Speaking Japanese Without Knowing It
It’s Friday desk clearing time for this blogger. “Not even Supreme Court justices are immune from the economy. Justice Sonia Sotomayor plans to keep her apartment in New York for the time being. Sotomayor’s condominium in the Greenwich Village neighborhood of Manhattan was worth about $1 million, according to the financial disclosure she gave the Senate in May. She owed about $380,000 on a mortgage. It’s hard to say what she could get for the apartment at the moment.”
“‘Right now I — like many other Americans, it would not be wise for me to sell my home in New York because the market is so low,’ Sotomayor said in an interview.”
“Maryann Salvas and dozens of other homeowners filed complaints against ventura attorney Daniel Fox with the state attorney general or Florida Bar. Fox was disbarred on Sept. 3 after pleading guilty to disciplinary charges that he abandoned the ‘representation of clients’ seeking real estate loan modifications. Almost a year passed without the loan on her Rhode Island house being modified, said Salvas who hired Fox based on a phone solicitation. In order to pay Fox’s fee, Salvas said she missed a mortgage payment, never caught up on the late payment, and is now four months behind on the mortgage.”
“‘It’s very unfair for a lawyer to take advantage of people who are trying hard to get by,’ she said. ‘He put me in a situation that I’m having a hard time to get out of.’ When Salvas sent $1,795 to Fox to arrange a modification of her mortgage and reduce her monthly payments, she didn’t hesitate because she thought ‘people were supposed to trust lawyers.’”
“Oregon homeowners facing foreclosure have one more line of defense thanks to a law that went into effect Monday requiring lenders to discuss loan modifications with troubled borrowers. However, in testimony last week before the Senate Committee on Banking, Housing, and Urban Affairs, Gene Dodaro, the acting comptroller general of the United States, said the federal Government Accountability Office believes the Treasury Department’s estimate of 3 million to 4 million homeowners who would likely be helped under the federal loan modification program ‘may have been overstated.’”
“Through Monday, 2,648 notices of default have been filed in 2009 in Deschutes County, an increase of more than 103 percent through the same day last year, according to county records. ‘It’s true, the foreclosure option is usually the last resort, and when inevitable, this (law) is not going to stop it,’ said Linda Navarro, the executive director of the Oregon Bankers Association.”
“O’Ryan Goring and his fiancée fell in love with a castle-like Pennsylvania estate called Cairnwood as the perfect setting for their marriage. But they also fell in love with a condo in Ewing that would be the perfect starter home for the first-time homebuyers. Using traditional mortgage products, they wouldn’t be able to have both, because they would have had to put $40,000 down to buy the condo. Lucky for them, the condo development had just received approval from the Federal Housing Administration. The FHA program asked for just 3.5 percent down — or $7,000. ‘All the money we saved, we’ve just transferred it over to the wedding,’ Goring said.”
“The increase in FHA financing for condos is particularly worrisome because condos historically are riskier than single-family homes, experts said. ‘They have higher defaults, they suffer price depreciation much faster and much deeper than a single-family house,’ said Guy Cecala, publisher and CEO of the publication Inside Mortgage Finance.”
“In a housing market plagued by one of the highest foreclosure rates in the country, finding and buying a home would seem to be an easy hunt, especially if you’re armed with federal funding assistance. The sheer mass of real estate available at a record-low price combined with a no-interest loan from the government and an $8,000 income tax credit for first-time buyers quickly persuaded 30-year-old Lisa Locascio to make the leap into home ownership.”
“Phoenix received more than $39 million. However, after rolling out the home ownership assistance portion of the program six months ago, program funding has been used in the purchase of just three homes.”
“Locascio endured almost 30 rejected bids placed on homes throughout northwest Phoenix before a bank finally accepted a $140,000 offer on a 1,100 square-foot home. She admits to tears of frustration and said she almost considered giving up on the program in favor of moving in with family and saving toward a conventional loan.”
“She eventually decided on optimism instead. Speculating in retrospect on why banks rejected so many of her offers, she said, ‘I think it’s because the program hasn’t been out there enough.’”
“The federal government’s $8,000 first-time home buyer tax credit, which expires Nov. 30, is the best-known stimulative giveaway. Washington asks only that buyers ante up the requisite 31/2 percent down payment. But that apparently was too cruel a demand for Gov. Charlie Crist and Co. in Tallahassee. Starting in August, Florida legislators decided to provide home buyers a cash advance on that $8,000.”
“In other words, home buyers who take the Florida freebie have no chips on the gaming table. They’re playing with someone else’s money. Remember how well 100 percent financing worked in 2005?”
“Richard Fisher, president of the Federal Reserve Bank of Dallas…opined this week that ‘life support’ for the housing market has to end. ‘The market for housing will not become truly robust until market forces replace the prostheses of government support,’ Fisher proclaimed.”
