KeNo's Housing and Economic Portal: Saturday August 29 Housing and Economic stories

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Rahm Emanuel Freddie Mac Connection Aired on Beck By Democratic Pollster - (www.youtube.com) – Good video. We reported on this in much greater detail on March 26th. Click through above for video. Rahm sat on the board of Freddie Mac, and made $16M in 2 years between Freddie Mac and another financial firm. He was there while Freddie Mac was cooking the books. Look at the crooked connections between Rahm, Whitacre, Mayor Daley and of course Jim Johnson (Fannie Mae).

Banks Help Small Debt Become a Big One – (www.nytimes.com) In his briefcase, Imar Hutchins carries a certified check for $25,000. It is a crazy amount to walk around with, but for the last nine months, a series of banks have refused to take the money, even though Mr. Hutchins owes it toward a mortgage on a small apartment building in Harlem. In fact, the $25,000 check is the fourth and largest payment that Mr. Hutchins has tried to make after he fell one month behind last year. Since then, the banks have rejected every penny he has sent. At bewildering speed, and without telling him, the original bank — Washington Mutual — invoked a clause in the lending note and moved to seize the building, at 763 St. Nicholas Avenue, near 148th Street. So many foreclosures are hitting the courts, the stories of greed and folly by all parties could fill volumes. But the machinery of foreclosure also has a brainless side. Even generally responsible people can get trapped among the shards of the global financial crisis. In 2005, lenders filed foreclosures on an average of 14 properties a day across the city. This year, it is 65 per day. “Banks get bought by other banks, they change their philosophies,” Mr. Hutchins said. “The people fall through the cracks. No one is really looking out for the customer.” While Mr. Hutchins’s case is just one foreclosure among thousands now moving through the courts, a judge saw it as an example of how things should not be done. “The facts in this case, in their simplicity,” wrote Justice Emily Jane Goodman, “illustrated the state of property foreclosures in New York and the economic relationship between banks and their borrowers, as well as the surrounding ironies.” Mr. Hutchins, 39, who, among other things, co-founded an elementary school in Atlanta while he was a student at Morehouse College, ran a vegetarian restaurant in Washington, and got a law degree from Yale, has lived in Harlem for the last five years. His grandfather Lyman T. Johnson sued the University of Kentucky to force it to admit black students in 1949. “My father was a Realtor,” Mr. Hutchins said. “I tried like hell to do anything but real estate.” In May 2006, he bought 763 St. Nicholas Avenue, which has seven apartments and a storefront, taking out a $470,000 loan. As tenants left, he renovated the apartments and began to collect higher rents. A few days ago, Mr. Hutchins welcomed a visitor into a ground-floor apartment that he is using as an office. The new floor had a high gleam. “The wood is from a Brazilian tree that grows up in water,” he said. “We got it because the guy upstairs kept flooding the apartment, and I thought it would do better in a flood.” Generous as the guy upstairs was with water, he did not pay his rent for a year and a half, Mr. Hutchins said. Another tenant got sick and couldn’t pay for a year. That meant two out of seven apartments in the building were a dead loss. A year ago in May, Mr. Hutchins missed a mortgage payment of $3,730. The lender, Washington Mutual, was then on the verge of the largest bank collapse in United States history. “First, I tendered $3,730 — that was a month late,” Mr. Hutchins said. “I didn’t want it to go 60 days. They rejected that. It made me look bad later. Then I tried to pay $7,500. I Fedexed the check to the bank. They returned it uncashed with a form letter.” Later, he tried to pay $17,500, and eventually the $25,000. Although lawyers for the bank did not respond to a request for comment, for Justice Goodman the central facts were not in dispute. “There is no evidence whatsoever that Defendant intended to ignore, neglect or default in this matter,” she wrote, adding that Mr. Hutchins “made numerous efforts to pay the two months that were late, and even attempted to pay more.” While Mr. Hutchins had regular communications with bank lending officers, no one told him that the bank had begun foreclosure. The notice was served on a tenant in the building rather than the owner, suggesting, Justice Goodman wrote, “bad faith by Washington Mutual, especially when taken with their refusal to accept payment.” With no reply from Mr. Hutchins, he was declared in default. When he learned of the action, he went to court, and Justice Goodman agreed to lift the default. Now Mr. Hutchins and the successor to Washington Mutual will meet in court to settle the amount he owes. Why wouldn’t a bank take money that it was owed? There are only guesses. One possibility, Mr. Hutchins said, is that the building is worth around $700,000, considerably more than the $470,000 original mortgage. The judge also wondered why. “Despite the Owner’s undisputed efforts to pay the Bank,” she wrote, “the Bank nevertheless brought proceedings to foreclose because, as stated by Plaintiff’s counsel at oral argument, ‘that’s their choice.’ ” That would fall under the unilluminating doctrine of “because they feel like it.”

Collapse Of The "Ownership Society" - (Mish at globaleconomicanalysis.blogspot.com) Bush's "ownership society" has collapsed under the dead weight of debt. There is too much debt and too little income to support it. Please consider President shifts focus to renting, not owning. The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities. The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates. Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home. In addition to an ideological shift, the move is a practical response to skyrocketing foreclosure rates, tight credit, and the economic crisis. Barney Frank The Hypocrite: "I’ve always said the American dream should be a home - not homeownership," said Representative Barney Frank, chairman of the House Financial Services Committee and one of the earliest critics of the Bush administration’s push to put mortgages in the hands of low- and moderate-income people. What a distortion of reality. Barney Frank was in the pocket of Fannie Mae and Freddie make and their biggest supporter for years. Now he plays on semantics in an unbelievable lie. He would have been better off keeping his mouth shut, but political hacks seldom if ever can.

