The Housing Bubble

CBS 12 Action News reports from California. “Once the largest home builder in Chico, Paradise resident Tony Symmes struck a bad deal to sell a number of his newly built homes that weren’t moving. Garett Gililland already indicted for another mortgage fraud scheme came to Symmes with a plan. Both agreed to inflate the prices of the new homes $40,000-$60,000 and then sell them to straw buyers. Chico homeowners living in some of the areas where Symms’ company Aspire Homes built are now feeling the effects. Not only are dozens of the homes foreclosed on bringing down the value of the neighborhoods, but the whole scheme drove up the original cost of new homes.”

“Butte County District Attorney Mike Ramsey says, ‘Some bought their homes for artificially inflated prices in a comparable analysis paid way too much and it hurt them when the housing market bubble burst. Mr. Symmes was quoted during the investigation noting greed broke his moral compass.’”

The Voice of San Diego. “In North San Diego County, Jim McConville picked up condos for a low price from distressed developers and arranged for them to be sold to buyers who’d rented their identities to him, our investigation showed. By arranging high purchase prices, McConville could pay off the developers and rake in a chunk of money for himself on each condo. McConville couldn’t let the banks making the mortgages know that he was sucking at least $120,000 each out of more than 80 condo sales in Escondido and San Marcos in 2008. He got the help he needed, federal prosecutors say, from Bay Area escrow officer Donna Demello of Stewart Title of California.”

“The indictment doesn’t answer some questions we still have, like who performed the appraisals on the properties that dramatically overvalued the condos two years into the real estate slump. Nor does it name anyone involved in renting the condos out to tenants. McConville’s team of conspirators illegally continued to collect rent even after he’d stopped making the mortgage payments, the prosecutors say.”

“The indictment says, ‘Members of the conspiracy obtained and provided to the mortgage lenders materially false and misleading appraisals that inflated the value of the real property secured by the loans to Straw Buyers.’”

The Appeal Democrat. “In small towns with big dreams, things can get complicated. Take Live Oak, for example, where the housing boom has left some unfinished business behind. For Live Oak, it’s a $5.6 million question. Will the city get the money it says it’s owed — plus interest — for a subdivision that ran aground?”

“According to the court filing, Pacific Mountain financed the project with loans from a North Carolina Bank, RBC Centura. Sometime in late 2007, according to the court papers, Pacific Mountain stopped work on the project. In an October 2008 letter to Live Oak, an RBC official said the company, which acquired the property through foreclosure, ‘is interested in working with the city to preserve its property interests and protect public health and safety. Please note the RBC is not interested in consenting to the property reverting to acreage.’”

The Sacramento Bee. “Think of it like buying a house with a hefty mortgage that looked good when home prices were spiraling upward – but threatens to pull you under now that the housing market has tanked and your pay has been cut. Sacramento-area governments amassed billions of dollars in debt in recent years, issuing bonds as a quick means of raising money. Now that times are leaner, the principal and interest local governments must pay on the bonds in many cases are competing for dwindling funds with basic public services, a Bee analysis shows.”

“Mandy Morello doesn’t believe her local school board did much long-term thinking before putting two large bond measures in front of voters several years ago. Then, it closed 10 of those newly improved schools between 2004 and 2009 because of declining enrollment. Morello had two children at Roberts Elementary in Fair Oaks when it closed in 2005. ‘We bought a home a block away from it,’ she said. ‘It was an amazing school. The year that Roberts closed, they had paved the parking lot, painted the school, new sprinkler system – and then they close it.’”

The Bakersfield Californian. “Kern County is threatening to halt several major development projects in the city of Bakersfield, claiming they aren’t paying for the county fire stations, libraries and parks that their new homes and stores will demand. A consultant for Stockdale Ranch Developer Castle & Cooke drafted a report arguing land prices the county of Kern uses in its calculations are dramatically high, born out of the CIP’s early days in the middle of the housing market boom.”

‘County Development Services Director Ted James said the bottom line is local government has not, historically, demanded that development pay for all of the impacts that it had on government. Things have changed, James said: ‘We don’t have adequate streams of revenue.’ The county and development groups will continue to search for a way to handle growth impacts and end the conflict. ‘It’s either that or we have to lower our standards,’ James said. ‘How do we do that and make sure the public understands we can’t provide the level of service we have in the past?’”

Los Cerritos News. “The State of California required the Cerritos Redevelopment Agency to make a payment of $11,812,007 to the Los Angeles County Auditor on May 10, a result of the State’s decision to raid $2.05 billion in local redevelopment funds. To make the payment, the Cerritos Redevelopment Agency borrowed the funds from its Low- and Moderate-Income Housing Fund. ‘The State of California continues to live beyond its means and California’s cities are paying the consequences,’ said Cerritos Mayor Joseph Cho.”

The LA Daily News. “Banks and other lenders will have to maintain foreclosed homes or face a $1,000-a-day fine under an ordinance approved Friday. Officials estimate there are at least 100,000 homes in some state of foreclosure in Los Angeles County. ‘I hope this will send a message to the banks that they should work to keep people in their homes,’ said Councilman Bill Rosendahl, who asked for a breakdown of foreclosed properties and their owners.”