“For a nation whose citizens pride themselves on self-reliance, the U.S. doles out an awful lot of welfare. No other interest group makes out quite the way homeowners do. Even with all this aid, though, U.S. homeowners haven’t been doing so well. The value of their real estate holdings has fallen by $4 trillion since 2006, according to the Federal Reserve.”
“Rising prices are always good news, though, for real estate agents, mortgage lenders and homebuilders. These groups are powers in Washington. The National Association of Realtors gave more money than any other group to candidates in the last elections ($4 million), according to the Center for Responsive Politics, and its 1.1 million members can do a lot of lobbying. Hence the subsidies for homeownership that never go away.”
“In 1961 departing President Dwight Eisenhower warned of ‘the acquisition of unwarranted influence’ by what he dubbed the military-industrial complex. Maybe it’s time to call out the real estate — industrial complex.”
“Portland’s housing market showed solid improvement in July as prices climbed for the second straight month, reversing what had been a 17-month run of record declines. University of Oregon economist Tim Duy said the housing market is seeing a ’speculative frenzy fueled by the government.’ ‘The government is doing everything it can to re-create a housing bubble,’ Duy said.”
“In the longer term, Duy said Portland-area home prices have to get back in line with incomes. Compared to July 2008, Portland-area home values are down 13.9 percent. Since 2000, Portland home values are up 48 percent.”
“Over the years I covered so many government-made messes, each one a near-carbon copy of an earlier mess, that I started using the term ‘flat learning curve’ to describe all things Washington D.C. Now, one might take that to mean that politicians never learn from the past. But no, it’s quite the opposite. They’ve learned all too well. But the lesson they learned is not the one we’d hope for. What they’ve learned is this: If they refuse to pass laws that tighten regulations and prevent abuses like the kind that created the dot.com bubble, the housing bubble and looted America’s 401ks, they are rewarded by tons of campaign cash. Then, when their legislative malfeasance results in entirely predictable fiscal calamity, they are again rewarded with tons of cash by simply not doing anything real that might prevent such abuses in the future.”
“Victoria McGrane and Lisa Lerer, Politico.com: ‘Wall Street has showered nearly $11 million on the Senate since the beginning of the year, and more than 15 percent of it has gone to a single senator: Democrat Chuck Schumer of New York. Schumer’s $1.65 million take from the financial services industry is nearly twice that of any other senator’s. While the industry has scaled back its political spending in the wake of last year’s economic collapse, data from the Center for Responsive Politics show that it’s still investing heavily in the Senate, where it’s likely to have its best shot at stopping - or at least shaping - the crackdown on Wall Street that President Barack Obama has proposed.”
“And it’s clearly looking to Democrats to do it. Of the $10.6 million the industry has given to sitting senators this year, more than $7.7 million has gone to Democrats. ‘Democrats are holding the reins in Washington now with a Democratic-run White House and Congress,’ said one financial services lobbyist. ‘It only makes sense that donors want to put their money into the coffers of those who are driving the agenda.’”
“Americans have always assumed that financial crises happen in basket-case countries, not here. So how then did the U.S. follow the lead of Argentina, Mexico and Thailand by plunging into this one? Economists Carmen Reinhart and Kenneth Rogoff answer that question in a provocative new book, ‘This Time Is Different.’”
“‘If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom,’ they wrote. ‘Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private-sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels, and make banks seem more stable and profitable than they really are.’”
“Q. How bad is this crisis? A. Reinhart: Let us not lose sight of the fact that we are past the two-year mark already since the onset of this crisis. So that’s beyond the resolution time in most of the other postwar crises. Japan and Spain are the two exceptions, because the 1977 Spanish crisis also took forever to mop up.”
“Q. Any parallel with Japan’s elusive recovery in the ’90s? A. Reinhart: We’re speaking Japanese without knowing it. When you look at the combination of forbearance and zero (percent) interest rates, doesn’t that sound Japanese? And let’s pretend that all these bad loans, all these zombie loans don’t exist. That sounds real Japanese to me.”
“There is renewed speculation that Taylor Wimpey will sell its North American housing division, according to the Daily Mail. The company may use any proceeds from the sale of the Taylor Morrison business to cut its £1bn debt pile.”
“During its complex refinancing discussions the company is understood to have sounded out private equity companies about the possibility of a sale but sources said the firms were ‘too greedy’ in what they were prepared to pay.”
“Las Vegas homebuilder Jim Rhodes has agreed to turn over most of his Southern Nevada residential development operations to lenders to close his companies’ bankruptcy cases, court records show. In 2005, when money was easy to come by, the majority of the Rhodes Homes assets were used as collateral for a $500 million credit facility arranged by Credit Suisse — also a big lender to the bankrupt Lake Las Vegas and Park Highlands planned communities. It was that loan that Rhodes defaulted on, pushing the company into bankruptcy.”
“Now, court records show, the value of the Rhodes collateral has declined so dramatically during the recession that the first-lien lenders project recovering only about 24 percent of the $325 million owed to them.”
