Commercial & Residential Real Estate Market

More Short Sales

2012-02-20T15:17:00.003-05:00

First appeared in USA Today

Lenders are allowing more short sales by financiallystrapped homeowners and a few people are even getting cash to complete thesale. Such is the case with DurhamShort Sales.

Short sales are when lenders allow borrowers to sell homesfor less than their unpaid mortgages. They are an alternative to foreclosures.

Short sales have been increasing for months, but thefinancial incentives — which Realtors say are random and infrequent — are anewer wrinkle. Those who care about BrooklynHome Insurance are paying attention.

Examples:

· JPMorgan Chase went national with short-saleincentive offers last year, paying up to $35,000 in some cases.

· Bank of America is testing incentives from$5,000 to $25,000 in Florida to see if they should be expanded to more states.The Florida program began last fall, spokesman Richard Simon says.

· Wells Fargo's incentive offers range from lessthan $3,000 to $20,000, spokesman James Hines says.

Short sales, even with incentive payments to borrowers, cansave lenders money compared with the expenses involved in completingforeclosures. This is true of TriangleHomes for Sale Foreclosures.

In states such as Florida where foreclosures go through thecourts, 50% of loans in foreclosure are more than two years past due, says aJanuary report by mortgage tracker LPS Applied Analytics.

"It's a lot cheaper to shell out $10,000 or $20,000 tosomeone than it is to go through a long foreclosure," says Jim Gillespie,chief executive of Coldwell Banker.

Banks are more willing to do short sales now than in thepast, Gillespie says. Cash incentives appear to be "limited butincreasing" in number, he adds.

"When a loan modification isn't possible, a short salemay be a better and faster solution" than foreclosure, says JPMorgan Chasespokesman Thomas Kelly.

The lenders won't say how often they extend such incentives.Those in CaryShort Sales are curious, though.

"If you have two similar sellers, one might get it andanother may not," says Colleen Badagliacco of Altera Real Estate in SanJose. "It's very random."

Typically, short sale incentives are more common for loansin states where foreclosures take more time, Hines says.

In November, short sales accounted for more than 9% ofsingle family home sales and were up 32% from the year before, according toCoreLogic.

Market researcher Dataquick also shows short salesincreasing from January 2011 through last month throughout California and inPhoenix, Miami and Seattle.

The federal government-run foreclosure prevention programalso offers short sale incentives, at least $3,000 for sellers, but far moreshort sales are being done outside the government program.

Through December, just 26,901 short sales had been completedthrough the Home Affordable Foreclosure Alternative (HAFA) program. A RaleighReal Estate Lawyer is curious.

In contrast, BofA, the largest servicer of home loans, did107,000 short sales last year. That was up from 92,000 in 2010, which wasdouble the 2009 volume, it says.

"The trend is up," says Moody's Investors Serviceanalyst William Fricke.

$26 Billion Mortgage Settlement Is Being Called Historic

2012-02-09T11:29:00.003-05:00

First appeared in USA Today

Five major mortgage servicers agreed to a $26 billionsettlement with state and federal officials in a deal that is being calledhistoric, but which critics are likely to say doesn't go far enough.

The deal could grow to $30 billion if nine more servicerssign on, and it's expected to cover almost all 50 states, a White Houseofficial said Thursday.

The settlement would be the biggest involving a singleindustry since a 1998 multistate tobacco deal.

A monitor will be appointed to see that it is carried out.

The five servicers involved so far —Bank of America, JPMorgan Chase, Citigroup, Ally Financial and Wells Fargo— will provide $17billion in mortgage relief to more than 1 million homeowners. Another $1billion will go to the federal government; $3 billion will help the servicersrefinance borrowers into lower-interest rate loans.

Hundreds of thousands of borrowers are also expected toreceive restitution, averaging $1500 to $2000, if they lost homes toforeclosure from 2008 to the end of 2011.

The relief must be extended within three years or servicerswould have to pay any remaining part of the settlement in cash. To encourageservicers to do more work sooner rather than later, given the ongoingforeclosure crisis, they'll get more credit for modifying and refinancing loansin the first year of the deal.

The settlement, which has been a year in the making, willcreate the largest effort by servicers so far to write down the amounthomeowners owe on underwater mortgages, where the homeowners owe more than thehouse is now worth. Falling property values have put many homeowners underwater. HomeInsurance in New York City may be able to help.

The reductions in loan principal are expected to account forat least 60% of the $17 billion pot. By writing down principal, officials hopefewer people will eventually default on their loans.

Most of the writedowns are expected to occur on loans thatthe five servicers own themselves, and will not include any loans owned bymortgage giants Freddie Mac, Fannie Mae or the Federal Housing Administration.

The impact of the principal reduction is expected to gofarther than the actual dollars. Servicers will get "credits" forwriting down loans at varying stages of being under water. They'll get morecredit for some writedowns than for others, officials said.

All told, the $26 billion deal could provide up to $40billion in mortgage relief, one official estimated.

If so, California officials said in a statement that statewould get $18 billion of that, including $12 billion in principal reductionsand other relief for an estimated 250,000 homeowners.

"This is an historic amount of relief for Californiahomeowners, but it is one piece of a broader focus. We will continue ourcrackdown on mortgage fraud and quickly move to pass legislation that willsimplify, reform and upgrade our broken mortgage system," CaliforniaAttorney General Kamala Harris said.

In most cases, to be eligible for principal write downs,borrowers would need to be delinquent on their mortgages. While the principalwritedowns, when averaged, might run just $20,000 or so on a national basis,writedowns could be much larger in some cases, officials say.

The servicers will be expected to devise a plan on how toreach out to borrowers to carry out the mortgage relief.

The settlement is expected to include most states; New Yorkand California were prominent last-minute holdouts. A BrooklynHomeowners Insurance company waits to hear.

In exchange for the settlement, the servicers will get somerelief from future legal claims.

But disgruntled borrowers could still sue individually or aspart of a class action. The settlement also does not prevent future or ongoinglawsuits in the arena of securitization, in which loans were packaged and soldto investors. Nor would it prevent any criminal investigations.

The nationwide settlement stems from abuses that occurredafter the housing bubble burst. Many companies that process foreclosures failedto verify documents. Some employees signed papers they hadn't read or used fakesignatures to speed foreclosures — an action known as robo-signing.

Along with financial costs, the settlement is expected tocreate what supporters say are the strictest standards to date for how mortgageservicers should treat distressed home loan borrowers in the future.

Support for the settlement by so many states increaseschances that it'll be viewed as a win for the state attorneys general.

It also arms the Obama administration with more ammunitionfor its claims that it's addressing the foreclosure crisis.

But the settlement falls far short of fixing all that wentwrong in the U.S. mortgage industry, after risky loans were extended tomillions who couldn't afford the loans. That helped lead to a collapse in U.S.home prices, which are down an average of 33% nationwide since 2006.

The settlement will not compensate the vast majority of U.S.homeowners who have kept making payments while their home values plunged.

Instead, much of the settlement will help homeowners who areon the brink of foreclosure — but have continued to make payments — withprincipal reductions.

If the principal reductions help prevent foreclosures, thatwill mean fewer distressed homes for sale, which could help overall homeprices.

But U.S borrowers collectively owe $700 billion more ontheir homes than their homes are worth. The principal forgiveness is "notgoing to be enough to generate a significant and sustained housing marketrecovery," says Capital Economics economist Paul Diggle.

For weeks, attention has largely focused on how much theservicers would end up paying in the settlement, and what states would sign on.

But state and federal officials say new servicing standards,which affect how companies interact with distressed borrowers, are equallyimportant.

"There's no doubt that they are an improvement,"says Ira Rheingold, executive director of the National Association of ConsumerAdvocates.

The new standards are expected to restrict one practice thathas long been criticized, dubbed "dual track." That's where servicersproceed with foreclosures even if someone is pursuing a loan modification. Noteven the best QueensHomeowners Insurance can fix everything.

The agreement won't ban that completely, but it wouldprevent servicers from completing a foreclosure sale of a home if amodification is being considered.

Servicers will also be required to provide borrowers with asingle point of contact, something other new standards also require. Most largeservicers already have that or are implementing it, companies say.

In addition, the settlement monitor will periodically testthat foreclosure affidavits are executed properly.

NY Attorney General Sues Banks Using an Electronic Mortgage Database

2012-02-06T13:35:00.002-05:00

First appeared in Reuters

New York State Attorney General Eric Schneiderman on Fridaysued three major U.S. banks, accusing them of fraud for using an electronicmortgage database that resulted in deceptive and illegal practices.

Schneiderman filed the lawsuit against Bank of America Corp(BAC.N), Wells Fargo & Co (WFC.N) and JPMorgan Chase & Co (JPM.N) in NewYork state court in Brooklyn.

The lawsuit is over the banks' use of MERS, the MortgageElectronic Registration System the industry created in the mid-1990s to trackthe ownership and servicing of residential mortgage loans.

Schneiderman claims the system is plagued by inaccuracies.The lawsuit also names MERS and its parent as defendants.

"The mortgage industry created MERS to allow financialinstitutions to evade county recording fees, avoid the need to publicly recordmortgage transfers and facilitate the rapid sale and securitization of mortgagesen masse," Schneiderman said.

Schneiderman's lawsuit claims that banks saved $2 billion inrecording fees by using MERS.

The suit also said the use of MERS resulted in the filing ofimproper NY foreclosures and created "confusion and uncertainty" overproperty ownership interests.

Over 70 million mortgage loans, including millions ofsubprime loans, have been registered in the MERS system, rather than in localcounty clerks' offices, according to the lawsuit.

Schneiderman is seeking to stop the banks from filing NewYork foreclosure actions in MERS name, and executing false or defectivemortgage assignments in state foreclosure proceedings. He is also seeking toobtain the profits the banks obtained through MERS, along with other damages.

JPMorgan spokesman Patrick Linehan declined to comment onthe lawsuit. Wells Fargo spokesman Ancel Martinez said the company wasreviewing the lawsuit. Bank of America spokesman Rick Simon declined comment.

Merscorp and its subsidiary MERS comply with the law andmortgage regulations, spokeswoman Janis Smith, a spokeswoman said in astatement.

"We refute the attorney general's claims and willdefend the case vigorously in court," Smith said.

MERS was sued by Delaware in October and similarly accusedof deceptive practices that led to unlawful shortcuts in dealing with theforeclosure crisis.

MORTGAGE SETTLEMENT NEARS

Schneiderman filed the suit in his capacity as New Yorkattorney general, but he also serves as co-chair of a working group PresidentBarack Obama formed last month to investigate misconduct in the pooling andsale of risky home loans.

Schneiderman is also a central figure in widely publicizednegotiations to reach a federal-state settlement with the top U.S. banks overmortgage abuses.

A key question is whether holdouts, including Schneidermanand California Attorney General Kamala Harris will join the settlement.

Danny Kanner, a spokesman for Schneiderman, declined commenton what Friday's lawsuit may mean for the prospects of the settlement, whichcould be announced as soon as next week.

In exchange for up to $25 billion, the banks are expected toresolve state and federal lawsuits about servicing misconduct and faultyforeclosures. The states have until Monday to decide whether to sign on.

A draft settlement circulated to the states would havereleased the banks from liability for their use of MERS - claims at the heartof the new lawsuit.

The New York lawsuit suggests Schneiderman and otherattorneys general opposed to the settlement may have been successful in workingto narrow the broad releases of liability.

Last week Schneiderman told Reuters that the releases in thesettlement had "become narrow enough" so that a "fullinvestigation" by the new mortgage crisis unit could move forward.

However, Schneiderman said last week he was not yet ready tosign on to the settlement.

On Thursday, California AG Harris told Reuters that she isnot focusing on the Monday deadline for states to sign up.

"I'm less concerned with the timeline than thedetails," Harris said on the sidelines of a Harvard Women's Law Associationconference in Boston.

Harris said any settlement should address the priorities shehas previously laid out, like enforcement.

She also said she was aware of Schneiderman's lawsuitagainst banks over MERS, but that MERS was less of a priority in the scope ofCalifornia's mortgage problems than it was in other states.

"But we support that MERS work," she added.

Is Desegregation Really Happening?

2012-01-31T09:48:00.000-05:00

First appeared in the Wall Street Journal

An exodus of African-Americans from struggling industrialcities such as Detroit and the growth of Sunbelt states have pushed racialsegregation in U.S. metropolitan areas to its lowest level in a century,according to a new study.

The report, released by the conservative Manhattan Institute,said U.S. cities are more integrated now than at any time since 1910, based onanalysis of census data from neighborhoods.

Fifty years ago, nearly half the black population lived in aghetto, the study said, while today that proportion has shrunk to 20%.All-white neighborhoods in U.S. cities are effectively extinct, according tothe report.

Immigration and gentrification have helped convert ghettosinto racially mixed communities and contributed to diversifying suburbia, saideconomists of Harvard University and of Duke University, who co-wrote thestudy. "Segregation is as low as we have ever seen it," said theeconomists. "It's an unprecedented scenario."

Some scholars said the report, titled "The End of theSegregated Century: Racial Separation in America's neighborhoods,1890-2010," paints too rosy a picture and argued the country is far frombeing fully integrated.

"That segregation is declining in most places is a realplus," said a Brown University sociologist who has published research onthe topic. "But it is declining at a rate that will leave the country witha very high level of segregation for a long time."

From around 1910, rural blacks began moving in large numbersto urban centers in search of work, in what became known as the GreatMigration. Government policies and discriminatory practices in areas such asmortgage lending promoted residential segregation, which peaked in the 1960s.The civil-rights movement then paved the way for integration, and the 1968 FairHousing Act specifically banned housing discrimination.

By the 1980s, blacks were moving to suburbs, which bothaltered the face of the urban areas they left behind and created racially mixedneighborhoods where they settled.

Using the most common measure of segregation, the"dissimilarity index," the authors found that segregation is lowernow than it was in 1970 in all but one of the 658 housing markets tracked bythe Census Bureau. Between 2000 and 2010, segregation declined in 522 out of658 housing markets, the report said.

The index of dissimilarity measures how evenly two groupsare distributed in a neighborhood. The score indicates what share of themembers of one group would need to move neighborhoods to enable the two groupsto be equally distributed.

In 2010, Dallas-Fort Worth and Houston were the country'sleast segregated large cities. Atlanta's index fell 28 points to 54.1 in 2010from 82.1 in 1970; Dallas-Fort Worth's fell to 47.5 from 86.9 over the sameperiod.

Still, segregation hasn't been eliminated. The typical urbanAfrican-American still lives in an area where more than half the blackpopulation would need to move to achieve overall integration.

"There are still segregated places, like the South Sideof Chicago, the East Side of Cleveland and Detroit," said a sociologist."But those places have fewer people."

Many of the people leaving industrial cities moved to the Sunbelt,which stretches from California to North Carolina and has experienced rapidgrowth in recent decades. As cities such as Phoenix, Houston and Charlotteexpanded to accommodate the new population, many neighborhoods became moreracially mixed than those left behind in the Rust Belt, a sociologist said.

The beacon of economic opportunity is luring ambitious youngAfrican Americans such as a 28 year old, who left Cleveland for Houston a yearand a half ago for a promotion in the Veterans Administration. He now managesoutpatient care at Houston's Michael E. DeBakey VA Medical Center.

"It was a good promotion, and with the economy beingthe way it is, it was too good to pass up," said the young man.

A 59 year old, who moved to Phoenix from Racine, Wis., in1987 to run a janitorial business, said: "Everybody here came fromsomewhere else so they are not just living next to their own kind."

Immigration has been a factor in desegregation. The Hispanicpopulation has climbed and spread across the U.S. since the 1990s, with LatinAmerican immigrants settling in both predominantly black and whiteneighborhoods, the report says. The typical African-American now lives in a neighborhoodthat is 14% Latino.

Access to credit has also fostered mobility and integration.Minority home buyers were affected by the subprime mortgage crisis, but manybuyers were able to stay in their homes, the report said.

But the decline in desegregation in residential areas hasn'tmeant an end to racial inequality. Minorities at every income level tend toreside in poorer neighborhoods than whites with comparable incomes, accordingto the scholar at Brown.

Home Foreclosures Looking Up

2012-01-12T13:42:00.000-05:00

First appeared in CNN Money

Foreclosure filings and repossessions fell to their lowest level since 2007 last year.

Total filings, including default notices and bank repossessions were down 33% for the year to 2.7 million, according to RealtyTrac, the online marketer of foreclosed properties.

One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That's a significant improvement from the peaks reached in 2010 -- when 1.05 million homes were repossessed -- and the lowest levels seen since 2007.

More than 4 million homes have been lost to foreclosure over the past five years.

While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the "robo-signing" scandal that broke in late 2010.

During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.

"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year," said Brandon Moore, chief executive officer of RealtyTrac.

However, Moore said there were "strong signs" during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011's level but remain below the peak hit in 2010.

Low rates offer some help for homeowners

Early in 2011, many forecasters were predicting a wave of foreclosures due to resetting adjustable-rate mortgages, but low mortgage rates helped many borrowers refinance into more affordable loans, said Moore.

The government helped as well, through efforts like the Home Affordable Refinance Program (HARP), which made refinancing easier for borrowers who owe more on their mortgage than their homes are worth.

Turning foreclosures into rentals

Government foreclosure prevention programs, including HARP and the Home Affordable Modification Program (HAMP), have started about 5.5 million mortgage modifications since April 2009, according to the U.S. Department of Housing and Urban Development.

"Programs like HAMP and HARP have definitely made a dent in the foreclosure problem," said Moore "However, they are certainly not living up to their billing of preventing several million foreclosures. In addition, many [HAMP] homeowners fall back into foreclosure later on."

Of course, there were still plenty of factors working against homeowners in 2011, including the continued erosion in home prices. Falling prices rob homeowners of home equity, which they can tap if they need emergency cash.

Foreclosure hot spots

Hot spots for foreclosures remain mostly in "bubble states," where speculative investors helped drive up home prices beyond their fundamental values during the mid-2000s housing boom.

Nevada, where one out of every 16 households received some kind of default notice during the year, was the worst hit of all, a distinction it has held for the fifth consecutive year.

Foreclosure free ride: 3 years, no payments

Arizona had the second highest foreclosure rate and California came in third. Florida, which had been running neck-and-neck with the other "Sand States" in past years, fell to seventh, behind Georgia, Utah and Michigan.

Among metro areas, Las Vegas suffered from the highest foreclosure rate in 2011. California put seven cities in the top 10, led by Stockton in the second slot. Other cities in the top 10 included Phoenix, which finished sixth, and Reno, Nev. was eighth.

Rental Demands Changes Housing Outlook

2012-01-06T13:42:00.000-05:00

First appeared on Yahoo! News
Brian Keith is busier than ever as the architecture firm he works for rushes to wrap up work on a 300-unit apartment complex in Dallas.

The project is one of dozens the firm, JHP Architecture, has on its hands -- a surge of business driven by a rise in demand in the United States for rental properties.

The increased demand has forced JHP to expand, and it expects to keep hiring at least through the first quarter.

"We're seeing overall work come back and there's a backlog of contracts to go through," said Keith, director of urban design and planning at JHP. "There's strong interest in multi-family units and plenty of pent-up demand."

With U.S. unemployment at a lofty 8.6 percent, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the U.S. housing industry.

The percentage of Americans who own their home dropped from a peak of 69.2 percent in late 2004 to a 13-year low of 65.9 percent in the second quarter. It edged up to 66.3 percent in the third quarter of this year.

