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Let me take that. yes he is but he is getting ready for winter odds and ends, yet always there if you need him.
CitiMortgage to Launch Home Rental Program as Foreclosure Alternative
08/08/2012
CitiMortgage announced the launch of the Home Rental Program, a program designed to provide an alternative to foreclosure and allow eligible borrowers to stay in their homes.
The Home Rental Program will be managed by Carrington Capital Management, LLC and Carrington Mortgage Services, LLC. CitiMortgage and Carrington developed the program as a pilot.
Under the program, the eligible borrower transfers ownership of the property to a vehicle established by Carrington Capital and its joint venture partner, Oaktree Capital Management, L.P. A lease will then be established for the property at a manageable monthly payment.
Lease payments will be determined by local market rates but are expected to be lower than the borrower’s mortgage obligation. Carrington will work with borrowers to establish a length for each lease.
The program will be tested in six of the hardest-hit markets to evaluate its effectiveness: Arizona, California, Texas, Florida, Nevada, and Georgia. Carrington will contact homeowners who meet eligibility requirements.
In order to be eligible for the program, candidates must: Occupy the property; owe more than their home is worth; be delinquent for 120 days; and be unable or ineligible to receive an affordable loan modification while still having the resources to make monthly rent payments. In addition, candidates must have a loan in the pilot portfolio serviced by Carrington.
To implement the program, CitiMortgage has transferred the ownership of loans in its portfolio through the sale of $158 million in mortgages to the Carrington/Oaktree partnership.
“We’re looking forward to working on this important initiative with CitiMortgage and our partner, Oaktree Capital Management,†said Bruce Rose, founder and CEO of Carrington. “Offering alternatives for borrowers looking to stay in their homes and simultaneously relieving their distress is core to the operating principles of our firm and will help substantially in the overall housing market recovery.â€
http://www.dsnews.com/articles/citimortgage-to-launch-home-rental-program-as-foreclosure-alternative-2012-08-08
Investors tout 'condemnation' for housing fix
Eminent domain has never been used to seize mortgages of investors or institutions
6/11/2012 7:36:43 AM ET
NEW YORK — Here's a controversial but intriguing approach to the U.S. housing crisis: keep cash-strapped residents in their homes by condemning their mortgages.
A mortgage firm backed by a number of prominent West Coast financiers is pushing local politicians in California and a handful of other states hardest hit by the housing crisis to use eminent domain to restructure mortgages that borrowers owe more money on than their homes are actually worth.
San Francisco-based Mortgage Resolution Partners, in a presentation reviewed by Reuters, says condemning so-called underwater mortgages and taking them out of the hands of private lenders and bondholders is "the only practical way to modify mortgages on a large enough scale to solve the housing crisis."
Eminent domain is a well-tested power by local government to get a court order to take over a property it deems either blighted or needed for the public good.
Over the years, governments have used eminent domain authority to clear urban slums or seize land to build highways and bridges.
The power to do this is often controversial because landowners don't have much negotiating power. And in this case, potentially even more controversial since it has never been used to seize mortgages held by private investors or financial institutions.
Under the ambitious proposal, Mortgage Resolution Partners would work with local governments to find institutional investors willing to provide tens of billions of dollars to finance the condemnation process to avoid using taxpayer dollars to acquire millions of distressed mortgages.
A local government entity takes title to the loans and pays the original mortgage owner the fair value with the money provided by institutional investors.
Mortgage Resolution Partners works to restructure the loans, enabling stressed homeowners to reduce their monthly mortgage payments. The restructured loans could then be sold to hedge funds, pension funds and other institutional investors with the proceeds paying back the outside financiers.
Mortgage Resolution Partners, which up until now has tried to keep private its discussions with local politicians and the two investment banks it is working closely with, would collect a negotiated fee on every loan that is condemned and restructured.
The plan by Mortgage Resolution Partners to keep people in their homes by condemning underwater mortgages comes as many institutional investors are raising money for funds to acquire foreclosed single-family homes with an eye toward renting them out until housing prices recover.
Meanwhile, Mortgage Resolution Partners got caught up in a controversy earlier this year after Reuters reported that Phil Angelides, the former chairman of a Financial Crisis Inquiry Commission, was the executive chairman of Mortgage Resolution Partners. Angelides left the firm soon after, when some on Capitol Hill began raising questions about potential political influence by Mortgage Resolution Partners.
The firm's condemnation proposal, which is getting a receptive hearing from some public officials in San Bernardino County, Calif., could also prove controversial because eminent domain traditionally has been used by municipalities to take ownership of blighted properties and buildings -- not loans.
In a condemnation proceeding, the owner of a property is entitled to be compensated at fair market value, which often can be much less than the initial purchase price. That means banks or investors in mortgage-backed securities could face losses, if many underwater mortgages were condemned at a steep discount to their face value.
"We are intrigued," said Gregory Devereaux, chief executive of San Bernardino County, which is east of Los Angeles and has one of the highest unemployment rates in the state. "Our economy in this county can't be turned around until a large proportion of the mortgage crisis has been addressed."
Devereaux said the idea of using private money to condemn underwater mortgages was first brought to him by Mortgage Resolution Partners several months ago. He said if the county goes ahead with the idea, it isn't definite it will work with the firm to manage the program.
But Mortgage Resolution Partners would appear to be further along than any other firm in putting the pieces together to use private money to fund public condemnations of underwater mortgages.
Working with investment banks
The firm is working with investment banks Evercore Partners Inc and Westwood Capital to find institutional investors interested in providing the billions of dollars necessary to fund the condemnation process on a significant scale, according to the firm's marketing documents and people familiar with the matter. The investment banks are talking to big bond fund managers, hedge funds and insurers about providing the financing.
The documents also note that San Bernardino County and some of its municipalities are the closest to moving forward with the idea.
Mortgage Resolution Partners is also having discussions with politicians in at least one other California county and in Nevada and Florida, said people familiar with the situation.
"The private sector provides all the financing and all the risk with this program," said Steven Gluckstern, the firm's chairman and a former money manager and former owner of New York Islanders hockey team. "We have watched state (and) national government try to fix this and it hasn't worked."
Gluckstern acknowledges that using eminent domain for mortgages is untested but said the firm's lawyers believe the strategy would withstand a legal challenge from bondholders or banks. He also said he thinks most bondholders would not oppose eminent domain because the market prices for many mortgage-backed securities reflect the fact that millions of borrowers are underwater on those loans.
"The loss for many bondholders has already been baked into this," he said.
A person familiar with the matter, who was not authorized to speak publicly, said condemnation of underwater mortgage creates a "liquidity event" for many mortgage-backed securities that have been cobbled together largely from distressed home loans.
The problem of underwater mortgages may be the most lasting impact of the U.S. financial crisis. Recent estimates by real estate information firm CoreLogic found that roughly 22 percent of U.S. homeowners owe more on their mortgages than their homes are worth.
In San Bernardino County, an estimated 100,000 homeowners have mortgages that are underwater, according to county officials.
Two California municipalities in the county, Fontana and Ontario, have agreed to work with the county on that study. But a third community, Hesperia, voted on June 5, not to join the effort.
The use of eminent domain to help underwater homeowners has gotten some attention from the local press in San Bernardino County. But until now, Mortgage Resolution Partners behind-the-scenes role had not surfaced.
Devereaux said Mortgage Resolution Partners has not come up in the public discussions about the eminent domain proposal because no decision has been made to work with them.
But the lack of openness has concerned some in the local real estate community.
"In two months and four public meetings, the critical details of how this might work have been left out of the discussion," said Paul Herrera, government affairs director for Inland Valleys Association of Realtors.
My younger son just locked in a 3.50%
30 yr fixed refinance on his residence Friday. Using the artificial low rates is the easiest way to short the US$$.
Yikes I would not know how to address your question, as I would not try that model if potential profits were double your projected figures.
Maybe I can offer some insights just looking at yesterday when a neighbor who paid 15000 for a cabinet and 10 feet of wardrobe doors with no back and a new safe (the main cost 10K).
The Co. which was contracted to do this work is considered high end, working for wealthy clients.
When I got to the apt. I met the surly worker with his helper who spoke no english. The wood for the shelving was the cheapest wood one can find, a quality slightly lower than IKEA. The doors all had imperfections, laminated coats were sprayed on to wood without proper sanding ( they had to be replaced). The safe door was marred and had to be replaced. Through out the day the workman left tools on bed and borrowed our dustpan which we later located in our neighboor's sink.
I cannot say more as I only use people I know and still do not let out of sight unless I am willing to accept excess do overers at my expense as some work must be caught early.
This model works best when you get a property for almost nothing and people are content to live with many imperfections, the way I do when I go to a cheap motel , never focusing on the decor. The model also works when you buy a property which is rapidly rising in price so that just keeping it for calander spans will result in great profit as new buyers will pay more and gut your place to match their new needs.
Now if I were in a position to own 30 buildings I would need a different model, I would have to have a supervisor I trusted to be my eyes and the cash flow would pay for such a business model.
There are a few neighborhoods around here you don't want to be caught wandering around at night but none of the stuff I look at is in those areas.
I'm more in the mid-level market, often cheaper stuff in decent neighborhoods.
Home prices at all levels out here have been hit much more than 10% but the lower end has been hit the hardest. And condos much more than single family homes.
