KeNo's Housing and Economic Portal: Saturday December 12 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Online government auctions deceive newbie foreclosure buyers - (www.heraldtribune.com) Erika Ginsberg-Klemmt and William Anderson met online, but not in a good way. Driven by the misconception that they had stumbled on a brilliant formula that would allow them to buy a Siesta Key condominium for pennies on the dollar, the two novice real estate investors began unknowingly bidding against each other on Sarasota County's new online auction Web site. Anderson ended up prevailing with a bid of $86,001 and believed that he held unencumbered title to a condo once valued at $327,000. But all Anderson really won was the right to pay off $20,000 in unpaid association dues. More than a dozen investors who made similar mistakes in Sarasota and Duval counties since July are now out hundreds of thousands of dollars. Though they acknowledge that they were "suckers" and "stupid," they also question why government-run Web sites do not do more to warn novice bidders. "Okay, I'm an idiot," said Ginsberg-Klemmt, who settled in Sarasota in 2005 and began buying liens this summer after living on a sailboat with her husband for more than a decade. "But I'm not alone. Every day another sucker believes what we did." The fact that inexperienced investors have been burned by bidding for foreclosures on the sites calls into question whether Florida counties have rushed into this brave new world of online bidding. But Lloyd McClendon, chief executive of Plantation-based Realauction.com, which runs the auction sites for 12 Florida counties, notes that 20,000 properties have been sold online by his company in the last year. Aside from a mistake in improperly advertising one sale, the complaints from this mainly Sarasota group of investors is a first. McClendon says there are adequate warnings on the site but more could be added if the clerks want. But he is not sure how much good it would do. "I don't know how you protect them against themselves," he said. Irene Plank, the attorney for Sarasota County Clerk Karen Rushing's office said, "Whether it be a sale in the courthouse or online it doesn't alleviate the onus of responsibility to research it." But Ginsberg-Klemmt and her fellow investors argue that Sarasota and the other Florida communities doing the auctions -- Manatee and Charlotte included -- should do more.

Colorado foreclosures hit record in third quarter - (www.aspentimes.com) Colorado had a record-high number of new foreclosures in the third quarter, when new filings hit 12,468. The quarter ending Sept. 30 was the fourth consecutive quarter in which new foreclosure filings increased. For the year so far, new foreclsoure filings in Colorado are up about 18 percent compared to the same period in 2008. The news isn't all bad, though. Housing officials say Thursday that there are fewer completed foreclosures this year. The total number of completed foreclosures fell 8 percent during the first three quarters of the year when compared to the same period last year. That drop indicates that some homeowners behind on payments are doing a better job trying to get back on track and keep their homes.

FHA-Backed Lending Is a Train Wreck - (www.bloomberg.com) The Federal Housing Administration, the agency that insures home purchases made with down payments as small as 3.5 percent, may create another lending crisis, Toll Brothers Inc. Chief Executive Officer Robert Toll said. “Yesterday’s subprime is today’s FHA,” Toll said today at a New York conference for builders sponsored by UBS AG. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.” Toll Brothers is the largest U.S. luxury homes builder. The FHA’s insurance reserve ratio fell to 0.53 percent, the lowest level in history, and more steps are needed to shore up the agency that guarantees one of every five single family loans, Housing and Urban Development Secretary Shaun Donovan said Nov. 12. While the insurance fund’s capital ratio is at an all-time low, Donovan said those who say FHA is the next subprime- mortgage crisis are “dead wrong.” The quality of the loans FHA insures is “actually very good,” Donovan said. FHA’s total reserves are more than $31 billion, giving it an overall capital resource ratio of 4.5 percent, according to statement by FHA Commissioner David Stevens. The 0.53 percent net capital loan insurance ratio takes into account projected losses and is the yardstick Congress uses to determine the health of the fund. Congress requires the FHA to maintain a loan reserve ratio of at least 2 percent to protect the insurance fund from default. Record Defaults: The FHA said 456,000 of its loans, or 8.2 percent, were in default as of September. That was up from 5.6 percent in September 2008. The default rate for loans tracked by the Mortgage Bankers Association was a record 9.24 percent for the three months through June, the most recent period for which data is available. That was up from 6.41 percent a year earlier. FHA loans accounted for about 8 percent of the mortgages Toll Brothers closed in the past quarter, Robert Toll said. About 80 percent of the company’s financing is loans guaranteed by Fannie Mae or Freddie Mac, he said. Those government- supported agencies require larger down payments and better credit than loans insured by the FHA.

How to prepare for 'global collapse' - (www.telegraph.co.uk) Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction. In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems. Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years. "As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast. Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010. Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade. (UK figures look low because debt started from a low base. Mr. Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case). The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said. Inflating debt away might be seen by some governments as a lesser of evils. If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s. The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time. SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

Banks start foreclosure on 2,100 mortgages - (www.mortgage.freedomblogging.com) DataQuick reports lenders filed 2,152 notices of default in Orange County in October, down 3.2 percent from September but up 132.6 percent from a year ago. Default notices fell for the third straight month, which could reflect borrowers getting more affordable terms to their loans under the Obama administration’s loan modification program. Making Home Affordable is reaching more people, but it is unclear how many are getting permanent loan modifications. The administration won’t release figures on completed modifications until December. And those getting temporary modifications account for just 20 percent of all eligible loans at least two months past due. Default notices initiate the foreclosure process and are typically filed after a borrower misses three or more monthly payments. Banks foreclosed on 763 houses and condos last month, up 7.6 percent from the prior month and 3.5 percent from a year ago. Foreclosures fell for the previous three months, so it is too early to say if the October rise indicates a trend. But if many borrowers don’t get permanent loan modifications, foreclosures will likely increase in the months ahead. A separate report from a real estate agent showed a recent uptick in foreclosures and short sales listed for sale. Short sales are when a bank agrees to accept less than debt owed on a property. It’s also possible that short sales will increase, if modifications fail. For sales and pricing information, check out Lansner on Real Estate.

One in 7 U.S. mortgages foreclosing or delinquent - (www.reuters.com) A record one in seven U.S. mortgages were in foreclosure or at least one payment past due in the third quarter, according to fresh data signaling the recovery in the housing market will be tepid at best. U.S. mortgage delinquency rates and the percentage of loans that entered the foreclosure process also jumped to records from July to September, the Mortgage Bankers Association said on Thursday. Rising job losses were behind the increasingly bleak portrait of the housing market in a trend that will continue into next year, the group said in data that adds to recent evidence of a still-struggling housing market. Housing and related business account for about 20 percent of the economy and recovery is essential to bring unemployment down from a 26-1/2-year high and kick-start economic growth. Yet record foreclosures will add to the growing supply of unsold homes, sapping the housing market as it attempts to recover from the worst slump since the Great Depression. The MBA said the percentage of loans in foreclosure rose to 1.42 percent, from 1.36 percent in the second quarter and 1.07 percent in the third quarter of 2008. "Foreclosures remain the biggest hurdle to the housing recovery," said Michelle Meyer, economist at Barclays Capital in New York.