Wednesday August 27 Housing and Economic stories

Top Stories:

Major Builder Woodside Homes Forced Into Chapter 11 – (www.ml-implode.com) - Top 25 builder Woodside is in bankruptcy. No mainstream stories on this yet; but we've got the scoop.

Jefferson County Alabama Considering Bankruptcy - (www.globaleconomicanalysis.blogspot.com) The president of the Jefferson County Commission has softened her opposition to bankruptcy and is instructing lawyers to begin research on the impact a bankruptcy filing would have on the county. President Bettye Fine Collins' move could substantially alter the course of negotiations as advisers work with Wall Street creditors on how to handle Jefferson County's $3.2 billion sewer debt and soaring interest rates the county is unable to pay. "A lot of it depends on Wall Street, as to whether we have to file bankruptcy or not," Collins said in an interview with The Birmingham News. "My sympathies are not with Wall Street. I think they realize now they are in a situation where the clock is ticking." The idea of bankruptcy emerged as a viable option in July, when Alabama pension chief David Bronner said the Retirement Systems of Alabama would buy Jefferson County's sewer system for as much as $1.4 billion if commissioners agreed to file for court protection under Chapter 9 of the U.S. Bankruptcy Code.

Tyrone Georgia finance director: "We’re broke" - (www.globaleconomicanalysis.blogspot.com) On May 7th city of Vallejo, California voted to declare Chapter 9 bankruptcy. Tyrone, Georgia could be next. The Citizen is reporting Tyrone finance director: "We’re broke" The Tyrone Town Council got a huge dose of reality Thursday night. “We’re broke,”said Finance Director Mary Sturm. Sturm said the city’s operating costs per month are $275,000 per month, but the town has only collected $53,000 in revenue this month. The economic climate has taken its toll on the town, with only two building permits this month, she added. The town currently has a Certificate of Deposit valued at $794,000 that earns just over 4 percent interest. Sturm recommended cashing in the CD, and invest in another CD when tax money starts rolling in at the end of the year. “We only have 7,000 residents and we’re providing services that towns such as Peachtree City with a population of 40,000 provide,” she added. The town reluctantly agreed to cash in the CD, but Councilman Tracey Young wants to make sure this does not happen again.

FDIC gets ready for bank failures - (www.statesman.com) The Federal Deposit Insurance Corp. is one of those agencies with a low profile but essential role similar to plumbing or electricity — you don't notice it until the power's out or the basement's flooding.
These days, the FDIC's folks are busier with the financial equivalent of fixing burst water mains and dead power lines. Seventy-five years after it was launched during the Great Depression, the bank regulator and insurer is facing its biggest challenge in decades. Many banks in Georgia and across the nation have been battered by the slumping economy and troubled loans to home builders, developers and homeowners. Hundreds could fail, some industry experts predict. That could force the agency to make good on its promise to insure most customers' checking and savings deposits up to $100,000 and some retirement accounts up to $250,000, putting pressure on its insurance fund. Is the agency, whose combined insurance funds were technically pushed into insolvency during the savings and loan debacle two decades ago, ready for another banking crisis? And how bad could it get? Despite the frequent gloom on both Wall Street and Main Street, industry players seem confident in the overall resiliency of the banking industry and the FDIC's ability to shelter customers from bank failures. It's hiring 70 new employees and bringing back 70 retirees to beef up its teams that swoop in, usually over a weekend, to take over and reopen banks under new management.

Seller wouldn't budge, house wouldn't sell - (www.contracostatimes.com) In October 2005, David Raimondi put his 100-year-old Allendale, N.J., house and barn on the market, asking $525,000. It's been almost three years, and the property has still not sold.
Raimondi, a house painter who wants to move to a less expensive area, is one of the growing ranks of frustrated sellers whose homes have been on the market for more than a year. Though most sellers don't stay on the market for years, real estate agents say the average time between listing and sale has stretched out during the housing slump. Within a week or two after Raimondi first listed his house in October 2005, he got an offer for $495,000 — $30,000 less than his asking price. He turned it down, convinced he could do better. But the real estate market began to slide in late 2005 and has not recovered yet.  Even today, Raimondi insists his house is worth $450,000 — after all, it is in Allendale, an upscale town with fine schools. In addition, the property is 200 feet deep and includes the barn. "The real estate agents wanted me to give my house away so they could make a sale; that's how I looked at it," said Raimondi, who paid $230,000 for the property in 1999. "I wanted to make a sale, too, but at the right price, not a giveaway." Recently, he's gotten several offers around $350,000. That's a sign, Gildea said. "If you've gotten two or three offers at the same number, that's where the market is," she said. Bouton agreed: "If it was worth $450,000, it would be selling for that." Raimondi has worked with six real estate agents since 2005.

