappointing news came down from the state that all but six of the 18,344 Charles County homes assessed last year dropped in value, with the county as a whole seeing a 28.2 percent drop. But it will be months before those homeowners find out whether or not that means a break on their tax bills.”

“In January, the Maryland Department of Assessments and Taxation announced that the county’s residential property — primarily the St. Charles and Waldorf neighborhoods — lost $1.7 billion in value. The total percentage of residential improved properties in Charles County that decreased in value was 99.97 percent.”

“‘Property values went up substantially between 2003 and 2006,’ said Robert Farr, supervisor of assessments at the Charles County office of state assessments.”

“One of the major issues will be whether the state Homestead Tax Credit, which has historically been a helping hand for residents, has turned into a burden. While the tax credit has helped during boom times it is proving to be a kick while the market’s down. Last year, Mechanicsville resident Beverly Long received news that the state had assessed her home $100,000 less than the last time. Her first assumption was that while her house might not be worth as much as before, at least her tax bill would be proportionately lower.’

“‘When I got my tax bill in July I almost had a heart attack,’ Long said. ‘We had been knocked out of the Homestead Credit. In fact, we owed $400 more. This was our dream home that’s become a nightmare. I know things cost money, but there’s gotta be a happy medium.’”

The Boston Globe in Massachusetts. “State and federal regulators reached agreements with two more struggling Massachusetts banks to shore up their finances. The Massachusetts Division of Banks and the Federal Deposit Insurance Corp. ordered Athol-Clinton Co-operative Bank in Athol and Stoneham Savings Bank in Stoneham last month to take steps to safeguard deposits.”

“Stoneham Savings, which was hit hard by delinquent real estate loans after the housing bubble burst, lost $9.2 million last year. Athol-Clinton Co-operative lost $2 million last year, primarily because of troubled home mortgages. Bank president Wayne Grimes noted the Athol area was hit hard by unemployment.”

“‘Things are looking up,’ he said, ‘but it’s a gradual process.’”

The Cape May County Herald in New Jersey. “Fox Chase Bank announced a net loss of $1 million for 2009, compared to net income of $1.2 million in 2008. This year’s net loss included a provision for loan losses of $9.1 million compared to a provision for loan losses of $2.9 in 2008. ‘Economic conditions in the Bank’s geographic locations of Southern New Jersey and Southeastern Pennsylvania continued to deteriorate during the latter part of 2009. We are disappointed with the increased levels of nonperforming assets and the associated increase in the provision for loan losses during the fourth quarter of 2009. Continuing high unemployment and weakness in the housing market continue to place stress on our borrowers,’ said Thomas M. Petro CEO of the company.”

“‘The most significant impact on our loan portfolio was continued stress on real estate values as construction loans for residential projects; residential mortgages and home equity loans comprised $24.1 million of our $29.7 million nonperforming loans at year-end.’”

The Charlotte Business Journal in North Carolina. “Last summer, NewDominion Bank became the reluctant owner of 30 vacant lots in an unfinished subdivision in north Charlotte. Seven months later, the small Charlotte bank still pays bills and mows grass for real estate it never wanted. Banks across North Carolina own $4.5 billion in real estate acquired through foreclosure, according to the latest research by Forum Capital, a Charlotte firm that specializes in banking and real estate issues.”

“That’s a 346% increase since March 2008.”

“Robert Fox, a veteran Charlotte banker who’s president at NewDominion…describes the housing collapse and disputes between builders and developers as ‘a dangerous combination.’ And with real estate lending such a big part of banking in Charlotte, most lenders suffered when the dominos started to fall. ‘The business model worked all through the ’90s and most of the 2000s,’ Fox says. ‘We rarely saw a builder walk away from a project. But that’s what started happening.’”

The Gainesville Times. “The developer facing foreclosure on three Reunion subdivision homes in South Hall said he plans to settle his multi-million dollar loan dispute before his property is auctioned off.

“‘Homeowners may rest assured that this dispute has no impact whatsoever on their property,’ said John Wieland of John Wieland Homes and Neighborhoods in a written statement. ‘It’s business as usual for Wieland.’”

“On Thursday, Compass Bank filed foreclosure notices in The Times against the 39-year-old company. The bank is seeking repayment on a $23 million loan it gave Wieland to build Reunion subdivision, a planned community that opened in 2001. In the spring of 2009, Wieland took to the road in hopes of selling 101 homes in 60 neighborhoods in Georgia, the Carolinas and Tennessee.”

