July 31, 2009

Bringing The Market Closer To An Eventual Equilibrium

It’s Friday desk clearing time for this blogger. “Ari and William Morel are homeowners and grandparents who hope to save their home from foreclosure after becoming victims of what they consider to be a predatory loan. The Morels, whose troubles began in 2006 when Will lost his job as a bank adjuster, were told that they could not force the bank to modify the loan under the Making Home Affordable Refinance and Modification program. The program gives struggling homeowners facing foreclosure and who have a loan owned or guaranteed by Freddie Mac or Fannie Mae the opportunity to modify their mortgage payments or refinance to a lower mortgage rate. The Morels did not qualify because they had waited too long to apply. The bank had failed to tell them they qualified for the plan when they first went to them in February, according to the Morels.”

“‘We’re not looking to get a new house. We can pay a mortgage,’ said Ari Morel, who said she has lived in her current home for over 15 years. ‘We were cheated.’”

“Orlando’s housing starts, once a bellwether of success, have been cut by more than half during the past year, according to a real-estate analysis. The large number of foreclosures and short sales in the resale market has driven down prices of new homes as well, allowing buyers to employ ‘aggressive’ negotiation tactics, said longtime homebuilder Steve O’Dowd, VP of the Home Builders Association of Metro Orlando.”

“‘Market price is way down, and the ability to rebuild and reproduce that house at that price doesn’t exist — you can’t do it,’ O’Dowd said. ‘There may be a desire for new construction, but the replacement cost is higher than the market is willing to pay.’”

“New federal rules that went into effect May 1 prevent mortgage bankers from ordering appraisals on homes under contract to sell. It’s called the Home Valuation Code of Conduct, and it was created to address some of the problems that led to the nationwide run-up in housing prices and accompanying downturn. ‘It makes all the sense in the world. It truly protects the consumer. In the old days, you could talk to the appraiser and say, ‘I need this value,’ said Robert Runnells, production manager of Old Point Mortgage in Hampton.”

“It’s true the appraisals are coming in low, he said. ‘That’s more a product of the market,’ he said. ‘We’ve had more appraisals come in low this year than my previous 10 years combined. It’s hard to tell someone their house is worth less than they think it’s worth. Some people get mad at you; they point the finger at us, when it’s not us.’”

“The number of properties facing foreclosure in Hampton Roads has more than doubled from this time last year, according to a new study.And it’s not over yet. ‘We should expect more foreclosures in the future rather than fewer,’ said James V. Koch, an Old Dominion University economics professor.”

“Though foreclosures force people out of their homes, it puts others into them, Koch said. ‘Foreclosures aren’t completely bad. When they go on the market, they’re oftentimes snatched up by individuals who are looking for bargains and probably have an ability to actually meet the terms of the mortgage,’ Koch said. ‘I think, actually, some of the foreclosures are healthy in the sense that we’re really bringing the housing market closer to an eventual equilibrium. That sounds harsh, but we need to have some additional decline in the housing prices and some improvements in overall economic conditions before I think we’re going to see the housing market turn around.’”

“By midyear, 1,616 Honolulu homeowners had received a foreclosure notice, a 276 percent increase from the same period a year ago and a 31 percent increase from the prior six months. But while Honolulu foreclosures are growing, overall the city has a limited foreclosure footprint as compared to the nation…The same could not be said for the neighbor islands, which have been harder hit by economic recession and had experienced higher price swings during the last real estate boom, said Howard Dinits, a Realtor in Wailea, who specializes in Big Island and Maui sales.”

“Declining real estate values and increased joblessness, combined with a tighter lending market and a depressed economy, have created the perfect neighbor island storm, said Dinits, who has had to switch real estate firms twice this year due to office closures. ‘Get ready, it’s just going to get worse,’ Dinits said. ‘California was littered with foreclosures last year and we tend to lag that market by six to nine months or more.’”

“San Diego County home prices were down 18.52 percent from a year earlier, according to the most recent Standard & Poor’s/Case-Shiller index for May, released Tuesday. In the three-and-a-half years since the market’s price peak in November 2005, prices have fallen 42.05 percent to a level last seen in summer 2002. Still, prices remain 45 percent higher than they were at the start of the decade.”

