KeNo's Housing and Economic Portal: Wednesday September 16 Housing and Economic stories

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Landlord Sues Sheriff For Delaying Evictions - (www.cbs2chicago.com) He's known across the country as the sheriff who stood up for the little guy, the renter or owner caught in the foreclosure crisis. Time magazine named Cook County Sheriff Tom Dart one of its most influential people. But now, a local landlord is serving Dart with his own notice: a lawsuit. It's being filed by a man who owns 50 buildings with hundreds of rental properties in 15 communities. You could say he's suing Sheriff Dart out of sheer desperation. "We wouldn't say this was the Taj Mahal, but what we do say is we give people a good, clean place to live," said Mike Slinkman. But longtime landlord and property owner Mike Slinkman says that good reputation might not be enough to keep him in business anymore. And he blames Tom Dart. "My only recourse is Sheriff Dart. That's what the law is. And when he's failing to do his job egregiously, I am forced to, I'm fighting for my livelihood," Slinkman said. That fight will now take place in federal court. Slinkman is filing a lawsuit on Wednesday, claiming Dart and his deputies are deliberately slowing down evictions for political gain, and he says it's costing him tens of thousands of dollars in lost rent. "They didn't do evictions half of November, almost all of December, almost all of January and almost all of February," Slinkman said. Could the cold weather this winter be to blame? Slinkman doesn't think so. "He's continuing to do it in April, May, June, July," Slinkman said. After the economic collapse, Dart's been a champion, of sorts, for the downtrodden, stopping mortgage foreclosure evictions last fall. That helped land him on the cover of Time magazine as one of the country's most influential people.

AFL-CIO, Dems push new 0.1% Wall Street tax - (www.thehill.com) The nation’s largest labor union and some allied Democrats are pushing a new tax that would hit big investment firms such as Goldman Sachs reaping billions of dollars in profits while the rest of the economy sputters. The AFL-CIO, one of the Democratic Party’s most powerful allies, would like to assess a small tax — about a tenth of a percent — on every stock transaction. Small and medium-sized investors would hardly notice such a tax, but major trading firms, such as Goldman, which reported $3.44 billion in profits during the second quarter of 2009, may see this as a significant threat to their profits. “It would have two benefits, raise a lot of revenue and discourage speculative financial activity,” said Thea Lee, policy director at the AFL-CIO. “The big disadvantage of most taxes is that they discourage some really productive activity,” she said. “This would discourage numerous financial transactions. People flip their assets several times in an hour or a day. They make money but does it really add to the productive base of the United States?” Lee said that taxing every stock transaction a tenth of a percent could raise between $50 billion and $100 billion per year, which could be used to pay for infrastructure projects and other spending priorities. She said the tax could be applied nationwide or internationally. The proposal would hit especially hard those hedge funds and large banks earning hefty profits despite the shaky economy from a practice known as high-frequency trading. High-frequency traders use powerful computers to conduct hundreds of thousands of orders in mere seconds, taking advantage of slower traders. Only the biggest investment firms can afford to develop the technology, which delivers handsome profits at little risk. The growing popularity of the practice has contributed to the soaring volume of trades on Wall Street in recent years and, some critics argue, market volatility and rampant speculation. High-frequency trading is estimated to earn about $20 billion in profits for the nation’s biggest investment firms, who guard the their practices zealously. Goldman Sachs, for example, has accused a former computer programmer of stealing the valuable code, launching a high-profile legal battle. The AFL-CIO and some allied Democrats would like to cut down on the overall level of trading, or at least give the U.S. government a piece of the action, which would likely tamp down trading. Democrats and labor officials would also like to take a bite out of Goldman’s profits. Liberals are angry the company, which immersed itself in the frenzy of speculation leading to last year’s financial collapse, is now making huge profits after accepting (and repaying) $10 billion in government aid. Goldman employees are on track to earn an average of more than $700,000 this year. There is also a growing realization among Obama administration officials and lawmakers that tax increases may be necessary to curb the ballooning federal deficit. The idea of taxing financial transactions has gained some support on Capitol Hill and among senior government officials in London, a major foreign financial center.