“Woodfield Crossing, the housing development in southeast Ocala that was put on foreclosure notice in June when The Ransome Group defaulted on its loan documents, has been sold to the local Cope Properties Inc. The $2.6 million purchase from mortgage holder Regions Bank was finalized Wednesday, but David Cope and his attorney, Timothy Haines, were on hand Thursday at the Marion County Courthouse in the event competing bidders showed up.”
“There were none.”
“Woodfield Crossing, a 40-acre, 137-lot subdivision was imagined as a standard of ‘The New Urbanism’ model with pedestrian-friendly walkways and two-story homes. Cope expressed cautious optimism Thursday over his new acquisition. ‘We hope that we’re buying low and selling high,’ he said.”
“In late 2007, while the real estate market in Florida was busy falling apart, one developer rolled the dice. John Ryan’s Metro Development Group started buying up land all over Florida - much of it on the Suncoast. By early 2008, Metro controlled 30,000 home sites in Florida. Now, 9,000 of Ryan’s home sites are tangled up in foreclosure and in the hands of a court-appointed receiver.”
“Ryan said he could not speculate on the future of any of the communities now in receivership, but he vowed that Metro would survive ‘this unprecedented downturn.’ ‘This market has crushed seemingly impenetrable companies nationwide and recently brought down icons of real estate in the Tampa Bay area,’ he wrote. ‘It’s a humbling experience.’”
“The number of foreclosure lawsuits filed in Lee County in September fell slightly but bit more deeply into the middle class as people started to lose more expensive homes. A third of the foreclosures were houses with pools, said Jeff Tumbarello, director of the association.”
“That’s a big change from past months when foreclosures were largely inexpensive homes and lots let go by investors who bought during the real estate boom and then simply let the properties go after prices started falling in 2006, he said.”
“‘What’s coming in residential real estate is very much the cream,’ he said.”
“The bungalow with peeling red paint in the Liberty Park area of Salt Lake City has all the classic signs of foreclosure. It’s vacant, the lawn is dead and no one has bothered to fix a busted window. Gary Rigler, housing and zoning officer for Salt Lake City…(is) quick to point out that the vacant house problem is evident in every area and every price range. ‘It’s not a west side problem, it’s not an east side problem — it’s a problem all over.’”
“To prove his point, he drives over to a home just a short walk from the Salt Lake Country Club near Sugar House. The assessed value of the property he stops at is nearly $650,000. But it has all the signs of a distressed property or a foreclosure — it’s empty and much of the landscaping on this nearly two-thirds of an acre lot is dead or overgrown.”
“Many of today’s vacant homes tell a story of a housing boom along the Wasatch Front that came to an end so quickly, many people left financially devastated almost overnight. There are the properties that were bought at the height of the market, some with adjustable-rate loans or exotic mortgages. They are properties that were destined to be ‘flipped’ by investors for great profit after some amount of renovation. But when the market turned, there were few buyers willing to pay an amount that would cover those investments.”
“Back in central Salt Lake City, Rigler stops in an area some call ‘Sugar Hood.’ There are three empty homes in a row that Rigler and his team are tracking. Local real estate agents say the properties were purchased by a single investor in 2006. All three are foreclosures by Taylor, Bean & Whitaker Mortgage Corp., a large national lender that filed for bankruptcy in recent weeks after a crackdown by regulators made it nearly impossible for the company to continue to make new loans.”
“Wichita is the 10th-most affordable housing market in the United States according to a national study. Coldwell Banker’s 2009 Home Price Comparison Index says a 2,200-square-foot, four-bedroom home can be purchased in Wichita for an average of $144,625.”
“The cumulative average sales price of the four-bedroom homes surveyed in the 310 U.S. markets, including one in Puerto Rico, covered in the Coldwell Banker HPCI is $363,460. ‘The four-bedroom, two-and-a-half bath home is one we deem ‘aspirational’ and usually purchased by move-up buyers experiencing lifestyle changes,’ Jim Gillespie, CEO of Coldwell Banker, said in a statement. ‘Thirty percent of the markets show this type of home to be below $200,000, illustrating the opportunity to take advantage of price declines, interest rate levels and increased selection of homes. Encouraging these move-up buyers back into the market is a crucial next step toward helping to rejuvenate the housing industry and the overall U.S. economy.’”
“Couple the study with an aggressive buyer’s market in Wichita, and local homes may be a bigger value than Coldwell Banker thinks, a local real estate agent said. ‘The thing I’ve seen change is the expected sale price for the seller and what the house actually sells for,’ said Evin Alcindor of J.P. Weigand & Sons.”
“‘Buyers are very aware of this economy, and they’re being opportunistic in a buyer’s market. They’re asking for a lot of things from the seller and they’re getting them. Sellers aren’t getting nearly for their homes what they should in some instances, because buyers just won’t give it to them.”