FHA giving away taxpayer money to scammers - (www.fwweekly.com) Ameriquest has tried to foreclose on the property — and Garcia thinks that may be making it even harder for him to pull back even financially. He’s looking for a better job, but many prospective employers do credit checks — which turn up the foreclosure proceedings and may have cost him some potential health-care jobs. Ameriquest won’t comment on specific cases, but officials said late last month that the company is setting aside $325 million to settle predatory lending cases being investigated in 30 states, including Texas. Ameriquest “continues to be engaged in discussions with a number of state attorneys general and regulators about the company’s business practices,” the company said in a statement. “We are focused on resolving the issues under discussion with these agencies and hope to reach a reasonable resolution that is fair to our customers and fair to the company.” But recent lawsuits filed by borrowers in 20 other states echo Garcia’s claims. The filings allege a pattern of fraud, false documents, and bait-and-switch sales tactics. According to the Los Angeles Times, in a sworn statement in a California class-action case, a former loan officer named Kenneth Kendall said Ameriquest managers encouraged employees to “promise certain interest rates and fees, only to change those rates at the time of the closing.” On the same day that Ameriquest released the news of its $325 million lawsuit fund, the White House announced that President Bush nominated California billionaire Roland E. Arnall to be ambassador to the Netherlands. Arnall is Ameriquest’s principal shareholder, and he, his wife, and their companies have been the biggest political contributors (more than $250,000) to Bush since 2002, according to the Washington Post.
And maybe that says all one needs to know about why predatory lending practices seem to be flooding the country. Politicians, who credit the deregulated lending laws with opening up the housing market to people who couldn’t get a home loan before, generally don’t see much of a problem. And new housing is stoking the economy, providing 40 percent of the 2.3 million jobs added since the 2001 recession, according to economist David Rosenberg of Merrill Lynch & Co.

In Central Valley, Ruins of Housing Bust - (www.nytimes.com) ELLIE WOOTEN, the likable mayor of this likable Central Valley city, is on her way to the office when her cell phone rings. A constituent wants her mortgage payments reduced, and is hoping that the mayor has some clout with her lender. Although Merced has one of the highest foreclosure rates in the country, this borrower isn’t in such dire straits. She’s not even behind on her mortgage. But her oldest daughter is turning 18, which means an end to $500 a month in child support. She just wants a better deal. The mayor hangs up and shrugs: “It’s a surprise her daughter is turning 18? You’d think she could have planned ahead.” But hardly anyone in Merced planned very far ahead.

Not the city, which enthusiastically approved the creation of dozens of new neighborhoods without pausing to wonder if it could absorb the growth. Certainly not the developers. They built 4,397 new homes in those neighborhoods, some costing half a million dollars, without asking who in a city of only 80,000 could afford to buy them all. Obviously not the speculators turned landlords, who thought that they could get San Francisco rents in a working-class agricultural city ranked by the American Lung Association as having some of the worst air in the nation. And, sadly, not the local folk who moved up and took on more debt than they could afford. They believed — because who was telling them differently? — that the good times would be endless.

Appraisers still under the gun to 'hit the numbers' - (www.chicagotribune.com) CONGRESS IS CONTRIBUTING TO THIS BEHAVIOR AS THEY ARE PRESSURING LENDERS TO WORK OUT NEW LOANS WITH BORROWERS. MANY OF THESE BORROWERS HAVE NEGATIVE EQUITY SO LENDERS ARE HESITANT. Have the real-estate valuation shenanigans and inflated home appraisals that characterized the boom years disappeared? Are mortgage loan officers and realty agents—even individual home sellers—continuing to influence or attempting to interfere with appraisals despite new federal rules that ban such behavior? Ask appraisers and many will tell you: It's still business as usual. Attempts to encourage inflated appraisals remain common, though some techniques have become subtle. "Absolutely appraisers continue to get pressured" to hit the numbers needed to push transactions to closing, said Bill Garber, government affairs director for the Appraisal Institute, the country's largest professional organization representing appraisers.

Cramer Calls Another Housing Bottom…Puh-leeeze. Enough is Enough! - (www.ml-implode.com) - I believe you are intentionally deceiving people. Calling the bottom to housing using a variety of bad indicators and rampant speculation is wrong. I am giving you the benefit of the doubt by saying you are ‘deceiving’ people because there is no way you are this naive about the housing and mortgage markets. In your research story published yesterday in RealMoney and TheSreet.com, you use the fact that 14 million homes were “purchased” between 2005 and 2007 and those being the ‘bad lending years’ for the basis of a hypothesis that the housing market will bottom seven months from now. You also talk about new home builders reducing their supply, the FDIC offering mortgage modifications and FHA being the savior. If you are a headline reader, perhaps these things do sound great. But, in reality very little of your analysis or conclusions have substance or are likely to come into play in any significant way. First, you are overly attached to ’subprime’ when anyone following the story knows that the Alt-A and Prime universes are beginning to blow and they dwarf the subprime universe. Second, you overemphasis ‘fraud’ when we all know that while fraud is a big factor, lender negligence and negative-equity are the leading contributors to loan default especially among higher grades of paper. I should have stopped reading after the ’14 million homes purchased’ statistic was thrown out. This is because purchases were only about 33% of the market at any given time and millions more refinanced into exotic loans than ever purchased a home using them. In addition, prices are down near 2004 levels and approaching 2003 levels quickly. There were exotic loans during those years as well, so only focusing on homes ‘purchased’ from ‘2005-2007′ captures a small portion of the at-risk market.



