The Positive Side Of The Long, Painful Contraction
The San Francisco Chronicle reports from California. “Banks are under pressure from the Obama administration to participate in its Making Home Affordable program to rewrite mortgage terms. But only about 7 percent of the 850,000 homeowners enrolled have received permanent modifications. More commonly, homeowners say they spend months pleading with their lender and end up with suggested new payments that are not sustainable. Steve and Sue Alparone of Pittsburg first contacted their servicer in December 2008 to request a loan modification after reductions in their income and a reset of their adjustable-rate mortgage to $4,400. Steve Alparone had to leave his IT job due to health reasons and ended up with a lower-paying job at Trader Joe’s, while the retailer where Sue Alparone worked went out of business.”
“After several months of fruitlessly asking for lower payments, the couple skipped several payments, then finally got a verbal offer for a new payment of $1,944 this fall. They have made that payment since Oct. 1, but two months ago received notice that they were being given a new loan modification that would raise their payment to $3,500 a month, which they said they can’t afford.”
“Even though they are significantly underwater, the couple want to hang on. ‘We would love to stay in this house,’ said Steve Alparone. ‘We’ve got a lot of sweat equity in it. We’re not looking to make any money on it, just looking to stay.’”
The Marin Independent Journal. “A total of 305 notices of default were recorded in Marin during the October-to-December period, down from 428 in the third quarter of 2009. But compared year to year, default filings in the fourth quarter of 2009 were up 57 percent from the same period in 2008. The number of actual foreclosures jumped from 87 in the fourth quarter of 2008 to 123 in the fourth quarter of 2009.”
“Realtor Greg Browman of Marchant Chapman Realtors of San Anselmo, who specializes in short sales, said he did not see a rebound any time soon. ‘I think we’re not going to see any increase in value,’ he said. ‘Many parts of Novato are at their bottom - there’s nowhere else to go. The first-time homebuyer market is really attractive right now because the prices are so low. I think it’s going to continue like that.’”
“‘I think we’re going to have another couple years of this, but anything can happen,’ Browman said.”
The Mercury News. “Fewer Santa Clara County homeowners received mortgage default notices at the end of last year, but upscale areas are becoming a bigger part of the foreclosure problem. ‘I certainly can attest to the fact that we’re seeing more notices of default in more affluent neighborhoods,’ said Rick Turley, president of Coldwell Banker for the San Francisco Bay Area. But, he said, ‘I don’t necessarily know that we’re out of the woods for the entry level.’”
“Karl Lee, president of the Santa Clara County Association of Realtors, agreed that defaults and foreclosures are trending up in the higher-end neighborhoods. ‘I imagine the increase has to do with the unemployment situation,’ he said. ‘The lower end got hit earlier because, frankly, their reserves were less. In the higher end they were able to put it off a little bit’ by tapping their financial reserves, he said.”
The Press Democrat. “Foreclosures dipped slightly in Sonoma County during the fourth quarter. Analysts, foreclosure counselors and others cautioned that they aren’t seeing a drop in the overall numbers of homeowners in danger of losing their homes. ‘We seem to get new clients constantly and the old ones aren’t going away,’ said Linda Hedstrom, a manager who oversees a homeowner counseling program in Santa Rosa.”
“Even more ominous was a national report released last week by a collection of state attorneys general and banking regulators. ‘Despite efforts of (loan) servicers, homeowners and the government, the foreclosure crisis continues to worsen,’ wrote the State Foreclosure Prevention Working Group, which has tracked the issue for more than two years. ‘These signs point to more foreclosures in 2010 than in 2009.’”
“The attorneys general and banking regulators warned of trouble ahead for those with ‘payment option’ adjustable-rate mortgages, a loan segment estimated at $200 billion. The officials predicted that two-thirds of those mortgages will readjust in the next two years and cause ‘payment shock’ for the homeowners.”
“Madeline Schnapp, director of macroeconomic research for TrimTabs Investment Research of Sausalito, said November estimates suggest there were a record 6.2 million mortgage delinquencies in the United State. She wrote recently that the housing market remains on ‘life support.’ ‘I don’t see things getting substantially better because there’s just not a lot of economic activity generating jobs,’ Schnapp said Wednesday.”
Capital Public Radio. “Sacramento-area homebuilders pulled about 2,300 permits for single-family homes last year, and that is much lower than the previous record low of about 4,000 in 2008. Both are a dramatic drop from the 18,700 permits in 2004, considered the peak of the housing boom. In fact, you would need to add the past three years to even come close to the figure of building permits issued in 2005.”
“The Sacramento region has lost almost 11,000 construction-related jobs during the past year, and about 116,000 statewide.”