At least we can find 'value' pretty easily in real estate right now vs stox IMO
For me the property location is far more important than the extra 1,2 or 3% return that I might get. The quality locations tend to have lower returns but the neighborhoods seem to be better with less people type problems. I've done some reading on countries that went thru a financial collapse and there seems to be a general theme that high quality real estate also got hit but not nearly as bad as the lower end stuff. To some extent that's true in our economy today... some lower quality real estate is down as much as 70%. The typical stuff I look at is off less than 10% from the peak... Hard to find a good deal
Some of the areas that got hit so hard are seeing really strong price gains right now... If you have the intestinal fortitude for it now may be a good time to get that lower end stuff. There is a neighborhood in Florida that I am aware of where prices were around $220,000 at the peak and now you can buy all you want for $60,000... It's actually possible to think about doubling your money in that stuff. But I would not like to own it longer term... Too many issues... It's not even safe to drive through some of these neighborhoods.
Anyway... Good luck however you go about it... I think it's good time to buy... I hope I'm not wrong.
7-9% on higher-end properties is better than I can do around here. So guess we've both found niches of potential success.
I agree on the mngmnt thing, easy to say something is broken when maybe not bad or have a friend that cleans or whatever and bill for more than work performed.
So far so good though. I'm looking at possibly adding another condo in near future. I can handle no cashflow for awhile, no mortgage to worry about. Just fixed costs eating away when vacant (taxes, utils, HOA dues, etc).
PS- I still am looking seeing rental property as better than stox currently. Obviously doing both but finding 'easy' stocks are hard to find right now while I am starting to find a couple easy properties again (after seeing inventory evaporate the last several months).
"10% net pretax with 1 or 2 months vacancy cushion to boot."
That's a great return if you can get it, the properties that I own don't do that well... more in the 7-9% range after all expenses but pre-tax. The property management in my area is between 10-20% of the gross rental each month.. For that they call the repair people for you and do the showing for new tenants etc. I think it's too high given what they provide. I don't mind showing and I can call the plumber as well as they can.
I have first hand knowledge of a property "manager" that charged the owner for a complete paint job and in reality her husband did some paint touch up... another reason I don't use them.
The most important thing in this market is to be sure that what ever you get into that you can survive difficult times. Don't put yourself into a position so that you have to have the rent to stay afloat. If you can survive with no rental income then you should be OK no matter what.
I'm looking for 10% net pretax with 1 or 2 months vacancy cushion to boot.
Hard to find on single family homes now that things have picked up but there are occassional condos and not junk either. Not new but quite liveable.
Have you used manager services on properties? I decided to try it on one property and so far not bad. Pay $30 per month for overhead costs (advertising, showing unit, credit screens, etc) and 5% of gross rent. Plus the yhave fairly reasonable repair people for simple stuff (replacing curtain, fixing leaky faucet, general small maintenance).
I had always done it on my own but when I can get almost 10% net pretax USING this it sure seems like potentially less hassle.
These are the guys that could be big competition. Probably would be mostly lower-end market properties so may not have the effect on dickmilde as much as it might on my midling affordable junk property.
With the size they're wielding (bigs/hedgies/etc) if they get packaged deals from the fed, they'll get steep discounts to what you or I could get IMO and lift a bunch of inventory off the market. Good for homeowners near term wanting their property values to appreciate a little bit. But not good for us owners renting out units.
Talk about tough competition- imagine a big block of homes in your area being swept up at prices 10-20% below what you would pay for them and then having those big batches suddenly become vacant rentals needing tenants in direct competition to your place that you paid more for. Then throw in the cash firepower these big buyers would have in pricing down rent rates and crowding out us little fish.
It'd kinda be like Microsoft vs some little software company with a good idea but little money and no pricing power. If MSFT wanted to, they could run the small company under by price cutting them out of market to where little fish can't swim any more.
The upside would be lower rents for the masses for a bit until the bigs realize the little competitors are dead and gone or struggling mightily against the bigs' lower rent offerings. Then the bigs jack the rents when the competiiton is completely gone or insignificant enough to not bother with.
Hoping I may find a worthwhile existence in between the extremes where life is good enough to allow for maybe a bottle of wine on occassion and maybe even some steak cooked over an outdoor alderwood fire enjoyed by family members AND have the time to savor, enjoy, and relax simultaneously
Ah, the good life. Still fleeting but some day.
I get 4% before any financing.
Living the big city life... Hmm, wasn't that the Scorpions? Eh, listening to Rammstein right now. Just as good.
Hopefully this real estate suff works out for us all. I'm hoping it'll help pay for the little one's college down the road.
Must just mention L.A. not a friendlier place......... intrusive unnesessary mold remediation (testing alone can cost $2000), in Condo
or units where you have dictatorial housing associations who inflict Stasi like protocols. I can write 30 pages on this topic alone and did .Nuff said, I had to stop as this needed to head to Supreme court as well,lol.
Well said! Fortunately we don't have rent controls and all that hooplah around here. But there are other sneaky ways such as imposing business licenses with annual renewal fees on homeowners renting their places.
Glad LA seems to be a friendlier place for you. You've come (and gone) a long way...
I couldn't fully digest you post, think I'll go get a Tums...
Bunked into a guy (knew him briefly from past) who wished to ask me for advice and started:
"Gee, my Landlord died and lawyer son asked everyone to vacate when their lease is up. His stated reason is that he wishes to use the space for himself and family." I said " say no more, let me tirade and rant and in the cracks you will be filled in and made whole and comfortable". Now what I did not point out to this fortunate man (part of a privileged class) ill- equipped to manage such a brash obviously flawed proclamation from his newly announced "upstart" landlord, was that I agreed with the new owners imagined entitlement and liberties, which unfortunately had no legal legitimate bases in NYC or NY State law. A law which was temporarily enacted just after WW 11 to alleviate a housing shortage and suggested to be reversed after vacancy rates were greater than 5%, but could almost never happen because the law itself created a housing crises as millions were incentivized to vow to never move again, as landlords would be the legal adopted parents to their burgeoning stay put homesteaders. Thick books of regulations administered the finer management details while a new class of inspectors responding to all forms of intentional malice, inflicted the dribbling for proclaimed purposeful time into the crucible lottery of grief, to the owning class.
Of course I was jealous of this inherited self interested soul. I already endured working hours in slave labor routine functions to pay off prominent "wealthers" ( way above my social station) to budge after paying huge legal fees to these tenants ducking autograph signing after being sighted in the courts.
My advice to this Tenant was take a deep breath and laugh off this misunderstanding by your new landlord with an arrogant capacious capacity to be intoxicated by self want and imagined privilege.
For those still with me, there is a startling point to my now overlong story.
In my wildest dreams I could not imagine that George Will would be talking about the same actual people:
http://www.washingtonpost.com/opinions/rent-control-laws-foolish-and-unconstitutional/2012/02/14/gIQAcZvbGR_story.html
Or that the Supreme court may deliberate on my actual concern and knowledge of the parties.
Anyway, I like buying property in California, as they made property owners an entitled privileged
class freezing property tax rates for the conceivable future, as shhh but I did try to feast my own greedy gully before the table turns.
Bunked into a guy (knew him briefly from past) who wished to ask me for advice and started:
"Gee, my Landlord died and lawyer son asked everyone to vacate when their lease is up. His stated reason is that he wishes to use the space for himself and family." I said " say no more, let me tirade and rant and in the cracks you will be filled in and made whole and comfortable". Now what I did not point out to this fortunate man (part of a privileged class) ill- equipped to manage such a brash obviously flawed proclamation from his newly announced "upstart" landlord, was that I agreed with the new owners imagined entitlement and liberties, which unfortunately had no legal legitimate bases in NYC or NY State law. A law which was temporarily enacted just after WW 11 to alleviate a housing shortage and suggested to be reversed after vacancy rates were greater than 5%, but could almost never happen because the law itself created a housing crises as millions were incentivized to vow to never move again, as landlords would be the legal adopted parents to their burgeoning stay put homesteaders. Thick books of regulations administered the finer management details while a new class of inspectors responding to all forms of intentional malice, inflicted the dribbling for proclaimed purposeful time into the crucible lottery of grief, to the owning class.
Of course I was jealous of this inherited self interested soul. I already endured working hours in slave labor routine functions to pay off prominent "wealthers" ( way above my social station) to budge after paying huge legal fees to these tenants ducking autograph signing after being sighted in the courts.
My advice to this Tenant was take a deep breath and laugh off this misunderstanding by your new landlord with an arrogant capacious capacity to be intoxicated by self want and imagined privilege.
For those still with me, there is a startling point to my now overlong story.
In my wildest dreams I could not imagine that George Will would be talking about the same actual people:
http://www.washingtonpost.com/opinions/rent-control-laws-foolish-and-unconstitutional/2012/02/14/gIQAcZvbGR_story.html
Or that the Supreme court may deliberate on my actual concern and knowledge of the parties.
Anyway, I like buying property in California, as they made property owners an entitled privileged
class freezing property tax rates for the conceivable future, as shhh but I did try to feast my own greedy gully before the table turns.
How to go short on the US dollar
Buy a single family home and finance it with a 30 Yr mortgage at 4%.
Agree with you on the assets and what inflation/debt may continue to do to those people at the lower end of the middle over time.
One thing that strikes me right now is how expensive housing has become in some areas of SE Asia compared to here. Ten years ago (or even more so 15-20 years ago), houses over there were almost a fraction of the pricing over here. Not so any more.
