Monday August 31 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Tax Bills Put Pressure on Struggling Homeowners (as JP Morgan Chase profits) - (www.nytimes.com) Hard times are causing more homeowners to fall behind on their property taxes. But in thousands of cases, they are not responsible to their local governments, but to private companies that charge double-digit interest and thousands of dollars in service fees. This is because in recent years struggling cities and counties have sold their delinquent tax bills to the highest bidder. It seemed a painless way to turn old debts into cash to finance schools or public services. But housing advocates say the private companies may be exacerbating the foreclosure crisis, pushing out homeowners faster than would governments, which are increasingly concerned about neighborhoods becoming wastelands of abandoned properties. “In the beginning, you’re getting this immediate windfall of cash,” said Anita Lopez, the auditor of Lucas County, Ohio, which sold off more than 3,000 tax liens for $14.7 million. The county includes Toledo. “But when you think about abandoned properties, foreclosed properties — the cost to the community is far more expensive than the short-term benefits.” Investors say the arrangement actually benefits everyone. School districts, fire departments and public parks get an infusion of cash. The investors take on a risky but potentially high-yielding investment. And taxpayers do not have to pick up the slack from scofflaw landlords or tax evaders. Governments, of course, can charge interest and penalties too, and they foreclose on properties for back taxes. But governments charge interest rates that are half what private investors charge — often offering no-interest payment plans — and are also more likely to be concerned about the long-term prospects of neighborhoods. In Toledo, one of the areas hardest hit by the downturn and by private lenders holding tax liens, homeowners like Richard Fix are facing foreclosure for a few thousand dollars in overdue taxes. Mr. Fix said he lost his job with Chrysler in January 2008 and took a lower-paying job. As he and his family struggled to pay their mortgage, credit cards and other bills, he said they fell behind on $5,900 in taxes. “I’m in a no-win situation at this point,” he said. With the economy faltering and property values plunging, homeowners and landlords are falling behind on their bills or abandoning their property, just as governments are facing huge budget shortfalls. Private investors step in and buy tax liens, paying governments upfront all or part of the value of the taxes. The investors then get the right to foreclose on the properties, taking priority over mortgage lenders, and to charge interest rates as high as 18 percent on the unpaid taxes. “It beats the heck out of any certificate of deposit,” said Howard Liggett, executive director of the National Tax Lien Association. Because the sales occur in a patchwork of cities and counties across more than two dozen states, there are no figures tracking the number of tax-lien sales nationwide. The liens that are sold come from cases in which homeowners pay taxes to the local government, not through their lenders. But Mr. Liggett, whose group represents tax-lien investors, said they generated about $10 billion every year. In 2006, Lucas County began selling off its overdue tax certificates to a New Jersey company named Plymouth Park Tax Services, a subsidiary of JPMorgan Chase. It also operates under the name Xspand. The company, once run by the former governor of New Jersey, James J. Florio, was sold to Bear Stearns and then absorbed into JPMorgan after Bear’s collapse last year. Today, Plymouth Park is one of the largest players in the tax-lien business. Plymouth Park has filed more than 1,000 foreclosure actions against delinquent taxpayers, more than any single mortgage lender in the county. But it says that it has only foreclosed on 56 of those filings.

Radisson hotel at LAX files for bankruptcy - (www.latimes.com) The Radisson hotel at Los Angeles International Airport entered bankruptcy proceedings after its owner, Harp Group of Chicago, failed to renegotiate the 580-room property's $120 million of debt. A Chapter 11 petition for the hotel was filed in U.S. Bankruptcy Court in Chicago. Another Harp property, the InterContinental Chicago O'Hare hotel, also entered Chapter 11.

