KeNo's Housing and Economic Portal: Monday December 21 Housing and Economic stories

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Views from Dubai: 'The end of the dream' - (news.bbc.co.uk) Here, Dubai residents describe the changes the worsening economic situation has brought and what lessons can be learnt.

KEVIN DRAPER, FOUNDING CHAIRMAN OF A COMPANY: In 1996 I established a company in Dubai which designs and builds exhibition stands. After 12 years of impressive growth it was valued at £18m earlier this year. It's a high-profile company with high-profile clients.

A takeover was imminent but the economic collapse changed everything in less than one year. Client budgets were slashed and as a result we had to take a 60% reduction in our sales turnover. I am currently in the UK living with my elderly parents and seeking investment to be able to continue trading. It's a riches to rags story. I have a house in Dubai, which is in a great development with fantastic views. I am trying to sell it at the moment, so that I can invest in my company. The falling property prices mean that I'll lose money on the house too. Dubai was overheated in the property sector, there was so much speculation going on. I don't think development will continue in the same way. Most importantly, I think some laws need to change. One of the biggest challenges businesses and individuals in Dubai face is that a debt payment delay is a criminal offence. You can go to prison for a bounced cheque. There are many British expats in jail right now because they've delayed their debt repayments. This is exactly why people are leaving overnight and abandoning their cars at the airport. Many of my staff have been jailed. Because of delays of business transactions I could face immediate imprisonment as soon as I fly back into Dubai. I could also be prevented from travelling back to the UK. It is a terrifying prospect.

The punishment is so severe and I think that this is definitely a contributor to Dubai's problems. It's an old law that needs to catch up with the economic development of the country. But I haven't given up on Dubai. It's a great place to live. I am currently employing 140 people there and will continue to try to make it a success. I am sure that Dubai will sort out its problems.

SARAH, WESTERN JOURNALIST: Six months after I bought a flat, it lost more than half its value. I'm trapped here - even if I rent it, the rental income won't cover my mortgage payments. Lots of people have left - my neighbour, an architect from the US, was fired and her whole company shut down. You see cranes and construction material everywhere, but nothing is being built. The airports are empty. There are not that many people when you go out shopping, and there are almost no Westerners in the bars and clubs.

All the big Dubai events are gone, and it's more about Abu Dhabi these days. It's like something's died and the city is in mourning.

MATTHEW, PERSONAL TRAINER: We moved to Dubai two years ago. One of the questions we asked ourselves was how is this property boom sustainable and who is going to live in all these tower blocks. Friends already living here assured us that if you build them, they'll come. They even urged us to invest - thank goodness we didn't. There are lots of rumours of buildings that have been empty from the moment they were built. I know a few tower blocks that are never lit up in the evenings. So I think Dubai has made mistakes and what we see happening here is not only down to the global downturn. Many people have left - mostly people employed in the construction and property industries. Quite a few guys from the rugby club have left. We are not affected personally, as neither of us work in industries hit by the recession. This is not to say we aren't watching the pennies. We are worried, of course, but I am sure they'll turn it around. There's too much money invested here to let it all go wrong. The word out there at the moment is that Abu Dhabi will bail Dubai out and people here are confident that sooner or later it will happen.

Fire-sales trigger dramatic slump in NZ seaside values - (www.nzherald.co.nz) The number of coastal sections selling at firesale prices is undermining beachside property values, and in some areas it may be years before prices start to move again. A Weekend Herald analysis of prices in the North Island's holiday-home market shows substantial drops. Unlike some areas, such as Auckland, Wellington and Canterbury, where a shortage of houses for sale has helped push prices to records, coastal property prices are still slipping. From the Far North through Kaipara, Rodney, Coromandel and Bay of Plenty to Ohope and Raglan, too many coastal sections and houses for sale and too few buyers are forcing values down. Median price figures prepared by property information company QV and published today shows big drops in all the popular beach areas as sales have plummeted. Some areas have lost 20 to 24 per cent in value since the market highs of 2006 and 2007. The tell-tale statistic is the small number of sales. The year to September last year was well into the downturn, but the dip since then has been dramatic. Sales numbers did not increase in any of the areas surveyed, and in many were down more than 30 per cent. Waihi Beach was down 61 per cent, Pauanui 57 per cent, Ohope 51 per cent, Whangamata 38 per cent, and Mangawhai Heads 35 per cent.

Federal Reserve tries theater ads to burnish its image - (www.latimes.com) Spots urging shoppers to use their credit cards wisely will be shown on big screens in 12 U.S. cities. The central bank has long been accused of neglecting its consumer protection duties. The Federal Reserve isn't too popular these days, what with its failure to predict or prevent the financial crisis and recession, not to mention its involvement in last year's bailouts. Rep. Ron Paul (R-Texas) has a bestselling book out called "End the Fed," and some lawmakers are looking to cut back the central bank's power. It sounds like a perfect time for an ad campaign. The Fed has made a 45-second public service announcement to help consumers use their credit cards wisely. The spot will run before movie previews at theaters in 12 U.S. cities, including Long Beach, from Friday through Dec. 3. Over jazzy music, the announcer asks: "Want to use your credit card wisely? Here are some tips you can trust from the Federal Reserve." With the Fed logo featured prominently, the ad offers suggestions such as paying your bill on time and watching for changes in the terms of the account. The Fed has been under fire for neglecting its consumer protection authority for years -- particularly for taking 14 years to enact rules protecting consumers from unscrupulous mortgage lending.