I understand your concern about the HOAs that could be running low on cash... That is particularly true in Florida where the vacancy rate is so high... Many places no longer have enough residents to pay for standard maintenance concerns. My area is considerably different, It looks to me that we may have passed the bottom for the time being, I see less for sale although prices are not yet firming. I only invest in the highest quality properties, which doesn't mean the highest price properties. The good locations have near 100% occupancy and very high collection rate on HOA dues so the lack of funds isn't a problem here. We also have distressed areas with higher vacancy rates and more payment problems but I don't invest in those areas. Real estate is not very liquid like buying or selling a stock... You can't get out right away if you need to get rid of it so my first and top priority is ALWAYS a quality assessment. If I would not be comfortable to live in one of my properties I would sell it and I did exactly that last year and recently replaced it with a higher quality property.
As far as the return... The 11.2% I mentioned is a gross return with 12 month occupancy. Our leases are always 12 months. That doesn't mean that no one ever leaves in less than 12 months but we tend to have tenants for many years. Taking taxes, insurance and HOA dues into account my return on this latest addition is about 9%. As you go down in quality or the desirability factor goes down the return goes up... You can buy house trailers and get them paid for in two years or less! Anyway, all rents are in my mail box on time and I don't have to go out asking for it... I like it that way.
The economy seems to be slowly improving but the spread between the haves and the have nots is also getting wider. My leases are with the haves... above average income tenants that have decided not to own a home. Obama is killing the very people he is trying to help... With all the money printing everything is going up in price and real estate will follow as well. The people with assets will see their net worth increase and the people at the lower end of the economic scale are screwed. They don't have assets that will go up and are finding it harder to buy food and gas. I am buying properties from people that made bad investment decisions and I will probably be blamed later for taking advantage of those that had their creative financing deals fall apart.
If we have a major financial collapse similar to Greece then owning stuff rather than paper will put you far ahead of the game. For me the highest priority is to increase net worth and to do it with solid assets that will withstand widespread economic hardship. If you are buying make sure that you can afford it even if it stays empty... That way you won't get hurt if you have to wait.
Wow, was just reading that foreclosures in Jan rose 8% nationally from Dec but down 15% YOY. Conversely, out here (Washington) foreclosures fell 18% (in one month!) from Dec amd down 58% YOY.
Guess that explains my frustration in not finding more properties right now. I don't think the 5 big banks are going to be enough to saturate the market on low end to drive prices down so think we hit bottom in Oct-Nov around here.
Single family home? Wow, that sounds cheap. No idea what taxes, insurance and other costs are like down there and risks of flood dmg etc.
The demographics drivers down there seem to be decent- Fla seems like it would be attractive to aging baby boomers wanting warm winters and also have growing hispanic population thru immigration etc.
dickmilde- out here in the NW it has been a bit different recently. The REO properties on the low end got hit pretty good (some easily down over 50% from peak on single family, more so on condos) while the upper end has held up some but down more than your area and still a bit softer (not as many qualified buyers) than the low-end recent turnaround. I started looking more in earnest around Oct-Nov at distressed stuff and making a few lowball offers. I swear about 2 weeks after I started, the whole lower end (REOs in avg/OK neighborhoods) caught fire.
Now if I see a cheap 'hot' listing, it will have 5-14 offers in a day/couple days with "last and best" coming back from sellers/banks. I have seen a couple sell close to 20% above the list price. Before that, I could spend 3 or 4 days deciding on which one to bid on (out of maybe a dozen) and then lowball it by 10-15% and work from there with counters or whatever. Managed one small property doing that and got it cheap last year.
This year it has become too competitive now so I'm about ready to call it quits and be happy with what I managed. Maybe more inventory will show up but aint happening right now.
Just not enough supply to deal with right now. It's a waste of time to see a place that you could buy for 5-10% less than list price 2 months ago now go above the list when it first lists and with many offers to boot so no bargaining leverage/wiggle room on price.
The 11% you mentioned- is that your rate of return after paying all cash and calculating in taxes/insurance (and HOA dues of course) and maybe a repair and/or vacancy cushion? The condo I picked up would give me an 11.8% annual return on all cash purchase if it rents for 10 out of 12 months and doesn't have repairs. If I put in a repair amount it gets closer to 10% but still... Conversely, if it rents all 12 months we're talking over 16%. If you leverage the property with a loan, it gets better as far as rate of return on the upfront cash used to buy although there are all those fees with a loan.
Tricky part with condos of course in part is understanding whom the owners are, looking out for potential special assessments in the future, how many upside down owners, how many owners not current on HOA dues and such. I had to do a fair amount of background looking before figuring out the place I bought and that was a bit tiring.
The HOA has had decent cash cushion for several years and dues have only modestly risen. There are a couple longtime owners of a few blocks of units too but not so much to be near majority-control levels and they've owned the units since the early 90s or earlier w/o leveraging the properties so they're generating good cashflow as well. Hoping to meet them at the next HOA meeting and owuldn't mind picking up another unit or two in there if price is right.
In general though, I'm a bit leary of some of the risks with condos (such as upside down HOAs with special assessment risks or jumping HOA fees or both and large amounts of underwater owners). Would rather have single family home where you own the property and building outright but that market is running away and was just getting to my buy area when it turned almost on a dime.
Good luck with your RE investments! If we get any price appreciation on the units, that'll make for a nice kicker.
I closed on a new property last week.
New paint, carpet and appliances will make this a very attractive property. The location is outstanding and I have already had inquiries from prospective tenants. Gross return will be about 11%. Our area is still holding up very well with average prices down from the peak less than 7%. The higher quality properties in the most desirable locations such as this have hardly changed in price.
How I removed my securities from the control of my broker and their holding bank
http://www.siliconinvestor.com/readmsg.aspx?msgid=27816576
I called them and said, "I want my securities out of street name and direct registered with the issuer or their transfer agent." It was that easy. There was no fee. My other broker (a well-known online discount broker) has a "Direct Registration Request" form that is a one-page document that must be submitted. Still, pretty easy and no fee. There is also no fee to transfer the securities back to my broker to sell (other than their normal commission). Isn't that a revolutionary idea? My broker is now my agent to buy or sell securities...not a bank that holds them, lends them out for shorting, uses them for collateral on transactions I have no idea about, re-hypothecates, hyper-hypothecates, etc.
If you have not heard of direct registration (I hadn't either before this week), then I encourage you to do some research. Start here to understand the three ways to hold securities:
http://www.sec.gov/investor/pubs/holdsec.htm
By googling direct registration I see Jim Sinclair has been advocating this for years but I guess it never clicked with me. I thought direct registration meant that I would have to take delivery of a certificate (a pain in the butt; I have dealt with that before) but that is not the case. Let me make this clear so everyone can understand. YOU CAN GET YOUR SECURITIES COMPLETELY AWAY FROM YOUR BROKER AND THEIR HOLDING BANK/CLEARING HOUSES WITHOUT THE HASSLE OF TAKING DELIVERY OF A STOCK CERTIFICATE.
How does this work? Let me use the example of GORO which is one of the securities I own. Its transfer agent is a company called Computershare. I called Computershare and talked to a nice guy there who walked me through the process. By asking my broker to direct register my GORO security, my broker contacts Computershare and they do their thing which results in GORO transferring out of my brokerage account (the securities in which are actually held by a different larger company called National Financial, which is owned by an even larger investment bank Fidelity) and Computershare sends me a statement showing ownership of the securities. Now at this point you are thinking, well now I'm just relying on Computershare instead of National Financial to secure my assets but that is actually not the case. All Computershare does is direct register my name "AceofKY" (actually my real name) on the shareholder register of GORO - a "book entry." If you've ever read an annual report and wondered how a billion dollar market cap company like GORO only has like 90 registered shareholders, the reason is that most people hold their securities in the "Street Name" of their brokerage's holding bank rather than direct registered or certificated to themself. Computershare is just the transfer agent for GORO. They can be fired at any time and GORO can hire a new transfer agent. Computershare cannot loan out my securities or use them as collateral because they don't have them to loan out. My securities are just a book entry on GORO's ledger. I get dividends directly from GORO (or their agent) rather than than getting them from my broker. When I want to sell, Computershare merely pulls me off of the ledger and transfers the securities to the brokerage of my choice.
The downside to this is that this stuff doesn't happen instantly. Traders wouldn't want to direct register because they want to be able to sell their securities immediately at any time. I'm an investor and don't care about that. It takes me weeks or months to decide to sell a security in the first place. I care more about the security of my assets rather than the ability to instantaneously sell them. Another argument could be made that having a certificate is safer. I don't think that is the case. If your certificate doesn't match up to the company's ledger, you're in the same boat as having a statement that doesn't match up to the company's ledger. Mistakes can be made in either case, and at least this way you don't have to worry about losing the certificate. The direct registration process basically gets rid of the need to use paper in a world that is electronic; the same way that my business uses solely email now instead of mailing out hardcopy letters.
Now here's the bad news: I haven't figured out a way to direct register securities held in a custodial IRA account. I have several IRA accounts and the custodians have told me that they will not be the custodian unless those assets are held in street name. I have made a couple calls and haven't yet found a custodian who will do this (and I understand the problem; how can they keep the IRS reporting straight if they don't control the assets?) If anyone knows of a custodian who will handle an IRA without controlling the assets, let me know. Computershare told me that they don't perform this service. I'm investigating the potential of an LLC held in a self-directed IRA but haven't come to any conclusions yet. I considered distributing the money out early but the tax and penalty consequences are just massive.