“Though a tightened supply and an increased demand might typically indicate underlying strength, this market has too many issues to say for sure, said Mark Goldman, mortgage broker and real estate professor at San Diego State University. ‘I don’t like to be Dr. Doom in the housing market,’ he said. ‘We’ve taken most of our licks, but what’s going to cause the market to improve?’”

“Goldman said…with the potential for inflation on the horizon, a homebuyer could do well to buy a discounted home and lock in a mortgage at the interest rates in today’s 5 percent range. ‘I just see a bunch of stuff going on that can become a concern, but is now a good time to buy a home? Hell, yeah,’ he said. ‘Will prices slide some more? Yeah, they will. Are they going to slide a lot? No.’”

“Fueling optimism of a real estate turnaround in San Joaquin County, Tracy has been listed the eighth-hottest investment market by a statistics-based company that measures an area’s real estate affordability, crime, school rankings, lifestyle rankings and employment potential. Investment possibilities in a county where the median home price has dropped to $155,000, and the slight decrease in foreclosures brings hope to community leaders.”

“‘Foreclosures and unemployment rates are still way too high in the Central Valley, but I’m hopeful that we could start to see the market stabilize,’ said Rep. Dennis Cardoza D-Atwater. ‘This is a great place to live, and I think the housing prices in the Central Valley are underpriced.’”

“Rental prices across California fell 4.5 percent this spring compared with the same period last year, according to research. Fewer than 90 percent of Modesto apartments had tenants this spring, compared with about 94 percent a year ago and nearly 96 percent two years ago. ‘It’s definitely not going in a good direction,’ said Georgina Bockel, a West Coast consultant.”

“The purchase of Pacific Union Real Estate, a struggling but well-known Bay Area name, by a smaller rival in Marin might be a sign of things to come in these down economic times. The deal is the latest in an industry that has experienced seismic shifts locally over the past year. Marin has about 1,450 Realtors practicing, based on membership figures from the Marin Association of Realtors. Through the first six months of this year, there were 881 residential home sales in the county, according to MAR. At last year’s midpoint, there were 965 home sales. By the halfway mark of 2004, 1,987 home sales had already taken place.”

“‘We’re going to see more of these types of mergers and acquisitions to reflect the difficult market,’ said Katie Beacock, president of the Marin Association of Realtors.”

“During the buying orgy of the housing boom, many consumers overleveraged themselves by signing on for low-introductory-rate ARMs, apparently presuming that tomorrow would never come, or at least that the option to refinance always would be there. Toll Brothers raised a few financial eyebrows recently when it announced it would offer an adjustable-rate mortgage to its buyers at an eye-popping 3.75 percent rate.”

“When a high-profile company such as Toll Brothers rolls out an ARM, and with some fanfare, one has to wonder: Could these loans be making a comeback already? ‘ARMs are not evil; really they’re not,’ said Keith Gumbinger, a loan analyst at a mortgage-industry publisher.”

“Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon. The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. ‘They’re probably going to default at a rate that makes subprime look like a walk in the park,’ warned Rick Sharga, senior VP for RealtyTrac.”

“They pose risks for the broader U.S. economy because they threaten to add inventory to a depressed housing market and could hasten the blistering pace of foreclosure filings — more than 1 million from March to May alone. ‘We can’t rebuild housing values when there’s a serious risk that another set of mortgages is collapsing,’ said Elizabeth Warren, a Harvard University law professor.”

“Foreclosure rates in the Baltimore-Towson metropolitan area are less than half the national average, according to a new report, but industry professionals have warned that the lull in filings is temporary and artificial and said they are girding for a new wave of problems in the third and fourth quarters of this year. ‘Foreclosures have probably been artificially low because of moratorium programs that have been in place,’ said Rick Simon, a spokesman for Bank of America Home Loans. ‘The expectation is that we’re going to see an increase, not just because we’re getting through that backlog but also because the projections are showing that people are not going to qualify for loan modifications because of unemployment.’”

