KeNo's Housing and Economic Portal: Monday January 17 Housing and Economic stories

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Housing Distress Pits Neighbor Against Neighbor - (online.wsj.com) Few things agitate Sid Schulman, who often shoots the breeze with other retirees and flirts with women friends at their condominium complex here. But it galls him when neighbors stop paying their mortgages and maintenance fees, and leave the cost of community upkeep to others. "I am paying for these guys," said the 75-year-old sitting poolside, a diamond stud in his left ear. Last year, he took matters into his own hands. Near the mailbox of each condo building he posted a list of residents delinquent on their maintenance fees, with the message "Pay up or move out" and the same in Spanish, Pague O Mudese. He also tried, unsuccessfully, to get the cable company to cut off service to non-payers. The public shaming angered some of those named. "You know where I live—come and tell me that to me face," said Lorena Garcia, 36, who lost her job and ability to pay. The storm that struck the housing market has strewn many casualties—lenders, builders, real-estate agents, mortgage-bond investors. Add to the list the comity of certain communities where residents live close together, some of them paying their mortgages and homeowner-association fees, and some not. As banks slow foreclosures amid concerns about sloppy record keeping, some delinquent homeowners get to stay put even longer without paying. The delays are further inflaming some neighbors who consider that unfair.

Microlending turns malignant: Suicides in India - (www.bloomberg.com) Tanda Srinivas was lounging in the yard of his two-room house in the southern Indian village of Mondrai shortly after noon on Oct. 28 when his wife, Shobha, burst out of the door covered in flames and screaming for help. The 30-year-old mother of two boys had poured 2 liters of kerosene on herself and lit a match. The couple had argued bitterly the day before over how they would repay multiple loans, including those from microlenders who had lent small sums to dozens of villagers, says Venkateshwarlu Masram, a doctor who called for the ambulance. Shobha, head of several groups of women borrowers, was being pressured to pay interest on her 12,000 rupee ($265) loan. Lenders also were demanding that she cover for the other women, even though the state had restricted microfinance activities two weeks earlier, Bloomberg Markets magazine reports in its February issue. When Srinivas, 35, tried to snuff out the flames with a blanket, his polyester clothes caught fire. Within three days, both parents were dead, leaving their sons orphans.

Unfair Law Stops Troubled Borrowers from Hiring Attorneys - (www.olenderpham.com) Proponents of Senate Bill 94 (SB 94) claimed that the law would stop unscrupulous attorneys from charging borrowers for services that they then did not provide. Although that was and continues to be a problem, it is one that was already forbidden by the law before SB 94. Attorneys could already be prosecuted for criminal fraud, disciplined and disbarred for defrauding clients. The problem that existed before SB 94 was not the law, but law enforcement. SB 94 was most likely the result of opportunistic bank lobbyists seeing a real problem and trying to use it as a tool to camoflauge their desired result: eliminate attorney representation for borrowers. The New York Times recently wrote about this problem on December 20, 2010. In that article, David Streitfeld writes that the law was "intended" to protect borrowers from fraud:

But foreclosure specialists say there has been an unintended consequence: the honest lawyers can no longer afford to assist Ms. Bell and all the others who feel helpless before lenders that they see as elusive, unyielding and skilled at losing paperwork.

S&P revises shadow inventory timeline upward, again - (www.housingwire.com) In the last three months, an estimated liquidation timeline covering the nation's backlog of distressed real estate actually increased, according to Standard & Poor's. The ratings agency now estimates it will take 44 months — up 10% percent from an estimate made just three months ago and 25% annualized — to clear the so-called shadow inventory of homes in distress or foreclosure, but not yet on the resale market. Some markets are significantly more impaired when compared to others, the agency concluded. In September, Standard & Poor's estimated it would take 40 months. "Our recent estimates of months to clear have increased primarily as a result of the deceleration of the distressed property liquidation rate rather than a rise in overall distressed property levels," according to analysts in a research report emailed to HousingWire.

Mortgage lawsuit deals setback to Bank of America - (www.boston.com) Bank of America’s hangover from the housing bubble could be harder to shake in the new year as a result of a recent court decision. The bank lost a major procedural ruling in a lawsuit over its liability for allegedly toxic mortgages. The ruling will make it harder for the bank to defend itself in that case, and it could set a standard for similar disputes. Bank of America had tried to set a high bar for plaintiff MBIA Insurance Corp. by requiring that the files for each of 368,000 or more disputed loans be evaluated individually. That process would have cost MBIA $75 million, and it would have taken more than four years, MBIA estimated. Instead, the New York State Supreme Court in late December declared that MBIA can pursue its case by focusing on a statistical sample of 6,000 disputed loans. That could pave the way for a trial to proceed as scheduled in 2011. “It’s a big setback’’ for Bank of America’s “scorched-earth strategy,’’ said David Grais, a lawyer involved in other suits against the bank. MBIA still must prove its case, and “this we believe it cannot do,’’ Bank of America said.