Sunday November 1 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

$25M mansion now up for a paltry $6M - (www.chicagobreakingnews.com) An upcoming auction of a Burr Ridge home isn't your typical property sale event. But then, Villa Taj isn't your typical suburban home.The 30,000-square-foot abode has not one but six master suites, each with its own full bath, dual 30 feet by 30 feet living rooms, a ballroom, nine fireplaces, 15,000 square feet of wrap-around terraces and a 20-car garage, to name a few of the features. Materials used in the construction include Jerusalem limestone, mahogany, Italian marble and sterling silver doors. One more detail: It's never been lived in. In fact, it doesn't have a certificate of occupancy yet. Owners Husam Aldairi and his wife, Rawaa Attar-Aldairi, built the house for themselves and their three children. Aldairi took almost 1 1/2 years off from his dental practice to monitor the construction but halfway through the project, Attar-Aldairi said she decided the house was too big. Bidding at the Nov. 4 auction will start at $6.265 million for the house, which was on the market earlier this year for $25 million. The house hasn't been appraised but the property, on the Cook County side of County Line Road, was partially assessed last year at $613,587. "It hasn't been appraised because there's nothing to compare it to," said Michael Berland, a real estate broker whose firm, Chartwell Group LLC, is handling the auction. "It's impossible to figure out a number, it's like picking a number out of the air. It looks like a mosque and it's built like a fortress, with 14-inch walls." More than $87,000 of liens have been filed against the property, according to public records. Berland said those will be paid out of auction proceeds and the buyer will receive title free and clear. In the hopes of attracting a buyer, the auction company is spending $100,000 to market the property nationally and in Europe, the Middle East and Asia. Attar-Aldairi said the home just needs that special someone who'll appreciate the home's Spanish and Moroccan accents and the attention to detail. "We decided we wanted to do something unique," she said. "[The buyer] has to be someone interested in the arts. "It's not your common regular person who walks in saying 'this is your common house, I like it.'" Berland said the property isn't being sold absolute, meaning it won't automatically go to the highest bidder, regardless of price. But, he added, "I've got a very motivated seller. He needs to sell it now."

Foreclosure Prices Don't Lower Property Tax In FL - (www.miamiherald.com) This is supposed to be the perfect time to buy a home. Interest rates are low, prices have fallen and there's a glut of available houses for sale. So when Glenn Suarez decided five months ago to buy a new home for his growing family, he figured he'd have an easy time of it. It hasn't quite worked out that way. ``I was very naive when I started this process of looking for properties,'' says the married father of two, whose family is being crowded out by a fast-growing 3-year-old. Instead of an ideal situation, he and many other buyers are finding unrealistic sellers, mysterious middlemen, uncooperative lenders and property tax rates that don't reflect reality. The result is a huge disconnect in home values that is stalling an already complicated market. And the longer it takes to clear the high levels of inventory, the longer it will take us to get out of the current real estate mess. SEARCH FOR ANSWERS: Just consider Suarez, who found a home he and his wife liked in South Miami-Dade and called the person who was marketing the property. From the get-go, he couldn't get that person to give him straight answers to his many questions. Tired of the runaround, he hired a real-estate lawyer to look into the property, which is in foreclosure. That's when he learned the person whom he thought was a listing agent was really some kind of loss-mitigation specialist. He still doesn't know who that person represents. Determined to purchase the house, he continued to use the lawyer to pursue a possible sale. The house had sold for about $600,000 a couple of years ago and was now on the market for about half that price. Suarez mistakenly thought his property taxes would be based on the new, lower value. But the Miami-Dade County property appraiser isn't recognizing the sales of foreclosed properties. As a result, values for tax purposes don't reflect the lower prices of many homes now on the market. That pretty much killed Suarez's interest in the home. He wasn't prepared to pay more property taxes than the house merits. ``This is happening to a lot of people,'' he says, referring to a friend who also backed out of a recent purchase after learning the property taxes would be based on a higher value. ``It just took him right out of the market.''

Detroit's Mortgage Mod Plan: We'll Just Burn Down Our Houses - (www.businessinsider.com) Half of all the home fires in Detroit are caused by arson. And many of those who set fire to houses are set by desperate homeowners seeking to avoid foreclosure by collecting on fire insurance payments. Call it Detroit's version of mortgage modification. “As the city has been plagued with foreclosures and an unemployment rate above 28 percent, fire officials have said that some despairing owners are risking prison to get out of debt, and vacant, foreclosed homes are being torched,” the Detroit news reports. Arson is up 27.8 percent since 2004, with 6,486 arsons investigated by the Detroit Fire Department's Arson Squad last year. Arson-related insurance fraud in Detroit is up roughly 40 percent from 2005 to 2008. Detroit has the nation’s worst delinquency rate, at 10 percent of all mortgages.

Developers Enforce Contracts With Remoseful Buyers - (www.dailybusinessreview.com) Bucking the Florida Supreme Court, a federal appellate panel waded into the battle between condo developers and buyers over the use of a consumer protection law to void contracts. The 11th U.S. Circuit Court of Appeals sided with developers in a Sept. 30 decision, giving them wide latitude in claiming an exemption from the Interstate Land Sales Full Disclosure Act, better known as ILSA. Passed in 1968 to protect consumers from unscrupulous swampland salesmen, the plaintiff bar seized on the law when the real estate bubble burst as a way to get their clients out of their purchase contracts with developers and get back deposits. Much of the litigation centers on promises by developers to deliver their product within two years to be exempt from ILSA’s onerous requirements, such as providing a building report to the buyer and registering with the U.S. Department of Housing and Urban Development Judge Ed Carnes, who wrote the 18-page opinion for the unanimous panel, said buyers have used ILSA disingenuously, changing their minds on what morphed into a bad real estate investment once the market turned. Circuit Judge Gerald Bard Tjoflat and U.S. District Judge Joseph M. Hood, sitting by designation from Lexington, Ky., concurred. “The bigger the bubble, the bigger the pop. The bigger the pop, the bigger the losses. And the bigger the losses, the more likely litigation will ensue,” Carnes wrote. The case is centered on a Lee County condominium contract signed in 2005 by Alan and Karen Stein for a unit at the Paradigm Mirasol development for $895,000. The Steins paid $205,370, including a $179,180 deposit, and sued under ILSA for the return of the money, the appellate opinion said. The six-story condo building was completed within the two-year timeframe, but the Steins argued they should be able to get out of their contract because they did not receive the building report required by ILSA. Their argument centered on the vast number of contract provisions that would allow Paradigm to go beyond the two-year limit. The so-called “force majeure” clause starts with acts of God and goes from there. “After the housing bubble burst, the Steins had second thoughts about their decision to purchase the condominium unit,” Carnes wrote. “Wanting out of their contract, they seized onto the Interstate Land Sales Full Disclosure Act, a federal statute that has become an increasingly popular means of channeling buyer’s remorse into a legal defense to a breach of contract claim.” Three weeks before the scheduled closing date, the Steins asked for their down payment back, claiming the developer violated ILSA. Paradigm refused, saying the property was exempt from the law because it was promised to be complete within two years.

