KeNo's Housing and Economic Portal: Friday July 2 Housing and Economic stories

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Commercial Loans That Vanished in Property Bust Reappear - (www.nytimes.com) The W Hotel in Union Square has had an eventful six months. The 270-room hotel changed hands in December after the private equitydivision of Dubai World defaulted on a $117 million mezzanine loan in the face of dwindling business. But the lender, LEM Mezzanine, could itself lose the hotel in coming months as a result of its filing for bankruptcy protection earlier this year. Mezzanine loans, which are secured by stock or other ownership stakes in a company, became a popular form of secondary financing during the real estate boom, offering high returns to investors and high interest rates for borrowers. There is an estimated $100 billion in mezzanine loans outstanding across the country, and when the economy slowed and business slumped they became a special headache for borrowers. But despite built-in risks, lenders say mezzanine loans are beginning to resurface, albeit slowly.

Is Massive Refinancing During Bubble Years a Ticking Bomb? - (www.realestatechannel.com) During 2004-2005, it was California which led the way in refinancings. Keep in mind that many of the largest unregulated mortgage lenders were headquartered in California. They were only too willing to shovel out refinance loans to practically any homeowner in California who could sign a document. For those two years, the California numbers are simply mind-boggling. According to mortgagedataweb.com, which derives its figures from municipal recordings, slightly more than 2.6 million California mortgages were refinanced in 2004 and another 2.4 million the next year. The average size of these refinanced mortgages was a surprisingly small $200,000. That's because most of them were second lien Home Equity Line of Credit loans (HELOCs) many of which were taken out by long-time homeowners who refinanced several times as home prices climbed seemingly toward the sky. The following short sale situation, described in a September 2009 post in the socalbubble.com blog, was not at all uncommon in California: "The homeowner had purchased some 20+ years earlier, but had withdrawn over $500K [refis] in the last decade." He goes on to explain that "The most amazing thing to me during the housing downturn is the number and amount of refis that I have seen. It seems MOST of Southern California took out several hundred thousand dollars each from their houses; enough to buy entire houses outright in most other places in the country." To get a sense of what really went on in southern California, here is a description of one homeowner's refinancing which was recently posted on the Irvine Housing Blog:

· The property was purchased on 11/13/1999 for $485,000.

· On 5/13/2003 they opened a HELOC for $63,400

· On 1/26/2004 they got a HELOC for $100,000.

· On 2/1/2005 they refinanced with a $634,500 Option ARM with a 1% teaser rate.

· On 3/23/2005 they obtained a $80,000 HELOC.

· On 8/10/2005 they got a HELOC for $100,000.

· On 11/3/2006 they refinanced with a $688,000 first mortgage and a $85,000 HELOC

Realtors spent $4.3M to corrupt our laws in Q1 - (www.businessweek.com) The National Association of Realtors spent $4.3 million lobbying the federal government in the first quarter of the year as it pressed for measures to aid the hobbled housing market, a recent disclosure form shows. That amount was 24 percent less than the $5.7 million the Chicago-based group's spent a year earlier and 23 percent less than the $5.6 million it spent in the fourth quarter of 2009. The Realtors group is one of the most powerful lobbying forces on Capitol Hill. With allies in the real estate industry, the group and its members successfully pressed last year for a tax credit of up to $8,000 for first-time home buyers. Lawmakers then decided, after intense lobbying, to extend and expand the incentive until April 30. The group also lobbied on foreclosure relief, predatory lending, lead paint, protections for endangered species, flood insurance and other issues, according to an April 20 filing with the House clerk's office.

In Brutal Job Market, More Than a Million Quit Looking - (www.cnbc.com) If you think the jobs situation has become pretty hopeless, you're not alone. Roughly 1.1 million workers have given up hope of finding employment. The staggering level of "discouraged workers" as the government calls them has swelled to historic proportions in 2010, past the million barrier for the first time since the Bureau of Labor Statistics has been tracking the number. Though a bit off its all-time high of 1.2 million recorded in February, the metric stands as perhaps the most daunting statistic of last Friday's gloomy jobs report, which showed that almost all the new employment is coming from temporary government Census jobs and not the kind that will sustain an economy. "The fact that people are sitting down indicates just how bad the market is for some categories of people," says Peter Morici, professor at the University of Maryland's Smith School of Business and the former chief economist at the US International Trade Commission.