On the flip side, the percentage of rental properties that are empty fell to 9.8 percent in the third quarter from 10.3 percent a year earlier.

In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 "The Year of the Landlord."
"Rents are rising, vacancies are falling, household formations are growing and rental supply is limited," the Morgan Stanley report stated. "We believe the demand for rental properties will continue to grow."

Groundbreaking for new housing jumped 9.3 percent in November to the highest level in 19 months, fueling optimism that the battered housing market was regaining its footing.

The gains, however, were almost solely in multifamily housing. Groundbreaking for structures with five or more units shot up more than 30 percent from October to now stand at nearly double the year-ago level.
Prices reflect the shift in demand. Rental costs are up 2.4 percent over the last year, compared with an increase of just 0.6 percent in 2010.

Steve Blitz, senior economist at ITG Investment Research, says the lure of higher returns is spurring the development of apartment buildings. He argued the next "boom" in residential construction has already started.

"The reason rents were rising is that through the past 15 years there has been an under-building of rental properties because typical renters were increasingly able to garner cheap financing to buy a house," he wrote in a research note.

While the rise in demand is great news for builders and developers, it remains unclear what the pick-up in homebuilding will mean for the economy as a whole.

"Residential construction will be a plus to GDP in 2012, but house price declines will be a negative. So net, net housing will be neutral or a small drag on the economy," said Mark Zandi, chief economist at Moody's Analytics.

At its peak at the end of 2005, homebuilding accounted for about 6.2 percent of overall economic activity. Now, it is only about 2.4 percent.

U.S. housing starts in April 2009 hit their lowest level on records dating to January 1959. While multifamily starts have given them a lift, 2011 may be the weakest year ever for construction of single-family homes.

"Business is slightly down from last year," said Bill Zach, a third-generation homebuilder. His family business, the Zach Building Co. in the Milwaukee, Wisconsin, area, is mainly focused on single-family units.

To Zach, that his firm is still in business when so many of his competitors have gone bust represents some success.

"It used to be my competition was every guy that owned a pick-up truck and called himself a builder. Hundreds of them," Zach said. "That's no longer the case, those guys are dropping by the wayside."

But there are signs of a turn and signals that the housing market may be close to finding a bottom.

The Architecture Billings Index, a gauge of future construction, picked up last month, breaking above the 50 level to signal growth in billings.

And the stock of homebuilders, as measured by a Dow Jones index, has shot up more than 30 percent since early October.

"Residential construction is finally beginning to rise from its post-recession lows," said Joseph Lavorgna, chief U.S. economist for Deutsche Bank. "The true test for starts and (building) permits, as well as most of the sales metrics, will come during the spring buying season."

Massachusetts Sues Banks For Holiday Foreclosures

2011-12-09T14:29:00.002-05:00

Story first appeared on CNNMoney.

The Massachusetts attorney general sued some of the nation's biggest banks on Thursday, accusing them of unlawful and deceptive conduct in the foreclosure process. This is currently not involving a Birmingham Foreclosure Lawyer.

The statement described the state court lawsuit as the nation's first comprehensive lawsuit against the five major national banks regarding the foreclosure crisis.

The AG's lawsuit seeks accountability for the banks' unlawful and deceptive conduct in the foreclosure process, including unlawful foreclosures, false documentation and robo-signing ... and deceptive practices related to loan modifications, the statement said.

MERS runs a database created in the 1990s to digitize and centralize the paperwork surrounding the bundling and selling of the loans.

The Massachusetts suit alleges that the database was used by the big banks to transfer ownership of mortgage debt without paying government registration fees and properly recording the transactions. The system also concealed the identities of the holders of mortgage debt from borrowers, the suit claims. It does not appear to have any relevance if owners had Homeowners Insurance.

MERSCORP, parent company for Mortgage Electronic Registration System Inc., said the Massachusetts complaint hangs on ambiguous language and has no applicability to MERS' business model.
Fannie Mae, banks halt foreclosures for the holidays. A Rochester Hills Foreclosure Lawyer said this was a nice gesture.

The banks, meanwhile, say negotiations they are conducting with a group of state attorneys general toward a settlement over their handling of foreclosures are a more promising means of resolving the issue than lawsuits.

Bank of America spokesman Lawrence Grayson said the firm believes that collaborative resolution rather than continued litigation will most quickly heal the housing market and help drive economic recovery.

Chase echoed those comments, saying it was disappointed with the suit, as did GMAC Mortgage, which said it would vigorously defend its actions in court.

Citi said in a statement that it had not yet reviewed the lawsuit, but that the bank believes they have operated appropriately in compliance with existing laws. Wells Fargo also denied the allegations, adding that the suit will do little to help Massachusetts homeowners or the recovery of the housing economy in the state.

Settlement talks fraying: Coakley told reporters Thursday that the suit had come about in part because settlement talks with the banks, which have dragged on for more than a year, appear unlikely to yield a fair result.

Attorneys general from California, New York, Delaware and Nevada have also distanced themselves from the settlement talks and are pursuing their own investigations.
Will FHA be the next big government bailout?

The talks are stalled at present, but have focused on a settlement in the range of $20-25 billion in total from the firms involved in exchange for release from liability for all conduct related to foreclosures, according to sources familiar with the matter. Of this total, roughly $10-15 billion would come in the form of credit for loan modifications. A Wayne Foreclosure Lawyer is watching the case closely.

Iowa Attorney General Thomas Miller, who is coordinating talks on behalf of the states, said in a statement Thursday that Coakley had pledged to evaluate the joint state-federal settlement they are negotiating, which they hope to reach soon.

MyElderLawPlanning Michigan Estate Planning

2011-10-27T17:05:00.000-04:00

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$22 Million Mansion On The Market In New York

2011-09-15T16:57:00.003-04:00

Story first appeared in the Wall Street Journal.
A massive home on nearly 50 acres that was once occupied by former Sony Music executive Tommy Mottola is on the market with an asking price of $22 million.
Its current owner, Sara Arnell, purchased the 18-room house in Katonah, a hamlet in the town of Bedford, N.Y., from the music mogul once married to singer Mariah Carey, for $18.3 million in 2001, according to property records.
Ms. Arnell, the chief executive officer of Arnell Group, an advertising agency owned by Omnicom Group, said she literally looked at it once and thought, this is an amazing piece of property and an amazing home.
The house spans more than 12,900 square feet and has nine bedrooms, a plush, 20-seat home theater, a wine cellar and a sprawling eat-in kitchen with a sitting area and a fireplace.
Music Mogul's Former Estate
Former Sony Music head Tommy Mottola once owned this sprawling property on nearly 50 acres in Katonah, N.Y. After spending millions on renovations, the current owner is ready to sell for $22 million.
Ms. Arnell said she put several million dollars into home improvements, which included the addition of a conservatory with a fireplace off the kitchen.
In the three-story great room with vaulted ceilings, some of the stones were removed from the fieldstone fireplace to make room for a timepiece mural inspired by a clock found in a church in Italy.
Ms. Arnell also added a Juliet balcony off the master bedroom that overlooks the terrace and the 80-foot pool.
On the property are several structures, including a quaint writer's cottage that is tucked away on one of the property's rolling hills.
There's garage space for as many as 10 cars and a kid's cottage, as Ms. Arnell calls it, with a foosball table, arcade machines and a disco ball.
Other amenities include a riding rink used as an ATV motocross track and a mile of private road for hiking and jogging.
Ms. Arnell has three children and said the large home is perfect for a family who likes to entertain.
With two of her kids out of the house, Ms. Arnell will soon be an empty nester, so she decided to put the property on the market in April. Houlihan Lawrence holds the listing.

HURRICANE VICTIMS MAY GET LOWER INSURANCE DEDUCTIBLES

2011-09-07T11:50:00.002-04:00

Story first appeared in USA TODAY.
According to a Troy Foreclosure Attorney, Connecticut officials have announced that several more insurance companies have agreed to waive higher-cost hurricane deductibles for coastal property owners whose homes were damaged by Tropical Storm Irene.
Gov. Dannel P. Malloy and Insurance Commissioner Thomas B. Leonardi announced Tuesday that Allstate, Bunker Hill, Connecticut FAIR Plan, Farm Family, Farmers Insurance, Fidelity National, Privilege Underwriters Reciprocal Exchange, Quincy Mutual Fire Insurance Co. and Universal North America have joined more than a dozen other companies to waive the deductibles.
Several companies initially pledged to waive the deductibles Friday.
According to a Houston Insurance Attorney, Malloy praised the companies for giving customers what he says is a much-needed financial break.

Financial Firm Giants Sued By U.S.

2011-09-06T13:14:00.001-04:00

Story first appeared in USA TODAY.
In a sweeping move, the government on Friday sued 17 financial firms, including the largest U.S. banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.
The lawsuits were filed Friday by the Federal Housing Finance Agency which oversees Fannie and Freddie, the two agencies that buy mortgages loans and mortgage securities issued by the lenders.
The total price tag for the securities bought by Fannie and Freddie affected by the lawsuits: $196 billion.
The government didn't provide a dollar amount of how much it seeks in damages. It said that it wants to have the purchases of the securities canceled, be compensated for lost principal and interest payments as well as attorney fees and costs. The lawsuits allege the financial firms broke federal and state laws with the sales.
Home mortgage-backed securities were risky investments that collapsed after the real-estate bust and helped fuel the financial crisis in late 2008. A real estate agent selling Raleigh Homes agrees that there was risk.
In the lawsuits that were filed in federal or state court in New York and the federal court in Connecticut, the government said the securities were sold with registration statements and prospectuses that contained materially false or misleading statements and omissions.
The Federal agency said the banks and mortgage lenders also falsely represented that the mortgage loans in the securities complied with underwriting guidelines and standards. They also included representations that significantly overstated the ability of the borrower to repay their mortgage loans.
The 17 institutions are Ally Financial, formerly known as GMAC LLC, Bank of America, Barclays Bank, Citigroup, Countrywide Financial, Credit Suisse Holdings, Deutsche Bank, First Horizon National, General Electric, Goldman Sachs, HSBC North America Holdings, JPMorgan Chase, Merrill Lynch and its unit First Franklin Financial, Morgan Stanley, Nomura Holding America, The Royal Bank of Scotland Group and Societe Generale.

Big Family Homes Costs Compared

2011-09-06T12:20:00.000-04:00

Story first appeared in the Associated Press
ST. HELENA, Calif. $2.3 million
A 3,120-square-foot house in Napa Valley with five bedrooms and four baths, on 0.3 acre.
Details: This Victorian-style house was built around 1900 and renovated in 2000. The home has a pool, a porch and patios. There's a formal dining room and a double parlor. 2010 property taxes were $11,800.
Reunion Time: The home has a reverse floor plan, with the dining room, parlor and kitchen upstairs. The kitchen opens to a deck.
Group Dining: Downtown St. Helena is six blocks away. Cindy's Backstreet Kitchen can accommodate groups of 50 or more.
Friday's Forecast: Sunny, high 94 degrees.
CENTERVILLE, Mass. $2.1 million
A 3,300-square-foot home on Cape Cod with four bedrooms and 4½ baths, on 0.6 acre.
Details: This 1960s Cape Cod-style home, renovated in 2006, sits on a lake with a sandy beach and has a dock. A detached garage has a carriage apartment with a bath, and the property has storage space for a boat. 2011 property taxes are $14,500.
Reunion Time: Boat, fish or jet-ski on Wequaquet Lake, a 654-acre pond. The home has a screened-in porch, patios and decks.
Group Dining: Less than five miles away, Five Bays Bistro in Osterville has a back room that seats 24.
Friday's Forecast: Partly cloudy, high 73 degrees.
DALLAS $2.2 million
A house of about 7,000 square feet, with five bedrooms and 5½ baths, on an acre in Preston Hollow.
Details: This Colonial-style home was built in the 1940s and remodeled several years ago. There's a game room, gym and pool, plus garage space for five cars. A wooded backyard has paths. 2010 property taxes were $47,500.
Reunion Time: A great room with a wood-burning fireplace opens to a patio that leads to the pool area. A formal dining room can seat 15.
Group Dining: Less than two miles away, the Southern-cuisine spot Rathbun's Blue Plate Kitchen can accommodate groups of up to 60.
Friday's Forecast: Partly cloudy, high 102 degrees.

HOME BUILDERS MAY NOT BE HANGING ON FOR MUCH LONGER

2011-09-06T12:19:00.000-04:00

Story first appeared in the Wall Street Journal.
Five years into a housing meltdown, questions are arising about how long some publicly held home builders can survive without significant improvement in the market.
Sales of newly built homes, which peaked at 1.3 million units in 2005, were running at an annual rate of just 298,000 units in July and are on pace to post the lowest count this year since record keeping began in 1963.
So far, home builders have been able to stave off disaster by sharply cutting employees and shrinking their product mix to compete with existing homes. Several Obama administration stimulus measures also helped the builders, including a tax break that allowed the builders to pocket $2.6 billion in tax refunds and a home-buyer tax credit that temporarily lifted sales last year.
But the lifelines are running out, and home sales aren't expected to pick up anytime soon.
Alex Barron, a founder and analyst with the Housing Research Center, said the market is not deep enough or big enough to support all the builders, and there needs to be some consolidation. He doesn’t think that means [mergers or acquisitions]. He just thinks that means there has to be a shakeout.
Mr. Barron declined to speculate about any specific companies. But two operators that other analysts are watching closely are Hovnanian Enterprises Inc. and Beazer Homes USA Inc. Some analysts believe both companies are running low on cash. Both companies have seen their stock prices decline nearly 60% so far this year—making them the sector's biggest decliners—and both have traded below $2 a share.
To be sure, the shares of most of the major builders have fallen so far this year. Toll Brothers Inc. shares are down about 10%, while Lennar Corp. has dropped 22%.
On Tuesday, Hovnanian shares closed at $1.75 apiece and Beazer ended at $2.19.
J. Larry Sorsby, Hovnanian's chief financial officer, said in an email that the company has taken many steps to right-size their company, strengthen their balance sheet and position themselves for a return to profitability."
During the second quarter, Hovnanian, based in Red Bank, N.J., burned through $88.5 million, leaving it with $433.5 million in cash, though $85.3 million of that is restricted and not easily accessible.

At that rate, Ms. Bryan said Hovnanian could run out of money in less than two years. The stronger builders have cash hoards topping $1 billion.
Mr. Sorsby believes the company's cash situation won't be a problem. They are confident that they have sufficient capital to meet all their obligations.
Hovnanian will report third-quarter results next week.
A key component in a home builder's health is its strategy for buying and developing land. Some companies have pulled back on land purchases to conserve money, while some builders have looked to new ventures to weather the downturn.
Both Lennar Corp. and Toll Brothers, for example, are working out distressed real-estate loans, a move that is being cheered by many industry analysts. Toll, long known as the builder of suburban McMansions, has expanded into urban areas building condominiums, which continue to be some of its strongest performers.
Hovnanian's strategy is to keep acquiring land lots and keep building a broad variety of homes. In the second quarter, it spent some $125 million of cash to purchase about 1,440 lots and to develop land.
One thing in Hovnanian's favor, he adds, is that the company doesn't have significant debt coming due in the next few years, although that changes in 2016.
Hovnanian's Mr. Sorsby said the company will refinance the debt before it matures, providing breathing room.
Still, bondholders are jittery. Some of Hovnanian's unsecured debt is trading below 50 cents on the dollar.
Some analysts are also worried about Atlanta-based Beazer. The company recently replaced longtime Chief Executive Ian McCarthy with its chief financial officer, Allan Merrill.
Mr. McCarthy oversaw the builder through numerous legal and regulatory problems, including a Securities and Exchange Commission investigation. He left several months after agreeing to repay $6.5 million and return company stock as part of a settlement with the SEC; Mr. McCarthy wasn't accused of a crime.
In 2009, the company agreed to pay as much as $55 million to the federal government and homeowners after a joint federal probe in which the company acknowledged violations of certain mortgage-lending regulations and accounting rules.
A year earlier, Beazer settled SEC civil allegations over the company's accounting practices without admitting any wrongdoing. Beazer said it understated earnings by a net total of about $28 million between fiscal years 1998 and 2006.
As of June 30, Beazer had $559 million in cash, though roughly half of it is restricted. But Beazer is also buying and developing land: It spent more than $50 million in its fiscal third quarter, and the annual total could come in around $250 million, executives said in an earnings call earlier this month.
Ms. Bryan of Gimme Credit thinks Beazer also could see cash depleted within two years.
On the earnings call, however, Beazer executives said home sales currently in backlog could help boost unrestricted cash as high as $400 million by Sept. 30. To be sure, given the recent stock-market turmoil, all of these sales may not close, they said.

