The Housing Bubble

The LA Times reports from California. “Buyers last week of a Spanish-style, 3,220-square-foot house on a cul-de-sac here got a bargain: $1 million for a hilltop home in Northern California’s wine country, with views to San Francisco in the distance. Two years ago, the same property sold for $1.4 million. But after the lender foreclosed on the property, the home was deeply discounted.”

“Real estate agent Michael Snider, who handled the sale, thinks more such sales are on the way. ‘It’s just beginning,’ Snider said.”

“Napa County saw 112 homes repossessed in the first quarter, up from 23 a year earlier, according to DataQuick. Most of those foreclosures have been in lower-priced areas, where new-home construction and sub-prime lending were widespread during the housing boom. But the top end is now starting to tumble.”

“The house Snider just sold is next to two other distressed properties. One property for sale a few doors down was abandoned by its developer before construction was complete.”

“Elsewhere in Napa, a 5,676-square-foot Mediterranean villa on a 35-acre lot was recently foreclosed on. It’s now on the market for $5.255 million.”

“Snider said he saw some of his well-to-do clients running out of time. ‘They’re just pushing aside their mortgage payments, holding default off,’ he said, even using credit cards to make mortgage payments.”

The Sacramento Bee. “Pressured by a faltering economy and often burdened by loans they took out during the housing boom, more Sacramento-area homeowners are looking to reverse mortgages for an escape route. But many are finding the road blocked by the falling values of their homes.”

“‘A lot of them aren’t qualifying now. With the falling values they don’t have as much equity,’ said Sylvia Williams, a Elk Grove loan specialist.”

“Loan officials say that reverse mortgages, which were developed and marketed 20 years ago as a tool to fund vacations or expensive leisure activities, are increasingly serving something more simple - basic living expenses.”

“‘We see more and more need lately,’ said Rich Young, executive VP at Sacramento-based California Reverse Mortgage Co.”

“Young said many older homeowners refinanced during the boom years, but often chose risky loans with lower payment plans that increased dramatically over time. Faced now with higher monthly payments, he said, many older homeowners are seeking a way to pay off their old loan.”

“Greg Hayes,VP for marketing with Sacramento-based Liberty Reverse Mortgage, one of the nation’s biggest reverse mortgage lenders, said those borrowers now dominate.”

“‘The No. 1 thing people are doing with reverses is paying off existing mortgage debt,’ he said.”

“For the housing market - and for many seeking reverse mortgages - the declines are another example of limited loan options at the moment when many people most need them.”

“‘We just didn’t have enough equity in the house,” said Leroy Martin, 83, of Stockton, who was turned down for a reverse mortgage earlier this year.”

“Martin, and his wife hoped to escape a risky loan they used to refinance their home. Their monthly payment was within months of doubling. Though Williams, the Elk Grove loan specialist, couldn’t get them a reverse mortgage, she finally helped save the couple from foreclosure by persuading their lender to modify the loan for five years.”

“‘We just bought them time,’ Williams said.”

The LA Daily News. “Foreclosures hit a record pace in April across the San Fernando Valley, soaring 201 percent from a year earlier and pounding down home prices. During April, 608 families lost a home to foreclosure, up from 202 a year earlier and 511 in March, according to the San Fernando Valley Economic Research Center.”

“Foreclosures are now on pace to break the quarterly record of 1,854 set in the third quarter of 1996 - the most recent time the housing market was in a slump, said Daniel Blake, director of the center at California State University, Northridge.”

“‘The signs are, it’s going to go up,’ Blake said of the foreclosure total. ‘We’re pushing on that record number.’”

“The glut of homes on the market pushed the price of a median single-family home down to $505,000, a loss of 21 percent, or $125,000, from the year-earlier price, the report said.”

“With notices of default - the first step in the foreclosure process - increasing from 663 in April 2007 to 1,560 a year later, there’s no indication the housing slump will end anytime soon, the center said.”

“‘There is no indication we’re through the worst of it, especially with (default notices) rising,’ said Andrew LaPage, an analyst at DataQuick.”

“During April, 964 new and previously owned houses and condos were sold, down 29 percent from a year earlier. It’s the lowest sales total for an April since DataQuick began tracking the market in 1988, Blake said.”

From Desert Television. “A buyer’s market has builders offering free incentives and special deals while many homeowners hold off on making a sale and hold on to their most valuable asset.”