“David McIlvaine, president of the Greater Baltimore Board of Realtors, also sounded a warning. ‘I work with numerous banks, and I’m hearing from banks …’get ready,’ because there’s significant inventory [of foreclosures] expected to hit the market in the third and fourth quarters,’ he said. ‘I would say it was an anomaly if just one bank was telling me this. But three different banks have told me that we’re in a lull, that loan modifications have slowed things down … we’re going to see a significant rise from what we saw last year.’”

“In the first half of 2009, Las Vegas posted the nation’s highest rate of foreclosure. More than six times the national average. But number crunchers at RealtyTrac say Las Vegas could see more houses on the market. If foreclosure filings from June actually become available, it would more than double homes for buyers all at once.”

“Realtor Nick Nolf believes banks and lenders have homes ready for sale but they won’t release them from foreclosure. ‘There’s a long period and that’s an ambiguous period because some of the banks will release properties at certain times. Sometimes they hold off,’ he said.”

“Bill Uffelman is the President and CEO of the Nevada Bankers Association. He says it isn’t collusion or shady plans by FDIC insured banks. Foreclosures take time to work through the courts. ‘It doesn’t happen overnight, but it isn’t something they sit on. There’s no advantage to them to sit on these properties,’ he said.”

“Southern California investors have returned to the Las Vegas market in force to look for bargains on single-family homes and helped drive Las Vegas to a record number of sales in June, housing industry experts said. ‘Real estate has always been a good investment, and right now it has never been better from a residential standpoint,’ said Steve Bottfeld, executive vice president of Marketing Solutions.”

“Glenn Plantone, a Realtor and president of the Real Estate Insiders Club in Las Vegas, said investors are taking advantage of a steep drop in prices since they peaked in 2006. In some cases, prices of homes in the northwest fell 70 percent. Homes that sold for about $300,000 are going for about $110,000 he said.”

“‘They are buying them for cash flow,’ Plantone said. ‘We are not even talking about appreciation potential.’”

“In once-inflated markets like Phoenix, Las Vegas and inland swaths of California and Florida, where prices have tumbled more than 40 percent, sales are rising because first-time homebuyers are snapping up bargain-priced homes. They are getting help from a federal tax credit. For Aaron Carter, a musician who was struggling to fit a drum set, a piano and three guitars into his 600-square-foot apartment in Phoenix, the math on owning a home finally began to work in his favor.”

“Rent for the apartment he shared with his wife: $615. Mortgage payment for a home with twice the space: $760. And the interest on a mortgage is tax-deductible. So they jumped at the chance to buy some elbow room. ‘We figured that everything together, getting more space, getting out of the apartment life and also just the prices right now, it just was the perfect time for us as a couple’ to buy, said Carter, 20.”

“Neighborhood profiles by Jason Sheftell and real estate advice from Barbara Corcoran. Q: Most military families stay in their homes for four years or less, and often four years is rare! What advice do you have for military families — buy a home or rent? A: Stick to renting, as there’s just too much risk in buying a home for such a short period of time. If you buy, there’s no guarantee you’ll be able to get your money back or even be able to sell in the first place.”

“Q: My husband and I purchased a piece of land last year in Lehigh Acres, Fla., for a very good price, but it’s not in a very good area (lots of crime, foreclosures, etc.). My husband thinks the area will only get worse, with the economy the way it is, and wants to sell. I feel that the area will eventually pick up and that this is a good investment. What do you think?”

“A: The fact is you’ll have a tough time selling it now. There’s not much of a market for land because of the credit crunch. Very little new development is taking place and there are too many newly built homes and not enough buyers. You should hold on to the property and wait this rough spot out, as long as you can afford to carry it. You’ll do much better later, once the market recovers, than you can now.”

“House Democrats have declined to subpoena available records that might reveal whether other members of Congress got discounted VIP mortgages from subprime lender Countrywide Financial Corp. similar to the sweetheart deals given Democratic Sens. Chris Dodd and Kent Conrad. Countrywide was taken over by Bank of America a year ago.”