PEOPLE ARE SICK OVER HOME FORECLOSURES-LITERALLY

2011-09-06T12:17:00.000-04:00

Story first appeared in the Wall Street Journal.
The threat of losing your home is stressful enough to make you ill, it stands to reason. Now two economists have measured just how unhealthy the foreclosure crisis has been in some of the hardest-hit areas of the U.S.
New research by Janet Currie of Princeton University and Erdal Tekin of Georgia State University shows a direct correlation between foreclosure rates and the health of residents in Arizona, California, Florida and New Jersey. The economists concluded in a paper published this month by the National Bureau of Economic Research that an increase of 100 foreclosures corresponded to a 7.2% rise in emergency room visits and hospitalizations for hypertension, and an 8.1% increase for diabetes, among people aged 20 to 49.
Each rise of 100 foreclosures was also associated with 12% more visits related to anxiety in the same age category. And the same rise in foreclosures was associated with 39% more visits for suicide attempts among the same group, though this still represents a small number of patients, the researchers say.
Teasing out cause and effect can be delicate, and correlation doesn't necessarily mean foreclosures directly cause health problems. Financial duress, among other issues, could lead to health problems—and cause foreclosures, too.
The economists didn't find similar patterns with diseases such as cancer or elective surgeries such as hip replacement, leading them to conclude that areas with high foreclosures are seeing mostly an increase of stress-related ailments.
Is the housing crisis making Americans sicker? New economic research suggests just that. The research found a direct correlation between foreclosure rates and the health of residents. Mitra Kalita explains on Lunch Break.
Tuesday brought news of further weakness in the housing market as the closely watched S&P/Case-Shiller home-price index came in 5.9% lower for the second quarter from a year earlier. Continued job losses and economic uncertainty could weigh on home prices and make for another wave of foreclosures, economists say.
It may not just be foreclosure victims arriving at hospitals—but neighbors also grappling with depleting equity in their biggest investment.
Ms Currie said you see foreclosures having a general effect on the neighborhood with everybody being stressed out, and t
here is a connection between people's economic well being and their physical well being."
The situation got so bad for Patricia Graci, a 51-year-old Staten Island, N.Y., resident, that she canceled a recent court appearance related to the foreclosure on her house because she couldn't get out of bed. After her husband lost his job as a painter in 2008, the Gracis relied on savings to pay their mortgage for two years.
She said everything was going downhill, her savings were going down to nothing, and when she realized the money wasn't there anymore, she started getting very anxious and depressed.
She says her lender advised her to default on her mortgage to qualify for a loan modification. Ms. Graci, who was an assistant bank manager and already had rheumatoid arthritis, says she began seeing a therapist and landed in the hospital with difficulty breathing in December 2009. A few weeks later came the foreclosure notice from the bank.
Ms Graci said she was told it was more anxiety and stress that made her wind up in the hospital than the arthritis. After repeatedly missing work due to illness, Ms. Graci went on long-term disability.
The areas that have the highest foreclosure rates also tend to have a large portion of their population unemployed, underemployed or uninsured. Ms. Currie says the research accounted for this by instituting controls for persistent differences among areas, such as poverty rates, as well as for county-level trends. Much of the 2005-2009 period examined came before unemployment peaked, too, she says. The researchers examined hospital-visit numbers and foreclosure rates in all ZIP Codes that had those data available.
The areas that have the highest foreclosure rates also tend to have a large portion of their population unemployed, underemployed or uninsured. Ms. Currie says the research accounted for this by instituting controls for persistent differences among areas, such as poverty rates, as well as for county-level trends. The time period examined, 2005 to 2007, was before unemployment peaked, she says. The researchers examined hospital-visit numbers and foreclosure rates in all ZIP Codes that had those data available.
They found that areas in the top fifth of foreclosure activity have more than double the number of visits for preventable conditions that generally don't require hospitalization than the bottom fifth.
At the local hospital in Homestead, Fla., a city of mostly single-family, middle-class homes about 30 miles from Miami, the emergency room has been bustling. Emergency visits to the hospital in 2010 more than doubled from 10 years earlier to about 67,000, and emergency department medical director Otto Vega says they will surpass 70,000 this year. Homestead has the highest rate of mortgage delinquencies in the U.S.—in June, 41% of mortgage holders in the hardest-hit ZIP Code of Homestead were 90 days or more past due on payments, according to real-estate data firm CoreLogic Inc.
While the most common ailments are respiratory problems and pneumonia, Dr. Vega notes an increase in psychosomatic disorders, such as patients with chest pain and shortness of breath, and others who feel suicidal. He said when a lot of young people, less than 50 years old, have chest pain, then you know it's anxiety.
Nationwide, overall emergency-room visits have also been rising, growing 5% from 2007 to 127.3 million in 2009, according to the American Hospital Association. But inpatient stays have largely kept pace with population growth over the last decade, says Beth Feldpush, a vice president for policy and advocacy at the National Association of Public Hospitals.
The number of people covered by employer-sponsored insurance has been falling, she says. When people don't have insurance, they put off seeking care for too long and end up in the emergency room.
And some of those seeking treatment had medical conditions before foreclosure—but the stress of losing their homes has exacerbated their ailments.
In 2008, Norman Adelman of Freehold, N.J., called his lender to ask for a forbearance of three or four months, saying he was about to undergo knee-replacement surgery. The lender complied and Mr. Adelman, who runs a home-energy business, says he began scaling back his work. He underwent needed tests and doctor visits.
After two months of not paying his mortgage, he successfully applied for a loan modification, taking his monthly payment from $2,700 to $1,900. But then the loan was sold—and a new servicer didn't recognize the terms of the arrangement, he says.
Mr. Adelman is fighting the new lender but says he has been in and out of the hospital for the last two years. He never had his knees replaced and is now on antidepressants and antianxiety medication.
Earlier this month, after working with the nonprofit Staten Island Legal Services, Ms. Graci received a trial loan modification. She may be happy about this , however she is still scared because it is not a permanent solution.

COUNTRYWIDE FINANCIAL BEING PUSHED TO REPURCHASE LOANS

2011-09-06T12:14:00.001-04:00

Story first appeared in Bloomberg.
A U.S. Bancorp unit asked a New York court to force Bank of America Corp.’s Countrywide Financial unit to repurchase more than 4,000 loans in a mortgage pool to repair breaches of contract related to improper underwriting.
The unit, U.S. Bank National Association, sued Countrywide yesterday in state court in New York, saying the lender agreed when it sold the pool in 2005 that it would repurchase all the loans within 90 days of receiving notice of a material breach. U.S. Bank is trustee for HarborView Mortgage Loan Trust 2005-10, which held the pool. The pool’s original value was $1.75 billion, the bank said in court papers.
U.S. Bank said in its complaint that soon after being sold to the trust, Countrywide’s loans began to become delinquent and default at a startling rate, and during the time period in which Countrywide originated the loans, it completely ignored its underwriting guidelines.
U.S. Bank asked the court to find that, as a result of a breach of its seller representation, Countrywide must repurchase all the loans. Or the court can order Countrywide to repurchase all defective loans, U.S. Bank said.
Thomas Joyce, a company spokesman, said U.S. Bank filed the lawsuit as trustee for HarborView, and they filed the lawsuit on behalf of the investors in the trust, at the direction of the investors in the trust.
Lawrence Grayson, a Bank of America spokesman said the are reviewing the complaint and do not have any comment at this point. Charlotte, North Carolina-based Bank of America, which was also sued, acquired Countrywide in 2008.
66% ‘Breached Representations’
A review of loan performance found that in a sample of 786 loans an extraordinary 66 percent of the loans breached one or more mortgage representations, according to the U.S. Bank complaint. The bank asked Countrywide to either cure the breaches or repurchase the loans, according to the lawsuit.
To date, Countrywide has failed to repurchase any loan put back to it by the trustee and has offered no basis for its refusal, the U.S. Bank’s lawyers said in court papers.

Attorney Generals Battle Over Fraud Enforcement Laws For Foreclosures

2011-08-30T10:22:00.000-04:00

Story first appeared on CNNMoney.
A deal to help victims of improper foreclosures has been slow going, in large part because of infighting among state attorneys general over giving banks a free pass from future lawsuits.
The talks are between the attorneys general and federal agencies on one side, and the five largest mortgage servicers, which comprise nearly 60% of the market: Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).
Attorneys general in states with stronger fraud enforcement laws, such as New York, Delaware and Massachusetts, don't want to give up the right to go after banks in future fraud lawsuits. And a few other state attorneys general have balked at the draft versions they consider too tough on the banks, according to sources familiar with the talks. A Novi Foreclosure Lawyer wants to see his clients get immediate results.
The infighting came to a head Tuesday, when Iowa Attorney General Tom Miller -- who had been leading the talks on behalf of the states --- booted New York Attorney General Eric Schneiderman from an executive team, accusing Schneiderman of working to actively undermine a deal with the states.
At the heart of the talks are wholesale changes in the policies and practices of mortgage servicing that could help consumers, especially those behind on payments. But the banks, while willing to commit to some massive changes, are pushing for immunity from future lawsuits. A Northville Foreclosure Lawyer want to see the infighting stop and concentration put back on the consumer instead of the bank.
Also at stake is a reported $20 billion pot of money, to be collected from the banks, which states could use to modify mortgages and counsel underwater homeowners, according to sources familiar with the talks.
Schneiderman has been tough on the banks. Earlier this month, his office filed a motion to oppose a proposed $8.5 billion settlement between investors and Bank of America and the Bank of New York over bad mortgage-backed securities. Schneiderman called that deal unfair and inadequate in court records.
Number of troubled mortgages on the rise again
He has his own broad investigation into banks that sold mortgages to investors, zeroing in on some of the same banks involved in the settlement talks. Schneiderman's probe targets the practice of assigning and bundling mortgages into securities, a Riverview Foreclosure Lawyer has said.
And he has said over the past several months that any deal with banks on foreclosure practices shouldn't prevent individual states from their own investigations into the mortgage-servicing industry.
If New York pulls out entirely, it could dampen down any final settlement award. But New York could still back the deal.
The government probe of mortgage servicers followed reports that the institutions were using shoddy documentation to improperly foreclose on homeowners. That news prompted several servicers to halt foreclosures for a short period of time.
The attorneys general launched the probe in October to review improper documentation and mortgage modifications. A Garden City Foreclosure Lawyer was happy to see this step taking place.
Federal government agencies involved include the Department of Justice, the Department of Housing and Urban Development, the Department of Treasury, the Federal Trade Commission as well as the new Consumer Financial Protection Bureau.

STANDARD AND POOR UNDER INVESTIGATION

2011-08-18T10:58:00.000-04:00

Story first appeared in the New York Times.
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.
It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.
During the boom years, S.& P. and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable. They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.
Since the crisis, the agencies’ business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits.
The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P., according to a person interviewed on that matter, and may be looking at the other two major agencies, Moody’s and Fitch Ratings.
Ed Sweeney, a spokesman for S.& P., said S.& P. has received several requests from different government agencies over the last few years, and that they continue to cooperate with these requests. He added that they do not prevent such agencies from speaking with current or former employees and that S.& P. is a unit of the McGraw-Hill Companies, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes this summer.
The people with knowledge of the investigation said it had picked up steam early this summer, well before the debt rating issue reached a high pitch in Washington. Now members of Congress are investigating why S.& P. removed the nation’s AAA rating, which is highly important to financial markets.
Representatives of the Justice Department and the S.E.C. declined to comment, as is customary for those departments, on whether they are investigating the ratings agencies.
Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case.
The government has brought relatively few cases against large financial concerns for their roles in the housing blowup, and it has closed investigations into Washington Mutual and Countrywide, among others, without taking action.
The cases that have been brought are mainly civil matters. In the spring, the Justice Department filed a civil suit against Deutsche Bank and one of its units, which the government said had misrepresented the quality of mortgage loans to obtain government insurance on them. Another common thread — in that case and several others — is that no bank executives were named.
Despite the public scrutiny and outcry over the ratings agencies’ failures in the financial crisis, many investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.
Companies and some countries — but not the United States — pay the agencies to receive a rating, the financial market’s version of a seal of approval. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp for investing decisions — which bolstered the agencies’ power.
A successful case or settlement against a giant like S.& P. could accelerate the shift away from the traditional ratings system. The financial reform overhaul known as Dodd-Frank sought to decrease the emphasis on ratings in the way banks and mutual funds invest their assets. But bank regulators have been slow to spell out how that would work. A government case that showed problems beyond ineptitude might spur greater reforms, financial historians said.
Richard Sylla, a professor at New York University’s Stern School of Business who has studied the history of ratings firms, said he thinks it would have a major impact if there was a successful fraud case that would suggest there would be momentum for legislation that would force them to change their business model.
In particular, Professor Sylla said that the ratings agencies could be forced to stop making their money off the entities they rate and instead charge investors who use the ratings. The current business model, critics say, is riddled with conflicts of interest, since ratings agencies might make their grades more positive to please their customers.
Before the financial crisis, banks shopped around to make sure rating agencies would award favorable ratings before agreeing to work with them. These banks paid upward of $100,000 for ratings on mortgage bond deals, according to the Financial Crisis Inquiry Commission, and several hundreds of thousands of dollars for the more complex structures known as collateralized debt obligations.
Ratings experts also said that a successful case could hamper the agencies’ ability to argue that they were not liable for ratings that turned out to be wrong.
Lawrence J. White, another professor at New York University’s Stern School of Business, who has testified alongside ratings executives before Congress, said their story is that they should be protected by full First Amendment protections, and that would be harder to make in the public arena, in Congress and in the courts. Also, if they mixed business and the ratings, it would certainly make their story harder to tell.
The ratings agencies lost a bit of ground on their First Amendment protections in the recent financial reform bill, which put the ratings firms on the same legal liability level as accounting firms, Professor White said. But that has yet to be tested in court.
People with knowledge of the Justice Department investigation of S.& P. said investigators had made references to several individuals, though it was unclear if anyone would be named in any potential case. Investigators have been asking about a remark supposedly made by David Tesher about mortgage security ratings, two people said. The investigators have asked witnesses if they heard Mr. Tesher say: “Don’t kill the golden goose,” in reference to mortgage securities.
S.& P. declined to provide a comment for Mr. Tesher.
Several of the people who oversaw S.& P.’s mortgage-related ratings went on to different jobs at McGraw-Hill, including Joanne Rose, the former head of structured finance; Vickie Tillman, the former head of ratings; and Susan Barnes, former head of residential mortgage bond ratings. Investigators have told witnesses that they are looking for former employees and that has proved difficult because so many crucial people still work at the company.
One former executive who has been mentioned in investigators’ interviews is Richard Gugliada, who helped oversee ratings of collateralized debt obligations. Calls to his home were not returned.

Roxanne Pulitzer’s $19.9 Million Home

2011-08-05T09:50:00.000-04:00

Story first appeared on WSJ.com
In the 1980s, Roxanne Pulitzer's bitter divorce from an heir to the Pulitzer publishing fortune made her the subject of headline-grabbing accusations ranging from cocaine use to occult rituals, all set in the wealthy enclave of Palm Beach, Fla.
Three decades and a few husbands later, Ms. Pulitzer, 60, appears to enjoy a quieter life today, though she said she does enjoy sleeping in late and drinking wine in the afternoon. She and her fifth husband, Tim Boberg, have focused lots of energy, and money, on their 23,000-square-foot, seven-bedroom home, set on 3½ acres overlooking the San Miguel Mountains. Decorated in a style that's best described as log-mountain-lodge-meets-Palm Beach, the house has a bowling alley, an indoor shooting range, a putting green, an indoor lap pool and a waterfall. There's also a replica of a labyrinth in Chartres, France, 45 feet in diameter.
After adding nearly every amenity they could think of, Ms. Pulitzer and Mr. Boberg, a 64-year-old retired co-founder of a large management consulting firm, said they've run out of house projects. So they've decided to sell, putting their house on the market earlier this year for $19.9 million, making it one of the most expensive listings in this remote mountain community. Not far away, comedian Jerry Seinfeld recently listed his 14,200-square-foot, 11-bedroom home on 26 acres for $18.3 million.
The home, originally 8,800 square feet, is now 23,000 square feet.
Matthew Hintermeister, the listing broker with Peaks Real Estate Sotheby's International Realty, said although the price-per-square foot for their place is similar to other listings in the area, he's only had a few showings so far (potential buyers must prove they have nearly $20 million in liquid assets to see the house). The couple said they're realistic about market. The buyer "would have to be somebody who loves a labyrinth," Ms. Pulitzer said.
Ms. Pulitzer, who received minimal alimony and lost custody of her sons after her divorce battle in the 1980s, later wrote a tell-all book about it. She's since written three novels based in Palm Beach, and is currently working on her fifth book. In 1999 she and Mr. Boberg met in Palm Beach, where they have an apartment. They bought their Telluride home in 2001 for $5.5 million and in 2006, were married on the back deck of house. It's the third marriage for Mr. Boberg and Ms. Pulitzer's fifth. When they bought it in 2001, the house was 8,800 square feet. But a couple of years later Ms. Pulitzer told her husband she wanted a bowling alley for her birthday. In the end, the couple expanded the house by an additional 13,600 square feet and added more amenities, spending more than $8.5 million.
To avoid adding a narrow, oblong shape to the house, the couple decided to widen the addition by also placing a shooting range and a 70-foot-long lap pool on either side of the bowling alley.
The bowling alley has an AMF regulation electronic scoring system. The shooting range is made of 1-foot-thick, steel-reinforced concrete and has a switch-operated wind machine that sucks the lead particles out. The indoor swimming pool is flanked by two giant sculptures of Buddha heads as well as a fireplace and cushioned lounge chairs.
Directly upstairs, the couple built a 4,000-square-foot master suite decorated much like the rest of the house. While there are vaulted ceilings with log beams and a large stone fireplace, the furnishings, created by the couple's designer in Palm Beach, include comparatively delicate-looking couches and chairs upholstered in pale pink and green fabrics. The bathroom walls are in pink fabric brocade.
Outside the couple's bedroom is a giant teak sculpture of a rhinoceros, part of Mr. Boberg's large collection, much of which is displayed around the house. Ms. Pulitzer's passion is gardening, and in addition to her outdoor gardens there's also a glass solarium just off the swimming pool, complete with misters and grow lights. There are a few remnants from her years of infamy, including a framed photo of Ms. Pulitzer when she posed for Playboy and framed notes from the late Hunter S. Thompson, who she said she become friends with after he wrote about her divorce trial for Rolling Stone magazine.
Mr. Boberg said he's already looking forward to possibly building a new house in the area when this place sells, though Ms. Pulitzer is more reluctant to let the home go.

ORANGE COUNTY SEEING RECOVERY

2011-08-04T11:14:00.000-04:00

Story first appeared in Bloomberg News.

Investors are bidding up prices for top-tier office buildings in Orange County, California, even as vacancies stand at almost 20 percent after the collapse of the subprime-mortgage industry that once made the region its home.

Prices paid for offices in the area climbed 63 percent to $111 a square foot in the second quarter from recession lows of $68 in 2009. An 11-story building near John Wayne Airport is on the market at $225 a square foot, up 80 percent from the $125 it fetched two years ago.

The gains come in a region where vacancies more than doubled with the
2007 collapse of subprime lenders including New Century Financial Corp. and Ameriquest Mortgage Co., both of which were based in Orange County. Second-quarter asking rents were down 31 percent from the 2007 peak, and office vacancies stood at 19.2 percent. That compares with a 17.2 percent rate nationwide.

Capitalization rates, a measure of investment yield, for Orange County office buildings dropped to an average of 6.9 percent in the second quarter from 7.7 percent in all of last year and 7.9 percent in 2009.‘Premium Price’

Orange County, home to the Disneyland and Knott’s Berry Farm amusement parks, has been attractive to office buyers because of the region’s excellent infrastructure, school system and weather.

The region was a major U.S. hub for mortgage lending. The financial-market crisis had a major impact on these firms and employment. It spelled the end of Orange County.

Joblessness in the county soared to a high of 10 percent in January 2010 from 3.1 percent in December 2006, during the property boom, according to California’s Employment Development Department. In May, the latest month for which figures are available, the rate was 8.5 percent. Office vacancies rose to a high of 21.8 percent in the second quarter of last year from a low of 8.6 percent in mid-2006, Cushman said.

Office transactions of more than $5 million climbed 55 percent to $1.09 billion last year from $701.8 million in 2009. That compares with about $6.33 billion in the 2007 peak.
Volume so far in 2011 totals $260.6 million.

Emmes Group of Cos., based in New York, in June 2009 paid $160 million, or $302 per square foot, for the 20-story 3161 Michelson Ave. in Irvine, which was 38 percent vacant at the time. The price included a parking garage.

The building was developed as the headquarters for New Century, the largest independent mortgage lender to subprime borrowers before it collapsed in 2007 as defaults by homeowners with poor credit soared. The company never occupied the space.

The property used to belong to MPG Office Trust Inc., the Los Angeles- based landlord formerly known as Maguire Properties. MPG has been disposing of buildings to reduce debt after paying $2.88 billion for all the real estate in downtown Los Angeles and Orange County that Blackstone Group LP purchased in its acquisition of Sam Zell’s Equity Office Properties Trust.

Vacancies at 3161 Michelson have dropped to about 24 percent. Tenants include Hyundai Capital, Jacobs Engineering Group Inc. and real estate services provider Eastdil Secured LLC.

Irvine Co. said in December that it bought Pacific Arts Plaza in Costa Mesa, an 827,000-square-foot (77,000-square meter) property with four office buildings and four restaurants, for an undisclosed amount.

They commented that because they think they will see positive returns in the future, they are comfortable with prices that have more modest initial yields on investments as they believe the recovery will outperform what most people anticipate.

Ocean West Capital Partners, founded early last year, completed the purchase of a 16-story building at 2600 Michelson for about $70 million, or $228 a square foot, this month. The property, previously owned by MPG and 50 percent vacant, had been under receivership for a year and a half.

Ocean West bought the building in a joint venture with New York-based Dune Real Estate Partners.

Their view is they get to step in to reposition the building and to reintroduce it to the market. They expected horizon for returns is around five years. They are already seeing some leasing activity since they acquired the building.

