The Housing Bubble

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This thread will be forwarded during my trip through Florida for the purpose of communicating with local bloggers, posting observations and photos. Let’s call this the Shadow Inventory Tour. Pics will be posted on Picasa.

The News Press. “Some struggling homeowners could get as much as an 18-month reprieve from their mortgage payments when a federal program starts distributing $23 million earmarked for Lee County in a few months. Mike DeGregorio, who bought his Cape Coral house in 2006 for $211,000, said he hopes to take advantage of the program. The house is appraised at only $38,000 by the Lee County Property Appraiser’s Office, but DeGregorio said he’s recovering from losing his electrician job as well as rotator cuff and back injuries.”

Now, he’s working but still still having trouble with his mortgage. A neighbor urged DeGregorio to simply walk away from the mortgage and live free for a year before losing the house in foreclosure. But he doesn’t want to do that. ‘I wasn’t brought up that way,’ DeGregorio said. ‘I have children, I want to live in my house.’”

The Tribune. “Dr. Jacob Siwek became disabled after he fell walking his dog in 2006. His wife stays home to care for him. The couple is left to rely on disability checks of $1,035 a month and then another $360 in food stamps. In 2007, the home Jacob bought in 1981 went into foreclosure. Their monthly mortgage is $1,400 with an interest rate of 10.55 percent. ‘I worked hard throughout my life, I paid taxes and everything,’ Jacob said. ‘So where is my government now? Why won’t they help me?’”

“As of May 31, 2010, there were 329 foreclosures in the city of Sunrise. Christel Wright, who lives four houses down from the Siweks, is also in foreclosure. She told the Commission that her husband was laid off and she is the sole provider of income. She fears that she won’t be able to keep a roof over her young son’s head. ‘I have a new address, 2006 Honda Accord,’ she said.”

“Mario Garcia, a friend of the Siweks, also attended the meeting and has helped raise awareness regarding foreclosure. A neighbor he knew for 15 years suddenly disappeared, and he found out they were kicked out of their home and left silently. ‘It’s just going to get worse and worse. In walking around the last few days…I must have seen 15 homes that were empty. You look in the window and there’s nothing there,’ he said.”

The Palm Beach Post. “Three years ago, Loxahatchee resident James Gamble was preparing for retirement. His home was paid off, he wasn’t married, and he has no children needing an inheritance. So to finance his retirement - and a summer home in West Virginia - Gamble took out a reverse mortgage, getting about $200,000 out of a house he paid an estimated $85,000 for in 1994.”

“‘I would get Social Security and I had enough to live on and pay my bills, but I couldn’t have bought a house in West Virginia for sure,’ said Gamble, 65. ‘I didn’t want to retire and just do nothing.’”

“Nearly 11,000 Floridians lost their homes to bank takeover in May, a whopping 81 percent increase over the same month last year and an indication that loan modification programs are failing, some economists say. In Palm Beach County, the number of homes lenders repossessed last month was 824, six times the amount in May 2009, according to a report.”

“Coral Gables real estate attorney Rashmi Airan-Pace said new Web-based foreclosure auctions in Palm Beach, Broward and Miami-Dade counties are allowing banks to get speedier sale dates. ‘It’s not good for the borrowers,’ she said. ‘A lot of homeowners acted in good faith on trial modification agreements, followed the rules, and all of a sudden they’re denied.’”

The Associated Press. “Imagine going to a house or condo you own and finding a stranger living there who claims the property no longer belongs to you. It’s happening across Florida and other parts of the country through what authorities say is abuse of a centuries-old concept known as adverse possession. In Broward and Palm Beach counties alone, adverse possession claims have been filed on some 200 homes in recent months. Three of the four people behind the claims have been arrested, and police are investigating the fourth man, who along with his father, a convicted mobster, tried to take over properties in Hollywood.”

“‘We look at this as another con job, another get-rich-quick scheme,’ said Don TenBrook, a Broward state prosecutor of economic crimes. ‘You’re starting to see them pop up all over the place. It’s been spawned by the real estate crisis.”’

“Mark Guerette of Wellington, filed notice in official county records that he was taking possession of 100 homes in Broward and three in the Palm Beach community of Lake Worth through Saving Florida Homes Inc. and two other companies. On one day last November, he filed takeover notices on 10 condos in the same North Lauderdale complex records show. Police say Guerette rented out six of the properties and collected more than $20,000 from tenants before he was arrested in April. He has pleaded not guilty to a charge of organized scheme to defraud.”

“His lawyer, Robert Shearin, said Guerette is nothing more than a good Samaritan, rescuing blighted homes. ‘The banks are letting these properties go down the tubes,’ Shearin said. ‘Here’s a guy trying to help out, and he ends up in jail.’”

The Orlando Sentinel. “The Orlando metro area, plus parts of Polk and Volusia counties, has 125 residential projects that have been idle, with no builder activity, for at least a year, a new report shows. Of those, about 15 percent are apartment or condominium projects, while the rest are housing subdivisions, according to Charles Wayne Consulting Inc. of Maitland. ‘Most of the 125 such projects …consist of those abandoned by a previous builder; however, some consist instead of fully developed sites which have never had an active builder … not even the first home built,’ the report states.”

The News Herald. “People planning to build single-family homes are beginning to reconsider as a massive oil slick spreads across the Gulf of Mexico, local builders said this week. The oil spill is hurting an industry already among the hardest hit by the Great Recession. New construction was just beginning to make a slight recovery. ‘I know of at least three projects tabled until this is resolved,’ said local builder Tom Ledman, Home Builders Association of Panama City-Bay County president. ‘Since the oil crisis began, construction has just stopped. If it’s really bad, it will affect all the tourism in Bay County. Ultimately, that will affect housing as well.’”

