KeNo's Housing and Economic Portal: Saturday October 24 Housing and Economic stories

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Condo Prices Will Reset Lower - (www.dailybusinessreview.com) Commercial real estate veterans predict the sale of loans held by failed lender Corus Bank could further batter South Florida’s new condo market — ushering in a deeper price correction needed before the condo market can begin a road to recovery. The Miami area has one of the nation’s largest concentrations of condo projects financed by Corus — about $1 billion. If the buyer of Corus forecloses on the nonperforming loans and unloads the underlying condo units at fire-sale prices, it could drive the value of South Florida condos to new lows, experts predict. “This is going to establish really one of the biggest blocks of properties in South Florida. That is going to establish a new [price] basis and is going to reset the whole market to a new realistic [level,]” said Steve Russo, a former Wachovia Bank real estate executive and founder of investment advisory firm CREF Group in Fort Lauderdale. “This is a first step to the inevitable.” Real estate broker Jaret Turkell agreed. “It’s going to be a catalyst to bring prices down — kind of give us a much needed reset on values,” said Turkell, an associate director with Holliday Fenoglio Fowler in Coral Gables. “It is better to get it over with, set a new base for the market and pave the way for recovery,” said Brad Hunter, Metrostudy’s chief economist and national director of consulting. “Ultimately, most of these condos are going to have to sell for well below half of the peak pricing.” A group led by Starwood Capital Group won the bidding for the remnants of the Chicago-based lender that regulators seized Sept. 11, Bloomberg reported Monday. Corus had a $5.4 billion commercial real estate loan portfolio as of March 31, including $997 million to condominiums in South Florida, according to company filings.

Government Gears Up for Second Stimulus - (apnews.myway.com) Confronted with big job losses and no sign the U.S. economy is ready to stand on its own, Democrats are working on a growing list of relief efforts, leaving for later how to pay for them, or whether even to bother. Proposals include extending and perhaps expanding a popular tax credit for first-time home buyers, and creating a new credit for companies that add jobs. Taken together, the proposals look a lot like another economic stimulus package, though congressional leaders don't want to call it that. Democratic leaders in Congress and the White House say they have no appetite for another big spending package that adds to the federal budget deficit, which hit a record $1.4 trillion for the budget year that ended last week. But with unemployment reaching nearly 10 percent, many lawmakers are feeling pressure to act. Some of the proposals come from the Republicans' playbook and focus on tax cuts, even though they, too, would swell the deficit. "We have to do something for the unemployed, politically and economically," said Rep. Charles Rangel, D-N.Y., chairman of the tax-writing Ways and Means Committee. The House already has voted to extend unemployment benefits an additional 13 weeks for laid off workers in the 27 states where the jobless rate is 8.5 percent or above. Senate Democrats reached a deal Thursday to extend the benefits an additional 14 weeks in every state. Both proposals are paid for by extending a federal unemployment tax. Also on the table: extending subsidies for laid-off workers to help them keep the health insurance their former employers provided, known as COBRA. The current program, which covers workers laid off through the end of the year, costs nearly $25 billion. Congressional leaders haven't settled on the length of an extension, or how to pay for it. Several bills would issue extra payments to the more than 50 million Social Security recipients, to make up for the lack of a cost-of-living increase next year. One bill would set the one-time payments at $250, matching the amount paid to Social Security recipients and railroad retirees as part of the stimulus package enacted in February. The payments would cost about $14 billion and would be paid for by applying the Social Security payroll tax to incomes between $250,000 and $359,000 in 2010. Currently, payroll taxes apply only to the first $106,800 of a worker's income. House Speaker Nancy Pelosi, D-Calif., said she is also considering a Republican proposal to allow money-losing companies to use their losses to get refunds of taxes paid in the previous five years. Under current law, most companies can only use current losses to get refunds from the previous two years. "The issue of a net operating loss carryback to five years rather than two is an idea that has some currency," Pelosi said.

In FL, most foreclosed housing is 'under water' property - (www.mcclatchydc.com) Most Manatee County homeowners who fell into foreclosure last month were financially "underwater," property and court records show. Two out of every three owed more on their property than what it is worth, according to a Bradenton Herald analysis of property tax records and September foreclosure filings. The average deficit was $72,098. The Herald’s findings didn’t surprise foreclosure experts, who said Monday that most Florida homeowners have been financially swamped by freefalling home values. "I would have estimated it as closer to 100 percent," said Shari Olefson, a Fort Lauderdale foreclosure attorney and author of "Foreclosure Nation: Mortgaging the American Dream." The average underwater homeowner in Manatee who was hit with a foreclosure suit in September owed $282,268 on a home valued at $210,170, the Herald’s analysis showed.

