Like A Winter Coat In June
The Grand Rapids Press reports from Michigan. “Architects and home designers headed into a national convention at the Amway Grand Plaza Hotel on Tuesday predicted a ‘new normal’ for economic activity in their industry, rather than a return to the housing boom. Wayne Visbeen, of Visbeen Associates Inc., in Kentwood, said his business fell by as much as 50 percent but is climbing again slowly. He used to design million-dollar homes along Lake Michigan. He’s doing $300,000 homes now. ‘The level of luxury is definitely more conservative. Even people with money are more conservative,’ he said.”
The Detroit Free Press in Michigan. “In metro Detroit, short sales jumped 85% last year from 2009 and are up nearly 20% so far this year, according to Realcomp. Homes with more than one mortgage and mortgage insurance tend to take the longest, said Ellen Mahoney, president of Complete Title Services’ loss mitigation division in Birmingham. A growing reason short sale deals fall through or take longer is because of mortgage insurance purchased after the homeowner closes on the deal and the loan is later sold to other lenders and investors.”
“Unlike private mortgage insurance required for sellers who put less than 20% down, these lenders and investors buy insurance to minimize risk. It is known in the real estate industry as pool insurance because it covers a group of loans that have been purchased. Premiums are paid by the lender or investor and the homeowner isn’t aware of it. When the loan defaults, such as in a short sale, the mortgage company may demand that the seller pay part of what is owed to minimize its losses.”
“‘That’s a mess. They are the worst,’ Mahoney said. ‘It is usually the lender mortgage insurance that nobody knew about, and it is usually on the second mortgage. It is real disruptive.’”
“Evelyn Sokol has an offer on her 1,000-square-foot Shelby Township home, but will likely lose the home to foreclosure even though she never knew her lender had purchased mortgage insurance on her loan. The home is priced at $75,000. Sokol, who bought the home in 2001 for $146,000, put more than 20% down and did not need the mortgage insurance. At some point, her lender pooled her loan with others to sell to investors and purchased the mortgage insurance.”
“‘This is absolutely ridiculous, and expecting a woman who is surviving on Social Security and a small pension to pay this? I’ve never heard of this,’ McGuire said. ‘How do they make a homeowner responsible for something they didn’t even sign on to?’”
“The government’s Home Affordable Foreclosure Alternatives program was meant to give homeowners an alternative if they don’t qualify for a loan modification. But most banks are unwilling to go along with HAFA short sales, in part, because the program forgives the homeowner’s loan balance. Lenders, in some circumstances, would much rather try to recoup their money.”
“Laurie Maggiano, director of policy for U.S. Department of the Treasury’s Homeownership Preservation Office, said that while the first mortgage holder receives 65 to 80 cents on the dollar after the property is sold, the second and other lien holders get less than 6%, and they want to retain the rights to go after homeowners for more. But the change is not likely to happen, she said. ‘We don’t want taxpayer dollars going to a transaction where a borrower still has contingent liability,’ Maggiano said.”
“Celso Martinez would have been happy to benefit from a program like HAFA. The 44-year-old bought a Royal Oak bungalow in 2008 for $164,000, then lost his job and moved to Collierville, Tenn., for a new one last fall. He spent almost 10 years in Michigan, working at the General Motors Tech Center in Warren. Laid off, Martinez exhausted his savings and unemployment benefits trying to keep up with the mortgage, but he fell behind. He got a short sale offer of $80,000 this spring, but his bank rejected it. He got another offer in June for $104,500, but that didn’t go through, either.”
“The house is now for sale at $102,500, but as a foreclosure. ‘It was my first time buying a home, living the American dream,’ said the native of El Salvador. ‘But it isn’t as good as it sounds. Now I am kind of messed up with bad credit for seven years.’”
The Chicago Tribune in Illinois. “Minnesota-based TCF Financial said the Chicago area is its weakest market in terms of the quality of its loans and other assets on its books. It’s ‘even weaker than Michigan,’ the bank said. TCF, which has 201 TCF Bank branches in Illinois, partly blames the prolonged foreclosure process in the Chicago area, making it difficult to get bad loans tied to commercial and residential properties off of its books.”
“‘They think they are doing a good thing, but they’re not,’ Chief Executive William Cooper said of the legal process that banks must go through to dispose of foreclosed property in the Chicago area. ‘It takes us longer to get a house through the system (in Chicago), and to get it sold takes us longer there than anywhere else.’”
The Journal Star in Illinois. “Richard Canges can only think of the good old days when reminiscing about a nearby Central Peoria house he visited as a kid. The house was a nice, brick family-owned residence with a warming fireplace inside. ‘That is a shame,” Canges said, as he glanced across the street recently at the now vacated house, which one neighbor said is an attraction for raccoons and rodents. The two-story house is one of about 30 houses awaiting the wrecking ball, if the funding for city-wide demolitions exists by the end of the year.”
