KeNo's Housing and Economic Portal: Friday August 28 Housing and Economic stories

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TOP STORIES:

Buyer wants money back for townhouse "hell" - (www.dailybusinessreview.com) When Pamela Hart paid $275,000 for a townhouse in one of Cornerstone Group’s new developments in Riviera Beach, she thought she was making a great purchase. The 59-year-old county employee said she received a $10,000 discount when she bought what she believed was the last unit for sale in Sonoma Bay. But in 2007 soon after moving in, she said she learned that most of the units were vacant and that she had moved into a development plagued by crime, foreclosures, questionable sales and some unwanted renters. After trying to get out of what she describes as a “living hell” that makes her fear for her safety and unable to sell her unit, she recently filed a lawsuit in Palm Beach Circuit Court against Cornerstone’s Sonoma Bay Inc. seeking to return the unit and unspecified punitive damages. Hart claims the developer marketed the property as an owner-occupied community but turned it into a rental community that is poorly maintained and is dangerous to live in. “There is limited security, robberies, drug sales, unqualified renters, untagged vehicles and rat infestations in the garbage area,” she said. Hart said she has tried to sell her townhouse but on the day of an open house prospect buyers were scared away because “some guys had a dog fight” in front of her property. She said the apartment next to hers was recently set on fire and last weekend there were “some kids outside shooting bullets up in the air.” “I have become a prisoner of my own home,” she said. Riviera Beach police and the mayor are aware of the problems at Sonoma Bay. They recently attended a homeowners association meeting at the development and made suggestions to the developer — which still controls the association because it owns more than 10 percent of the units — on how to improve safety in the community. Among the police proposals: adding round-the-clock security guards. The residents at the Sonoma complain that the developer’s sales staff said a gated entrance would be staffed. Jorge Lopez, a Cornerstone partner, said the company did not make any promises to provide 24-hour security and said there is a guard at the property at various times but the homeowners association — which is financially strapped because the majority of owners, many in various stages of foreclosure, aren’t paying fees — can’t afford to pay a guard full-time. Lopez said he is in talks with the police and expects there will be changes in security within 60 days. He declined to detail his plan saying it is still in discussion. Representatives of the Riviera Beach police department did not return a call by deadline. Section 8 renters: According to the lawsuit, Sonoma Bay has rented some of the 60 developer-owned units in the 302-unit community to low-income renters under the federal Section 8 program. The city of Riviera Beach has an ordinance that prohibits developers from renting to recipients of Section 8 vouchers, the lawsuit said. In a letter to the U.S. Department of Housing and Urban Development which administers the program, Police Chief Clarence Williams told the agency that the Sonoma Bay master plan approved by the City Council does not allow any part of the development be used for subsidized rental housing. Lopez said Cornerstone is renting “a few” of the units it owns to Section 8 renters but other owners in the development also are accepting Section 8 renters.

Where did that bank bailout go? Watchdogs aren't sure – (www.mcclatchydc.com) Although hundreds of well-trained eyes are watching over the $700 billion that Congress last year decided to spend bailing out the nation's financial sector, it's still difficult to answer some of the most basic questions about where the money went. Despite a new oversight panel, a new special inspector general, the existing Government Accountability Office and eight other inspectors general, those charged with minding the store say they don't have all the weapons they need. Ten months into the Troubled Asset Relief Program, some members of Congress say that some oversight of bailout dollars has been so lacking that it's essentially worthless. "TARP has become a program in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested," a special inspector general over the program reported last month. The "very credibility" of the program is at stake, it said. Access and openness have improved in recent months, watchdogs say, but the program still has a way to go before it's truly transparent. For its part, the Treasury Department said it's fully committed to transparency, and that it's taken unprecedented steps to report the status of TARP to the public. It regularly posts information on which banks have received money, as well as details about each of those transactions. Further, Treasury said, it doesn't agree with all of its watchdogs' recommendations, which it said could hamper the program's effectiveness. TARP was passed in the midst of last fall's financial meltdown as a way to keep American banks from falling deeper into the abyss. The program was controversial from the start. Its supporters say it's helped spark bank lending in the country, but critics say it's unfairly rewarded the big banks and Wall Street firms that pushed the economy to the brink. The program also has undergone a major transformation. When the Bush administration first went to Congress for the money, TARP's main purpose was to buy up hundreds of billions of dollars in bad mortgages and so-called mortgage-backed securities that were bought and sold on Wall Street. Today, TARP consists of 12 programs that sent those hundreds of billions of dollars to big banks, but it's also bailed out auto companies, auto suppliers, individuals delinquent on their mortgages, small businesses and American International Group, the big insurance company. The watchdogs now must oversee the maze that TARP has become. Just because a lot of people are watching, however, doesn't mean they get everything they want to see.