I also called SIPC this week and talked to a very nice lady in the legal department who walked me thru the process of what would happen if one of my brokerages failed. There is no way to get "first in line" for SIPC reimbursement. IRA/custodial accounts or individual cash accounts get no special treatment over margin accounts, etc. When the investment bank or brokerage fails, you submit a claim form with the securities that you are missing (usually the accounts are transferred to a different broker somewhat quickly, and when there is no theft or mismanagement usually all the securities and segragated customer cash is intact and shows up at the other broker in your new account). Your claim form is then compared to the failed brokerage's records and THE ASSUMPTION IS THAT THE BROKER'S RECORDS ARE CORRECT. This is very important as we've all heard that MF Global's records were in bad shape. YOU BETTER BE PRINTING OFF/SAVING YOUR MONTHLY STATEMENTS AND TRANSACTION REPORTS FROM YOUR ONLINE BROKERAGE if they don't mail these to you. If your claim matches the broker's records then SIPC replaces the missing securities and cash up to $500k. Funds are distributed pro rata above $500k depending on how much is recovered. If your claim does not match the broker's records...who knows what will happen? It's not like they keep paper records any more. I did not ask what happens if the CEO changes the password on the database just after he electronically shifts the cash to an account overseas and gets on his private jet because that just scares the hell out of me and I don't want to think about it.
The SIPC has a reserve account of about $1 billion to handle claims and replace missing securities. I asked her what happens if the claims result in more than $1 billion missing (MF Global alone may exceed that!) She said she believes the SIPC can borrow money from the U.S. Treasury. I did not ask her what would happen if the Treasury did not have enough money or if an act of Congress is required to appropriate money for this purpose.
Cities With Dangerously Falling Home Prices
By Morgan Brennan, Forbes.com
December 8, 2011
http://realestate.yahoo.com/promo/cities-with-dangerously-falling-home-prices.html
Home Buying Tips and Advice
Anyone who has ever purchased a home understands that buying a home is one of the hardest things they have ever done in life. There are many things to consider and tasks that must be completed as part of the home buying process. For those who have never brought a home or who have not brought a home in a long time and are considering doing so, it is highly recommended that you learn as much about the home buying process as possible to avoid the pitfalls associated with making such a large purchase.
More at: http://rocknj.hubpages.com/hub/Home-Buying-Tips-and-Advice
Here on the Space Coast of Florida, in my neighborhood my girlfriend paid over $200k for a 3/2, which is now valued around $77k. There's one around the corner selling for $36k. Thinking of picking one up.
Now that the space shuttle is gone and nothing is replacing it, I'm not sure we should call this the "space coast" anymore. It's more like a "everyone's broke coast."
I'm trying to stick with buying in 'better' areas but for me that would mean better avg neighborhoods. Can't afford that high end stuff, or rather don't want to leverage to it just in case things sour further. Our country still allows big leverage on real estate vs much of the world (at least in Asia).
That high end certianly has held up well though as you mention (wealthy end). Amazing to hear you have only seen very mild price depreciation. I'm looking at stuff selling at levels seen almost 15 years ago at times.
I'm still spending most of the time looking at residential property right now instead of 'stocks'. Gotta figure out how much exposure is enough, no knowing how low home prices will go but in this area I am finding listings selling around 1998 levels (sometimes lower) and with immediate decent positive cash flow. Some need some cosmetic repair but the rent values I would think should drive some stability at some point (unless rents start tanking- so far they have not out here).
With 20% down, calculating 20% vacancy rate and 10% allowance (of annual rents) for fixing stuff plus taxes and ins, it is not hard to find 20%+ annual ROE and fairly strong cash flow. Prob is I don't want to leverage much into real estate with all the unknowns. A little, yes. Not a lot.
About the only gated place for us (my family) might be a new home to live in With interest rates where they are, it is a meaningful thought to pursue.
Suppose I could quit the day job and become a full time landlord (d'oh!!!). But work hasn't pissed me off enough to try that LOL. It is nice to get health benefits and such for sure with the regular job. Eh, the wife probably wouldn't spring for it anyway even if I wanted to.
It's much easier when the quality of the properties is higher... The return is less but you don't have to put up with getting calls at all hours of the night. Also, you don't have to go out and collect rent every month. In the long run I find that it works much better for me to be a real estate investor first and then look for good tenants to help me pay for the properties. It's like investing in "blue chip" stocks vs bulletin board or pink sheet stuff. You will find that the quality level of the properties that you offer will attract a comparable quality level of tenants.
Of course the real estate environment has changed considerably... It looks like it will be a while before we will see the value gains that I have enjoyed over the years so investing for cash flow is a serious consideration right now. In years past I always received part of my gains via rising property values... as we all know that has changed. I am very fortunate in that in my area we are down only 3.5% to 8% from the peak levels... depending on specific community... so it seems we will survive this brutal market. There are some really good quality properties available... So many people made poor real estate choices and now have to let them go at fire sale levels... These lower prices improve the cash flow since the rents are holding up very well. In my area rents have remained steady to slightly firming, and best of all we are 100% occupied.
Here is another post re my property selections...
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=66945411
Good luck with your real estate!
Gadzooks rogue- that does sound like a bloodbath.
(Not so)Funny thing on the property taxes around here is how the assessed values have declined sharply but the levy rates per $1,000 have gone up so unfortunately not a corresponding equivalent drop in prop tax rates paid.
I'm simply looking at it as investment and cash flow. Can buy a fixer, put 25% down, another 5-10% for cosmetics, and turn around renting it with ROE approaching 20+% annually even with 1 or 2 months allowed as vacancy cushion.
BUT it's a total pain in the arse having neighbors call at 5 AM to say the police are breaking up a raucous party the tenants decided to have where drywall, windows, and even the toilet bowl somehow breaks...
Much less of a pain in the arse getting 20%+ in the markets every year, but last year I couldn't do that and this year neither with a fair chunk of 'invest' money in cash.
Soooooo, I am deciding to take the path of pain in the arse. :-0
Here in Crook County Illinois it's a bloodbath. Out of control property tax raises over the last 5 years or so and the collapsed economy have prices easily down 75% from the peak (2005-2005) here in my neighborhood.
It's not a pretty site here. This is what a Depression looks like for homeowners who bought anytime except the last few years.
Lot's of people wiped out.
BUT lot's of bargains for fresh money or new first-time homeowners.
Not a lot of cherry picking in the microcaps world these days but I am finding several residential properties that are darn near cherry pick pricing in the ol' Pacific NW. In some good neighborhoods too. House hunting is fun again. Don't even need a high caliber gun either.
I do still have the stash of canned food, bags of oats, water, firewood, and smoked salmon too just in case
Hope all is well in Kanland.
Bankers & Tradesman
October 18, 2011
The Massachusetts Supreme Judicial Court ruled today that if an original foreclosure was faulty, people who buy foreclosed property might not own what they think they do.
The case, Bevilacqua vs. Rodriguez, involved a Haverhill property which had been owned by Pablo Rodriguez, who took a mortgage on it in 2005 through a lender named Finance America. The mortgage was assigned to the Mortgage Electronic Registration System (MERS), and the note was subsequently sold into a securitized trust.
In 2006, U.S. Bank, acting as trustee, foreclosed on the property. But the mortgage, which had been entered into the land records as assigned to MERS had never been transferred over to U.S. Bank. This transfer occurred only after the foreclosure sale had already been completed.
Last year, the SJC ruled in its influential Ibanez decision that such post-foreclosure transfers were illegal - banks must be assigned the mortgage prior to foreclosure in order to foreclose.
In 2006, U.S. Bank sold the property to Francis J. Bevilacqua, granting him a "quitclaim deed" affirming U.S. Bank no longer had an interest in the property. But, given the court's Ibanez ruling, in 2010 Bevilacqua elected to file a "try title" action in order to clear up any potential problems with the title.
A "try title" action is a legal method of clearing disputes over who owns a piece of property by forcing the parties with a claim on the land to appear in court and present evidence. If a party with such a claim fails to appear and defend it, or loses the case on the evidence, their claim is wiped out, making it easier for the current owner to sell.
Judge Keith Long of the Land Court, however, ruled that Bevilacqua didn't have the right to attempt to "try title." Since U.S. Bank's original foreclosure was illegal, they didn't have the right to sell the property to Bevilacqua in the first place, and he was not its legal owner.
The SJC today affirmed that decision, saying that the fact that U.S. Bank had granted a deed to Bevilacqua wasn't enough to establish his ownership.
"Recording may be necessary to place the world on notice of certain transactions. Recording is not sufficient in and of itself, however, to render an invalid document legally significant," said the court. "In light of its defective title, the intention of U.S. Bank to transfer the property to Bevilacqua is irrelevant and he cannot have become the owner of the property pursuant to the quitclaim deed."
The court does state that it might be possible for property owners in Bevilacqua's position to establish ownership by, in effect, re-foreclosing on the property.
Bevilacqua might argue that the record shows that U.S. Bank intended to transfer its interest in the property to him, and that therefore he is entitled to foreclose on the property under the terms of the original mortgage, just as U.S. Bank would have been.
However, the court says that a try title action isn't the proper legal proceeding in which to attempt such a maneuver. But they explictly leave the door open for Bevilacqua to make another attempt to establish his ownership.
See http://www.ma-appellatecourts.org/display_docket.php?dno=SJC-10880
SUPREME JUDICIAL COURT
for the Commonwealth
Case Docket
The way I read this is that houses can be provided at a lower price if the government isn't imposing taxes on the cost of labor and the unions aren't able to use their extortion tactics to raise the cost of EVERYTHING.
So the government will sue the builders and then ask why prices are going up. This stuff is not hard to figure out.
States, IRS to Join Probe of Home-Builder Pay Practices
By ROBBIE WHELAN
Seven states and the Internal Revenue Service plan to join the Department of Labor in a broad review of the hiring and pay practices of home builders and other companies the government says routinely misclassify workers as independent contractors, rather than employees.
