28 January 2013
New Home Sales in 2011: Best since 2009
Story first appeared on USA Today
Sales of new homes cooled in December from November, but sales for all last year were the best since 2009.
The Commerce Department said Friday that new-home sales fell 7.3% last month to a seasonally adjusted annual rate of 369,000. That's down from November's 398,000 rate, which was the fastest in 2 ½ years.
For all of 2012, sales rose nearly 20% from 2011, to 367,000. That's the most since 2009 and the first annual gain since 2005, although that's coming off the worst year for new-home sales since the government began keeping records in 1963. Sales are still below the 700,000 level that economists consider healthy.
The housing market began to recover last year, roughly five years after the housing bubble burst. Stable job gains and record-low mortgage rates encouraged more people to buy homes.
Sales of previously occupied homes rose to 4.65 million last year, the most in five years.
Home prices rose steadily, and the gains appear to be sustainable. Builders finished their best year for residential construction since 2008.
The housing market has a long way back to a full recovery. But most economists expect the recovery will strengthen in 2013.
One reason is more people are looking to buy or rent a home after living with relatives or friends during and immediately after the Great Recession.
And the supply of both newly built and previously occupied homes for sale have dwindled. Fewer homes for sale have helped drive prices higher and made many markets more competitive.
Though new homes represent less than 20% of housing sales, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Homebuilders.
Gains in home building helped boost construction hiring in December by 30,000 jobs, the most in 15 months.
Still, the number of first-time buyers remains low, which has limited sales. Many are unable to qualify for historically low mortgage rates because banks have adopted tighter credit standards and are requiring larger down payments..
23 January 2013
Lafayette Towers being revamped for young professionals by Detroit Developers
Story first appeared on The Detroit News
The Lafayette Towers, like the rest of the Lafayette Park neighborhood, was once considered a shining example of urban revitalization.
Designed by famed architect Ludwig Mies van der Rohe and built in 1961, the apartment towers were part of a planned community that included a shopping center, a 19-acre park and a school to attract young professionals to live near downtown.
Today, as the city undergoes its latest round of urban renewal, investor and lifelong Detroiter Gregory Jackson said he wants to use the aging modernist-style glass and aluminum high-rise community to reinvent Detroit living.
He bought the 22-story, 584-unit apartment complex from the city for $5.8 million in November with a promise that he would pay to bring the iconic structures back to their original glory.
"I wanted to be part of the renaissance that's taking shape in Detroit," said Jackson, who lives on the city's west side.
The renaissance that Jackson and other developers refer to is tied to rising demand in certain neighborhoods for rental housing for the city's new class of young professionals. Their migration has resulted in a more than 90 percent occupancy rate in Midtown and surrounding areas, according to Midtown Detroit Inc., which tracks housing trends.
State and federal tax incentives as well as easier availability of financing make renovating empty and historic buildings more appealing for Detroit investors than new construction, real estate experts said.
In October, Bloomfield Hills-based Princeton Enterprises bought the shuttered, historic Milner Hotel in downtown with preliminary plans to convert the 10-story building into apartments and rename it The Ashley.
In November, the 34-story Broderick Tower accepted its first tenants after completion of a two-year renovation project. And as investors bid on the Free Press Building on Lafayette Boulevard, there was talk that the historic structure would be converted into housing.
"The city has prioritized restoration rather than new construction. Detroit would like to see the empty buildings back into the market," said Richard Baron, chairman of the St. Louis-based development firm McCormack Baron Salazar.
Baron, who has years of experience rehabilitating historic buildings, is in talks with Susan Mosey of Midtown Detroit Inc. on a $25 million project to restore a vacant building on Alexandrine, just west of Woodward Avenue, into rental residences.
Though demand for housing in certain areas continues to climb, incentives for developers to embark on new construction projects aren't there, Baron said.
Jackson said an investment of as little as $5 million could help attract new, younger tenants.
The Lafayette Towers, he said, noting that it is more than 50 percent occupied, already has some amenities that would appeal to potential younger tenants. The complex is equipped with an Olympic-sized pool, fitness center and 360-degree panoramic views of the city. It's also within walking distance of Greektown.
Rents at Lafayette Towers range from $500 a month for a studio to $1,400 a month and up for a three-bedroom unit, with approximately 30 units that qualify for government subsidies.
Jackson said units can run as low as $1 per square foot, compared to other units downtown where rentals such as the Broderick Towner and other recently renovated buildings charge a much higher rate.
The rates at Lafayette Towers will eventually go up, but Jackson said he does not plan to raise rents until after all renovations are made.
Preliminary improvements, he said, will include adding shuffleboard courts and cabanas to the rooftop pool area, replacing equipment and offering classes in the fitness center, and updating kitchens and bathrooms in apartment units. Jackson said he also plans to install bicycle racks, improve Wi-Fi service and allow residents to use rooftop lounge spaces to hold receptions.
Jackson said he hopes to have initial renovations completed within 18 months.
Molly Dougherty, 24, a high school English teacher, moved into the complex in August with her fiancé.
"(We) decided to move to an exciting part of town," Dougherty said.