Federal Housing Administration Encourages More Bad Mortgage Loans - (www.dailyreckoning.com.au) "An astounding 20 percent of the Federal Housing Administration's $725 billion portfolio of mortgage loans will go into default as the result of the agency's recent campaign to subsidize first-time homebuyers with little cash and weak credit. That prediction comes from an industry insider who has seen it all happen before: former chief credit officer of Fannie Mae, Edward Pinto, who recently testified before a House committee on the gathering storm of FHA mortgage defaults. It's déjà vu all over again. But why did federal policymakers allow history to repeat itself? "To listen to our glorious leaders discuss such matters is to realize that they have no real understanding of what they are dealing with," writes Independent Institute Senior Fellow Robert Higgs in a new post on The Beacon. "They see the collapse of an artificially stimulated house-construction industry, and they conclude: the government must subsidize more house construction. They see the collapse of real estate prices, and they conclude: the government must stimulate demand for real estate in order to raise its price." Had policymakers grasped the causes of the housing boom and subsequent bust, they would have stopped subsidizing unqualified borrowers, stopped trying to raise the prices of houses, and let the economic process work itself out through market processes. Continues Higgs: "Simply piling on more and more of the same distortive policies that generated the crisis in the first place can, at best, only delay the day of reckoning while magnifying the adjustments that ultimately will have to occur."

Judge blasts bad bank, erases $525K debt - (www.nypost.com) A Long Island couple is home free after an outraged judge gave them an amazing Thanksgiving present -- canceling their debt to ruthless bankers trying to toss them out on the street. Suffolk Judge Jeffrey Spinner wiped out $525,000 in mortgage payments demanded by a California bank, blasting its "harsh, repugnant, shocking and repulsive" acts. The bombshell decision leaves Diane Yano-Horoski and her husband, Greg Horoski, owing absolutely no money on their ranch house in East Patchogue. Spinner pulled no punches as he smacked down the bankers at OneWest -- who took an $814.2 million federal bailout but have a record of coldbloodedly foreclosing on any homeowner owing money. "The bank was so intransigent that he [the judge] decided to punish them," Greg Horoski, 55, said about Spinner's scathing ruling last Thursday against OneWest and its IndyMac mortgage division. It erased up to $291,000 in principal and $235,000 in interest and penalties. The Horoskis -- who had been paying only interest on their mortgage -- had no equity in the home. Horoski, who had begged the bankers to let him restructure the loan, said, "I think the judge felt it was almost a personal vendetta." Dealing with the bank, he said, was "like dealing with organized crime." OneWest said, "We respectfully disagree with the lower court's unprecedented ruling and we expect that it will be overturned on appeal." It claimed it "has been extremely active in working with consumers on home loan modifications through the Obama administration's Home Affordable Modification Program and other loan modification initiatives." The bank is owned by a private equity group that purchased the failed IndyMac bank. Yano-Horoski, a college professor of English and cognitive reason, and Horoski, who sells collectible dolls online, bought their 3,400-square-foot, one-level house 15 years ago for less than $200,000. In 2004, court records show, they refinanced, paying off their original mortgage with part of a $292,500 sub-prime loan from Deutsche Bank. They used what was left for health care and for his business. The loan carried an initial adjustable interest rate of 10.375 percent, which soared to 12.375 percent. It eventually ended up being either owned or serviced by IndyMac, and the bank sued the couple in July 2005 when they began having trouble making payments because of Horoski's health problems.

Banks forced to buy back more bad mortgages - (mortgage.freedomblogging.com) Banks had to buy back $7.1 billion in defaulted single-family loans in the third quarter to reimburse mortgage investors, up from $1.9 billion in the previous quarter. Federal Deposit Insurance Corp. Call Report information shows that most of the buyback demands fell on JPMorgan Chase and Bank of America. Chase repurchased $2.7 billion in defaulted loans and BoA repurchased $2.3 billion to satisfy investor demands. Both are on the hook for troubled loans they took control of when they purchased ailing mega-thrifts — Countrywide in the case of BoA and Washington Mutual by Chase. The FDIC information also lists buybacks by Citibank ($898 million), National City Bank ($361.6 million), Wells Fargo Bank ($266 million) and SunTrust Bank ($232.3 million). Investors like Fannie Mae and Freddie Mac can require lenders to buy back defaulted loans that don’t comply with their underwriting requirements. Freddie Mac forced its seller/servicers to buy back $960 million in bad mortgages in third quarter. (Fannie does not disclose buyback information.) Ginnie Mae and Federal Housing Administration also require buybacks and indemnifications on bad loans.