“Robert Feinberg, who worked in Countrywide’s VIP section, told…investigators and the Senate Ethics Committee that Dodd and Conrad were made aware that they were getting special deals on their mortgages. Elana Goldstein, one of Feinberg’s lawyers, said Justice Department prosecutors interviewed Feinberg last October but have not contacted her or her client since then.”

“The senior Republican on Towns’ committee, California Rep. Darrell Issa, has been trying for months to get Towns to subpoena Bank of America for Countrywide’s records. Daniel Frahm, a Bank of America spokesman, said the bank is ready to turn over the Countrywide VIP documents if it receives a subpoena. ‘They have it packed and ready to go,’ Issa said in the interview.”

Bits Bucket For July 31, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.

July 30, 2009

Fighting With An Arm Tied Behind His Back

A guest post by NYCityBoy

Bloggers love to sit on blogs and discuss what is going on in the world. We read the garbage being pumped out by the mainstream media and critique their objectivity. I believe most of us believe that their efforts are juvenile, disingenuous and in general a complete joke. Everybody is a victim to the mainstream media, regardless if it is CNN, The New York Times or CNBC. They just choose different victims. The depth of their reporting is appalling. It does not seem like their reporting resides in the real world.

When I was told that I would be given an opportunity to be a guest blogger on the HBB it was a great honor. But I had to think of what I wanted to do. I decided that I wanted to bring my experiences to the blog and the experiences of regular people. I will be doing a series of interviews with “regular guys” that might give everybody a better understanding of what is going on in the real world. The first interview in this series is my interview of Jason, a guy that feels like he is fighting with an arm tied behind his back.

I have known Jason since 1997. It was back in my days living in St. Paul, Minnesota. We worked in the same building and developed a friendship. Although we did not work together I could tell that Jason was a hard working and responsible person. You could tell that he cared about the job that he did and took pride in doing a job right. His co-workers did not take nearly as much pride in their work. Jason always reminded me of a guy from a bygone day. I could have pictured him working on a railroad or plowing a field behind a horse drawn plow. He is not a big man but he had a heart that shouted out his rugged individualism.

I left Minnesota in 2000 but kept contact with Jason over the years. He changed jobs after I left. He was making more money. He had a new girlfriend. Things seemed to be going very well for him.

A few years ago Jason hit a rough patch. The bank that he worked for was snatched up by a larger bank. The corporate bank did away with many long time employees. They also did away with Jason. The relationship with his girlfriend ended. Jason found a new job but at a much lower income level. Shortly after this Jason got a DWI. This caused him to lose the job he had.

I could tell that all of this had been difficult for Jason. He could not drive. Finding a job was difficult. He was without a job for nearly a year. During that time he did something that the Jason I knew would never have done. He went into debt. He lived off of credit cards and got himself into a hole. Eventually he found himself in debt to the tune of $25,000.

We all have a unique story. Jason’s story is unique but it is not unusual. We all hit rough patches in life. Many of us are seeing people that have gone through their own rough patch. Getting out of that rough patch can be even more difficult when faced with the prospects of digging out during the worst economic downturn in 80 years. As the wizards of Washington try to bailout “homeowners” (and banks) it does nothing for guys like Jason. They need an economy that has decent jobs. They need an income that can allow them to dig out. The Federal Reserve talks of an ending recession and stabilization the way they do in this article. It is easy to speak of recovery from the terrace of an ivory tower.

Jason does not expect anybody’s sympathy. That is just not the type of guy he is. But I wanted to share Jason’s story so we can see what regular people are facing. Jason is just a regular guy and this interview sheds light on what regular guys are going through during this time. Let’s see if he agrees with Bernanke and the positive crowd.

Have you made any attempts to use a third party to help you with your debts?
Yes. I used an organization called Campos Chartered Law Firm for debt consolidation. I was paying them $423 per month. It had got to be $4,799 before it stopped. I didn’t even get a phone call from them to let me know that they were getting shut down. They went into receivership.

