March 7, 2009

For Would-Be Sellers, The Bad News Keeps Coming

The Orange County Register reports from California. “An appraiser lost her license after state regulators concluded her evaluation of a home for $625,000 in a declining Santa Ana real estate market was ‘grossly misleading,’ a scheme first exposed last year by The Orange County Register. Todd Lackner, an appraisal fraud investigator from San Diego, said Wells Fargo should have known there was something fishy about the $625,000 appraisal. ‘Anyone could have seen the house wasn’t worth $625,000 by going on Google or Zillow,’ Lackner said. ‘And Wells Fargo has much better tools than that. I’m not sure why they didn’t use them.’”

“The home’s current owners, Mario and Paula Gomez, have kept up their monthly payments to Wells Fargo of $2,760, said Paula Gomez. Both are garment workers at St. John Knits Inc. in Irvine. ‘We can keep the house as long as we keep our jobs,’ she said.”

The Contra Costa Times. ” Any doubt about the housing bubble’s thick burst across the job market ends here, on Port Chicago Highway, at an EASTBAY Works one-stop center where a national surge in unemployment shows up in the form of weary faces. At one keyboard, Bob Coleman, of Lafayette, searches for a path out of retirement after his real estate investments in Hawaii went south.”

“Coleman, whose wife works, said he worked for AT&T in sales and marketing before venturing into real estate three years ago to build a nest egg. ‘I thought I was in retirement. I was a millionaire,’ he said as he headed out of the job center. ‘Not anymore. We’ll all survive one way or another, but our world’s different.’”

The Modesto Bee. “The jobless rate in Stanislaus County surged to a 12-year high of 16 percent in January, the state reported Thursday. Merced County rose to 18.9 percent and San Joaquin to 15.1 percent, clear evidence that the recession has hit the region hard. Out on Carpenter Road, about a dozen men stood in the Home Depot parking lot, hoping for a day’s work from a contractor or homeowner.”

“‘It’s terrible right now,’ said Santos Avila, 65, of Modesto, who hoped to make $10 an hour in remodeling, painting, pouring concrete or other work. He said such jobs have been hard to get for the past three years. ‘A lot of these guys here are doing the same thing I’m doing — looking for labor, an honest job.’”

The Recordnet. “Mortgage delinquencies in California and across the county continued to climb at the end of 2008, despite various default moratoriums, but the root cause has shifted from adjustable-rate mortgage payment jumps to rising unemployment…concluded the Mortgage Bankers Association’s new fourth-quarter national survey.”

“Employment is expected to suffer through mid- to late 2010, said Jay Brinkman, the association’s chief economist, and delinquent mortgage and foreclosure activity won’t start improving until after that, he said. ‘The recovery is going to depend on when the jobs come back,’ Brinkman said.”

“Jacy Mahoney was laid off from her production line welding job at Dana Holding Corp. a month ago. She said the only jobs out there are paying $8 per hour, half what she used to earn at the truck frame assembly plant in Stockton. ‘There’s nothing out there, unless I want to go to work at McDonald’s,’ she said.”

“Rep. Dennis Cardoza, D-Atwater, said unemployment is one of a number of issues that have been hurting the Central Valley. ‘I call this the Hurricane Katrina of California,’ he said. ‘I’m talking about the whole enchilada - jobs, foreclosures, the dairy crisis, the state budget crisis, the water crisis - all are imposing extreme economic hardships on the region.’”

The Desert Sun. “California Golf Mart in Bermuda Dunes has been added to the list of businesses closing up shop in the Coachella Valley. ‘It’s a great store and it’s a shame it’s closing,’ said Bill Spratt of Palm Springs. ‘This is just another indication that American is in trouble — that the world is in trouble.’”

The Santa Cruz Sentinel. “As construction shriveled and retail shops closed, Santa Cruz County’s jobless rate reached 12.6 percent in January, led by a nearly 26 percent jobless rate in Watsonville. Scotts Valley contractor Dene Bustichi said competition for jobs is cutthroat. ‘People are bidding jobs at cost and hoping for change orders to make ends meet,’ he said. ‘I’ve not seen it like this in 20 years in business.’”

