KeNo's Housing and Economic Portal: Tuesday October 27 Housing and Economic stories

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TOP STORIES:

Property transfers lock in lower tax assessments in CA - (www.pe.com) County assessors are increasingly worried that the historic drop in property values in the Inland area and around the state will turn out to be more than just a temporary blow to government coffers. Millions of properties statewide have been temporarily reassessed to reflect their lower market value. Under state law, property owners will pay reduced taxes until the market recovers and the property returns to its base value. But assessors and other tax officials say there are signs that some property owners are going a step further: using back-and-forth ownership transfers to trigger a property reassessment and lock in a much lower level of property taxes. Court rulings give assessors the power to ignore such transfers. But identifying them is not easy, they say. They worry that large numbers of changes could cost governments significant amounts of future property-tax revenue, a major part of government budgets. "It's a little scary, actually," said Larry Ward, the assessor in Riverside County, where the assessed value is down $16.2 billion for 2009-10. "Theoretically, somebody changing ownership could mean a lot of difference in tax value." There are no estimates on how many properties have been permanently reassessed to lower values after change-of-ownership transfers. Assessors, though, have started reviewing their records and recently asked state tax authorities to weigh in. Three weeks ago, the state Board of Equalization issued an advice letter telling assessors they could decline to reassess a property if they conclude it was little more than a paper shuffle meant to trigger a reassessment. But officials said detecting such transfers would take hundreds of staff hours. "It's kind of a loophole in the law," said Dennis Draeger, the assessor of San Bernardino County, which also has seen large drops in assessed value. "We've got our eyes open but some of them may never be discovered."

Debt: From American dream to American nightmare - (www.oregonlive.com) Kevin and Annette Martin celebrated their 15th anniversary by getting foreclosed out of their Newberg house. Kevin's homebuilding business collapsed in the recession, and they couldn't pay the mortgage. Their bank, JPMorgan Chase, rejected the Martins' request for a mortgage modification and took legal possession of the house Aug. 19. On their anniversary two days later, the Martins and their two young children moved in with Kevin's aunt in her small condominium in Charbonneau. They're broke, unemployed and visibly stunned at their rapid plunge from the middle class to the newly poor. A bomb of debt vaporized the Martins' once-comfortable life. The heavy load of leverage they had assumed in hopes of grabbing their piece of the pie proved their undoing. "I believe in the American dream, the white picket fence and the whole thing," said Kevin, 38. "But now, we're just in survival mode. For 14 months, it's been survival mode." A year has passed since the peak of the great financial panic of 2008. Regulators and analysts alike spent much of September pontificating about the economy's regained stability. Thanks to a multitrillion-dollar bailout, much of the financial sector has regained an uneasy equilibrium. Some banks that seemed on death's door less than a year ago earned record profits this past spring. But for many individual Americans, 2009 feels a lot like the depression that we supposedly averted. The unprecedented transfer of wealth from taxpayers to the financial industry has done little to improve the prospects of millions of people who have lost their jobs, their homes and much of their wealth. Even their sense of security is gone…. Household debt doubles: The current economic wreckage has its roots in a sweeping change in American behavior dating to the late 1980s. Between 1965 and 1985, household leverage -- measured by the ratio of debt to personal disposable income -- hovered between 55 to 65 percent. It more than doubled in the ensuing years, reaching a zenith of 133 percent in 2007, according to a paper issued in May by Lansing and Reuven Glick, economists at the Federal Reserve Bank in San Francisco. For people who wondered how their friends and neighbors afforded their McMansions, BMWs and high-end club memberships, it may well have been courtesy of their always-obliging debt merchant. Much of the debt was mortgage-related, the loans backed by escalating home prices. In 1995, Americans took out $3.3 trillion in mortgage and home equity loans. Ten years later, the total topped $10.4 trillion. The surge in debt is attributable, in part, to what Lansing politely calls "credit industry innovation and product development." Translated, that means that some lenders dropped any pretense of cautious loan underwriting. In an era when most lenders simply bundled their loans and peddled them to the secondary market, a buyer's ability to make mortgage payments seemed of minor importance. No one could lose, as long as home values were going up every year by double digits.