Labor Secretary Hilda L. Solis, Internal Revenue Service Commissioner Douglas Shulman and top labor officials from seven states will agree Monday to coordinate enforcement efforts and share information about companies found to have violated labor laws, including denying workers minimum wages, overtime pay and benefits, according to an announcement Friday by the Labor Department.
Workers build a home in a Pulte development in Las Vegas in July.
The IRS is interested in the issue because employers don't pay payroll taxes on workers classified as independent contractors. A Government Accountability Office report from 2009 found that the misclassification of workers cost the federal government $2.72 billion in 2006. A Labor Department report in 2000 estimated that up to 30% of employers misclassify workers.
In August, the Labor Department sent letters to large home builders including Lennar Corp., KB Home, D.R. Horton Inc., Pulte Group Inc. and NVR Inc., seeking pay and employment records, according to people familiar with the matter and a copy of one of the letters reviewed by The Wall Street Journal. The letter also asked for names of all contractors hired in the past year. The letter didn't allege any specific violations of law.
A Pulte spokesman said the company received the letter, and was still reviewing it. The other builders declined to comment.
The Labor Department, in an emailed statement, said it was looking at industries in addition to home building, including hospitality, janitorial services, agriculture, day care, health care and restaurants.
"We are actively looking at those industries that employ the most vulnerable workers and that engage in business practices—such as misclassifying employees as independent contractors—that result in violations of minimum wage and overtime laws," a spokeswoman said.
Builder advocates say the probe represents another example of "regulatory intrusion" by the Obama administration and that the push for increased enforcement couldn't come at a worse time for the hobbled residential construction industry.
Home builders were on pace in July to sell 298,000 new homes in 2011, which would be the lowest level of new home sales ever recorded. During the housing boom, builders were selling more than 1.2 million homes per year. Few publicly traded builders are profitable, and most of them have laid off hundreds of workers.
"You've got an industry that's almost singularly responsible for keeping our economy in the doldrums. To pick this time to do these types of investigations, it's counterproductive to the health of the economy," said Jerry Howard, president of the National Association of Home Builders, a trade group.
The proper classification for a worker depends on factors including how much control or direction an employer wields over the workers. Employers aren't required to withhold income taxes or pay Social Security or Medicare taxes for independent contractors. Meanwhile, independent contractors aren't covered by many labor protections, including minimum wage and overtime laws, and unemployment or workers' compensation insurance.
Federal and state regulators say worker misclassification is particularly common in residential construction. Most large home builders in the U.S. typically don't keep many laborers on their books and do little actual home construction. Instead, they entrust much of the construction to carpenters, plumbers, roofers, electricians and others employed by contractors. This reduces the companies' costs and exposure to potential violations of labor laws.
Allegations of worker misclassification in the construction industry generally come in two forms: that builders misclassify laborers they hire directly as independent contractors, or they knowingly hire subcontractors who misclassify workers. The Labor Department's efforts focus at least in part on holding large builders accountable for classification violations by their subcontractors, according to person familiar with the matter.
The Labor Department is stepping up enforcement due in part to complaints from construction companies that keep laborers on their books as employees and say they can't compete against other companies that classify workers as independent contractors.
"In industries where there is competitive bidding, the honest contractors get nailed twice. Their rates of worker's comp premiums are higher because the other guys aren't paying, and they're losing jobs," said Carl Hammersburg, compliance chief for the Washington State Department of Labor and Industries, who attend Monday's meeting. "Now things are so cut-throat that every single job matters. If they lose a bid to someone who isn't paying worker's comp, isn't paying unemployment insurance, then they can go out of business."
The Laborer's International Union of North America has for several years protested Pulte's hiring practices and sought to unionize the builder's subcontractors.
One of the most high-profile disputes about worker misclassification is a continuing battle between the International Brotherhood of Teamsters and FedEx Corp. The union argues drivers for the company's FedEx Ground operation are illegally classified as independent contractors and thus ineligible to be organized, unlike drivers at rival United Parcel Service Inc. who belong to the union.
The misclassification issue has taken a higher profile in the past few years as cash-strapped states have focused on ways to capture more revenue and prevent employers from illegally failing to pay taxes on workers.
"In the last three or four years, the issue has taken off because of the economic downturn and the state budget crisis," said Cathy Ruckelshaus, legal co-director at the National Employment Law Project, a nonprofit, nonpartisan group that works on low-wage worker issues. "It's a huge revenue drain."
—Kris Maher and Melanie Trottman contributed to this article.
Obama going to Denver Airport late Sept, 2011 - Jesse Ventura Uncovers What's UNDER the Airport!
A Hail Mary
Monday, September 5, 2011
Obama’s Refi Plan May Not Work For Local Market
Glut Of Underwater Borrowers, Desire To Shorten Terms May Sink Nascent Strategy
By Colleen M. Sullivan
Banker & Tradesman Staff Writer
The Obama administration is floating a new backdoor stimulus plan, pushing Fannie Mae and Freddie Mac to allow more people to refinance at today’s low rates. But even mortgage brokers say the idea may fizzle.
It’s easy to see why the plan might appeal to the administration, according to Northeastern University economics professor Barry Bluestone. The two mortgage giants carry about $2.4 trillion in loans on their books at rates above 4.5 percent; if all the homeowners with such mortgages were to refinance into today’s 4 percent rates, collectively they could save upwards of $80 billion.
And the savings wouldn’t come at the expense of Uncle Sam’s balance sheet – instead, any hit would be to investors who own the mortgage-backed securities insured by Fannie and Freddie. When the loans were refinanced, investors would get their original money back – but they’d then have to go looking for new bonds to buy at today’s much lower interest rates.
“The thinking is, ‘It may not be the strongest stimulus we can imagine, but most of the strong stimuli we can’t get through Congress, so let’s see if we can’t find one that potentially has bipartisan support,’” explained Bluestone. “The only way it actually stimulates the economy is by leaving consumers with a little bit more money in their pockets, after they refinance.”
Saving Vs. Spending
But if the plan does not perform as strongly as hoped, it won’t be for lack of demand, mortgage brokers and industry professionals told Banker & Tradesman.
“I tell you, we’re swamped,” said Jonathan Asker, CEO of North Atlantic Appraisal in West Bridgewater. “The rates are so low right now, you’re starting to tap into the people who might have said last summer, ‘It doesn’t make sense to do this for three-quarters of a point,’ but who might be willing to refinance for a rate cut of 1 or 1.25 percent.”
But the problem for the feds is that many such borrowers are seizing the opportunity to get a loan with a shorter term, looking to pay more to pay down debt now rather than save a little over the longer term.
“What we’ve seen is a lot of people going from a 30- to a 20- or a 20- to a 15-year fixed rate loan,” said Craig Tashjian, vice president at Fairway Independent Mortgage in Needham. “People are trying to get rid of debt as opposed to add debt on.”
While potentially helpful for their own households, those kinds of refinancings wouldn’t have much effect on the broader economy, said Bluestone.
If consumers take the money they save on their mortgage and go out and spend it on other things they need, that creates demand. But if they sock away those savings, “it has virtually no effect whatsoever on the economy,” said Bluestone.
“People who are employed, people who are doing relatively well – they’re kind of pulling in their consumer horns, not going out and spending a lot of money,” he told Banker & Tradesman.
Good On Paper
And other homeowners – those scrimping to make their current payments, and who therefore might spend any refinancing savings on other things they need – are still finding it tough to get deals done.
“I find more of the people that are stuck are those who did 80-10-10 [loans], or 100 percent financing, and because they are now upside down, they can’t subordinate or get rid of their second mortgage,” said Jaclynn Sulfaro, president of the Massachusetts Mortgage Association and vice president of operations at Medford-based Constitution Financial Group. “That seems to me like more of an issue.”
Plus, Fannie and Freddie already have programs in place open to borrowers with good credit who have high loan-to-value ratios, she points out.
But even such programs can’t do much for those who are completely underwater – and their numbers have been on the increase as home values remain shaky and appraisals are pushed lower by distressed comparable sales figures, inexperienced appraisers and skittish lenders.
“I have a borrower right now who bought a house in 2009, for a little less than $300,000. When I tried to help him refinance last year, the appraisal came back in at about $270,000, so he couldn’t refinance,” said Geof McLaughlin, a broker at Mortgage Master in Walpole. “Now, there’s a dip [in the rates] again, so I looked, hoping that the values came back a little bit, and actually the appraisal came back even lower.”
“On paper it sounds good to bring everyone down to 4 percent,” said Tashjian. “But from a practical standpoint…the banks are doing their regular process in terms of underwriting, appraisals and all that. That hasn’t gone away. So I don’t know if it will have much impact.”
All of these problems are a drag on the housing market. According to Bluestone’s latest analysis “we’re now talking about a cycle that might last 12, 13, or more years [before prices return to 2005 levels]. That is a very long time for home prices to return, and that’s in Greater Boston, where they only fell 15 to 20 percent. All the glaciers will unfreeze before [prices] return in Florida.”
Banks in U.S. Overwhelmed by Mortgage Refinancing Boom After Slashing Jobs
Sep 2, 2011 11:08 AM ET
Mortgage rates near historic lows have sparked a refinancing boom that has U.S. lenders struggling to handle the surge.
“There’s just so much volume,” said Kristin Wilson, a senior loan officer in Bloomington, Minnesota, for Fairway Independent Mortgage Corp., who has seen clients seeking lower rates climb to about half of her business from 20 percent a month ago. “We can’t just ramp up by hiring inexperienced people because they don’t know what they’re doing.”
