January 8, 2013

Going Back Into The Mess

WMBF reports from South Carolina. “The Palmetto State saw a 32 percent increase in foreclosures from the last month, most of them happening in the upstate counties. Horry County is the fourth highest, but still better than the state’s average. Local real estate experts say these high numbers are expected in certain markets. ‘All the ones that are vacation areas or second homes. California, Nevada, Florida, South Carolina. So it’s not that alarming in that regard because it was already shadow of inventory that was really kind of accounted for anyways,’ said real estate expert Blake Sloan.”

The Sun News in South Carolina. “Condominium developer Ford Shelley will have to report to federal prison on Wednesday after a judge on Friday denied Shelley’s request to postpone his sentence while he appeals his case. Shelley was sentenced to 20 months in prison after pleading guilty last year to one felony charge of mail fraud related to sales at his Pineapple Bay condo project. Most of the buyers at the 12-unit Pineapple Bay project included Shelley’s family – including Shelley’s wife, his brother-in-law and sister-in-law – and friends or business associates.”

“The original sale price for each of the 2,250-square-foot condos ranged from $625,000 to $700,000 in 2006, according to county property records. The most recent sales have been for between $135,000 and $157,500, according to statistics from the Coastal Carolinas Association of Realtors.”

“Scott Lemons, a real estate agent, and Simpsonville real estate investor Kevin Robinson were indicted Thursday on three felony charges apiece of mail fraud related to sales of Ashley Park condominium units in the Carolina Forest subdivision, according to court documents filed in federal court. According to the indictment, Lemons and Robinson used several of their companies to help Ashley Park buyers fraudulently obtain financing for their condo units in late 2007 and early 2008. Lemons falsely inflated the comparable values of units in the project by taking part in sham purchases from Ashley Park’s developer, who is not named in the indictment, according to court documents.”

“Lemons then obtained fraudulent appraisals that overstated the value of Ashley Park units, according to the indictment. Lemons and Robinson then provided banks with loan applications that included false information about buyers’ employment and incomes and falsely stated that buyers had provided down payments for their units, according to court documents.”

“Horry County property records show a $325,000 purchase for unit A-3; $329,500 for unit E-3 and $326,500 for unit E-10. None of the buyers has been named as defendants in any criminal investigation. All of the units referenced in the indictment went into foreclosure, according to county court records. Condos in the Ashley Park development have recently been selling for less than $60,000, according to statistics from the Coastal Carolinas Association of Realtors.”

The Star News in North Carolina. “BB&T Corp. has issued a foreclosure motion against developer Mark Saunders and companies owned by him charging he defaulted on loans of about $4.5 million, according to court documents. In the foreclosure, the bank is seeking 11 tracts containing multiple lots. The Coastal Companies attorney Elaine Jordan says in a motion for continuance that…The Coastal Companies had been making monthly loan payments, and BB&T said that it wanted to resolve the issue by the year’s end. ‘For 15 years we timely made every payment required by BB&T, including this month’s,’ Jordan said.”

“BB&T says, in the court documents, that Saunders had not been making the loan payment in full. The foreclosure adds to the list of legal actions taken against developer Saunders and his umbrella corporation since the real estate bust in 2008. Saunders had been the largest developer in Brunswick County, holding thousands of parcels at one time. But the bust left Saunders unable to finish basic infrastructure, including roads and sewer, leaving many buyers unable to build on or sell their lots.”

“Litigation includes a suit from homeowners at numerous developments, a separate lawsuit from Seascape at Holden Plantation residents, and a Bank of America suit that sought $78 million. Saunders recently settled the suit with Bank of America, and the company handed over 750 parcels to the bank.”

The FayObserver in North Carolina. “Foreclosures in Cumberland County jumped 53 percent in 2012. Consumer advocates blame the economy, job losses and the mortgage industry not doing enough to help distressed homeowners. But a significant factor in the 825 foreclosures last year may be a surge in cases that banks previously put on hold for a review of documents.”

“Cumberland County had 890 foreclosures in 2010; that number dropped to 538 in 2011, as banks had slowed or suspended their proceedings. Clerks at the Cumberland County Courthouse are now seeing lenders refile stacks of older cases. Chris Smoot, a clerk at the Cumberland County Courthouse, sees cases piling up. ‘We’ve got dates into April already for foreclosure hearings from certain firms,’ she said.”

