KeNo's Housing and Economic Portal: Wednesday April 7 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

One Defaulting Owner's Free Ride: Three Years and Counting - (www.irvinehousingblog.com) Freeloaders enjoying the entitled life are not confined to subprime areas. Today's featured property may be the worst case of housing entitlement in the country, and it is right here in Irvine. If people get to have free rides, don't you want to be one of them? Looks like great fun to me. I can see why everyone wants to own a house in California; you get a nice entitlement during the rough times, and you get free money during the good times. Where do I sign up? Recently, I exposed The Face of Housing Entitlement Today. ... from the LA Times article Many borrowers in default live for free as lenders delay evictions: Irvine's Housing Entitlement: I first profiled today's featured property back in September of 2009 in the post Bluebell, a shocking example of gaming the system here in Irvine.

The owner of today's featured property paid $465,000 on 10/23/2003. She used a $372,000 first mortgage, a $93,000 second mortgage, and a $0 down payment.
On 12/30/2004 she refinanced into an Option ARM for $486,500.
Two months later on 2/3/2005 she opened a HELOC for $67,000.
Total property debt is $553,500 plus 3 years of missed payments, negative amortization, and fees.
Total mortgage equity withdrawal is $88,500.

Consider what this woman accomplished:

She put no money into the transaction. None.
She extracted $88,500 in just over one year. That is nearly the median income in Irvine, and that money came to her without tax withholding.
She has lived in the property since 2003, and in the full term of ownership, she has not made payments totaling what she pulled from the property.

I admit to feeling foolish. I looked at property in late 2003, and I deemed it too expensive. It never occurred to me that anyone could accomplish what this woman has done, or I might have followed in her footsteps. I feel like an idiot struggling to actually pay for my housing costs when I could have obtained a free ride for the last seven years. I hope lenders know that California borrowers are learning their lessons well.

Pleasanton housing cap violates law, judge says - (www.sfgate.com) So much for state and local rights. Pleasanton's voter-approved cap on the number of residences in the city, a measure intended to limit growth and congestion in the town, violates a state law requiring all cities to take on their share of regional housing needs, an Alameda County judge has ruled. The ruling is the first by a California judge to require a city to change its zoning to accommodate new housing, said attorney Richard Marcantonio of the nonprofit Public Advocates firm, which represented the plaintiffs in a lawsuit seeking to overturn the cap. Those plaintiffs said Pleasanton was welcoming employees to office parks and other businesses, but forcing other cities to house them. "Pleasanton imports workers to fill thousands of jobs but excludes those workers and their families from a chance to live in the community," Marcantonio said. "Now there's a chance for people to live in the city that they contributed to building."

Students, this is where your money goes! - (www.sfgate.com) The California State University system has more than 2,700 full-time employees with annual base pay over $100,000. Find out who they were, what campuses they worked for and how much they made by searching the database below. To perform a search, you can leave the fields blank if you want broad results. For more narrow results, you can enter a person's name or select from the drop-down menus. (Note: This data was provided by the State of California. Annual base pay is based on monthly pay figures for April 2008.)

LA power and water rates may rise 8% to 28% to pay for mayor's green initiatives - (www.latimes.com) Households that get their power from the Los Angeles Department of Water and Power could see their electric bills go up between 8.8% and 28.4%, depending on where they live and how much energy they use, under a plan unveiled Monday by Mayor Antonio Villaraigosa. Appearing with labor and environmental leaders, Villaraigosa said the proposed increases would ensure that the DWP meets his goal of securing 20% of its energy from renewable sources such as wind and solar by Dec. 31. The increased revenue would help pay for new environmental initiatives, including more aggressive conservation programs and a solar initiative designed to create 16,000 jobs. But it also would address the DWP's failure to collect enough money to cover the cost of existing renewable energy initiatives and the fluctuating price of coal and natural gas, utility officials said. "Nobody's denying that this is a big increase -- at least I'm not," said DWP Acting General Manager S. David Freeman. "Because we've put it off so . . . long, [ratepayers] have saved money in the last three years." The mayor has been talking for weeks about the need for the DWP to charge more. Monday was the first day his team showed its estimate of the effects on consumers of the increase, which is scheduled to be phased in over a full year starting next month. Under the plan, households that use the smallest amount of electricity -- technically known as Tier 1 customers -- would see an average increase of 8.8%. Those customers make up 58% of the DWP's residential ratepayers. Tier 2 customers, who use more power and make up 36% of the utility's residential customers, would see an average increase of 16.8% to 18.9%. Tier 3 customers, who use the most power and make up the remaining 6%, would face hikes in their electric bills of 24.4% to 28.4%, according to documents provided by the mayor's office.

Banks profit from U.S. debt rather than from lending - (www.contracostatimes.com) Comedian Steve Martin has told this joke for more than 30 years: "Let me tell you how to make a million dollars? First, .... get a million dollars (drum rim shot)." If you're a large American bank, you can "get $1 million" for $2,500 in interest a year. Since December 2008, the Federal Reserve's bank lending rate has held steady at 0.25 percent, as close to free money as it gets. Tuesday, the Fed voted to keep this sweet deal for banks in place, despite some talk it is ready to begin raising key lending rates. For now, the nearly free money continues to flow. Don't stop a good thing, conventional banking wisdom says, by raising interest rates and rocking the recovery boat. But conventional banking, where banks profit from loans they originate, is missing at sea. Instead, big American banks have learned how that nearly free money can buy sure bets, which create profit and produce those multimillion-dollar bank bonuses that have even the White House crying foul. But those complaints in the Oval Office ring hollow. The Obama administration and the Federal Reserve are the main enablers for a profit machine that cannot fail. Banks have been making profits by borrowing nearly free money (0.25 percent interest) and buying Treasury bonds in a way that makes Steve Martin's joke sound more prophetic than comedic. The profit is the reason for the executive bonuses that attract more attention than why they were awarded.

Miami: Couldn't get worse, then it did - (www.eyeonmiami.blogspot.com) I know. Just when you think the real estate implosion in Miami couldn't get any worse, it gets worse. With a regional mortgage delinquency rate of 28.8%, Miami is number one in the nation. But hey, look, you could own a condo on South Padre Island, Texas. This little bit of hilarity should take the edge off. Don't miss it. Funny video showing leaning tower in South Padre Island TX built on sand and developer has $125M lawsuit.

OTHER STORIES:

Fed's Duke Warns Against Narrow Regulatory Approach - (www.cnbc.com)

Greek Bank Shares Fall on EU Support Worries - (www.cnbc.com)

Housing Market Sure to Double-Dip - (www.cnbc.com)

Beware Of A Double-Dip Recession - (www.forbes.com)

US Mortgage delinquencies at historic highs - (www.moremoney.blogs.money.cnn.com)

Health Bill Will Cut Deficit $100 Billion in Ten Years: Hoyer - (www.cnbc.com)

Toyota Faces Racketeering Claims in Consumer Suits - (www.cnbc.com)

California Police Report Supports Prius Driver - (www.cnbc.com)

Orange County Feb. bankruptcies highest for the decade - (www.jan.freedomblogging.com)

Chicago House Foreclosures Up 16 Percent - (www.chicagoist.com)

Scary Housing Statistics of the Last 24 Hours - (www.timiacono.com)