“‘It’s terrible,’ said longtime Palm Springs resident Doreen Prudeaux who has had her house on the market for over a year. ‘You just have to look beyond the money.’”

The Daily Bulletin. “PFF Bancorp, the financial parent of PFF Bank & Trust, said in a statement Monday that it’s looking for cash to ’strengthen the company’s capital levels.’ The Rancho Cucamonga-based financial institution has been getting hammered with losses because it loaned money to housing developers who can’t repay what they borrowed.”

“‘The odds are probably good that they could raise capital by that date, but there’s never-ending uncertainty,’ said Joseph Gladue, a banking analyst with Los Angeles-based B. Riley & Company, Inc. ‘Somebody who was going to provide capital could change their mind. There’s always that possibility.’”

The North County Times. “It just became slightly more difficult for home buyers to find the perfect house because of technological glitches and a learning curve associated with a new listing service system, real estate agents said this week. The listing service, known as Sandicor, launched an update that agents said is plagued with bugs and takes time to learn.”

“‘The productivity drain is immense,’ said Dennis Smith, a real estate agent in Carlsbad. ‘It’s costing the Realtors and the real estate operations a lot of time and money to transfer over. That’s not going to translate into costs for the consumer, though. We can’t add a time surcharge like the airlines do, so we’re going to have to eat it.’”

“‘Guys like Ray Ewing at Sandicor don’t give a hoot about what is wanted and needed by the agents,’ said Jim Klinge, a real estate agent in Carlsbad. ‘I love change when the change is positive. The only positive that’ll come out of this boondoggle is that it’ll drive out a lot of Realtors who are just hanging on.’”

The Ventura County Star. “Almost two years after giving an affordable housing developer $400,000, the city of Santa Paula wants it back. ‘I see it as a loss of interest,’ said Councilmen Ray Luna. ‘The project did not get built…the money should be returned and Cabrillo should reapply.’”

The Modesto Bee. “Amid a tottering economy, rising inflation, increasing unemployment and a housing market meltdown, waiters, beauticians and pet groomers report that customers are growing tightfisted.”

“It is hard to determine just how much people are cutting back on tipping, but the stakes are huge.”

“Groomers at Sparky’s Pet Salon in Los Angeles also are seeing tips fall. Last year, about half of the people who brought their dogs to Sparky’s gave the groomers tips. But as gas and food prices have surged over the past six months, that’s dropped to about 30 percent, said Luigi Pruve, a groomer and manager at Sparky’s.”

“‘People who used to give us $10 give us $5. People who used to give us $5 give us just $2 or $3 or maybe nothing. We don’t ask why,’ Pruve said. ‘There’s not much we can do.’”

From Pacific Coast Business. “While this spring’s federal economic stimulus package is expected to help the tri-county economy, more needs to be done ‘to stop the bleeding’ caused by the mortgage crisis, said Rep. Lois Capps, D-Santa Barbara.”

“‘We have to get the families back on track,’ Capps said in defense of HR3915. ‘Some are just walking away from their homes in Santa Maria because they can’t pay the mortgage.’”

“While Capps sees foreclosure relief as key to prevent the already troubled economy from worsening, she said, ’some accountability is needed. If the [mortgage] industry isn’t going to control itself, then maybe we should … maybe with the [real estate] associations, too.’”

“‘We’ve had seven years with no oversight in the financial world,’ Capps said. ‘We heard that some [lenders] forgot how to do loan documents.’”

The Final Call. “More than 100 people filled the Inglewood High School auditorium in mid-May, hoping to leave Congresswoman Maxine Waters’ mortgage foreclosure town hall meeting with real plans to help them save their homes, or at least, with a better understanding of the foreclosure crisis.”

“‘A lot of people are suffering alone, not telling anybody what’s happening, and they’re just walking away from their homes. We’re trying to get them not to do that and to call us because when the community starts to recognize that there’s a scheme going on, mortgage brokers in the neighborhood trying to get people to refinance and sign, the whole community can come together behind that and put some of these people in jail,’ Rep. Waters told the Final Call.”

“In her 35th Congressional District, which includes South Los Angeles and Inglewood, there are 640 properties in pre-foreclosure, 301 in the auction process and 581 properties that are owned by the bank. In Inglewood alone there are 335 properties in some stage of the foreclosure process and worth over $95 million, Rep. Waters said.”