Dear California, I'm dumping you - (www.latimes.com) I thought it would last forever, but you've changed and I want out. Dear California, I've been thinking about this for a very long time, and I've come to the conclusion that we should go our separate ways. I thought I loved you and it would last forever, but I was so very wrong. I know that our relationship has lasted 50 years and that we should fight to stay together, but you've changed so much that, frankly, I don't know who you are anymore! When we first met I was young and rather naive, and I loved you unconditionally. I spent years running with abandon across your sandy beaches in the bright sunshine, playing in your beautiful parks and attending your top-rated schools, which were a national model for the other states. For 18 years or so, I can honestly say that I was truly in love with you, but then came your first major transgression: Proposition 13. Oh sure, you tried to tell me that property taxes were bad for our relationship, but I knew you were lying. Low taxes, you said, would bring us closer together. You wanted to have your cake and eat it too. You said we could build schools and roads and parks without that tax money, but even back then I knew you were in denial. I didn't leave because I thought you'd get over it and we'd still have a future. But, to be totally honest, I stayed with you mostly for your weather. No other state has your perfect little sunsets (don't get me started on that sexy Pacific Ocean), your 364.5 days of sunshine each year and your mild climate even in winter. I know you occasionally turned on me with your random earthquake tantrums, and you tried to chase me away with flames more than a few times, but I forgave you. I always forgave you, which I suppose says something about me. I was weak when it came to you, California. But now you're hurting everyone we know, and I can't stand by and watch. You've totally lost perspective, and I'm sinking into depression! We can't pay our bills, and the phone is ringing off the hook with creditors calling from all over the world. Children across the state are losing healthcare, more than 766,300 Californians lost their jobs in the last year, and we're at the top of the foreclosure charts. You need to change, and you refuse to admit it. For the first time in our relationship, I'm embarrassed to say that we are together. There's no doubt that I still have feelings for you, but since I lost my job in the newspaper industry and my house is being sold under duress, I want out. I'm leaving you, California, and you might as well know the truth; there's another state and I'm falling for it hard. Never mind where it is, let's just say that it's above you and leave it at that. What I will tell you is that I can afford to live there without stressing every day that my expensive electricity will be shut off, or that my water, which I can use only sparingly, will dry up.

Slideshow: The Decline of Dubai - (www.fastcompany.com) Great photos. Deserts have a way of reclaiming whatever is built upon them. In the case of Dubai, the global financial implosion has sent that process into overdrive. After six years of frenzied expansion, during which the emirate's population grew at 7% annually and nearly $600 billion went into construction (the world's tallest building! the world's largest shopping mall! the biggest man-made island! an indoor ski resort!), reality has come rushing into view. Dubai's expansion was as ambitious as it was improbable. Dubailand, a $64 billion mixed-use development initially planned at 107 square miles, was to be the world's largest collection of theme parks, shops, residences, and hotels. For now, though, its roller coasters, life-size dinosaurs, snowy mountainscape, and polar bears will remain a fantasy, one of the gaudier casualties of the economic downturn. While formal cancellations are rare in Dubai, a number of other projects have been delayed or scuttled, including an underwater hotel; a Tiger Woods golf course; a residential community set among full-scale replicas of the Seven Wonders of the World; a rotating skyscraper; and a beach designed by Versace, complete with chilled sand. With requisite hookah and a jeroboam of Champagne, a group of German businessmen celebrate their purchase of an Alaskan oil field at Plastik Beach Club, a playground touting itself as "exclusively for the filthy rich and aesthetically perfect." Public intoxication and displays of affection are jailable offenses in Dubai, but private clubs are quietly ignored by the authorities, often rendering them happy havens of vice. Plastik offers a helipad and a dock for its wealthy guests, many of them Russian; as the economy crumbles, they party on. One American expat says that while Dubai's promise has faded in the economic downturn, "people who dream of a better life dream of coming to Dubai. You can call it the American dream." Dubai was a modest trading settlement until the 1980s. Fueled by cheap credit, tax-free living, and limitless ambition, the city-state pushed into the desert and up to the sky, culminating in the frenetic growth of the past six years. Now, with cash scarce and many of Dubai's expats moving away, the cranes (a quarter of the world's supply) have quieted and the streets are all but empty. A resident from Ireland reflects that living in Dubai during the rush was "like being on a drug. Every six months, the city would morph into something completely new." Kayla, a South African, recalls, "Everyone was talking about how it couldn't go on like this. Then, all of a sudden, everything changed."

