KeNo's Housing and Economic Portal: Wednesday July 22 Housing and Economic stories

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TOP STORIES:

Large condo association bankruptcy - (www.dailybusinessreview.com) $1 million debt sends condo association into Chapter 11. In a move an increasing number of condo associations are expected to follow, the Maison Grande in Miami Beach has filed for bankruptcy. Facing almost $1 million in claims by unsecured creditors, a troublesome recreational lease, and at least 100 unit owners delinquent on payments of their fees, the association filed a Chapter 11 petition last month in U.S. Bankruptcy Court in Miami. As one of the first condo association bankruptcies of the current economic crisis, “it’s definitely cutting edge,” said attorney Mark Schorr, a solo practitioner in Fort Lauderdale who represents the Maison Grande association. With residential foreclosures and personal bankruptcies soaring in South Florida, Maison Grande’s decision is expected to become more commonplace, said attorney Aleida Martinez Molina of Becker & Poliakoff in Coral Gables. She is not involved in the Maison Grande case. The significant drop in property values is a key factor pushing associations toward bankruptcy filings, said attorney Robert Kaye of Kaye & Bender in Fort Lauderdale. He represents associations in Broward and Palm Beach counties that are considering bankruptcy. He declined to identify them. “In prior times, there was enough equity in all the properties [in an association] so that assets would likely exceed liabilities,” he said. “Now, since a large percentage of associations are upside down, that’s changing their view about bankruptcy. Their debts have overtaken their assets.” So many of Becker & Poliakoff’s association clients have inquired about filing for bankruptcy, that Martinez Molina has begun studying how a bankruptcy filing would impact associations. “It’s not the answer for everyone,” she said. “It’s not a place to dump a situation to avoid other courts. But if there are special code sections or provisions that can help an association reorganize … it could be a very good forum.” But associations shouldn’t go into bankruptcy without an exit strategy, she said. “They can’t hide under a rock. They have to have a game plan — what provision will you avail yourself of to weather the storm?” Martinez Molina said. Typically, Chapter 11 petitioners are for-profit companies seeking financing as debtors-in-possession to bail themselves out of tough financial straits. But associations are nonprofit organizations with limited budgets and funding. The severity of the recession means credit will remain tough to obtain for some time. “The problem for everyone is the credit markets,” she said. “They are non-existent. But for that, there would be more bankruptcies.”

