An Eloquent Testament To A Series Of Bad Decisions
The Record Searchlight reports from California. “Michael Dastrup is a patient man. Four years after Big Wheels was destroyed by fire, Dastrup is still trying to rebuild the iconic Shingletown restaurant. But Dastrup has been unable to get a bank loan. The housing slump hasn’t helped his cause. Dastrup has been trying to sell two homes in Shingletown for nearly four years so he can use the profits to help finance a construction loan. One of the houses recently sold for $320,000, but that was $80,000 off the original asking price. Dastrup still has the second house on the market for $250,000.”
“Dastrup said he owns the land outright where Big Wheels once stood, plus the liquor license and other assets. ‘But they’re (assets) all tied to real estate, which banks don’t want to lean on. At this point, cash is king,’ Dastrup said.”
The Santa Cruz Sentinel. “The median sales price for a single-family home in Santa Cruz County edged up to $420,000 in April from $399,000 in March but remained far below the median of $661,000 a year ago. In Santa Cruz County, lenders have issued 883 default notices to borrowers, up from 867 a year ago, while the pace has slowed in neighboring Monterey and San Benito counties, according to the Santa Cruz Record.”
“‘A lot of homes went into default in Watsonville with prices that were inflated and loans that shouldn’t have happened but Santa Cruz hasn’t been hit hard like that,’ said Santa Cruz real estate agent Linda Burroughs.”
“Burroughs contends local home prices hit bottom in February, when the median sank to $380,000. She represented buyers of 225 Fairmount Ave. in Santa Cruz, which got three offers and sold for $453,000 in April. Since then, she said, similar properties are attracting 10-20 offers and bidding up prices by 10 percent.”
“Burroughs has switched her focus away from homes worth more than $1 million. ‘That end isn’t selling right now,’ she said, explaining that prospective buyers are reluctant to sell stock that has fallen in value. ‘They’re waiting for a recovery.’”
The Monterey County Herald. “A local version of ‘Flip This House’ is coming to Monterey County. Supervisors Tuesday approved an agreement with several cities hardest hit by the housing market downturn to buy foreclosed houses and sell them to lower-income buyers.’
“Under the agreement, the county Housing and Redevelopment Agency would apply for about $2.1 million in federal stimulus grant money on behalf of the county and the cities of Marina, Seaside, Soledad, Gonzales, King City and Greenfield, for use in a local Neighborhood Stabilization Program.”
“According to the county’s numbers, home prices have dropped precipitously in many local communities during the past year, ranging from about 27 percent in Seaside, 37 percent in Marina and 38 percent in North County to a whopping 66 percent in Greenfield. And a glut of foreclosed homes is making things worse.”
“Supervisor Simon Salinas praised the program and said the county should vigorously pursue the funding. ‘This is something where I think we’d be remiss if we didn’t do something,’ Salinas said.”
The Press Enterprise. “Shrinking nest eggs have retirees searching for ways to stretch their money. Some are discovering a new mortgage tool that can make buying a house cheaper than renting. The new tool is a variation of reverse mortgages. A 62-year-old using a reverse mortgage could buy a house priced at roughly twice the amount of the required down payment. The maximum price of a house that can be financed through a reverse mortgage this year was raised from $417,000 to $625,000.”
“Pat Conway, a real estate agent who lives in San Jose, salvaged the remaining equity from her 1,300-square-foot house, which had been losing value in California’s busted housing market, and bought a condominium in the same city. By using a reverse mortgage, she was able to finance more than half the $225,000 price of the condo and discard her monthly mortgage payment.”
“Conway said if she hadn’t used the reverse mortgage, she would have had to move out of the area, far from her children and grandchildren, to find a condominium she could afford to buy for cash. Although Conway knows the reverse mortgage could erode the equity in her new condo, she said she is confident that real estate will appreciate again and build back some of the lost equity.”
‘Besides, she said, she feels safe realizing, ‘Even if they use up your equity, they can never kick you out of your home.’”
The County Sun. “Accelerating a water rate increase that took effect two years ago will be considered by the City Council on Tuesday. The proposed rate increase would allow the city to recover its costs, not make a profit. In 1995, the city took out a $10 million bond to buy land, build a water reservoir and refinance an existing loan. But the economic downturn dramatically reduced annual revenues from connection fees used to repay the bond, according a recent study commissioned by the city.”
“The water connection fee is $3,500 per home. There have been 14 new connections in the 2009-2010 budget year. Two years ago, the city anticipated 350 new connections per year.”
The Merced Sun Star. “While little new construction has sprung up in Merced during the past year, small contractors like Warren Murdock’s Lynn Douglas Design & Construction have kept busy. Lynn Douglas Design and Construction specializes in smaller jobs like remodeling — jobs that developers and custom builders had little interest in.”
“But business isn’t booming and now contractors of all stripes are scrambling to get any work they can, Murdock said. Mat Harding, who works for Murdock, was building custom homes in Oakdale before the slowdown. Now most of the guys he knows in the building industry are out of work.”
“For Michael Carter, who runs Carter Construction, work has simply dried up. His industrial and commercial contracting company in Merced used to have up to eight workers on his crew and two or three jobs at a time, he said. Now he’s had to lay off his crew and feels lucky if something comes along every other month.”