“The funds are being stretched to their limit. The city budgeted $300,000 for demolitions in 2011, and has spent $258,208 already to tear down 39 properties. Pending the results of court cases, the city could have 66 properties potentially scheduled for demolition - and no money to do them. ‘It does get overwhelming with the number of properties we see that are vacant and being abandoned and just neglected and are falling into disrepair,’ said John Kunski, the city’s director of code enforcement. ‘The numbers are on the rise.’”
Bloomberg on Ohio. “Bank of America Corp, faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer. The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are either conducting or considering their own programs.”
“‘There is way too much supply,’ said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. ‘The best thing we can do to stabilize the market is to get the garbage off.’”
The Plain Dealer in Ohio. “Foreclosed homes in Cuyahoga County are more likely to remain vacant up to five years after they’re sold compared with homes sold by traditional means, a new study by the Federal Reserve Bank of Cleveland has found. In one key finding, he looked at homes that were sold or foreclosed on in January 2006 and whether they were vacant in December 2010. His calculations involved 85,000 properties and 130,000 sales.”
“‘The data reveal that foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure,’ wrote Fed researcher Stephan Whitaker. Among foreclosed homes, 22 percent are vacant five years after their last sale, compared with 10 percent of homes sold not through foreclosure, the study found.”
The Des Moines Register in Iowa. “During the past year or so, nearly 300 new downtown apartments were completed by several developers. Most filled up almost immediately, and more than 300 additional units are now under construction or in the planning stage. It’s a much better situation than existed as recently as five years ago when downtown developers were building more for-sale than for-rent housing and occupancy rates were dismal.”
“Builders misjudged the market, said Rick Tollakson, chief executive of Hubbell Realty, which has proved to be one of downtown’s most persistent and most successful housing developers. ‘We thought the price point was $200 a square foot,’ which translates to $300,000 to $400,000 per unit, ‘but it’s really $125 a square foot,’ or $200,000 for a 1,600-square-foot unit, Tollakson said.”
The Wichita Business Journal in Kansas. “The former Real Development Corp. office condos in downtown Wichita are sinking to new lows in their prices. A unit at the Orpheum Office Building sold this month for $80,000, down from more than $400,000 five years ago. All of them are owned by US Bank after the investors — most of them from California — sank into foreclosure after purchasing them about five years ago.”
The Duluth News Tribune in Minnesota. “Pending home sales in Minnesota were up 41 percent in June compared to June 2010. Still, it would take 18 months to sell all of the approximately 2,750 Duluth area homes on the market at the current sales rate. That’s the longest stretch of time in more than seven years, the data shows. ‘There’s tons of foreclosures, abandoned, distressed house in the 13-county metro area, bringing the price down,’ said Christopher Galler, Duluth Area Association of Realtors CEO.”
“The region between North Branch and Forest Lake also is having inventory problems with foreclosures and multi-unit housing complexes sitting empty, he said. He likened those distressed properties to a winter coat on the store rack in June. ‘Is it priced higher than in November or lower?’ he asked. ‘Right now, the housing stock is like a winter coat in June.’”
The Star Tribune in Minnesota. “The most frustrating aspect of the state’s three-week government shutdown was that Minnesota’s future seemed to hinge on one of two choices: Cut spending or raise taxes. What we desperately needed was a third option, an ambitious, long-term vision to restore economic growth.”
“Minnesota’s job numbers are a stark example of how swiftly expectations can go from great to greatly diminished. Between January 1990 and December 1999, the state added 530,000 net jobs. In the following decade, we experienced a net loss of 22,000 jobs. Naturally, a lot of those jobs were lost during the Great Recession, so it’s inevitable that many of them will come back, right? Not necessarily.”
“First, many midsize and large American companies are doing most of their hiring abroad. Second, new research suggests that the country faces a far more fundamental employment challenge that predates the recession by many years: a decline in the number of jobs being created by new businesses.”
“The Kauffman Foundation research focuses on businesses that employ others besides the owners. Those businesses are hiring fewer people. In the 1990s new businesses opened their doors with about 7.5 jobs on average, compared with 4.9 jobs today. The paper’s authors don’t spend much time discussing the possible causes for these declines, such as financing, free trade or the consequences of shipping jobs overseas.”
“Dane Stangler, the Kauffman Foundation’s director of research, cites another possibility: How much the housing bubble influenced or distorted job creation during the first part of the decade. ‘On the whole, a lot of those housing-related categories create fewer jobs,’ he said.”