“When the highly anticipated 2030 North Pacific condos opened last summer, they were touted as small luxury homes within walking distance of downtown and the beach — perfect for aging baby boomers and others who wanted to leave the car at home more often. Now, though, the 70-unit complex with retail space on the first floor sits mostly empty.”

“And condos that once advertised prices between $525,000 and $760,000 are now listing for as low as $399,000. So far, 13 have sold.”

“The Pacific Avenue condos ‘would be a great place to live,’ said City Councilman Mike Rotkin, ‘But at this point, who has the money to make the down payment? What bank will give you a loan?’”

The Associated Press. “Stephen and Linda Drake cast aside concerns about owning property in Mexico because they believed in Donald Trump. The Southern California couple paid $250,000 down payment on a 19th-floor oceanfront condo in Trump Ocean Resort Baja in 2006 before the first construction crew arrived.”

“But admiration for the celebrity developer has now turned into anger and disbelief as Trump’s luxury hotel-condo plan collapsed, leaving little more than a hole in the ground and investors out of their deposits, which totaled $32.2 million. ‘I can’t even stand to see Trump’s face on TV,’ says Linda Drake, a psychologist, whose husband is a commercial airline pilot and financial adviser.”

“Guadalupe Mendoza paid a $200,000 deposit at the first-day sale in San Diego, refinancing her Downey home and getting a loan from a sister. She watched a giant screen show units getting snapped up. After signing papers, buyers were ushered to a buffet of sirloin tip and fish tacos. Cheers erupted in the hotel ballroom for each new owner.”

“‘I did it in less than a minute,’ said Mendoza, an administrator in the Los Angeles County Office of Education. ‘I remember my head was hurting and thinking, ‘My God, what was that?’ I was thinking maybe I should have asked questions.’”

The LA Times. “When Club 740 opened on Broadway in mid-2005, many saw it as solid evidence of the hip night life that downtown boosters had been trying to bring to the city center. The club quickly distinguished itself — but not in a way that most people would boast about. Fights inside and outside the club, reports of sexual assaults and gang activity quickly garnered Club 740 a less-than-savory reputation. A man was stabbed in the parking lot behind the club in August 2006; last December, an intoxicated club-goer fell to his death from a third-floor railing.”

“Part of the problem is that downtown is becoming a residential area, with loft and condo dwellers who aren’t always excited about rowdy behavior well into the morning hours. The Chapman Flats, a 168-unit apartment building, opened last year next door to Club 740. Nearby, condos at the renovated Eastern Columbia building have fetched in the millions of dollars.”

“‘There was a time when Broadway was kind of forgotten in the evening,’ said Los Angeles City Councilman Jose Huizar. ‘So if you had incidents happening in a parking lot or outside a club, very few people would notice. It was kind of no-person’s land. There was no one to say that this activity is happening on these streets. A lot of the incidents didn’t even get reported to police. Now, with more residents living nearby, I do think it is getting on people’s radar.’”

“Amid concern that many Californians would not qualify for assistance from the federal anti-foreclosure plan, a powerful state legislator called on the Obama administration to make more homeowners eligible. The plan limits federal refinancing assistance to people who owe just a small amount, 5% or less, over what their homes are worth.”

“Assemblyman Ted Lieu (D-Torrance) said…the refinancing limit should be raised, perhaps to 115%, to help more people obtain cheaper loans. ‘Otherwise, you’re just going to end up helping a lot of people outside California,’ Lieu said.”

The Press Enterprise. “Almost 45 percent of homeowners with a mortgage in Riverside and San Bernardino counties owe more on their homes than the homes are worth, according to a report. Real estate industry leaders and economists said that because Inland Southern California homeowners are more upside down on their mortgages than most of the nation, few will benefit from the Obama plan.”

“Wil Herring, a Moreno Valley mortgage broker and president of the Inland Empire Chapter of the California Association of Mortgage Brokers, said his customers have mortgages that are at least 40 percent greater than their home values. Herring said many of his customers are not willing to wait for home values to catch up before they move, even if they have to let their lenders foreclose.”

“‘Their attitude is that even if they could get a 2 percent interest rate, they don’t care. They want to get out of their house because they don’t see their equity coming back soon,’ Herring said.”