Carter’s competition increasingly includes contractors who used to build houses, he said. Carter recently went to a prospective job site and there were more than 40 other contractors there when there used to be only three or four. ‘We’re seeing a lot of the people who would specialize in residential,’ he said, ‘now looking for anything they can get.’”
“New construction numbers in the city and county of Merced don’t tell a much rosier story. For the month of May, there was not one building permit issued by the county for a new home.”
The Daily Pilot. “Newport Beach and Costa Mesa could feel the squeeze when Orange County slashes spending by about $1 billion this budget cycle. Everything from bus routes and subsidized health care for families faces cuts in the coming year, Orange County Supervisor John Moorlach said.”
“‘Costa Mesa is going to be hit a little harder because these things are going to affect the poor living in those areas,’ Moorlach said. ‘But there also might be some loan brokers and car salesmen in Newport Beach who are on food stamps too, there are a lot of people who have been hit hard in this economy.’”
The Union Tribune. “Short sales often represent the best chance for distressed borrowers to avoid foreclosure. The problem is that many real estate professionals say it’s growing increasingly difficult to complete transactions in which lenders allow sellers to accept less for the home than the outstanding debt. Lenders have been slow to embrace short sales because they don’t like to take losses. Even when they decide a short sale is in their best interest, it can take months to negotiate a price. If there is more than one mortgage, which is common in California, the second, unsecured lien holder must sign off on the sale.”
“In cases where loans have been bundled into securities and sold on Wall Street, things get even more complicated. Investors may need to sign off on the deal. Bob Satnick, chairman of the California Mortgage Bankers Association, said he has seen cases in which sales are delayed when lien holders try to maximize their return. Recently, some institutions have pushed to have sellers sign promissory notes that require them to repay all or part of the outstanding loan balance at a later date.”
“‘That is a relatively new wrinkle,’ he said. ‘Where I have seen them come into play is from the second lien holders. I have seen lenders asking the seller to come in with additional money up front. I have seen them approve the short sale but reserve their right to pursue future deficiency from the borrower.’”
“Santee real estate agent Dan Tacon said he has a standard answer for lenders who seek promissory notes: ‘No.’ Tacon tells his clients if they can’t walk away free and clear, they probably are better off going through foreclosure.’
“‘If people could afford the payments, they would not be selling the house,’ he said. ‘Why should you pay for something you don’t have? Your credit already is shot. Everything already has been taken away from you.’”
The Tribune. “North County lenders Rod Jarmin and Tammy M. Jordan have been accused by the state’s Department of Real Estate of substantial misrepresentation of material facts, fraud and dishonest dealings. Both Jarmin and Jordan are stakeholders in Real Property Lenders, a mortgage loan brokerage business that solicited lenders and borrowers for high-interest loans secured by real estate.”
“The Paso Robles firm had more than 250 investors in $55 million worth of real estate loans, according to its last offering circular filed with the Department of Corporations in 2007. The basic allegations filed by the state regulators on May 18 involve about 20 investors who gave Jarmin more than $1 million to invest in the construction of four single-family homes in the North County.”
“In all the loans, the state alleges, Jarmin and Jordan concealed the fact that the money was going not to construct the homes but rather to purchase the land. The state also alleges that after they depleted their interest reserve funds, they then illegally paid investors monthly interest payments out of the construction loans, unbeknownst to investors.”
“Leaders of a third North County lending company, Estate Financial, are in County Jail, facing numerous felony charges involving fraud in their financial dealings. Together, the companies took in about half a billion dollars for loans from more than 5,000 investors, most of whom live in this county.”
The Marin Independent Journal. “A stash of heavy equipment and building supplies sits on a lot on Sir Francis Drake Boulevard in San Anselmo, and behind it the hillside is scarred from past landslides. By all accounts, it’s a blemish on the visage of an otherwise photogenic town - even the property owner admits it. But contractor Gerry Hynes said the stagnant economy is preventing him from obtaining about $1.6 million in financing to complete a project at 790 Sir Francis Drake Blvd.”
“Hynes intends to build two houses on Loma Robles Drive and a 9,500-square-foot commercial building on Sir Francis Drake. The project passed through three owners and multiple revisions since a 13-unit housing complex was proposed for the site in 2003.”
“Cherilyn Gilboy and her husband, Pat Haven, live on Luna Court above 790 Drake. Their home was built in 1879 and is the second oldest in San Anselmo; only the home of filmmaker George Lucas is older. Gilboy said there has been structural damage to her home - cracked cement and plaster - that she attributes to work on Hynes’ property. Gilboy said the situation is embarrassing for the whole town. There is no deadline for Hynes to finish the project, although he will have to renew his permits later this summer. ‘Everybody in San Anselmo sees it and asks about it, and they just shake their head,’ Gilboy said.”
“‘It’s sad,” said Councilman Ford Greene, whose law office is across Drake Boulevard from the lot. ‘It’s an eyesore. It is the most eloquent testament to a series of bad decisions. He’s got to clean it up, but it’s just going to sit there.’”
“Hynes is asking for patience. ‘I wish I had deep pockets and could come through and finish the job,’ he said. ‘I know it’s a little bit of an eyesore. Believe me, I want it done, too.’”
