A Bandage On A Blown-Out Tire
The Gazette reports from Colorado. “When Kelly Deutsch and her husband began having financial trouble late last year, they did what many families have tried to do - refinance their two mortgages, both of which have adjustable rates. Deutsch lost her job as a medical assistant in September. Her husband brings in about $2,000 a month. Their initial house payments to Countrywide had been roughly $1,000 a month, but their rate has jumped twice, raising the payment to $1,180 a month and then to $1,300. With the second mortgage, the couple, who has a 9-year-old son, was looking at $1,700 a month in mortgage payments. That left almost nothing for groceries and other bills.”
“After months of asking for a loan modification that would lower the payments, Deutsch was finally told by a Countrywide customer service representative in December that she didn’t have to send a check in that month, and that she qualified for a payment program…A month later, Deutsch said, she found out she’d been lied to. A letter from Countrywide arrived Jan. 2, informing the Deutsches that they didn’t qualify for reduced payments.”
“Deutsch was told she should be ‘ashamed that we can’t make our house payments.’ Deutsch said a service rep named Marguerite, who wouldn’t give her last name, said ‘that they would rather take the keys back to the house than let us keep it,’ and that the Deutsches’ loan ‘means nothing to (Countrywide).’”
“When Deutsch asked about being told in December that a payment wasn’t necessary, she was told by yet another customer service rep that there are ‘a lot of liars in the company.’”
“The Deutsches are two months behind on their mortgage payments and even selling wouldn’t get them out of a hole: they owe $25,000 more than their home is worth in today’s real estate market. On Friday, Bank of America, which has taken over Countrywide, announced at least a three-week moratorium on foreclosures on all its mortgage loans.”
“For Deutsch, the bottom line on Countrywide promising to help borrowers is simple. ‘I just don’t trust them.’”
The Arizona Republic. “Phoenix grew into the nation’s fifth-largest city through a reliable pattern: Build affordable homes on the metro area’s edges, welcome waves of new buyers, and then roads, schools and retail centers follow. Home buyers relied on that pattern. Buy an affordable home on the edge, watch it quickly appreciate, then sell at a good profit and move again to a bigger home in an established area.”
“One reason the current housing collapse has been so brutal in Phoenix is how suddenly that pattern broke down. In only a couple of years, the breakdown trapped people in unfinished communities much like a fast-moving landslide buries people in their tracks.”
“‘We have too many empty and foreclosed homes in our neighborhood and not enough stores and jobs. I have to do a lot of my shopping online,’ said Jennifer Barber, who lives in Goodyear’s Estrella Mountain Ranch. ‘The way we are growing is not working. We aren’t getting many of the basic things we were promised.’”
“On the same streets where stranded homeowners watch home values plummet, builders can’t sell the vacant homes next door. Businesses that did move in are struggling. Others have decided not to come. Cities and towns that counted on tax revenue from new residents and business have seen their budget plans fall apart.”
“‘We can’t keep doing this,’ said Shannon Scutari, Arizona’s policy adviser for growth and infrastructure. ‘Our method for growing is broke, and there’s no quick fix. We must have sustainable growth and solid ways of tracking and supporting it.’”
“(A) Goodyear shopping center on Estrella Parkway, has only one tenant, a pizza parlor that opened last year. The center sits near hundreds of new homes. The next closest place to shop and eat is a few miles away along Interstate 10. Karen Madison lives in the neighborhood. She shares a car with her husband, who works during the day.”
“‘I feel stranded most days because there’s nothing close enough for me to walk to,’ said Madison, who sometimes walks a few miles, pushing her daughter in a stroller, to fill prescriptions. ‘We were so excited when we saw the shopping center go up just a few blocks away. But there’s nothing there.’”
The Arizona Daily Sun. “The trouble started when Vice Mayor Al White uttered the phrase ‘urban growth machine.’ White said members of the ‘machine’ rarely needed to worry about affordable housing, while teachers and police officers consistently struggled to stay here in Flagstaff. ‘The machine isn’t a bad thing — it just is. It is the Realtors, it is the homebuilders, it is the architects, it is the engineers, it is utilities, it is the chamber boards, it is title companies. And when they can, by electing council people, it is also government,’ White said.”
“Added White: ‘When we identify the people who are on the affordable housing list and we ask who they are, firemen, policemen, teachers, mid-managers come up. Who is conspicuously absent from that list? Builders, Realtors and those folks.’”
“This brought an angry response from Councilmember Scott Overton, a contractor. ‘You stereotype me, you are putting me in a group that, in your opinion, has done things that are bad,’ he said. ‘Al, I go to work every day, I make about $40,000 a year, and I feel the pinch, too.’”