Did any of your money ever go toward any of your debt?
No. I didn’t read the fine print. The first year all of the money you sent them goes into an account. I didn’t know that the first over a year went for legal fees. The first 16 payments, or something like that, went towards fees. They never mentioned that during our talk.

Do you remember what they said they could do for you?
I can’t remember how much they said they could get it down to. They said they would take my debt and once I got enough in my account they would start negotiating. There were too many papers, too many little tiny frickin’ words. They said it would take four years to get paid off through them. They stated that they could help me get my debt paid off in 4 years. They said it would take 50 years if I made the minimum payments.

Now that Campos is out of the picture have you been able to deal directly with the card companies?
No. I’ve been dealing with their collection lackeys.

What do the lackeys tell you?
They tell me that they need $7,000 odd dollars now and they would call it even.

How much do you owe on this card?
I think I owe twelve on that one.

So, they will deal with you?
Yeah. If I had the money I could get rid of this sh*t right now.

What has the other company offered?
I can’t remember. They call every three months. In September I will get calls from both of them. One of them is going to try to up my payments.

Have you thought of bankruptcy?
No. I’ve been told that that is not a good thing to do. I have not looked into it. I know my credit is not good now but I don’t know how much worse it would be if I declared bankruptcy. If they force me to, I guess I will.

What do you do for a living?
I clean carpets. I work for Oxy Magic of Minnesota.

What have you seen in that business lately?
A downturn in the number of people that are” wanting” to get their stuff done. It’s not the people that usually do it regularly. It’s the people that need to get that sh*t done. So, the jobs are getting fewer and they are getting worse.

A lot of people are talking about the recession being over. What do you have to say to that?
(It took him a minute to stop laughing at this question.)

Until I start getting my 15 to 18 jobs a week again I just don’t think this economy is going to be right. I’ve gone from 18 jobs a week to 6 jobs a week.

How do people in your situation get caught up right now?
If I knew that then I wouldn’t have any problems, if I could figure that out. I might have to find a second job. That would not be easy since I don’t have a set schedule. Today I got done at 1:00. Last week I had a night where I didn’t get done until 9:30.

Have you looked at a jobs section lately?
Yes. There’s a lot of jobs in there (while laughing).

What are you seeing?
There’s stuff there. But the stuff there is not worth my time or I’m not eligible for it.

Do you feel like a victim?
No. I brought this upon myself. I have no one to blame but me. But some of it may be the economy that I can’t make the kind of money that I would make normally. I’ve always taken responsibility for my actions.

How do you feel when other people act like victims and expect the government to bail them out?
If you are going to play the victim card and you have resources to deal with things on your own but you choose not to use them then you are a douche bag. That is all I can think of. If I was to sit here and say, “woe is me. It’s all somebody else’s fault.” I would then say go hang yourself. If you aren’t going to take responsibility for your own actions then go jump off a f**king cliff.

If you screw up and you’re too p***y to admit it and you just blame other people for it then screw yourself. Admit that you’ve done some of this to yourself.

Is there anything you would like to add?
Yeah, if my buddy would get off his ass and buy a bar that we can run, then I could get out of this problem.

Jason wanted to add that anybody looking for a hard worker should give him a call. I can vouch that he is a hard working guy. This is just one of the many regular guys that has slipped through the cracks as we bailout banks, rework mortgages and talk of “green shoots” and recessions that are over. Without good paying jobs more and more holes are going to get deeper and deeper.

Bits Bucket For July 30, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.

July 29, 2009

Bits Bucket For July 29, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.

July 28, 2009

Mommy? What’s A Demographic Nightmare?

by Ahansen

For those of us born in the immediate aftermath of WW2, the knowledge that we were a demographic phenomenon was never far from our awareness. As our teachers and the popular press of the day constantly pointed out, our numbers overwhelmed the American school system, forced a reorganization of tax codes and social policy, gave boom to a youth-oriented culture, changed mores, and “radicalized” behavior across the country.

They also scared the bejabbers out of prognosticators who foresaw us bringing down the social security and health care systems sixty years down the road– when up to 79 million of us would hit retirement en masse.