California's Other Real-Estate Crisis: Internet Servers - (www.thebigmoney.com) Earlier this summer, Apple (AAPL) settled on a site for a mammoth, $1billion data storage center, which industry analysts suggest will be the hub of a huge cloud-computing initiative. At 500,000 square-feet, it's five times larger than Apple's current data warehouse, which points to the growing role of cloud computing in commercial and communication developments. Equally symbolic is the location: Maiden, N.C., about 2,600 miles from Apple's Cupertino, Calif., headquarters. It's not as outlandish as Google's 2008 patent filing to build an offshore server farm powered by hydroelectricity, but it's just as telling. Developers of IT storage facilities are pressing pause on Silicon Valley. As recently as mid-2008, the area was being called the "hottest data center market," but now companies are canceling or mothballing plans for new sites in the area. Companies that are big enough to build their own server farms are also decamping. In addition to Apple's foray into North Carolina, both Google(GOOG) and Microsoft (MSFT) plan to build facilities in Iowa. With corporations cutting expenses as the federal government boosts spending, the nation's capital is shaping up to be a new data Mecca. The shift could lead to shortages of data-storage space in the near term, and it will certainly reshape Silicon Valley even after the economy rebounds. But companies aren't putting the brakes on Silicon Valley because of lack of demand. Space in these vast, climate-controlled warehouses crammed with servers is more of a hot commodity than ever, thanks to the proliferation of social networking and cloud computing. Tech companies, social networking platforms, and even the government have been embracing the cloud concept—in which data is stored on a distant server farm instead of on your hard drive—which creates a huge demand for data-storage centers to warehouse all that stuff. According to market research firm IDC, the 487 billion gigabytes of data created in 2008 is on pace to quintuple by 2012, and all those bytes have to go somewhere. The reason Silicon Valley is losing out is a mortgage problem. Lenders can't or won't make the loans that data-storage companies need to build. Commercial real estate around the country isgetting hammered these days; its collective value is down 36 percent from October 2007 and the National Association of Realtors says the market will remain in the gutter until mid-2010. Keep in mind, that's with the aid of the government's TALF financing for commercial loans, which it just extended until next year. For California in particular, a state facing a budget crisis so severe it was reduced to paying its bills with IOUs, these postponed projects hurt its bottom line. According to Mark Wetzel, CFO of data-storage center developer Dupont Fabros Technology, an average facility costs about $260 million to build. While they're not labor-intensive once they're up and running, 40 percent of that $260 million goes to pay carpenters, engineers, and other laborers. In other words, that's a little more than $100 million per project that's not going to be paid to workers and taxed by the state.

How To Push Yet More Housing Cost On Taxpayers - (www.trulia.com) Let's face it - most of us would like to buy more home than we can afford. We all want more room, a bigger back yard, and/or a pool, but we just can't seem to make the numbers work. We either can't come up with a larger down payment, or we just don't have enough income to qualify for a bigger loan. Most home buyers think the only way they can get the home they truly want is to make a low-ball offer, and hope the seller is desperate enough to accept. Unfortunately, this tactic usually insults the sellers and dismisses you in their minds as a serious buyer. What if there was a way to stretch your dollars so that you could afford that bigger house without insulting the seller. Would that be something you would want to know about? Of course you would. This strategy has been around for a long time, but few people understand it and how to utilize it. This strategy is called a seller paid buy-down. Here is how it works. Suppose you see a house that you really like that is listed for sale for $800,000. You are going to make a 20% down payment. You want to offer $775,000. Let's look at the numbers at $775,000. The down payment is $155,000. Let's assume a 30 year fixed rate, no point loan is at 5.625%. The payment would be $3569 per month, and the property taxes roughly $710 per month, for a total of $4279 per month. You are worried that the seller is not going to accept this reduced price offer, and you certainly don't want to insult them, because you truly want the house. So you decide to use the seller paid buydown strategy. Instead of offering $775,000, you make a full price offer of $800,000, and you ask the seller to credit $25,000 toward your closing costs. What do you do with this $25,000 credit? You buy the interest rate down to 4.25% by paying almost 4 points, for example. By buying the rate down to 4.25%, your monthly payment has been reduced to $3149 per month. The property taxes are slightly higher, $733 per month. The down payment is $5000 more. But look at the impact this strategy has - a monthly savings of $397 per month! Now, here is the icing on the cake - although the seller made a contribution to buy your rate down, you get the tax deduction for the $25,000 in points paid all in the year that you purchase (check with your tax preparer to verify)!

FHA now backs 23% of mortgages - (www.usatoday.com) Almost a year after the federal government launched its rescue of the housing market, nearly one in four new mortgages is insured by the Federal Housing Administration. With less than a month to go in the 2009 fiscal year, the FHA is on pace for its busiest year. From Oct. 1 through mid-August, applications for FHA single-family-home mortgages were up 50%, to 2.52 million, from the same period a year earlier. Approvals for purchases, refinancings and reverse mortgages rose 70% to 1.67 million. Eighty percent of the FHA mortgages for purchasing homes went to first-time buyers drawn to the FHA's low-down payment requirements, starting at 3.5%. Private lenders making conventional loans typically require at least 10% down. The FHA's market share, about 3% in 2006, has swollen to more than 23%. With credit still tight, many borrowers could not get a mortgage without FHA help. FHA loans "are one of the most important sources in this market," says Mark Zandi of Moody's Economy.com. "Without FHA, the housing slide would be much more severe. We wouldn't be talking about a recovery now. We'd still be talking about a crash." FHA loans also have become more popular because of the demise of many subprime lenders, which sometimes allowed buyers to purchase a property with nothing down and no documentation of income. In addition, FHA increased its loan limits at the beginning of the year. Previously, the maximum had been $362,790. The new ceiling raised that to $729,750 in high-cost areas such as Boston, New York and Washington, D.C. Also fueling demand for FHA-insured loans is this year's tax credit of up to $8,000 for first-time home buyers. But as FHA insures more loans, it is also assuming more risk. Foreclosures on homes with FHA mortgages rose to 1.76% in June from 1.6% a year ago, and the default rate — for mortgages 90 days or more delinquent — was 6.88%, up from 5.57%. "I'm very concerned about risk," says FHA Commissioner David Stevens, who adds that risk is mitigated in part because applicants today are more solid than those in recent years. Borrowers with FHA-insured loans now have average credit scores of about 690, compared with about 630 two years ago. FHA also has tightened lending standards, requiring a 10% down payment for those with credit scores below 500.