KeNo's Housing and Economic Portal: Thursday October 8 Housing and Economic stories

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TOP STORIES:

Hercules (NorCal town) loan program bails out city employee homeowners for big bucks - (www.contracostatimes.com) A Hercules affordable housing loan program devised to help residents stave off foreclosure in recent years has bailed out numerous owners of "underwater" homes, including the project manager for the contractor that runs the city's Affordable Housing Department. Other properties belonged to people working for the city, and some were encumbered with debt double or more their market value. The city stepped in as creditor and paid the bank in full or bought the property outright for the full amount of the debt, records show. Between September 2007 and June 2008 the Hercules Redevelopment Agency invested about $1.65 million of Homeownership Retention and Loss Mitigation Program funds in four condominiums and one duplex, according to program records provided by the city. And as late as December 2008, the agency underwrote more than $350,000 in mortgage debt on a Foxboro condo where four identical-sized condos were listed for sale this week for between $108,000 and $120,000 on a popular real estate Web site. HRLMP loans came on top of earlier agency loans such as First Time Homebuyer loans of $50,000 or Citywide Incentive Program loans for city employees of $35,000. The HRLMP investments for 2007-2008 were:

· $295,000 in a two-bedroom, 869-square-foot condo on Chelsea in the Foxboro Downs subdivision owned by Rachael Redford, project manager for NEO Consulting Inc./Affordable Housing Solutions Group, which runs the Hercules Affordable Housing Department under contract;

· $396,488 in a 1,220-square-foot condo in the Village Park section co-owned by a Hercules city employee;

· $297,589 in a 930-square-foot condo in the Bravo section owned by a city employee;

· $270,662 in a two-bedroom, 1,126-square-foot condo in the Village Park section;

· $389,942 in a duplex in the Central section near San Pablo and Hercules avenues.

In the first three transactions, the city paid off the bank in full and stepped in as mortgagee. "We're the first lender," City Manager Nelson Oliva said, explaining the process in a July interview. "We're the bank." The other two transactions were outright purchases, according to city records. The $295,000 loan in Redford's Foxboro condo in June 2008, which came on top of a $50,000 First Time Homebuyer loan Redford got when she bought the condo in 2006, brought the city's investment in the condo to $345,000. In July, REALTOR.com listed three similar condos in the same subdivision at asking prices between $105,000 and $114,000. This week, REALTOR.com listed four 869-square-foot condos at Foxboro Downs, two on Bristol and two on Dover, for between $108,000 and $120,000. The $297,589 investment in the Bravo condo came on top of two redevelopment agency loans of $35,000 and $35,500 made in 2005, industry records show. The City Council adopted the Homeownership Retention and Loss Mitigation Program in May 2007 to "provide a system of support to all borrowers of the City of Hercules Community Redevelopment Agency Affordable Housing Program." To be eligible, a borrower must have been funded by the agency previously, either under the First Time Homebuyer program or under other agency programs. Under the HRLMP program, the Affordable Housing staff can work with the borrower's first mortgage lender to restructure the mortgage, step in as lender by paying off the first mortgage or buy the home and sell it to a first-time homebuyer under another program. "It's a program that the City Council felt we needed to do to help homeowners in dire straits," Oliva said in July. NEO Consulting Inc./Affordable Housing Solutions Group, the contractor, administers the program according to guidelines approved by the City Council in 2007; loans must be ratified by a four-person city staff committee, said Hercules spokeswoman Doreen Mathews. Oliva has not responded to recent e-mails seeking comment. Redford and Walter McKinney, the Affordable Housing program general manager, also have not responded to e-mails.