Owners No More - (www.nytimes.com) Indeed, in the absence of a rising market to ease the pain of having property, owners might be excused for wondering what it would feel like to surrender the keys and become a renter again. Would it be a relief — or an unnerving loss of control? A comedown, or, in the aftermath of the housing debacle, a fashionable, politically correct choice? Moving from owning to renting seems to teach some people that they just weren’t meant to be renters, while others find it liberating. “I love it,” said Kim Lipstein, 38, who unshackled herself from her Upper East Side co-op last spring. “I feel the weight of the world is off my shoulders.” Ms. Lipstein and her husband, Evan, 46, waved goodbye to the 850-square-foot two-bedroom one-bath apartment they shared with their children, Samantha, 7, and Jayda, 5, after their plans to combine it with another unit fell apart. Working with Wendy Jodel, a vice president at Citi Habitats, they sought to buy something larger. But they walked away from an accepted offer on a 1,400-square-foot two-bedroom because the maintenance was too high, the reserves too low, and their younger daughter would have been wait-listed for the nearest public kindergarten. By late May, eager to settle into a school zone with enough seats, the Lipsteins signed a year’s lease on a three-bedroom three-bath 1,400-square-foot apartment in the Public School 158 zone, near York Avenue and East 87th Street, for $5,200 a month. “It’s not perfect, but it’s freshly painted, the floors are redone and the kitchen is fresh,” said Ms. Lipstein, who described the postwar part-time doorman building as “nice, not really nice.” But the amount of space — and plumbing — is luxurious: No longer must she tell her girls to line up to go to the bathroom, or to tiptoe across the floors. “I don’t have to worry that when my children make noise, I’m going to get a letter from the owners downstairs,” Ms. Lipstein said.

Walnut Creek, CA realtor convicted of enslaving nanny - (www.sfgate.com) A Walnut Creek real estate agent has been convicted of charges that she lured a Peruvian nanny to the East Bay with promises of a better life but instead kept her as an indentured servant for nearly two years. Mabelle de la Rosa Dann, 46, also known as Mabelle Crabbe, kept the nanny a virtual prisoner, cut her off from Spanish-speaking media and rationed her food, authorities said. She was found guilty Thursday by a federal jury in Oakland of forced labor and other charges. U.S. District Judge Claudia Wilken is to sentence her Jan. 13. "No person should ever be forced to live in a world of fear, isolation and servitude," said John Morton, an assistant secretary for the U.S. Immigration and Customs Enforcement agency. Dann helped bring Zoraida Pena-Canal, 30, of Peru into the United States on a three-month visitor's visa in July 2006, authorities said. Pena-Canal had worked for Dann's sister and Dann as a housekeeper and nanny in Peru several years earlier, investigators said. Prosecutors said Dann lured Pena-Canal here with the promise that she would live in a large house with her own bedroom and private bathroom. Dann allegedly said she would pay Pena-Canal $600 a month after deducting the cost of the plane ticket for the first five months. Instead, Pena-Canal knew almost no world outside Dann's 900-square-foot apartment on Ygnacio Valley Road in the Cypress Creek apartment complex in Walnut Creek, where the two women lived with Dann's three children, Special Agent Jennifer Alderete of Immigration and Customs Enforcement wrote in an affidavit filed in federal court.

Poor investments dig a hole local residents and banks can't climb out of - (www.starnewsonline.com) During the mid-decade real estate boom, the exuberance of lenders and borrowers alike took hold here with a feverish intensity. But after the market turned stone cold, two local banks failed – Wilmington’s Cape Fear Bank and Cooperative Bank. One local couple’s legal problems provide a rare peek inside the region’s financial sphere during the investing frenzy that seized the area and ultimately led to the banks’ collapse. Over a 14-month period, the two failed banks and four others in Wilmington lent a total of $21 million to two novice real estate investors – drugstore owners John Davie and Charlene Waggett, according to court documents. There have been no charges or allegations of wrongdoing on the part of the Waggetts, who filed for personal Chapter 11 bankruptcy protection on May 19. They owe unsecured creditors more than $12 million, according to a disclosure report filed in bankruptcy court last month. John Waggett, when contacted this week, would not speak for attribution. The Waggetts’ bankruptcy attorney, Trawick “Buzzy” Stubbs of New Bern, described the couple as “a good, hard-working family who got caught up in the hype of the investment boom like many other investors.” Their Chapter 11 filing and a current lawsuit filed against them March 19 by BB&T provide a snapshot of the times. HEADY DAYS: Area home prices shot up, especially in beach areas, where speculative builders and investors moved in, many to make a quick profit flipping properties. Some beach homes doubled in value in a couple of years. When the market crashed, Wilmington suffered more than other North Carolina cities because its prices rose the most, banking experts say. As a matter of fact, the only bank failures in North Carolina since 1991 have been in Wilmington. The Waggetts, who own Seashore Discount Drugs and Winter Park Discount Drugs – and appeared in TV commercials for their businesses – were respected and well-known in the community as successful businesspeople. And John Waggett even served on Cape Fear’s board of directors, resigning in November 2007. At the same time the Waggetts plunged into the boom, so did “bankers, appraisers and a lot of other people involved in the real estate business,” Stubbs said this week. A timeline of loans to the Waggetts in 2005 and 2006 shows a string of financings on several properties – duplexes, condominiums and land – all but one in Carolina Beach.

