Wednesday February 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Desperate car dealerships leaving liens on used autos purchased from customers - (www.insidebayarea.com) Proposed Legislation would shield customers from paying liens on used autos if dealership folds. As more failed auto dealerships continue to close down, they're leaving behind unpaid bills for unaware car buyers to pay. Last year, Chastity Young was one such unlucky consumer, swept up in what has become yet another indicator of the state's economic downturn. The San Francisco resident traded in her 2003 Kia for a 2007 Kia at the now-defunct Kia of Hayward dealership, satisfied that the dealer had promised to pay off the $2,700 still owed on her old car. When the dealership abruptly went out of business last October, her lender, CPS Financial, demanded that she continue to pay off the car she no longer had, leaving her with two car payments totaling $645 a month. "I should not have to pay for two cars just because a dealer went out of business and left its consumers holding the bag," Young said through tears Tuesday at a Capitol news conference. "This has caused me and my family a lot of stress. It's not like we have money to throw away." The bill, SB95, introduced Tuesday by Sen. Ellen Corbett, D-San Leandro, would make it more difficult for dealers with shaky finances to sell cars by boosting the bond amount they'd have to pay to operate, and would require dealers to pay off liens on used cars before reselling them. "Consumers should not be those that have to finance the failures of car dealers in California," Corbett said. "This is a practice that must stop. It's not fair. We should not be balancing the economic downturn of dealerships on the backs of consumers." In California alone, 480 licensed car dealers went out of business last year, with just as many expected to falter this year, Corbett said. When dealers fail to pay off the liens on cars the results can be catastrophic — from damaged credit ratings to repossession of cars to bankruptcy. As national leaders have tried to grapple with the home foreclosure crisis, "there hasn't been nearly enough attention to the problems of car buyers," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety. "People are still buying cars in this market, and they really need to be able to go to a dealership with some confidence that if they trade in their car, and it has negative equity and the dealer says they will pay off the lien, they will follow through and do that." Car dealers say the bill will punish above-board dealers and likely force hundreds of otherwise strong dealers out of business, said Peter Welch, president of the California New Car Dealers Association. The bill would raise the dealer bond from $50,000 to $250,000 for franchised new car dealers and to $100,000 for independent car dealers. Bond companies act as insurers in that they cover the first $250,000 of a company's losses. It is not clear how much more dealers would have to pay in premiums. Currently, the most a dealer has to pay for a $50,000 bond is $1,500 a year.

Lupoe family was awash in debt - (www.insidebayarea.com) Los Angeles police say a man who apparently shot himself after killing his wife and their five children was awash in debt and planning to leave California. Detective David Cortez said Wednesday that Ervin Lupoe was at least one month behind on his mortgage. He says the 40-year-old Lupoe owed at least $15,000 to the Internal Revenue Service and thousands more on a line of credit. Lupoe and his wife, Ana, recently were fired from their hospital jobs after being investigated for lying about their income to qualify for cheaper child care. Cortez says Lupoe planned to take his family to his brother-in-law in Garden City, Kan. The family's vehicle was packed with children's clothing and snow chains. The bodies of Lupoe and his family were found Tuesday.

Financial troubles mounted for Wilmington family - (www.insidebayarea.com) Lupoe, who left behind hundreds of thousands of dollars owed to banks, creditors and the Internal Revenue Service, talked briefly with the 911 operator, who asked him to check whether his family members were breathing and had pulses. "He stops and he breaks down a little - 'I can't check them. I can't check.' Then he breaks down and cries a little bit and shortly thereafter he disconnects," Cortez said. Lupoe, a retired Marine, was lying. He had not come home from a graveyard shift to find his family dead. Police believe he killed them on Monday, likely sometime around 6 p.m. Earlier, he had called his Long Beach attorney, Bob Pierce, and left a message saying his wife had committed suicide during the day, Cortez said. Lupoe had no job. He and his wife had been fired from their jobs as medical technicians at Kaiser Permanente Medical Center in West Los Angeles. In his rambling and grammatically incorrect suicide letter, Lupoe wrote that he and his wife "were being investigated for misrepresentation of our employment to an outside agency for the benefit to ourselves's, childcare."

$600,000 San Francisco House Falls to $371,699 - (healdsburgbubble.blogspot.com)

Million Dollar Meltdown in Pacific Palisades, CA - (westsideremeltdown.blogspot.com) It appears we have a significant meltdown in Pacific Palisades that shaved over $1,000,000 in 17 months. This is in a gated community called "The Enclave" located in the Palisades Highlands. Here is the information about the house: 16850 Calle de Sarah, 90272, 5Br+4.5Ba, 5697 sqft, YB 1995, Sold for $2,200,000 on 12/11/08, $386/sqft, 14,266 sqft LotWhat is interesting is, the past sales history:2/25/99 $1,375,0007/10/07 $3,320,00012/11/08 $2,200,000 (-33.8%)This takes us back to 2003 - 2004 pricing.

