Friday February 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Real Estate Lobby Is Ready To Kill Reform - (www.businessweek.com) Barbara J. Thompson plans to put a human face on the high-stakes debate over whether to preserve cherished U.S. government subsidies for home loans. Hundreds of faces, in fact. Next month, she'll lead a legion of "everyday people" to Capitol Hill to affirm the virtues of homeownership and urge Congress not to abandon federal support for low-cost mortgages. "These are your neighbors, they're the people who teach your kids at school, they're your firefighters," says Thompson, executive director of the National Council of State Housing Agencies, whose members help provide loans to first-time home buyers. "The middle working class is the bedrock of our country." Joining Thompson's cause will be thousands of homebuilders, real estate agents, civil-rights leaders, and bankers who aim to deliver a similar message to Congress: Preserve government support for housing. Together, these groups represent what one might call, with apologies to President Dwight D. Eisenhower, a real estate-industrial complex that transcends partisan politics, geography, and socio-economic divides.

Mortgage Bankers Miss out on Profits From Flipping Their HQ Building - (online.wsj.com) A year ago, in what seemed like a supreme irony, the Mortgage Bankers Association sold its Washington, D.C., headquarters at a big loss. On Thursday, insult was added to injury: The building's buyer has flipped it for a big profit. The transaction shows how quickly the market for well-occupied and well-located office buildings has rebounded in some U.S. cities thanks to yield-chasing investors pouring cash into commercial property. A German real-estate fund is buying the former Mortgage Bankers' headquarters from real-estate data firm CoStar Group Inc. for $101 million, CoStar said Thursday. In February last year, CoStar paid $41.3 million for the building, which is located just blocks from the White House. At the time, the trade group for mortgage lenders, like many of its members' customers, was "under water"—owing more than the property was worth— on its $75 million mortgage for the 10-story, glass-walled building. The MBA purchased the building when it was under development in 2007 for $79 million.

Preapproved: Well, It Sounded Good - (www.nytimes.com) MELISSA CALDERONE was ready for a fresh start when she made plans last year to move to Florida from New Jersey. Recently remarried, she signed a contract in mid-March on a house to be built in Windermere, Fla., by Pulte Homes, the nation’s largest homebuilder. The neighborhood had good schools for her three children and two stepchildren. It was also close to where Ms. Calderone’s parents lived. Her local bank approved her for a mortgage. But then a Pulte Homes saleswoman told her that she would get a $4,000 credit toward closing costs if she took out a loanwith the homebuilder’s banking unit instead. Ms. Calderone, 38, agreed. She deposited $20,000 in earnest money and set aside $80,000 more for a down payment on the $347,000 house. Her closing date, documents show, was scheduled for late summer, about six months later. Then her troubles began. Although she had been “preapproved” by Pulte, the company ultimately denied her the loan. Then, contending that Ms. Calderone had defaulted on the purchase agreement by failing to close on time, Pulte kept her $20,000 deposit. The house went back on the market. “They have my money and the house, which they are selling to somebody else,” Ms. Calderone said. “I have no house and no deposit.”

Real estate executive pleads guilty to bid rigging - (www.sfgate.com) A Stockton real estate executive pleaded guilty Friday to conspiring to rig bids and commit mail fraud, admitting that he and other investors bought more than $10 million of foreclosed homes at artificially low prices before reselling and splitting the profits. Richard W. Northcutt, 56, is the fourth person to plead guilty in a federal investigation of anti-competitive practices in real estate foreclosure auctions throughout Northern California. "By rigging public auctions of foreclosed properties, the defendants who have pleaded guilty as a result of this investigation illegally manipulated the market for residential real estate," said Benjamin Wagner, U.S. attorney for the Eastern District of California. Northcutt pleaded guilty in U.S. District Court in Sacramento to one count of bid rigging, a violation of the federal Sherman Antitrust Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The fine can be increased to twice the gain from the crime or twice the victim's loss.

Student loan debt is forever. Bankruptcy does not help. - (www.latimes.com) The industry has seen growing criticism of its high-powered marketing and the heavy debt many students incur, as well as doubts about the value of the degrees it offers. Chelsi Miller was managing a burger joint when she saw an ad for Everest University promising a better life. The single mother in a small town near Salt Lake City wanted an associate's degree as a first step toward medical school. She said she chose Everest, a for-profit college, after a recruiter guaranteed that she could apply her credits toward a higher degree at the University of Utah. It wasn't until after she graduated in 2008 — two years and $30,000 in student loans later — that Miller learned the state university wouldn't take her credits from Everest, a unit of Santa Ana-based Corinthian Colleges Inc.