“Smoot attributes the increase to banks and other lenders who had paused certain cases for review. ‘Now they’ve completed that,’ she said, ‘and that’s started the refiling of those foreclosures. Now we’re taking up old cases put on hold and filing all these new cases.’”

Southern Maryland News. “Combined residential and commercial cash values for properties in northern St. Mary’s dropped by 7.9 percent compared to when they were last assessed in 2009, the Maryland Department of Assessments and Taxation reported this week. Residential values in St. Mary’s dropped by 8.4 percent. This is the fourth year in a row in which assessment values decreased.”

“Prior to the recession, values were increasing from year to year, sometimes wildly. Each year one-third of the county is reassessed. In 2007 values for properties in northern St. Mary’s rose by 84.3 percent during the previous three years for all improved property.”

“At the conclusion of the three-year assessment period, assessment values for residential properties in Maryland decreased by 7 percent and in Charles County by 11 percent, according to data from the state Department of Assessments and Taxation. Elsewhere in the region, the full cash value of assessed residential properties in Calvert County dropped by 13 percent.”

“Charles County Commissioners President Candice Quinn Kelly (D) said the assessment for this group was an unexpected disappointment. ‘When the recession had first begun and that area was assessed, that year we saw a 29 percent decrease in values, and our taxes are based on those values,’ Kelly said. ‘We were hoping to see that remain steady in the next assessment period or maybe even increase a little bit, but now with this 11 percent decrease from the last period, we’re looking at a 40 percent decrease from when this first began. When we do the budget, we make our projections for the future years and what our revenue will be, and this was unexpected.’”

The Baltimore Sun in Maryland. “The Federal Housing Administration has waived through 2014 an anti-flipping regulation, which had prevented the agency from insuring mortgages on properties sold within 90 days of acquisition. The waiver, first implemented in 2010 to bolster the flagging housing market, is intended to enable investors to buy and quickly rehab properties as the market continues to struggle.”

“But in Baltimore, one of the cities most affected by fraudulent flipping, some housing experts are concerned that another extension of the waiver may usher in a repeat of predatory transactions that duped hundreds of buyers in the late 1990s and early 2000s, and left many Baltimore neighborhoods scarred with abandoned homes.”

“‘While we recognize FHA’s business decision to again institute its anti-flipping waiver as a way to encourage investment, stimulate the housing market, and reduce blight through home ownership, we continue to have concerns that the anti-flipping waiver will also invite fraud schemes to occur,’ the inspector general’s office said in a statement.”

“Flipping schemes proliferated throughout Baltimore and targeted first-time and lower-income buyers. In some areas, groups of homes were bought cheaply by speculators, revalued by conspiring appraisers and resold within days — or hours — for many times over the seller’s purchase price. In the 1500 block of N. Bethel St., for instance, one unscrupulous investor purchased six rowhouses in 1997 for less than $6,000 apiece. He resold them the same day for nearly $50,000 each to unsuspecting buyers, according to tax records and Sun reports. They were subsequently purchased by the city and demolished.”

“‘We’re getting ready to go right back into the mess we just had,’ said Larry Chriscoe, who says he was the victim of a flipping scam in 1999. Chriscoe used an FHA-backed mortgage to buy a house in the Waltherson neighborhood of Northeast Baltimore. He said the seller had owned the home for a short time and used cosmetic improvements, such as paint and caulk, and a deceptive appraisal to charge him tens of thousands of dollars more than the home was worth.”

“‘I walked out on the property,’ said Chriscoe, who decided it wasn’t feasible — or logical — to pay off a mortgage that cost much more than the value of his home, which needed major roof repairs and an electrical overhaul. ‘There were so many things wrong in that house.’”

“Like Chriscoe, many buyers walked away from their homes and left behind vacant properties to be dealt with by banks, City Hall and the federal government. The transactions also destroyed buyers’ finances. Chriscoe filed for bankruptcy and said he is still trying to get his credit in order, eight years after leaving his flipped home.”

“Mark Sissman, president of Healthy Neighborhoods Inc., said he’s concerned about the anti-flipping waiver. His organization, which promotes homeownership and stabilizing Baltimore neighborhoods, still sees wide swings in appraised value of homes, he said. And loosening regulations could invite more mortgage fraud, he said. ‘Somehow, in Baltimore, creative entrepreneurs have found every way possible to make money at the cost of individual homeowners and the FHA,’ he said.”

Bits Bucket for January 8, 2013

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