While occupancies are starting to rise in Orange County, rents remain depressed. The average monthly asking rent at Class A, or the highest - quality, office buildings was $2.15 a square foot in the second quarter, down 5.7 percent from a year earlier. That compares with a record $3.13 in the third quarter of 2007.

Epicor Software Corp. in February signed a 10-year lease for about 68,000 square feet at a Class A building near John Wayne Airport -- a centrally located area with a high concentration of top-tier properties -- for $1.72 a square foot, which includes such services as heat and water. In May, Access Insurance Holdings Inc. agreed to a five-year lease for 31,000 square feet at a Class A building in Orange at the same rate, the brokerage said.

Those actively buying, mostly local investors who understand the market, are counting on a recovery in a region where new construction was nonexistent in the first quarter. While Orange County will come back, some office buyers may have to wait 10 years for returns.

A broader recovery in Orange County is dependent upon a decline in unemployment, which would help boost office demand and rents.

What’s striking is how quickly the appetite has returned to such a ferocious level after such a low point. In 2005, 2006 and 2007, it moved so quickly. In the last 12 months, it’s moved as quickly in terms of expectations.

RENTALS GO UP AS HOUSING GOES DOWN

2011-08-04T09:33:00.001-04:00

This story first appeared in USA TODAY.
Empty housing has been on the rise since the recession and real estate bust, but occupancy is starting to pick up in some places — largely because of soaring rental demand.
Neighborhoods from Tacoma, Wash., to New York's Bronx borough and parts of Albuquerque are showing an uptick in occupied housing.
There are quite a lot of variations in how metropolitan areas, for example Raleigh Homes are weathering the current economic conditions. Justin Hollander, an urban planning professor, led the research.
Hollander studied data on mail delivery to residences in nearly 30,000 ZIP codes in the contiguous 48 states during the housing boom and collapse. When a unit is vacant, the Postal Service scratches the address off its delivery list.
Occupied housing has declined in about a third of ZIP codes since 2009. From 2000 to 2006, before the recession hit, there were 26% fewer postal areas that experienced an increase in vacant homes.
Widespread decline
Percentage of ZIP codes that registered a net decline in housing occupancy from February 2009 through February 2011:
Suburban areas, where most new residential development was concentrated during the real estate boom, were hit hard: The number of ZIP codes in the suburbs that suffered drops in occupancy grew the most in the latter half of the decade.
Across the southern United States, from Atlanta to Fort Myers (Fla.) to Phoenix, massive new housing developments are largely unoccupied, while older housing is abandoned due to foreclosure.
But the nobody-home phenomenon haunting more and more neighborhoods across the USA is reversing in some cities:
•Tacoma, Wash. The merger of Fort Lewis and McChord Air Force Base last year has created one of the largest military facilities in the world.
The community now numbers almost 34,000 active-duty military personnel and 5,100 reservists, 49,500 family members, more than 29,000 military retirees and 15,000-plus civil service personnel and contractors all of whom need housing.
A real estate consultant in Tacoma and the suburb of Lakewood said their rental market is very strong compared to Cary homes. So strong that rental occupancy is at 98%, she says.
A condominium project in downtown Tacoma has been converted into a 50-unit rental and is filled, mostly with military.
In the last several months, 30,000 military contractors and others have needed temporary off-base housing.
The city has not been immune to housing market woes, however. Prices have fallen 30%.
•The Bronx. Astronomical housing prices in Manhattan have pushed residents — many of them Dominican immigrants — into the adjacent borough.
Many are priced out as Manhattan continues to gentrify. In South Bronx and West Bronx, there's a pent-up demand for rentals.
In 2002, as the housing market soared, the demand for home ownership was so high that older single-family homes on big lots on the east and north sides were torn down and three or four new ones built in their place. Housing units multiplied so much that there was a limit development through zoning changes.
Many of these row houses that went up came without parking or adequate parking. Some units had nine cars per household.
Hollander's analysis shows some Bronx ZIP codes have added more than 1,000 occupied units since 2006.
•New Orleans. Hurrican Katrina devastated the city in 2005 and housing occupancy plummeted in almost every ZIP code from 2006 to 2009. In 70117, home of the decimated Lower Ninth Ward, the number of occupied homes dropped by more than 9,500 during that time.
There are signs of recovery: 1,799 more occupied units in that ZIP from 2009 to 2011. In 70122, where the Gentilly Terrace and St. Bernard Area neighborhoods are, there were almost 3,500 more occupied housing units in 2011 than in 2009.
•Albuquerque. Janice McCrary, executive vice president of the Greater Albuquerque Association of Realtors, does not mince words saying new-home building is probably dead in Albuquerque.
Yet one ZIP code (87114) on the city's far west side has added more than 3,800 occupied units since 2006. Others, in older, more established neighborhoods, have added more than 700. Apex homes are also seeing an increase of owners.

PROPERTY TAX LAW HITS CALIFORNIA LOCAL GOVERNMENT HARD

2011-07-27T13:59:00.001-04:00

Story first appeared on WSJ.com.
Declining home prices are starting to slam California harder than the rest of the nation, in part due to a state law that sets a ceiling—but no floor—on property taxes.
The toll is evident here in Calaveras County, a largely rural area about 100 miles east of San Francisco. Over the past three years, it has seen among the biggest property-tax roll declines of any California county, with the total value of taxable properties down about 5% from last year—and 18% over the past three years—to $5.67 billion. Statewide, assessed values declined 1.8% last year from a year earlier, according to state data.
Calaveras's shrinking property taxes have resulted in cuts to the sheriff's department and public-health services, as well as an effort to cut 10% of the county's budget for the coming year. The tax drop also has pitted the county assessor, who has lowered taxes by re-evaluating home prices, against the head of the county board of supervisors, who said the reassessments have been too aggressive.
Calaveras's situation shines a spotlight on the unintended consequences of California's property-tax law. While many counties nationwide have offset property-tax declines by raising tax rates, a 1978 California law dubbed Proposition 13 prohibits that practice in the Golden State. The law caps property taxes at about 1% of a home's value and forbids major tax increases unless a home is sold or rebuilt, though it permits taxes to go down if a home's value drops.
As a result, while local governments in Washington, Maine, Hawaii and elsewhere recently raised property-tax rates to compensate for home-value declines, California doesn't have that option. It can take years for a California county to recover from a short-term decline in property-tax revenue, because tax revenue doesn't go up until home prices rise and many properties are sold.
Nationwide, property taxes make up about 45% of local-government revenue. They have become a pivotal source of funding for local governments as other revenue sources dried up.
President of the Center for Governmental Studies, a nonprofit and nonpartisan think tank in Los Angeles, said there were pros and cons with Prop 13. While the measure has succeeded in its goal of protecting senior citizens on fixed incomes from big tax increases due to rising real-estate values, he said, people didn't expect California property prices would drop for a long period, and therefore didn't foresee the problems in counties suffering from declining property values.
Counties across the state are now grappling with Prop 13's fallout. Central California's Stanislaus County saw its property-tax roll—the cumulative value of assessed properties—fall 4.7% this year and 21% over the past four years. It levied $447 million in property taxes last year, down 11.6% from two years earlier.
In San Diego County, property-tax levies in 2010 fell by more than $100 million to $3.96 billion—the first year-over-year decline in more than a decade.
In Calaveras, declining property values and property taxes have put Leslie Davis in the hot seat. Since being elected the county's tax assessor last year, she has been fielding calls from residents who said their taxes were too high because their homes were assessed at prebust values.
Under state law, assessors are supposed to re-evaluate homes to make sure they are being taxed at a fair rate. So Ms. Davis sent employees to re-evaluate home prices, which generally had gone down.
That caused consternation among other officials, who were struggling with state budget cuts and a county unemployment rate of more than 15%.
The county's board of supervisors, led by Mr. Tryon, said it will have to cut services such as sheriff patrols.
He has criticized Ms. Davis's reassessments, saying they are too aggressive. He added that all we live on in this county is basically property tax. He commented that assessors have a lot of discretion, and Ms. Davis has used hers in a way that's devastated the county.
Ms. Davis said she is just doing her job, because the law requires her to reassess.

PREOWNED HOME SALES ARE DOWN

2011-07-26T13:56:00.000-04:00

Story first appeared in USA TODAY.
Home sales slipped in June to the lowest in seven months as the U.S. housing market struggles to find traction.
Sales of existing homes, including single-family homes, condominiums and townhouses, dropped 0.8% in June from May and 8.8% below June last year, when sales were boosted by federal tax credits.
The results were worse than forecast, underscoring that a variety of factors are weighing on the market, including the recent deterioration in the pace of the U.S. economic recovery.
In June, 16% of Realtors said they had home sale contracts canceled, up from 4% in May. The reason for so many cancellations remains a mystery, says an economist. But he says that tight credit conditions and low appraisals — both of which can kill home sale deals — are prime culprits. Concerns about Washington's standoff over the federal debt ceiling may also be causing hesitation among some consumers and lenders.
Despite the slowdown in sales in June, the median price edged up to $184,300. That's up 0.8% from a year earlier. Median prices fell in the South and Midwest, but rose 3.1% year over year in the Northeast and 9.5% in the West.
Those increases may have more to do with the mix of homes selling than with any sustained rebound in prices, Newport says.
Median prices rise if higher-priced home sales make up more of the sales. That may be occurring if those buyers are locking in deals to get the best mortgage rates.
As of October, the size of loans that government-backed mortgage giants Freddie Mac and Fannie Mae can buy from lenders is expected to drop in many higher-priced regions. That may make bigger loans more expensive and harder to get.
The coming change is already affecting some sales contracts, the NAR says. Some lenders are enforcing the lower loan limits now, anticipating that deals may not close before Oct. 1, the association says.
Most U.S. economists expect home prices, down 30% from their 2006 peak, to continue to fall this year and perhaps next.

WELLS FARGO PAYS FINES FOR MORTGAGE ABUSE

2011-07-26T13:52:00.000-04:00

Story first appeared in USA TODAY.
Wells Fargo has issued a statement on its website indicating that it will reinforce oversight of mortgage lending practices and also move toward providing compensation to customers who were harmed by alleged mortgage abuses.
Chairman and CEO John Stumpf says in the statement that the alleged actions committed by a relatively small group of team members are not what they stand for at Wells Fargo. He added that fair and responsible lending practices have been at the core of their culture, and they will continue to guide them as they work closely with the Federal Reserve to provide restitution to customers who may have been harmed, and to reinforce their internal controls so they further reflect Wells Fargo's commitment to helping customers succeed financially.
Wells Fargo also points out in the statement that the agreement does not include an admission to committing the allegations, and indicates that before the agreement, it voluntarily provided restitution to about 600 customers in the form of cash refunds, reduced interest rates and other compensation.
Earlier Post:
To settle civil charges, Wells Fargo will pay an $85 million fine and compensate borrowers for allegedly falsifying loan documents and steering some borrowers to higher-interest subprime mortgages.
In its news release, the Federal Reserve says it is the largest consumer-enforcement fine the agency has imposed and the first formal enforcement action taken by a federal bank regulatory agency to address alleged steering of borrowers into high-cost, subprime loans.
Wells Fargo Financial, a former non-bank subsidiary, made subprime loans that primarily refinanced existing home mortgages in which borrowers received additional money from the loan proceeds in so-called cash-out refinancing loans, the Fed said.
Sales agents allegedly steered borrowers who were potentially eligible for prime interest rate loans into loans at higher, subprime interest rates, resulting in greater costs to borrowers. The Fed's order also addresses separate allegations that Wells Fargo Financial sales personnel falsified information about borrowers' incomes to make it appear that the borrowers qualified for loans when they would not have qualified based on their actual incomes.
The Fed says the tactics were linked to the company's incentive compensation and sales quota programs and the lack of adequate controls to manage the risks resulting from these programs.
In addition, 16 former Wells Fargo Financial sales personnel are barred from working in the banking industry.
The Fed is requiring the bank to improve oversight of its anti-fraud and compliance programs and incentive compensation and performance management policies for personnel who sell and underwrite home mortgage loans.
As usual in such settlements, the bank did not admit any wrongdoing.
Tuesday, Wells Fargo reported record second-quarter net income of $3.9 billion.
In another big mortgage-abuse announcement, the Federal Trade Commission said today that 450,177 homeowners who took out loans with Countrywide Financial Corp. will begin receiving their share of a $108 million settlement over claims the lender charged excessive fees to borrowers facing foreclosure, the Associated Press says. Checks will be mailed Thursday.
Bank of America Corp. acquired Countrywide in 2008.
AP writes that the FTC also accused Countrywide of making false claims to some borrowers about how much they owed on their mortgage or the status of their loan, and claimed the lender added fees and other charges to borrowers' mortgage accounts without notice.
The FTC says the refunds are going to borrowers whose loans were serviced by Countrywide between January 1, 2005, and July 1, 2008, and who were subject to the company's allegedly unlawful practices.

Zillow Stock Soars

2011-07-21T13:21:00.000-04:00

Investors set aside housing market doldrums and rushed to grab shares of real estate website Zillow on Wednesday, valuing the company at as much as $1.6 billion.
Zillow Inc., which has never made a profit, is yet another beneficiary of strong investor demand for the latest crop of Internet stocks. Many of the recent market debutantes provide social networking, online games or search. Zillow's shares tripled in their trading debut on the Nasdaq stock market. Zillow had set a price of $20 for its stock late Tuesday. The shares rose as high as $60 before settling back to close at to $35.77, valuing the Seattle-based company at about $950 million.
The weak housing market did not hurt Zillow's IPO. Figures released Wednesday show that Americans are buying homes at the weakest pace in 14 years.
Zillow's initial public offering follows filings by high-profile Internet companies ranging from daily deals site Groupon Inc., the professional networking service LinkedIn Corp., along with Zynga Inc. best known for the online game "FarmVille." Though these Internet-based companies are generating a lot of IPO euphoria, but the attention they receive on their initial day of trading has not guaranteed success. Pandora Inc., the online radio service, has seen it shares fluctuate wildly since going public on June 14. Pandora's shares are now trading at $17.60, 10 percent above their offer price.
Founded in 2004, Zillow provides online listings for more than 100 million homes that are either for sale or for rent. A feature called "Zestimate" helps estimate property values, so that people can see how much homes in their neighborhood or desired neighborhood- are worth.
The Zestimate has drawn criticism from homeowners across the country who suddenly had the value of their homes - as well as what they bought it for - easily accessible by anyone with an Internet connection. Zillow calculates the figure by taking available data, most of it public, and entering it into a formula that takes into account hundreds of such details as how many bathrooms or bedrooms a home has or where it is located. The site also offers personalized mortgage rates and housing advice. The company has never made a profit, though it grew its revenue 74 percent in 2010, to $30.5 million.
Zillow makes money from advertising, by real estate professionals as well as mortgage companies and brands such as phone or insurance companies. Spencer Rascoff, Zillow's 35-year-old CEO, said the volatile housing market has actually helped the company grow its ad revenue. That's because it accelerated companies' migration to online advertising from higher-priced offline ads in newspapers and elsewhere.
In the first quarter of this year, Zillow's loss narrowed to $826,000 from $2.8 million in the same period a year earlier and revenue doubled to $11.3 million. The company reported a loss of $6.8 million last year.
Though investors are betting on yet-unprofitable companies such as Zillow, experts say the current fever for Web stocks is hardly the bubble of the late 1990s and early 2000s. There are far fewer companies going public, and the ones that do have been around longer and have established business models. That wasn't always the case in the '90s. Back then, investors didn't even look at the companies they were snapping up, and only asked "how many shares can I get?". Investors are being more careful these days.
Whether the company's business model warrants the billion-dollar valuation is another question.
Including a private stock sale of 275,000 shares, Zillow raised $74.7 million in the IPO. That the company offered relatively few shares is another likely reason for its strong market debut.
Also on Wednesday, SkullCandy Inc., the maker of trendy headphones for iPhones and other gadgets, also went public. The company priced its shares at $20. Wednesday afternoon, the stock was trading slightly higher at $20.12 after earlier hitting $23.40.

TRENDS ARE FOR HOMES TO BE SOLD WITH REAL ESTATE APPS

2011-07-12T11:38:00.000-04:00

It's second nature for many consumers to research any big-ticket purchase online before they pony up their hard-earned money. So why should buying a house be any different?
Well, it's not. Online real estate listings have been common for years, but now an array of search tools and smartphone apps let buyers tap into a wealth of information on the fly.
Some brokers are using quick response codes — or QR codes — on their "For Sale" signs and flyers. QR codes are the small square versions of a bar code that look like ink blots and they're popping up more frequently in newspaper ads and other locations. Scan the code with a smartphone loaded with a QR app and it takes you directly to a website with photos, additional details and in some cases videos.
Real estate company Coldwell Banker has in the past two years encouraged agents to use video cameras to record home tours and clips of themselves offering advice.
The company has its own channel on YouTube and says it has about 70,000 videos posted. About 3 million views have been logged since the site was launched two years ago.
Videos are better than the traditional slide show because, for example, buyers can get a better sense of how the dining room flows into the living room. Video can also help provide context on where the home is in relationship to neighbors and show sights and sounds around the home. For example, the video of a beachfront home can show how close it is to the beach and demonstrate if the sound of the surf and seagulls can be heard from the deck.
Some agents have attached a camera to the dash or rearview mirror of their car and give viewers virtual tours and buying tips while driving around.
Video tours are expected to only grow in popularity as devices like the iPad make them much easier to watch and wireless providers offer higher speed connections.
Many other smartphone applications are available, too.
For example, Trulia.com has mobile apps for the iPhone and iPad and Android-powered phones. One enables users to see prices in a city or county using color-coded maps. It also shows neighborhood details including restaurant and grocery store locations.
Another Trulia app shows open houses and adds them to your calendar, has a QR code reader, and a voice search feature allowing the user to say the location and number of bedrooms and bathrooms to navigate to a home.
Zillow.com, offers free apps for the iPhone and Android smartphones with detailed home data including those for sale and rent, updated mortgage rates, and calculators.