OTHER STORIES:

U.S. housing reform at risk of stopping way short - (www.blogs.reuters.com)

Rand Paul Wants To End Public Housing - (www.patrick.net)

Outlook for house prices over the next decade - (www.nytimes.com)

The Real Estate Industrial Complex - (theautomaticearth.blogspot.com)

Egypt's Revolution: Coming to an Economy Near You - (www.blogs.hbr.org)

Social Security financial headwinds - (www.mybudget360.com)

Food Price Inflation Doesn't Matter, Unless You Eat Food - (www.dailyfinance.com)

Republicans turned off by size of Obama's package - (2009 - www.archive.easternecho.com)

Housing finance changes likely to mean lower taxpayer subsidies for debt - (www.washingtonpost.com)

Canada housing prices to drop 25% - (www.moneyville.ca)

Mortgage rule could improve housing prices, by lowering them - (www.reuters.com)

GOP Targets Transportation, Housing For the Deepest Cuts - (dc.streetsblog.org)

Thursday February 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Perfect bailout: Fannie, Freddie now send taxpayer cash directly to wall street - (finance.yahoo.com) As the terror of the financial crisis recedes, many folks have forgotten about the two huge taxpayer-owned mortgage companies, Fannie Mae and Freddie Mac. But they're still there, money-manager Barry Ritholtz reminds us. And they're still sending billions of dollars of taxpayer cash directly to Wall Street, in what might be described as the "perfect bailout." How does this bailout work? Fannie and Freddie got a "blank check" from Treasury Secretary Tim Geithner at the end of the financial crisis. This blank check allows the housing giants to lose as much money as they want, with the taxpayer footing the bill. Fannie and Freddie use much of this money to buy mortgages from Wall Street at what may be grossly inflated prices. This is a super arrangement for the banks, because they get to unload all their terrible mortgages at prices that won't produce losses. And it's fine for Fannie and Freddie because, well, because they have the blank check. But of course there's no free lunch. And in this scheme, the US taxpayer is, as usual, footing the bill.

Wall Street Pay Reaches Record $135 Billion Taken From Rest Of Us - (www.online.wsj.com) When it comes to paychecks, Wall Street's law of gravity is back in full force: What goes down must come back up. In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009. The increase was fueled by a revenue rebound as the financial crisis recedes in the rearview mirror. At 25 large financial firms that have reported full-year results, revenue rose to $417 billion, another all-time high, even though last year's 1% increase was just a fraction of the industry's revenue jolt from 2008 to 2009 as trading and investment banking sprang back to life. "Things are shifting back to where they were before," said J. Robert Brown, a law professor at the University of Denver who studies compensation and corporate-governance issues. Buried in the numbers, though, are signs of how Wall Street's pay culture is bending in response to pressure from regulators and shareholders. Last year, deferred compensation made up as much as half of total pay, up from about a third previously, estimates Alan Johnson, managing director of Johnson Associates Inc., a New York pay consultant. Banks and securities firms are deferring a larger percentage of compensation than they used to, trying to counter criticism that yearly cash bonuses encourage unwise risk-taking by executives, traders and other employees aiming for a big payday. At the same time, many Wall Street firms increased base salaries in 2010, another effort to encourage employees to focus on longer-term performance. Such moves nudged overall compensation higher, though the exact amount can't be determined from figures disclosed by the companies.

Toxic Mortgages Rally as Resets Accelerate - (www.businessweek.com) Home loans that inflated the U.S. housing bubble by giving borrowers the choice of cutting interest payments in exchange for higher balances are fueling the fastest gains in the mortgage-bond market. Prices for senior bonds tied to option adjustable-rate mortgages, called “toxic” by a government commission, typically jumped 6 cents to 64 cents on the dollar in the past month, according to Barclays Capital. The next best-performing class of home-loan securities without government backing rose 4 cents. Option-ARM debt tumbled to as low as 33 cents in 2009. Rising values show Federal Reserve efforts to stimulate the economy by purchasing an additional $600 billion of Treasuries and holding interest rates near zero percent are driving investors into ever-riskier securities. Bond buyers are overcoming a “mental hurdle” even as the debt is poised to lead a second wave of rising payments for homeowners, according to TCW Group Inc.