“He planned to sleep in a model home in a different neighborhood every night until he reached his sales goal. His first stop was at Reunion where he said he remained convinced that, despite the recession, the time was right to buy a house.”

“‘This is our fourth big recession, and in the three previous it has always been housing that led the economy out,’ Wieland said at the time.”

The Herald Sun. “North Carolina’s economy, like the country’s, appears to have bottomed out and is poised for what’s likely to be a slow recovery from the recession, an N.C. State University economist said Wednesday. Employment should starting picking up soon, but the state ‘will be lucky’ to add 40,000 jobs in 2010, economics professor Michael Walden told city and county managers from around the state in Durham for an annual seminar.”

“The recovery of a consumer-driven economy is likely to be slow-paced because families will devote more of their money over the next couple years to paying down the debts they incurred while they could borrow against rising home values, Walden said.”

“Walden has become one of the go-to people for local government administrators who, budgeting in mind, are eager to get a handle on economic trends. Walden is also well regarded by the state’s conservatives. He has penned numerous articles for the John Locke Foundation, a Raleigh think tank linked to former Republican legislator Art Pope.”

“Regardless of that tie, Walden said he thought the federal government had acted appropriately in 2008 and 2009 to cushion the economy. He noted that the Bush administration was responsible for some $950 billion in tax cuts and bailouts, to go with close to another $800 billion in economic stimulus from the Obama administration. The Federal Reserve has matched them, pumping up the money supply by some $2 trillion.”

“Comparatively, ‘more resources have been spent fighting this recession than were spent during the [1930s],’ during the Roosevelt administration’s efforts to combat the Great Depression, Walden said.”

“But the collapse of the housing market and other problems that caused a 20 percent, $11 trillion reduction in the citizenry’s on-paper wealth demanded such an aggressive counter, he said. ‘I agree with the view we were at the edge, we were right there, and were going to fall off,’ Walden said, referring to the crisis that unfolded in 2008. ‘The combined efforts of both administrations pulled us off the edge.’”

“Repeating what he told the Durham council a year ago, Walden said the Federal Reserve’s attempts to quell an unprecedented housing bubble by raising interest rates helped trigger the crash. Economists there and on Wall Street didn’t anticipate that bubble-busting measures would cause housing prices nationally to retreat, he said. Rather, they saw price increases continuing, but at moderate, historic rates of 2 to 3 percent annually.”

“The housing collapse ‘is why this recession has been so different from other recessions,’ as it has undermined bank and family balance sheets alike, he said.”

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

It’s Friday desk clearing time for this blogger. “Randall Guerra, a veteran of the housing industry, (and) executive director of the Community Housing Council in Fresno, has resigned, saying he lost faith in the Obama administration’s loan-modification program. ‘Making Home Affordable is not working,’ said Guerra. ‘I had a lot of hope and expectations that it would deliver, but it didn’t deliver anything but more bad news.’”

“‘They underestimated it,’ he said. ‘No one anticipated how far prices would fall. You can’t help states where [homeowners] are 50% or 60% underwater. People are making a business decision to walk away from the house.’”

“‘People still need to call us and ask for assistance,’ said Elias Del Gado of ClearPoint Credit Counseling Solutions in Fresno. ‘It’s a tedious process, but all good things come with a price. You may be part of that 7% [that get a modified loan]. If you don’t try, you’ll be part of the 93% that don’t.’”

“Erlinda Trujillo says she is helping her daughter, a single mother of two children in Fresno, pay an extra $500 a month that her lender tacked on to her regular payment. Her daughter fell behind after she was deluged with medical bills. The bank initially rejected her loan-modification request, but then reconsidered and tacked on the $500 to help capture $10,000 in back payments.”

“Trujillo said her daughter agreed to the deal because she didn’t want to lose her house of 2 1/2 years, but now the lender — saying she missed more payments — wants her to sign another agreement to pay $5,000 for some of the overdue amount or they will foreclose. ‘She was struggling before this new agreement, and now is struggling more,’ Trujillo said.”

“Tishman Speyer Properties walks away from 11,232 Manhattan apartments because it can’t pay its mortgage. Tishman and its partner, investment firm BlackRock, paid $5.4 billion to buy the property from MetLife in late 2006 — right at the market’s peak. They hoped to make money by converting rent-regulated apartments into luxury condos and raising rents. Then the housing crash hit. The value now: $1.8 billion. That’s good business.”

