A Glut Of Greed Seemed Like A Great Idea At The Time
A report from the Virginia Pilot. “The yellow-brick building with a view of the Chesapeake Bay seemed ideal to Adam Law. Condos there were small but reasonably priced, and from Ocean View it was a short drive to his job in Hampton. Plus, the contract stipulated that the developer would pay the first year of condo fees. So Law bought a place. Not long after, trouble began. Rainwater seeped through cracks around his windows and onto his living room floor during a November 2006 storm. Seven months went by before the developer sent a repairman. The developer, Jonathan Z. Rubin, also failed to fix a broken elevator or install the recreation room and gated entrance touted in advertisements for the condos.”
“He said he can’t decide whether to stay or leave. ‘It’s like the American dream has become the American nightmare. It is so upsetting,’ said Law. ‘I feel chained to my home.’”
“In January, Law stood in the building’s hallway, staring at a real estate flier taped to the door of an unsold unit. The bank listed it for sale at $50,000 – a fraction of the $160,000 Law paid. He shook his head. ‘I’m so screwed.’”
The Star Exponent in Virginia. “Distressed properties remain on the street and on the market in Culpeper, presenting opportunities for buyers with good credit to get a good deal. Last year, according to county records, at least 300 homes or vacant lots went into foreclosure in Culpeper. The current state of real estate put Clifford Kearns out of business. A mortgage broker for 17 years, he closed shop last week for good. So what happened?”
“‘We were a broker for two different lenders that were supposed to be bought out by a bank. Then we actually went to work for the bank and they were taking 90 days to get a transaction done so we couldn’t afford to stay open doing that,’ said Kearns, a lifelong Culpeper resident.”
“Tuesday afternoon, he was in the office overseeing final touches to its renovation, hoping he could find a new tenant sooner than later. Kearns, who owns the building, said he didn’t have any firm interest in it yet. Asked about the overall state of the mortgage business, he said, ‘It sucks. The banks are still not loaning any money. There’s another 200,000 foreclosures getting ready to hit in the state of Virginia.’”
The News Journal in Delaware. “At full throttle, Delaware’s housing market in the middle of the 2000s gave a record number of families a taste of the American dream of homeownership. For many, that taste is all they got. Thousands have since returned to renting because of job loss, unaffordable interest rates or a stagnant sales market. That has pushed Delaware’s homeownership rate back down to its 2000 level, prompting questions about how vigorously society should encourage owning over renting.”
“Pamela E. Freeman, who lost her house two years ago and moved into a rented Pike Creek townhome while her credit recovers. Freeman had been a homeowner for more than 25 years and had built up a good credit record. She and her husband divorced in 2007, shortly before she had a home built in Smyrna.”
“She got a mortgage for 100 percent of the home’s value, expecting to refinance to better terms after the sale of the couple’s previous home. But those plans fell through and left Freeman with a monthly mortgage payment of $2,600, which she couldn’t afford. Freeman tried to sell her home, but the market had slowed to a crawl. Her lender foreclosed and Freeman filed for bankruptcy. ‘I tried everything to not be in this situation,’ Freeman said. ‘It felt like such a failure.’”
“‘People were getting mortgages and becoming homeowners, but it wasn’t sustainable,’ said Steven Peuquet, director of University of Delaware’s Center for Community Research and Service. ‘There are some households that don’t have the financial stability to sustain homeownership, and maybe we’re doing them more harm than good,’ he said.”
“The gains in homeownership came at the expense of some common sense, experts said. ‘Remember this? ‘No job, no credit, no problem,’ said Melinda Proctor, a real estate agent with RE/MAX Sunvest Realty in Wilmington. ‘Everybody’s seeing the effects of it now.’”
“Freeman moved into her Pike Creek townhome about two years ago and figures she has another year before her credit recovers enough to become a homeowner again. She hopes others can learn from her mistakes. ‘There are a lot of people who are struggling with having to make this decision,’ she said. ‘Actually, there’s a positive side. This has become my transitory place of peace and restoration.’”
The News Post in Maryland. “In Frederick County, 55 permits for new construction were approved in March, according to John Lynn Shanton of Strategic Marketing Group in Frederick. The March permits for future construction included only one condominium in the Villages of Urbana. The rest were for single-family houses, 11 of those in the Villages of Urbana.”
“Bob Sawchuck, a Realtor with Mackintosh Inc. Realtors, said via email that as of May 14, 73 homes had been sold in Frederick County, up from 47 for the same date in April. Of those sold in May so far, 23 were foreclosures, and eight were short sales. As of May 14, the inventory of houses in Frederick County is 1,320, of which 313 are distressed properties, Sawchuck said.”
“‘I am certain the increase in existing home sales is having a negative effect on the sales of new homes.–Particularly, with the fact that about 50 percent of the homes are selling as distressed properties,’ Sawchuck said. ‘Buyers are getting a better buy for their money by purchasing a distressed property at below the market value.–This is putting extra pressure on new home builders to trim costs to continue building.’”
“Sawchuck said builders are offering incentives to encourage new-home buyers to invest in pristine properties. ‘Many distressed properties–are in need of moderate to significant repairs as the result of previous owners’ neglect or owners taking it out on the property prior to leaving,’ Sawchuck said.”
The Winston Salem Journal in North Carolina. “The state’s job market continued to move in a positive but exceedingly slow direction during April, according to economists. Even though the jobless rate remains at its lowest level in more than two years, economists said to not expect much more improvement until the housing market improves.”