Dougherty came to Detroit about a year and a half ago from Omaha, Neb., to volunteer at Cristo del Rey High School. She eventually got hired permanently at the parochial school and decided to move out of a roommate situation in the Mexicantown neighborhood to a more cosmopolitan living experience.
"There's a certain energy in an urban area. I like all the diversity — every day you see different people," said Dougherty, who regularly walks to Greektown for its restaurants, bars and casino.
Wilbert Sherrod, 73, a retired dentist who has lived in Lafayette Towers for 38 years, shared similar sentiments. When he moved into the city more than 40 years ago, he was immediately drawn to the air of affluence that the complex inspired.
"As soon as I came into the city," Sherrod said, "I said, 'I want to live here.' "
Sherrod said he loves summer walks to the RiverWalk, Renaissance Center and Greektown. He does most of his grocery shopping at Lafayette Foods down the street. In fact, after retirement he sold his car and rents one occasionally if he needs to go to the suburbs for errands.
But Sherrod said security and maintenance declined at the complex over the years.
By this past summer, Lafayette Towers was in danger of being sold by the U.S. Department of Housing and Urban Development in a foreclosure auction after then-owner Northern Group failed to make mortgage payments. The city stepped in and bought the property, with the understanding that it would seek a private buyer who would invest in its long-term revival.
When Jackson heard about its financial woes, he approached the city.
"I've been looking for an opportunity to invest in a city that I love," Jackson said.
Sherrod, who lives in a unit overlooking Ford Field, Comerica Park and Gratiot Avenue, said he is ready for the proposed revival.
"I hope this gentleman is truthful with his promise," he said.
The Lafayette Towers, like the rest of the Lafayette Park neighborhood, was once considered a shining example of urban revitalization.
Designed by famed architect Ludwig Mies van der Rohe and built in 1961, the apartment towers were part of a planned community that included a shopping center, a 19-acre park and a school to attract young professionals to live near downtown.
Today, as the city undergoes its latest round of urban renewal, investor and lifelong Detroiter Gregory Jackson said he wants to use the aging modernist-style glass and aluminum high-rise community to reinvent Detroit living.
He bought the 22-story, 584-unit apartment complex from the city for $5.8 million in November with a promise that he would pay to bring the iconic structures back to their original glory.
"I wanted to be part of the renaissance that's taking shape in Detroit," said Jackson, who lives on the city's west side.
The renaissance that Jackson and other developers refer to is tied to rising demand in certain neighborhoods for rental housing for the city's new class of young professionals. Their migration has resulted in a more than 90 percent occupancy rate in Midtown and surrounding areas, according to Midtown Detroit Inc., which tracks housing trends.
State and federal tax incentives as well as easier availability of financing make renovating empty and historic buildings more appealing for Detroit investors than new construction, real estate experts said.
In October, Bloomfield Hills-based Princeton Enterprises bought the shuttered, historic Milner Hotel in downtown with preliminary plans to convert the 10-story building into apartments and rename it The Ashley.
In November, the 34-story Broderick Tower accepted its first tenants after completion of a two-year renovation project. And as investors bid on the Free Press Building on Lafayette Boulevard, there was talk that the historic structure would be converted into housing.
"The city has prioritized restoration rather than new construction. Detroit would like to see the empty buildings back into the market," said Richard Baron, chairman of the St. Louis-based development firm McCormack Baron Salazar.
Baron, who has years of experience rehabilitating historic buildings, is in talks with Susan Mosey of Midtown Detroit Inc. on a $25 million project to restore a vacant building on Alexandrine, just west of Woodward Avenue, into rental residences.
Though demand for housing in certain areas continues to climb, incentives for developers to embark on new construction projects aren't there, Baron said.
Jackson said an investment of as little as $5 million could help attract new, younger tenants.
The Lafayette Towers, he said, noting that it is more than 50 percent occupied, already has some amenities that would appeal to potential younger tenants. The complex is equipped with an Olympic-sized pool, fitness center and 360-degree panoramic views of the city. It's also within walking distance of Greektown.
Rents at Lafayette Towers range from $500 a month for a studio to $1,400 a month and up for a three-bedroom unit, with approximately 30 units that qualify for government subsidies.
Jackson said units can run as low as $1 per square foot, compared to other units downtown where rentals such as the Broderick Towner and other recently renovated buildings charge a much higher rate.
The rates at Lafayette Towers will eventually go up, but Jackson said he does not plan to raise rents until after all renovations are made.
Preliminary improvements, he said, will include adding shuffleboard courts and cabanas to the rooftop pool area, replacing equipment and offering classes in the fitness center, and updating kitchens and bathrooms in apartment units. Jackson said he also plans to install bicycle racks, improve Wi-Fi service and allow residents to use rooftop lounge spaces to hold receptions.
Jackson said he hopes to have initial renovations completed within 18 months.
Molly Dougherty, 24, a high school English teacher, moved into the complex in August with her fiancé.
"(We) decided to move to an exciting part of town," Dougherty said.
Dougherty came to Detroit about a year and a half ago from Omaha, Neb., to volunteer at Cristo del Rey High School. She eventually got hired permanently at the parochial school and decided to move out of a roommate situation in the Mexicantown neighborhood to a more cosmopolitan living experience.