Now the awful nightmare has come to pass! As our country faces an unprecedented economic mess and the unpleasant realization that for the next few generations at least, our global dominance has peaked and our standard of living will decline, we boomers bear the collective condemnation of our parents as well as our progeny for bringing down the American way of life—and just, well, ruining everything. Again.

The blame for the housing crash has variously been placed on greed, overbuilding, shoddy lending practices, insane economic policy, “globalization,” and a host of other ills, but perhaps it should also be considered that maybe there were just too (bleeping) many of us baby boomers, and that the policies that were instituted to accommodate our numbers were not fungible to following generations. Maybe the PTB forgot to adjust for diminished need– in housing, in goods and services, in governance? (Those vexingly partial 3.2 children per household of my childhood, are now down to an even more anatomically puzzling 2.09.)

When the statistical last of us boomers bought our first homes in 1992, the need for new housing was reduced accordingly. Yet building (and finance,) kept pace with a demographic that no longer existed. (Unless you count illegal immigration, but for the sake of argument, let’s not?)

The more optimistic of today’s pundits tell us the market will likely bottom in 2011 or 2012 after Prime and Alt A mortgages reset. But will it? What about all us yuppie boomers who only had one kid? And the fact that those kids are waiting far longer than their parents to reproduce and “settle down” in a house of their own?

Moreover, when both sets of Boomer parents bite the pickle and leave the house to their grown offspring and their only-child spouses, there will be two inherited houses per couple– plus whatever home(s) the kids may have purchased in the interim. On that purely theoretical basis, all else being equal, the housing glut will persist until junior has moved the last of the boomer grandmas and gramps into a retirement home and sold off the old family homestead(s).

If we define boomers as those born between 1948 and 1964, and assume the average aged hippie freak gets hustled off into assisted living at age 81, barring a population explosion during a prolonged economic depression and a whole lot of unforeseen variables I don’t have the energy to come up with right now, it could well be 2045 before all those houses are absorbed. It’s going to take an awful lot of stimulation to keep housing prices from losing at least one zero in the next ten years of so. And that’s assuming anyone still has a job left to pay for them.

So stick that in your hashpipe and smoke it, Mr. Yun….

Bits Bucket For July 28, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.

July 27, 2009

Bits Bucket For July 27, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.

July 26, 2009

Mine To Look After

-by the Mysterious Flying Miser

Quite a few readers of this blog have recently posed the question “Where the hell is Ben Jones, and what the hell is he doing all day long?” Well, I woke him up early one morning and interviewed him to find out. According to him, he’s been working on his new business. He calls it “property preservation”. He swears his job is to secure and maintain houses once the delinquent occupant vacates the house. I eyed him suspiciously and pressed on. I was sure he was only making an excuse, that there would be girls in his bed and whiskey on his breath. I forced my way through the window and looked around. No girls. I decided to leave the breath question unanswered. So, with no evidence of excessive sloth and indulgence, I decided to play along and ask him a bit about this intriguing business of repossessing houses. Here’s how the conversation went:

Miser (with eyebrow raised): What made you decide to become a property preservation contractor?

Ben: I always considered the Housing Bubble Blog to be dedicated to the economic phenomenon of the mania. So I started a foreclosure blog as a place to put various related opportunities that I came across that weren’t directly relevant to that. I found an article on this field in 2006, and thought it would be a good business to ride out the bust with.

Miser: When did you decide to do it?

Ben: When I felt there were enough defaults in northern Arizona, by late 2007, I decided to start the company. It took a long time. The insurance alone took months to put together.

Miser: Describe what you do on a day-to-day basis.

Ben (lighting up a Nat Sherman mint cigarette and looking official): A typical day might start with what is called an initial secure. This usually involves changing a lock on a secondary door, which allows the owner and realtor to continue to access the house. Once a house is secured, it is checked for damages, etc. I may bid on these damages or for removing debris. Then the house is most often mine to look after; cutting the grass and making sure it is OK. Over time this list of houses to take care of becomes the bulk of the work.

Miser (leaning forward with excitement, trying to look cool): Have the houses already been foreclosed on by the time they are assigned to you?