HOME SELLING TIPS

2011-07-12T10:50:00.000-04:00

The home next door is in foreclosure. The neighbors down the street just put their house up for sale at a ridiculous discount. And "For Sale" signs litter lawns all over town.
Welcome to the toughest selling conditions in years.
The bright side of selling a home in a down market is you get to seek your own bargain if you're going to buy after you're done. Closing a sale, however, can be teeth-grindingly slow if you don't do everything right — and maybe even if you do.
It's probably the worst time you could find to sell a house since the late '70s or early '80s.
Sales of previously occupied homes continue to sag after hitting a 13-year low last year.
Realtors sometimes are taken off guard at the perceived randomness of it all.
A house that's in a good location, fully updated and seems perfectly priced might sit on the market without a nibble.
One homeowner is leaving nothing to chance in selling her four-bedroom colonial in Norwalk, Conn. She has taken every action she could think of to get an offer for the house she and her ex-husband bought 17 years ago.
She researched and interviewed four brokers before hiring one, made a YouTube video showcasing the house, and created a hardcover book of comments and photos of the house in all four seasons to display for open house visitors. She used Facebook and word of mouth to advertise, and marketed on close to a dozen websites. And she priced her house competitively with the broker's guidance after studying the comps herself. The initial listing of $683,000 in late April was far less than the $850,000 she had sought in a failed attempt to sell near the height of the market in 2004.She even brought in a shaman to cleanse the house of any negative vibes, figuring it couldn't hurt. Lowering the price can be a home seller's most painful move. It was for this homeowner, who reluctantly dropped her asking price 5% to $649,230 after eight weeks.
If you really want to move your house in this kind of a market, you have to do everything. It's a lot of effort, but people shouldn't leave it all in the hands of their broker.
Unfortunately, all that work still doesn't guarantee a sale, particularly when many buyers feel little urgency to act and assume they will get a better deal by waiting.
Selling is really emotional for many because they have put a lot into their house.
The best tips for selling underscore how the market has changed:
1. PRICE AGGRESSIVELY.
Even if you're fully aware that prices have plummeted, it can come as a shock when a real estate agent advises you to slap a low-low price on your home.
The reality is that only 4% to 10% of homes on the market nationwide sell in a given month right now. A typical selling time for a home the last two years has been eight to 10 weeks. But that timeframe makes selling sound easier than it is, because it doesn't factor in all the homes that never sold, or were pulled off the market and later relisted. With that in mind, you need to ask for at least 1% less than competing homes.
Holding out for a higher price generally doesn't work well in this market, either. Among homes that took at least four months to sell, nearly half the owners accepted less than 90% of their asking price, many far less.
Days on the market can be a helpful statistic. Available through most multiple listing services, it shows the average time it takes to sell a home. The specific sales data can provide valuable insight. When reviewing comparable homes it will become clear which list prices led to fast sales and which were set too high and prolonged the sale.
But don't focus on the overall average for a specific location. This can be misleading because it accounts only for homes that sold. Also, homes that were pulled off the market and relisted start the clock back at zero.
Sellers often like to look at the ratio of list price to sales price. Your local ratio gives an idea of the latest price trend and indicates how much a typical seller came down from the list price.
Be wary of using that to justify refusing to lower your price, however. For example, homes sold across the country in April went for an average of 96% of their list price. But it, too, does not reflect all the homes that failed to sell that month — by far the majority.
2. STAGE LIKE A PRO.
You may not be able to compete with the price of homes in foreclosure, or with short sales — those in which a lender is allowing the seller to list for less than is owed on the mortgage. But you can outshine them when it comes to the condition and appearance of your house.
Staging is no longer optional. It's like a boot camp that the seller and listing agent go through together.It can be an intense period of planting flowers, painting and depersonalizing the house so buyers can envision themselves living there. Getting rid of clutter and rearranging rooms to highlight the best features also are essential.
What's new this year is that many sellers are willing to go beyond the basics of staging to make physical upgrades. They’ll do whatever it takes to look better than the house down the street now.
One homeowner this year hired a contractor to turn a three-bedroom, one-bathroom home into a four-bedroom, two-bath. The month-long, $15,000 renovation paid big dividends: The house sold for at least $50,000 more than it was expected to otherwise.
After learning a valuable lesson about today's persnickety buyer, one homeowner went the extra mile in renovating the kitchen of his house in N.Y. Recognizing that their '70s-era kitchen looked dated, he and his wife first spent $2,000 on stainless steel appliances before putting the three-bedroom home on the market in April for $399,000.
After 15 showings, he says, they realized that nobody could get past the fact that a project was waiting for them in the kitchen. So they pulled the house off the market for two weeks while he installed a new floor, ceiling, cabinets and granite countertops. Then they put it back on the market in late June at the same price. They hope to justify the additional $10,000 investment with a quick sale.
3. GO ALL-OUT ONLINE.
Sellers used to post photos of their homes online only sparingly to entice buyers to visit. No longer. With about 90% of buyers starting their search online, you can't just tease and hope.
That whole strategy is thrown out the window, because all listings are online and there are so many that you have to compete for people's attention.
Agents recommend putting lots of high-resolution photos and as much information as possible online, including citing upgrades and what you love about living in the home. If you don't show a photo of a key area — kitchen, bathrooms, backyard — prospective buyers may assume there's something wrong and move on.
It's important to remember that buyers are going mobile, too. The use of smartphones and apps to review listings has exploded.
Nearly 1.8 million homes are viewed daily on Zillow's apps alone, and the service says 30% of its weekend traffic and 20% overall come from mobile devices.
So, make sure your listing agent markets your home in as many places as possible — from AOL Real Estate to Zillow — with a special emphasis on sites that work well for mobile access.
4. BE FLEXIBLE WITH BUYERS.
The single biggest change in the real estate market since the recession is tighter financing. Banks once freely dispensed loans for 95% of a home's value, but a requirement of 20% down is becoming the new normal in many cases. And any perceived imperfection in a credit record can spell denial.
If you're about to accept an offer, make sure you inquire about the down payment and are informed about the buyer's financing status. Consider accepting an all-cash offer, even if it's not your highest. If your buyer is hitting a roadblock, consider talking with the lender to help structure a deal.
Don't be afraid to speak directly to the prospective buyers. If they say they're leery about committing to a home in this environment, you can help make the case. Be ready to show them any recent local statistics indicating that owning is better financially than renting, as is the case in many areas. And if you don't accept an initial offer, share information to encourage a counteroffer and be ready to bridge the gap to close the sale.
5. DON'T RUSH TO RENT.
The fallback for many homeowners who can't sell is to rent the property. But it's a strategy that carries risk. With so many foreclosed and underwater houses on the market, there's at least a 50-50 chance that any given house will be worth less in a year than it is now.
Not only that, you may be planning to move out of town, so renting would entail being a long-distance landlord. Homeowners may need to take a deep breath and treat their house as a sunk cost — money that has been spent and cannot be recovered. The house today is worth what it's worth.
Accepting that advice may bring perspective and help you sell in the worst market in years.

BEFORE YOU MOVE LOOK UP THE NEIGHBORHOOD’S INFORMATION

2011-07-07T17:06:00.001-04:00

If you find a home on the market that has the right look, amenities and price, you're still only halfway there.
That's because a neighborhood is often as big a consideration as the house itself. Before you buy, you need to know if it's safe. Are the schools nearby any good? Are there parks, shopping centers or public transportation within walking distance?
Fortunately, there are more than a few websites that can help answer these questions and more.
SAFE NEIGHBORHOOD?
What makes a neighborhood livable is entirely subjective. It depends on the lifestyle you're seeking. But, crime is one concern just about everyone shares.
As a test, a selected neighborhood in Los Angeles called Los Feliz, which is about 5 miles from downtown, was ran through PolicyMap.com, NeighborhoodScout.com, CriminalSearches.com and newcomer Trulia.com, which recently launched its Crime Maps feature.
Overall, Trulia's approach was the most compelling. The site's maps allow you to visualize where -and to what degree- crime may be happening, down to the street level. The service is free, unlike NeighborhoodScout, which requires a paid subscription to access neighborhood-level crime stats. Those plans run between $39.99 a month and six payments of $19.99 for a half-year subscription.
Trulia uses data from the FBI and local law enforcement agencies on reported crimes, such as burglaries, assaults, shootings and vandalism. It then illustrates the concentration of crimes per block over a 12-month period on a color-coded map. The site also shows any individual crimes that have been reported within a span of just over a week, although the incidents represented a snapshot that was more than a month old.
At present, Trulia only has crime maps for 50 U.S. counties, Los Angeles being one of them.
One drawback is that the site doesn't let you search by address or ZIP code, which means you have to know where to look on the map to find the neighborhood you're interested in. It's easy to see how this would be a hassle for anyone planning to move to an unfamiliar city.
The company says it plans to add a better search function, along with the ability to view the crime data across a wider time frame.
Trulia also lets users comment on the incidents of reported crime to add the perspective of residents in the area. The idea is for residents to provide context that might get lost in a trove of crime report figures. For example, in some neighborhoods, a concentration of alcohol-related arrests may be due to there being several night clubs on a given block, and not necessarily indicative of an area being unsafe.
The visual feel of Trulia's Crime Maps is likable. And seeing a square block area cast in crime-riddled red makes it easy enough to avoid.
Similarly sobering is CriminalSearches' Neighborhood Watch section, which lets users enter a ZIP code or address and whips up a street map dotted with locations for registered sex offenders. The site also provides details about the individuals, including their full name, last known address and what type of crime they committed.
The portal also collects data from traffic and other minor offenses, and warns not all of the people listed may actually be criminals.
GOOD SCHOOLS?
Another factor that can make or break someone's view of a neighborhood is the strength of its schools
Several websites offer an assortment of school and neighborhood data. Their school profiles are generally assembled by mining public school and demographic data. As a result, details on private schools are harder to come by.

Five sites were tried: Zillow.com, GreatSchools.com, NeighborhoodScout, SchoolMatters.com and Education.com. Although they all hit on major data points, such as test scores and teacher-to-student ratios, Zillow was better at placing the school results in the context of a home buying decision.
Zillow lets users search a map for neighborhoods and shows where schools are located. The real estate site also lists school profiles from the National Center for Education Statistics and Education.com.
Users can find testing data, teacher information and a demographic overview of the school's student population.
GreatSchools was the best. It also provides details on spending per student, teacher experience and extracurricular programs.
The site grades schools on a five-star system derived, in part, by comparing scores on state standardized tests. And it features parent feedback and online forums, where visitors can pose questions and discuss their concerns.
CONVENIENT LIFESTYLE?
Many look for neighborhoods where you can get to a restaurant, bar or the drugstore and supermarket without having to drive - what is known as the walkability factor.
It's easy to dial up the location of nearby restaurants on real estate and mapping websites, as well as many smartphone apps. But Walkscore.com takes a different approach, using an algorithm that promises to determine a property's overall walkability.
The site's formula discerns how close a home is to retail shops, public transportation and other conveniences. It then generates a walkability score between 0-100. The higher the score, the more likely the property is within a walking distance of neighborhood businesses.
Homes that score 70 or above represent a very walkable neighborhood. Many properties in dense urban metros, like Manhattan, score very high. The more walkable the particular neighborhood, the higher the score. For instance, the Upper West Side scores a perfect 100.
Los Feliz comes in at a respectable 78.
For those in need of a comprehensive, dossier-like report on a neighborhood, there's little you can't find on PolicyMap.
The site pulls together U.S. Census data, which is particularly useful in sizing up population traits such as age, ethnicity, education level and even voting patterns.
The site is free, but offers subscription plans for expanded information. Sign up for the week-long free trial and you can get a report on the neighborhood, or even state, surrounding a specific address.

BANK OF AMERICA SETTLES AT $8.5 BILLION

2011-06-29T16:32:00.000-04:00

Bank of America and its Countrywide unit will pay $8.5 billion to settle claims that the lenders sold poor-quality mortgage-backed securities that went sour when the housing market collapsed.
The deal, announced Wednesday, comes after a group of 22 investors demanded that the Charlotte, N.C. bank repurchase $47 billion in mortgages that its Countrywide unit sold to them in the form of bonds.
The group, which includes the Federal Reserve Bank of New York, Pimco Investment Management, and Blackrock Financial Management, argued that Countrywide enriched itself at the expense of investors by continuing to service bad loans while running up servicing fees.
Bank of America, which bought Countrywide in 2008 for $4 billion, has denied those claims.
Bank of America CEO Brian Moynihan said Wednesday that the settlement would minimize future economic uncertainty in the banking business and clean up the mortgage issues largely stemming from our purchase of Countrywide.
For several months, Bank of America battled claims based on estimates that were much different from they were using. But at this point, it made more sense to settle than to keep fighting.
They have said consistently if people are reasonable and can get to a reasonable assessment of their claims and it's in the best interest of shareholders, they will settle.
The settlement is subject to court approval and covers 530 trusts with original principal balance of $424 billion.
Citi analyst said the settlement, which amounts to only 2 percent of the original principal balance, removes one of the largest investor risks for Bank of America.
This could prove to be a step forward for Bank of America. It would show investors that the bank can manage through crisis without raising additional capital.
As a result of the settlement, Bank of America put its second-quarter loss at $8.6 billion to $9.1 billion. Excluding the settlement and other charges, the bank expects to post a quarterly loss of $3.2 billion to $3.7 billion.
Shares of Bank of America Corp. jumped more than 4 percent, or 48 cents to $11.30 before the market opened, with investors happy that the bank can put very big uncertainty behind it.
Investors may now be more confident that they can get similar concessions from other major U.S. banks that created markets for mortgage-backed securities with questionable pedigrees.
Yet stocks in the financial sector were rising in electronic trading Wednesday, likely because the Bank of America deal presents a framework for others to follow.

Foreclosures Slow

2011-06-28T15:41:00.001-04:00

Millions of homeowners in distress are getting some unexpected breathing room — lots of it in some places according to a nc foreclosure lawyer.
In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations of a prominent real estate data firm.
Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.
In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books and a mers foreclosure lawyer fights on.
If you were in foreclosure four years ago, you were biting your nails, asking yourself, “When is the sheriff going to show up and put me on the street?” Now you’re probably not losing any sleep.
When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so.
But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month.
New foreclosure cases and repossessions are down nationally by about a third since last fall. In New York, foreclosure filings are down 85 percent since September.
A St. Petersburg, Fla., specialist in foreclosure defense, has 1,275 clients, up from 350 a year ago. About 75 clients have won modifications, dismissals or sold their properties for less than they owed. All the other cases are pending. Banks aren’t even trying to win, he said.
The chief judge of Florida’s Sixth Circuit, which includes St. Petersburg, agreed. He said they’re here to do what they are asked to do. But you’ve got to ask, and the banks aren’t asking, he said.
A spokesman for Bank of America said, any suggestion that they have a strategy to delay foreclosures is baseless. A Wells Fargo spokeswoman blamed changes in state laws governing foreclosure for any slowdown. A GMAC spokeswoman said it was following regulatory and investor expectations. JPMorgan Chase declined to comment. Servicers said some of the decline in foreclosures could be traced to an improved economy.
According to a Detroit foreclosure lawyer, there are many reasons that foreclosure, which has been slowing ever since the housing bubble burst, has been further delayed in many states.
The large number of cases nationally — about two million, plus another two million waiting in the wings — have overwhelmed many lenders and the courts.
Lenders, who service loans they own as well as those owned by investors, tried to circumvent the time-intensive process by using “robo-signers” who mass-produced documents, many of which made inaccurate claims. When the bad practices were discovered last fall, the lenders were forced to revisit hundreds of thousands of cases.
Over the last two years, most defaulting homeowners were people who had lost their jobs. Housing analysts say these homeowners are more likely to hire a lawyer and fight repossession than borrowers who had subprime loans that swelled beyond their ability to pay.
Judges these days are also more inclined to scrutinize requests for eviction rather than automatically approve them. The so-called foreclosure mills — law firms that handled many of the suits for the banks — are in retreat under law enforcement pressure. And some analysts suggest that banks are reluctant to take too many houses onto their books at any one moment for fear of flooding a shaky market.
In New York, lenders seeking to repossess face additional hurdles. The legislature has mandated that borrower and bank meet to discuss terms under the auspices of the court, but these conferences have turned out to be anything but brief or simple. Instead of one conference, 10 are often needed, and many foreclosure lawyers seem unable to meet a requirement, made last October by the New York Chief Judge, to affirm the accuracy of their documentation.
Last September, before the documentation crisis, nearly 1,500 New Yorkers lost their houses as a result of foreclosure. The average over the last six months: 286. That is far lower than at any point since the recession began.
Similar foreclosure cases can have different fates. To increase their odds of staying put, the foreclosed who can afford it are hiring lawyers, a move that can drastically slow down a case.
The Florida lawyer, said he divided his clients into three groups. Some are unemployed or disabled and just getting by. Others are able to save money and improve their financial situation as their case drags on. The third group are those who have strategically defaulted. They can afford to pay but are taking advantage of the banks’ plodding pace. Often the members of this group rent out the foreclosed home and keep the proceeds.
Though delays in foreclosure might seem like a gift to those behind on their mortgage, the foreclosed themselves do not necessarily feel that way.
One homeowner waited nervously in a Miami courtroom early this month. She and her husband, Roland, an architect, are among 97,000 households facing foreclosure in Dade County, where the average time to foreclose is 738 days and climbing.
The homeowner was on her third lawyer in a case that has stretched on many years. A friend of hers got her mortgage lowered through a modification and she would like to do that too. When her case came up, the judge told the lawyers they should try to work out a deal. They huddled outside the courtroom and agreed to meet again.

HOUSING MARKET RISES

2011-06-03T15:29:00.000-04:00

The U.S. housing market is plagued by falling prices and slow sales. But in the nation's capital, open houses frequently end with closed deals.
The Washington metropolitan area is the only major U.S. housing market where prices increased on an annual basis in the first quarter, according to a 20-city home-price index released Tuesday. The region was helped by relatively stable employment, fewer foreclosures and an abundant supply of house hunters.
Other surveys indicate sales in the area are approaching boom-time levels. In April, 5,170 home-sale contracts were signed in the Washington region, the second highest number since 2006. A survey showed April's sales volume was up from the same month a year earlier, a surprising milestone because of last year's boost from a federal homebuyer tax credit.
We're having a tremendous spring said a broker. Her survey tracks the District of Columbia, Fairfax County, Arlington and Alexandria, Va., and Montgomery County, Md.
While the area remains a buyer's market, anecdotal evidence suggests the tables are slowly turning, especially for properties in the city and inner suburbs.
One couple had to make five offers before they finally got a house under contract in the Burke area of Fairfax County, Va. One was a multiple-offer situation. The one they took had an escalation clause. They didn't even think people were doing those anymore. Such clauses raise a buyer's offer automatically in case of higher competing offers.
Some of the frenzy can be chalked up to the couples must-haves. Married for a year and a half, the couple had been renting and wanted a house with space to grow a family, within an hour's commute of downtown, in a good school district—all for under $500,000. In other words, they wanted what many young families in the area want.
The nation's capital has often been called a recession-proof town. But the latest economic downturn didn't leave it unscathed. Unemployment peaked in January 2010 at 6.9%. The Labor Department reported Wednesday that unemployment decreased in April to 5.4%. The area also has had its share of foreclosures, notably in Maryland's Prince George's County and Virginia's Prince William County.
Area home prices had ticked downward for seven months in a row, but that streak was snapped with Tuesday's data showing prices rose 1.1% in March from the previous month. The declines, however, weren't as steep as those affecting much of the country.
The city and inner suburbs have been the first to rebound, with prices in some areas at or above peak levels.

The farther out you go, the slower the uptick. But the prices are better in Woodbridge, Va. With gas prices, buyers are weighing those options though. The District of Columbia and close-in suburbs haven't experienced as high a rate of foreclosures as other areas, which has allowed pricing to remain more stable. In April, one in every 985 homes in the Washington metro area was in some stage of foreclosure, compared with one in every 593 nationally.
Perhaps more importantly, economists say, the region continues to both attract and keep those house hunters still missing in many areas: first-time, move-up and downsizing buyers, as opposed to luxury or investment buyers.