"There's a certain energy in an urban area. I like all the diversity — every day you see different people," said Dougherty, who regularly walks to Greektown for its restaurants, bars and casino.
Wilbert Sherrod, 73, a retired dentist who has lived in Lafayette Towers for 38 years, shared similar sentiments. When he moved into the city more than 40 years ago, he was immediately drawn to the air of affluence that the complex inspired.
"As soon as I came into the city," Sherrod said, "I said, 'I want to live here.' "
Sherrod said he loves summer walks to the RiverWalk, Renaissance Center and Greektown. He does most of his grocery shopping at Lafayette Foods down the street. In fact, after retirement he sold his car and rents one occasionally if he needs to go to the suburbs for errands.
But Sherrod said security and maintenance declined at the complex over the years.
By this past summer, Lafayette Towers was in danger of being sold by the U.S. Department of Housing and Urban Development in a foreclosure auction after then-owner Northern Group failed to make mortgage payments. The city stepped in and bought the property, with the understanding that it would seek a private buyer who would invest in its long-term revival.
When Jackson heard about its financial woes, he approached the city.
"I've been looking for an opportunity to invest in a city that I love," Jackson said.
Sherrod, who lives in a unit overlooking Ford Field, Comerica Park and Gratiot Avenue, said he is ready for the proposed revival.
"I hope this gentleman is truthful with his promise," he said.
21 January 2013
Home Construction Surge – Continuing Forward
Story first appeared on USA Today
Many homebuilders were forced to drastically scale back construction on new homes during the aftermath of the housing bust, to reduce the risk of being left with multiple newly build but as of yet unsold properties.
But an improving housing market has homebuilders feeling more confident about sales, and that's likely to kick the pace of new construction into a higher gear this year.
The Commerce Department said Thursday that builders broke ground on houses and apartments last month at a seasonally adjusted annual rate of 954,000. That's 12.1% higher than November's annual rate. And it is nearly double the recession low reached in April 2009.
Construction increased last month for both single-family homes and apartments. And the pace in which builders requested permits to start more homes ticked up to a 4½ year high.
For the year, builders started work on 780,000 homes. That's still roughly half of the annual number of starts consistent with healthier markets. But it is an increase of 28.1% from 2011. And it is the most since 2008 — shortly after the housing market began to collapse in late 2006 and 2007.
Steady hiring, record-low mortgage rates and a tight supply of new and previously occupied homes available for sale have helped boost sales and prices in most markets. That has persuaded builders to start more homes, which adds to economic growth and hiring.
David Williams, a homebuilding analyst with Williams Financial Group, says builders are very closely tied to what's happening in the housing market and they're going to build homes to meet demand, but not go overboard.
"I don't think, at this point, that they're going to overbuild," Williams said, noting that homebuilders are still holding back on building too many spec homes, or properties built before they're sold.
Having some spec homes can help sales, especially when a buyer isn't willing to wait several months for their home to be built. Builders tend to put up more of those homes heading into the spring home-selling season that traditionally begins next month.
Larry Webb, CEO of homebuilder The New Home Co., in Aliso Viejo, Calif., says he is building homes at a faster pace than a year ago, but he sticks to a sell-first, build-second approach.
Overall, Webb is selling and building a minimum of four homes a month, at least double the pace of sales and construction two years ago.
Webb believes the stepped-up pace of home construction will continue this year. But he's holding on to the sell-first approach.
"Based on what we've gone through in the last recession and the way we do business, we think we should primarily build after we sell homes," he said. "We only build after we sell."
The company, which builds homes in California, has 10 open communities and plans to open another 14 this year.
"Normally there's a big drop off between Thanksgiving and Christmas," Webb said. "We saw very solid traffic and we're anticipating a very good first quarter."
Thursday's positive housing report, along with a steep decline in unemployment benefit applications, contributed to a strong day on Wall Street. The Standard & Poor's 500 closed at a five-year high.
"There is no denying that the housing market recovery is solidifying, and we expect construction activity to ramp up to the 1 million annualized threshold by the end of this year," said Michael Dolega, an economist with TD Economics, in a note to clients.
Dolega said the gains in home building helped boost construction hiring in December by 30,000 jobs — the most in 15 months. He predicts the construction industry could add half a million jobs in 2013.
In December, the pace of single-family home construction, which makes up two-thirds of the market, increased 8 percent. While that's well below healthy levels, single-family housing starts are now 75 percent higher than the recession low reached in March 2009.
Apartment construction, which is more volatile, surged 23 percent last month. It is now back to pre-recession levels.
Applications for building permits, a sign of future construction, inched up to a rate of 903,000 — the highest level since July 2008.
"The strong rise in single-family starts is a clear indication of builder confidence in the sales outlook," said Pierre Ellis, an economist at Decision Economics, in a note to clients.
Confidence among homebuilders held steady in January at the highest level in nearly seven years. But builders are feeling slightly less optimistic about their prospects for sales over the next six months, according to a survey released Wednesday.
In November, sales of previously occupied homes rose to their highest level in three years, while new-home sales reached a 2 1/2-year high.