Experts: Plummeting prices have rendered condos nearly worthless - (www.azcentral.com) New federal loan-guarantee rules imposed to fend off future government losses from plummeting condominium prices have rendered condos utterly worthless, Valley real-estate experts said. The Federal Housing Administration rules, which took effect Oct. 1, prohibit any new FHA-backed loans on condo units in projects that include more than 25 percent commercial space. In addition, no single investor - including the developer - may own more than 10 percent of the units in a particular project. That particular restriction alone creates a catch-22 from which condo builders most likely cannot escape, said mortgage originator Jill Hoogendyk of Wallick & Volk in Glendale. Another rule that has sellers and brokers scratching their heads prohibits FHA loans in condo developments that aren't "primarily residential," which could be taken to mean the FHA won't guarantee loans in future mixed-use projects. "I'm predicting that what we'll see is whole condominium complexes sitting empty," Hoogendyk said. The new rules are a reaction to substantial losses on federally insured condominium mortgages in the past year, government officials have said. In Maricopa County, condominium foreclosures have outpaced condo-unit sales by nearly two to one since Jan. 1, according to real-estate analyst Zach Bowers of Ion Data in Mesa. According to Bowers, lenders foreclosed on about 8,200 condo units between Jan. 1 and Sept. 30, compared with about 4,900 units sold during the same period. "It's been pretty much consistent throughout the year that no one's buying condos," Bowers said. "The whole market seems to have stagnated." The new restrictions won't directly affect high-end, luxury condos that sell for more than the Federal Housing Administration's roughly $350,000 lending limit, but Hoogendyk said FHA loans are by far the most commonly used loan among condo buyers. Without that option, buyers would have to obtain conventional loans, which are more expensive and difficult to qualify for, or they would have to pay cash. Hoogendyk said the FHA rules amount to a death sentence for the Phoenix-area condo market, which had only been kept on life support by the continued availability of FHA loans.

OTHER STORIES:

For many U.S. wealthy, housing crisis still a squeeze U.S. - (www.reuters.com)

"Luxury" Key West Condo Drops $716,000 to $479,000 - (www.keywestchronicle.blogspot.com)

Silicon Valley Foreclosure notices up but foreclosure sales down - (www.mercurynews.com)

Suburban Foreclosure Wave Threatens Economic "Recovery" - (www.wbur.org)

Shiller: This Is No Housing Boom - (www.moneynews.newsmax.com)

Don't Reinflate the Old Bubbles - (www.washingtonpost.com)

Leading indicators and the shape of the recovery - (www.krugman.blogs.nytimes.com)

California's Sensible Mortgage Restraints - (www.business.theatlantic.com)

Banks/government cannot keep bad assets with no ill effects much longer- (www.theautomaticearth.blogspot.com)

Finance's Five Fatal Flaws - (www.huffingtonpost.com)

By Popular Demand: Repost of Marcy Kaptur and Simon Johnson - (www.pbs.org)

The U.S. Senate Has No Center Any More - (www.miller-mccune.com)

GOP Claims Olympia Snowe Was Born in Kenya - (www.borowitzreport.com)

Insurance Lobbyists Are On The Attack - (www.realclearpolitics.com)

Harry Reid: Include the Public Option - (www.pol.moveon.org)

Saturday October 31 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Debt City Dubai: Expats on the Hook - Debtors' prison here is real - (www.globalpost.com) Default on a loan or bounce a check in Dubai and you could end up in debtors’ prison. That was the very Dickensian prospect facing Simon Ford, a boyish British entrepreneur whose “alternative gift” business sold rides in hot air balloons and Formula 1 racing cars to the party crowd in this Disneyesque city-state. But the recession has hit Dubai hard and Ford’s business foundered. When his loans came due last June, he did what thousands of other expats have done. He packed up his family and fled — a few hours ahead of the law. Ford also left behind an anguished “open letter” to friends and creditors that neatly encapsulates the predicament of many expats in Dubai who took out loans during the flush times and now find themselves out of work and unable to keep up with the payments on their seaside villas and luxury cars. “I am not running away from debt, I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions,” he wrote in an open letter to local media. He promised to repay all of his creditors. Dubai authorities won’t say precisely how many people have been jailed for their debts, but local news accounts put the number at about 1,200 — more than 40 percent of the total prison population. Even trickier to gauge is how many others took Ford’s route and simply fled. Judging by the number of apparently abandoned BMW’s and Mercedes gathering dust on city streets and the ensuing chatter on expats’ discussion boards, the number is not insignificant. One recent escapee has written a book about his flight. Herve Jaubert, a former French intelligence agent who used to cruise around Dubai in a red Lamborghini, found the law breathing down his neck after his plans to manufacture “luxury submarines” became submerged in debt. Jaubert explains that he bolted last year after government interrogators threatened to stick needles up his nose. With 007 panache and a woman’s all-encompassing burqa concealing his frogman gear, Jaubert slipped into the sea, swam out to a police patrol boat and disabled its fuel line so that it could not give chase. He then used a rubber dingy to get safely beyond the UAE’s territorial waters where he was met by a confederate in a sailboat. Eight days later they landed in India. The book, “Escape from Dubai” comes out next month. But Jaubert’s website has been blocked in Dubai and sale of his book will no doubt be banned here. The Frenchman, now living in Florida, was tried in absentia and sentenced to five years imprisonment for fraud. A number of U.S. citizens have been imprisoned for bounced checks, but the American Embassy — apparently in keeping with the local custom of casting a veil of silence over disturbing news — declined to provide specific figures.