U.S. to Push for New World Order at G20 - (www.reuters.com) The US continues to take a flawed approach by blaming foreign countries for not consuming enough. The United States will urge world leaders this week to launch a new push in November to rebalance the world economy, but there are doubts national governments will bow to external advice. A document outlining the U.S. position ahead of the September 24-25 Group of 20 summit in Pittsburgh said exporters, which include China, Germany and Japan, should consume more, while debtors like the United States ought to boost savings. "The world will face anemic growth if adjustments in one part of the global economy are not matched by offsetting adjustments in other parts," said the document, which was obtained by Reuters on Monday. The framework drafted by U.S. policy makers foresaw analysis of G20 members' economic policies by the International Monetary Fund to figure out if they were consistent with better balanced growth. "We call on our finance ministers to launch the new framework by November," the document said, signaling a determined effort to maintain momentum for change created by last year's global financial crisis. The United States envisages the IMF playing a central role in a process of "mutual assessment" by making policy recommendations to the G20 every six months. Finance ministers and central bankers from the G20 countries are due to meet November 7-8 in Scotland. European Central Bank President Jean-Claude Trichet said persuading Europe, the United States and China to accept IMF advice on economic policy may be difficult. In the past, many countries have ignored suggestions the IMF dished out in regular reviews.

Bank of America Misses Congressional Deadline - (www.nytimes.com) Bank of America did not meet a noon deadline on Monday to submit documents and other possible evidence in the Congressional investigation of the bank’s takeover of Merrill Lynch, the House Committee on Oversight and Government Reform said. The committee’s chairman, Representative Edolphus Towns of New York, is deciding whether to issue a subpoena to force compliance, but first he plans to meet with the bank’s chief strategy and marketing officer, Anne Finucane, on Tuesday. Mr. Towns indicated that he planned to tell Ms. Finucane that the bank must comply with the request, and if it does not, a subpoena may be forthcoming. “Whether it is through future hearings, a subpoena, or both, the committee will obtain this information,” Mr. Towns said in a statement. Mr. Towns decried Bank of America’s failure to meet his Monday deadline for turning over the documents related to the Merrill deal and the subsequent $20 billion government bailout. “I am deeply troubled by Bank of America’s refusal to give this committee the records it needs to rightfully determine how and why a private deal became a public bailout,” Mr. Towns said in his statement. “The taxpayers are now on the hook for billions of dollars and they have a right to know how that happened.”

FDIC weighs extraordinary steps to shore up fund - (www.finance.yahoo.com) The Federal Deposit Insurance Corp. is weighing several costly -- and never-before-used -- options as it struggles to shore up the dwindling fund that insures bank deposits. The agency is considering borrowing billions from healthy banks. Alternatively, it may impose a special fee on the banking industry. Each option carries risk: Drawing money from healthy banks would take dollars out of the private sector, making that money unavailable for investment in the weak economy. But charging the whole industry a fee to replenish the fund could push weaker banks toward failure. A third option -- borrowing from the Treasury -- is politically unpalatable, since it would resemble another taxpayer-financed bailout. A fourth option would be to have banks pay their regular insurance premiums early. But this idea wouldn't solve the fund's long-term cash needs. "The bottom line is, there's no good solution," said Jaret Seiberg, an analyst with the research firm Concept Capital. "This is a fight over which option is least bad." The FDIC is expected to propose a solution, possibly combining two or more of the options, at a board meeting next week. Bank failures since the financial crisis struck have drained the fund to its lowest level since 1992, at the peak of the savings-and-loan crisis. The fund insures deposit bank accounts of up to $250,000. Officials have approached big, healthy banks about making loans to the agency, said two industry officials familiar with the conversations, who requested anonymity because the plans are still evolving. Doing so would help the agency avoid tapping a $100 billion credit line with the Treasury -- something FDIC Chairman Sheila Bair is reluctant to do. But taking billions from large, healthy banks would remove that money from the private sector and prevent it from being invested. That could slow an economic recovery, analysts said. Industry and government officials said Tuesday that plan was still on the table. But FDIC spokesman Andrew Gray downplayed its likelihood, saying, "It's an option, but it's not being given serious consideration." The FDIC also could levy a special emergency fee on the industry. That would allow the healthiest banks to keep more capital for investment. But it could drive shakier banks toward failure -- further depleting the fund. Losses on commercial real estate and other loans are causing multiple bank failures each week.