The Sacramento Bee. “Call it the positive side of the region’s long, painful contraction of housing values since 2005. Though the housing collapse has shredded the fortunes of thousands of existing homeowners, the sudden return of affordability also may help set the stage for an eventual turnaround. Widespread $400,000 and $500,000 price tags for single-family homes ‘used to be a hurdle,’ said Barbara Hayes, who woos companies and jobs as head of the Sacramento Area Commerce and Trade Organization. ‘Now (they’re) not.’”
“In December, the median price for a house in Placer was $275,500, compared with $525,500 at the market peak in 2005.”
“‘We liked where we were, but it was way beyond our reach to own a home,’ said attorney Anthony Cortez, who left Orange County with his family in 2008 for a house in Lincoln. After a year of renting there, the now-Sacramento attorney closed escrow before Christmas on a distress-sale property in Lincoln Crossing.’
“‘We paid literally less than half what the original owners paid for it,’ said Cortez.”
The Record.net. “Up to 2005, Mabini Fuertis was doing pretty well. He earned enough from his job as a train conductor together with a U.S. Postal Service pension to cover the mortgage, credit card and car payments and still put aside $12,000 a year in savings. The problems began when he lost his job but didn’t change his spending habits. Unable to find another full-time job in the intervening years, he exhausted the savings, piled up more than $30,000 in consumer debt and recently stopped making payments on the $430,000 mortgage on his Weston Ranch home.”
“‘Being bullheaded, I thought I could fight through it, but as you can see, I couldn’t,’ he admitted.”
“And while the Fuertises want to remain in their home and hope to get their mortgage reworked, Grant Fletcher, a certified financial planner in Lodi said they should consider alternatives. ‘Homeownership is the American dream, but when the American dream becomes a nightmare, we have to see if there is a better option.’”
The Modesto Bee. “Foreclosure statistics for 2009 show home losses leveled out in Stanislaus, San Joaquin and Merced counties. Far fewer homes were repossessed by lenders last year than in 2008. But housing counselors say record numbers of homeowners are seeking relief from mortgages they can’t afford. ‘We’ve seen no decrease in our counseling activities,’ said Martha Lucey, president of ClearPoint Credit Counseling Solutions’ Pacific region. ‘We had our highest-call-volume day the Monday after Christmas. We were shocked.’”
“University of California at Merced economics Professor Shawn Kantor also questioned whether 2009’s foreclosure statistics accurately reflect homeowner problems. More than 16 percent of Stanislaus County mortgages are 90 days or more delinquent, double the national average, according to First American CoreLogic.”
“Kantor said lenders may be delaying some foreclosures ‘for economic and political reasons.’ ‘They are managing the flow of foreclosed houses so they don’t completely overwhelm the real estate market and further drive down home prices,’ Kantor explained.”
“Patterson real estate agent Heidi Vento said many homes already are empty, and she doesn’t understand why lenders delay putting those homes on the resale market. Vento said there’s a ’shadow inventory’ of bank-owned homes that first-time buyers can afford and are qualified to buy. ‘There is a huge number of people who want to buy homes,’ said Vento, last year’s president of the Central Valley Association of Realtors. ‘But the banks are controlling what goes on the market and when. We’re really just not sure why they’re holding onto all this inventory.’”
“John Karevoll of MDA DataQuick Information Systems, offered an answer: ‘Banks are just trying to minimize their losses.’”
The Union Tribune. “Home foreclosures in San Diego County surged last month, even as default notices dropped to their lowest level in more than a year, MDA DataQuick reported. To real estate agents hungry for inventory of low-cost foreclosures to sell to bargain hunters, the upsurge in foreclosures promises to refill empty lists of homes for sale, although agents have complained in recent months that banks aren’t moving quickly to list those properties for sale — possibly hoping prices will rise.”
“DataQuick analyst Andrew LePage said San Diego had the state’s highest large-county foreclosure spike in December. ‘It’s a mystery,’ he said of the increase.”
“Jeff Shaffer, director of acquisitions and investments at McKinley Partners, a local investment group, said the modifications might work if the economy picks up. But if that doesn’t happen, distress will return and send values back down. ‘The December numbers are giving people confidence that the housing market is recovering to some point of stability and losses due to foreclosure are starring to subside,’ Shaffer said.”
“But he said a new sign of trouble is that lenders aren’t moving to file formal default notices against delinquent owners — both to carry out the Obama administration’s desire to get loans modified and to minimize the troubled assets on their books. ‘We’ll see how it works; it’s not sustainable for banks,’ Shaffer said.”
