It Makes Everything Look Like It’s Underwater
It’s Friday desk clearing time for this blogger. “A tempting job offer brought Mike Chang and his family from Connecticut to Coral Springs in the early ’90s. Soon after he moved to the city, Chang bought a four-bedroom house for $150,000. In 2004, Chang purchased a five-bedroom home; this one in the Wyndham Lakes community in Coral Springs. When a job offer from Texas that he couldn’t refuse came Chang’s way in 2007, the family shifted to Texas. ‘We refinanced our first house and took $300,000. Buying the second house seemed like the ideal thing to do,’ he said.”
“Not long after the family moved to Texas, Chang’s wife was diagnosed with breast cancer. ‘We found out that we were not able to pay both the medical bills and the mortgage. In 2008, we decided to sell our homes.’ Chang admits it wasn’t the best time to put the homes on the market. ‘The housing market started to crash by the time we thought of selling our homes. The timing wasn’t great, but I just couldn’t afford to pay mortgage. It was simple, I had to choose between my wife’s health and our homes.’”
“After 25 years of saving for his first home, Kevin Gehle bought a townhouse in Coral Springs for $189,000. This was a home he was going to live in for 30 years. ‘All your savings and everything goes to, you think, your home, and you think it’s going to hold price,’ he said. ‘Well, it did for about a year.’”
“Looking back, Gehle said if he hadn’t bought the house he would be fine now. He and his girlfriend don’t go on vacations or out to dinner and he doesn’t have much left for retirement. ‘I just hope we keep our jobs and we can keep the house we’re in,’ he said.”
“New York City recently passed a mortgage antifraud law that requires loan-modification companies to reveal that they cannot charge upfront fees. But many of the scammers are located in other parts of the United States. For example, a man in Queens, a borough of New York City, recently contacted a California company that was advertising heavily on radio and television that it could modify mortgages.”
“‘They asked for $4,800 upfront, and the desperate homeowner sent them $2,200 dollars,’ says Petra Tuomi, policy director at a network of nonprofits that provides services for housing counseling. ‘They told him to stop paying the mortgage to the lender, and then he was stuck with them.’”
“Greg Horoski and his wife, Diana Jano-Horoski, of North Patchogue won a stunning court ruling in November against IndyMac Mortgage Services when an angry judge ordered the bank to eat the couple’s housing debt because of the institution’s alleged cold-blooded lending practices. But the homeowners said that the next month, they received a letter from the bank insisting they still owe $474,936.78.”
“Horoski said the 3,400-square-foot ranch home is valued now at only about $275,000, but if taxation is figured on the full amount that was allegedly owed, the tax bill would be much heftier. ‘The housing market crashed. It’s not like we took the money and lost it in Atlantic City. All we did was refinance the house,’ Horoski said.”
“‘I’m a highly educated woman who has been taken advantage of by mortgage lenders and banks.’ That’s how Scottsdale resident Cheryl Pace started her e-mail, and it got the attention of our 3 On Your Side unit.”
“Like thousands in Arizona, Cheryl is in a desperate situation with her home. Cheryl says that after getting into what she calls a bad loan, she hired a loan modification company and was told her payments were going from $1,900 dollars to $1,500 a month. She began paying the new payment amount. The trouble is, the bank never signed on for this deal. Now Cheryl finds herself in an even bigger mess and at a loss, ‘I just don’t know what to do’ she said. ‘I don’t know who to turn to.’”
“From 2008 to 2009, construction was completed on 7,750 condo units downtown, which includes the Gold Coast, River North, Streeterville, Loop, West Loop and South Loop, said Gail Lissner, VP at an appraisal and consulting firm in Chicago. Of that amount, about 2,200 new-construction units are still available for sale by developers. According to Midwest Real Estate Data LLC, 5,020 condo units are listed for sale or resale in the downtown area.”
“American Invsco instituted drastic discounts of up to $150,000 per unit at its Private Residences at Ontario Place last month. ‘The developers thought they would make a profit. That’s gone,’ said Nicholas Gouletas, CEO of American Invsco. ‘Then they put in some equity. That’s gone. And then the bank had a loan for somewhere between 40 to 60 percent. Now you’re going to the bank and asking them to take a haircut. … I’ve been in this business for 40 years. We have five generations of Gouletas family members in this business. I’ve never seen this before. I see this as a real buyer’s market.’”
“Nearly half of Hamilton County’s neighborhoods have a median home value that’s less than the average homeowner’s mortgage. But South Lebanon is the Tri-State’s most severely underwater neighborhood when it comes to home equity. ‘It’s an issue,’ said Robert Sibcy, CEO of the region’s largest residential real estate firm. ‘If they bought their home in the last three years, they’re probably upside down or close to it.’”
“The 45202 ZIP code, which includes downtown and Over-the-Rhine, was close behind with an average mortgage balance of $309,433 compared with a median home value of $203,808. ‘There have been a lot of new transfers in Over-the-Rhine,’ Sibcy said. ‘As those transfers stop or slow down, that average comes way down quickly, and it makes everything look like it’s underwater.’”
“Nearly 10 percent of San Diego County homeowners with mortgages are at least two months late on their payments and are likely to default and fall into foreclosure, a sampling of area credit records shows. A monthly mortgage payment on a $379,000, 30-year fixed loan currently runs about $2,034, so someone two months in arrears would owe about $6,000, including the current payment.”
“FJ Guarrera, TransUnion VP of financial services…said history shows that anyone who is 60 days behind on the mortgage has a tough time making up the difference and becoming current. ‘Many if not most of the (delinquent) homes are going to end up in foreclosure,’ Guarrera said.”