Those factors have helped make homebuilders more confident and spurred new home construction. But homebuilders' are still warily watching the current standoff in Washington between President Obama and Congress over several approaching budget deadlines, including the need to boost the nation's $16.4 trillion borrowing limit.
Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. For each home built, there is approximately $90,000 in tax revenue and an average creation of three jobs lasting for at least a year, data from the homebuilder’s association shows.
7-year confidence high for home-builders
Story first appeared on USA Today
Although at the highest level in almost seven years, confidence among U.S. home builders remained unchanged from the month of December to January. Builders are however remaining less optimistic about sales for the next six months.
A report on an index that tracks home builder sentiment out Wednesday showed sentiment holding steady last month. A Charleston WV Real Estate Lawyer firm has been monitoring this. The National Association of Home Builders/Wells Fargo index was unchanged at 47, the highest reading since it hit 51 in April 2006, just before the housing bubble burst. Dallas Real Estate Lawyer firms are watching the housing market trends.
Readings below 50 suggest negative sentiment about the housing market. A New York Real Estate Lawyer monitors this. Still, the index has been slowly trending higher since October 2011, when it was 17. An Indianapolis Real Estate Lawyer is following the progression on this.
A measure of traffic by prospective customers increased, while a gauge of current sales conditions remained unchanged from December's reading. In Canada, a Toronto Real Estate Defense Lawyer has been keeping tabs on the changing market. The six month outlook for sales declined.
10 January 2013
New mortgage rule aims to protect borrowers
originally appeared in USA Today:
A new federal rule on home loan lending will give consumers more protection against risky mortgages, the government says, but it isn't immediately expected to make mortgages easier to get.
The Consumer Financial Protection Bureau today adopted the rule, which it says spells out what lenders must do to ensure that borrowers can afford their mortgages. Homeowners will also benefit from working with an excellent Michigan bathroom remodeling company.
The rule is meant to guard against lending practices that preceded the housing bust, when many borrowers took on risky loans they didn't understand and could not afford. A wave of foreclosures followed, helping to drive down home prices more than 30% since 2006.
Washington is saying that we're going to protect borrowers and regulate what mortgages are going to look like, according to a policy analyst with financial services firm Keefe Bruyette & Woods.
The CFPB Director called the rule a common sense one that ensures responsible borrowers get responsible loans.
But some consumer groups say it gives lenders too much protection and doesn't include adequate provisions to protect low-income borrowers.
The rule invites abusive lending, according to the National Consumer Law Center.
The rule, as required by the 2010 Dodd-Frank financial overhaul legislation, defines what constitutes a qualified mortgage.
If lenders meet those standards, borrowers who later default will have little recourse to fight foreclosure by claiming the lender sold them a risky loan.
The rule, effective next year, says a qualified mortgage cannot:
• Contain "risky" features, such as terms that exceed 30 years, interest-only payments or negative-amortization payments where the principal amount increases.
• Carry fees and points in excess of 3% of the loan.
• Be issued to borrowers who, once getting the mortgage, will spend more than 43% of their income on debt payments.
The 3% and 43% standards are reasonable, according to the CEO of LendingTree, an online lender exchange.
Only about 8% of loans that LendingTree facilitated in the last quarter had points and fees above 3%, it says.
Fewer than 14% of recent home loans sold to mortgage giants Freddie Mac and Fannie Mae had debt-to-income ratios above 43%, says mortgage tracker Inside Mortgage Finance.
But he says that 43% is too high for some low-income people, who'll get these loans, and then have no recourse.
Lenders can make loans that do not meet the qualified mortgage standards. If so, they won't have the same protections against consumer challenges.
To give the market time to adjust, loans that bust the 43% limit will be considered "qualified" if they meet Freddie and Fannie's standards, the CFPB says.
The rule's standards largely track with current lending practices — which many complain are too restrictive — and doesn't do anything to loosen credit, according to the CEO of Inside Mortgage Finance.
The CFPB, however, says the clarity of the rule, which lenders have sought since 2010, will enable banks to ease standards over time.
The rule will make it harder for some borrowers to get certain loans, such as interest-only loans more popular with wealthier borrowers, he says.
It will also continue to make it hard for subprime borrowers with weak credit to get loans, he says. That's because they'll have more recourse against lenders, should loans go bad, than prime borrowers will, he says.
A new federal rule on home loan lending will give consumers more protection against risky mortgages, the government says, but it isn't immediately expected to make mortgages easier to get.
The Consumer Financial Protection Bureau today adopted the rule, which it says spells out what lenders must do to ensure that borrowers can afford their mortgages. Homeowners will also benefit from working with an excellent Michigan bathroom remodeling company.
The rule is meant to guard against lending practices that preceded the housing bust, when many borrowers took on risky loans they didn't understand and could not afford. A wave of foreclosures followed, helping to drive down home prices more than 30% since 2006.
Washington is saying that we're going to protect borrowers and regulate what mortgages are going to look like, according to a policy analyst with financial services firm Keefe Bruyette & Woods.
The CFPB Director called the rule a common sense one that ensures responsible borrowers get responsible loans.
But some consumer groups say it gives lenders too much protection and doesn't include adequate provisions to protect low-income borrowers.
The rule invites abusive lending, according to the National Consumer Law Center.