Fulton Homes seeks protection from creditors, files Chapter 11 - (www.azcentral.com) A home-building company founded by one of the Valley's most generous philanthropists sought legal protection from creditors Tuesday by filing for Chapter 11 bankruptcy reorganization. Tempe-based Fulton Homes Corp. is one of the largest home builders based in Arizona, with 21 subdivisions selling homes in the Valley. Like many builders, Fulton has struggled to keep up with its debt payments as banks demand additional capital so their loan values don't exceed the builders' declining property values, market analysts say. Fulton Homes was founded 35 years ago by Chairman and Chief Executive Officer Ira Fulton, a prominent community figure and one of the state's best-known philanthropists. The engineering college at Arizona State University bears Fulton's name, and its Mary Lou Fulton College of Education was named after his wife in May. The couple's Fulton Foundation has contributed more than $160 million to ASU. Doug Fulton, Ira's son, is the company president. Neither the Fultons nor company bankruptcy attorney Mark Roth returned calls seeking comment. Court documents show that Fulton Homes owes $100 million to $500 million to more than 100 individual creditors, including lead creditor Bank of America. The company's estimated assets are listed as $100 million to $500 million, the documents show. The company is scheduled to have its court-mandated meeting with creditors on March 3. Companies filing for protection under Chapter 11 of the U.S. Bankruptcy Code typically remain in operation while the court reviews creditor claims and resolves debt issues.

Another Geithner Ethics Compromise (Let Them Eat Cake Edition) - (www.nakedcapitalism.com) This blogger was troubled by Geithner's demeanor during the Senate hearings on the Bear Stearns bailout, when he was dismissive and conveyed the impression that he thought the appearance was a waste of his valuable time. Then we have the issue of Geithner's failure to pay payroll taxes. Perhaps he did somehow miss the IMF memo warning that he was indeed liable for the employer and employee portion (as someone who has run a business for 20 years, I cannot fathom ho Geithner would be ignorant on this front). Nevertheless, in 2006 he was audited for 2003 and 2004 and had to pony up (but was not required to pay penalties, would mere moretals ever get such white-glove treatment?). What really does not pass the smell test is that Geithner had been employed by the IMF in 2001 and 2002 and had not paid payroll taxes then either. He did not clear up that issue when he learned he had filed incorrect returns via the 2006 audit; instead, it was Team Obama that connected the dots and got him to satisfy the older (but unassessed) tax deficiency. Geithner is clearly an ambitious man. Even if he though he could get away with it, good judgmenet (and ethics, but we'll put that aside for now) would have argued for cleaning up 2001 and 2002 sooner rather than later. But guess what, his gamble paid off, he did get away with it (as he didn't pay until forced to, and did not suffer as a result). Willem Buiter has repeatedly charged with the Fed being a victim of what he called "cognitive regulatory capture" by Wall Street, The latest Geithner incident illustrates both that he is literally too close to the Street and has absorbed the industry's attitude that rules don't apply to players.

CD rates at failed banks supported by FDIC guarantee - (optionarmageddon.ml-implode.com) If enacted, these proposals would be a decent first step in the battle against moral hazard. Bloomberg: The Federal Deposit Insurance Corp., which is selling failed U.S. banks at the fastest pace in 17 years, probably will propose limits on interest rates paid by lenders with less than adequate regulatory capital, industry consultant Bert Ely said. The FDIC at a meeting today will consider risk-based deposit insurance premiums on institutions that fall below regulatory requirements for adequate capital, a step to prevent banks from paying too much to boost revenue, Ely said yesterday. Banks also may be limited on higher-cost sources of funds, such as brokered deposits, if they miss regulatory targets, said Ely, chief executive officer of Ely & Co. in Alexandria, Virginia. As banks get more desperate for funding—often because they are at risk of failing—they tend to offer higher interest rates. See, for instance, GMAC offering 3.0% on CDs. Like WaMu before it, GMAC can still attract deposits by offering above market interest rates despite its high risk of failure. Depositors couldn’t care less if the bank is at risk of failing, since it has FDIC insurance, they are protected. Might as well take advantage of those high interest rates while you can, right?

Royal Bullsh!t - (www.bankimplode.com) - ROYAL BANK OF SCOTLAND is preparing a grand slamming of the barn door after the horses are gone. This is no ordinary exercise of the age old ploy, in his one Royal Bank of Scotland has seen to it that the stalls have been cleared and there’s time enough for odor to waft away. The Royal Bank of Scotland is getting ready to clear out their boardroom, purging the business of directors that are linked with Sir Fred Goodwin, the bank’s former Chief Executive. The change comes while the bank is getting ready to put between £50 billion and £100 billion in loans into the new bank insurance scheme of the government. The so-called purge is pure window dressing, coming too late to prevent the 70% government take over of the Royal Bank, but soon enough to effectively nationalize the remaining banks. as Peter Thal Larsen of the financial Times puts it. The British government is about to write a huge insurance contract for the banking sector. For ministers, the gamble is that their willingness to protect banks against big losses will in itself make it less likely the insurance will ever be needed. Is Peter kidding us? I suggest that the Britts and Hank Paulson play with that bazooka together, you know the one, that did not save Fannie or Freddy. In July, Congress gave [Paulson] authority to come to the aid of Fannie Mae and Freddie Mac. “If you have a squirt gun in your pocket you may have to take it out. If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out,” Paulson said. (Translation: if the market knew the companies had a federal backstop, investors would be more likely to give them more time to work out their troubles.) Paulson was forced to use the bazooka sooner rather than later. By the end of August, the weakened financial state of the two giants was threatening both domestic mortgage markets and the value of hundreds of billions of dollars’ worth of bonds they had issued that were owned by central banks around the world. (Daniel Gross, “The Captain of the Street,” Newsweek, September 20, 2008)