The LA Times. “So far, thousands of California borrowers have had their mortgages modified through Obama’s Making Home Affordable program, but only 7.8% of those modifications were permanent through Dec. 31, according to government data. If the majority of borrowers who have received temporary loan modifications are unable to make those changes permanent, another surge of foreclosures could follow.”
“‘Given what we see in terms of the number of distressed properties that are in the pipeline, we do expect that foreclosures will mount as borrowers are not able to make it from a trial modification to a permanent modification,’ Celia Chen, senior director of Moody’s Economy.com, said. ‘This will cause home prices to start falling again.’”
“‘If a borrower is deeply underwater, he doesn’t want to be in the home,’ said Laurie Goodman, senior managing director of Amherst Securities. A loan modification would give the borrower more time, she said, ‘but there is no reason to stay in your home, and you save a lot by just walking away.’”
“Agreeing to settle 29 class-action lawsuits alleging predatory lending, the Ameriquest group of subprime lenders has pledged $22 million to repay aggrieved borrowers and their lawyers — a fraction of its payments in previous suits before it shut down as the mortgage meltdown set in. The agreement potentially affects 712,000 borrowers from what once was the nation’s largest subprime lender, based in Orange County.”
“Because nonbank lenders such as Ameriquest sold their loans, they maintained very little capital and had few assets to recover when they closed up shop, said Benjamin G. Diehl, a deputy attorney general for California who helped craft the states’ agreement with Ameriquest. ‘Unfortunately, there isn’t much left for borrowers,’ Diehl said.”
“The settlement includes no payment from the estate of Ameriquest founder Roland E. Arnall, a billionaire who died in 2008, or from the Wall Street firms that funded subprime lenders and transformed the loans into securities that proved toxic when the housing bubble burst. ‘The abettors on Wall Street . . . got away untouched,’ said Christopher L. Peterson, a University of Utah law school associate dean who has testified to Congress about his research into subprime lending.”
The Acorn. “New regulations passed by Sacramento legislators and federal housing leaders will discourage mortgage fraud and make home buying safer, but the laws might also lead to higher borrowing costs and continued sluggish sales, some industry experts believe. One of the bills, introduced by Sen. Fran Pavley (D-Agoura), makes it illegal for California mortgage brokers and lenders to mislead customers on their loan applications. ‘It’s critically important. The crash of the housing market and impact on the local economy when people lose their homes affects all of us,’ Pavley said.”
“Jeanet Moltke is a Calabasas resident and a Realtor who has been involved in real estate for more than 20 years. She said the new laws should have been established years ago to prevent fraud. But mortage fraud wasn’t the only cause of the real estate crash that began in 2008, Moltke said.”
“‘Brokers weren’t alone, there was the supply and the demand. The bubble burst because home values declined and people had taken all the equity out of it,’ Moltke said.”
The Bakersfield Californian. “Appraiser Kirksey J. Newton Jr., who is fighting to keep his appraiser’s license, on Monday defended his choices in the inexact art of estimating home values, and blasted the media and regulatory authorities for dragging him into the ‘frenzy’ over mortgage fraud allegations against disgraced former real estate agents David Crisp and Carl Cole.”
“Newton insisted that with the exception of some minor errors that did not affect the ultimate valuation, he stood by all but two of the reports prepared by his company, Bakersfield-based San Joaquin Appraisals. The report on the Heaton Street house suggested a valuation of $910,000 in 2006, but did not explain why that figure was 87 percent higher than a February 2004 sale price of $487,500, according to the state’s official accusation. Another report valued the 10,454-square-foot Three Bridges Way property at $785,000 in 2006 based in part on a sale identified as comparable even though the other property was 40 percent larger.”
“‘Knowing what you know now, including this investigation, would you do anything differently?’ defense attorney Ernest Price asked.”
“‘No,’ Newton replied.”
“When California Deputy Attorney General Gillian Friedman asked what Newton did after learning about the alleged misuse of his name, he replied that he said nothing to William Drabick, senior property appraiser and investigator for the state. ‘I wanted Mr. Drabick to do his own investigation,’ he said. ‘It was a frenzy. The media went crazy. It would have been like saying the dog ate my homework.’”
The Fosters Daily Democrat. “Back in 2006, comedian Juston McKinney and his wife were ready to buy their first home. It was at the peak of the housing market and they were living in Los Angeles at the time. They figured they’d start looking around L.A. and then proceed east until they found something they could afford.”
“They checked out Pasadena first. It was beyond their reach. Then they looked into Nevada. Then Arizona. Homes out there were still too pricey. So they continued pressing eastward. How east? They bought a home in New Hampshire.”
“‘We couldn’t afford anything on the coast, though, so we had to retreat west a bit,’ he said.”