Ben (leaning backwards, obviously trying to suppress his whiskey breath): About 60% of the time, the initial secures I do are presale, which means it is not in foreclosure yet.

Miser: Are the houses always vacant by the time you get there?

Ben: No. It is rare for a house to be occupied, even presale, but it is the case in 5% of the houses, approximately. Usually, not only are they vacant, but they are abandoned. Utilities off, and no one is maintaining the yard. Sometimes a door or windows will be unlocked. (Ben makes note to self: Lock window to keep out Miser in future. Consider change of address.)

Miser (more friendly by now): What do you notice most about the houses you visit?

Ben: Of course, having worked with the HBB for years, I find situations of economic interest. I notice things like how long people have been living there, meaning it was probably a refinance that resulted in the default. One thing I see is the high number of foreclosures in expensive subdivisions. I see signs of anger and possibly embarrassment on the part of the owners.

Miser: Describe the most interesting things people leave behind.

Ben (pouring a bowl of some healthy cereal, making a point not to offer me any): The personal property I see isn’t very interesting, except in what people don’t find value in taking. Computers get left behind a lot. Furniture is often still present. There always seems to be some paint or chemicals. Then there is the food and other health hazards like tires. But it is surprising how often the houses are spotless, as if they have been professionally cleaned.

Miser: Do you ever talk to the neighbors? Why or why not?

Ben: Rarely. I try not to bother them, and I have constraints about what I can discuss legally. If there is some question about addresses, like in a rural area that is poorly marked, I may ask around to make sure I have the right house.

Miser: How do the neighbors usually seem to feel about the situation?

Ben: They often inquire about what is happening with the property. They are obviously concerned about their neighborhood and the values. For the most part, they aren’t pleased. Sometimes they express interest in buying the place, at a discount of course.

Miser: What’s the most interesting interaction you’ve ever had with a neighbor?

Ben (starts to say something with a mysterious little smile on his face, then suddenly stops and changes track): A few days ago, in a rural area near New Mexico, I couldn’t find a lot because the addresses weren’t in sequence. I approached one man who told me a title company rep had mistakenly put a notice of default on his door the day before, and left in a hurry. This gentleman told me he considered shooting this person. But I explained what I was there for, and he calmed down and we got along fine. He was very helpful in the end, and other neighbors inquired about buying the house for family members. All in all, the neighbors are glad someone is doing something about these vacant houses and are happy to see me show up and make sure everything is OK.

Miser: Do you ever feel sorry for the people who are losing their houses?

Ben: I’ve always believed that feeling sorry for someone is looking down on them, so no. Being a student of the housing mania, I understand the various factors that got us here and I tend to view it more as an academic education. The only part that is really unpleasant is to see that there were children involved.

Miser: Do you ever feel sorry for the banks that are taking the houses?

Ben: I have zero interaction with the lenders. But I do understand that behind these loans are bonds and bondholders, meaning that there are everyday people out there with stock losses or pension funds that have taken a hit. When I was an accountant, I never liked to see people lose money, and I still feel that way.

Miser: Are you glad you started doing this?

Ben: It’s a business like any other, with risks and rewards. It certainly isn’t some jackpot industry; it is very competitive and the deadlines never seem to end. That said, it is exciting to be in field that is growing. But that is the nature of a counter-cyclical industry, and this is no ordinary cycle, as folks at the HBB know.

Miser: For how long do you plan to do this?

Ben (leading Miser out the front door with a gentle push behind the shoulders): It’s hard to say. In northern Arizona, our market is behind others like Phoenix and Las Vegas by a couple years. I’m guessing 2 or 3 years and then it could become just like any other business. There is an ongoing body of work, but I can’t say if this will continue indefinitely or not.

Miser: Is there anything else you’d like to say?

Ben: Hi Mom!

