KeNo's Housing and Economic Portal: Wednesday March 24 Housing and Economic stories

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TOP STORIES:

B of A Walks Away & Refuses To Pay Their HOA - (blog.youwalkaway.com) In an eye opening interview by Chicago Public Radio on Friday, I learned of a Chicago condo owner whose building had turned into an absolute nightmare – 2/3 of the residents were gone, the utilities had been shut off, the place was literally crawling with maggots. Of the 27 unit building, Dee Hutchinson and two of her neighbors were left with the sole burden of all the HOA fees, leaving them virtually helpless to take care of even the most basic of necessities like heat and extermination. What really caught my attention about the story, the problem wasn’t that the residents of the building weren’t paying their dues – that problem had come and gone… the interesting, albeit not really surprising fact about this story was the fact that almost all of the condos in the building were owned by banks, mostly large ones like B of A. Listen to the full interview here… This story is yet another in a string recently that illustrates the fact that despite banks trying desperately to paint the picture that defaulting on one’s financial obligations is immoral, they are the first to do it when the tables are turned. Paul Leonard is with the Financial Services Roundtable, a banking industry trade group. He says banks aren’t set up to handle this. “The entire issue of a bank as landlord is a very challenging one, because they’re not in the business, nor do they want to be in the business of being a landlord. You know, they don’t have “Oh, we’ll just switch over to our system to pay condo fees.” They don’t have that.” said Leonard. Aren’t set up to handle it eh? Yet they are set up to call and harass a family who’s main breadwinner has just lost their job, or just found out that they had cancer, or had just died? These stories are a dime a dozen, meanwhile while the banks are raking in record profits and charging ridiculous interest rates and fees to everyday folks just trying to get by, yet they see no moral responsibility to their new neighbors in the condo to help pay their share so the residents who have heeded their plea to do what’s right and keep paying, can have heat, and a fridge that isn’t infested with maggots.

Hefty tax bill may hit those who lost house - (www.signonsandiego.com) San Diegans who have lost their homes through foreclosure or short-sales thought they had emerged from the dark times and could start rebuilding their lives. Then the state tax man came calling. With less than six weeks before taxes are due, an estimated 16,000 former homeowners statewide will owe $15 million in extra income taxes this year and $29 million through 2012. The tax applies to what is called the “cancellation of debt” that occurs when property owners lose their homes through foreclosure or arrange a short-sale in which they sell for less than the mortgage balance. The lender sends them a form itemizing the forgiven debt, and the amount is subject to income tax. Congress exempted most homeowners from the extra federal tax through 2012, and the state followed suit for 2007 and 2008 but did not extend the provision last year. The state Assembly may vote tomorrow on a bill to repeal the tax, but Gov. Arnold Schwarzenegger vetoed such a bill last year over unrelated provisions. “They’re probably stuck,” San Diego tax attorney Bob Kevane said of former homeowners facing the tax. “The biggest way around it is if you’re insolvent.

Wells Fargo takes ownership of 1,800 East Palo Alto rental units - (www.mv-voice.com) Wells Fargo took ownership of more than 1,800 housing units in East Palo Alto's Woodland Park neighborhood Tuesday afternoon, officially becoming that city's largest landlord. The bank's foreclosure auction for the properties, which were previously owned by Palo Alto-based firm Page Mill Properties, attracted no bidders Tuesday, said Elise Wilkinson, Wells Fargo spokesperson. As a result, Wells Fargo officially took ownership of the properties, which the bank valued at $142 million. Page Mill has been vehemently criticized by its tenants and by city officials for repeatedly raising rents at the properties. Some have accused the company of "predatory equity" and demanded rent reductions. Page Mill had maintained that the raised rents are needed to fund security upgrades, seismic retrofits and other improvements at the properties. The company is also embroiled in more than a dozen lawsuits with East Palo Alto over rent control at these properties -- lawsuits that the city officials hope to settle in the coming weeks.

City removes trash cans, streetlights to save cash - (www.cnn.com) Colorado Springs, Colorado (CNN) -- If you come to a neighborhood park in Colorado Springs, plan on bringing your own trash bags. To save money, the city has removed the trash cans.

