It Was A Heck Of A Parade
The Mansfield News Journal reports from Ohio. “Ralph Hunt, emeritus professor at The Ohio State University-Mansfield, found himself caught up in a local real estate vortex. Hunt started out asking about $170,000 for his Woodland-area home. The two-story, Tudor-style house, for which he paid around $129,000 about seven years ago, has been on the market for almost two years. Though the sour market has been frustrating, he said, Hunt stuck with his original team of real estate agents. In the meantime, Hunt moved out of his Edgewood Road home and bought a house near Akron.”
“Hunt’s housing arrangement may be coming to an end, as his agent thinks they may have a buyer. ‘I’ve had to come down about $40,000,’ he said. No papers have been signed yet, but Hunt estimates he’ll have to let the house go for around $125,000. ‘Since I bought another house, assuming mine would sell, I’ve had the expense of two houses to maintain,’ he said.”
“For Terry Booker, losing his home in 2005 was so stressful and embarrassing he avoids thinking about it. As president of the Sherman’s Estate neighborhood watch group, Booker invested in his house for 11 years, growing equity through a conventional home loan from Mechanics Bank. But when a mortgage company called promising to lower his interest rate, and encouraged further home improvements, he signed.”
“‘They had an appraiser coming in and saying, ‘This will be worth $150,000,’ he said. ‘Since I bought it for $40,000, I thought ‘That would be fantastic!’ Almost immediately upon signing the papers…the problems started.’”
“Mansfield-Richland County Fair Housing Director Don Mitchell said out-of-state lenders began targeting neighborhoods close to the city’s center several years ago — aggressively contacting property owners to offer refinancing. Mitchell said homeowners sometimes settled on terms that practically guaranteed their eventual inability to make mortgage payments. But Census Tract 6 also took a hit from what Mitchell called speculative buying. ‘A lot of speculators came in and bought up properties. When those things didn’t materialize, they kind of walked away from it,’ he said.”
The Toledo Blade from Ohio. “Matt Ruetz spent three months trudging through dilapidated foreclosures looking for a place to call home. Luckily for the 20-year-old Toledo college student and stock clerk, he didn’t find his diamond in the rough until a few weeks ago. As a result, he’ll be able to take advantage of a federal program that gives tax rebates of 10 percent of the purchase price, up to $8,000, to first-time buyers. ‘It’s a little bit of a sweetener,’ said Mr. Ruetz.”
“Homemaker Christina Williams and her husband, Shawn, a refinery worker, are debating whether to relist their mobile home and restart a search for their first single-family house. The tax credit program is a consideration, she said. The couple took the mobile home off the market after about a month, she said.”
“But so many houses are available in the $115,000 price range in Perrysburg, where they hope to buy, that they are beginning to think it would be best to buy now. At current prices, they could swing an additional mortgage payment if the mobile home fails to sell quickly. ‘We’re trying to decide whether to wait a year and save more,’ explained Ms. Williams, 37.”
The Dayton Daily News from Ohio. “The house at 6250 Wooden Shoe Lane, Washington Twp., is an upscale dwelling on a quiet street in a community many find desirable. It has no serious defects, Realtor Dennis Graf said, yet when it eventually sells, the price will be less than the $390,000 the same house fetched 13 years ago. The asking price is $45,000 less than the most recent owner, insurance agent and former University of Dayton basketball star Al Sicard, paid for it in 2003.”
“‘And it’s still not selling,’ he said, ’so that tells you enough about the market.’”
“‘I think the word for the market right now — I don’t want to use the word ‘dead,’ but it’s droopy,’ said Murray Chapple, who started selling real estate in 1971. ‘The foreclosures have put such a glut on the market, I’m seeing a supply like I’ve never seen in my life. It’s hard to sell a non-foreclosed home anywhere near market value. I’m seeing nice, big houses that are selling for 50, 60 percent of value.’”
“For those who can swing it, ‘there’s never been a better time to buy — and that’s not just the old Realtor’s line,’ Graf said. ‘You’re buying at yesterday’s prices.’”
The Columbus Dispatch from Ohio. “With wide inventory and competitive pricing in their favor, folks in search of frequent leisure (and perhaps retirement) could score a deal that puts relaxation within reach. ‘Now that people are able to afford it or justify it, the market has become extremely hot’ for vacation homes, said David Nourse, a real-estate broker who splits his time and clientele between Columbus and Naples, Fla.”