“Rick Gilson, a college custodial supervisor in South Dakota, wants to walk away from the mortgage on his mobile home. If he does, he’ll be a deadbeat. Gilson is too scared to dump the mortgage on his mobile home. He owes $31,973, but the home is only worth about $14,000. ‘I have 12 years of money put into this property that I will never get out,’ said the 50-year-old Gilson, from Rapid City, S.D. ‘But I am still paying because this is what I have been told to do. That’s what I think is right.’”

“Christy Nameche moved with her family to Kendall County, Ill., in 2007, joining thousands of other hope-filled newcomers who made the county No. 1 in population growth in the nation that year. Like so many other families, their timing was off. Just two years later, the developer of Nameche’s new neighborhood has gone bankrupt, some neighbors face foreclosure, many lots sit empty and the long-awaited conversion of an adjacent field into a town park is stalled. Kendall County is struggling, another once-booming American locale gone bust.”

“For those who kept moving to Kendall County in the second half of the decade, ‘it was just bad luck. They didn’t know this thing was going to crash,’ said Dennis Stone, vice president of Pilmer Real Estate Inc. in Plano, Ill. ‘If they bought in the last five years, most of the people, particularly the people who went for all the mortgage bait that was out there … they’re upside down.’”

“Nameche is still happy she made the move, despite the fact that the 2,400-square-foot house that she paid almost $240,000 for in 2007 is now worth $20,000 to $30,000 less. ‘We’re a very young subdivision with a lot of young children, and we have a lot of people who have a lot of things in common,’ said Nameche. ‘I like how peaceful it is.’”

“The good news is that Central Virginia’s housing market is likely to change in the next year, which is also the bad news. ‘The challenge is to bring buyers and sellers together to determine what a house is worth. What it sells for may not be related to how much money you owe on it,’ said Ray Caddell, of Ray Caddell Century 21.”

“‘We’re seeing a big change in that people are buying for a reason: They want a shelter for their family,’ Caddell said. ‘They’re looking at what they need and are planning on staying for some time. They want a home rather than an investment.’”

“Your house is worth shit. Get used to it. The shit value of homes in Washoe County since the real estate bubble burst is not news to anyone. Here’s the part that’s hard to swallow: Your house may never be worth what it was worth when you bought it. In all likelihood, particularly if you bought at the height of the bubble, your life savings are gone.”

“There’s a simple formula disillusioned home owners are using to break it down. It looks like this (M+D-d)at=U. In other words, M is mortgage, D equals down payment, d is devaluation, a equals appreciation, t equals time, and U is f*cked. It’s that simple.”

“Mark Shulman, a service industry worker, and his wife refinanced their home in April 2008 for $319,000. In May 2009, it was appraised at $159,000. Their 30-year fixed at 6.25 loan was through GMAC. ‘I went to HUD counseling because they recommend that as one of the steps you take,’ Shulman said. ‘The first HUD counseling session, they told me to let the property go into foreclosure. … That was unacceptable counsel to me. It makes sense financially, but it didn’t set right in our hearts.’”

“‘When we finally negotiated our Home Affordable in September of ’09, the house was appraised at $157,000, and they refinanced it for $253,000 for 2.75 percent for five years, 3.75 for the sixth year, and the seventh year it was 4.75 in which it would finish out the life of the loan. ‘The program is just misnamed; it should be Making Payments Affordable,’ Shulman said. ‘It did not make my home affordable. It did not sell my home. It still is a negative, toxic asset for me.’”

“These government programs may only be delaying the inevitable by offering too little too late. Even though some people have been able to delay foreclosure, ‘the actual success rate of these mediation programs is very, very low,’ says Brian Kaiser, housing and real estate analyst for the Center for Regional Studies at the University of Nevada.”

“When Kaiser says ‘very, very low,’ he’s primarily talking about California, for which he has seen solid numbers, but he says there’s a 60-70 percent redefault rate. ‘Even on a renegotiated loan, the default rate is astronomically high because the rest of the economy is still in shambles. If you can’t afford the home, you can’t afford the home. You can renegotiate the loan all you want, but if you don’t have a job, it’s not going to help…Having seen two years of economic devastation, if I was sitting in a home that was worth half of what I owed on it, I’m not sure I wouldn’t economically say, ‘Enough is enough,’ and walk away.’”