The lending logjam extends to the nation’s biggest banks, which fired thousands of mortgage workers after interest rates rose in November through February, chilling refinancing demand. Now, the time needed to close a loan has as much as doubled to 60 days, according to Wilson and other bankers, and lenders are holding some mortgage rates higher than they could be to slow the torrent of customers, data show.
Refinancing applications are up 83 percent from this year’s low in February, according to an index compiled by the Mortgage Bankers Association, a Washington-based trade group. After topping 5 percent that month, the average rate on 30-year fixed loans fell two weeks ago to 4.15 percent, the lowest in surveys dating back to 1971 by Freddie Mac, the second-largest U.S. mortgage-finance company.
Compounding the delays are stricter underwriting and disclosure requirements implemented in the past few years, which leave no room for shortcuts, said Stew Larsen, head of the mortgage unit at San Francisco-based Bank of the West. Wells Fargo & Co. (WFC), the largest U.S. home lender, is no longer hiring temporary staff and outsourcing firms when applications jump because of separate rule changes, according to Franklin Codel, head of national consumer lending at its mortgage unit.
Obstacle for Obama
“The industry has come a long way in terms of automation, but it’s still a people-driven industry,” Larsen said. “Mortgage insurers, appraisers and title companies, all those surrounding industries, they downsized as well.”
Lenders’ capacity to handle loan applications could be an obstacle for the Obama administration, which is weighing options for spurring a housing recovery, including steps to promote refinancing for underwater borrowers, or those who owe more than their property is worth. Almost 27 percent of single-family homeowners with mortgages have negative equity, according to Zillow Inc., a Seattle-based real estate data provider.
Mortgage Bonds Underperform
Refinancing can provide a boost to the economy by reducing monthly mortgage payments and putting more money in the hands of consumers. Banks can profit from making new loans at lower rates because the existing, more expensive mortgages are mostly held by investors in the form of bonds or by other lenders. The refinancing bank collects fees and other revenue.
The $5.3 trillion of mortgage securities with government- backed guarantees underperformed U.S. Treasuries last month by the most since 2008 on speculation that the government will ease refinancing rules. That could speed up repayment of the mortgage bonds and deprive investors of their higher yields.
Refinancing is a cyclical business tied to yields on Treasuries, and lenders sometimes don’t let their rates fall as low as possible to avoid being overwhelmed. Today’s mortgage rates could be lower, based on their recent relationship with yields demanded by investors buying mortgage-backed bonds.
Yield Spreads
The difference between the average rate on a 30-year fixed loan and Fannie Mae-guaranteed bonds widened last month to more than 100 basis points, or 1 percentage point, from an average of 60 basis points in the first half, according to data compiled by Bloomberg and Bankrate.com, a North Palm Beach, Florida-based financial-information provider. The gap, which never exceeded 75 basis points in the decade through 2007, shows that banks have increased their margins on average.
“With the consolidation of the mortgage-lending industry during the housing bust, there is a lack of capacity to meet a surge in refinancing,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in an e-mail. “Mortgage lenders have been slow to lower primary lending rates, which is likely due in part to their lack of capacity.”
When the books close at Fairway Independent Mortgage, Wilson’s employer, August may turn out to have been the second- busiest month in the company’s 15-year history, said Dan Cutaia, president of capital markets and risk management. The Sun Prairie, Wisconsin-based lender operates in 47 states and originated $4 billion of mortgages last year.
Looming Test
The test for banks will come in a couple months when newly approved borrowers expected to close, Cutaia said.
“We took in all this volume,” he said. “Now we have to do the best we can to have them processed, underwritten and closed.”
A smooth process requires underwriters, title insurance companies and appraisers to work quickly. The turnaround time for an appraisal, usually five business days, now is as long as 14 days in some parts of the country and probably will get longer because of new valuation requirements that will take some getting used to, according to Betty Graham, senior vice president of operations at Frisco Lender Services LLC, a unit of Fairway in Fort Wayne, Indiana.
New York Condos
In New York City, managing agents at condominiums and cooperative apartment buildings are swamped by requests for information from appraisers, said Norman Calvo, president and chief executive officer of Universal Mortgage Inc. in Brooklyn.
Calvo said his refinancing work has tripled since June, and borrowers who took on new loans a few months ago are applying to lower their rates again.
“It was one of our greatest months in more than 10 years, and it keeps on coming,” Calvo said.
Mortgage companies, which kept their loan-servicing operations lean during the housing boom, similarly were unequipped to handle the avalanche of defaults in the four years since the crash, resulting in paperwork snafus that continue to delay foreclosures and the recovery of the property market.
One proposal to expand the administration’s refinancing program for homeowners hit by the decline in property values would remove the cap on negative equity and exempt participants from risk-based fees charged by Fannie Mae and Freddie Mac. The mortgage-finance companies would also be required to inform all of their borrowers that the program is available, according to legislation filed by U.S. Senators Barbara Boxer, a California Democrat, and Johnny Isakson, a Georgia Republican.
Bob Walters, chief economist for Detroit-based Quicken Loans Inc., the largest online lender, said mortgage companies in the past depended on independent brokers to field borrower applications. The number of brokers dwindled after the housing bubble burst, he said.
Slashing Jobs
“All of a sudden now we see a smaller universe of people handling the volume,” Walters said. “So what’s happening is when the volume hits, people hit capacity much quicker.”
Bank of America Corp. (BAC) said Aug. 31 that it plans to sell or shut its correspondent-mortgage unit, which buys loans from smaller companies, a move that may exacerbate the crunch. Earlier this year, the Charlotte, North Carolina-based bank joined lenders across the industry in cutting staff added during a refinancing boom that crested in October.
In April, Wells Fargo, based in San Francisco, said it aimed to cut 4,500 employees from its mortgage unit, and Bank of America, its biggest competitor, said it trimmed its mortgage workforce by 1,500 employees and 2,000 contractors.
Wells Fargo’s Codel said the bank shut a handful of refinancing offices it had opened around the country that employed as many as 300 back-office workers each. The company is now reaching out to staff it let go and holding job fairs in an effort to add employees within a few weeks.
Warning Customers
Mortgage-industry jobs fell to 239,100 on June 30 from 259,700 at year-end and more than 500,000 in 2003, according to Department of Labor data cited by Bank of America bond analysts and MortgageDaily.com, an industry-news website. MortgageDaily.com says the data are skewed by how individuals at some firms are counted, and puts net layoffs this year at more than 2,200, including those in lending and servicing divisions.
While Bank of the West held its mortgage staff steady earlier this year, it’s also being challenged by higher volumes, telling consumers a refinancing is likely to take 45 days, said Larsen, whose 137-year-old bank is owned by France’s BNP Paribas (BNP) SA. Its customers can usually close within 30 days.
Keeping rates higher than the bank might otherwise to ward off business is “certainly in the playbook, but that’s not something we’ve had to go with yet,” Larsen said. “Some lenders do that more than others.”
Managing Expectations
Wells Fargo has sometimes offered less competitive rates because “we look at it all around the country and there are times when we do that to control volume,” Codel said. The bank has stopped offering the option to lock in rates for 30 days, as a way to curb consumer expectations that loans will close that quickly. Longer rate locks, which it continues to provide, can cut down on applications because they carry higher rates, he said.
Both Wells Fargo and Bank of the West said they often extend rate locks if consumers can’t close on time because of processing delays.
Meeting Demand
Bank of America can cope with refinancing demand with its current staffing, partly by moving work among different departments, Terry Francisco, a Calabasas, California-based spokesman for the lender, said in an e-mail. Some local offices aren’t as inundated as call centers working with online applicants, he said.
“We seek to price competitively but not at a level that will cause volumes to spike and disrupt our ability to close loans within a customer’s requested closing date,” Francisco said.
Lenders’ decisions on pricing depend on several issues, including their ability to handle volume and their own costs to borrow money, said Doug Lebda, founder and chief executive officer of Charlotte, North Carolina-based Tree.com Inc. (TREE), which runs the LendingTree mortgage website.
“In a market that is very volatile, there are wide varieties of pricing,” Lebda said. “Now it’s more important than ever to comparison shop.”
To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net; Prashant Gopal in New York at pgopal2@bloomberg.net
To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net; Alan Goldstein at agoldstein5@bloomberg.net
Housing Fix: End the Government’s Subsidy ‘Ponzi Scheme,’ Says NYU Professor
video discussion....
http://finance.yahoo.com/blogs/daily-ticker/housing-fix-end-government-subsidy-ponzi-scheme-says-184750774.html
Aug 23, 2011
More bad news on the housing front today, as the housing market can't seem to find a bottom.
New-home sales fell in July by 0.7% to the lowest point since February, the Commerce Department said Tuesday. Sales for June were also revised downward to negative 2.9% from the previously reported decrease of 1%.
NYU finance professor Viral Acharya writes in his new book Guaranteed to Fail that the only way to fix the housing market is to end government subsidies like the mortgage interest tax deduction.
The less told story on such subsidies is what they have done to generate more demand and push up prices, he says. "One the one hand you are actually getting all your subsidies, but you are actually paying more for the property you would have liked to consume," says Acharya. "Therefore the real subsidy goes only [to those] at the very top. It is for people who are buying a second house. It is for people who are buying more land than they would otherwise."
Not only have government subsidies failed to really help everyday people, except to "prop up the housing market artificially," says Acharya, but the big question also remains: Who's paying for all these subsidies? "It's sort of a Ponzi scheme, because the current generation is reaping all its benefits, but we're basically scaling up our government debt in response, and someone else is going to pay for it down the road."