Pimco, Goldman Sachs exit Fed mortgage bond program - (www.latimes.com) The Federal Reserve Bank of New York plans to get along without the help of bond giant Pimco or Goldman Sachs Group as the central bank continues its massive purchases of mortgage-backed securities. The New York Fed on Monday said it had "streamlined" its 8-month-old, $1.25-trillion program to buy mortgage bonds from four investment managers to two. Saying the changes were "not performance related," the bank said it was retaining Wellington Management Co. and BlackRock Inc. Newport Beach-based Pacific Investment Management Co. and Goldman Sachs Asset Management will exit. The bank said it had "anticipated that it would make adjustments to its use of external investment managers as it gained more experience with the program. . . . The New York Fed is committed to implementing its programs in the most efficient and cost-effective manner possible." The bank didn't indicate why Wellington and BlackRock won out over Pimco and Goldman, or whether the latter two wanted out for some reason. A Goldman spokeswoman said the firm had no comment. A Pimco spokesman couldn't be reached. The mammoth purchase program is aimed at keeping a lid on mortgage rates by providing a constant source of demand for home-loan-backed bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae. Bloomberg News calculates that Pimco and Goldman each stood to earn $7.8 million in fees per quarter once the Fed's holdings of bonds reached $1 trillion. The Fed has purchased $742 billion of mortgage bonds so far, according to Bloomberg's tally. Pimco in July surprised Wall Street by dropping out of the running for the Treasury's program of partnering with money managers to buy rotting mortgage bonds from banks.

L.A. budget deal threatens to unravel - (www.latimes.com) Strategies to close a $530-million budget shortfall appear to be in jeopardy as plans to get union concessions falter and contract talks with police and firefighters grow increasingly acrimonious. Nearly three months after he signed off on a plan to eliminate a $530-million shortfall, Los Angeles Mayor Antonio Villaraigosa still has not won enough concessions from city workers to avert deep cutbacks that could hit L.A.'s police hardest. The City Council left last week for a summer recess even though solutions to the budget crisis threaten to unravel. Contract talks with public safety employees have grown acrimonious, with Villaraigosa denouncing a publicity campaign by the firefighters' union against more cuts. A proposal to give early retirement to 2,400 civilian workers -- slashing $200 million each year from the payroll -- has run into problems over how the city would pay for it. And city financial advisors privately have begun warning that even if the council signs off on early retirement and wins new agreements with public safety employees, the city will still fall short by an estimated $40 million. In the meantime, the Planning Department has been hit by furloughs. The Fire Department has begun shutting down rescue units and ambulances on a rotating basis. And Police Department commanders have begun developing a contingency plan to furlough officers at least two days a month starting in October. If negotiations with police and fire unions reach an impasse, the city has the authority to unilaterally slash paychecks for officers and firefighters -- as well as the number of hours they are on duty. "We are moving toward impasse and that's a shame because . . there is a way out," Villaraigosa said last week. "I certainly understand that it's tough to make those sacrifices. But what's the alternative, to go into bankruptcy? No, we can't do that." Villaraigosa and council leaders have asked police to accept a 14% cut in overall compensation -- salaries, bonuses, overtime and benefits. At the same time, the mayor has vowed to continue his campaign pledge to expand the department by 1,000 officers, saying it is essential to holding down violent crime.

OTHER STORIES:

Lies, Damn Lies, and the Real Estate Recovery - (www.minyanville.com)

No quick recovery ahead for housing - (www.finance.yahoo.com)

Few expect boom after this bust - (www.msnbc.msn.com)

Brace for Wave of Foreclosures, Dam About to Break - (www.Mish)

Why the New American Real Estate Dream Is Renting - (www.online.wsj.com)

Ten Key Charts on Property Values - (www.newobservations.net)

Wall Street sees shoppers as key to rally's future - (www.news.yahoo.com)

Commercial property sales plummet - (www.philly.com)

Does the US have enough money to solve its problems? - (www.dailyfinance.com)

You think Ireland is bad? Look at Spain - (www.tribune.ie)

Some saw housing bubble and sold; trick now is spotting the bottom - (www.latimes.com)

California real estate: No light yet in tunnel - (www.marketwatch.com)

Greetings from Bulgaria - (www.theautomaticearth.blogspot.com)

America's Japanese Banks - (www.blogs.reuters.com)

Birthers! Banks and insurers profit from your fears - (www.huffingtonpost.com)

How insurance firms twist debate - (www.cnn.com)

Fear is weapon of choice for opponents of reform - (www.washingtonpost.com)

Health Care War! - (www.moneyandmarkets.com)