The rule, as required by the 2010 Dodd-Frank financial overhaul legislation, defines what constitutes a qualified mortgage.
If lenders meet those standards, borrowers who later default will have little recourse to fight foreclosure by claiming the lender sold them a risky loan.
The rule, effective next year, says a qualified mortgage cannot:
• Contain "risky" features, such as terms that exceed 30 years, interest-only payments or negative-amortization payments where the principal amount increases.
• Carry fees and points in excess of 3% of the loan.
• Be issued to borrowers who, once getting the mortgage, will spend more than 43% of their income on debt payments.
The 3% and 43% standards are reasonable, according to the CEO of LendingTree, an online lender exchange.
Only about 8% of loans that LendingTree facilitated in the last quarter had points and fees above 3%, it says.
Fewer than 14% of recent home loans sold to mortgage giants Freddie Mac and Fannie Mae had debt-to-income ratios above 43%, says mortgage tracker Inside Mortgage Finance.
But he says that 43% is too high for some low-income people, who'll get these loans, and then have no recourse.
Lenders can make loans that do not meet the qualified mortgage standards. If so, they won't have the same protections against consumer challenges.
To give the market time to adjust, loans that bust the 43% limit will be considered "qualified" if they meet Freddie and Fannie's standards, the CFPB says.
The rule's standards largely track with current lending practices — which many complain are too restrictive — and doesn't do anything to loosen credit, according to the CEO of Inside Mortgage Finance.
The CFPB, however, says the clarity of the rule, which lenders have sought since 2010, will enable banks to ease standards over time.
The rule will make it harder for some borrowers to get certain loans, such as interest-only loans more popular with wealthier borrowers, he says.
It will also continue to make it hard for subprime borrowers with weak credit to get loans, he says. That's because they'll have more recourse against lenders, should loans go bad, than prime borrowers will, he says.
09 January 2013
Another Slap on the Wrist for Big Banks
originally appeared in The New York Times:
In the face of widespread evidence of illegal foreclosure practices, federal regulators in 2011 told the big banks to investigate themselves.
The banks had to hire consultants to review foreclosures in 2009 and 2010. If violations were found, they were supposed to reimburse wronged borrowers “as appropriate.” Regulators pledged to ensure that the reviews would be comprehensive and reliable. In practice, it was left up to banks to decide what constituted wrongful foreclosure and appropriate redress.
Not surprisingly, after spending an estimated $1.5 billion on consultants, the banks have found little wrongdoing and provided no meaningful relief. Equally unsurprising, regulators will let the banks off with a wrist slap for their failure to execute credible and effective reviews.
This week, the Federal Reserve and the Office of the Comptroller of the Currency reached a deal with 10 banks under which the regulators will end the reviews and the banks will instead provide $8.5 billion in aid to borrowers. Of that, $3.3 billion is earmarked for cash payments to borrowers who lost their homes and $5.2 billion is for loan modifications and other help for borrowers currently at risk of foreclosure.
Regulators have said that the goal in ending the reviews is to provide relief to borrowers “in a more timely manner.” If it’s timely relief they wanted, they would not have instituted the deeply flawed review process in the first place, nor would they have let the sham reviews drag on for more than a year. Worse, the settlement amount is inadequate.
Since there are no reliable analyses to identify wronged borrowers — which was the ostensible purpose of the self-reviews — there is also no clear way to apportion the $3.3 billion among 3.8 million borrowers covered by the settlement. Some borrowers may get big sums while others get nothing, or millions could receive token payments. But given the extent of foreclosure abuses and the amount of money available, the individual reimbursements will be paltry compared with the harm of losing one’s home in an abusive process. If, say, half of the potentially eligible borrowers received a payment, each would get roughly $1,700 on average.
The $5.2 billion in antiforeclosure aid is potentially even more problematic. Details are not yet available, but, presumably, a bank will receive credit toward its obligation for various forms of assistance — say, a dollar’s worth of credit for every dollar by which it reduces the balance on an underwater loan or a lesser amount for every dollar of payment it postpones for unemployed borrowers. A similar formula, currently being used to enforce a separate mortgage settlement struck between banks and government officials in 2012, has yielded troubling preliminary results. It appears, for instance, that much of the aid is going to higher-income borrowers, even though the housing bust disproportionately hurt low-income communities.
For the new settlement to have any credibility, regulators must appoint an independent monitor with full authority to oversee, analyze and publicly report on the deal’s enforcement.
In the meantime, the only hope for lasting change rests with the Consumer Financial Protection Bureau, which is expected to issue new rules shortly to rein in the risky and abusive mortgage practices of banks.
What’s needed are rules to ensure that lenders face legal consequences if they structure and promote loans that fail because of lax underwriting. Rules are also needed to ensure that all eligible borrowers facing foreclosure can receive modifications according to specific, publicly available criteria. If foreclosure is unavoidable, a bank must provide borrowers with proof of its legal right to foreclose before the process gets under way.
The bureau cannot undo the past, but strong rules could at least help to ensure that the past is not repeated.
In the face of widespread evidence of illegal foreclosure practices, federal regulators in 2011 told the big banks to investigate themselves.
