KeNo's Housing and Economic Portal: Thursday June 24 Housing and Economic stories

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NY Nearly Goes Broke Again, Delays Paying Bills - (www.cnbc.com) New York state delayed paying $2.5 billion of bills as a short-term way of staying solvent but its cash crunch could get even worse in August and September, Budget Director Robert Megna said on Tuesday. "Had we not done that, I think we would have been close to broke," Megna told reporters in Albany. This is the third time since December the cash-poor state has withheld funds. This time, the state's general fund, which counts everything but federal aid and some specific revenues, ran in the red by about $500 million to $600 million, Megna told reporters. The state was able, however, to borrow from other funds, including the short-term investment fund. About $1.5 billion of the withheld funds must be paid to schools in June. The rest of the total could be paid in July. "The next big bottleneck is in August and September," Megna said, adding that tax revenues have recently improved slightly, which is a slight bright spot. Democratic Governor David Paterson's $135 billion budget has not been enacted by the legislature though it was due on April 1.

US likely to stand with Israel on raid - (www.abcnews.com) I’m told there won’t be any daylight between the US and Israel in the aftermath of the incident on the flotilla yesterday, which resulted in the deaths of 10 activists. Regardless of the details of the flotilla incident, sources say President Obama is focused on what he sees as the longer term issue here: a successful Mideast peace process. “The president has always said that it will be much easier for Israel to make peace if it feels secure,” a senior administration official tells ABC News. The suggestion is that US condemnation of Israel would further isolate that country, and make further peace negotiations between the Israelis and Palestinians even more difficult. The senior administration official says that President Obama spoke to Israeli Prime Minister Benjamin Netanyahu three times on Monday. Mr. Obama pushed the notion that last night – as the United Nations Security Council met to issue a statement about the incident – was the moment when the US had maximum leverage, that the longer the statement was being debated the worse it would ultimately be for Israel.

Pelosi ducks Israeli blockade question - (www.thinkprogress.org) Today, House Speaker Nancy Pelosi (D-CA) held a conference call with bloggers, where she received questions — including from ThinkProgress — about Israel’s raid of the flotilla carrying humanitarian aid and activists bound for Gaza. Pelosi refused to speak directly about whether Israel’s blockade is causing a humanitarian crisis in Gaza, saying that the focus should instead be on solving Middle East peace through a two-state solution:

Placing the Blame as Students Are Buried in Debt - (yahoo.finance.com) Like many middle-class families, Cortney Munna and her mother began the college selection process with a grim determination. They would do whatever they could to get Cortney into the best possible college, and they maintained a blind faith that the investment would be worth it. Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she's been enrolled in night school, which allows her to defer loan payments. This is not a long-term solution, because the interest on the loans continues to pile up. So in an eerie echo of the mortgage crisis, tens of thousands of people like Ms. Munna are facing a reckoning. They and their families made borrowing decisions based more on emotion than reason, much as subprime borrowers assumed the value of their houses would always go up.

Building industry wants the U.S. Treasury Dept to guarantee builders' loans - (www.hadd.com) - Legislation introduced yesterday by Reps. Brad Miller (D-N.C.) and original co-sponsors Carolyn Maloney (D-N.Y.) and Joe Baca (D-Calif.) would help alleviate the severe lack of credit for acquisition, development and construction (AD&C) financing that threatens to end the budding housing recovery before it has time to take root, according to the National Association of Home Builders (NAHB). “We applaud these lawmakers for taking the lead to address the housing production credit crisis that is jeopardizing the housing and economic recovery now under way,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. H.R. 5409, the Residential Construction Lending Act, would create a new residential construction loan guarantee program within the Department of Treasury to provide loans to builders with viable construction projects. Designed to unfreeze credit for small home building firms, the measure would expand the flow of credit to residential builders on competitive terms. Under intense pressure from their bank examiners to reduce their exposure to development and construction loans to builders and curtail their outstanding portfolios of real estate loans, many lenders are refusing to make loans for viable new housing projects and cutting off the funding for performing loans, or calling them. This is causing unnecessary foreclosures and losses on these loans. Performing loans are also being reappraised, reducing the value of the collateral and forcing borrowers to come up with large amounts of cash to keep their loans current.

NY Owners Bet on Raising the Rent, and Lost - (www.nytimes.com) The first signs of financial turmoil came at Riverton Houses in Harlem. Then came Stuyvesant Town and Peter Cooper Village on Manhattan’s East Side. Now a third complex built by Metropolitan Life in the 1940s for veterans and middle-class families has run into financial distress after being purchased by speculators during the recent real estate boom. The owners of the sprawling Parkmerced apartment complex in San Francisco announced this week that they would default on their $550 million mortgage, which comes due in October. A partnership of Laurence Gluck of Stellar Management and the Rockpoint Group, which had already lost Riverton Houses in Harlem in March to foreclosure, put out a statement on Wednesday that placed their problems at the 3,221-unit Parkmerced in the context of the current economic downturn. “The landscape has changed dramatically,” P. J. Johnston, a spokesman for the owners, said in an interview. “The economy has taken a major hit. Many properties are facing default.” But just like Riverton and Stuyvesant Town, the owners of Parkmerced sought to take advantage of a roaring market to replace rent-regulated residents with tenants able to pay far higher rates. The owners in all three cases invested substantial sums in upgrading the aging buildings and renovating some apartments. But ultimately they failed to increase revenue enough to cover the debt payments on the properties, which were heavily leveraged. The recession did not help. “It’s pretty interesting that they have all ended up in the same place,” said Andrew Florio, an analyst at Real Capital Analytics, a research firm. “People assumed they could boost revenues by kicking people out and raising rents.”