US corruption system is based on lobbyist access - (www.huffingtonpost.com) Bill Moyers' show is always illuminating, but tonight's is one that no one should miss. When I spoke to Bill yesterday he described it as "a moment of truth-telling that could ignite the public's passion for Wall Street reforms that have been strangled in the crib by the big banks and their bought-and-paid-for politicians." Below are two clips from the show and the transcript of an exchange Moyers has with Kaptur and Johnson about the special phone-a-friend relationship Tim Geithner has with the heads of Citigroup, J.P. Morgan, Goldman Sachs, and what it says about how the system works -- for Wall Street. And tune in to PBS tonight at 9:00 pm ET to watch. BILL MOYERS: Let -- let's look at this story that just-- I just read from the Associated Press this week about how Treasury Secretary Geithner is on the phone several times a day with a select group of very powerful Wall Street bankers, especially Citigroup, J.P. Morgan, Goldman Sachs. He will talk to them when Members of Congress have to leave a message on the answering machine. And these are the bankers who helped bring on this calamity and who are now benefiting from it. What does that say to you? MARCY KAPTUR: That says to me that-- Wall Street and Washington is a circuit. And because Mr. Geithner headed the New York Fed that that historic relationship, unfortunately, continues. And it gives them special access and special power to influence policy. SIMON JOHNSON: Well, I think it really tells you how the-- the system works. The system is based on access and is based on-- on what-- on Wall Street shaping Washington's view of what's important. It's the people who are very close to Mr. Geithner before-- when he was the head of the New York Fed. Before he became Treasury Secretary. These people have unparalleled access. And in a crisis, when everything is up for grabs, you don't know what's going on, the people who-- who will take your phone calls, right, in government-- and people who are gonna be standing in the oval office, making the key decisions. That-- that's the-- that's the heart of the system. That's the-- the heart of how-- you get your agenda through, by changing their worldview. MARCY KAPTUR: And they also move people. In other words, Mr. Geithner came from the New York Fed, he came from Wall Street, and he becomes Secretary of the Treasury. His-- his-- predecessor, Mr. Paulson, came from Goldman Sachs, and he becomes Secretary of Treasury. You can go back decades, and you will see that there's this-- revolving door between Wall Street and Washington. And I recently asked Chairman Bernanke of the Federal Reserve, "Let me ask you a question. Would you be willing to consider a reform where the Cleveland Fed would have equal power to the New York Fed, in terms of how the Fed is run?" And his answer was, "No." BILL MOYERS: And why did you ask that question? MARCY KAPTUR: Because I think we need to democratize the Fed. I think that my region of the country, which is suffering so heavily from these decisions that were made by Wall Street and Washington, we need to have voice. And our bankers, who didn't do the bad things. Our community bankers, who are having to pay higher fees-- shouldn't be treated this way. Why should the people who did it right be penalized for those that did it wrong?

OTHER STORIES:

Stanford University looks to sell $1 billion in assets - (money.cnn.com)

Soros to invest big in 'green' projects - (money.cnn.com)

Banks still stuck with the junk - (money.cnn.com)

Maui Condo Prices Drop - (www.honoluluadvertiser.com)

Some CA state retirees rake in pensions and paychecks - (www.latimes.com)

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

Goldman Faces PR Dilemma Over Huge Bonuses - (www.cnbc.com)

UK to Sell up to $23 Billion in Government Assets - (www.cnbc.com)