“Claiming that he hasn’t been as busy in three years, Nourse said Naples-area homes that might have sold for $450,000 at the start of 2006 are being snapped up for as little as $300,000. He added that smaller inland properties can be found for even less, prices that didn’t exist several years ago, when the housing bubble and building boom fueled sky-high sale prices.”
“‘With the economy the way it is, a lot of people have decided to give up a second place,’ said Jerry Chapman, a real-estate agent who represents towns surrounding Indian Lake in northwestern Ohio. ‘A lot of them are willing to take less than what they paid.’”
“Real-estate agents who represent popular Ohio vacation spots say their markets are in much healthier shape than Sunbelt destinations, with far fewer (if any) foreclosures and more stable prices. ‘We never really had that bubble,’ said Port Clinton real-estate agent Donna Schoonmaker.”
“Average local sales prices for single-family homes on the MLS dropped 9.3 percent in 2008, to $125,348. That’s nearly $10,000 less than the previous year, and the lowest average since 2000. The region includes Montgomery, Greene and Preble counties, and northern Warren County. ‘These values were punched up pretty aggressively with loan products,’ said agent Scott Kichline in Beavercreek, who works with banks to get homes in foreclosure back on the market and sold. ‘The idea they’re coming down now should be no surprise.’”
“‘I don’t want to come off as insensitive to the people’s plight, but the way to deal with it is to get on it. The longer it takes, the worse it gets,’ Kichline said. ‘I consider myself helping to clean up the mess, kind of like the guy who follows up the parade. It was a heck of a parade out there for quite a few years.’”
The Post Tribune from Indiana. “Argyo Tripodis and Nick Simmons are the local poster children for the national home foreclosure crisis, albeit for two different reasons. Tripodis was one of millions of Americans who fell victim to a predatory mortgage loan, in 2002, that came with a fine-print adjustable rate. It eventually skyrocketed to nearly 15 percent, forcing her family into bankruptcy and looming foreclosure.”
“‘”We knew the rate would go up, but nothing like this,’ said Tripodis, a Hobart resident who is married with three children.”
“She and her husband, Yiannis, initially paid $1,300 a month for their home, now appraised, but not market valued, at $250,000. After the rate increased, they tried to refinance but were denied repeatedly. In 2004, they filed for bankruptcy, thinking they could patch up their credit woes and get back on track. But their monthly mortgage payments kept rising, as well as penalty fees that are now up to $11,500.”
“Simmons, of Gary, has also filed for bankruptcy and is going through the foreclosure process after his home’s ballooning property taxes caused his monthly mortgage to jump from $394 to nearly $1,100. He and his wife are losing their home of 21 years and they’re planning on moving into a beat-up mobile home on a separate property next to his home. When Simmons, a county maintenance man whose take-home pay is about $1,600 a month, asked his bank representative for guidance, he was told to get a better job, he said.”
“‘The government has you coming and going with these new taxes, and the bank has you, too,’ he griped. ‘You can bet that after the bank gets my house –which I owe only $15,000 on — it will turn around and sell it for at least $40,000 to $50,000. That’s a tidy profit, isn’t it?’”
“Bankruptcies, which are often tied to foreclosures, also have spiked in Northwest Indiana, with a 25 percent increase from 2007 to 2008. And a 23 percent increase in the first two months of this year, according to the Northern District of Indiana Bankruptcy Court. ‘I have never seen so many people walk away from their homes as I have in the last 18 months,’ said Highland bankruptcy trustee Daniel Freeland in a Post-Tribune story last week.”
“‘Their idea was to get into the mortgage and to refinance in one to two years before the ARM adjusted, using the rising home values to build equity,’ said Stephanie Shappell Katich, an attorney with Indiana Legal Services Inc. in Merrillville. This concept was sold by mortgage brokers and the real estate industry because it was expected that real estate prices would continue their upward trend. Of course, they didn’t.”
‘My clients are people who purchased or refinanced a home with no mortgage because they were generally victims of the great mortgage scam,’ she said. ‘This is the category of people for whom the term ‘predatory loan’ was invented,” she said. “These are not people who purchased $450,000 homes with values inflated by a sky-rocketing market, or who bought as an investment strategy.’”