The Next Global Banking Crisis Is 3 Years Away - (www.theatlantic.com) The world is slowly inflating a commodities bubble that could burst just like the housing market in 2008, creating an even more devastating worldwide recession. THE COMMODITIES BUBBLE: Let's start in 2011. The world is in a three-speed recovery, with Europe at the bottom, the U.S. in the middle, and Asia growing between 6 and 10 percent. If you're an investment bank looking for high returns, where do you look? The fastest gains are in the hottest markets, and the hottest markets are in the developing world. In particular, commodities investments (gold, silver, platinum, rare earth metals, oil) have soaked up lots of excess global money supply and central banks have dropped their interest rates. Commodities-rich economies like Russia, Brazil and the rest of Latin America have been key beneficiaries.

Learning To Walk: Fear, Shame And Your Underwater Mortgage - (www.huffingtonpost.com) Nearly 1 in every 4 U.S. homeowners with mortgages owe more on their home than it's worth. Once a month, those 10.8 million are faced with a question that cuts to the core of the American Dream and offers a confusing collision between a deep-seated sense of personal obligation and a cold, simple business calculation: Should I pay my mortgage? For decades, there was only one answer for most people: Of course I should keep paying, it's the right thing to do. Besides, the argument went, a home is a great investment. Today, in the wake of the most seismic housing collapse in the nation's history, that logic has increasingly been challenged by homeowners despondent about their lack of options.

OTHER STORIES:

Chinese money supply bigger than America's - (www.interest.co.nz)

Taleb Advises First Avoid Treasuries, Then Dollar - (www.bloomberg.com)

Shadow inventory of prime real estate is growing - (www.irvinehousingblog.com)

Struggling downtown San Jose condo tower to switch to rentals - (www.contracostatimes.com)

Foreclosed Houseowners Go to Court on Their Own - (www.nytimes.com)

Does everyone need a college degree? Maybe not - (www.csmonitor.com)

Survivors of Tucson Shooting Now Suffer From US Healthcare Costs - (www.nytimes.com)

Wednesday February 23 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Tribune Tower in default | San Francisco Business Times - (www.bizjournals.com) After losing numerous tenants, including its namesake, Oakland’s Tribune Tower, one of the city’s most recognizable landmarks, has slid into default. Bluett & Associates has been appointed as receiver for the 21-story, 90,000-square-foot property after the previous owner, Edward B. Kislinger, was issued a notice of default on a $10 million loan. Kislinger, an attorney based in Los Angeles, bought the property in 2006 for $15.3 million from Madison Park Financial, a development firm that still manages the property.

Claremont Hotel Files For Bankruptcy, operations unaffected - (www.berkeleyside.com) The Claremont Hotel & Spa, a fixture in the Berkeley hills since 1915, was part of a luxury hotel group that filed for bankruptcy yesterday. The Claremont and seven other resorts were part of a $6.6 billion acquisition by Morgan Stanley in 2007. When debt of $1.5 billion came due yesterday, lenders foreclosed on five of the properties (three other properties with longer-term debt did not file for Chapter 11 protection).

The lenders, led by hedge fund Paulson & Co, stated in a press release that they intend to work down the debt and position the hotels to benefit as the economy improves. The last few years have been particularly bruising for the luxury end of the travel industry, and the Claremont has suffered from poor occupancy rates. The Morgan Stanley purchase came right near the top of the market for luxury properties. Although business turned down soon after the acquisition, there was some investment in the Claremont, including a complete revamping of its main restaurant, The Meritage, refurbishment of guest rooms, and the addition of a new children’s pool. For many Berkeleyans, the Claremont is primarily used for its health and tennis club (and Berkeleyans also know that the resort has a Berkeley address but is technically in Oakland). Jokey emails were flying around this morning imploring members to make sure they returned towels, but people seemed unfazed by the bankruptcy.