FHA Facing "Cataclysmic" Default Rates - (www.finance.yahoo.com) Given the choice between "complete collapse" and increased government involvement in the housing market, Whitney Tilson, manager of T2 Partners, is glad policymakers opted for the latter in 2008.

But there is going to be a heavy price to pay for the U.S. government becoming the nation's mortgage broker, says Tilson, co-author of More Mortgage Meltdown. Specifically, Tilson is worried about the potential need for a bailout of the Federal Housing Administration (FHA), which has guaranteed about 25% of all new U.S. mortgages written in 2009, up from just 2% in 2005. Created in 1934 to help low-income and first-time homeowners, the FHA has historically played a minor role in the U.S. housing market. But the agency has become the government's vehicle of choice for mortgage financing in the past year. Again, Tilson supports the concept of the government stepping into the breach caused by the near total cessation of private mortgage lending, as well as the curtailed financial activity of Fannie Mae and Freddie Mac, which became wards of the state in September 2008. But "there's a price to pay," he says, noting the FHA is facing "cataclysmic default rates" on loans written in 2006, 2007 and early 2008, as detailed by The NY Times. "Effectively we the taxpayers are now guaranteeing mortgages written by over 10,000 FHA-approved lenders," Tilson says. "The FHA's portfolio is exploding [and] the taxpayer is now on the hook for 100% of the losses." How big of a hook? The FHA's mortgage portfolio is now approaching $1 trillion. You can't assume all those mortgages will default but you can assume the FHA's exposure will only grow in the months ahead as politicians continue to look for ways to support the housing market (especially in an election year.) In other words, FHA is looking very much like the "new Fannie Mae."

Cluster of buyers spike foreclosures of million-dollar mansions in FL - (www.palmbeachpost.com) The gilded gates of Wellington's Versailles development are miles of highway and millions of dollars from cinder-block homes in Opa-Locka. But for some, it was a short jump from modest digs to million-dollar mansions in the upscale Wellington community — and from there, to $41 million in ruined home loans. Cosmetologist, barber, dental technician, seniors: A cluster of 25 South Florida buyers living within 15 miles of Opa-Locka all picked up millions of dollars in loans, drove 60 miles north, bought a slice of ornate paradise in Versailles, and then defaulted. Left in their wake are tax bills, green swimming pools and lowered property values. They even played a role in bank bailouts: Millions of dollars in these collapsed loans were bundled with others, then traveled up the fiscal food chain to eventually become part of the soured loan packages triggering taxpayer-funded bailouts for Goldman Sachs and Countrywide Financial Corp. Yet certain borrowers, now living in other new homes or richer by hundreds of thousands of dollars following unexpectedly robust sales, appear no worse for the wear. Versailles is holding its own, said homeowners association president Sal Van Casteren. But the former New York police detective says flatly that he believes the community was at one point targeted by fraudsters, flippers or both. It's a sentiment echoed by Lake Worth real estate agent Zeev Greenstein of Exit Realty Premier Properties. "These people got robbed in broad daylight," said Greenstein of the larger Versailles community. Golden opportunity With its ornate entrance and winding roads, the 451-house Wellington development "really does look like Versailles," gilded home to kings of France, said Michael Sichenzia, a former mortgage whiz who spent time in New York state prison for mortgage fraud and now investigates suspect deals. Despite being "a beautiful, beautiful place," said the reformed fraudster, when it comes to questionable mortgage defaults, "Versailles seems to be tremendously skewed." Along with other developments along State Road 7, Versailles mortgage deals have come under law enforcement scrutiny. A multi-agency task force last year issued a slew of indictments stemming from mortgage fraud; two Versailles transactions were involved. None of those indictments involved the cluster of South Florida buyers. Asked if any Versailles transactions were still being examined, a spokeswoman for the FBI said simply, "The investigation continues." How this cluster of South Florida buyers found their collective way from some of the poorer regions of Miami-Dade County to Wellington is a mystery. There was no single lender, title company or seller connecting all 25. Almost none responded to repeated requests for comment by phone and registered letters. Several have no working phone numbers. They all had three things in common, however: Their addresses when they purchased mansions revealed modest, even Spartan homes. They lived within miles of each other and several lived much closer. All defaulted. Every home went into foreclosure. Pieces of paradise: It's not clear how many — if any — intended to live in their palatial digs. Take Wedelie Etienne. Armed with loans totaling $1.17 million, Etienne bought a five-bedroom, four-and-a-half bath pool home. But Etienne already had a home, according to court records — an approximately $148,000, 25-year-old condo purchased just months earlier with $7,500 in financial aid from a Miami-Dade County homeownership program. John Law paid $1.15 million for his five-bedroom Versailles home, according to public documents; a price roughly double the estimated market value. "The house had never been lived in," said former tenant Steven Koch of Law's home, which he leased. Law's mailing address at the time of sale was a three-bedroom Opa-Locka home then valued at $142,552. And Law didn't move to Wellington to live in his Versailles home; he moved to rural Crawford County, Georgia. The Versailles home went into foreclosure.