The San Francisco Chronicle. “Struggling homeowners who get a loan modification to reduce their mortgage payments are often unaware that it can seriously ding their credit score. Moreover, if they don’t get long-term help, the temporary loan mod can bury them in a deeper hole of debt. When demand began to slump for Victor Mendez’s tile contracting work, he and his wife asked their bank, JPMorgan Chase, for a loan mod. ‘They said, ‘We can’t help you until you’re late,’ said Patricia Mendez.”

“Because Victor Mendez’s work requires him to buy supplies, the poor credit was devastating. They had to juggle even more to come up with cash to buy work supplies, even cashing in an IRA. Then, after 10 months, they got a letter from Chase saying they had been denied for permanent help and now owed $44,000 in past-due amounts and fees.”

The Contra Costa Times. “Though the nine-county Bay Area’s median sales price of $370,000 was up 21.7 percent from a year ago, it fell by $10,000 from March and is far below the $665,000 median peak reached in June and July 2007. In the Bay Area, 29.5 percent of existing home sales in April were properties that had been foreclosed upon in the past 12 months, down from 46.4 percent of existing homes sales a year ago.”

“‘There are a lot less short sales and foreclosures at this point. More higher-end homes are selling compared to a year ago,’ said Ellen Lancaster, a Realtor in the Oakland-Piedmont office of Coldwell Banker Residential Brokerage.”

“But if you ask Lancaster, jumbo financing is still hard to obtain. ‘I just had a sale in Walnut Creek at $500,000 with a 50 percent down payment and the buyers could not get a loan,’ Lancaster said. The buyers ending up paying cash for the owner-occupied home, she said.”

The LA Times. “The modest house has yet to be shingled and a stack of drywall sits on the bare concrete floor, but Karame Adesko and her fiance, Pablo Garcia, can envision their future in this developing Corona cul-de-sac. Adesko and Garcia originally planned to buy one of the many foreclosed properties in Southern California. But after touring several and seeing the pricey repairs they needed, the couple opted to spend $309,000 on a new 1,300-square-foot home.”

“‘I wanted to buy a move-in-ready house,’ said Adesko, a 27-year-old dance instructor.”

“Although the project has a pastoral feel, set amid dairy farms and with views of the snow-capped San Gabriel Mountains, it’s not far from her job in Placentia and his in Yorba Linda. One recent morning, Adesko and Garcia were led on a tour of their future home by Arnold Lloyd, a KB Home superintendent with an impressive handlebar mustache and long, thick, white sideburns. He explained the home’s features, showing them their property line, energy-saving air conditioner and gas fireplace.”

“‘You just have to turn the switch on and you have instant romance,’ he said. ‘You can sit back and enjoy your glass of wine.’ ‘Nice,’ Adesko said.”

“Later this month, Miami-based Lennar will open Central Park West in Irvine, Calif., a project it had put on hold during the housing crash…with prices ranging from the upper $300,000s to more than $1 million. Pulte Homes is opening a new development in Northeast Pasadena on a five-acre parcel of land it bought late last year…with prices starting in the high $700,000s.”

The Ventura County Star. “Sitting in a Moorpark town home worth $225,000, knowing he owes the bank $350,000, Joseph Shull can’t help but think about his options. ‘I put probably 100 (thousand) down on this home to buy it and now that’s gone and I won’t get that back,’ he said. ‘In order to sell the home, I would probably have to come up with another 100 out of my pocket, and I got to thinking, ‘Why would I want to do that?’”

“In 2006, he paid $410,000 for the single-story, 1,200-square-foot town home in Moorpark. He finally went to his bank about a year ago to ask for a lower interest rate. ‘I felt I was dealing from strength because I’ve never missed a payment or been late,’ he said. ‘I told them I was willing to walk away from the home and they were going to lose a lot of money.’”

“It took six months, he said, but the lender finally adjusted his interest rate, lowering his mortgage payments to about $1,400 a month from the previous $2,200. But that deal expires in 2011, and he’ll have to work to get it extended. He and his wife, both teachers, want to retire soon and would like to move to Oregon or Central California, so he’s seriously considering a strategic default.”

“‘My ace in the hole is these banks don’t want these properties,’ he said. ‘They’re not in the business of selling homes.’”

The Press Enterprise. “About 15 homeowners are looking for help at real estate agent Thalia Poulos’ seminar at the Temecula Public Library. Her basic sales pitch is that there are alternatives to foreclosure. Some homeowners talk about the embarrassment they would feel if their neighbors were to ever find out about their sad plight. Ironically, some say they believe many of the people on their street are in the same predicament. But everybody is too proud to talk openly about it.”

“There’s a literal hush in the room as Remy Mondola tells her story.’I am about to fall, mentally and physically,’ the former teacher says of a house that she paid $610,000 for six years ago, a home now worth roughly half. ‘I am done.’”

“At 77, Phil Schindler has seen his share of booms and busts. He moved to Temecula in 1988 and lost a house in the early 1990s in the previous downturn. This time around he lost a home in Montana, one he was renting out until his tenant lost his job and Schindler couldn’t afford to keep up the mortgage payments. He’s here more out of curiosity than anything else. He’s into land development now and he likes to keep up on the latest trends, no matter how dreary they may seem. If he’s into pain and suffering; he’s come to the right place at the right time. Now if only it would all just end.”

“‘It’s only property,’ he says nonchalantly.”