Mario Draghi and Goldman Sachs, Again - (www.huffingtonpost.com) In its previous response to us, the Bank of Italypointed out that Mario Draghi (its current governor) did not join the management of Goldman Sachs until 2002 - hence he was not there when the controversial Greek "debt swaps" were arranged. We agree that he joined Goldman only in January 2002 (this was in our original post). But the latest revelations regarding the Goldman-Greece relationship (on the Senate floor, no less) clearly indicate that Goldman was a lead manager of Greek debt issues in spring 2002, i.e., when Mr. Draghi was on board. This raises three entirely reasonable and straightforward questions.

1. Was Mr. Draghi involved in the Goldman-Greece relationship? Sources indicate that this was very much part of his set of responsibilities, but this may be disputed.

2. If Mr. Draghi was involved in marketing Greek debt, did he at that time know the true Greek debt numbers - i.e., was he aware of the "debt swap" arrangement? Perhaps his Goldman colleagues concealed that information from him.

3. And when/if Mr. Draghi became aware of the inherent misrepresentation involved this transaction, did he take steps to fully informed investors (and any relevant regulatory bodies)? Again, it is entirely possible he learned of this matter only recently and from the newspapers.

Gas pump prices highest ever for this time of year - (www.news.yahoo.com/s/ap) U.S. gasoline prices have jumped to the highest levels ever for the middle of February. The national average hit $3.127 per gallon on Friday, about 50 cents above a year ago. The price is about 6 percent higher than on this date in 2008. The next day, pump prices began a string of 32 gains over 34 days. They rose 39 percent over five months, eventually hitting an all-time high of $4.11 per gallon in July. Although gas prices are expected to rise, most experts aren't expecting a reprise of 2008, when the price spike forced many drivers to join car pools and trade in gas-guzzling SUVs for fuel-efficient cars. "It would be a mistake to think we're going to have that all over again," said OPIS chief oil analyst Tom Kloza.

Grand Wailea Hotel in Bankruptcy - (www.staradvertiser.com) Maui's Grand Wailea Resort Hotel & Spa was placed into bankruptcy with four mainland luxury resorts after the owner of the properties couldn't restructure $1.5 billion in debt that matured yesterday. The five resorts are expected to continue operating without disruption while their owner, a group of investors, works with lenders to restructure the debt under Chapter 11. The move was made four days after the investors group seized ownership of eight resorts from Morgan Stanley real estate funds at a foreclosure auction. Three resorts didn't have debts maturing yesterday and were excluded from the bankruptcy, which was filed in New York. Besides the Grand Wailea, the other resorts placed in bankruptcy were La Quinta Resort & Club and Claremont Resort & Spa in California, Doral Golf Resort & Spa in Miami and the Arizona Biltmore Resort & Spa in Phoenix.

OTHER STORIES:

Toxic Mortgages Rally as Resets Accelerate - (www.businessweek.com)

The Next Global Banking Crisis Is 3 Years Away - (www.theatlantic.com)

Bet on Foreclosure Boom Turns Sour for Investors - (www.nytimes.com)

How Low Can Los Angeles Go? - (westsideremeltdown.blogspot.com)

47% of Phoenix sales were from all cash buyers in December - (www.mybudget360.com)

12 Signs That The Worst Housing Collapse In U.S. History Is Getting Worse - (www.businessinsider.com)

Low rates prompting more 'cash-in' refinances - (www.washingtonpost.com)

How inflation is turning breakfast into a luxury item - (finance.fortune.cnn.com)

Stocks prices up, but housing still hurts - (www.csmonitor.com)

Perfect bailout: Fannie, Freddie now send taxpayer cash directly to wall street - (finance.yahoo.com)

Wall Street Pay Reaches Record $135 Billion Taken From Rest Of Us - (online.wsj.com)

Bill Gross sees dangers in the debt-limit debate - (www.sfgate.com)

The cult of Australian property - (www.businessspectator.com.au)

China Is Poised to Raise Rates Again, Bankers Say - (www.nytimes.com)

Tuesday February 22 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Danville's hero pilot Sullenberger sues over real estate deal - (www.insidebayarea.com) Hero sully proves he is an amateur and not accepting personal responsibility for bad real estate decisions.

The pilot acclaimed for safely landing a plane in New York's Hudson River has filed a lawsuit over a real estate deal in Northern California. Chesley Sullenberger and his wife, Lorraine, claim the $935,000 they paid for a building in the city of Paradise in 2002 was well above its market value. They accuse bank officials and the real estate broker of overinflating the price. The suit seeks a nullification of the original loan and reimbursement for alleged overpayments. A trial is set for September if mediation talks fail. The real estate broker, Cherie Huillade, tells the Press Democrat of Santa Rosa the property's appraisal was accurate.