“Reno lawyer Mark Mausert has litigated several cases related to this very matter. ‘Is it immoral? It depends. In this situation, for the average person, the answer is a definitive no. … I had a lady from Countrywide say to me, months ago, ‘You signed a contract.’ My response to that is, ‘Precisely, I did. And so did you.’ The essence of contract is mutuality of obligations. Both parties are bound. And while I was putting down a hefty down payment and making my payments every month, what was Countrywide doing? Countrywide was out writing predatory loans, loans which were intended to result in foreclosures. They wanted them to end in foreclosures because they had them backed up by credit-default swaps, up to 30 to 1. It was a giant insurance scam.’”

“But, fundamentally, does the borrower have a moral obligation to stay in an upside down house? Two wrongs don’t make a right. ‘You’re asking the wrong f*cking question,’ said the heated attorney. ‘The real question is, should we hang these f*ckers or just put them in prison at hard labor for the rest of their f*cking lives?’”

“It is probably best to leave the gods out of discussions of economic policy, but this barrier was breached in November when the CEO of Goldman Sachs, Lloyd Blankfein, told an interviewer that Goldman Sachs was doing God’s work. Most people will never have the opportunity to join Goldman Sachs’s gang of multi-millionaire bankers. However, by Blankfein’s logic, tens of millions of people will have the opportunity to do something at least as heavenly: walk away from their mortgage.”

“As many as 20 million people owe more than the current value of their homes. In most cases they have little hope of ever accruing equity in their home. There continues to be an enormous glut of housing. Nationwide, vacancy rates are at record highs. Rents are actually falling for the first time since we have reliable data.”

“Also, temporary government supports in the form of extraordinarily low interest rates and the first time buyers’ tax credit are about to end. It is virtually certain that house prices will soon resume their decline and will remain low for many years to come. This means that people who are underwater today are likely to be even further underwater five or 10 years from now when they plan to sell their homes.”

“We did calculations recently that showed that homeowners who bought near the peak in many bubble markets could easily save themselves more than $1,000 a month by renting equivalent units. This means that these underwater homeowners could be throwing out more than $12,000 a year in a desperate effort to keep up on their mortgages. Since most of these homeowners will never have any equity in their home, the mortgage check they send to the bank is money thrown in the garbage.”

“Not only would it benefit millions of homeowners to send the keys back to the bank, it would also benefit the economy. The money that homeowners save by not paying their mortgage is money that could instead be used to support consumption and boost the economy. If 5 million underwater homeowners saved an average of $10,000 each by becoming renters, this would free up $50bn a year for additional spending. This would have the same impact on the economy as a $50bn tax cut. If we assume a multiplier of 1.5 on these savings, the 5 million walk-aways will generate close to 750,000 jobs.”

“Unfortunately, the current policy from the Obama administration goes in the opposite direction. Rather than realistically assessing what is best for homeowners, the policy seems intended to do everything possible to persuade people to keep sending checks to the banks, even using taxpayer dollars as an inducement.”

“In short, homeowners who are seriously underwater in their mortgages should check the numbers. Walking away from a home may well be the best economic choice, and in such cases, it is also likely to be the best choice from the standpoint of the economy as a whole. This may not be advancing God’s work, but if millions of people walked away it might educate Goldman Sachs and the rest of Wall Street bankers about what happens when everyone plays by their rules.”

“At the Columbia Forum in Astoria, economist Joe Cortright explained to a group of around 40 people why the usual methods of revitalizing the U.S. economy aren’t going to work this time around. After a recession, Cortright said, ‘we don’t really recover the economy we lost - especially in this one. Recovery doesn’t mean we’ll get back the same jobs and industries we had before. … It’s time to lay the foundation for the new economy we’ll have in the future.’”

“And he said economists don’t know what the future economy will look like. In fact, he said, listening to an economist about what will happen next is ‘like getting driving directions from someone who’s looking in the rear-view mirror.’”

“Although in the past, the country has always added more jobs decade over decade, ‘that won’t be the case this time,’ Cortright said. ‘We’ve given up all the jobs we gained in the last 10 years. … What we saw as growth in markets was actually ephemeral; it was a bubble economy.’”

“The recession that started in December 2007 worsened with the collapse of the housing market and ensuing financial meltdown, driven largely by mortgage defaults. In September 2008, he said, when the recession should have been bottoming out, there was that one moment - the ‘Wiley Coyote’ moment - ‘when we looked down and found nothing to support our set of values.’”

“Traditional monetary policy has been rendered inept. The Federal Reserve had high interest rates traditionally and could lower them to stimulate lending and boost the housing market. ‘But as we all know interest rates are very low,’ he said. ‘We used all the economic ammunition - we already shot the bullets we usually use to stimulate the economy - and as a result we don’t have them to use now.’”

