KeNo's Housing and Economic Portal: Saturday August 7 Housing and Economic stories

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Those sweet Bell retirements may cost you too - (www.latimes.com) A pension reform activist says that since Bell is pooled with 140 similar-size California towns and public entities, their taxes will help support the three high-priced officials who have resigned. The sad reality, dear Californian, is that depending on where you live, you may be personally contributing to the insultingly fat pension of ousted Bell city administrator Robert "Ratso" Rizzo. And if the estimates of pension reform advocate Marcia Fritz of Sacramento are accurate, the 55-year-old Rizzo's bloated $787,637 salary could translate into even more than an earlier guess of $600,000 a year. "I estimate the pension will be $710,000," said Fritz, an accountant. That alone would add up to more than $14 million if Rizzo lives to 75. But Fritz says that on top of his pension and other benefits — are you ready for this, folks? — Rizzo will collect a monthly Social Security check and get cost of living increases in his pension.

Agencies refuse to rate mortgage-backed bonds bc of new legal liability - (www.democraticunderground.com) The Three Big Ratings Agencies (hereinafter, TBRA) are refusing to rate asset backed bonds due to the stepped up regulations of the financial reform package. This is ground-shattering news that already demonstrates the effectiveness of the new legislation. I'm going to tell you why. Now, if you listen to CNBC or NPR's Marketplace, this is meant to be a Very Troubling Development. You see, according to existing securities regulations, you can't sell asset backed bonds without a ratings agency stamp on it that tells buyers the TBRA's "opinion" of their risk. That's a principle of transparency. You need an "objective" third party assessment of the risk for such bonds. If one of the TBRA doesn't rate the bond, you can't sell it. So, the bond market for asset backed bonds is at a dead stop: no ratings, no sales. Full stop. So, what's the NEW problem? The financial legislation just signed into law makes the TBRA's liable for the opinion they give on a bond. If, for example, they give a bond a very strong rating (AAA, say), and the bond turns out to be junk, and it turns out that the ratings agency was negligent in its assessment, it can be sued by the bondholders. This has sent shockwaves through the financial set, but not only because it exposes the ratings agency and forces them to be honest in their assessment of the bonds. Rather, it pinpoints the precise pressure zone in the whole asset backed securities market and forces changes all the way down the line. They are screaming bloody murder and essentially blackmailing the government precisely because the new law cascades throughout the system.

Bell council used little-noticed ballot measure to skirt state salary limits - (www.latimes.com) The city asked voters to back conversion to charter status in 2005, the year the California Legislature limited the pay of council members statewide. Only 400 people in a city of 40,000 voted on the measure. The highly paid members of the Bell City Council were able to exempt themselves from state salary limits by placing a city charter on the ballot in a little-noticed special election that attracted fewer than 400 voters. Since passage of the measure, salaries for council members — part-time employees — have jumped more than 50%, from $61,992 a year to at least $96,996. The Los Angeles County district attorney has opened an inquiry into whether the salaries are lawful. A state law enacted in 2005 limits the pay of council members in "general law" cities, a category that includes most cities in Southern California. That law was passed in reaction to the high salaries that leaders in South Gate had bestowed on themselves earlier in the decade.

Cities seek property tax by giving away land - (www.nytimes.com) Give away land to make money? It hardly sounds like a prudent scheme. But in a bit of déjà vu, that is exactly what this small Nebraska city aims to do. Beatrice was a starting point for the Homestead Act of 1862, the federal law that handed land to pioneering farmers. Back then, the goal was to settle the West. The goal of Beatrice’s “Homestead Act of 2010,” is, in part, to replenish city coffers. The calculus is simple, if counterintuitive: hand out city land now to ensure property tax revenues in the future. “There are only so many ball fields a place can build,” Tobias J. Tempelmeyer, the city attorney, said the other day as he stared out at grassy lots, planted with lonely mailboxes, that the city is working to get rid of. “It really hurts having all this stuff off the tax rolls.” Around the nation, cities and towns facing grim budget circumstances are grasping at unlikely — some would say desperate — means to bolster their shrunken tax bases. Like Beatrice, places like Dayton, Ohio, and Grafton, Ill., are giving away land for nominal fees or for nothing in the hope that it will boost the tax rolls and cut the lawn-mowing bills.

Shadow Inventory Builds As Lenders Shift to Short Sales - (www.irvinehousingblog.com) The result of the amend-extend-pretend dance is shadow inventory. Lenders cannot wave a magic wand or bury their heads in the sand and make delinquent loans disappear. People are not paying their mortgages; in fact, more people are not paying their mortgages every day. Delinquency rates are still rising with no end in sight. Unemployment is often blamed, and it certainly plays a role, but astronomical delinquency rates was predicted by everyone who saw the housing bubble for what it was. People took on debt they could not afford, and with or without unemployment, delinquency rates were going to be very high. Lenders have been playing games with foreclosure filings since 2008 when the subprime foreclosures wiped out the housing markets wherever these loans were concentrated. Once the rate of delinquency began to exceed the rate of foreclosure, we began creating shadow inventory. At first many pundits thought we could amend our way out of the problem. As I pointed out, this is merely a game of Bailouts and False Hopes. The dismal failure of the various loan modification programs surprised no one who understood the housing bubble. The growth of shadow inventory has been steady and consistent since 2008. The current foreclosure inventory is huge, but shadow inventory is at least four-times larger. There are 3,600+ Distressed Properties in Irvine, and There are 36,000+ Distressed Properties in Orange County.