Run on DSB bank makes Dutch central bank take control - (www.nrc.nl) The Dutch government has intervened in another bank. Not because of the credit crisis this time, but because of a run on DSB, a bank notorious for the way it sold loans to customers. The Dutch central bank took control of the consumer bank DSB on Monday after an attempted sell-off of the bank fell through over the weekend. DSB, named for its founder Dirk Scheringa, is famous in the Netherlands for its sponsorship of football champions AZ, but mostly for its cutting-edge loans, mortgages and connected insurance policies. The bank did not fall victim to the credit crisis, but got into trouble after a foundation standing up for DSB customers who felt duped by the bank encouraged all savers to withdraw their money. Pieter Lakeman of the foundation Hypotheek Leed (Mortgage Suffering) said on October 1 he hoped the company would collapse because bankruptcy was the best prospect for the people who took out excessive mortgages with the bank in recent years. DSB told critics at the start of October it had 1.5 billion euros in cash – enough of a buffer to withstand a run on its 4.3 billion euros in deposits. At a press conference on Monday central bank president Nout Wellink said around a sixth of the bank's total deposits had been withdrawn since the beginning of this month. According to owner Dirk Scheringa civil servants at the finance ministry worsened the run on DSB by leaking information about the impending curatorship to Dutch daily De Volkskrant over the weekend. Savers subsequently withdrew their funds en masse, leaving the bank unable to meet its payment requirements. On Monday morning the Amsterdam court imposed emergency control on the company. "A large outflow of liquidity has put the survival of DSB at risk," the court agreed with the central bank. Central bankers and people from the ministry tried to prevent bankruptcy by selling DSB to a consortium of other Dutch banks over the weekend. Negotiations with ABN Amro, ING, Fortis Bank Nederland, SNS and Rabobank failed, mostly because the banks feared claims from customers who felt deceived by DSB. For years DSB has been criticised for the way it sold loans, sometimes to customers unable to carry the interest burden. The catch with loans and mortgages taken at DSB was they came with expensive single-premium insurance policies. DSB received high provisions for the policies, while its customers were forced to loan more money than their homes were worth in order to pay for them. Despite the criticism and pending claims from customers, owner Dirk Scheringa became an accepted force in Dutch banking in recent years. He was invited to a hearing in parliament about the credit crisis last November, and DSB's annual report in July showed numbers far less alarming than some of its competitors. The net profit was down 17 percent to 45 billion euros, but it met solvency criteria without help from the government. The Dutch finance ministry bailed out ABN Amro and Fortis Netherlands last year and has guaranteed many 'toxic' loans to keep ING afloat.

Contemplating yet more "aid" to make housing more expensive - (www.heraldtribune.com) How badly did the U.S. housing market crash? Well, just look at how much federal aid it has taken to stabilize it, at least for now. The Federal Reserve has bought almost $700 billion worth of mortgage-backed securities, with more to come. The Treasury Department is covering the losses of Fannie Mae and Freddie Mac. Congress has enacted tax credits to spur home buying, including an $8,000 bonus to first-time buyers that expires Nov. 30 but may well be extended. The Federal Housing Administration has dramatically expanded its mortgage insurance portfolio. The Obama administration offers government-backed refinancing to middle-income homeowners who are up to 25 percent underwater in their current mortgages. Yet housing remains burdened by a huge backlog of unsold homes, which will probably grow since more foreclosures are on the way. And so the Treasury Department is contemplating yet more help, this time in the form of backstopping state-issued mortgage-revenue bonds, which are federally subsidized in that investors collect the interest tax free. During the boom, the states' housing finance agencies used these bonds to fund about 100,000 low-interest mortgages per year for lower-income home buyers. But since the bust, private bond buyers have shunned them, notwithstanding their tax-free status. At $4 billion this year, mortgage-revenue bond sales are running at a quarter of the pace they set in 2007, according to Thomson Reuters. The plan under discussion would have the government purchase about $20 billion worth of new bonds before the end of the year while insuring $15 billion in existing securities that states otherwise might be forced to redeem because they would not be tradable in the markets. Administration officials are considering steps to limit the risk to taxpayers by, for example, charging a fee to back those bonds that Treasury does not buy outright. It is also true that, in the past, borrowers of bond-backed mortgages, well selected by the states, have defaulted relatively rarely. Of course, past borrowers didn't face anything like today's unemployment and foreclosure rates. Indeed, those conditions partly explain why private investors have bowed out of the market. As compared to other more direct forms of housing aid, mortgage-revenue bonds also come with high associated costs, in the form of fees for lawyers, rating agencies and underwriters. Compared to the overall size of the huge housing bailout, this latest policy idea is pretty small beer. It does illustrate, though, that Washington is still in crisis mode when it comes to thinking about a vast, strategic sector of the economy. That's perhaps understandable, but it can't go on indefinitely. The financial crisis was partly the result of years of government-encouraged over-investment in residential real estate. When will the federal government start working on an exit strategy and a new, more rational housing policy -- one in which individual homeownership occupies a central, but less heavily subsidized, position? The answer, apparently, is not yet.

Iceland's Parliament May Demand Government Drop IMF Program - (www.bloomberg.com) Iceland’s parliament may demand the government abandon its International Monetary Fund economic program and forgo further loan payments after the IMF delayed a review of the program for eight months. The Left Green Party, the junior member of the ruling coalition, is split on the issue and will meet tonight to discuss its stance. Of the Left Green’s fourteen lawmakers, five have publicly criticized the program. Iceland’s three opposition parties are also mulling alternative solutions to the IMF program, party leaders and lawmakers said. The delays in the review, originally scheduled for February, are “embarrassing for us and it is embarrassing for the IMF,” Finance Minister Steingrimur J. Sigfusson, chairman of the Left Greens, said yesterday. “Iceland doesn’t have everlasting patience and if the review doesn’t take place soon, we will have to examine our position.” Iceland got a $4.6 billion bailout from the IMF and four Nordic nations last autumn to resuscitate the economy after its biggest banks failed. While $827 million was paid out, further tranches have been delayed pending IMF reviews. The fund is withholding the payments until Iceland settles U.K. and Dutch depositor claims in so-called Icesave accounts stemming from the collapse of Landsbanki Islands hf. The cost of hedging against losses on debt sold by Iceland’s government rose 59 basis points to 415 basis points, according to CMA DataVision prices for credit-default swaps at 5:20 p.m. in London. IMF, Icesave Link: “In light of what has happened in the past year we believe that there’s good reason to revisit the IMF program,” Bjarni Benediktsson, chairman of the Independence Party, said by phone yesterday. “We’re skeptical as to whether Iceland needs the high loans originally anticipated.”