“‘We’re at a point now where we need to think about whether we have the right set of institutions for the road ahead,’ he said.”

“Economic leaders ‘put too much stock in subsidizing and encouraging people to own homes,’ he said. ‘The problem was clearly been exacerbated by financial market manipulation. … We simply let financial speculation play far too high a role in our economy.’”

“Cortright said the U.S. built a lot more houses than it needed, and now ‘we have 50 million extra bedrooms.’”

“But overall, Cortright said he is optimistic about the future under the ‘new normal,’ where people spend their time differently, buy less ‘imported crap’ and build better relationships and experiences. ‘We have a big opportunity to do things differently,’ he said. ‘To create a new good life.’”

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The Journal Gazette reports from Indiana. “When General Motors Co. closed factories nationwide last year, 700 laid-off employees were told a shift existed for them at the Allen County truck assembly plant. But hourly worker Charlie Cook says that while retaining a job these days is good news, his story doesn’t have a happy ending yet. The father of four is stuck living alone weekdays at the Extended Stay America hotel while his family remains in Michigan.”

“An apartment isn’t practical, and rental houses are at a premium, he says. ‘I have a house (near Pontiac, Mich.), and we’re just going to try to rent it out. But in the meantime, I can’t find a house here to rent,’ said Cook.”

“Real estate agent – and fellow GM worker – Andrew Z. Menchaca called the transferred workers refugees. ‘That’s the only way to put it, really,’ he said. ‘Imagine being told to move to another part of the country, to sell your existing house – if you can in this market – and find your kids a school. I mean, that’s a lot to deal with. That’s why there’s so much frustration and anxiety out there right now.’”

“About two weeks ago, the Allen County Council debated offering incentives to entice transferred GM workers to buy homes, but the council did not make a decision. Menchaca said offering such incentives would be premature because most people aren’t likely to buy a home in an area they know nothing about. ‘A lot of them want to try to get a feel for Fort Wayne before making any decisions,’ he said. ‘What they need is help and not someone pressuring them to buy a house.’”

“Beth Wyatt, executive director of the Apartment Association of Fort Wayne, said she doesn’t believe there is a shortage of rental homes. ‘We just need to get the information out there to them, so that they know what’s available,’ she said.”

“Even so, Cook said the situation remains tough for larger families. ‘I’m still looking for a home to rent,’ he said, ‘and I have to find someone for my house back home because I just can’t rent it out to anybody.’”

Crain’s Detroit Business in Michigan. “National economist David Crowe was clear about the best news he could offer to a room full of local home builders. ‘It’s over — 2009 is over, that’s the best news,’ said Crowe, chief economist for the National Association of Home Builders. ‘It was the worst year we’ve seen since there was a world war going on, and it is now behind us.’”

“Crowe, the keynote speaker for the Building Industry Association of Southeast Michigan’s award luncheon in Sterling Heights, said there is good news in the sense that things aren’t continuing to get worse. Looking toward 2010 home sales, Crowe showed an analysis of house prices relative to household income. The national average has shown a home costing 3.2 times a person’s income. After 2001, that rose to 4.7, and is back down to 3.3.”

“In the Metro Detroit area, the average home sells for 2.11 times a person’s income. ‘That doesn’t necessarily mean it’s time to buy, but it does mean someone can afford a home,’ Crowe said.”

The Detroit News in Michigan. “With housing values down more than 34 percent in the last two years, Metro Detroit homeowners are pretty much out of options for getting any cash out of their homes. For the large and growing number of homeowners who owe more than their houses are now worth, refinancing is out and so is a sale. But there is one small sliver of hope: lowering your property taxes.”

“One client has a tax value that is more than three times the real value of her home, says Lee Morof, a Southfield attorney who handles tax appeals. ‘It’s costing her an extra $2,000 to $3,000 a year. She’s having trouble making her house payment, and she needs that money.’”

“It seems like a lot of time and hassle, but the process can pay off, especially for homeowners who bought near the peak of the market in late 2005 and early 2006. ‘About 90 percent of the people I see, if they bought five years ago and they’re not doing this, then they’re leaving money on the table,’ says Morof, the attorney. ‘And I don’t know anybody in this economy who couldn’t use the money.’”

“So many condos have sprouted along Lake Michigan that developers can’t fill them. The influx has raised tensions, especially between the blue-collar locals and well-heeled Chicagoans buying the condos. Some locals celebrated the collapse of the housing market because it’s the only thing that has slowed the deluge.”