Could Silicon Valley become another Detroit? - (www.washingtonpost.com) Could Silicon Valley become another Detroit? It's hard to imagine as you crawl along the traffic-choked lanes of Routes 101 and 280 between San Francisco and San Jose, past office parks and gleaming campuses still buzzing with energy despite the recent recession-related layoffs and cutbacks. Yet some who work here see trouble on the horizon. These include top executives at Hewlett-Packard, who are ringing an alarm bell about what they see as a looming disaster, not just for HP, but for the entire U.S. tech industry. They say that unless we boost government spending on science, technology, engineering and math -- STEM, in industry jargon -- we will be unable to keep up with countries such as China and India. At some point, companies such as Apple, Cisco, HP, IBM, Microsoft and Oracle could be eclipsed by foreign rivals, just as Ford, General Motors and Chrysler have been. This may sound farfetched or hysterical. But HP isn't a place given to hysteria. This is the world's largest tech company, an outfit that did $118 billion in sales last year and earned a net profit of more than $8 billion, one that employs 321,000 people worldwide, about 100,000 of them in the United States. HP also operates one of the world's leading industrial research labs, with 600 scientists working under the direction of Prith Banerjee, an Indian-born computer scientist with a background in academia and start-ups. Banerjee says the rest of the world has been rapidly boosting spending on science and technology, while the United States has been, in effect, scaling back. "There is a perfect storm headed toward our tech industry," he says.



OTHER STORIES:

Ron Paul Grills Fed Governor 1/13/09 - (www.ml-implode.com) - "Congressman Ron Paul questions Donald L. Kohn, Vice Chair of the Federal Reserve Board of Governors, at the House Financial Ser...
Mountains of Doom - (www.ml-implode.com) - A video on the bad bank idea.
Mortgage Application Volume Plummets - (www.ml-implode.com) - " A reading of raw mortgage application volume plummeted a seasonally-adjusted 38.8 percent for the week ending Jan. 23, accordi...
First Horizon Continues Mortgage Pullback - (www.ml-implode.com) - " Memphis-based First Horizon National Corp. , the bank holding company for First Tennesse Bank, said Wednesday morning that it ...
Credit Weakness Spreads from Subprime to Alt A to Jumbo - (www.ml-implode.com)
Waiting For A Real Estate Miracle To Happen - (www.ml-implode.com)
"Bad bank" plan "gaining momentum" - (www.ml-implode.com)
Bankers' Worst Nightmare Materialize - (www.ml-implode.com)

Fed Keeps Rate as Low as Zero, Says Prepared to Buy Treasuries - (www.bloomberg.com)
FDIC May Run ‘Bad Bank’ in U.S. Plan to Remove Toxic Assets - (www.bloomberg.com)
Deluge of layoffs hits U.S. economy - (www.latimes.com)
Fed Shift Leaves Experts Blind, Complicates Central Bank’s Job - (www.bloomberg.com)
Mortgage applications dropped 38.8% last week - (www.marketwatch.com)
California home foreclosures top 236,000 in 2008 - (www.latimes.com)
California Home Prices Fell 42% as Slump Worsened - (www.bloomberg.com)

"Skyrocketing" house sales news is utter bullshit - (bespokeinvest.typepad.com)
Bottom? Not at all. Prices are about to start dropping - (huffingtonpost.com)
California Housing Market - Foreclosure Surge to Hit - (mrmortgage.ml-implode.com)
Worst U.S. housing market in 2008? California! - (lansner.freedomblogging.com)

More record house price declines - (themessthatgreenspanmade.blogspot.com)
U.S. house price index fell again in November - (www.iht.com)
Where Housing Is Headed, By City - (online.wsj.com)
November Case-Shiller Chart Extravaganza - (www.voiceofsandiego.org)
Layoffs Spread to More Sectors of the Economy - (www.nytimes.com)
A Red-Letter Day for Layoffs - (www.businessweek.com)
Consumer Confidence index sinks to all-time low in January - (money.cnn.com)
Economic Cures Are Like Booze for an Alcoholic - (www.bloomberg.com)

Court mortgage-modification bill passes House committee - (www.marketwatch.com)
Mortgage Cramdowns Will Drive Up Interest Rates - (www.cnbc.com)
Twenty-five people at the heart of the meltdown - (www.guardian.co.uk)