OTHER STORIES:

Massachusetts Land Court Decision Could Invalidate Thousands of Foreclosed Home Sales in Massachusetts – (www.boston.com)

Gold Continues Its Record Climb... - (www.bloomberg.com)

...Acting Like a Super Global Currency - (www.commidityonline.com)

Jim Rogers: Gold Will Hit $2,000; Other Commodities Cheaper - (finance.yahoo.com)

Milk's Lobbying Success Story: Unnatural, Unhealthy, Unwise - (www.kstatecollegian.com)

Food Production Must Rise 70% Over the Next 40 Years - (news.bbc.co.uk)

Southern California House Prices Fall on Foreclosures - (www.bloomberg.com)

More tax credit cheese to be placed in new-buyer mousetrap - (www.marketwatch.com)

TARP deadbeats go unnoticed - (www.blogs.reuters.com)

Commercial-Mortgage Defaults Jump Sevenfold - (www.bloomberg.com)

Housing Fall Rate Slows But Has Not Bottomed Tilson Says - (www.finance.yahoo.com)

Investor saw trouble in subprime - (www.washingtontimes.com)

Dollar loses reserve status to yen & euro - (www.nypost.com)

Thoughts on the Economy: Problems and Solutions - (www.Mish)

The Great Recession is over! Phew! - (www.eyeonmiami.blogspot.com)

Great Recession Will Maintain Grip for a Generation - (www.seekingalpha.com)

No Recession In Chinese Billionaires - (www.blogs.wsj.com)

How Private Health Insurers Proved Need For Public Option - (www.robertreich.blogspot.com)

Ex-insider: Insurance industry report is bogus - (www.amfix.blogs.cnn.com)

Friday October 30 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Hercules housing loans bump up assessments, resident finds ... - (www.insidebayarea.com) Inflated prices on condominiums underwritten or purchased outright by the Hercules Redevelopment Agency can affect the property taxes of neighbors, one Foxboro condo owner found. Karen Kahn bought her two-bedroom, two-bath, 954-square-foot condo on Chelsea in June 2004 for $270,000. Last fall, she sent a form to the Contra Costa County Assessor's Office requesting a reduction in her property tax assessment, in light of the regional crash in real estate values. On March 23, Kahn received a letter from the assessor's office: "We regret that we are unable to justify a reduction ... of your (assessed) value of $292,256." When she called in May to protest, an assessor's official told her a somewhat smaller condo on the same street had sold for $350,000 a few months earlier, Kahn said. Recent sales of "comparable" properties factor into property tax assessments. That 869-square-foot condo, on the 1500 block of Chelsea, once belonged to Rachael Redford, project manager for the Hercules Affordable Housing Department, run under contract by NEO Consulting Inc./Affordable Housing Solutions Group. In December 2008, Redford sold the condo -- thanks to no-cash-down, 100-percent financing of $351,606 from the Hercules Redevelopment Agency -- to someone who, according to City Manager Nelson Oliva, would not have qualified for a conventional bank loan, not even at the condo's market value, which last week stood at about a third of the recorded sale price. The Web site href='http://Realtor.com'>Realtor.com listed four condos identical in size to Redford's in the same subdivision for sale last week from $108,000 to $120,000. Redford bought the condo in 2006 for $345,000 with the help of a $50,000 First Time Homebuyer Loan from the redevelopment agency and a $295,000 bank loan for the balance. In June 2008, the agency bailed out Redford under the Homeownership Retention and Loss Mitigation Program, paying off the bank for the full $295,000 mortgage principal and stepping in as first lender. The HRLMP program, approved by the Hercules City Council in May 2007, is supposed to "provide a system of support" to borrowers of the Hercules affordable housing program "to avoid foreclosure and loss of their home as a result of financial difficulties." The program also protects the agency's initial investment in a property, such as a first-time homebuyer loan, Oliva has said. Six months after the agency bailed her out, Redford sold her condo. Oliva said Redford had gotten married; she was out of the office on maternity leave last month and has not responded to several recent e-mails. City spokeswoman Doreen Mathews described the sale as a "paper money" transaction. "She (the new buyer) essentially took over both loans, which covered the principal amount of the primary loan, the $50,000 FTHB deferred loan, and escrow fees," Mathews said. HRLMP loans typically are for 40 years at 4 percent a year interest, Oliva has said. Asked about the high sale price in relation to nearby similar condos, the new buyer told the Times that the price did not bother her and that she agreed to it for "personal reasons." She declined to comment further. Kahn, meanwhile, has asked the assessor's office to reconsider her assessment for this year in light of the anomaly of the $350,000 sales price of Redford's condo. She said an official there appeared sympathetic to her argument. She has not received a new tax bill but expects to get it any day. She said she cares not only about her tax assessment but how Hercules is spending public funds. "That's my taxpaying dollars," she said.Hercules Redevelopment Agency records show several other investments in recent years that appear to exceed the market value of the properties.

· $389,942 in September 2007 to buy a duplex on Cottage Lane;

· $270,662 in March 2008 to buy a two-bedroom, 1,126-square-foot condo in the Village Park section; the agency previously had put $50,000 into the property;

· A $396,488 HRLMP loan in October 2007 on a 1,220-square-foot Village Park condo co-owned by a Hercules city employee;

· A $297,589 HRLMP loan in October 2007 on a 930-square-foot condo in the Bravo section owned by a city employee; real estate industry records show two earlier redevelopment agency loans of $35,000 and $35,500.

Agency records also show investments during the 2008-2009 fiscal year of $212,472 in a 778-square-foot Village Park condo and $219,826 in another 869-square-foot condo on Chelsea. NEO Consulting Chief Executive Officer Taylor Oliva and Affordable Housing program general manager Walter McKinney have not responded to recent e-mails seeking comment.