The Nevada Appeal. “Declining apartment rents and increasing vacancy rates have property managers across the region scrambling to keep existing tenants and provide higher levels of tenant service — and some property managers are even reducing existing rents to keep or lure new tenants. Len Ramos, first vice president with the multi-housing group with CBRE, says managing occupancy is of utmost importance in a time of declining rents and rising vacancies.”
“‘That is the key; maintaining occupancy is the bottom line,’ he says. ‘Managers are saying they are meeting more with their tenant base and are just staying closer to them to make sure they don’t leave.’”
“Don Wilkerson, president of Gaston and Wilkerson Management Group, says the most typical concessions are a month off a year lease, or a reduction in required deposits. And in worst-case scenarios for property owners losing tenants to other properties, managers are cutting rents unbidden. ‘I have heard of managers that have gone to their residents and say, ‘I am going to lower your rent by $5 or $10 for remainder of your lease. In case of one owner they were losing residents to other properties that were offering big discounts.’”
“‘Amateur hour is over. What is it going to take to keep apartments full is good strong property management, and that is more than collecting rents and paying bills,’ he said.”
The Reno Gazette Journal from Nevada. “Some folks dream about making it big in a big city. Others pine for fame and fortune. In the case of 33-year-old Erika Hernandez, her dream stands on an acre and a half of land just north of Reno with three horses and a miniature pony in the back. For more than five years Hernandez and her family have called their Red Rock house home — a source of shelter and pride for Hernandez since 2003.”
“‘This house means a lot to me,’ Hernandez said. ‘When I look at it, it’s like, ‘Oh my God, I did it.’ It’s like a dream.’”
“What Hernandez did not know is that the price for keeping her dream was about to get steep. Acquired through an adjustable-rate mortgage, Hernandez was informed late last year that her monthly house payment was set to jump from $1,785 to as high as $3,200 once her loan fully resets.”
“By the time February rolled by, all the stress and shame about potentially losing her house, compounded by cuts to her hours at work, left Hernandez emotionally shaky. ‘I can’t sleep,’ Hernandez said. ‘I’m afraid my husband would divorce me because he’s really stressed about it and he’s always blaming me (for the loan). He says, ‘You’re the one who speaks English. You should have read what you were signing.’ It’s been really tough.’”
“Last December, 54 percent of all closed transactions for homes in the area involved bank-owned properties, said CalNeva Realty owner Mitch Argon, who tracks and publishes a report on local foreclosure inventory. Add the 12 percent accounted for by short sales and you have distressed properties making up 66 percent of closed transactions for the period, Argon said.”
“‘Banks are really motivated to sell these properties, and it’s reflected on their price and the disproportionate amount of activity around them,’ Argon said. ‘Banks are really reducing prices aggressively.’”
“Even the best designed loan modification, however, can’t solve one problem: unemployment. Ultimately, the overall health of the economy may have a bigger say on the true impact of resetting Alt-A’s than the ARMs themselves, said Mark Carrington, director of analytics for First American CoreLogic. ‘People think it’s the loans causing all the problems, but the real trigger event is the economy,’ Carrington said. ‘Job loss is the biggest reason that people can’t make their mortgage payments. It always has been and it still is.’”
“Hernandez, who has spent the past few months fighting to keep her house, knows full well about the impact of the current recession. A waitress who works in the now struggling casino industry, Hernandez has seen her hours cut and a week’s vacation taken away along with her holiday pay. The bad economy also means customers don’t have as much disposable income, causing Hernandez’s income from tips to nosedive.”
“Hernandez also finally got some good news on Feb. 9 while shopping for groceries. The person helping her with her mortgage called to say Wells Fargo approved her loan modification. The increase in her monthly house payment was less than $200.”
“‘Oh my God, I could sleep now,’ said an ecstatic Hernandez over the phone shortly after hearing the news. ‘It just shows that there are people out there who will help you. I love this house, and I was willing to do everything to keep it. Now I just want to cry. Oh my God, I can’t believe I saved my house.’”
The Las Vegas Sun from Nevada. “Boosters of down-payment assistance programs that had benefited poorer homebuyers before they were abolished by the Bush administration are lobbying for their revival, saying they could help rejuvenate the distressed housing market.”
“Under the programs, the buyer’s cash burden is eased because the seller contributes from 3 percent to 6 percent of the purchase price toward the buyer’s down payment and/or closing costs, and the nonprofit organization donates up to 3 percent. But the Bush administration reasoned that if homeowners didn’t use their own money for down payments, they were less financially committed to their homes and thus more likely to default.”