HOME BUYING MARKET IS BLEAK

2011-06-02T16:19:00.003-04:00

The housing market recovery is still a long ways away especially for Apex Homes, and proof is in April’s numbers. Housing sales - http://www.blogger.com/img/blank.gifmeasured by signed contracts - dropped in April to a staggering low. The National Association of Realtors says its index of sales agreements for previously occupied homes sank 11.6% last month to a reading of 81.9.
A reading of 100 would be considered healthy. The last time the index reached at least 100 was in April 2010. That was the final month when people could qualify for a home-buying tax credit of up to $8,000 that was greatly used by Cary Homes buyers.
Signings are still nearly 8% above June's reading of 75.9, the lowest figure since the housing bust.
Contract signings are considered a reliable indicator of the housing market's direction especially for Chapel Hill Homes. That's because there's usually a one to two month lag between a sales contract and a completed deal.
But the Realtors group has noted a larger than usual number of contract cancellations in recent months. Some buyers have canceled purchases after appraisals showed that the homes were worth less than the buyers' initial bids. A sale isn't final until a mortgage is closed on Clayton Homes.
The trade group said Friday's report implies a slower than expected market recoverhttp://www.blogger.com/img/blank.gify in upcoming months, in light of rising oil prices, severe weather across the Midwest and South and a rise in applications for unemployment benefits.
The index of contract signings was uneven across the country: It rose 1.7% in the Northeast but dropped 8.9% in the West, 10.4% in the Midwest and 17.2% in the South with a large drop on Durham Homes.
High unemployment, tighter credit and a lingering fear that home prices have yet to hit bottom are preventing many Americans from buying homes.
That's true despite super low mortgage rates and home prices that are falling in some areas, like on Fuquay Varina Homes, to their lowest points in a decade.
Overhanging the entire housing sector are waves of foreclosures. They are forcing down home prices and holding back a potential recovery.
Economists say it could be several years before the nation's housing market recovers especially on Garner Homes. Sales of previously occupied homes fell last year to their lowest level in 13 years.
Home purchases numbers are just below half of the number that was in 1963. This is a hard number to comprehend since in the United States there are 120 million more people. This difficult home market will continue to affect sales on Holly Springs Homes.

BEST BEACH IN THE US: FLORIDA'S SIESTA BEACH

2011-06-02T12:49:00.001-04:00

After years as being a runner up in the best-beach rankings, Sarasota's Siesta Beach is finally number one.
The wide slice of brilliant white sand and warm, emerald water on Florida's southwest Gulf coast was named the best beach in the United States Friday in an annual survey by Florida International University.
Siesta Beach, 40 acres of almost pure quartz crystal sand on the Siesta Key barrier island, was runner-up in rankings the past two years and was third in 2008.
The sand is often compared to sugar because it is so soft and super fine. This beach claims to have the finest, whitest sand in the world.
San Diego's Coronado Beach was runner-up. Rounding out the top 10 were:
• No. 3, Kahanamoku Beach in Waikiki, Honolulu, Hawaii
• No. 4, Main Beach, East Hampton, N.Y.
• No. 5, Cape Hatteras in North Carolina
• No. 6, St. George Island State Park, Florida Panhandle
• No. 7, Beachwalker Park, Kiawah Island, S.C.
• No. 8, Coast Guard Beach, Cape Cod, Mass.
• No. 9, Waimanalo Bay Beach Park, Oahu, Hawaii
• No. 10, Cape Florida State Park near Miami
The beaches are ranked on 50 criteria, including the look and feel of the sand, water quality, weather, facilities and crowds. A top score is 250. Siesta Beach came in the 230s, losing minor points because the vista is heavy on condos to the north and south of the county park. Once a beach reaches the pinnacle of the list, it is retired from consideration for future rankings.
A number 1 spot on the popular list annual typically brings a 15 to 20 percent boost in visitors for the beach destinations.
Siesta Beach got big points for shallow water and gentle currents. Most days you measure waves over there in inches, not feet.
Repeat visitors are not surprised by the beach’s ranking. Many enjoy the powdered sugar sand, calm waters, cleanliness and nearby bathrooms. One visitor commented that the beach is pretty pristine and praised that it is kept in pretty good shape. Another commented that is has got the best sand of any beach and it can be crowded and not seem like it's crowded just because it is so wide and long.
Parking at the public beach is free, but regulars say that by late morning it can be challenging to find a spot in the 800-space lot.
The report touted Gulf Coast destinations Siesta Beach and St. George Island State Park despite last year's BP oil spill, which soiled parts of the western Florida Panhandle coastline. Siesta Beach and other strands on the state's west coast remained untouched by crude, but BP crews are still scouring places that were affected for scattered tar balls, even though the vast majority of damage has by now been cleaned up. St. George Island, in the eastern part of the Panhandle southwest of Tallahassee, didn't get any oil, but it was off last year's list because it was in the line of fire before the gusher was capped.
Even then, when the oil spill occurred, researches said oil was not going to get to the Sarasota beaches and southwest Florida. A big loop current trapped the oil 100 miles offshore, and the oil just spun and spun in the Gulf. And, in fact, right now one can hardly find any of it, even in the areas which did have oil and tar on the beaches in the Panhandle.
Separate from the top 10 list, which is in its 21st year, Florida International University leadership has a project called the National Healthy Beaches Campaign. Campaign member beaches pay $800 a year to be evaluated monthly on 60 self-reported criteria and receive advice on maintaining environmental quality through proactive management. It is emphasized that beaches do not pay to be evaluated for the top 10 best beaches list, and that all top 10 candidates are visited incognito to collect sand and water samples for study.
Eliminating each year's national winner from consideration in future surveys hasn't diluted the quality of the annual rankings. Researchers insist that the United States has hundreds of beautiful beaches in which to choose from for their rankings.

LUXURY APARTMENTS AVAILABLE TO ALL

2011-06-01T12:02:00.002-04:00

Renting was never as good as it is now with luxury Philadelphia apartments. Due to a glut of glitzy condo towers and the need to appease skittish lenders some developers have found a new use for the gilded, clubby preserves once meant for buyers who could afford the seven-figure price tags. They're renting them out and offering all of the perks normally reserved for the elite. The hand-watered grass roofs and outdoor movie theaters. The heated, valet-attended porte-cocheres. The pet spas offering canine cardio and play dates for your puppy.
And developers have found that renters -reluctant to buy in a still-unsteady market- are embracing them. One marketing banner flapping against a ritzy, new rental building in New York says it best: "Repent. Rent. Repeat."
Frank Gehry's crumpled, stainless-steel skyscraper in Manhattan--the tallest residential tower in the world--was originally supposed to include 200 sprawling condos along with 700 rentals. Now all of the critically-acclaimed building's apartments are for rent. The units, whose rents start at $2,630 for a 600-square-foot studio, are even rent-stabilized --meaning rents are regulated so tenants will only see small annual increases. There's even an option to pay extra for décor hand-picked by Gehry, including Capellini's Rive Droite armchair, Jonathan Adler's Claude Drawers and Blu Dot's Swept Sofa.
People like the fact that they don't have to commit to a mortgage and a large dollar amount to live here.
The upgrades aren't limited to New York buildings. Luxury Chicago apartments that are 547-square foot studio in the Jeanne Gang-designed Aqua, with its liquid, undulating glass skin and curving balconies, can be had for $1,571. In late April at Silicon Valley's Three Sixty Residences, the sales office re-opened as a rental office. Since 2007, not one of the building's sleek condos, with their Bosch appliances and Del Tango cabinetry, had made it out of escrow and into a final sale, despite the fact that the plush residence sits in the middle of Silicon Valley, one of the U.S.'s top 10 millionaire hotspots. This is good news for those wanting to rent a luxury St. Paul apartments.
During the credit bubble, the 651 units in New York's MiMA might have easily gone into bidding wars, as similar properties had. Instead the developer put 500 of the apartments on the market as rentals. Since rentals in the Hell's Kitchen building became available in mid-March, 70 percent of the rentals have been leased. For $3,390 a month you will get quartz countertops, Italian cabinetry and 44,000-square-feet of hand crafted party space. There's also a subsidized 24-hour Equinox gym.
One man looked at an apartment at MiMA because of the buzz the development had generated. He took one look at the brushed-oak floors and floor-to-ceiling windows and filled out an application. In May, he moved into a 1,200-square-foot two bedroom. He pays $6,400 a month for an apartment he says he could never afford to buy - and wouldn't want to if he could. He feels so many people are in debt with real estate that he doesn’t want to put a lot of his money into a purchase.
That's a departure from the attitude of the housing boom years. Renting used to be thought of as lower class among young, executive-class strivers, a sure sign that you couldn't come up with the money for a down payment. Now, even among the rich, leasing luxury West Chester apartments and being untethered is chic.
Would-be homeowners in some parts of the U.S. should look elsewhere for long-term investment returns. It's sobering to think, but some people shouldn't be thinking of their home as an asset.
Conflicting signals about the market have only added to the allure of renting for those who might otherwise buy. Prices and interest rates are low. But lending standards are strict. Supply is abundant. But so are the forecasts that the U.S. could be in for a lost decade of sideways house prices. It's led to a resurgence in people taking advantage of the renter's subsidy, the idea that while real estate prices are stuck or moving lower, it's better and cheaper to rent premium real estate than it is to buy.
There is a lot of people who can afford to buy, but who won't buy. The statistics on renting luxury Pittsburgh Apartments and owning reflect that sentiment. One-third of U.S. homeowners now owe more on their homes than they are worth. Since the financial crash, nearly 3 million households have gone from owning to renting. Another 3 million are expected to do the same by 2015. That has led to higher rents; the average price of a two bedroom residence is nearly $1,000, a 50 percent increase since 2001. Still, in nearly three quarters of cities, it is cheaper to rent than to own.
These factors have helped push home ownership rates to a 10-year low; 66.4 percent of Americans own their homes, down from a record 69.2 percent in 2004.

LOWER PROPERTY TAXES ARE FINALLY CATCHING UP TO MUNICIPALITIES

2011-03-31T15:13:00.000-04:00

The lag time between property tax values and the true reality prices causes shortfalls in local governments. Cities, counties and school districts had been sheltered from the full impact of the slump because of the lag between when realty prices fluctuate and values are reset by local tax assessors. That’s changing as property rolls are adjusted to the current market and residents push to have their taxes cut.

Local officials are now facing the consequences. Property- tax revenue dropped in the last three months of 2010 at the fastest pace since home prices slipped from their peak more than four years ago. The decline may continue as values fall further, adding strains to cash- strapped localities that already fired workers, halted projects and cut spending because of the recession that began in 2007.

The decline for local governments contrasts with a recovery for U.S. states led by income and sales taxes. Collections in the fourth quarter climbed by $13 billion to $177.8 billion. This is the biggest jump since 2006.

In Maricopa County, Arizona, it was reported last month that values of all property dropped by 12 percent for the next tax year, the second straight double-digit decline. In Los Angeles, the second most-populous U.S. city, property taxes for the year ending June 30 are projected to fall 1.7 percent to $1.42 billion.

The strain may mean credit-rating cuts this year for local- government debt, which trades in the $2.93 trillion municipal bond market.

Local and state property-tax revenue slid $5.3 billion, or 2.9 percent, in the fourth quarter from a year earlier to $177.1 billion. All but $3.7 billion went to municipalities.

The slump in the most-active period for real estate revenue outpaced a
2.5 percent drop in the first quarter of 2010, the only other significant decline since prices peaked in 2006.

Residential real estate prices in 20 U.S. cities dropped by the most in more than a year in January. Property values fell 3.1 percent from January 2010, the biggest year-on-year decrease since December 2009. That’s prompting homeowners to seek reductions in the assessed value of their properties.

A symptom of a depressed real estate market has been a proliferation of successful tax appeals. This causes problems because a municipality has already assessed a property, collected taxes and made payments to local school boards and county governments.

Montclair, New Jersey, officials had to remake their budget when tax appeals reduced revenue to $51 million from an expected $53 million in the current budget year. They were forced to make large changes in library services, abolish community pre-kindergarten and lay off 12 municipal workers.

Only 15 percent of counties raised property taxes to make up for the lost revenue. Such a strategy can draw voters’ ire, as Carlos Alvarez, the former mayor of Miami-Dade County, Florida, found out. He was thrown out in a recall election on March 15 after he boosted property-tax rates last year to make up for a drop in home values.

Many local governments have been anticipating the revenue slide and cutting budgets to compensate. They’ve eliminated 377,000 jobs, or 2.7 percent of payrolls, since employment peaked in September 2008. The usual cost cutting has already happened and now deeper cuts are being made to compensate for the loss of revenue.

Upswing Expected To the Home Remodeling Market

2011-03-15T13:54:00.004-04:00

During the recession many home owners saved their dollars, however, this year is forcasted to show an upswing in home improvement. Spending on remodeling probably will rise 9.2 percent to $125.1 billion in the first quarter from $114.6 billion a year earlier. A 13 percent increase forecast for April through June would be the largest jump in five years. which is good news for those in home remodeling Parma, Ohio and home remodeling Chagrin Falls, both areas that were hit hard by the recession. Home-improvement retailers are preparing for a spring sales bump as homeowners consider upgrading rather than selling their houses at a discount in a struggling market. These are signs of recovery in the economy are encouraging people to spend money on work they may have been putting off for years.

Spending on renovations may increase 3.5 percent annually through 2015. The data measured includes hours worked by remodelers and retail sales at building materials stores. The gain follows a decline that started in the third quarter of 2007 and sent spending to a six- year low of $112 billion in 2009.

New owners of discounted, foreclosed properties and a tax credit for energy-efficient windows and modifications will help drive remodeling demand. The bulk of spending during the next five years will be on replacements and upgrades rather than high-end projects.
The Residential Remodeling Index by Asheville, North Carolina-based BuildFax showed demand for remodeling rose 18 percent in December from a year earlier, the property data provider said Feb. 15. The index tracks the number of construction permits issued for home improvements in specific metropolitan regions.
Home Depot and Lowe’s, the largest U.S. home-improvement retailers, said they plan to hire additional seasonal workers during the next few months. Both companies in February reported fourth-quarter profits that exceeded analyst estimates, and Home Depot raised its earnings forecast for the year.
Improving employment and consumer confidence are drawing customers back stores.

The U.S. unemployment rate fell to 8.9 percent in February, the lowest in almost two years, the Bureau of Labor Statistics reported last week. Retail spending probably will increase 4 percent in 2011, according to the National Retail Federation.

Many people are holding onto their homes until the value can improve. While they are holding onto these properties they are putting some well deserved money into renovating.

Some property owners are stuck in their homes after falling values left almost a quarter of mortgage holders owing more than their residences are worth. U.S. home prices fell 2.4 percent in December from a year earlier and are down 31 percent from the July 2006 peak, based on the S&P/Case-Shiller index of values in 20 cities. A Chapel Hill Real Estate Agent was hopeful that the increase in home remodeling would eventually lead to improvement in the home sales market.

The negative equity may limit remodeling projects as it dries up a source of funding. Americans spent about $63 billion a year from home-equity loans on renovations during the 2000 to 2005 real estate boom.

Home Depot, the largest U.S. home-improvement retailer, said on Feb. 22 that earnings per share excluding some items will increase as much as 9.5 percent this year, up from a December forecast of no more than 9 percent. The company is hiring more than 60,000 temporary workers to handle an expected spring sales surge.

The average Home Depot purchase jumped 2.6 percent in the fourth quarter, the most in more than four years, though consumers are favoring smaller improvements and are still cautious about spending on major renovations.
Lowe’s plans to hire 50,000 seasonal workers this spring which is up from 43,000 a year ago.

The driving force behind this year’s spending increases will be baby boomers, the first of whom are reaching 65 and preparing their homes for retirement. Raleigh Homes and Cary homes in North Caroline are expected to see a small increase in home sales as the baby boomers look to relocate to desirable locations.

Detroit, Flint may be Diamonds in the Rough, real estate Investors say

2010-11-11T01:53:00.000-05:00

Crain's Detroit Business

Commercial real estate executives put some perspective on a national report tagging the Detroit market as one of the worst in the country, saying there are bright spots and opportunities in the local real estate market.

The national Emerging Trends commercial real estate report was presented during the University of Michigan and Urban Land Institute's 24th annual Real Estate Forum today.

The study, by ULI and PricewaterhouseCoopers put the Detroit market at the bottom of markets to invest in.

The report was presented during the first day of the two-day event. Today's forum focused on Flint's efforts to re-invent its downtown.

"Sparking Reinvention: The Evolution of a Factory Town," today's opening panel, featured investors and developers who have leveraged private money against public money to develop and redevelop many of the city's downtown buildings.

But the dose of reality today came from the annual ULI Emerging Trends report, presented by Tom Murphy, former mayor of Pittsburgh and a senior resident fellow with ULI.

In a national context, Detroit ranked at the bottom of the list for markets to watch for commercial and multi-family real estate investment as well as the bottom for markets to watch for new development and for for-sale homebuilding.

All three of those lists were topped by Washington followed by New York, San Francisco, Boston and Seattle.

The report predicted a continued "bifurcated market" nationally where the trophy and trash properties are most popular. It said investors are looking for either highly sought-after buildings or bargain-basement deals expected to bring a high return.

It also called for tempered expectations from investors. While prices are low and opportunities plenty, it said "don't try to shoot the lights out and expect outsized returns."

Other best bets for 2011, the report said, are locking in debt at historically low rates, focused investment in global gateways and 24-hour markets, as well as favoring in-fill development over fringe development.

Following the report's presentation, local real estate executives said that while there are fewer national investors interested in the Detroit market, it makes for more opportunities for local investors.

In addition, the low point in the market is forcing communities and investors to make the hard decisions to put properties in position for the future.

"This is forcing us to do the right things," said Jim Becker, international managing director of the Detroit office of Jones Lang LaSalle.

"Cities, such as Detroit and Flint, are looking at ways to revitalize and retract into manageable zones."

On the retail side, everything changed in 2008, said Chris Brochert, a partner with the Lormax Stern Development Co.

"We went from calling ourselves developers to calling ourselves investors and property managers," he said.

And as the national investors leave, Brochert said there are more and more opportunities for local firms.

"Those who stay here have the ability to make a tremendous amount of money," he said. "They have the chance to get in on the ground floor."

Later in the day, the Real Estate Excellence Awards were presented for Lease of the Year, Development of the Year along with the overall Real Estate Excellence Award.

Crain's Detroit Business is a sponsor of the awards and of the Real Estate Forum.

• Lease of the Year was given to the 465,000-square-foot lease signed by Blue Cross Blue Shield of Michigan at the Renaissance Center in Detroit. Mark Wallace, leasing director for the Renaissance Center accepted the award.

• Development of the Year was given to the BAE Systems facility in Sterling Heights, the defense company making use of the vacant TRW manufacturing facility. Accepting the award was Brandon Podolski, a project manager with Southfield-based Plante Moran Cresa, the firm which has represented BAE on the project.

• The overall Real Estate Excellence Award was given to David Friedman, president and CEO of the Friedman Real Estate Group.

During a panel discussion of the winners following the event, Friedman said there is increasing demand in the city of Detroit as companies such as Quicken Loans Inc. want to use a city location as a recruiting tool.

"The reality is that the younger generation pool wants to be in an urban setting," said Friedman.

Podolski pointed out that there are more and more examples of the local economy diversifying into new industries such as defense.

"And as Michigan continues to diversify, the talent pool here remains tremendous, and is a draw for the companies interested in locating here," he said. "BAE came here for the engineers that are available."

Wallace said the key to new developments and business growth will be for the private sector and local governments to work together in public-private partnerships.

"I expect to see more collaboration in the future," he said. "It has to happen."

Earlier in the day, panelists gave presentations on the strategies needed to redevelop the Flint's downtown.

Calling themselves the "Uptown Six" a group of investors and developers gave specific examples of the disciplined approach to investing downtown.

"This morphed out of a few business leaders who had enough with the boarded-up buildings in town, who had done well for themselves and wanted to do the right thing and give back," said Tim Herman, president of the Uptown Reinvestment Corp., an umbrella group made up of public and private executives and leaders.

Asked how the private sector members got involved, Phil Shaltz, a member of the group, quipped "beyond stupidity?"