These big points on subsidies are never conveyed when they are sold to the American people, and all the more reason Acharya believes one day there will be political will in Congress to eventually eliminate such incentives. "Subsidies have been sold as something that actually help remove income inequality and helps us create an ownership society," says Acharya. "[But] if we convey the right message to the middle class and the poor that this has not in the end produced huge substantial benefits for them," then the subsidies will be much easier to remove.
But an end to subsidies is not a quick fix to the U.S. housing market. Pressures will still exist even without subsidies, because when the government fixed the bank problem, it really failed to address the underlying mortgage issue. That's really why the housing market continues to struggle, he says. "Just the way we recapitalized the financial sector, I think there was a very good case for recapitalizing the households," says Acharya.
Massive housing re-fi program making waves, again
August 22, 2011, 5:31 PM
A housing program that includes a massive mortgage refinance proposal – and a backdoor stimulus to boost consumer spending – is generating debate again in Washington.
At least that’s the word from Jaret Seiberg, analyst at MF Global Inc. , in his report Monday. Seiberg said it could be a proposal announced by President Barack Obama as part of a post-Labor Day address about jobs and the economy.
“The administration is desperate for ways to revamp housing. The one idea that doesn’t go away is a mass refinancing program,” he said in a report.
(Some analysts believe that the Federal Housing Finance Agency, which oversees government-seized housing giants Fannie Mae and Freddie Mac, could implement such a program on its own without statutory authority).
The idea of such a program first emerged on a large scale in August 2010, but soon went back under the radar – until now.
With such an approach millions of mortgages backed by the U.S. government could be refinanced without the need for an analysis of a borrower’s credit quality because the principal is already backed by the government. Many homeowners who are unemployed, have poor credit or who owe significantly more than their homes are worth currently can’t refinance, but would be permitted to use such a program.
It could boost the economy by putting cash for spending into borrower hands. However, Seiberg insists that there are lots of problems here, adding that FHFA policymakers are seeking to reduce taxpayer costs and that such an approach could cost billions more for taxpayers. He added that it could also cause problems for the troubled mortgage-backed securities, or MBS, market.
“This could accelerate losses for [Fannie and Freddie] and could disrupt the MBS market…” Seiberg said in his report. “It requires FHFA to go along. That is an issue as FHFA has been very consistent in arguing that its top goal is to minimize losses to the enterprise. So any program that could boost losses is a negative. The administration is trying to overcome FHFA’s objections by arguing that the short-term additional costs are outweighed by longer-term savings.”
Seiberg also discussed a number of pieces of legislation that could become a focal point for debate in the months to come, even though he adds that the ideas have little chance of being approved because of GOP opposition over costs to taxpayers and MBS holders.
Rep. Gary Ackerman, D-N.Y., introduced the “Homestead Act 2” bill last week that would provide down-payment assistance in the form of a government matching subsidy of up to $20,000 to the first 2 million creditworthy borrowers. The subsidy would be in the form of a loan to the borrower, and 20% of it would be forgiven each year over five years. With the bill, 1 million borrowers who buy a home and turn it into a rental property would have their rental income tax-free. However, Seiberg seems skeptical “It’s a Democratic idea and it is hard to see how House GOP would pass it,” he said.
Read about the bill here.
A housing bill introduced by Sen. Barbara Boxer, Democrat of California, seeks to help underwater borrowers.
Another program Seiberg insists would have trouble with Republican support seeks to allow a part of a borrower’s rent to go towards a down-payment to buy the home.
Such a “rent to own” approach needs legislation and a funding source, Seiberg said.
– Ronald D. Orol
States Where No One Wants To Buy A New Home
Sunday, August 21, 2011
by Douglas A. McIntyre and Charles Stockdale
There is a strong indication that home builders have almost ceased activity in several states as demand for newly built homes has dwindled. The slowdown in new home permits is particularly stark when compared to the total number of existing homes in each state. 24/7 Wall St. examined the number of building permits to find the states where no one wants to buy a new home.
Building permits are among the carefully watched statistics issues by the real estate industry each month. Permits are needed in most jurisdictions before individuals or contractor can begin physical work. Therefore, they are a reasonable indicator of future home construction. The data on permits is issued by the Commerce Department.
Building permit activity has fallen in most months since the 2007 housing crash — one that continues today. In the first half of 2005, slightly over one million permits were issued. By contrast, the number was the just below 300,000 for the first six months of this year. The decline in new permits in some states is over 80% for the same period.
Building permits are not enough in and of themselves to demonstrate a slowdown. Their size in relation to the total existing homes is also an indication of the state of the housing market. Consider that in a large state like California, across all towns and cities, just over 20,000 permits were issued during the first six months of this year. The number of permits may seem like a lot for a weak housing market, but is negligible when compared to the 13.6 million existing homes in the state.
24/7 Wall St. looked at the total number of building permits issued by each state for the first half of the year. We then identified the states that had the lowest percentage of new housing permits as compared to the total number of housing units.
Surprisingly, our list of states where few permits have been issued recently is different from the typical list of the worst housing markets. California, Nevada and Florida are always on those lists because homes are vacant and home values continue to drop. But the three are not on this list. It may be that prices have dropped so low in these markets that home inventory has begun to move, even if only tentatively. Instead, markets where housing permits are very small in relation to total homes are markets in which builders have abandoned any hope of near-term sales.
The 24/7 Wall St. analysis is another look through the prism that is the collapsing residential real estate market. Most data the public sees is based on home prices, number of homes sold or foreclosures. Housing permits are a way to look ahead at what is likely to happen in the markets in the next year. Once a permit is issued, the builder has no obligation to begin or complete the construction. This additional risk has a compounding effect.
These are the states where no one wants to buy a new home:
1. Rhode Island
Building permits/total housing units: 0.07%
Decline in building permits (2005-2011): -70.81% (22nd largest)
Building permits 2011 YTD: 312
Total housing units: 463,388
Foreclosure filings increased 4% in Rhode Island from the first six months of 2010 to the first six months of 2011, according to RealtyTrac. Foreclosures dropped by 29% for that same period on the national level. Rhode Island home sales decreased 20% from one year ago in the second-quarter, according to the Rhode Island Association of Realtors. Additionally, median home prices have dropped 2%. These numbers indicate that Rhode Island's housing market is not recovering at the same pace as the majority of the country. For the first six months of this year, the state has issued a mere 312 building permits, the smallest number in the country.
2. West Virginia
Building permits/total housing units: 0.09%
Decline in building permits (2005-2011): -72.71% (17th largest)
Building permits 2011 YTD: 774
Total housing units: 881,917
West Virginia's decline in building permits has slowed to almost a crawl. In the first six months of 2005, the state issued almost 3,000 permits. For the first half of 2011, that amount decreased to 774. If every permit were to result in a new housing structure, those homes would represent less than 0.1% of the total housing units in the state. Despite all this, construction is one area that is benefiting the state. According to the organization, WorkForce West Virginia, 700 construction jobs were added in-state this past July — the largest amount of jobs added in the private sector.
3. Illinois
Building permits/total housing units: 0.09%
Decline in building permits (2005-2011): -84.18% (3rd largest)
Building permits 2011 YTD: 4,897
Total housing units: 5,296,715
Illinois has seen an almost 85% decrease in new housing permits since 2005. This is the third largest drop in the country. There are a number of initiatives being made across the state to improve the housing markets. In Chicago, for instance, Mayor Emanuel has made a number of changes to increase the speed with which building permits are issued. Additionally, a Ã?Â?Micro-Market Recovery Program has been introduced to slow the city's foreclosure rate.
4. Michigan
Building permits/total housing units: 0.09
Decline in building permits (2005-2011): -82.19% (7th largest)
Building permits 2011 YTD: 4,250
Total housing units: 4,532,233
Michigan is one of the states that has suffered the most from the recession. The state's unemployment rate peaked around 15% in 2010. It is now at 10.5%, which is still significantlyhigher than the national average of 9.2%. The state has a vacancy rate of just under 15%, which is one of the highest in the country. New building permits have also decreased by over 80% since 2005, also one of the highest rates in the country. The state may now be more focused on tearing down old buildings than building new ones.
5. Connecticut
Building permits/total housing units: 0.09%
Decline in building permits(2005-2011): -74.06% (14th largest)
Building permits 2011 YTD: 1,403
Total housing units: 1,487,891
Connecticut has had one of the greatest declines in the number of new building permits in the country. This trend saw a small turnaround in June — the first monthly year-over-year gain in 2011 in new construction, according to the Connecticut Department of Economic and Community Development. However, the Hartford Courant reports that for the first six months of the year, residential construction was down 30 percent compared with the same period in 2010. June was also the first increase in home construction in five years.
6. Ohio
Building permits/total housing units: 0.12%
Decline in building permits (2005-2011): -76.61% (12th largest)
Building permits 2011 YTD: 6,184
Total housing units: 5,127,508
Ohio has suffered, and continues to suffer, greatly from the housing crisis. Over 8,000 homes were foreclosed in July 2011, the ninth-largest amount in the country, according to real estate company RealtyTrac. With such a high foreclosure rate, currently at one in every 608 housing units, housing is already too inexpensive for people to want to build. Ohio has therefore had one of the greatest decreases in building permits in the country over the past six years. Median existing home sales are also down in many areas of the state, according to data from the National Association of Realtors. In Toledo, prices are down 17% from one year ago, the third largest rate in the country.