Colorado foreclosures filings hit record high - (www.9news.com) State housing officials say foreclosure filings hit a record high in the second quarter with 12,135 homes entering the initial proceedings of bank repossession. "The second quarter was a very active quarter and so there were certainly more new . . . foreclosures opened than in any other quarter . . . we expect that is larger than numbers say 20 years ago," Ryan McMaken of the Colorado Division of Housing said. Nearly 5,000 foreclosures were completed, meaning the homes were returned to the bank, according to Colorado Division of Housing figures released Thursday. Metro area counties showed declines in completed foreclosures while Mesa County experienced the sharpest increase at 143 percent. Completed foreclosures in El Paso County increased 30 percent. "The counties that in the past have faired the worst, like Adams County, Arapahoe County, Denver County, have done relatively well lately. We're starting to see renewed growth or really some very unexpected growth in places like El Paso County, Douglas County, but Weld County, which has long been a challenging county for foreclosures continues to have fairly high numbers," McMaken said. During 2008, there were 39,333 total foreclosure filings and 21,301 total completed foreclosures. McMaken spoke at length about why the numbers seem to be reversing a trend where foreclosure numbers appeared flat. "Well, there were nationwide as well as in Colorado a variety of actions taken by big mortgage companies and investors like Fannie Mae who put moratoria on mortgages. That meant that they weren't moving mortgages forward, they were taking their time to see if their were strategies that could be employed to slow foreclosures down. "Now in March they started to phase those out and so what that means is that during the second quarter you had a lot of people having new foreclosures filed and foreclosures were moving quickly toward the final foreclosure sale at auction and so we just generally saw more foreclosure activity during the second quarter than the first quarter and that's why we saw the increases. "Fifteen percent in both new foreclosures filed as well as completed foreclosures. And so that's what concerns us. If you compare actually the first half of this year to the first half of last year it's still fairly flat but we now need to keep an eye on what things are going to do this year because of that growth from the first and second quarter," he said. Going forward, McMaken says it is important to follow adjustable rate mortgages as well as unemployment numbers.

Paulson & Goldman Sachs, The Plot Thickens - (www.dailybail.com) SCARY VIDEO. A reader emailed us this excellent video from Channel 4 News in Great Britain. Their economics reporter is Faisal Islam, and he's put together a little clip that you'll enjoying seeing. Interestingly, on he laments the lack of transparency with the UK bailouts and praises our own. Odd in that most observers here make the same complaint about our own particular bailout bastion of disaster. But the plot has thickened over the connections between the former US Treasury Secretary Hank Paulson and his former company Goldman Sachs. It centres on the decision made to bailout AIG, which saw some $13 billion of US taxpayers money go to Goldman, its biggest counterparty. On this blog last week I wrote: ‘Fascinatingly, Mr Paulson was aware of the potential for a conflict of interest in those decisions so he went to the lawyers. “It would have been wrong to recuse myself, so I got a waiver from the ethics agreement from the Government ethics office,” he recently told Congress, in little-reported remarks. That waiver has now been published here after sterling investigative work from the New York Times. It can be viewed here. It was granted by a White House counsel on the day of the decision about AIG, which is not the normal course of events according to the New York Times. The newspaper also found out through freedom of information about the disproportionate number of telephone calls being made by Paulson to Lloyd Blankfein, Goldman’s CEO at the time of the bailout. Two things I would draw from this. First, why don’t we have similar disclosures about the UK bailouts? Second, Hank Paulson’s forthcoming book should make for rather interesting reading.

Forced DNA Tests on Patients – (www.safehaven.com) Like a good joke, the conspiracy theories and rumours that get legs are the ones with a grain of truth in them. Of course, if they actually are true, so much the better. Here's a look a few of the gams that recently have been exposed. FBI and Healthcare: If you'd like to experience the full savagery of the health-care system/big pharma triangulated with a government agency and the insurance companies, try having a chronic health condition. Some time back, I spent two years in pain management, have friends who are still pain-management patients and so I know of what I speak. Pain management doctors and patients around the country are hounded by both insurance companies and the DEA to severely ration medication. The insurance companies restrict treatment because they don't want to pay for any chronic condition since it affects their profits. The DEA is involved in pain management because legal drugs encroach upon its territory and, therefore, its profits as well. Here's the shocker and if I didn't know both the doctor and patient I might be sceptical, but I do and I'm not. In the last few weeks the FBI has descended on doctors' offices in New York, and presumably elsewhere, to demand that patients' mouths be swabbed for DNA samples . . . and whatever other information can be gleaned from a mouth swab, but, really, it's for the DNA. If you think this is one of the most egregious invasions of civil rights in the past few weeks and wonder why no one stands up to them, it's because there are immediate consequences. If the doctor does not comply, his or her license to prescribe opiates is suspended; if the patient refuses to comply, he or she won't be given medicine. So, a near 100% level of cooperation guaranteed. The FBI's recent involvement in healthcare is in addition to the DEA's, which for years has been raiding doctors' offices -- in front of patients and staff -- to confiscate patient files and intimidate the sick and their caregivers. They pick off the weak, chronically sick who are defenceless in every way. Although seemingly minor by comparison, something similar happened to me at the PA Department of Transportation the other day. I had to remove my glasses for a drivers'-license-renewal picture because they might impair the retinal-recognition feature built into the new card. Here's an unintended consequence for you: I'm an organ donor. If my eyes end up in someone else's head does that mean he or she will inherit my driving record and any other records linked to a drivers' license? In the meantime, I'm curious to know where this is all going and under what ruse we'll be micro chipped.

OTHER STORIES:

House foreclosures set another record in July - (www.reuters.com)

Foreclosures rise 7 percent in July from June - (www.news.yahoo.com)

Foreclosure pipeline grows in the Bay Area - (www.contracostatimes.com)

Foreclosure fallout hangs heaviest in FL - (www.heraldtribune.com)

A market addicted to foreclosures? - (www.boston.com)

Interview with Deutsche Bank about 'underwater' mortgages - (www.money.cnn.com)

Why you should ask for lower rent - (www.marketwatch.com)

Despite What Cramer Said, Housing Has Not Bottomed - (www.seekingalpha.com)

Three Ways to Predict the End of the Housing Bounce - (www.minyanville.com)

Housing Rebound: Why It Could Take 20 Years - (www.seekingalpha.com)

My First 100 Days as Director of SEC Enforcement - (www.sec.gov)