“‘Being upside down by itself is not a catalyst for default. But it does mean less turnover of houses,’ said Greg McBride, senior financial analyst with Bankrate.com. ‘People who are making their payments on time will not be able to sell the house to take a job in another city. They are stuck. They are handcuffed to the house.’”

The New York Times. “For would-be sellers, the bad news keeps coming. This week, one new report showed that one in nine mortgages was delinquent or in foreclosure, while another showed that January contract signings for sales of previously owned homes fell at their fastest pace in two years. In inland areas of California, for instance, sales are surging now that prices have fallen sharply. But most of the sellers are not individuals but rather banks that foreclosed on homeowners who could not or would not pay their mortgages.”

“Christian Punsal, a 24-year-old city employee in Elk Grove, Calif., near Sacramento, is among the first-time homeowners and investors swooping in. Mr. Punsal bought a three-bedroom home for $193,000. On a monthly basis, the house will cost him $100 less than the rent on his two-bedroom apartment. The home sold for $336,000 four years ago, when he was a junior in college.”

“‘I just felt that this would be the perfect time to buy,’ he said.”

The Mercury News. “Marie, a San Jose homeowner, owes about $560,000 on her house in the city’s east foothills and figures it’s now worth about $460,000. She tried to sell it in 2007 when she got married and moved to her husband’s home, with no luck. Now she’s renting out the house, but the income is not enough to cover the loan and property taxes. As she scrimps to pay two mortgages, Marie is considering ditching the mortgage on her first house and walking away.”

“‘I can’t make myself sick,’ she said. ‘I’m at the point where I’m losing sleep over it. I can’t afford that. I have children to care for, and a job to do.’”

“A report released Wednesday revealed that an estimated 13.5 percent of properties with mortgages in the San Jose metro area were underwater at the end of 2008, according to First American CoreLogic. That’s up from 9.5 percent at the end of the third quarter last year.”

“Berkeley attorney Peter Fredman said that many people who contact him have ‘pretty much realized they don’t want to keep the house under any circumstances. They just want some help through that process in terms of personal liability issues, tax issues, just sort of basic hand holding, often.’”

“Reaching a lender to discuss a walkaway client or a deed in lieu can be tough, Fredman said. On his desk are keys to the house of some clients who walked out on their mortgage (and home) last fall. Fredman said he wants to return the keys to the lender, but it’s been months, and the lender has not yet told him where to mail them. Nor have they foreclosed on the homeowners.”

“‘It may come to the point of having to sue them to get them to take the house back,’ he said.”

“Meanwhile, Marie remains in a tough spot. She’s only been able to make the minimum payment on her negative-amortization, adjustable-rate loan recently, so the balance on her loan is increasing with every passing month. Her lender told her that because she does not live in her home anymore, she doesn’t qualify for a loan modification (most programs only apply to ‘owner-occupied’ homes). Also, her lender is only modifying loans for borrowers in default, she said, which doesn’t help her since she is still current on her payments.”

“Knowing this, and loaded down with stress, walking away appears to be a viable option, though she’s worried about the inevitable effect on her credit score. ‘I worked hard to get it to be excellent,’ she said.”

The Marin Independent Journal. “The Danville couple who won last month’s ‘dream house’ raffle will take $1.2 million in cash rather than the $2 million San Rafael residence. Brad and Susan Wells, who own their Danville home, were the big winners in the Community Action Marin benefit raffle that raised about $1.3 million for the agency.”

“Officials with the San Rafael nonprofit organization said the unemployed couple picked the $1.2 million cash option - the amount after taxes - and were still deciding how to use it. ‘They’re going to take a little time to decide,’ said Russ Hamel, Community Action Marin’s director of development.”

“A few days before the raffle, Brad Wells was laid off from his job as a sales executive for a high-tech Silicon Valley electronics company. Susan Wells, who hadn’t told her husband she bought what turned out to be the winning ticket, is also unemployed.”

“The winner of last year’s inaugural ‘dream house’ raffle also took cash instead of the same prized home.”

“Hamel said another raffle will begin in September with a different home. ‘We’re not sure where it’s going to be yet, but it’s going to be another beautiful house in Marin.’”




Bits Bucket For March 7, 2009

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