Need to catch a bus? Don't try on evenings or weekends. The city has cut that service, too. And when the sun goes down, Colorado Springs is going to look a little bit dimmer. Crews are removing a third of the city's streetlight to save money on electricity and light bulbs. It's this conservative city's way of closing a $28.5 million budget gap. "You can cry about the fiscal situation ... or you can take it as an opportunity to change, reinvent yourself and innovate and that's what were going to do in Colorado Springs," City Councilman Sean Paige said. Other governments are considering higher taxes to avoid such cutbacks, but in the state of Colorado, there is a taxpayers' bill of rights. It prevents state and city governments from raising taxes unless such a measure is approved by the voters.

Members of Jersey City MUA and Incinerator Authority have to start paying toward health insurance - (www.nj.com) Members of the Jersey City Municipal Utilities Authority and Jersey City Incinerator Authority may have to start paying for their health benefits. Councilman Steven Fulop tried to introduce ordinances Wednesday night that would have eliminated the benefits altogether, but failed to muster the necessary votes. The council instead introduced a measure, backed by Mayor Jerramiah T. Healy, that would limit health insurance to the member and eliminate family coverage. The board members would also have to pay 20 percent of the cost of the premium. Currently, the agency foots the entire bill. "This ordinance is a compromise ordinance in that it allows for a substantial savings while at the same time allowing the commissioners to pay a portion of their premium to maintain health coverage," Healy said in a statement yesterday. According to a memo Healy sent council members, Fulop's proposal would have saved $287,569 and the "compromise ordinances" would save $155,294.

Increasing numbers of Californians are suing lenders to avoid foreclosures - (www.mercurynews.com) Two weeks before their Sunnyvale home was to be auctioned off on the courthouse steps, Sonia Leverman and her sons seized on a desperate David-vs.-Goliath strategy: They sued their lender. Everything else the Levermans tried had already failed. By turning to the courts, they joined a fast-growing number of fearful and frustrated California home- owners who hope litigation will allow them to hold onto the American dream — maybe at a lower monthly mortgage cost, maybe just for a while longer until the inevitable foreclosure. In the last five years, the number of foreclosure lawsuits filed in federal court in California has ballooned — like an exploding adjustable-rate mortgage — from only 29 statewide in 2005 to nearly 1,400 last year. Many such lawsuits also are filed in state courts, which don't track the numbers or the outcomes.

Hovnanian's first-quarter profit tied to gift from taxpayer - (www.nj.com) Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, reported its first profit since 2006 after recording a tax benefit designed to help companies weather the housing recession.

Net income for the fiscal first quarter was $236.2 million, or $2.97 a share, compared with a loss of $178.4 million, or $2.29, a year earlier, the Red Bank-based company said yesterday in a statement. Revenue fell 14 percent to $319.6 million. Hovnanian recorded a $291 million tax benefit related to a change in U.S. law allowing builders to carry back land-sale losses for five years and recoup a portion of federal taxes paid when the company was profitable. Fitch Ratings forecast the builder would post at least a $275 million gain, according to a Jan. 15 report. Five analysts in a Bloomberg survey predicted Hovnanian would report a loss of 28 cents a share.

Untold Story Of How AIG Destroyed Itself - (www.businessinsider.com) The collapse of American International Group (AIG) was largely the result of a little understoodinvestment strategy that allowed the insurance giant to make optimistic bets on the housing market and other asset classes without having to actually buy the bonds backed by mortgages or other assets. The details of AIG’s investment strategy have been largely obscured by the analogy with insurance. In the typical telling, AIG is depicted as insuring mortgage bonds packaged by banks. AIG often seems to be almost a passive and unsophisticated player that came in after the deal. In reality, AIG was deeply involved in the creation of the financial products it insured, according to a person familiar with the matter. AIG was frequently involved right from the start of deals to securitize assets. It conducted its own due diligence on asset backed securities, sometimes going further than the banks that were actually buying the securities. Its financial professionals at times pitched deals AIG wanted insure to underwriters. It was an active participant in the market with a sophisticated, if risky, strategy for investing in the housing markets and infrastructure projects.