“Norm Miller, a real estate professor at the University of San Diego and VP of CoStar Group, said the distress is not as widespread as the numbers suggest. About 60 percent of homes carry a mortgage — roughly 600,000 countywide — and about one-third of those were bought at the peak of the real estate boom, 2004 through 2007. ‘A point to remember is that 80 percent of foreclosures are in 20 percent of the submarkets,’ Miller said — such as in parts of Oceanside, Escondido, East County and South Bay. ‘I’m not saying Rancho Santa Fe, La Jolla and Cardiff don’t have any foreclosures — they do — but there’s not so much that it creates a tipping point in falling values.’”
“In lower-priced areas where most foreclosures have occurred, many homeowners have lost value because of their neighbors’ plight. That doesn’t mean they will go delinquent and end up in foreclosure. ‘Hopefully, they’ll ride this thing out,’ Miller said. ‘These are people that don’t pay attention to the lawyers on TV, are stressed out by the threat of foreclosure and feel they should be responsible and make their payments. So even though they don’t have any equity in their homes, they understand they’d lose a lot if they walked away.’”
“More proof that the world as we know it is ending: For as long as I’ve been tracking human behavior through the lens of real estate, it’s been dogma that homeowners who are strapped for cash will pay the mortgage first, then use whatever is left for the credit card bill. But a recent report from the TransUnion credit-scoring firm says that since the recession took hold, credit cards have one-upped, though the credit industry has presumed that the populace would revert to a mortgage-first priority once the recession improved. To the contrary, this ‘hierarchy reversal,’ as TransUnion calls it, is becoming even more pronounced.”
“Speaking of the housing industry. Membership in the Chicago-based National Association of Realtors is shrinking like the price of a South Loop condo. The trade group’s Web site has long claimed 1.2 million dues-paying members, though a recent report from its chief economist, Lawrence Yun, notes that membership in January was just over 1 million, down from its 1.4 million peak in 2007.”
“Fannie Mae and Freddie Mac would no longer be able to rely on subprime mortgages to meet their government-mandated goals for helping lower-income Americans obtain home loans, according to proposed regulations. The rules offered by the Federal Housing Finance Agency would restrict the companies from using private-label bonds backed by Alt-A and subprime mortgages, or commercial mortgage- backed securities, to meet affordable-housing targets.”
“‘The results of providing large-scale funding for such loans were adverse for borrowers who entered into mortgages that did not sustain homeownership and for the enterprises themselves,’ the agency said in the proposal.”
“Federal rules introduced Tuesday to tighten mortgage requirements will squeeze the purchasing power of the average Metro Vancouver buyer by $40,000 to $50,000, market observers say. Finance Minister Jim Flaherty said buyers who want insured high-ratio mortgages will need to meet tougher requirements. However, Flaherty said, the changes were not meant to stop a possible housing bubble, as some warned was looming unless Ottawa was prepared to act.”
“‘There’s no clear evidence of a housing bubble, but we’re taking proactive, prudent and cautious steps today to help prevent one,’ Flaherty said.”
“FortressInvestment Group LLC, whose Intrawest ULC owns Olympic skiing venue Whistler Blackcomb, agreed with creditors to postpone a foreclosure auction set for tomorrow, said a person with knowledge of the agreement. The lenders, which include Lehman Brothers Holdings Inc., the investment bank liquidating in bankruptcy, have sought control of Intrawest since it missed a final payment in December on a US$1.4 billion loan.”
“Fortress bought the company in part for its real estate, said Hayley Wolff, an analyst at Rochdale Securities LLC, a Stamford, Connecticut-based brokerage. ‘Intrawest has a lot of real estate at the base of its mountains, with several projects having been in development at the time of acquisition, and much of it properly zoned to build out condos,’ Wolff said in an interview. ‘In a good real estate market that had a lot value but in a bad times it’s an albatross.’”
“Why is Fortress Investment so close to losing the keys? Karen Petrou is with Federal Financial Analytics. She says Fortress built a bunch of swanky slope-side condos at Whistler, just before the bottom fell out of the housing market. People who had planned to take out a home equity loan to buy a second home at Whistler had to change their plans.”
“Petrou: ‘The first homes have been ATMs for seconds, and the money just fell out of the machine.’”
“The new president climbed aboard Air Force One a year ago for a trip to Phoenix to reveal his strategy for attacking the housing crisis. It was a signal moment in the buoyant early days of Barack Obama’s administration. The plan, Obama told a cheering audience of high school students, would keep as many as 9 million people in their homes by lowering their monthly mortgage payments. Ambition, though, got far ahead of reality. The numbers show a program that failed to deliver.”
“‘We were attempting to set realistic expectations, but I think we failed to do so,’ Michael Barr, an assistant Treasury secretary, said in an interview.”
“The dismal results of Obama’s mortgage aid program now raise doubts about whether the government can fix the housing crisis. Joseph Romanski of Coram, N.Y. had been trying to get a modification from Bank of America since July. He relies on rental income and unemployment to pay as much of his $2,200 a month mortgage as he can afford. He has been looking for help since work at his brother’s roofing company dried up due to the recession. Romanski was initially told he would qualify for Obama’s program, but then waited several months for an official offer. None came.”
“‘It seems like they want me to just forget about it and give up on it ,’ Romanski said.”
“‘President Obama is finding that, well, it actually is pretty hard’ to fix the foreclosure mess, said Phillip Swagel a Treasury official under President George W. Bush. ‘It’s very easy to say ‘you need to do more.’ But it’s very difficult to find something that is more — and can be done.’”
“‘Realistically, we still have massive problems. When exactly are we going to deal with it?’ said Christopher Thornberg, a Los Angeles economist who long warned that the housing bubble would burst.”