“But it also left the overdeveloped town with dozens of homes that have never been lived in and whose high prices prevent the middle-class from moving in. Nora Duffy, a real estate agent who is chairwoman of the Zoning Board of Appeals, defended the city against criticism that it failed to control development.”

“‘Could we have gone slower? Yes,’ she said. ‘But no one saw the (housing market) bubble coming.’”

The Morning Sun in Michigan. “Final figures for 2009 for homes sold by members of the Central Michigan Association of Realtors showed a year-to-year increase in price for 2009 compared to revised figures for 2008. The average sale price of a home sold by a Realtor operating in Gratiot and Isabella counties rose 1.82 percent, from $83,019 in 2008 to $84,530.”

“The Central Michigan association was the only one of the 41 local Realtors boards represented by the Michigan Association of Realtors to show a year-to-year increase. The average sale price of a Michigan home fell by 16.27 percent during 2009, to $99,121. That’s the first time since 1994 that the average sale price of a Michigan home sold through a Realtor was less than $100,000.”

“Michigan’s most expensive homes continued to be in northwestern Michigan’s Emmet County, with an average sale price of 209,682. That’s down 22.75 percent from 2008, and down nearly 35 percent from the peak year of 2006. That year, the average sale price of an Emmet County home was $321,106.”

The La Cross Tribune in Wisconsin. “More people are falling further behind on their taxes, figures from area counties show. Taxes delinquent by at least a year rose by about 25 percent on average throughout the region from 2008 to 2009. ‘There are people that have been laid off, lost their jobs. We hear it every day now,’ said La Crosse County Treasurer Donna Hanson.”

“Monroe County’s delinquent taxes saw the biggest one-year increase in this area, jumping 56 percent. But treasurer Annette Erickson said taxes on one property - the moribund Three Bears Resort in Warrens - accounts for about half of those unpaid taxes.”

The Post Crescent in Wisconsin. “When faced with mounting bills and limited job options in a down economy, a growing number of northeastern Wisconsin residents have resorted to filing for bankruptcy to eliminate their debt. The road to bankruptcy varies among individuals, said Alan Prahl, education manager for a Menasha-based financial counseling organization.”

“‘It’s tough to generalize, because there are so many causes behind it,’ he said. ‘Job loss, accidents, illness or sometimes it’s simple overspending.’”

“Prahl said business owners sometimes fall into debt quickly, especially in a down economy. ‘If your company say was a vendor that depended on the housing industry … well, the recession has hit that industry very hard,’ he said. ‘You become accustomed to a certain amount of income and it becomes difficult to adjust to less.’”

The Journal Sentinel in Wisconsin. “Marshall & Ilsley Corp. probably won’t start paying back the U.S. Treasury’s $1.7 billion TARP investment until next year, the company’s chief financial officer said at an investors’ conference Wednesday. ‘In all likelihood, it’s more of a 2011-type discussion,” Greg Smith said.”

“Milwaukee’s M&I, the biggest banking firm based in Wisconsin, has reported losses for five consecutive quarters. The bank’s loan portfolio has been hit by losses related to the recession and the housing slump, especially in Arizona and Florida. ‘I think the first hurdle is getting back to profitability before we can start having that discussion,’ Smith said.”

The Chillicothe Gazette in Ohio. “A Ross County woman trying to save her home from foreclosure testified in front of the Ohio Senate Committee on Finance and Financial Institutions Tuesday, advocating inclusion of funding in Senate Bill 197 for housing counselors.”

“‘The process of modifying my mortgage to allow me to stay in my home has been complicated, frustrating, and confusing,’ Beth Ann Allen shared with the Senate in her written testimony. ‘My bank seems like they’re putting every obstacle in my way that they can. In December, I was so tired and frustrated that I was ready to walk away from my house and take my three children to a homeless shelter…Without housing counseling, we would be homeless right now.’”

From WKYC.com. “Northeast Ohio part of a growing national trend in which homeowners in danger of being foreclosed upon simply walk away from their houses. As attractive as ‘walking away’ may appear, Cleveland organizations who work to prevent foreclosures say it is not the right choice. ‘Don’t do it,’ says Mark Seifert, Executive Director of ESOP, which has been assisting distressed homeowners for more than 15 years. ‘If you walk away, we can’t help you. We can only help owner-occupied properties, so no matter what the bank tells you, or no matter what the stress is at night, do not walk away.’”