Other Stories:

Growing Herd Of White Elephants - (www.globaleconomicanalysis.blogspot.com)
Repossessed Toys Are A Booming Business - (www.globaleconomicanalysis.blogspot.com)
Subprime-mortgage crisis in third stage - (search.japantimes.co.jp)
Yakuza, the big winners - (business.smh.com.au)
Danish nation's No. 10 bank fails - (www.salon.com)
The big secret in U.S. housing: Fannie and Freddie are toast - (news.yahoo.com)
US prime mortgage defaults worsen faster than subprime - (www.reuters.com)

Bad time to buy, according to rent vs buy calculator - (www.geldpress.com)
My house's value has fallen sharply. Should I default on the mortgage? - (www.indystar.com)
Credit losses expected to double - (www.marketwatch.com)
Pent-up supply now holding housing back - (www.marketwatch.com)
FBI saw threat of mortgage crisis - (www.latimes.com)

Zero down for homebuyers almost gone - (www.ml-implode.com) - Call it the last gasp of no-money-down. In recent weeks, homebuilders have loudly advertised zero-down options at entry-level tr...
Housing Rebound Unlikely Before 2009 - (www.ml-implode.com) - A recovery in the U.S. housing market from the worst slump since the Depression is unlikely until "well into 2009," Housing and ...
Obama Plays Ball - (www.ml-implode.com) - Here’s the problem: If Fannie Mae and Freddie Mac collapsed, then probably the financial system would receive such a body blow t...
JPMorgan May Post $600 Million Write-Down On GSE Shares - (www.ml-implode.com) - "JPMorgan Chase & Co. (JPM) could post a write-down of $600 million or more on the value of its holdings of Fannie Mae's (FNM) a...
Flagstar Bank Selects ServiceLink as National Appraisal Company - (www.ml-implode.com)
Freddie, Fannie pare losses - (www.ml-implode.com)
China Construction Bank Cuts Fannie, Freddie Bond, MBS Holdings - (www.ml-implode.com)
Existing Home Sales Don't Signal Market Normalization, Economists Say - (www.ml-implode.com)
That Housing Recovery? Keep Waiting. - (www.ml-implode.com)
Existing Home Sales Post Gain, But So Does Inventory - (www.ml-implode.com)
Washington Is Quietly Repudiating Its Debts - (www.ml-implode.com)
U.S. Existing Home Sales Rose 3.1% in July to 5 Million Rate - (www.ml-implode.com)
Mortgage Future Now, Have One Later - (www.ml-implode.com)
Happy Real Estate - (www.ml-implode.com)

Bankers caught between hope and despair - (www.ft.com)
U.S. Existing Home Sales Rose 3.1% in July to 5 Million Rate - (www.bloomberg.com)
Economy Challenges Obama Agenda - (online.wsj.com)
Metro Atlanta jobless rate hits 16-year high - (www.ajc.com)
Some see moderation from wealthy - (www.chron.com)
Higher food prices staying, for now - (www.dallasnews.com)
Average taxpayers subsidize executive pay, report says - (www.kansascity.com)
Los Angeles, San Diego Luxury-Home Prices Fall Most in Decade - (www.bloomberg.com)
U.S. Auto Sales Woes Continue - (online.wsj.com)
Delta taps $1 billion credit line - (money.cnn.com)
Bankers caught between hope and despair - (www.ft.com)
A SarbOx for banks? It could happen - (www.financialweek.com)
Mining Industry Shifts on Bad News - (online.wsj.com)
Toyota raising Japan prices on hybrids - (www.boston.com)
Gulf Countries Remain Tied to the Dollar - (www.nytimes.com)
Mersch Says ECB to Change Collateral Rules Soon - (www.bloomberg.com)
China Construction Bank Cuts Fannie, Freddie Bond, MBS Holdings - (money.cnn.com)
Spain Producer Prices Rise Most in Two Decades - (www.bloomberg.com)
Bond fundraising costs soar - (www.ft.com)
Fannie, Freddie Woes Vex Experts And Leave U.S. Hard Choices - (online.wsj.com)
Retailers’ woes hit real estate investors - (www.ft.com)
Fannie-Freddie crisis spreads - (www.ft.com)
Funds feel the strain amid bond slide - (www.ft.com)
Flurry of debt issues could push yields even higher in September - (www.financialweek.com)
40% of options are underwater - (www.financialweek.com)
Bond Market Flashes Caution Signals for Stocks - (online.wsj.com)
FBI saw threat of mortgage crisis - (www.latimes.com)