"So many times, you have seen the investors, the so-called carpetbaggers who aren't from the city," said Shaltz, president of Shaltz Automation. "They want to build casinos and other projects that a community doesn't really need.

"Our return on investment is different from what an outside investor would see as an ROI. We want to salvage downtown Flint, and that's part of our ROI."

The Uptown Six started with three rules:

• They would invest $167,000 each, and no more.

• There would be no personal guarantees on loans.

• And third, they vowed to never give up.

"Fortunately, we have only violated the first two," Shaltz said, noting there are more than $20 million in personal guarantees on their loans, meaning that if projects fail, the group members will be personally responsible for repaying the money.

The Flint panel was moderated by Scott Whipple, development manager for Uptown Developments LLC, the for-profit investment group which has overseen development and investment in the city.

Herman said the for-profit corporation was used to collect the private money, acquire loans and purchase properties.

It now has control over 12 properties representing $64 million in investment.

The process involved a series of bank loans which were paid off with a combination of grants from non-profit organizations and the Michigan Economic Development Corp.

"So what started with an $800,000 loan has now become nearly $70 million on the books," Herman said.

Troy Farah, co-managing partner of Flint-based development company West Second Street Associates said another key was to work on office projects that bring in the anchor tenant as a partner in the development.

"We've used a lot of investment tools," he said. "But the most important parts have been patient capital and sweat equity."

The use of façade grants have been used, as well as brownfield tax credits and new market tax credits, as well as leveraged loans from groups such as the Flint-based C.S. Mott Foundation.

Shaltz added that as investors, this group has nowhere to go.

During a welcome address, Flint Mayor Dayne Walling gave a positive take on the city's progress, pointing to the crucial aspect of private participation from the business leaders in the city.

The keys to investment, he said, are collaboration, grassroots involvement, imagination, smart planning and preservation of culture.

Seeing the city's population drop from 200,000 at its peak in 1955 to the current level of nearly 100,000 shouldn't be a cause of concern, he said, choosing to focus on the recent redevelopment of buildings in the city's downtown.

"We truly are sparking a reinvention here," he said. "We are evolving from a factory town to a more diverse economy. And I'm fired up about our progress."

The event continues Thursday with guided bus tours of Flint and closing with a keynote address by Toni Griffin, the consultant hired to guide Detroit in its efforts to reconfigure the city.

Brookfield Refinances Tower With Chinese Loan

2010-11-11T01:52:00.000-05:00

The Wall Street Journal

Bank of China Ltd. is lending $800 million to Brookfield Office Properties to refinance a Manhattan office building in the latest sign that well-capitalized Chinese investors are helping to fuel a commercial real-estate recovery in U.S. cities.

The loan on the office building, a 44-floor, block-long office tower in midtown Manhattan majority-owned by Brookfield, is one of the biggest made on a single building since the economic downturn began. It also is the biggest commercial real-estate loan ever made by the Bank of China's New York branch, which has helped fill a void in the commercial real-estate market for loans valued at hundreds of millions of dollars.

Brookfield confirmed the Bank of China loan but declined to comment further. A mortgage loan on the building comes due in February, according to a regulatory filing.

"Our standards are conservative and they haven't changed," said Bill Smith, chief lending officer of the Bank of China's New York branch. "It's just that now, for the moment, there's no other competition."

The loan for the building at 245 Park Ave. near Grand Central Terminal, whose tenants include J.P. Morgan Chase & Co. and Major League Baseball, comes as the commercial real-estate industry is becoming divided into two markets: one mostly of property in New York, Washington and other big cities where values are recovering; and one of less-attractive properties in the suburbs and in smaller cities that is continuing to languish. The industry also continues to struggle with billions of dollars of properties that are valued at less than their mortgages.

Both foreign and domestic lenders are returning, but Chinese institutions have been more aggressive than many. Chinese banks had $1.8 billion in commercial real-estate loans outstanding in U.S. branches in the second quarter, according to data firm Foresight Analytics, more than double the level a year before.

Bank of China in the last year and a half made at least two other large loans on Manhattan skyscrapers.

Industrial & Commercial Bank of China Ltd., China's largest bank by assets, said this year that it was rolling out a "large-loan" program aimed at U.S. commercial real-estate owners in need of loans that exceed $100 million. China Investment Corp., the $300 billion sovereign-wealth fund, also is looking to pile cash into U.S. real estate through investing with U.S. property-fund managers.

"The bank was interested in this asset because it was a stabilized, safe, secure asset with good ownership," said Robert Martin, a Jones Lang LaSalle Inc. broker who helped arrange the 245 Park deal.

Vornado Bids for ING Real-Estate Unit

2010-11-10T05:56:00.001-05:00

The Wall Street Journal

Frustrated with the shortage of U.S. properties for sale, some of America's biggest publicly traded landlords are going global.

The Macquarie Bank Building in Sydney is part of an Australian real-estate portfolio recently acquired by Brookfield Office Properties.

Vornado Realty Trust, which until now mostly has focused on investing in the U.S., has entered a bid for the global private-equity real-estate investment platform of Dutch financial company ING Groep NV, people familiar with the matter said. The ING business could offer Vornado teams in Europe and Asia, as well as the U.S., to manage property and scout for deals.

An ING spokeswoman declined to comment on Vornado's involvement, but said the Dutch bank is "conducting an evaluation" of the real-estate investment-management business, which has about $100 billion in assets under management, and that "a sale is not ruled out." Along with Vornado, private-equity firm Kohlberg Kravis Roberts & Co. and affiliates of real-estate brokerages CB Richard Ellis Group Inc. and Jones Lang LaSalle Inc. are among the firms still pursuing the business, people familiar with the matter said, with final bids due Dec. 1.

Other U.S. office landlords including Brookfield Office Properties and SL Green Realty Corp. in recent months did deals overseas or raised the possibility of doing them.

"London is, in our view, a gateway city and a global financial capital," Marc Holliday, chief executive of SL Green, one of Manhattan's biggest office landlords, said in an interview. "It's more parallel and akin to New York than almost any other domestic U.S. market."

But overseas acquisitions have stirred controversy. Some investors and analysts wonder whether there still are good deals to be had for U.S. real-estate investment trusts. Many overseas markets already are well-traveled both by local companies and U.S. firms that pursue private-equity strategies, such as the real-estate units of Goldman Sachs Group Inc. and Morgan Stanley. In the U.K., an index of office-building values is up 24% in the last year, according to CB Richard Ellis, and London property prices in particular have been bid up by a flood of foreign buyers.

REITs pursuing global strategies also have been criticized for straying beyond their expertise and possibly confusing Wall Street with a hodgepodge of properties. Publicly traded real-estate investment trusts generally have attracted investors by more targeted deal making: allowing people to invest in, say, shopping centers in the Northeast.

"For most REITs, investing overseas is not a core competency," said UBS analyst Ross Nussbaum. After SL Green disclosed last month that it had bought the debt backing an office building in London, Mr. Nussbaum dubbed it "the head scratcher of the week" because the company has made its name focusing on New York City.

The new appetite for overseas investments is partly fueled by the enormous amount of cash public real-estate companies have raised in the past two years for acquisitions. Real-estate investment trusts sold $34.6 billion in debt and equity in 2009 and more than $35.3 billion this year partly for investments. Relatively few properties have been put on the block because values still are well below their peak and banks are trying to avoid fire sales.

Also underlying the trend: Emerging similarities in global hubs such as London, Paris, New York, and Washington that some U.S. landlords believe they can exploit. Big banks and other multinational companies have offices in major financial centers around the world, and many may be interested in having the same landlords in New York and in Tokyo, some company executives believe.

These "global cities" have performed much better in the economic recovery than second-tier cities, drawing an influx of big real-estate investors looking for a stable place to put their money.

"We own modern office properties in the world's largest, most dynamic, business-forward cities," said Brookfield Office Properties Chief Executive Ric Clark. "The tenants that we deal with are in every one of those cities."

Brookfield Office, which owns 70 million square feet of property in North American cities, this year paid $64 million for a 50% interest in a London development project and shelled out $1.4 billion to buy 16 Australian office properties from its controlling shareholder, Brookfield Asset Management Inc.

Office landlords aren't the first to come up with the idea of establishing a global brand for multinational tenants. Warehouse companies ProLogis and AMB Property Corp. became Wall Street darlings during the economic boom by becoming one-stop real-estate shops for companies with global logistics needs.

While warehouse developers can offer global companies uniform construction and warehouse technology, the market demand for a certain office building usually is driven primarily by location, not by the landlord.

For Vornado, a REIT that owns 35 million square feet of office space in New York and Washington, the bid for ING's real-estate-investment business comes as company executives have expressed frustration with the dearth of good deals available in the U.S. real-estate market. The company has explored off-the-beaten-track ways of making money from the downturn, including a $600 million investment in J.C. Penney Co. stock. "We're going around the margins trying to find value," Vornado Chief Executive Michael Fascitelli said at a conference last month.

General Growth Exits Biggest Real Estate Bankruptcy

2010-11-10T05:56:00.000-05:00

Bloomberg

General Growth Properties Inc., the second-largest U.S. mall owner, exited from the biggest real estate bankruptcy in the country’s history and split itself into two companies.

The landlord has spun off Howard Hughes Corp., an owner of master-planned communities and other properties, Chicago-based General Growth said today in a statement. The shares of the newly separate General Growth will begin trading tomorrow on the New York Stock Exchange.

General Growth filed for Chapter 11 protection in April 2009 after weighing itself down with $27 billion in debt that it was unable to refinance because of the financial crisis and collapse of the commercial mortgage-backed securities market. The company’s restructuring plan provided a full recovery for creditors and a recovery for shareholders, which is rare in a bankruptcy reorganization.

General Growth last month hired Sandeep Mathrani of Vornado Realty Trust as its new chief executive officer. Mathrani will assume the position at the beginning of 2011 after serving for more than eight years as executive vice president of retail real estate at New York-based Vornado.

Adam Metz has been General Growth’s CEO since October 2008, when he replaced John Bucksbaum, a member of the company’s founding family. Metz and Thomas Nolan, president and chief operating officer, agreed to stay in their positions for as long as a year after the restructuring while the company searched for a new management team.

Takeover Fight

After filing for bankruptcy, General Growth first focused on restructuring about $15 billion in mortgage debt tied to about 140 properties, an effort it completed earlier this year. It then turned to its corporate-level debt and became the subject of a takeover battle between rival Simon Property Group Inc. and an investor group. Indianapolis-based Simon is the largest U.S. mall company.

The investor group -- Brookfield Asset Management Inc., Bill Ackman’s Pershing Square Capital Management LP and Bruce Berkowitz’s Fairholme Capital Management LLC -- prevailed, committing more than $8 billion to bring General Growth out of Chapter 11.

General Growth began a public offering of 135 million shares of the new company to replace some of the financing commitments from the Brookfield, Fairholme and Pershing group, as well as the Teacher Retirement System of Texas, the company said in a separate statement.

The stock closed today at $17.39. Its closing price was 59 cents on April 16, 2009, the day the company filed for bankruptcy.

General Growth owns and operates more than 183 retail centers in 43 states. The company reported a loss in core funds from operations on Oct. 29 of $29.3 million in the third quarter, compared with a profit of $88.9 million, or 28 cents, a year earlier because of restructuring costs.

U.S. Commercial Property `Substantially' Off Bottom, Roth Says

2010-11-09T05:04:00.000-05:00

Bloomberg

U.S. commercial property prices are rising in desirable investment markets like New York and Washington while office vacancies are beginning to fall more broadly, according to top real estate executives.

Values are “substantially” off the bottom after more than a year of decline, said Steven Roth, chairman of Vornado Realty Trust. Hotels and multifamily properties are leading the rebound, with South American investors purchasing condominiums in Miami, according to Barry Sternlicht, chairman of Starwood Capital Group LLC in Greenwich, Connecticut.

“The recovery has been more rapid than anybody expected,” Roth, 68, said during a panel discussion at the Bloomberg Link Real Estate Briefing today in New York. His New York-based company hasn’t purchased as many properties as it would like. “We’ve been trying, but apparently not hard enough,” Roth said.

U.S. property deals probably will double next year and may account for almost a quarter of global transactions, according to a forecast by New York-based research firm Real Capital Analytics Inc. Although high-quality buildings will be in demand, they will be leased at lower rental rates than the 2007 peak, according to billionaire investor Sam Zell.

“Over the next 18 months I think we’re going to see little or no new construction and we’re going to see all the institutional-quality assets be full,” Zell, 69, chairman of Chicago-based Equity Residential, said on a separate panel. “The bad news is they’re going to be full at 20 or 30 percent rates less than the peak.”

Little Construction

The U.S. economy expanded at a 2 percent rate in the three months ended in September, the fifth consecutive quarterly increase. The growth followed 12 months of contraction as the economy weathered the worst financial crisis since the Great Depression.

As the recovery builds, rents are poised to rise in 2011 after reaching a low this year, Bruce Mosler, 53, co-chairman of broker Cushman & Wakefield Inc., said at the conference.

Office vacancies in U.S. central business districts declined for the second straight time in the third quarter as tenants signed leases for additional space, according to Cushman & Wakefield. The average vacancy rate fell to 14.7 percent from 14.8 percent in the second quarter, the broker said Oct. 14. Vacancies dropped in half of the 30 cities tracked by Cushman.

‘World Cities’

International investors seek real estate in “world cities” such as New York, Washington and San Francisco, Roth said. Rising office rents in New York and Washington helped Vornado’s third-quarter revenue climb 5 percent from a year earlier, the company said this week.

Those cities are “desperately important to investors” outside the U.S., according to Roth. Foreign institutions would rather invest in New York properties, with a 4 percent capitalization rate, than in Cleveland buildings, where the cap rate may be 8 percent, Sternlicht said. The cap rate, a measure of a property’s investment yield, is calculated by dividing net operating income by purchase price.

For fully occupied buildings, demand from investors is similar to what it was at the peak of the market, with bidding competitive for those properties, Zell said.

805 Third Ave.

“Capital feels safest investing in New York and D.C.,” Jonathan L. Mechanic, a partner at Fried, Frank, Harris, Shriver & Jacobson LLP in New York, said during his panel with Mosler.

Investor capital available to purchase real estate in the Americas rose by 54 percent since December, London-based broker DTZ Group Plc said.

Charles S. Cohen, chief executive of Cohen Brothers Realty Corp., said the pace of leasing has increased in the last six month from “five miles an hour” to “15 to 20 miles” an hour.

Cohen’s New York-based firm signed a lease with publisher Meredith Corp. for nine floors comprising 212,594 square feet of space for its new corporate headquarters at 805 Third Ave. in Manhattan, he said today without disclosing terms.

Manhattan’s East Side is benefiting from renewed leasing, with Newsweek magazine, the New York Daily News and AT&T Inc. announcing plans to relocate there, William C. Rudin, co- chairman of Rudin Management Co. in New York, said during the panel with Roth and Sternlicht.

Miami condominiums acquired in Starwood’s purchase of Corus Bankshares Inc. are “selling like hotcakes,” Sternlicht, 49, said. Starwood in October 2009 led a group including TPG, Perry Capital and WLR Lefrak that paid 60 cents on the dollar for the failed Chicago-based lender.

“The whole country is being driven by a search for yield,” Sternlicht said. “Real estate is a proxy for the bond market.”

U.S. Commercial Real Estate Rents to Rise in 2011, Cushman's Mosler Says

2010-11-08T09:18:00.000-05:00

Bloomberg

Commercial real estate rents are poised to rise in 2011 after reaching a low this year, according to Bruce Mosler, co-chairman of Cushman & Wakefield Inc., the largest closely held property services company.

“The market has bottomed,” Mosler said today at the Real Estate Briefing hosted by Bloomberg Link in New York. “We can expect to see rental appreciation next year.”

U.S. economic growth is beginning to stimulate demand for office space, Daniel Neidich, chief executive officer of New York-based Dune Real Estate Partners, said during a panel discussion that also featured Howard Michaels, chairman of the Carlton Group Ltd. Manhattan office leasing by square footage increased 66 percent in the first nine months from a year earlier, though rents have fallen for eight straight quarters, New York-based Cushman & Wakefield reported last month.

“Real estate market fundamentals are improving,” Neidich said.

The U.S. economy expanded at a 2 percent rate in the three months ended in September, the fifth consecutive quarterly increase. The growth followed 12 months of contraction as the economy weathered the worst financial crisis since the Great Depression.

805 Third Ave.

Office vacancies in U.S. central business districts declined for the second straight time in the third quarter as tenants signed leases for additional space, according to Cushman & Wakefield. The average vacancy rate fell to 14.7 percent from 14.8 percent in the second quarter, the broker said Oct. 14. Vacancies dropped in half of the 30 cities tracked by Cushman.

“About a year ago we were going one mile an hour,” Charles S. Cohen, chief executive of Cohen Brothers Realty Corp. in New York, said during a separate panel discussion. “Six months ago we were going five miles an hour. Maybe we’re going about 15 to 20 miles an hour now.”

Cohen said today that his New York-based firm signed a lease with Meredith Corp. for nine floors comprising 212,594 square feet of space for its new corporate headquarters at 805 Third Ave. in Manhattan. He declined to disclose terms.

Meredith, the publisher whose magazines include Better Homes and Gardens, plans to consolidate its 125 Park Ave. and 375 Lexington Ave. offices in the new space.

New York, Washington

The New York and Washington markets are in most demand from real estate investors, said Jonathan L. Mechanic, a partner at Fried, Frank, Harris, Shriver & Jacobson LLP in New York.

“Capital feels safest investing in New York and D.C.,” he said.

Mechanic doesn’t expect the changes in Congress from the election will have big impact on vacancies in Washington.

“I don’t think people are concerned that the Washington market is going to fall off a cliff because the Republicans have come back.”

Dune’s Neidich said there is a lot of pressure on landlords to keep rents down even though the number of deals has increased.

“It’s clearly a little bit of a race to the bottom,” he said.

Dubai Home Prices Fall 6% While Developers, Builder Suffer

2010-11-08T09:17:00.000-05:00

Bloomberg / BusinessWeek

Dubai home prices declined 6 percent in the third quarter while the United Arab Emirates’ biggest construction firm, Arabtec Holding PJSC, reported 96 percent drop in profit and Deyaar Development PJSC suffered a loss.

The Dubai House Price Index dropped 6 percent in the third quarter compared with the previous one, reaching its lowest level since the second quarter of 2009 on a summer slowdown and as banks continued to restrict lending, Colliers International, a brokerage, property and asset management company said today.

The deepest global financial crisis since the 1930s led Dubai property prices to drop by more than 50 percent from the 2008 peak and forced builders to cancel half of their projects in the emirate. Property prices in Dubai will continue to drop due to an oversupply of housing units and offices over the next 20 months, said Mohamed Alabbar, chairman of Emaar Properties PJSC, the U.A.E.’s largest developer.

Deyaar, a property developer partly owned by Dubai Islamic Bank PJSC, tumbled 7.8 percent today after reporting a third- quarter loss of 145 million dirhams. Arabtec dropped the most since May 25 after it reported a profit plunge.

“After a period of stable prices we are beginning to witness a shallow but lengthening slide in overall average prices,” said Ian Albert, regional director at Colliers. Prices had been hovering around the same values since the third quarter of 2009, he said in the report.

The average price per square foot of residential real estate fell to 951 dirhams ($258.90) in the third quarter from 1,015 dirhams in the second quarter. The number of transactions also declined 4 percent, according to the report.