7. Massachusetts
Building permits/total housing units: 0.12%
Decline in building permits (2005-2011): 69.55% (24th smallest)
Building permits 2011 YTD: 3,402
Total housing units: 2,808,254
Despite having a healthy economy compared to much of the country, Massachusetts' housing market is beginning to face serious troubles. In June 2011, sales of single-family homes in the state decreased 23.5% from the year before, reaching the lowest level since 1991, according to the Warren Group, a New England real estate research firm. With so few home sales, it follows that not many new homes are being built. Year-to-date, building permits for 2011 are about one quarter of what they were in 2005.
8. New York
Building permits/total housing units: 0.14%
Decline in building permits (2005-2011): -61.85% (12th smallest)
Building permits 2011 YTD: 11,033
Total housing units: 8,108,103
New York State's housing market is among the largest in the country. As a result, the number of permits is minuscule when compared to the state's total housing units. Although new home sales decreased in the first half of 2011 from 2010, the number of permits actually increased slightly during that period, from 10,189 in 2010. This is significantly lower than 2005's 28,921 permits.
9. Maine
Building permits/total housing units: 0.14%
Decline in building permits (2005-2011): -77.09% (11th largest)
Building permits 2011 YTD: 1,000
Total housing units: 721,830
Maine has seen one of the largest decreases in building permits in the past six years. This is not surprising as home sales in general declined substantially. Home sales for June 2011 decreased 21.39% from June 2010, according to the Maine Association of Realtors. The state's median sales price also decreased 1.37% over this same period. According to numbers from the Census Bureau, Maine has the highest vacancy rate in the country, reaching 22.8% in 2010. However, this number also includes empty vacation houses.
10. Pennsylvania
Building permits/total housing units: 0.15%
Decline in building permits (2005-2011): -60.29% (11th smallest)
Building permits 2011 YTD: 8,136
Total housing units: 5,567,315
At the beginning of 2011, a number of new, restrictive building codes went into effect in Pennsylvania. This caused a rush among builders to secure permits, with housing permits increasing a massive 117.8% between November and December 2010, according to the Philadelphia Federal Reserve. The state's housing market has not been doing well since. Permits issued from January to June 2011 fell 16% compared to the same six-month period one year earlier. The national average for permits issued in the first six months of 2011 compared to the first six months of 2011 is a decrease of 6%.
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Sounds like more of what didn't work the last time around... Putting people into homes that can't afford them. The tax break for investors has some merit but it will cause similar problems in that people that have no idea what they are doing will end up in the rental business resulting in more failures. Giving people $20,000 to go buy a house is just as dumb as "Cash for Clunkers" was. These government programs always fail when they try to pick winners and losers... The market place has to do that.
Can't help but think when a Congressman says "everybody wins", that most will lose.
New York Congressman to Propose Down Payment Subsidy
08/17/2011
Rep. Gary Ackerman (D-New York) Tuesday announced his plan to propose a bill to reduce the housing glut, create jobs, and stimulate the economy.
Deriving inspiration from the success of the Homestead Act of 1862 – which offered 160 acres to Americans in order to promote Western settlement – Ackerman’s Homestead: Act 2 aims to achieve these goals with three targeted initiatives.
Addressing 3 million properties currently depressing the market, Ackerman proposes a subsidy of up to $20,000 for down payments on foreclosed homes bought by owner-occupants and a tax incentive for investors who purchase foreclosures for rental properties.
Available to the first 2 million eligible, single-family borrowers, the subsidy would function as a loan that would be forgiven in one-fifth increments over five years, provided the borrower stays in the home.
The second component of Ackerman’s bill would be a 10-year tax exemption on rental income for the first 1 million investors who purchase single-family homes to rent.
Ackerman believes this tax exemption would motivate investors to purchase properties that would otherwise remain vacant, continuing to depress neighborhoods and the overall housing market.
By absorbing some of the excess inventory on the housing market, Ackerman believes his Homestead: Act 2 would help reignite the traditional housing market, thus putting more than 1 million Americans back to work.
The third component of Ackerman’s bill addresses the cost of the first two components – the subsidy and the tax cut.
Ackerman aims to bring some of the estimated $1.2 trillion in offshore capital back within U.S. borders. He proposes reducing the corporate tax rate on these earnings to 10 percent.
If successful, this action would provide enough income to cover the cost of the home purchase subsidy and investor tax cut.
“Clearly, ‘Homestead: Act 2’ would help to eliminate quickly the overhang glut of the housing market, putting two million owners in homes and inspire the purchase of an additional one million homes by investors who will rent them out, and enjoy tax-free rental income for 10 years,” Ackerman said.
“This would clear the way for new housing starts, and put millions of Americans back to work. It would incentivize corporations to bring their cash cheaply back into the United States,” Ackerman added.
“In addition, the newly emancipated billions would further spur the economy,” he concluded. “Everybody wins.”
Ackerman plans to introduce the Homestead: Act 2 to Congress after its August recess.
This Is What A Collapsing Ponzi Scheme Looks Like
David DeGraw | Bad as the housing crisis has been, it has only been a warm up to what we have headed our way.
http://www.infowars.com/this-is-what-a-collapsing-ponzi-scheme-looks-like/
BofA Donates Then Demolishes Houses to Cut Glut
July 27, 2011, 10:43 am EDT
Bank of America Corp. (BAC), faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer.
The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co. (WFC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Fannie Mae are conducting or considering their own programs.
Disposing of repossessed homes is one of the biggest headaches for lenders in the U.S., where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. of Irvine, California. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping.
“There is way too much supply,” said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. “The best thing we can do to stabilize the market is to get the garbage off.”
BofA’s 40,000
Bank of America had 40,000 foreclosures in the first quarter, saddling the Charlotte, North Carolina-based lender with taxes and maintenance costs. The bank announced the Cleveland program last month, has committed as many as 100 properties in Detroit and 150 in Chicago, and may add as many as nine cities by the end of the year, said Rick Simon, a company spokesman.
The lender will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Uses for the land include development, open space and urban farming, according to the statement. Simon declined to say how many foreclosed properties Bank of America holds.
Ohio ranked among the top 10 states with the most foreclosure filings in June, according to RealtyTrac. The state has 71,617 foreclosed homes, Cuyahoga County 9,797 and Cleveland 6,778, RealtyTrac said.
The tear-downs are in varying states of disrepair, from uninhabitable to badly damaged. Simon said some are worth less than $10,000, and it would cost too much to make them livable.
Unwanted Homes
“No one needs these homes, no one is going to buy them,” said Christopher Thornberg, founding partner at the Los Angeles office of Beacon Economics LLC, a forecasting firm. “Bank of America is not going to be able to cover its losses, so it might as well give them away and get a little write-off and some nice public relations.”
Donating a house may create an income-tax deduction, said Robert Willens, an independent accounting analyst based in New York. A bank might deduct as much as the fair market value if a home wasn’t acquired with the explicit intent of knocking it down, he said.
Wells Fargo and Fannie Mae already started donating houses and demolition funds in Ohio. San Francisco-based Wells Fargo, the biggest U.S. home lender, gave 26 properties and $127,000 to the Cuyahoga land bank, said Russ Cross, Midwest regional servicing director for Wells Fargo Home Mortgage. Since 2009, Wells Fargo made more than 800 donations, the bank said.
Fannie Mae
Fannie Mae, the mortgage-finance company operating under U.S. conservatorship, made its first deal with the Cuyahoga land bank in 2009, and sells houses to the organization at a “very nominal value,” or about $1 and an additional $200 in closing costs, said P.J. McCarthy, who heads alternative disposition programs.
Fannie Mae sold 200 foreclosures to the Cuyahoga organization in 2010 and has similar programs in Detroit and Chicago. Cleveland is the only city where Washington-based Fannie Mae contributes $3,500 toward demolition, McCarthy said.
“It’s an economically justifiable transaction,” McCarthy said. “Holding on to a property that might sell for $1,000 or $2,000 or $5,000 for several hundred days is not in anybody’s best interest.”
JPMorgan, the second-biggest U.S. bank, has donated or sold at a discount almost 1,900 properties valued at more than $100 million in more than 37 states since late 2008, including 22 in Cleveland, said Jim O’Donnell, manager of community revitalization. The majority aren’t demolished, he said.
Nonprofit Role
Citigroup has been donating foreclosures since 2008 through the National Community Stabilization Trust, according to an e- mailed statement from Natalie Abatemarco, managing director for the bank’s office of homeownership preservation. The New York- based company, ranked third among U.S. lenders, is part of the Washington-based nonprofit trust’s pilot program that starts in late August to provide funds for purchases in distressed neighborhoods, and the money can be used toward demolition, Abatemarco said.
Demolishing all of Cleveland’s foreclosed and abandoned properties might cost $250 million, Frangos said. There are as many as 13,000, according to Case Western Reserve University in Cleveland and Neighborhood Progress Inc., a nonprofit organization working to counter the effects of foreclosures in six Cleveland areas, according to its website. The Cuyahoga County land bank owns about 899 properties and will demolish about 700 in the next six to seven months, Frangos said.
Blow Them Up
The oversupply of homes once prompted Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), to quip in February 2010 that one solution was to “blow up a lot of houses -- a tactic similar to the destruction of autos that occurred with the ‘cash-for-clunkers’ program.’”
Still, the knockdowns aren’t likely to outpace foreclosures, said Rick Sharga, RealtyTrac’s senior vice president. Foreclosures may accelerate as banks clear a backlog caused by soft real estate markets and legal disputes over tactics used to seize homes.
“These sorts of programs will basically only be nibbling on the edges,” Sharga said.
To contact the reporter on this story: Lindsey Rupp in New York at Lrupp1@bloomberg.net
To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green in New York at rgreen18@bloomberg.net.
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