Concord weighing options for money-draining Sleep Train Pavilion - (www.contracostatimes.com) The City Council knows what it wants at the Sleep Train Pavilion — a vibrant arts and entertainment venue that attracts a variety of acts. And, council members know what their main problem with the Pavilion's current operation is: It costs the city money. They just do not know how to fix it. That is where the consultants come in. In the meantime, the city made a deal to buy back $8.5 million worth of the 1995 bonds that financed the renovation of the Pavilion, lowering the interest costs the city pays. In July, Concord hired consultants to look at options for the Pavilion; they had a preliminary study session with the council at last week's meeting. Their full report will be out before the end of the year. Council members expressed their pride in — and frustration with — the Pavilion. "The city has a proud arts history that we want to keep," Councilman Mark Peterson said. "This facility is a great facility. "... I have a great time there." But Peterson, like his fellow council members, wants to see the Pavilion stop draining city coffers. "I don't like where it is today," said Vice Mayor Guy Bjerke, insisting the city cannot keep subsidizing the Pavilion. The city had been spending $1.8 million each year to repay bonds from the Pavilion's 1995 renovation; those bonds are scheduled to be repaid by 2020. The revenue the city gets under its contract with LiveNation, the Pavilion's operator, has not been enough to cover those repayment costs in recent years. This year, LiveNation's payment will be about $430,000 short. LiveNation says it, too, is losing money on the Pavilion. It would need to lower its payments even more if it continues running the Pavilion after its current contract ends next year, the company told the city. "The Pavilion is a weak facility in the market," consultant Jerry McClendon said. LiveNation's Shoreline Amphitheatre in Mountain View seats 22,000; Concord's pavilion seats 12,500. Bjerke said he wondered whether LiveNation was keeping Concord's facility "on ice" to increase profits at its other properties. Taking a different approach to reducing the Pavilion's drain on city coffers, this week the city agreed to buy back two-thirds of the outstanding bonds from the 1995 renovation to cut the city's interest payments. Until this week, the city had about $13 million in bonds outstanding, at 8.24 percent interest. To cut that payment, this week the city made a deal to buy back some of those bonds from an investor, cutting the city's annual payment from $1.8 million to less than $700,000. To pay the investor, the city borrowed money from its own sewer fund and insurance funds, money that was not needed in the short or long term, city Finance Director Peggy Lefebvre said. The money will be paid back to those funds with interest — a much lower interest rate than the 8.24 percent of the old bonds.

OTHER STORIES:

Tidal Wave of Homeless Kids Hits Schools - (www.msnbc.msn.com)
Gary Tanashian: Stock Market Status - (www.biiwii.com)
The Dark Years Are Here - (www.matterhornassetmanagement.com)
Why can't we audit the Fed? - (www.theautomaticearth.blogspot.com)

Kudlow Report: Mr. Schiff Goes to Washington - (www.dailypaul.com)
WTF? F.D.I.C. May Borrow Funds From Banks - (www.nytimes.com)
Japan Scraps Its Death Penalty - (www.timesonline.co.uk)

Ohio housing values falling - (www.coshoctontribune.com)

Most mispriced house ever! Listed at $3,299,000, rents for $3,850/mo - (www.patrick.net)

U.S. mortgage delinquencies set record - (www.reuters.com)

Houseownership fell in '08; Asians hit worst - (www.sacbee.com)

Banks Force Houseowners to Keep Paying After Short Sales - (www.businessweek.com)

"Produce The Note" Movement Helps Stall Foreclosures - (www.huffingtonpost.com)

Seller-funded Downpayment Assistance Information Center - (www.ml-implode.com)

The Problem Is Government Guarantee Of Loan Repayment From Fannie And Freddie- (www.bestsyndication.com)

Extending Tax Credit For First-time Homebuyers Is Bad Policy - (www.lasvegassun.com)