“Michael Walden, an economics professor at N.C. State University, said he was encouraged that more people were in the labor force looking for jobs. ‘The problem is the slow pace of improvement in the job market is related to the housing market,’ Walden said. ‘Normally, the housing and construction markets are sectors leading the economy out of recession. With housing prices still falling and construction employment sagging, these sectors are still a negative for the economy.’”
“The commission reported that there was a loss of 1,500 construction jobs in April. ‘The economy won’t get well until the housing market gets well — and that’s still in the future,’ Walden said.”
The Citizen Times in North Carolina. “Just four years ago, in August 2007, there were grand plans that could have made Western North Carolina a golf mecca for world-famous players turned course architects. Today, those dreams are at best postponed and more likely gone forever. The legal travails of developer Keith Vinson at Seven Falls in Etowah suggests more than bad timing and misfortune created problems, but in most other cases what can through hindsight seem like a glut of greed for high-end golf and real estate seemed like a great idea at the time.”
“Four years ago numbers from the National Golf Foundation offered research that several million baby boomers with money were going to retire to North Carolina and South Carolina and were looking to live on golf courses. With the lay of the land and the natural beauty this area had to offer, why wouldn’t developers target WNC as a prime area for growth?”
“With wealthy golfers lining up for lots and homes, it appeared to be a plan that couldn’t go wrong. But it did. The economy tanked, stocks sank or disappeared, retirements were postponed or canceled, grand times of leisurely rounds, 19th hole cocktails and a relaxed slide into the golden years was replaced by fear and conservative money management that didn’t include second homes that cost millions.”
“The latest numbers suggest fewer than 60 golf courses are being built in the U.S. this year, when a couple of years ago that would have been a slow month. The world has changed a lot in four years, and those who struggle to maintain jobs and mortgages and grocery money don’t shed tears for millionaires missing out on second homes.”
“The future of private golf is as uncertain as many other aspects of a still troubled and deeply flawed economy, but there is little doubt that the dreams of yesterday have been crushed by the realities of today.”
The Charlotte Observer in North Carolina. “U.S. District Judge Frank Whitney asked the questions Thursday that many have asked about the real estate professionals, lawyers and others caught up in Operation Wax House, one of the biggest mortgage fraud investigations ever in the Charlotte area. ‘Did you think you might not get caught? Didn’t you know eventually someone wouldn’t be able to pay the $14,000- or $15,000-a-month-mortgage?’”
“In a federal court sentencing hearing in Charlotte, Whitney was addressing defendant Walter Staton Jr., a former Charlotte mortgage broker who admitted receiving about $500,000 in kickbacks from illegal flip sales of pricey area houses. Staton also admitted moving his family into one of those houses for a time, an almost 6,000- square-foot home that prosecutors described as a ‘mansion.’”
“Staton and others were accused of setting up an acquaintance to buy the house at $1.05 million in April 2007, then manufacturing false paperwork just a few months later to allow a family member to buy the house at an inflated, ‘flip’ price of $1.6 million, prosecutors said Thursday. When the house went into foreclosure, the lender was able to recoup only $700,000, according to county property records.”
“‘It was never the intent for the property to go into foreclosure,’ Staton told the judge. ‘How did someone of your sophistication think you could beat the foreclosure?’ Whitney pressed. Said Staton: ‘Maybe I was just hoping it wouldn’t happen.’”
“Operation Wax House has 37 defendants so far and prosecutors say they expect to eventually charge 70. The scam, carried out mostly in 2006 and 2007, involved about 80 homes and about $100 million in loans in seven subdivisions in Union County’s Waxhaw area and south Charlotte. At least five mortgage fraud groups, or cells, worked to inflate the sales prices of new homes by $200,000 to $500,000 over their actual value, according to records in federal court in Charlotte.”
The Journal News in West Virginia. “At 50 years of age and with more than 25 years working at newspapers across West Virginia, very little information comes as a great surprise. That’s not saying journalists know when a particular bank will be robbed, but none are surprised to hear that a criminal robbed another bank. The same is true of business failings: If you’re aware that a business picked a bad location, didn’t advertise or provided poor service, you’re not really surprised to hear it closed. The Journal’s initial efforts to investigate problems and issues facing Eastern Panhandle homeowners, subdivisions and developments, however, has broken that rule. Just a quick look at those many challenges generated real surprise, shock and worry.”
“To quote one homeowner who attended a Jefferson County Organization of Homeowner’s Associations meeting this week: ‘It’s a real mess.’”
“That’s an understatement. With thousands of homes in hundreds of developments spread across the region - and thousands of other home sites just waiting for the recession to end - this is a huge regional issue. The challenges are almost endless: foreclosures and bankruptcies, maintaining the infrastructure, building out the dozens of unfinished developments in the region, resolving the numerous court cases already filed in the region, enforcement of traffic laws within subdivisions and more.”
“West Virginia - unfairly some say - is referred to nationally as a ‘judicial hellhole.’ If we fail to look at the problems facing the thousands of homeowners who have moved into our subdivisions and developments, we might add ‘homeownership hellhole’ to the list.”
“The problems are complicated and exasperated and because the housing boom came so quickly, there was very little advance planning. The homeownership questions also are complicated because no one forced these homeowners to buy a house in a subdivision or private development. It seems a valid argument: It was the homeowners’ choice, so let the buyer beware. No one forced the homeowners to buy but - in terms of looking at the long-term issues such as public services, liabilities and commitments - no one was there to help them either.”
“When subdivisions and developments were being planned and approved - and covenants and restrictions being written - there are no homeowners involved. No one was watching out for the homeowners’ long-term interest. It was all about development and growth. It was all too easy. Too quick. The money too good. The explanations were too simple.”