Views of Life After Fannie, Freddie - (online.wsj.com) The Obama administration outlined on Friday its plans to begin shrinking the government's broad support of the nation's crippled mortgage market, a process that officials said could take several years and would include phasing out Fannie Mae and Freddie Mac. Officials portrayed a housing-finance system that would include a role for both the public and private sectors, but would be different from the current system in that the government's role would be smaller, underwriting standards would be tighter, and borrowers would be required to hold larger amounts of equity in their homes. The proposal offered a series of short-term steps that would help attract private capital into the mortgage market, including a reduction in the maximum loan sizes that Fannie and Freddie can purchase and gradual increases in the fees the mortgage companies charge lenders. Both of those steps could make it more attractive for lenders and investors to buy loans without government backing, but they could also raise borrowing costs for millions of Americans and weigh on the nation's home-building industry.

Borders Prepares to File for Bankruptcy - (www.nytimes.com) Borders, the beleaguered bookseller, is preparing to file for bankruptcy as early next week after efforts to refinance its debt faltered, people briefed on the matter said Friday. The company had largely failed to persuade publishers to convert payments they had been owed since late last year into interest-bearing loans. Borders itself had suggested two weeks ago that it might need to file for bankruptcy despite receiving a $550 million loan commitment from GE Capital. It has also been working on securing financing to support itself through a Chapter 11 filing, according to a person briefed on the matter.

U.S. Mortgage Finance Overhaul May Create New Winners, Losers - (www.bloomberg.com) Under the privatization plan, the government would regulate insurers and, in exchange for a premium, provide a backstop in the event of a market failure. The approach, which follows the contours of plans submitted by groups including the Financial Services Roundtable, could give big banks the opportunity to move into a niche that would be vacated by the GSEs. “They’re saying let’s just move everything over to the private sector,” said Lawrence Yun, senior vice president of the National Association of Realtors, who joined others in the real estate industry in opposing the proposal. The administration’s emphasis on expanding privatization, won praise from Tom Deutsch, executive director of the American Securitization Forum, who cited short-term proposals that would reduce the market share of Fannie Mae and Freddie Mac, which now own or insure almost 97 percent of mortgage bonds.

'Toxic' Assets Still Lurking at Banks - (online.wsj.com) During the financial crisis, investors fretted over "toxic," hard-to-value assets that banks were carrying. Those fears have faded as bank profits have rebounded, loan delinquencies have declined, and bank stocks have soared 25% in the past five months. But banks still hold plenty of the bad assets that once spooked investors: mortgage-backed securities, collateralized debt obligations and other risky instruments. Their potential impact concerns some accounting and banking observers. In part due to those bad assets, the top 10 U.S.-owned banks had $13.8 billion in "unrealized losses" that have lasted at least a year in their investment portfolios as of Sept. 30, according to a Wall Street Journal analysis. Such losses are baked into banks' book value, but don't get counted against earnings as long as the banks believe the investments will later rebound. If those losses were assessed against earnings, it would have reduced the banks' pretax income for the first nine months of 2010 by 21%, according to the Journal analysis.

OTHER STORIES:

Premier American Acquires Bank in Florida as 4 U.S. Lenders Fail - (www.bloomberg.com)

Luxury home sales jump 21% in California - (www.latimes.com)

Gas pump prices highest ever for this time of year - (www.reuters.com)

Fed's Plosser says U.S. deflation risk gone: report - (www.reuters.com)

Obama Says Budget Will Make U.S. `Live Within its Means', Invest in Future - (www.bloomberg.com)

Suit Says Bear Stearns Pocketed Bond Money - (www.nytimes.com)

Cisco spooks Street again with weak outlook, margins - (www.reuters.com)

Medical Device Makers Shun U.S. - (www.nytimes.com)

Fannie, Freddie Could Be Phased Out Under Geithner's Options for Housing - (www.bloomberg.com)

Plans Near for Freddie and Fannie - (www.bloomberg.com)

Wells Fargo Finance Chief Atkins Steps Down, Takes Unpaid Leave - (www.bloomberg.com)