The banks had to hire consultants to review foreclosures in 2009 and 2010. If violations were found, they were supposed to reimburse wronged borrowers “as appropriate.” Regulators pledged to ensure that the reviews would be comprehensive and reliable. In practice, it was left up to banks to decide what constituted wrongful foreclosure and appropriate redress.
Not surprisingly, after spending an estimated $1.5 billion on consultants, the banks have found little wrongdoing and provided no meaningful relief. Equally unsurprising, regulators will let the banks off with a wrist slap for their failure to execute credible and effective reviews.
This week, the Federal Reserve and the Office of the Comptroller of the Currency reached a deal with 10 banks under which the regulators will end the reviews and the banks will instead provide $8.5 billion in aid to borrowers. Of that, $3.3 billion is earmarked for cash payments to borrowers who lost their homes and $5.2 billion is for loan modifications and other help for borrowers currently at risk of foreclosure.
Regulators have said that the goal in ending the reviews is to provide relief to borrowers “in a more timely manner.” If it’s timely relief they wanted, they would not have instituted the deeply flawed review process in the first place, nor would they have let the sham reviews drag on for more than a year. Worse, the settlement amount is inadequate.
Since there are no reliable analyses to identify wronged borrowers — which was the ostensible purpose of the self-reviews — there is also no clear way to apportion the $3.3 billion among 3.8 million borrowers covered by the settlement. Some borrowers may get big sums while others get nothing, or millions could receive token payments. But given the extent of foreclosure abuses and the amount of money available, the individual reimbursements will be paltry compared with the harm of losing one’s home in an abusive process. If, say, half of the potentially eligible borrowers received a payment, each would get roughly $1,700 on average.
The $5.2 billion in antiforeclosure aid is potentially even more problematic. Details are not yet available, but, presumably, a bank will receive credit toward its obligation for various forms of assistance — say, a dollar’s worth of credit for every dollar by which it reduces the balance on an underwater loan or a lesser amount for every dollar of payment it postpones for unemployed borrowers. A similar formula, currently being used to enforce a separate mortgage settlement struck between banks and government officials in 2012, has yielded troubling preliminary results. It appears, for instance, that much of the aid is going to higher-income borrowers, even though the housing bust disproportionately hurt low-income communities.
For the new settlement to have any credibility, regulators must appoint an independent monitor with full authority to oversee, analyze and publicly report on the deal’s enforcement.
In the meantime, the only hope for lasting change rests with the Consumer Financial Protection Bureau, which is expected to issue new rules shortly to rein in the risky and abusive mortgage practices of banks.
What’s needed are rules to ensure that lenders face legal consequences if they structure and promote loans that fail because of lax underwriting. Rules are also needed to ensure that all eligible borrowers facing foreclosure can receive modifications according to specific, publicly available criteria. If foreclosure is unavoidable, a bank must provide borrowers with proof of its legal right to foreclose before the process gets under way.
The bureau cannot undo the past, but strong rules could at least help to ensure that the past is not repeated.
Nashville’s Latest Big Hit Could Be the City Itself
originally appeared in The New York Times:
Portland knows the feeling. Austin had it once, too. So did Dallas. Even Las Vegas enjoyed a brief moment as the nation’s “it” city.
Now, it’s Nashville’s turn.
Here in a city once embarrassed by its Grand Ole Opry roots, a place that sat on the sidelines while its Southern sisters boomed economically, it is hard to find a resident who does not break into the goofy grin of the newly popular when the subject of Nashville’s status comes up.
Their Mayor, a Democrat in his second term, is the head cheerleader.
It’s good to be Nashville right now, he said during a recent tour of his favorite civic sites, the biggest of which is a publicly financed gamble: a new $623 million downtown convention center complex that is the one of the most expensive public projects in Tennessee history.
The city remains traditionally Southern in its sensibility, but it has taken on the luster of the current. On a Venn diagram, the place where conservative Christians and hipsters overlap would be today’s Nashville.
Flush with young new residents and alive with immigrants, tourists and music, the city made its way to the top of all kinds of lists in 2012.
A Gallup poll ranked it in the top five regions for job growth. A national entrepreneurs’ group called it one of the best places to begin a technology start-up. Critics admire its growing food scene. GQ magazine declared it simply “Nowville.”
And then there is the television show."Nashville,"a song-filled ABC drama about two warring country divas, had its premiere in October with nine million viewers. It appears to be doing for the city of 610,000 people what the prime-time soap opera"Dallas"did for that Texas city in the ‘80s.
You can’t buy that, according to the mayor. The city looks great in it.
Different regions capture the nation’s fancy for different reasons. Sometimes, as with Silicon Valley, innovation and economic engines drive it. Other times, it’s a bold civic event, like the Olympics, or a cultural wave, like the way grunge music elevated Seattle.
Here in a fast-growing metropolitan region with more than 1.6 million people, the ingredients for Nashville’s rise are as much economic as they are cultural and, critics worry, could be as fleeting as its fame.
People are too smug about how fortunate we are now, according to a Southern journalist who has lived in Nashville since the 1970s.
We ought to be paying more attention to how many people we have who are ill-fed and ill-housed and ill-educated, he said.