“‘These bills are forcing the Congress to have to deal with this problem … we’re trying to teach them that many people who got into these loans didn’t simply make bad decisions. They were tricked into these loans!’ the outspoken congresswoman declared.”

“‘Probably the most striking aspect of this in California is that a similar cycle occurred a little over a decade ago, and although certainly some people saw the signs of this one coming, many people disregarded the red flags in favor of believing that the housing prices would continue to rise in perpetuity even though those housing prices were becoming (too high) for most people,’ said Daren Blomquist, RealtyTrac Marketing communications manager.”

From The Hill. “Rep. Laura Richardson could face fines for leaving a heavily indebted mortgage off her financial disclosure statement, according to campaign finance experts.”

“A review of Richardson’s 2007 financial disclosure shows that she failed to report her Sacramento home mortgage as a liability even though she owed $40,000 more than she paid for the home, which was purchased in January of that year.”

“By the end of 2007, Richardson had accumulated $575,000 in total debt after failing to make payments on her original $535,000 mortgage, according to Sacramento County records.”

“‘On a plain reading of the law, it’s not clear why this mortgage would not be included on her financial disclosure statement, given the situation,’ said Meredith McGehee, the Campaign Legal Center’s policy director.”

“Lawrence Noble, former general counsel for the Federal Election Commission and a campaign finance, ethics and lobbying expert, agreed.”

“‘That is what the rule says,’ Noble said. ‘The reality is that at the end of the year, if she was indebted for more than what she paid for the house, then she was required to report it.’”

“The home went into foreclosure and was sold at auction last month. Richardson is disputing the sale.”

“Her office did not return repeated calls seeking comment for this story. It also has not responded to questions about how Richardson was able to loan her congressional campaign $77,500 while continuing to default on several properties.”

“Additional reports indicated Richardson has a long history of mortgage defaults that also covers homes in San Pedro and Long Beach. Richardson’s own financial statement, however, showed no indication that anything was amiss.”

“Under Schedule III of her 2007 Financial Disclosure Statement, filed on Feb. 22 of this year, the freshman lawmaker listed her liabilities as simply ‘N/A.’”

“Yet throughout 2007, as her Sacramento home was going from newly purchased to foreclosed on, Richardson also defaulted on her Long Beach home a third and again a fourth time, when she fell $15,101 behind on her payments.”

“In September of that year, Richardson also let her San Pedro home slip into default when she fell $12,410 behind on her payments.”

“In January 2008 Richardson defaulted on the San Pedro home a second time, and in April - with Richardson owing $367,436 on an original loan of $359,000 - Wells Fargo Bank issued a notice of trustee sale of the home. Records indicate that the home is still scheduled to be sold at a July 14 auction.”

“Richardson was able to rescind both of the default notices on her Long Beach home after catching up on her payments, which she did first in March and then again in October 2007.”

“Richardson’s fourth default notice, for $15,101, on her Long Beach home came in October 2007 - the same month she again caught up on her payments as well as repaid herself $8,000 from her campaign, her FEC records show.”

“Noble said that the entities that monitor financial disclosure statements - the House ethics committee and the Department of Justice - will likely issue a warning to Richardson to amend her reports.”

“‘In terms of what they would ultimately do about it, I think the question would be: Was this an attempt to cover up anything, or was it a mistake?’ Noble said.”

“‘Obviously this raises questions about disclosure and more information, I think, is needed to ensure that she has, indeed, abided by the statutory requirements,’ McGehee said. ‘The purpose of the financial disclosure is, first and foremost, to reveal conflicts of interest or potential conflicts of interest … and to ensure that if questions come up about positions, votes, other actions they take as a federal official, that there is transparency.’”

“Although Richardson missed the vote on the housing bill that passed the House in early May, she has said she only did so in the wake of her father’s sudden death.”

“Richardson last fall voted to help pass the Mortgage Forgiveness Debt Relief Act, which prevents the federal government from charging income tax on debt forgiven as a consequence of foreclosure.”

“Richardson told the Long Beach Report on May 24 that she thinks people ‘expect me to take what I’ve learned, what I see, not only for myself but what I see that they’re doing, and figure out how to fix it, and that’s what I intend upon doing.’”

“Over the weekend, two of Richardson’s opponents seized on the issue. Peter Mathews accused her of ‘a pattern of financial irresponsibility’ and wondered ‘how she can be responsible for a federal budget when she can’t balance [her] own budget,’ while Lee Davis said she was a ‘national embarrassment’ who has lost credibility.”