Senate Leadership Blocks Federal Reserve Audit - (www.ronpaul.com) Good video clip as well. Senator Jim DeMint (R-SC) was blocked by Senate Democrat Leadership from having a vote on his amendment to audit the Federal Reserve, based on a bill authored by Congressman Ron Paul (R-Texas) in the House, H.R. 1207, and Senator Bernie Sanders (D-Vermont) in the Senate, S. 604. HR 1207’s identical companion bill in the Senate is known as S 604, the Federal Reserve Sunshine Act, sponsored by Sen. Bernie Sanders. If your Senator is not on the following list of S 604 co-sponsors, call their offices, write to them, email them. Let them know they need to support S 604. If you live in their district, let them know. Go to their office. S 604 Co-Sponsors (as of 7/7/2009) Sen Crapo, Mike [ID] – 6/25/2009 Sen DeMint, Jim [SC] – 6/11/2009 Sen Vitter, David [LA] – 6/16/2009 Campaign for Liberty President John Tate sent out the following email on July 6: Dear Friend of Liberty, Earlier today, the first shot in our battle to pass Audit the Fed through the U.S. Senate was fired on the Senate floor by Senator Jim DeMint of South Carolina. Senator DeMint, who has a well-deserved reputation for taking the battle to the other side in the Senate, once again proved why he is such a valuable ally in our fight to bring transparency and accountability to the Federal Reserve. A little while ago, the Senate voted to pass HR 2918, the Legislative Branch Appropriations Act. This $3 billion bill contains, among many other things, provisions for GAO audits on certain agencies. Seizing on a chance to take quick action to bring Audit the Fed up for a vote, and with the GAO provisions in mind, Senator DeMint attached the full text of S 604, the Senate version of Ron Paul’s Audit the Fed bill, to HR 2918 as Senate Amendment 1367 before it was considered for final passage. However, Senate Democrats refused to even allow a vote on the amendment! That’s right. The internationalist, Fed-loving elite in the Senate used a parliamentary tactic to shut down DeMint’s amendment. After Senator DeMint brought Audit the Fed to the floor, Senator Ben Nelson of Nebraska raised a “point of order” to prevent a vote, claiming that the amendment violated Senate Rule 16 by “legislating” on an appropriations bill. The Senate president agreed, and the amendment was shot down. Senator DeMint did not back down, though, and directly challenged Senate leadership by pointing out the other GAO audits contained in the bill. As Senator DeMint listed them off, the Senate president was forced to agree with Senator DeMint that each one he described, all of which would be left in for final passage, also violated Senate Rule 16. Which tells us at least one thing: the problem wasn’t with “legislating” on the bill or violating Senate Rules (which is commonly done). Shooting down the amendment was about preventing a thorough audit of the Federal Reserve for the first time in its history! Senate leadership is hoping this issue will just fade away so they can get on to what they deem to be more “important” business, like dictating what kind of healthcare plan you and I can carry or passing destructive Cap-and-Tax legislation. But the American people deserve answers on what the Fed has done with trillions of our tax dollars and what they are committing us and future generations to as part of their secret deals with foreign central banks and governments. The leadership decided today to turn their backs on transparency, but our fight is just beginning. As Senator DeMint made clear on the floor, the Audit the Fed bill has wide bipartisan support. He rightly warned the Senate that even if they delay today, they WILL have to deal with the issue on the floor. It is up to you and me to back up Senator DeMint’s words by making sure the momentum continues to build and the bill comes up for a final vote. The rejection of the Audit amendment is just the first battle in our war. Now is the time to really put the pressure on the U.S. Senate to Audit the Fed! Senator DeMint fired the opening salvo and showcased the hypocrisy of the Senate for allowing other GAO audits to be included in the bill while refusing to even allow a vote on Fed transparency. Again, we’re just getting started. Senator DeMint will keep fighting to pass Audit the Fed on its own or as an amendment, and we need to continue putting pressure on our senators to do everything in their power to achieve a floor vote! Click here to sign our online petition. And visit our Audit the Fed action page for contact information to call, write, and fax your senators and urge them to support S 604 and to push for a final vote. Together, we will finish this fight to Audit the Fed! In Liberty, John Tate President

Fraudster and Bankrupt former Met Lenny Dykstra says he is 111-0 in making good stock bets - (www.cnbc.com) Lenny Dykstra sat down with CNBC at his $24 million hilltop estate behind the gates of Sherwood Country Club. In our exclusive interview, he wanted to explain why he filed for Chapter 11 this week, which stopped a planned foreclosure of the mansion scheduled for today. "Bottom line...this case is about bank fraud," he says. We are posting the entire interview. To understand certain parts, here is a thumbnail sketch of what Dykstra claims happened. He says when he bought Wayne Gretzky's estate two years ago, a broker from Washington Mutual promised him a single $17.5 million loan, but delivered only $12.5 million. Dykstra says he was urged to go get a second $8 million mortgage, to complete the $17.5 million and allow him to have some extra cash, as the house, Dykstra says, appraised for $25 million. Dykstra says the broker promised he could refinance both mortgages into one affordable payment after 60 days. But the baseball legend claims the mortgage broker disappeared. There was no re-fi. Meantime, he was paying close to $200,000 a month in mortgages, and his income was only $125,000, that money coming from a promissory note he received after selling his car wash business. Unable to continue paying more than he was making, Dykstra says he was forced to sell the promissory note back to the owners of the car wash to pay off the second mortgage. That erased his nest egg, he says. Dykstra refused to talk about Index Investors, which, as we reported yesterday, is the company actually moving to foreclose on his mansion, saying Dykstra owes $910,000. Dykstra is suing Index and its owner, Jeff Smith, for violating state usury laws, among other claims. Finally, Dykstra says he is 111-0 in making good stock market bets, though he would not say how much money he's making. And when I asked him where he plans to be financially in a year, he said, "I'll be living the dream." Lenny Dykstra's attorney, Jon Hayes, says that the baseball legend's assets far exceed the $0-$50,000 listed in the emergency Chapter 11 filing.