The Naples News. “A Naples beachfront homeowner filed a class-action federal lawsuit Thursday seeking at least $5 million from BP and others to reimburse Florida homeowners affected by the Gulf of Mexico oil spill. Cynthia Joannou, trustee for The Cynthia Joannou Revocable Trust, filed her lawsuit in U.S. District Court in Fort Myers. Joannou, a North Naples Realtor who sells properties in Collier and Lee counties, also alleges buyers of coastal homes are watching the growing oil slick and asking for guarantees before purchasing homes, while some Realtors are offering oil-spill addenda allowing contract cancellation or a delay of closings up to 30 days if signs of the spill show up within 48 hours of a closing.”

“Joannou, a Gulf of Mexico beachfront property homeowner, has a home on Lely Barefoot Beach in North Naples. Records show she purchased the Jumento Cay Lane house for $372,500 in 1997. Real estate ads show Jumenta Cay Lane condos are listing for $3.4 million. Property records show the most recent sales were $4.3 million in December and $3.4 million in April 2007. Joannou’s home was last listed for sale in 2003 and the listing was extended several times before it expired in July 2006.”

The Herald Tribune. “The Justice Department announced Thursday that it has arrested 485 people across the nation in a mortgage fraud sweep, though no charges were brought against anyone in Manatee, Sarasota or Charlotte counties. An effort similar to the so-called Operation Stolen Dreams occurred two years ago, when the agency and the FBI announced widespread arrests of more than 400 people.”

“It was not until the following month that federal prosecutors moved against Sarasota real estate investor Neil Mohammad Husani, indicting him and three partners on charges of mortgage fraud and money laundering. Criminal attorneys and other observers expect a similar pattern this time. ‘The FBI tends to make a big splash in major media markets first. I’m sure investigations are proceeding in Sarasota. They may just may not be as far along,’ said Jack McCabe, a Deerfield Beach real estate consultant.”

“After a year-long investigation, the Herald-Tribune reported last summer that at least 37 separate groups in Sarasota and Manatee counties were involved in artificially inflating the value of real estate. They sold properties to associates at higher prices to get more loan money than would have been otherwise possible. All told, the groups defaulted on more than $450 million in loans. There is no doubt that more players will be arrested in Southwest Florida and across the state, said Daniel Castillo, a Tampa lawyer who defended one of the members of Husani’s circle.”

“‘I would be shaking in my boots right now,’ Castillo said. “There is no way these people will be able to get away with what they did. They crippled the nation.’”

The St Petersburg Times. “Sang-Min Kim, a tattoo parlor owner who made a fortune flipping homes at the height of the real estate boom, was indicted by federal officials on Wednesday and charged with money laundering and conspiracy to commit wire, mail and bank fraud. A six-page indictment by the U.S. Attorney’s Office accused Kim of operating a far-reaching scam that involved numerous buyers, sellers, lawyers, banks and real estate professionals. The multimillion dollar scam was first revealed by the St. Petersburg Times in 2008 as an example of how mortgage fraud contributed to the Tampa Bay area’s housing collapse.”

“The indictment said Kim flipped about 100 homes between January 2005 and October 2008. Of those transactions, 80 involved fraud that cost lenders about $6.4 million, the indictment stated. ‘It’s one of the biggest and one of the more significant mortgage fraud cases we’ve done in the last year,’ said Steve Cole, a spokesman for the U.S. attorney for the Middle District of Florida. ‘There’s a conspiracy there, so we’re not done.’”

The Wall Street Journal. “Housing markets that have escaped the brunt of home-price downturns may not be home free. A new report shows that the ’shadow inventory’ of homes, with delinquent mortgages that have yet to go through the foreclosure process, is growing fastest in areas that have so far avoided the biggest home-price declines, according to a report by ratings agency Standard & Poor’s.”

“Mortgage companies could be forced to reduce their prices on these foreclosed homes as they work through that supply, and as more of those homes sell, that could continue to put pressure on prices. At the top of the list: the New York City area, where at the current rate it would take 103 months to clear the shadow inventory of loans that are more than 90 days delinquent or in foreclosure.”

“After the New York region, Miami has the largest backlog with a 62-month supply. But unlike New York, Miami’s shadow inventory has fallen from its March 2008 peak of 129 months. New York’s backlog has held at more than 100 months since early 2008. The biggest increase in shadow inventory came in Dallas, which had a 43-month supply, up from 19 months in September 2008. Other cities with big increases in recent months include Atlanta, Boston, Denver and Charlotte. Shadow inventory has remained elevated, but hasn’t increased much, in both Seattle and Portland.”

“Nationally, foreclosure timelines have swelled over the past two years as lenders deal with rising piles of delinquent loans and as they are under pressure to modify those loans and avoid foreclosures. But so-called ‘judicial’ states that require banks to get a court order in order to foreclose, including New York, New Jersey and Florida, have seen foreclosure timelines grow even larger.”

“‘The big problem of course in the New York metro area is that we have not had the re-pricing that the West Coast has had,’ says Daniel Alpert, managing partner at Westwood Capital LLC, an investment fund. ‘This is very similar to what happened in the early 90s where the crisis moved regionally from one area to another.’”

Post off-topic ideas, links and Craigslist finds here. The Florida/DC meetup link at the forum is here. Click here for the shadow inventory thread.

Please consider signing the Shadow Inventory petition.