“People considering walking away are those who have seen the value of their home fall to less than they owe on their mortgage. Many are in bust-and-boom housing states, like Florida and California. Jeff Horton is a Florida homeowner whose house is now worth about half of the $255,000 he paid for it three years ago. ‘Why would I continue to pay all this money every month, and cut back on the things that I enjoy doing,’ Horton told NBC, ‘just to make the payment when there’s catastrophic negative equity in the house?’”

The Buckeye Lake Beacon in Ohio. “A challenging real estate market throughout most of 2009 has given way to renewed optimism as Ohio’s housing sector was buoyed by strong fourth quarter sales and a clear uptick in the average sales price, according to statistics provided by the state’s MLS. ‘Despite the dire economic conditions that gripped the nation, more than 104,000 homes were sold…a clear indication that the desire to make the American Dream of homeownership a reality remains strong throughout Ohio,’ said Doug McCloud, president of the Ohio Association of REALTORS ®. ‘We remain bullish on the marketplace – as interest rates remain at historic lows, prices have stabilized and begun to trend upward, sellers are realistic in their expectations and consumers understand that long-term, owning a home is a tremendous investment.’”

From News Net 5 in Ohio. “Cleveland police and fire officials have only offered limited information about the cause of the West 83rd Street fire and explosion. Investigators announced Tuesday that the cause was intentional, but did not want to tip their hand to potential suspects or witnesses. Meanwhile, the chief investigator has been looking into the company that owns the home that exploded.”

“EZ Access Funding, LLC and its owner, Newport Beach, Cal. Attorney, Marc Tow, have been buying up foreclosed homes across Cleveland. The California group now owns 85 houses here. There are tons of active cases in Cleveland’s housing court against the firm that also owned the home on West 83rd Street that exploded. Files in housing court show big violations and big money owed.”

“Councilman Matt Zone said it’s time to crack down on EZ Access Funding and other out of state firms like it. ‘How can we strengthen local ordinances to prevent speculators, like this individual and EZ Access from preying upon innocent people?’ Zone said.”

The Chicago Tribune in Illinois. “Chicago Spire developer Garrett Kelleher’s effort to build the nation’s tallest building in Chicago is threatening the viability of one of his Ireland-based firms. Clarinabbey Ltd., a subsidiary of Kelleher’s Shelbourne Property Group, lost $197.2 million for the year ended March 31, with much of the loss tied to an intracompany transfer of funds for the Spire.”

“The company said it made a provision of $187.8 million against money due it from sister companies because it was unsure that those funds would be recovered. That sum includes advances and loans made in 2008 totaling $153.4 million to Shelbourne entities associated with the Spire. The annual financial accounting of the company…said most of the covenants tied to the company’s bank loans are ‘technically in breach’ and that Kelleher and other directors are seeking a ’standstill agreement’ with its banks.”

“If such an agreement cannot be reached, the directors’ report submitted with the financial statements said ‘there exists a fundamental uncertainty over the company’s ability to meet its obligations as and when they fall due.’”

The Daily Herald in Illinois. “Officials at the Northern Illinois Food Bank say the increase in the number of people in the region needing food assistance is ‘exploding,’ and the recession is to blame. Lake Villa Township Supervisor Dan Venturi said he can sometimes spot the first-timers by their cars.”

“‘Someone may drive in with a Lexus. These are people who have lost good jobs and their circumstances have changed,’ Venturi said. ‘They were otherwise affluent before the economy turned.’”

The Citizen in Minnesota. “Three years ago, Mayor Mary Capra envisioned ‘the biggest change to the community in the past 150 years’ as the city adopted its Master Plan and Development Guidelines for the city’s Downtown Redevelopment Plan. The largely residential area was rezoned to Mixed Use. State grants began flowing in. Architectural standards were developed and adopted. A partnership was formed between the city and Beard Group, the developer selected for the project.”

“And then the economy went belly up. Most of the grant money has had to be returned, unspent. Bond payments for the Main Street improvements will be paid out of the tax levy for the foreseeable future instead of from TIF District proceeds. For the owners of the 40 or so nonconforming residences in that area, the plans they may have had to expand their homes to meet the needs of their growing families are now prohibited under zoning rules.”

“January 11, 2007 was a red-letter day for 26-year-old Ryan Lewellen. That was the day he became the new owner of his very first home, a 12-year-old house on Heritage Street. ‘The housing bubble was already bursting,’ Lewellen said. ‘I thought I was getting in at a fairly good time.’”