Former Met Lenny Dykstra Files for Bankruptcy - (www.cnbc.com) Baseball legend Lenny Dykstra filed for Chapter 11 bankruptcy protection today, which puts a hold on the planned foreclosure auction tomorrow of his $25 million Ventura County mansion. He bought the home from Wayne Gretzky for $17.5 million, a sprawling estate nicknamed "Wayne's World" by those who live behind the gates of Sherwood Country Club. Dykstra's attorney, Walter Hackett, says the bankruptcy will give Dykstra time to "reorganize his estate, successfully challenge the multitude of meritless claims that have been made against him and allow him to pursue his lawful claims against a number of parties who have attempt to steal his property, breached material agreements with him, or otherwise acted in bad faith." How did a high-flying investment advisor and entrepreneur end up in bankruptcy? Attorney Hackett tells CNBC that Dykstra is the victim of "an awful lot of mortgage fraud", blaming Washington Mutual, now owned by JPMorgan Chase. According to Hackett, Dykstra obtained a $12 million first mortgage from WaMu, and an $8 million second mortgage through a smaller lender in Los Angeles, totaling $20 million, more than the purchase price. The second mortgage had a high interest rate, but Hackett claims Dykstra was told by the WaMu loan officer that both mortgages would be re-financed into one loan after 60 days. That never happened, says Hackett, forcing Dykstra to liquidate "a substantial amount of assets" to pay off the second mortgage. Those assets consisted of an promissory note he had after selling his chain of car washes. Hackett says when Dykstra sold the business, he was guaranteed a six-figure monthly income for a decade, with a large lump sum at the end, an asset Hackett says was worth $40 million. But Dykstra had to liquidate that asset at a steep discount to pay off the $8 million. However, it's not JPMorgan Chase which moved to foreclose on the mansion. Instead, Hackett says it was Index Investors, which had loaned the baseball legend $900,000, and Dykstra had put his home up as collateral. Hackett says Dykstra filed a lawsuit against Index Investors last week, and is now considering a lawsuit against JPMorgan Chase.