Easier To Have Bad News Rather Than No News

-by the Mysterious Flying Miser

Kermit Arnold, a 47-year-old business consultant from McLean, Virginia, has been living in his condo for 8 months without making a single mortgage payment, but his lender has yet to kick him out. He purchased the condo in 2004, but couldn’t keep up with the $2400 monthly payments when unexpected health problems arose. “In the midst of funding my business expansion in 2008, I developed some severe health problems, which then necessitated long term chemotherapy, which is still ongoing. For about eight months I had no income, was still paying business expenses, and had many large medical bills. Even with good insurance, the costs mount quickly. I even appealed to my church for financial assistance and received some,” says Arnold.

Arnold thinks he will be forced to move in about 2 more months, but he can’t get a straight answer from his loan servicer. He tried to restructure his loan, but the restructuring was put off while waiting for new legislation to take effect. Since then, he has gotten conflicting information about the status of his loan, and his attorney has not been able to clarify the matter any further. Kermit hopes his problems may be solved, saying “I’m sure part of the issue is the sheer volume of this problem nationwide, although I was not one of those who took out a loan I couldn’t afford or was speculating. I may yet learn that I made it through the pipeline and now have a restructured loan with a lower payment and no arrears. In some ways, it would be easier to have bad news rather than no news.”

Elizabeth Lake, on the other hand, has always paid her bills, but her neighbors haven’t. A 30-year-old public relations representative, she questions her neighbors’ integrity. She says the couple (in their late 50s or early 60s) moved to Reno from out of state in spring of 2006, and were initially upset to find rented homes in the neighborhood. They complained of the cars parked on the street, for instance. Since then, they have moved out, stopped paying the mortgage, and are now collecting rent from their new tenants (a couple in their early 30s with two kids).

Lake believes her neighbors haven’t paid their mortgage for about 6 months. The tenants told her they received notices via certified mail that the payments are behind and there is a possibility of foreclosure. When asked why the delinquent couple stopped paying the bill, Lake says “My observation is that they stopped paying because the husband took a job out of state, and the wife eventually ended up moving to be with him, and now they are paying rent on top of having their mortgage – they (like the rest of us who bought during that horrible time) are aware of how much the value has decreased in their home, and my guess is that they figured the easiest/best way out is to just let the house go. Better for them to deal with a little bad credit than be stuck with a house they weren’t ever planning on living in again.” She says the tenants are considering buying the house in a short sale.

Says Lake: “I’m frankly disturbed by the situation. I think it’s really shady for someone (in this situation) to be taking money from a renter and not put it toward the mortgage. Every month, they have been taking that money knowing they are not using it to make their house payments. I just think it’s wrong and puts the renters in a bad position. The renters basically will get kicked out of the home, unless of course the short sale option works out. It also bothers me because I feel it has an impact on my home and the rest of the neighborhood – the renters made a comment about how they’re continuing to let the yard go (looks horrible, weeds, dead grass, etc.) so that, when the house is appraised, they can get the lowest price possible on the short sale. I can see why they would want to do this to help themselves, but again, it’s affecting the whole neighborhood.

“As far as how I feel personally/morally about the whole situation (and the fact that this is happening all over America) is that people really disappoint me. I guess it bothers me that I am in a home that is now worth ½ of what we paid for it, but I’m not just jumping on the bandwagon and taking the easy way out. I think people need to be more responsible and follow through with the actions they initiated when purchasing a home for such a price. Don’t get me wrong, I do sympathize with those who are truly having a hard time and cannot make their payments (those that got caught up in the greed from the banks/lenders), but I know several instances (even friends of mine) who are just walking away like it’s no big deal. I think it’s wrong and irresponsible. I think it’s eventually going to affect those of us who are continuing to be responsible and dealing with the mess we got ourselves into. We can’t even refinance our home because its value is so low compared to what we owe on it.

“I found it interesting that the home owners never even gave the renters a heads up that they were not paying the mortgage (but I guess that was the whole point – take the money and run!). I think they could have at least gone to them and told them their situation was bad and that they couldn’t pay, and maybe tried to work out some kind of sale deal (or at least let them know they could be evicted). I believe the renters actually had to contact the owners when they got the notices to get them to fess up to it.”

Bits Bucket For July 26, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.

July 25, 2009

Bits Bucket For July 25, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.