“The Housing and Urban Development Department lobbied Congress last spring to stop insuring loans where the programs were used, and Congress did so in July. The ban took effect Oct. 1.”
“Area real estate agents who specialized in such down-payment assistance programs say their reinstatement would also stanch their falling incomes…Agent Teresa McCormick says, her income has dropped by two-thirds. McCormick disputes the notion that down payment dictates the odds of default. ‘I put a lot of money down on my house, but I can’t pay my mortgage right now,’ she says, noting that she’s two months behind. ‘If I can’t pay the bills right now, I can’t pay the bills. It doesn’t matter how much you put down.’”
“New homeowner Susan Nagata concedes the seller of the four-bedroom house she bought through Nehemiah last year probably tacked the closing costs onto the asking price, but doesn’t regret the transaction. At about $1,000, her monthly mortgage is $300 less a month than what she and her husband had paid for an apartment. Had the Nagatas looked for a house today, Nagata is convinced she and her husband would still be renting.”
“‘I had figured I’d never own a home again,’ the 58-year-old says, noting their $1,500 savings at the time they bought the home.”
In Business Las Vegas form Nevada. “Signature Homes founder Richard Plaster is calling on the federal government to use its power of eminent domain to help ease the housing crisis. Plaster says he is worried about home-owners walking away from their homes en masse because they are underwater - they owe far more than the homes are worth.”
“If something isn’t done, that will add to the large number of foreclosures already on the market, he says. He adds it makes no sense for a homeowner to stick around when they are underwater by more than $100,000, as many people are.”
“‘There is going to be real social change where people walk from houses on a wholesale basis,’ Plaster says. ‘What I am concerned about is when (the homeowner) wakes up because so many people feel so dutiful about debts that they need to repay them. But I am afraid if something is not done immediately, that characteristic of paying your debts is going to be meaningless to somebody who is totally buried in his house.’”
“Plaster calls himself ‘a little left wing’ and big supporter of Democrats, but says something must be done. ‘We have a treacherous couple of years, and unless public policy gets in there and saves, to my mind, what has made America great - this ability for people to be flexible and to grab a piece and be optimistic. What we are doing right now because of the way this housing bubble burst is that we are getting people to a very pessimistic state of mind. That could be disastrous for us. So what undoubtedly will be a difficult two years, could be a tough 10 or 20 years, and I don’t want to see that.’”
The Review Journal from Nevada. “Las Vegas home foreclosures declined 20 percent in January to 2,609 from 3,283 the previous month, Foreclosures.com reported Friday. However, the number increased 48 percent from 1,763 in January 2008. Las Vegas had 31,416 real-estate owned, or bank-owned, homes in 2008 and some analysts are projecting as many as 50,000 foreclosures this year.”
“REO specialist Troy Kearns of Gavish Real Estate said he took on 60 new foreclosure listings in the past week and now has 350, up from 250 a month ago. He has two properties in foreclosure at more than $1.5 million. ‘What happened is Fannie Mae’s moratorium is over and they flooded the market,’ Kearns said. ‘I know some guys who got slammed who are handling Fannie Mae properties and they hadn’t done anything for two months. Watch February and March take off.’”
“Las Vegas-based research firm Applied Analysis also reported a drop in lenders taking back homes. January foreclosures totaled 1,124, down from 1,712 in December, but up 16.2 percent from 967 in the same month a year ago. There were 6,171 active foreclosures, or units in the foreclosure process, but the title has yet to go back to the bank. ‘That tells us there’s a significant number likely to be taken back,’ Applied Analysis principal Brian Gordon said. ‘Looking at the data, it would appear foreclosures remain elevated and we haven’t seen a significant correction yet.’”
“The Obama administration announced a $50 billion initiative this week to help strapped homeowners. Some say banks are worsening the foreclosure crisis and undermining the government’s efforts to keep people in their homes.”
“‘I don’t know how that’s going to play out,’ Kearns said of Obama’s plan. ‘If it slows things down, it’s only a bandage on a blown-out tire. At a certain point, you’ve got to let the market correct itself. Things are selling. People are still buying homes.’”
“The…tax break for homebuyers approved by the Senate last week should help to revitalize the downtrodden housing market, said Sue Naumann, president of the Realtors association. A bigger issue, she said, is for banks to release their stranglehold on lending practices.”
“‘We’ll have to see what transpires. Just like everything, when the government tries to get in the middle with intervention, they don’t know the business,’ Naumann said. ‘I don’t see how they could stop a foreclosure. That would be contractual interference. The only thing they can do is make it easier to refinance at a fixed rate and keep more people in their homes.’”