Downsizing the dream - (themessthatgreenspanmade.blogspot.com) or most Americans, until the recent past, home ownership was a dream and the pile of rent receipts was the reality. From 1900, when the census first started gathering data on home ownership, through 1940, fewer than half of all Americans owned their own homes. Home ownership rates actually fell in three of the first four decades of the 20th century. But from that point on forward (with the exception of the 1980s, when interest rates were staggeringly high), the percentage of Americans living in owner-occupied homes marched steadily upward. Today more than two-thirds of Americans own their own homes. Among whites, more than 75% are homeowners today. Yet the story of how the dream became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It's not the story of the inexorable march of the free market. It's a different kind of American story, of government, financial regulation, and taxation. We are a nation of homeowners and home-speculators because of Uncle Sam. It wasn't until government stepped into the housing market, during that extraordinary moment of the Great Depression, that tenancy began its long downward spiral. Before the Crash, government played a minuscule role in housing Americans, other than building barracks and constructing temporary housing during wartime and, in a little noticed provision in the 1913 federal tax code, allowing for the deduction of home mortgage interest payments. Until the early 20th century, holding a mortgage came with a stigma. You were a debtor, and chronic indebtedness was a problem to be avoided like too much drinking or gambling. The four words "keep out of debt" or "pay as you go" appeared in countless advice books. As the YMCA told its young charges, "If you can't pay, don't buy. Go without. Keep on going without." Because of that, many middle-class Americans—even those with a taste for single-family houses—rented. Home Sweet Home didn't lose its sweetness because someone else held the title. In any case, mortgages were hard to come by. Lenders typically required 50% or more of the purchase price as a down payment. Interest rates were high and terms were short, usually just three to five years. In 1920, John Taylor Boyd Jr., an expert on real-estate finance, lamented that "increasing numbers of our people are finding home ownership too burdensome to attempt." As a result, there were two kinds of homeowners in the United States: working-class folks who built their own houses because they couldn't afford mortgages and the wealthy, who usually paid for their places outright.

‘Jingle Mail’ Comes to Hotels . . . - (www.ritholtz.com) ‘Jingle mail” isn’t just for homeowners anymore. From San Diego to Dearborn, Mich., an increasing number of hotel owners in the U.S. market are simply walking away from money-losing properties and forfeiting them to lenders. The rise in hotel forfeitures is the product of the worst hotel market since the early 1990s, with revenue declining by double-digit percentages. That has pushed the value of many hotels to less than the balance on their mortgages. Just like homeowners who mail their house keys back to the bank — so-called jingle mail — hotel owners see no hope in renegotiating their loans . . . To be sure, a delinquency doesn’t immediately or always translate to foreclosure. It often takes several months for a lender to foreclose on a property with a delinquent mortgage. And some delinquent borrowers manage to negotiate with lenders to avoid foreclosure or file for bankruptcy protection to thwart it. What is striking about the current trend is that several of the companies forfeiting hotels are publicly traded.“ (emphasis added)

Tax-Cheat Showdown: Fess Up or Stay Quiet? - (online.wsj.com) The Internal Revenue Service is staging a massive poker game. It has invited 52,000 UBS AG account holders to the table. Now that the U.S. and Swiss governments have resolved a longstanding dispute about disclosing the identities of secret Swiss bank accounts, the holders face an acute dilemma: Do they confess their tax-evasion sins and possibly give up a large portion of their offshore accounts? Or do they stay quiet, hoping to avoid detection, but risk far greater penalties or even criminal prosecution if exposed to authorities? Their decision is made harder because the IRS is doing its best to keep account holders in the dark about both the timing and reasons for which names are disclosed. That is because the IRS hopes to use the threat of disclosure as leverage, coaxing offshore tax evaders to come clean on their own. At this high-stakes game, numbers matter. A Swiss newspaper recently reported that the Swiss government will turn over 5,000 names, which is only a fraction of the total 52,000 accounts the IRS believes are used to avoid U.S. taxes. Some U.S. taxpayers hold more than one of the 52,000 accounts. While holders of secretive Swiss accounts are reluctant to talk to the media, their lawyers say many are still undecided. One factor in play: The IRS only has resources to prosecute about 1,000 criminal tax cases each year. "I'm surprised at how many are willing to gamble," said Kevin Packman of Holland & Knight in Miami. At least until recently, said George Clarke of Miller & Chevalier in Washington, the cost of a disclosure was persuading many with offshore accounts to take their chances: "For everyone I have talked to who decided to go forward with a disclosure, there are five who did not." Attorneys say that many of those who confess are likely to pay 40% or more of the total account value in taxes, penalties and interest, plus state taxes, penalties and interest. That doesn't factor in legal and accounting fees, which can run from $20,000 to more than $50,000 per taxpayer in an expensive area like New York. The IRS has vowed to be even more severe for those who don't step forward, by imposing massive, congressionally authorized penalties on offshore evaders. One recent example put the taxes and penalties on a hypothetical $1 million at $2.3 million, plus interest and the possibility of criminal prosecution. Then there are the odds that any particular name will be on the list. If no one can figure out how names were chosen, it becomes harder for tax cheats to game the system and avoid disclosure. "The best thing for the IRS would be if they get a large number of names and it's not clear how they were chosen," said Barbara Kaplan, of New York law firm Greenberg Traurig, who has UBS account holders as clients.