"Shadow" Inventory In FL Keys Not Found On MLS - (www.rocktrueblood.blogspotcom) Developers, for the most part, have lost their asses in the Keys during the Housing Bubble. At this moment, we've got rows of new and used empty houses, town homes, and condos all throughout the Keys where the lights and water have never been turned on or where the once lived in unit hasn't seen a living soul in months. (The condo unit next to my rental has never seen a human being for the past 13 months and it is in foreclosure. This next door condo, for whatever reason, is not currently listed on the Key West MLS.) Out here on the north end of Key West, there are dozens of brand new condos built in 2005 which have never been sold. I've driven by these "ghost" condos nightly and wondered who in the world is going to buy one of them at 2005 prices? After all, the high end of the market is only beginning to fall now. If these expensive homes did not move for the past four years, who in their right mind would buy one now just as Prime and Jumbo borrowers have begun to default on their loans at faster rates than the sub-Prime borrowers? As more Prime and Jumbo borrowers default on their old homes, the pool of prospective buyers of such expensive homes as this town home grows smaller. More so, what bank is going to lend anyone money on one of these unless they have the full $220,000 down payment? Lending has changed drastically and you won't see cab drivers being able to buy (I know a cab driver in Key West who bought two of the smaller Seaside condos by using Option ARMs. He's now trying to short sale one of them) these type of townhomes on less than $100,000 a year family income any longer. Thus, it is no surprise to see the following "reduction in price" entry . . . finally . . . on the MLS a week ago: Luxury three level town home with ocean views in a gated community. The home features 2 master suites, 3 full baths, large rooms, vaulted ceilings, two car garage, private rear yard, elevator and hurricane/wind resistant doors and windows. Upgraded finishes include tile floors, granite countertops in the kitchen and baths, stainless steel appliances and security system. There is a rooftop observation deck with spectacular water and island views. The home is being sold furnished and the community includes pool and clubhouse. Listing Date:6/7/2007, Original Price:$1,200,000, Listing Price: $1,100,000 (Price Change on June 26,2009), Property Type: Townhouse, On Market: 758 Days, Mile Marker: 4, Building Style: Townhouse,Three Story, Bedrooms: 2, Bathrooms: 3.0, Price Per Sq. Ft. $603.07, Square Footage: 1,824, Lot Sq Footage: 1,702, Year Built: 2005, Taxes $7,029.00, Tax Year: 2008, Exemptions: None, Ouch. Check out those taxes.Please note that this is the only one of these 3 story town homes currently listed on the MLS. That means all the other ones still sit on the developer's inventory where they (the developers) are waiting to drib and drab these empty town homes onto the MLS one at a time, hoping that the slow approach willartificially keep these homes high prices propped up. The problem with this developer's method of stemming potential home price drops is this: the pool of investors who can afford this type of place at the new listing price of $1,100,000 (woo-woo, you save $100,000 off 2005 prices) is quickly shrinking like a puddle on hot asphalt. The fact that this home was marketed at $1,200,000 for over 750 days with no price change tells us this developer has been in denial for much too long and is now beginning to realize . . much too late . . . that this market ain't coming back any time soon.

Market crash drives will to kill - (business.watoday.com.au) Economic crises prompt an increase in suicides, homicides and fatal heart attacks, but also a fall in road deaths, according to a European study published by The Lancet. Every one-per cent rise in unemployment leads to an increase in suicides of 0.79 per cent among people aged under 65 and a similar rise in homicides, say British researchers, poring over figures from European countries. By contrast, road mortality slumps by 1.39 per cent, because people walk more and drive less. The researchers at Oxford University and the London School of Hygiene and Tropical Medicine used data from 26 countries from the European Union between 1970 and 2007. They say many of the premature deaths can be eased through "active labour market programs" by governments. Every $US10 ($12.56) spent per person on supporting families, housing costs and providing unemployment compensation reduces the unemployment-related suicide rate by 0.038 per cent. "Financial crisis causes hardship for many ordinary people, but it does not have to cost them their lives," lead investigator David Stuckler said. "Our findings show that investing in active labour market programs can both help the economy and save lives." The researchers admitted that the study had several limitations, and only applied to rich countries, not poor economies. Figures from central and eastern Europe were sketchy or missing in some areas, and there were indirect ways in which a crisis could affect health.

OTHER STORIES:

Treasury Dials Back Plan to Aid Banks - (www.washingtonpost.com)

Tarp exit could be more difficult than planned - (www.ft.com)

Treasury pushes ahead with toxic asset plan - (www.ft.com)

White paper examines how to burst bubbles - (www.ft.com)

Treasury Picks Nine Firms for Toxic Securities Plan - (www.nytimes.com)

Bank of England holds key rate at 0.5 percent - (finance.yahoo.com)

U.S. Initial Jobless Claims Decreased Last Week - (www.bloomberg.com)

Congress reignites US stimulus debate - (www.ft.com)

G-8 Says Recovery Is Too Weak to Withdraw Stimulus - (www.bloomberg.com)

White House hit in skirmishes over spending - (www.ft.com)

In fundamental shift, consumers are saving rather than spending - (www.latimes.com)