“When Margaret Gainsley bought her 1-1/2-story 1946-vintage home in 2005, she was a single mother with two children. ‘I like older homes,’ the engineering document specialist said. ‘I could have purchased a split-entry house for $320,000 or I could buy this older home with a lot of land for $220,000.’”

“She met and married Olaf Lee two years later. Together, the Lees’ blended family numbered seven. The couple needed more elbow room, and they considered selling. In consulting a realtor, the news wasn’t good: the recommended sale price wouldn’t begin to pay off the mortgage, Margaret said.”

“‘How am I supposed to sell my property, when [the city] is telling the community that this area is blighted?’ she asked.”

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A commentary in the Daily Business Review. “Realtors can’t cry over condo mess they made.” By: Jack McCabe

Every now and then, I read an opinion piece from a local real estate person complaining about the condo depression in Miami that screams of “still in denial,” and which I opine to be an absolute shirking of the author’s personal responsibility in creating the mess to begin with.”

In an opinion piece in the Jan. 25, 2010, DBR, Jack Studnicky, a sales executive with International Sales Group, or ISG, blames banks and appraisal firms. “Banks holding boatloads of foreclosed Miami condos need to take a deep breath and stand firm on realistic pricing, which should be at least the cost of replacement. There is no need to comply with an archaic and misdirected appraisal process
as these bargain hunters are paying cash.”

ISG, along with several other South Florida sales groups, were responsible for hyping and fluffing the Miami condo market with multimillion-dollar international campaigns to develop a market of speculative flippers that artificially inflated sales and created the atmosphere for developers to overbuild true market demand.

Marketing programs and Web site ads were designed to attract investors to purchase multiple condo units, because as marketing materials trumpeted, they were a “can’t lose” investment.

Perhaps the best example of ISG’s own involvement in catering to speculative flippers can be found in a quote from ISG Principal Philip Spiegelman in an article by the Miami Herald on May 22, 2005, regarding the condo project Marina Blue (exclusively marketed by ISG). “One hundred percent of the
buyers were investors and speculators,” Speigelman said. “Anyone who tells you their projects are different are deluding themselves.”

I would recommend to representatives of firms that profited in the millions of dollars by prostituting Miami’s condo market that perhaps it is best to go play golf, go fish, go to Aspen and put a finger across their collective lips anytime they might wish to shine a light on the role they played in causing this debacle, and expose how they profited by it at the expense of the investors or flippers they sold to, and the banks that made the construction and mortgage loans.

To point the finger at anyone else or any other industry is not only ludicrous, but hypocritical and delusional. Time for some to take a good, hard look in the mirror.

Jack McCabe is a Deerfield Beach-based real estate analyst and CEO of McCabe Research & Consulting

The Herald Tribune. “Troubled homeowners in Sarasota and Manatee counties will soon be guaranteed a meeting with lenders to try to save their properties from foreclosure. Every homesteaded property will be referred to a new mediation program under a Florida Supreme Court order, and the lenders will have to pick up the cost. The homeowners will get credit counseling, as well as a trained mediator to guide the meeting with the lender about short sales, loan modifications or other alternatives to foreclosure.”

“‘It’s one more layer of protection from the unnecessary loss of the home,’ said Elizabeth Boyle, a lawyer with Gulfcoast Legal Services in Venice. ‘It’s a large step forward for homeowners.’”

“The program could resolve more foreclosure cases before they end up in the courts, where they are clogging civil dockets. One of every 19 homeowners in Manatee and Sarasota counties received a foreclosure notice last year, a total that pushed Florida to third in the nation for its distressed property rate.”

“The main hurdles to starting the new program: it must be run by a proven nonprofit group that is politically and professionally neutral, and there are upfront startup costs. For anyone looking to take on the task, the ‘good news’ is ‘there will be no shortage of clients,’ wrote Twelfth Circuit Judge Lee Haworth, in a letter to the legal community.”

“‘We expect the flood of residential foreclosure cases into our civil divisions to continue through 2010 and into 2011, so there should be thousands of cases eligible for mediation,’ Haworth wrote.”

“There are questions about how effective the program will be. A leading real estate expert, Jack McCabe, says homeowners might get a loan modification through mediation, but many slip back into foreclosure in less than a year because lenders are not reducing the amount owed.”

“Half the state’s mortgages are for more money than the property is worth, and could stay that way for the rest of their owners’ lives, McCabe said. ‘They’re upside down and they’re getting deeper in debt,’ McCabe said. ‘We’re going to continue to see this high and escalating number of foreclosures.’”

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