Obama Sides with Republicans on "Patriot" Act Renewal Bill - (www.eff.org) Well, it looks like most of the Senators on the Senate Judiciary Committee weren't swayed by this morning's New York Times editorial, which cited this morning's Committee meeting to consider USA PATRIOT Act renewal as a "critical chance to add missing civil liberties and privacy protections, address known abuses and trim excesses that contribute nothing to making America safer." Instead, the Committee just passed a bill to renew all of the PATRIOT powers that were set to expire at the end of the year, with only a handful of the original reforms that were first proposed by Senators Feingold and Durbin's JUSTICE Act and Committee Chairman Leahy's original PATRIOT renewal bill. Instead of adding more protections to the bill, as EFF and the Times have been urging (along with many other Americans who have been organizing Facebook and Twitter activism around PATRIOT reform), the Committee this morning voted to accept seven Republican amendments to the USA PATRIOT Act Sunset Extension Act to remove the few civil liberties protections left in the bill after it was already watered down at last Thursday's Committee meeting. Surprisingly and disappointingly, most of those amendments were recommended to their Republican sponsors by the Obama Administration. After voting on amendments (vote counts and text of the amendments are now available on the Committee's web site), the Committee voted to pass the PATRIOT bill itself, 11 to 8. Some Democrats voted against it, agreeing with us that it didn't protect civil liberties enough, while some Republicans voted against it because of the few meager privacy improvements it did include:

· Those who voted AYE: Leahy, D-Vermont; Kohl, D-Wisconsin; Feinstein, D-California; Schumer, D-New York; Cardin, D-Maryland; Whitehouse, D-Rhode Island; Klobuchar, D-Minnesota; Kaufman, D-Delaware; Franken, D-Minnesota; Kyl, R-Arizona; Cornyn, R-Texas;

· Those who voted NAY: Feingold, D-Wisconsin; Durbin, D-Illinois; Specter, D-Pennsylvania; Sessions, R-Alabama; Hatch, R-Utah; Grassley, R-Iowa; Graham, R-South Carolina; Coburn, R-Oklahoma

EFF extends its heartfelt gratitude to the only three Democrats who continually stood up for civil liberties throughout this process and ultimately voted no on the final bill: Senators Feingold, Durbin and Specter. We particularly thank Senator Durbin for doing his best to pass an amendment to reform the government's authority to issue National Security Letters (NSLs) for Americans' records without having to show any connection between the records sought to a suspected terrorist or spy, and Senator Specter for cosponsoring Senator Feingold's ultimately unsuccessful attempt to pass an amendment to let the so-called "lone wolf" wiretapping authority expire. We especially thank Senator Feingold for offering an amendment to stop the government from using last summer's FISA Amendments Act to conduct "bulk collection" of Americans' phone calls and Internet communications, even though that amendment was ultimately withdrawn and not voted on after procedural objections from Chairman Leahy. Finally, we congratulate Senator Feingold on the success of his amendment to require that the government "minimize" the records that it obtains with NSLs.

Businesses follow real estate from boom to bust - (www.oregonlive.com) When private equity giant Wasserstein & Co. bought Harry & David in 2004, the future seemed as sweet as one of the Medford company's baskets of juicy Rogue Valley pears. Harry & David's 75-year history of quality and Wasserstein's Wall Street savvy appeared to be a potent blend. Almost immediately, Harry & David took the requisite first steps toward a public stock offering, which held the promise of a hefty payday. But after five years with the private equity sharpies in charge, Harry & David faces bushels of problems. The stock offering never happened. The company lost more than $20 million in its 2009 fiscal year. Sales fell to the lowest level this decade. Moody's downgraded the company's bonds in March, declaring it likely to default on its debt payments. What happened? The economy, of course. There are few more discretionary buys than one of Harry & David's spendy mail-order gifts. For customers nationwide, the company's $29.95 5-pound box of Royal Riviera pears became dispensable after the economy tanked. But it was more than that. Harry & David also illustrates the downside of big debt. After Wasserstein took control, Harry & David's long-term debt soared from zero to $245 million. The debt itself did not drive these companies to the precipice. But it did put additional pressure on their balance sheet and removed much of the cushion they had when the economy soured. For much of this decade, debt was to the economy as meth is to the inveterate tweaker. Consumers and businesses borrowed trillions of dollars at a rate unprecedented in modern economic history and blew through that money in a wild binge of spending. Now, that binge is over and the economy is suffering a nasty case of withdrawal. Some are now talking about "peak debt," the way that energy watchers talk about "peak oil." The inference is that the end of the debt bubble could change U.S. society in nearly as profound a way as the waning of the petroleum-based economy. Companies, investors and governments alike, the thinking goes, must adjust to a new reality of significantly lower consumer spending and lower tax revenue that could last a generation or more. "The thing that has shocked economists and business owners worldwide is how fast and deep consumer demand has declined," said Portland money manager Michael Elfers in a July missive to his investors. "We have reached "peak debt," the point where additional credit is no longer available and interest payments on outstanding debt forces a reduction in spending.

