KeNo's Housing and Economic Portal: Monday August 23 Housing and Economic stories

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TOP STORIES:

The Awesome Story Of California City: The Original Housing Community Ghost Town - (www.businessinsider.com) Just in case you think that ill-conceived housing tracts-turned-ghost towns were somehow unique to the last housing boom, head on over to the LA Times to read about California City, California. 100 miles outside of LA, smack dab in the middle of the desert, California City was conceived of in 1958 by a Columbia University professor, with the idea of it becoming the third largest city in the state (insert joke about grandiose failure being conceived of by an Ivy League professor). Countless roads were built (many named after top universities and big car companies), and though buyers came in from all over the world, few people ever built homes, and the land is filled with miles of unpaved road. Today about 14,000 people live in one corner of the city -- hardly the third biggest city in California. But here's the best part: But the zombie of speculation is easily awakened. During the recent real estate boom, California City's population nearly doubled. Hundreds of homes were built in the city's core. Late-night infomercials hawked land in the distant "second community." Lots that had been selling for $3,000 fetched $20,000. "People lined up to buy them," said Cheryl Hoffman, a local real estate agent. "They were being told, 'This is where you're going to make your fortune.' " That's right. Even an epically bad idea will gain new adherents during bubble, kind of like how you get reports of people speculating in tulips from time to time.

Fannie and Freddie's Foreclosure Barons - (www.motherjones.com) How the federal housing agencies—and some of the biggest bailed-out banks—are helping shady lawyers make millions by pushing families out of their homes. LATE ONE NIGHT IN February 2009, Ariane Ice sat poring over records on the website of Florida's Palm Beach County. She'd been at it for weeks, forsaking sleep to sift through thousands of legal documents. She and her husband, Tom, an attorney, ran a boutique foreclosure defense firm called Ice Legal. (Slogan: "Your home is your castle. Defend it.") Now they were up against one of Florida's biggest foreclosure law firms: Founded by multimillionaire attorney David J. Stern, it controlled one-fifth of the state's booming market in foreclosure-related services. Ice had a strong hunch that Stern's operation was up to something, and that night she found her smoking gun. It involved something called an "assignment of mortgage," the document that certifies who owns the property and is thus entitled to foreclose on it. Especially these days, the assignment is key evidence in a foreclosure case: With so many loans having been bought, sold, securitized, and traded, establishing who owns the mortgage is hardly a trivial matter. It frequently requires months of sleuthing in order to untangle the web of banks, brokers, and investors, among others. By law, a firm must execute (complete, sign, and notarize) an assignment before attempting to seize somebody's home. A Florida notary's stamp is valid for four years, and its expiration date is visible on the imprint. But here in front of Ice were dozens of assignments notarized with stamps that hadn't even existed until months—in some cases nearly a year—after the foreclosures were filed. Which meant Stern's people were foreclosing first and doing their legal paperwork later. In effect, it also meant they were lying to the court—an act that could get a lawyer disbarred or even prosecuted. "There's no question that it's pervasive," says Tom Ice of the backdated documents—nearly two dozen of which were verified by Mother Jones. "We've found tons of them."

Foreclosures increase in affluent Park Ridge and northwest suburbs - (www.chicagonow.com) Park Ridge foreclosures have increased 50% compared to the same quarter last year with nearly 120 foreclosures during the first 6 months of 2010. In the Northwest suburbs, many of 2010's foreclosures have been condominiums, a 75% increase from last year. Park Ridge isn't the only community suffering from increased foreclosures. Niles' foreclosures have increased 11%, Des Plaines' foreclosures have increased 33%, and Edison Park, Chicago, has seen a 69% increase in foreclosures. With all of the chatter of a housing recovery, why aren't we seeing it in our Northwest suburban community? Park Ridge foreclosures are higher in 2010 than in 2009 because the foreclosures of this year are a result of 2009's economic downturn. RE/MAX Properties Northwest agent, Joe Guzzetta, explains: "even though 2009's foreclosure inventory was 50% less, it isn't a true representation because most of those foreclosures that were recorded in 2009 probably originated in 2008. So 2009's foreclosures reflect 2008's economic problems. Consequently, the increase in foreclosures in 2010 is more of a representation of 2009's economic problems. This is an economic trickle-down effect."

Fed to resume buying Treasury bonds with newly printed cash - (www.latimes.com) Concerned about a slowing of the economic recovery, the Federal Reserve decided Tuesday to resume buying U.S. Treasury bonds in an effort to hold down longer-term interest rates. The net effect will be to keep the Fed's mammoth portfolio of about $2 trillion in U.S. Treasury bonds and mortgage-related securities constant, rather than allow the holdings to shrink as securities are paid off. The Fed bought the bulk of those bonds in 2009 via a program that has helped push mortgage rates to record lows. Fed policymakers, holding their midsummer meeting, apparently rejected taking more dramatic steps to bolster the economy despite more evidence in recent weeks that growth was ebbing. But they signaled their unease, saying in their post-meeting statement that the recovery appeared "more modest in the near term than had been anticipated."

Greenspan: A Charlatan Unmasked - (www.bullionbullscanada.com) Life is very good – if you’re Alan Greenspan. He was the “architect” of the U.S. “dot-com” bubble, and clearly laid the foundation for the subsequent U.S. housing bubble. These two, enormous asset-bubbles made a lot of bankers obscenely wealthy, while laying-waste to the U.S. economy. Despite this ignominy, Greenspan is able to flit from one highly-paid speaking engagement to another, like some kind of Teflon butterfly. Since he invariably shows up only at venues filled with sympathetic audiences, he rarely has to face a single “hard question” – let alone any hint of hostility. In a recent Greenspan appearance on NBC’s “Meet the Press”, the stench of hypocrisy and revisionism emanating from Greenspan was positively nauseating. Greenspan began by posing as a born-again, “fiscal conservative”. Meanwhile, back in the real world, Federal Reserve Chairman Greenspan was the originator of near-zero interest rates – rates lower than anything seen in the history of our modern economy. The reason that our societies have never seen such reckless interest rates at any time prior to this is because it is absolutely inevitable that excessively low interest rates cause debt-levels to soar exponentially, along with inflation/asset prices – and these factors inevitably lead to destructive asset bubbles. Given that Greenspan’s interest rates were (at the time) the most reckless in history, it is no surprise at all that they led to the largest asset-bubbles in history, despite all the experts who claimed to be “surprised” by the inevitable (including Greenspan, himself). Compounding this monetary-madness was the fiscal suicide of the Bush regime, who gifted the wealthiest Americans with the largest tax-cuts (for the wealthy) in the history of any major economy. Given that the U.S. economy was incapable of running a “balanced budget” prior to the tax cuts, they had the effect of creating a massive, structural deficit in the U.S. economy.