“Katich cited a study showing that roughly 30 percent of home buyers who were accepted for these ’subprime loans’ were, in fact, qualified for the 30-year fixed-rate ‘traditional’ loans. ‘Why weren’t they put into them? Because the lending industry, underwriters, brokers, (and) investors made more money off of subprime loans,’ she said.”
The Journal Sentinel from Wisconsin. “James Lytle and Martin Valadez met in the Walworth County Jail in 2001. Three years later they were business partners - tapping the mushrooming subprime mortgage market for $4 million in fraudulent loans. Lytle pleaded guilty in 2007 and is serving a seven-year sentence for masterminding one of the largest mortgage fraud schemes in Wisconsin history. A top state banking regulator says Lytle probably never should have received a broker’s license.”
“Lytle devised the scheme to take advantage of the frenzied subprime mortgage market. Lenders eagerly approved loans that sent billions of dollars to borrowers who often supplied little or no proof of their income or employment status. The risky loans were then packaged and sold to investors around the world. Some lenders and investors who bought the securities say they were clueless about fraud and other problems occurring at the street level. But some other people find that hard to believe.”
“‘They knew what the hell was going on and they didn’t care,’ said Rodney Cubbie, a former federal prosecutor who, as a defense lawyer, has defended people charged with mortgage fraud. ‘They’d take these loans, bundle them and sell them off as investments.’”
“Cubbie’s comments were not aimed at the Lytle-Valadez case but rather the overall attitude in the subprime mortgage market that lasted until it crashed in 2007. That hear-no-evil, see-no-evil approach allowed unscrupulous local brokers to game the system and feed the demand created by national lenders and securities dealers. ‘If you’re going to prosecute any of these guys on the local level, you need to prosecute those guys too,’ Cubbie said, referring to the national players.”
“Even now, mortgage broker’s licenses are doled out with little oversight. A Journal Sentinel investigation published Sunday showed that more than 340 admitted criminals, including burglars, drug dealers, thieves and a killer, had loan broker’s licenses last year.”
“Regardless of their records, each man should have been denied a license for at least two years for lying about their criminal pasts to Department of Financial Institution regulators, said Michael Mach, administrator of the department’s banking division. Even in hindsight, Mach said he believes there was little state regulators could have done to keep Lytle and Valadez from entering the mortgage business and running a scheme that authorities are still unraveling.”
“‘Do we have regrets? In retrospect, I guess we could have regrets,’ Mach said. ‘We followed the procedures that we had at the time. In this business,’ he added, ‘you don’t get do-overs.’”
The Michigan Messenger. “In Cleveland, Detroit, and elsewhere, speculators from out of state and even overseas buy bank-owned foreclosed homes on places like Craigslist or eBay for pennies on the dollar, then try to quickly flip them for a profit, or to rent them out before abandoning them.”
“In Chicago, once-hot neighborhoods on the city’s North Side have become ‘condo ghost towns’ because of foreclosures — and children are afraid to go out after dark because the empty properties have been taken over by drug dealers and criminals, the Chicago Tribune found.”
“A house that might sell in Detroit for as little as $10,000 still would command rent of $700 a month or more, because the rental market hasn’t collapsed yet, said Alan Mallach, a housing and community development expert who spent time in Detroit last fall researching its housing crisis. Speculators can collect that rent, while spending very little on minimal repairs, and within three years they’ll get their money back with a nice profit. Then, having taken all they can out of the property, they walk away. The house is ‘exhausted,’ in further decline, and left to sell again for even less or to sit empty.”
“Speculation has gotten so out of hand that there are some neighborhoods in Detroit where every single house is owned by a speculator, Mallach said.”
“One speculator who bought a handful of Detroit properties at fire-sale prices recently described his interest this way: ‘I thought it would be quite good fun to have a look,’ Darren Veness, who lives near Brighton, England, told the Associated Press.”
The News Democrat in Illinois. “The number of home foreclosures sought last year surpassed the total recorded in 2007. In Belleville, Realtors Association of Southwestern Illinois Executive Director Stephanie Tonnies said realtors are working to help educate future homeowners as regulations have tightened and new laws are being pursued in an effort to prevent the loose lending practices that fed the housing boom before it crashed.”