Credit Vise Tightens for Small Businesses - (www.nytimes.com) Many small and midsize American businesses are still struggling to secure bank loans, impeding their expansion plans and constraining overall economic growth, even as the country tentatively rises from its recessionary depths. Most banks expect their lending standards to remain tighter than the levels of the last decade until at least the middle of 2010, according to a survey of senior loan officers conducted by the Federal Reserve Board. The enduring credit squeeze appears to reflect an aversion to risk among lenders confronting great uncertainty about the economy rather than any lingering effects of the panic that gripped financial markets last fall, after the collapse of the investment banking giant Lehman Brothers. Bankers worry about the extent of losses on credit card businesses as high unemployment sends cardholders into trouble. They are also reckoning with anticipated failures in commercial real estate. Until the scope of these losses is known, many lenders are inclined to hang on to their dollars rather than risk them on loans to businesses in a weak economy, say economists and financial industry executives. “The banks are just deathly afraid,” said Sam Thacker, a partner at Business Finance Solutions in Austin, Tex., which helps small businesses line up financing. “I don’t see commercial banks coming back to the market anytime soon.” In the long view, tighter loan standards seem healthy after a terrible crisis attributed in part to years of recklessly lenient lending. But some economists worry that bankers have overshot the boundaries of a healthy reaction, as even strong companies are finding it difficult to borrow. “The banks are still very risk averse,” said Robert J. Barbera, chief economist of the research and trading firm I.T.G. “Regional banks are in a particularly tough spot, because they’re choking on commercial and residential real estate.” Bankers acknowledge that loans are harder to secure than in years past, but they say this attests to the weakness of many borrowers rather than a reluctance to lend. “Banks want to lend money,” said Raymond P. Davis, chief executive of Umpqua Bank, a regional lender based in Portland, Ore. “The problem is the effect that the recession is still having on us. Some of these businesses are still trying to come out of it. For them to go to a bank, if they are showing weak performance, it is harder to borrow.”

Ailing Commercial Mortgage Securities Deepen Commercial RE Woes - (industry.bnet.com) Hawaii’s Maui Prince Resort offers white sand beaches, acres of lush tropical forest, two golf courses and even a hotel featuring cascading waterfalls. What it doesn’t provide is a return on investment. The property, which Morgan Stanley Real Estate and local developers bought only two years ago for $575 million, is in foreclosure after defaulting on a $192.5 million loan. Its investors, which also includes Swiss banking giant UBS, may be wiped out on the deal. The loans behind Maui Prince were financed by commercial mortgage-backed securities, or CMBS. The resort’s failure reflects the troubled market for these bonds, which are backed by a pool of mortgages on commercial properties. The market for CMBS is one leg of the stool supporting the commercial real estate sector, providing a vital source of funding for mortgages on hotels, offices, shopping malls and other business properties. And as we’ve been saying a lot of late, that stool is collapsing. The CMBS market has yet to revive after seizing up last year. In 2007, sales of commercial mortgage-backed debt rose to roughly $240 billion and accounted for nearly half of all commercial lending. Today, sales of CMBS have sunk to just over $12 billion. Loans underpinning CMBS are deteriorating fast. As of August, delinquency rates were seven times their level of a year ago, and 12 times the rate shortly before the real estate bubble burst in 2007. Unpaid balances on CMBS investments, which are typically held by banks, insurance companies, pension funds and other large investors, exceed $28 billion, up a startling 592 percent from 2008 (click on chart to expand).

OTHER STORIES:

Foreclosures Grow in Housing Market's Top Tiers - (www.online.wsj.com)

A Case Study of Distress California Housing: Sacramento County - (www.financemymoney.com)

CA renters enjoy biggest U.S. rent cuts - (lansner.freedomblogging.com)

Rising U.S. Vacancies: Real Estate Is Headed Down - (www.seekingalpha.com)

Tenants and Foreclosure: New Legislation Signed - (tenantsforeclosure.blogspot.com)

Why Higher Asking Prices are a Bad Sign - (www.reallyf'dedhomeowner.com)

All that has been achieved is to put off real pain until later on - (www.reuters.com)

Low Earners Have More Mortgage Trouble - (s.wsj.net)

Stiglitz Says Banks Should Be Banned From CDS Trading - (www.bloomberg.com)

Who Needs Big Banks? - (www.baselinescenario.com)

Writedowns on Mortgage Servicing Make Even JPMorgan Vulnerable - (www.bloomberg.com)

Go to Middle America, Young Men & Women! - (www.newgeography.com)

Thursday October 29 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Chicago Cubs file Chapter 11 to speed team's sale - (news.yahoo.com/s/ap) The Chicago Cubs filed for Chapter 11 bankruptcy protection Monday, a step that will allow their owner to sell the baseball team in an $845 million deal. The filing in Wilmington, Del., was anticipated and is expected to lead to a brief stay in Chapter 11 for the Cubs. A hearing was scheduled for Tuesday in front of the judge who has been handling the bankruptcy of the Cubs' owner, Tribune Co. The Cubs' filing is part of the Tribune Co.'s plans to sell the team,Wrigley Field and related properties to the family of billionaire Joe Ricketts, the founder of Omaha, Neb.-based TD Ameritrade. Tribune, which also owns the Chicago Tribune and the Los Angeles Times, filed for bankruptcy protection in December, but the Cubs were not covered in the filing. The team's run through Chapter 11 could last mere days, enough to protect its new owners from potential claims by Tribune creditors, said Ira Herman, a bankruptcy attorney with Thompson & Knight. Tribune bought the Cubs in 1981 for $20.5 million from candy maker Wm. Wrigley Jr. Co. Tribune announced plans to sell the franchise in 2007, but got tripped up by the recession and the collapse of the credit markets. It has agreed to sell the Ricketts family a 95 percent stake in a deal that tops the record $660 million paid for the Boston Red Sox and its related properties in 2002. Tribune Co. is keeping the remaining 5 percent. Major League Baseball's other owners have approved the sale. The Cubs' bankruptcy filing is not the first in baseball. The Baltimore Orioles were sold in a bankruptcy auction in 1993 after owner Eli Jacobs filed for Chapter 11. The same happened to the Seattle Pilots after the 1969 season. The new owners moved the team to Milwaukee and changed the name to the Brewers. The National Hockey League's Phoenix Coyotes, a franchise that has yet to make a profit since moving from Winnipeg, Manitoba, in 1996, filed for Chapter 11 protection in May.