Many will argue that the city’s schools need improvement, and although it remains more progressive on social issues than Tennessee as a whole, the city, with its largely white population, still struggles with a legacy of segregation and has had public battles over immigration and sexual orientation.From an economic standpoint, it has been a measured rise. When the housing boom hit the South, Nashville, long a sleepy capital city with a Bible Belt sensibility, did not reap the financial gains seen in cities like Atlanta, whose metropolitan region is more than three times its size.
But Nashville’s modest growth meant a softer fall and a quicker path out of recession. By July 2012, real estate closings were up 28 percent over the previous year. Unemployment in Davidson County, which includes Nashville, is about 5.7 percent, compared with 7.8 percent nationally, and job growth is predicted to rise by 18 percent in next five years, according to the vice president for research with the Nashville Chamber of Commerce.
He and others attribute Nashville’s stability and current economic health to a staid mix of employers in fields like health care management, religious publishing, car manufacturing and higher education, led by Vanderbilt University.
By some estimates, half of the nation’s health care plans are run by companies in the Nashville area.
Health care is countercyclical, according to the vice president for research. It inoculates the city against a lot of the winds that blow.
But the music industry is the bedrock of Nashville’s economy. In the past two decades, country music has grown into a national darling. The city has attracted musicians and producers whose work moves beyond the twang and heartache.
On a recent evening, Nashville’s once-seedy honky-tonk district was jammed with young hopefuls pulling guitars out of Hondas, a bus from “America’s Got Talent” and Aerosmith fans heading to the Bridgestone Arena.
It is not uncommon to see the power couple Keith Urban and Nicole Kidman show up at a popular restaurant, or to pass Vince Gill on the street.
Music celebrities are attracted to a state with no income tax and a ready-made talent pool. But they also just like it.
Jennifer Nettles, of the country duo Sugarland, spent 17 years in Atlanta and has been dipping in and out of New York and Nashville for years. She recently bought a farm here, had a baby and is settling in with her husband.
Part of what is really attractive about Nashville right now is that it isn’t Atlanta, and I love Atlanta, she said. There’s a bit of charm and a richness a city the size of Nashville allows for.
As if to underscore Nashville’s position in the nation’s musical hierarchy, the city hosted the annual Grammy nomination concert in December. It was the first time the show was not held in Los Angeles.
But to be a truly great city, some skeptics argue, it has to be a place that tends to its residents first and tourists second.
The city’s politicians are banking on the tourists. At the center of the plan is the Music City Center, a huge convention center whose main section is shaped like a giant guitar laid on its back.
It sits on 19 downtown acres and is attached to both the Country Music Hall of Fame and an 800-room, $270 million Omni Hotel, which is expected to open in the fall.
To pay for it all, the city offered generous tax breaks and based public financing on increased hotel and rental car fees and taxes. To lure the hotel, for example, the city discounted property taxes by more than 60 percent for 25 years.
The idea was to help the city land bigger conventions, like the National Rifle Association conference, which will bring 48,000 people to the city in 2015.
But using generous economic incentives and relying on conventions has been called an outdated economic strategy.
This was probably a good idea in 1985. And probably a good idea in 1995, according to a member of the region’s Metropolitan Council. But in 2012, the momentum for that kind of economic development has passed.
She once called the convention center a “riverboat gamble.”
In giving away your tax base for the purpose of expanding your tax base in the future, she said, you make it difficult to deliver on the fundamentals, the things that make your city livable, like parks and roads and schools.
The current mayor, a former city lawyer who became mayor in 2007 and led the city’s recovery from historic floods in 2010, said the project, which got under way during the recession, has been a fight every step of the way.
The gains for the city are real and tangible, he said.
The mayor has orchestrated more than a dozen tax incentive deals over the past few years. Most recently, he arranged a $66 million incentive package to help the health care giant HCA Holdings move part of its Nashville operations to new midtown high-rise buildings.
He acknowledges that more needs to be done on transportation and education, but in the meantime, he, like most of Nashville’s residents, is enjoying its ride.
I love the rhythm of this town and the pace of it and the tone of it, according to a local writer. I think Nashville is a big unfinished song.
Portland knows the feeling. Austin had it once, too. So did Dallas. Even Las Vegas enjoyed a brief moment as the nation’s “it” city.
Now, it’s Nashville’s turn.
Here in a city once embarrassed by its Grand Ole Opry roots, a place that sat on the sidelines while its Southern sisters boomed economically, it is hard to find a resident who does not break into the goofy grin of the newly popular when the subject of Nashville’s status comes up.
Their Mayor, a Democrat in his second term, is the head cheerleader.
It’s good to be Nashville right now, he said during a recent tour of his favorite civic sites, the biggest of which is a publicly financed gamble: a new $623 million downtown convention center complex that is the one of the most expensive public projects in Tennessee history.
The city remains traditionally Southern in its sensibility, but it has taken on the luster of the current. On a Venn diagram, the place where conservative Christians and hipsters overlap would be today’s Nashville.
Flush with young new residents and alive with immigrants, tourists and music, the city made its way to the top of all kinds of lists in 2012.