“‘We want to try to prevent some of what is occurring right now,’ Tonnies said. ‘We can all agree that was a result of lending that was occurring a few years ago and partly because of the economy job loss and income. What we can do educationwise, that is what we want to focus on: How can we get beyond this and look to the future?’”
“Tonnies also said that most of the predatory lenders who fed the housing market’s swift rise with subprime loans before the market fell are gone. Restrictions have been placed on lending practices. The Senate has just passed an appropriations bill that would permanently ban banks from getting into real estate.”
“‘In reality, that is what we have been talking about for years in the National Association of Realtors,’ Tonnies said. ‘That’s why it’s good legislation, so that banks are not both lending and selling houses at the same time.’”
The Star Tribune in Minnesota. “A couple sued Edina Realty for not telling them that a murder took place in the house they bought. The case raises questions about what real estate agents and sellers have to reveal about a home’s past. In general, real estate agents and sellers should disclose to prospective buyers if a murder has taken place on the property, experts say.”
“‘There are some exemptions, but murder isn’t one of them,’ said Chris Galler, chief operating officer for Minnesota Association of Realtors. ‘If a licensee is aware of a murder and the seller is aware, they both have an obligation.’”
“Despite a swift and steep downturn in the region’s housing market, some homeowners are receiving property assessments that show only slight declines in their home values for tax purposes. ‘This is ridiculous,’ said Randy Kirihara, of Bloomington, who recently discovered that the taxable value of his home has been shaved by a mere 1 percent compared with last year, even as the market tanks. ‘I was looking forward to a substantial drop.’”
“‘We bought our house in January for $155,000,’ said Kate Gens of south Minneapolis. ‘The taxable value at that moment was $214,000. And now they’re saying it’s still as high as $189,000? Ridiculous.’”
“The main reason for the disconnect, assessors say, is a factor nobody complained about over the many years of rising values: The deliberateness of the process, coupled with the need for as large a sampling of sales as possible to estimate values, causes a six- to 18-month lag between tax assessments and the churnings of the real-time market.”
“Anoka County’s assessor, Mike Sutherland, says he has given, in some cases, a slight break to the more recent developments. He knows of a townhouse in another county, once worth $190,000, that sold for $60,000. ‘Anyone in our business would have to be under a rock,’ he said, to miss what’s happening in the real world.”
“‘Most of my appraisers under age 40 have no idea,’ Sutherland said. ‘They have never seen anything like this. Things don’t always go up.’”
“In Dakota County, where after double-digit percentage increases earlier this decade, residential values dropped an average of 8 percent this year. In Dakota County, as in many other spots, townhouse and condominium values dropped faster than those of single-family homes, in part because so many stand vacant, hit harder by foreclosures or never purchased after the real estate bubble popped.”
“‘We’ve never seen the market fall like this before,’ said Bill Peterson, the county assessor, who has 30 years of experience. ‘There are people that are calling to say ‘You’ve not reduced them enough,’ Peterson said. ‘We’ve also had people call concerned that the values are dropping as much as they are.’”
“The whole sequence leaves many homeowners confused, upset and suspicious. ‘I doubt I could sell this place for $228,000 right now,’ said Amy Fastenau, who lives in south Minneapolis. ‘There used to be huge difference in our favor; now it’s the opposite. It seems like they have to find some way to charge more for taxes. It seems sneaky.’”
The Pioneer Press from Minnesota. “Brad Krogman, VP of loan administration for Bremer Bank, said his company expects to participate in the Obama plan. The steps outlined in the loan modification portion of the program are tools that banks already use to modify loans, Krogman said, so the program makes sense.”
“But unanswered questions about exactly how the program will work make it difficult to say how many customers of the St. Paul-based bank might take advantage of it. One of the concerns is that consumers might get the idea that there will be no more foreclosures. ‘As a general rule, most of these customers want to make payments,’ Krogman said. ‘One of our challenges is to manage that expectation. This plan or any plan doesn’t mean that it’s for everybody — there are some people that we just can’t help, and we’re not going to be able to help.’”
“The intervention could delay recovery in the housing market, said Tom Kelly, a senior fellow at a conservative think tank in Minneapolis. He estimates that this decade’s housing bubble caused home prices to appreciate roughly 35 percent beyond where they should have been considering their historical relationship to income.”
“‘That needs to be resolved,’ Kelly said. ‘Everything the government does to prop up prices prolongs the economic pain.’”