Some CA state retirees rake in pensions and paychecks - (www.latimes.com) Thousands who have returned to public service in California, including eight legislators, receive their retirement benefits and a salary. The practice has raised concerns. As California's public retirement funds reel from losses of nearly $100 billion in recent years and lack enough cash to cover their long-term costs, thousands of state employees are collecting government pension checks along with their paychecks. John Benoit, a Republican state senator from Palm Desert and a former California Highway Patrol captain, is one. He draws a $98,600 annual state pension while also collecting a six-figure salary as a lawmaker. David Turner retired as a state fire chief in 2004, went back to work for the state firefighting agency two days later and is still employed there. He collected $65,229 in salary in the last fiscal year in addition to a state pension of $105,000. Paul W. Anderson is a psychiatrist at Napa State Hospital who retired two years ago from the state Department of Mental Health. His pension is $117,840. He also received $104,200 in state wages in the last fiscal year. State records show that more than 5,600 others are drawing double checks, a figure 57% higher than a decade ago. Meanwhile, billions of dollars -- $3.3 billion in this fiscal year alone -- are being siphoned from the state budget to cover pension system expenses. The California Public Employees' Retirement System and California State Teachers' Retirement System combined lost about $98 billion -- nearly a quarter of their value -- after their investments were battered in the real estate and stock markets over the last two years. CalPERS is under additional strain from enhancements approved by lawmakers a decade ago that allow most state employees to retire at 55 instead of 60 and public-safety workers at 50.

CIT debt swap struggles, bankruptcy looms - (news.yahoo.com) CIT Group Inc (CIT.N) is seeing little interest from bondholders in a debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely, sources familiar with the matter said. The lender to small and medium-sized businesses said earlier this month it was looking for investors to approve a large debt exchange that would reduce its borrowings, or to approve a prepackaged bankruptcy. CIT is now more likely to try a prepackaged bankruptcy, two people familiar with the matter said. They declined to be identified because the exchange offer is ongoing and information about its progress is private. But separately, investors in CIT securities said it is possible the company will not find enough debtholder approval for a prepackaged bankruptcy, which requires sufficient support before the company files for protection from creditors. Instead, CIT might have to aim for a prenegotiated bankruptcy, which typically has less support before the actual filing. CIT spokesman Curt Ritter declined to comment. CIT has limited time to work out its debt difficulties. It has about $3 billion of debt to repay in the fourth quarter, including both secured and unsecured obligations, according to a CIT quarterly filing with regulators. CIT has lost access to unsecured debt markets, but has billions to refinance in coming years. In three of the next four years, it will have more debt to repay than cash to pay it back. CIT has roughly 1 million customers and more than $70 billion of assets, but many of its borrowers are struggling amid the worst recession since the Great Depression.

Short-staffed DMV offices close; PECG files holiday grievance - (www.sacbee.com) We're hearing that at least four DMV offices closed today due to short staffing on what is undoubtedly the most controversial Columbus Day in California government history. SEIU Local 1000 passed along unconfirmed reports that said offices in Watsonville, Compton, Oxnard and Hawthorne are closed. The union, which had told the 95,000 workers covers to stay home and observe the holiday, said that some other offices are open but struggling because of low staffing. DPA spokeswoman Lynelle Jolley said that the administration had heard that three DMV field offices in Southern California and one the Gilroy area had closed today. Employees at closed locations who showed up were directed to work at nearby worksites. "Otherwise, it's been business as usual, except for a handful of offices," Jolley said. DPA is working to confirm which offices closed. The administration says that the Legislature and Gov. Arnold Schwarzenegger changed the law earlier this year and that Columbus Day isn't a paid day off any more. Meanwhile, Professional Engineers in California Government filed a grievance over the elimination of Columbus Day and Lincoln's Birthday for members of Bargaining Unit 9.

Chicago fares could soon be among nation's highest - (www.sacbee.com) The Chicago Transit Authority is recommending fare increases that would see commuters who rely on the nation's second-largest transit system paying more than almost anywhere else in the U.S. The 2010 budget proposal made Monday would have the basic subway fare go up 33 percent, from $2.25 to $3.00. Simultaneously, the agency would reduce subway service by 9 percent and bus service by 18 percent. CTA President Richard Rodriguez told reporters a battered economy has forced Chicago's hand. The agency is receiving 30 percent less income from sales and real estate taxes than expected. Many cities face similar woes and also have raised ticket prices, including New York, which boasts the nation's biggest mass-transit system

U.S. autoworkers protest tax dollars sending jobs to Mexico – (www.freep.com) It isn’t fair. That’s what 500 American autoworkers in Kenosha, Wis., whose tax dollars helped rescue Chrysler, are saying about the new Fiat-controlled Chrysler, Reuters reports. They’re part of a coalition fighting to save Kenosha and nearly 2,000 other UAW-represented jobs at two other Chrysler plants slated to close next year. After Chrysler took $10 billion in U.S. assistance, it scrapped plans to bring a new, more fuel-efficient engine to its Kenosha plant, sending the work to Saltillo, Mexico, instead. The workers are crying foul -- to the media, the Obama administration and anyone else who will listen. So far, the lines of communication remain open. "We played the political card, you know, taxpayer dollars supporting Chrysler and the jobs going to Mexico," Kenosha Mayor Keith Bosman told Reuters.

OTHER STORIES:

Accord will keep LAPD staffing at current levels, Villaraigosa says - (www.latimes.com) The mayor and two members of the City Council say they've forged an agreement to keep the number of police officers steady amid a budget crisis.

Schwarzenegger signs seven mortgage bills - (www.latimes.com)

SEC investigates KB Home - (www.latimes.com)

Deadline looms for Americans to disclose accounts in foreign tax havens - (www.latimes.com)

One year after market crash, Silicon Valley residents still hurting - (www.contracostatimes.com)

Walnut Creek, CA realtor convicted of enslaving nanny - (www.sfgate.com)

Arizona Rents Falling - (www.azcentral.com)

North Texas condo markets are in big trouble - (www.star-telegram.com)

Graying Brentwood, TN has glut of big houses - (www.tennessean.com)

Job competition toughest since recession began - (www.sfgate.com)

The FHA, VA, USDA Foreclosure Time Bomb - (www.homedebtors.blogspot.com)

Rich Uncle Pays Your Mortgage - (www.mises.org)

"Sell" for Research Renegades Becomes Business Off Wall Street - (www.bloomberg.com)