A Gallup poll ranked it in the top five regions for job growth. A national entrepreneurs’ group called it one of the best places to begin a technology start-up. Critics admire its growing food scene. GQ magazine declared it simply “Nowville.”
And then there is the television show."Nashville,"a song-filled ABC drama about two warring country divas, had its premiere in October with nine million viewers. It appears to be doing for the city of 610,000 people what the prime-time soap opera"Dallas"did for that Texas city in the ‘80s.
You can’t buy that, according to the mayor. The city looks great in it.
Different regions capture the nation’s fancy for different reasons. Sometimes, as with Silicon Valley, innovation and economic engines drive it. Other times, it’s a bold civic event, like the Olympics, or a cultural wave, like the way grunge music elevated Seattle.
Here in a fast-growing metropolitan region with more than 1.6 million people, the ingredients for Nashville’s rise are as much economic as they are cultural and, critics worry, could be as fleeting as its fame.
People are too smug about how fortunate we are now, according to a Southern journalist who has lived in Nashville since the 1970s.
We ought to be paying more attention to how many people we have who are ill-fed and ill-housed and ill-educated, he said.
Many will argue that the city’s schools need improvement, and although it remains more progressive on social issues than Tennessee as a whole, the city, with its largely white population, still struggles with a legacy of segregation and has had public battles over immigration and sexual orientation.From an economic standpoint, it has been a measured rise. When the housing boom hit the South, Nashville, long a sleepy capital city with a Bible Belt sensibility, did not reap the financial gains seen in cities like Atlanta, whose metropolitan region is more than three times its size.
But Nashville’s modest growth meant a softer fall and a quicker path out of recession. By July 2012, real estate closings were up 28 percent over the previous year. Unemployment in Davidson County, which includes Nashville, is about 5.7 percent, compared with 7.8 percent nationally, and job growth is predicted to rise by 18 percent in next five years, according to the vice president for research with the Nashville Chamber of Commerce.
He and others attribute Nashville’s stability and current economic health to a staid mix of employers in fields like health care management, religious publishing, car manufacturing and higher education, led by Vanderbilt University.
By some estimates, half of the nation’s health care plans are run by companies in the Nashville area.
Health care is countercyclical, according to the vice president for research. It inoculates the city against a lot of the winds that blow.
But the music industry is the bedrock of Nashville’s economy. In the past two decades, country music has grown into a national darling. The city has attracted musicians and producers whose work moves beyond the twang and heartache.
On a recent evening, Nashville’s once-seedy honky-tonk district was jammed with young hopefuls pulling guitars out of Hondas, a bus from “America’s Got Talent” and Aerosmith fans heading to the Bridgestone Arena.
It is not uncommon to see the power couple Keith Urban and Nicole Kidman show up at a popular restaurant, or to pass Vince Gill on the street.
Music celebrities are attracted to a state with no income tax and a ready-made talent pool. But they also just like it.
Jennifer Nettles, of the country duo Sugarland, spent 17 years in Atlanta and has been dipping in and out of New York and Nashville for years. She recently bought a farm here, had a baby and is settling in with her husband.
Part of what is really attractive about Nashville right now is that it isn’t Atlanta, and I love Atlanta, she said. There’s a bit of charm and a richness a city the size of Nashville allows for.
As if to underscore Nashville’s position in the nation’s musical hierarchy, the city hosted the annual Grammy nomination concert in December. It was the first time the show was not held in Los Angeles.
But to be a truly great city, some skeptics argue, it has to be a place that tends to its residents first and tourists second.
The city’s politicians are banking on the tourists. At the center of the plan is the Music City Center, a huge convention center whose main section is shaped like a giant guitar laid on its back.
It sits on 19 downtown acres and is attached to both the Country Music Hall of Fame and an 800-room, $270 million Omni Hotel, which is expected to open in the fall.
To pay for it all, the city offered generous tax breaks and based public financing on increased hotel and rental car fees and taxes. To lure the hotel, for example, the city discounted property taxes by more than 60 percent for 25 years.
The idea was to help the city land bigger conventions, like the National Rifle Association conference, which will bring 48,000 people to the city in 2015.
But using generous economic incentives and relying on conventions has been called an outdated economic strategy.
This was probably a good idea in 1985. And probably a good idea in 1995, according to a member of the region’s Metropolitan Council. But in 2012, the momentum for that kind of economic development has passed.
She once called the convention center a “riverboat gamble.”
In giving away your tax base for the purpose of expanding your tax base in the future, she said, you make it difficult to deliver on the fundamentals, the things that make your city livable, like parks and roads and schools.
The current mayor, a former city lawyer who became mayor in 2007 and led the city’s recovery from historic floods in 2010, said the project, which got under way during the recession, has been a fight every step of the way.
The gains for the city are real and tangible, he said.
The mayor has orchestrated more than a dozen tax incentive deals over the past few years. Most recently, he arranged a $66 million incentive package to help the health care giant HCA Holdings move part of its Nashville operations to new midtown high-rise buildings.
He acknowledges that more needs to be done on transportation and education, but in the meantime, he, like most of Nashville’s residents, is enjoying its ride.
I love the rhythm of this town and the pace of it and the tone of it, according to a local writer. I think Nashville is a big unfinished song.
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