Goldman, influence intact, lets one well run dry - (www.reuters.com) Goldman Sachs Group Inc (GS.N), legendary for its clout in Washington, has inexplicably halted its political fund-raising machine. The strange twist comes at a time when Wall Street's biggest and most powerful investment bank, nicknamed Government Sachs by critics, seems in other respects to be just as politically involved as ever. By all accounts, its senior executives are in close contact with Washington regulators, the lobbyists on its payroll include some of the best connected, and it continues to spend heavily to influence government. Yet one key prong of its assault on the Capitol has been oddly neglected lately: Campaign finance filings show its federal political action committee (PAC) has not taken a penny from employees in more than a year and has a balance of just $25,483 -- pocket change for a Goldman banker. At the same time, Goldman's chief rivals -- Morgan Stanley (MS.N) and JPMorgan Chase & Co (JPM.N) -- have armed their U.S. lobbyists with hundreds of thousands of dollars in employee political contributions, filings show. Companies like Goldman use their PACs to collect political contributions from employees; lobbyists funnel the funds to candidates and parties. Why Goldman -- whose alumni include many who have held high positions in the federal government -- abruptly stopped tapping its employees for political money is a mystery. A Goldman spokeswoman would only say, "We have a PAC and we plan to continue to have a PAC." Critics believe Goldman might be operating under the belief that it has all the political influence it needs. "They don't seem to need a PAC since Goldman has had its way with Washington consistently since Wall Street imploded a year ago," said Harvey Rosenfield, president of the non-profit Consumer Education Foundation. "You could argue they have done pretty well without any PAC contributions."

Layer of credit checks surprises house buyers - (www.sfgate.com) When Kimberly and Derek Hayes went house hunting, they bumped into an unusual requirement that raised their hackles. If they wanted to bid on a bank-owned foreclosure, the bank insisted on doing its own credit check of the couple, said Kimberly, 42, a Web writer. "This unnecessary credit pulling can potentially lower my credit score and widens the exposure of my sensitive financial information," she said. "I'm concerned about yet another set of eyes looking at my private information in a time of so much identity theft." One bank selling a foreclosure urged them to apply for a mortgage with it, "and it was strongly implied that if we did not do it, we shouldn't even bother making an offer," she said. The Hayeses found the requirements sufficiently infuriating that they decided not to submit offers on some properties they had been considering, and are now in contract to buy a non-foreclosed home from a traditional seller. Real estate agents say both practices - requiring fresh credit checks and steering potential buyers toward specific mortgage lenders - are increasingly common with many foreclosure sales. "Banks are leery of any lenders other than themselves," said Janelle Boyenga, a Realtor with Intero Real Estate in Los Gatos. "They request prospective buyers to get pre-approved with specific lenders - even though that isn't necessarily the best for that buyer." More commonly, she said, it's not the banks themselves but the listing agents selling the bank-owned properties, known as REOs for "real estate owned" by banks, who make that request.

Elizabeth Warren: Wall Street's Worst Nightmare - (www.motherjones.com) Can DC's top bailout cop beat the finance lobby—and Larry Summers? By her own reckoning, Elizabeth Warren had two transformative experiences on the way to becoming official Washington's most unconventional expert on the financial industry. Let's start with the second. It was 2003, and Warren, an earnest-sounding and ever enthusiastic Harvard law professor who specializes in bankruptcy, was on the set of Dr. Phil. She had written a book with her daughter called The Two-Income Trap: Why Middle-Class Mothers & Fathers Are Going Broke, and she'd expected to sit next to the host and explain its key points. Instead, Dr. Phil was interviewing a stressed-out couple with serious medical and financial troubles. After they mentioned they had obtained a second mortgage to pay off their credit card debt, the lights went up on Warren, and Dr. Phil asked her if this had been a smart step. No, she declared, because now they could lose their home if they defaulted. As soon as her turn was over, Warren found herself thinking, "You've been doing this work for 20 years now, and it is unlikely that any of it has had as direct an impact as these 45 seconds." She had reached millions, some of whom might actually pay attention to her advice. "So here you are, Miss Fancy-Pants Professor at Harvard. What do you plan to do now? Is it all about writing more academic articles, or is it about making a difference for the families you study? I made a decision right then: It was for the families, not the self-aggrandizement of scholarship." Six years later, Warren is applying that people-first philosophy by simultaneously running the Congressional Oversight Panel, which monitors the $700 billion TARP bailout program on behalf of the taxpayers, and pushing for a new agency to protect consumers from predatory lenders. Now, as Congress seriously considers her proposal (and lobbyists maneuver to kill it), the question is: Can a middle-class populist in Ivy League garb change the world—or at least Big Finance? Warren, 60, grew up in Oklahoma in what she terms "modest circumstances." Her father was a maintenance man; her mother worked for Sears. After graduating early from high school, she headed to college on a debate scholarship. Eventually she landed at Rutgers' law school, where she admits starting out somewhat clueless: When a fellow student asked if she would try out for the law review, she didn't know if he meant a magazine or a theatrical show. "All I knew was, if the smart kids were doing it, count me in." She graduated in 1976, with no job lined up and nine months pregnant with her second child. Soon she'd started her own practice, handling wills, real estate closings, and the like. Later she taught nights at Rutgers, and then found a position at the University of Houston's law school—one of the first women ever hired there, she says, and the first who was not married to a faculty member. She began teaching bankruptcy law. "Bankruptcy," she says, "is about economic death and rebirth, a story of failure but survival, how people come back, how businesses come back. It's an American story."