Townhouses suffered the biggest price decline, falling 8 percent in the third quarter, Colliers said. Apartment prices slid 7 percent, while those of villas dropped by 5 percent.

Colliers estimate that 33,000 new housing units will be added to Dubai’s market by the end of this year, down from an earlier estimate of 41,000 units.

“We are witnessing a slow but protracted decline in asset values,” Albert wrote. “This reflects the reality on the ground as occupancy rates fall to 80 percent and the market is unable to absorb the additional supply without a growth in the population or a slowdown in the release of stock.”

Fannie, Freddie want Servicers to assume Risk

2010-11-06T12:01:00.000-04:00

Reuters

Fannie Mae and Freddie Mac are in talks with U.S. title insurers to require mortgage servicers to assume insurers' liabilities if there are legal challenges to foreclosures on homes whose mortgages Fannie and Freddie underwrote, a source familiar with the matter said.

Fannie Mae and Freddie Mac, which are controlled by the U.S. government, together own or guarantee more than half of the $11 trillion of U.S. home mortgages.

Allegations that some banks used shoddy paperwork in processing foreclosures has sparked a wave of lawsuits, and more borrowers are expected to challenge foreclosures in court.

The disputed foreclosures could create a headache for title insurance companies, which protect homeowners against the risk of a prior owner claiming to still have a legal right to the property.

Fannie Mae and Freddie Mac are negotiating with the American Land Title Association, the trade group for title insurers, to ensure that any legal costs associated with faulty foreclosure paperwork by loan servicers are borne by the servicers, the source said. Both Fannie and Freddie declined to comment.

The biggest loan servicers are owned by banks.

"Fannie and Freddie are interested in (servicers agreeing to provide warranties) because they want to make sure that the market for foreclosed properties opens up," said Peter Sadowski, spokesman for the largest U.S. title insurer, Fidelity National Financial Inc.

Fannie Mae and Freddie Mac buy up pools of mortgages from lenders in order to free them to make new loans and then package some of the mortgages into securities that are sold to investors.

If an improperly foreclosed home is sold, the owner who defaulted could sue the current owner. The title insurer would have to defend the current owner in court, and if unsuccessful, have to pay the owner back.

ALTA chief lobbyist Justin Ailes said title insurers hope lenders and servicers will reassure insurance companies that the insurers would not be on the hook for liabilities and costs if home ownership transfer is challenged because of banks' mistakes.

Title insurance is virtually a required step in a foreclosure sale and provides extra footing for a security.

Fidelity National as of Wednesday requires such an assurance from lenders as they have to assume any liabilities that the title insurer might incur in foreclosure sales closed on or after Nov. 1 if owners who lose their homes challenge the foreclosures.

Fidelity National reached a similar agreement with the Bank of America earlier this month.

Sadowski said his company is working toward similar indemnity agreements with three other large lenders, JPMorgan Chase, Citigroup and Wells Fargo.

The four largest national title insurers -- Fidelity National Title, First American Financial Corp, Stewart Information Services and Old Republic International Corp -- control 90 percent of the market.

Commercial Real Estate's Uneven Rebound

2010-11-05T16:19:00.001-04:00

Bloomberg / BusinessWeek

Commercial real estate deals can be found around the U.S., but only a handful of markets interest big investors

In October, an investment group that included Blackstone Group (BX), Paulson & Co., and Centerbridge Partners purchased Extended Stay, a bankrupt U.S. hotel owner, for more than $3.9 billion, less than half what previous owner Lightstone Group paid for it at the peak of the real estate boom in 2007. While it is the biggest commercial real estate sale so far this year, according to CoStar Group (CSGP), a Washington (D.C.) real estate information and analytics company, it is also a reflection of the current U.S. commercial property market: distressed assets and struggling owners selling at a loss to investors with plenty of cash who can afford to wait for the economy to rebound.

Extended Stay was the victim of overleveraging by Lightstone and a drop in demand as the economic downturn dried up business for the midprice chain, which is based in Spartanburg, S.C."Nothing is wrong with the properties," says Bruce Ostly, an analyst in Portland, Ore., for Integra Realty Resources, a commercial real estate valuation and consulting firm. "The ownership got in trouble," Ostly says, "by buying and financing at the peak of the market based on inflated price."

In order for the market to pick up again, new owners must buy the properties and "make [them] work at today's price," says Brian Glanville, Integra's managing director and chairman of the real property board of RICS (Royal Institute of Chartered Surveyors) Americas. "What you're seeing is an opportunity to buy properties for less than what you can build them for today."

Obstinate Gap

In real estate, "you take risks, and you're rewarded if you're right," Glanville says. In the boom period from 2005 to 2007, many investors such as Lightstone bought at the wrong time and at the wrong price. The problem, he says, is that the market has not been allowed to function.

Commercial real estate values have fallen—by as much as 20 percent to 30 percent from peak levels in some markets—and a gap persists in most of the U.S. between what commercial real estate sellers want and what the buyers are willing to pay, says Glanville.

Banks have modified loans, through a practice called "extend and pretend," to prevent owners from defaulting, but "the banks are no longer willing to carry them," he says. Owners "have to face reality now and see what they can get."

In August 2010 more than one in four sales involved distressed real estate, according to Moody's. During that month, U.S. commercial property prices also fell to their lowest level since June 2002, according to the Moody's/REAL Commercial Property Price Index.

Looking Up: Trophy Buildings

The situation is expected to get worse: More than one-third of the $270 billion in U.S. commercial real estate loans maturing in 2010 will be under water (or have mortgages greater than the value of the property), reported trade publication National Real Estate Investor. It expects the rate to grow to 63 percent by 2012.

Among the most stable segments: trophy buildings, whose prices have increased by 23 percent from their 2009 trough in such major cities as New York, San Francisco, Boston, Los Angeles, and Chicago as buyers and lenders seek secure investments, according to an Oct. 19 report on Bloomberg.com.

New data from Los Angeles-based commercial property giant CB Richard Ellis (CBG) show the national vacancy and availability rates for office, industrial, and retail space all exceeded 10 percent in the third quarter. The company predicts vacancies will decrease next year, although rents are expected to remain low due to the high availability of space.

Rental Demand

"We are starting to see the first signs of demand as tenants see more stability in their businesses and are now looking to take advantage of low rents and a wide array of occupancy choices," stated Jon Southard, director of forecasting for CBRE Econometric Advisors, in a release.

This is good news for some of the country's biggest commercial landlords, such as Indianapolis mall owner Simon Property Group (SPG) and industrial real estate company Prologis (PLD) in Denver. "The bigger owners are those who own core or premium properties, and those are generally the ones that recover first," says Raymond Torto, global chief economist at CB Richard Ellis.

Even in the slowdown, the largest commercial real estate owners have been acquiring properties. Data from Real Capital Analytics, a commercial real estate research and consulting firm based in Manhattan, show that Blackstone Group, with more than $4.2 billion in acquisitions, is the top buyer of U.S. commercial real estate over past 12 months, followed by Simon Property Group with $2.8 billion.

"We're seeing a turn for the better," says Torto, "But once you've turned, it doesn't mean you go straight up."

Tishman Speyer grabs $380M Bargain in Chicago

2010-11-04T08:00:00.000-04:00

Crain's NY

Developer agrees to buy year-old, 45-story tower for less than the cost of construction; deal seen as stark warning for those considering building or financing new office towers.

Tishman Speyer Properties has agreed to purchase a new office tower in downtown Chicago for less than it cost to build it, according to sources. The developer will pay owner Mesirow Financial $380 million for its headquarters at 353 North Clark St., marking the first time in more than a decade that a building has been sold for below its cost of construction in Chicago.

The agreement came as an affiliate of Mesirow was running up against a deadline to pay off its construction loans on the building, according to people familiar with the transaction. Those sources say the price is a little less than the debt on the nearly 1.2-million-square-foot tower, which opened about a year ago.

The sale sidesteps an ugly foreclosure suit that might have been filed by Munich, Germany-based Hypo Real Estate Holding, which financed the project with a construction loan that comes due Monday.

The sale would wipe out tens of millions of dollars in equity invested in the 45-story tower, built by a venture led by veteran Chicago developer Richard Stein, a Mesirow senior managing director. Mr. Stein did not return calls requesting comment.

Chicago’s office market hasn't seen a new skyscraper sold for less than the construction cost since the collapse of the commercial real estate market in the 1990s, when billionaire investor Sam Zell scooped up 161 N. Clark St. and 1 N. Franklin St. at bargain prices.

Now, as developers start pushing plans for another round of new office buildings, the woes of 353 N. Clark could serve as a warning to investors and lenders that might back those future projects.

“A lender would be out of their mind to provide financing for new construction when prices are depressed as much as they are, and the (leasing) market is still in the early stages of recovery,” says Zaya Younan, chairman and chief executive of Woodland Hills, Calif.-based Younan Properties, which has a 1.6-million-square-foot office portfolio in Chicago.

Initially leasing at 353 N. Clark went well, with Mesirow and law firm Jenner & Block agreeing to take more than 60% of the building before construction started in 2007. But the leasing effort subsequently stalled at about 80% occupancy, according to real estate data provider CoStar Group Inc.

The price Tishman has agreed to pay for the building, about $324 a square foot, stands in sharp contrast to the record-breaking $503 a foot that a Southern California investment firm paid this summer for the nearby skyscraper at 300 N. LaSalle St. That building also was completed last year but it is 95% leased.

The Hypo loan has an outstanding balance of roughly $330 million and has been extended until Tishman closes on the purchase, sometime before the end of the year, sources say.

The project was also financed with a $44-million mezzanine loan from Chicago-based real estate firm Transwestern Investment Co.

Transwestern could recoup as much as 90% of its loan, which is similar to a second mortgage. A Transwestern representative declined to comment.

How much equity was used to finance the project could not be determined, but most of that money is probably lost. The project is a joint venture between Mesirow and Chicago-based Friedman Properties Ltd., which originally controlled the site.

Albert Friedman, CEO of Friedman Properties, did not return a call requesting comment.

The Mesirow venture also put up a multimillion-dollar letter of credit that would have become payable in the event of a loan default.

As part of the deal, Tishman is paying a couple million dollars to the development venture, sources say. And the venture avoids the costly expense of surrendering the letter of credit, sources add.

Tishman already is one of the largest landlords in downtown Chicago, with a portfolio that includes 10 and 30 S. Wacker Drive and Franklin Center in the West Loop. Tishman's financial partner in the deal for 353 N. Clark could not be determined.

A Tishman spokesman declines to comment. The deal was previously reported by Real Estate Finance & Investment, a trade publication.

Freddie Mac Reports $2.5 Billion Loss, Warns of Weak Housing Market

2010-11-03T18:06:00.000-04:00

The Wall Street Journal

Freddie Mac reported a narrower $2.5 billion third-quarter loss, the smallest shortfall in more than a year amid signs that mortgage delinquencies are slowing. But the company warned that delays in the foreclosure process could raise costs "significantly" and that losses also could rise amid a faltering housing recovery.

The third-quarter loss compared with a year-earlier net loss of $5.4 billion. While gains in the value of certain securities and derivatives left Freddie with a small cash surplus at the end of the quarter, it was forced to ask the Treasury for $100 million, in part to cover the cost of $1.6 billion in interest payments made to the government.

The government took over Freddie and its larger sibling, Fannie Mae, two years ago through a legal process known as conservatorship, and the taxpayer tab for the firms stands at about $134 billion.

While there were signs that mortgage delinquencies eased at Freddie during the third quarter, the company warned that any improvements could be offset by a worsening outlook for losses on homes that go into foreclosure.

Home prices fell 1.8% during the third quarter, according to the company's estimates, as sales declined following the expiration of the home-buyer tax credit.

"We believe that it will be a considerable time until the housing market has a sustained recovery," said Charles E. Haldeman Jr., Freddie's chief executive, in a statement.

Delays in the foreclosure process are the latest unwelcome development for the mortgage-finance company. Fannie and Freddie were forced to suspend the foreclosure process on homes in certain states this fall after paperwork errors prompted several mortgage servicers, including units of Bank of America Corp. and J.P. Morgan Chase & Co., to halt repossessions.

Tuesday, concerns over improper filings prompted the company to terminate its relationship with one of its top Florida foreclosure attorneys, and it had previously suspended foreclosures that had been referred to that firm.

In filings Wednesday, Freddie warned that expenses resulting from the foreclosure delays and the costs to correct paperwork errors could be "significant."

Freddie has taken back more homes as delinquencies have risen, and it owned nearly 75,000 homes at the end of September, up more than 20% over the previous three months. The costs of repairing and maintaining those properties totaled $840 million for the first nine months of the year, compared with $480 million during the year-ago period.

Freddie said it would seek to force banks to pay for costs of any delays that they were responsible for but warned that those efforts could be "difficult, expensive and time consuming." Freddie relies on the same big banks that sell mortgages to the company, its main source of income, to also handle servicing, or day-to-day loan management.

Three banks account for more than half of all loans sold to Freddie and also half of all loans serviced on behalf of Freddie: Bank of America, J.P. Morgan Chase and Wells Fargo & Co.

Fannie and Freddie already have locked horns with its lender-partners over demands to buy back soured loans that the mortgage companies say fell short of the firms' standards.

During the third quarter, Freddie collected $1.7 billion as a result of repurchase demands. Freddie had $5.6 billion in buyback requests during the quarter, and one-third of those demands had been outstanding for more than four months.

Even if Freddie is able to stem its losses, it is unlikely to ever pay down debt that has amassed as a result of the government's bailout. The company must pay the government a 10% annual dividend on its infusions from the Treasury, which totals $63 billion.

The cost of those interest payments exceeds the company's annual earnings from even its most profitable years. A new fee designed to help recoup the government's bailout of the companies is set to kick in next year.

Last month, a series of estimates by the firms' federal regulator, the Federal Housing Finance Agency, said that the taxpayer tab for the companies could run as high as $154 billion under the current home-price forecast. If the economy enters a double-dip recession and home prices fall more than 20%, the cost to taxpayers could reach $259 billion.

HomeServices buys North Carolina Real Estate Firm

2010-11-02T17:30:00.000-04:00

Greensboro News-Record

HomeServices of America Inc. said today it has acquired Greensboro-based Yost & Little Realty.

Financial terms of the deal were not disclosed in a news release.

HomeServices will merge Yost & Little with its existing residential real estate firm, Prudential Carolinas Realty. The new company in the Greensboro market will be re-branded Prudential Yost & Little Realty.

Prudential Carolinas Realty will continue to operate as the HomeServices brand in the Winston-Salem, Kernersville and Charlotte markets.

Yost & Little currently has three offices and more than 140 real estate workers in Greensboro and High Point. The company’s volume of closings in 2009 was $230 million.

“We are combining two strong firms within the Triad into an even stronger organization," Yost & Little president Eddie Yost stated in a news release. "Our commitment is to make this merger seamless for our customers, who will continue to be served by their existing agents.”

Yost will serve as chairman of Prudential Yost & Little Realty and will be joined by managing brokers Dean Little and Mark Yost. Tommy Camp, Prudential Carolinas Realty’s president and CEO, will continue to oversee HomeServices’ operations in the Triad, Charlotte and Triangle regions.

HomeServices of America, based in Minneapolis, Minn., is a subsidiary of Berkshire Hathaway Inc.

Florida Foreclosure Auction Cancellations ‘Frustrating’ to Judge

2010-10-28T12:57:00.000-04:00

Bloomberg

The Miami judge managing a backlog of 80,000 foreclosures said it’s “frustrating” that lenders including Bank of America Corp. and JPMorgan Chase & Co. continue to cancel foreclosure auctions.

Circuit Judge Jennifer Bailey in Miami-Dade County, which has the most foreclosures in Florida, recently set up a system to clear the logjam. She also chaired a state Supreme Court task force last year set up to address the volume of foreclosures in the state’s courts.

“It’s very frustrating to have put in this effort to design, plan and implement this system and when we finally get some forward momentum, we start slowing down again because of the banks,” she said yesterday in an interview.

Bailey said banks are canceling foreclosure sales every day. They canceled at least 20 yesterday in front of one judge, saying they had to review the affidavits used to seize homes.

The cancellations came as Charlotte, North Carolina-based Bank of America and Detroit-based Ally Financial Inc.’s GMAC Mortgage unit said they were moving to complete pending foreclosures. They had suspended foreclosure sales and judgments after complaints that home seizures nationwide were based on faulty documentation.

Attorneys general in all 50 states, as well as federal agencies including the U.S. Justice Department, are investigating.

GMAC said it’s reviewing foreclosure cases with potentially defective affidavits in the 23 states that use judicial proceedings for foreclosures, including Florida. If there are problems, they will be fixed and the cases will proceed, said Gina Proia, a spokeswoman for GMAC. Any case going to foreclosure sale in non-judicial states will also be reviewed, she said in an interview.

Bank of America, the largest U.S. bank by assets, has completed a review of its foreclosure procedures and will “shortly” begin resubmitting affidavits in judicial foreclosure cases, spokesman Dan Frahm said Oct. 25 in a statement.

Battle Lines Forming in Clash Over Foreclosures

2010-10-27T15:19:00.000-04:00

NY Times

About a month after Washington Mutual Bank made a multimillion-dollar mortgage loan on a mountain home near Santa Barbara, Calif., a crucial piece of paperwork disappeared.

But bank officials were unperturbed. After conducting a “due and diligent search,” an assistant vice president simply drew up an affidavit stating that the paperwork — a promissory note committing the borrower to repay the mortgage — could not be found, according to court documents.

The handling of that lost note in 2006 was hardly unusual. Mortgage documents of all sorts were treated in an almost lackadaisical way during the dizzying mortgage lending spree from 2005 through 2007, according to court documents, analysts and interviews.

Now those missing and possibly fraudulent documents are at the center of a potentially seismic legal clash that pits big lenders against homeowners and their advocates concerned that the lenders’ rush to foreclose flouts private property rights.

That clash — expected to be played out in courtrooms across the country and scrutinized by law enforcement officials investigating possible wrongdoing by big lenders — leaped to the forefront of the mortgage crisis this week as big lenders began lifting their freezes on foreclosures and insisted the worst was behind them.

Federal officials meeting in Washington on Wednesday indicated that a government review of the problems would not be complete until the end of the year.

In short, the legal disagreement amounts to whether banks can rely on flawed documentation to repossess homes.

While even critics of the big lenders acknowledge that the vast majority of foreclosures involve homeowners who have not paid their mortgages, they argue that the borrowers are entitled to due legal process.

Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel A. Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”

Others are more sanguine about the dispute.

Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.

“You borrowed money,” he said. “You are obligated to repay it.”

After freezing most foreclosures, Bank of America, the largest consumer bank in the country, said this week that it would soon resume foreclosures in about half of the country because it was confident that the cases had been properly documented. GMAC Mortgage said it was also proceeding with foreclosures, on a case-by-case basis.

While some other banks have also suggested they can wrap up faulty foreclosures in a matter of weeks, some judges, lawyers for homeowners and real estate experts like Mr. Cole expect the courts to be inundated with challenges to the banks’ actions.

“This is ultimately going to have to be resolved by the 50 state supreme courts who have jurisdiction for property law,” Professor Cole predicted.

Defaulting homeowners in states like Florida, among the hardest hit by foreclosures, are already showing up in bigger numbers this week to challenge repossessions. And judges in some states have halted or delayed foreclosures because of improper documentation. Court cases are likely to hinge on whether judges believe that banks properly fulfilled their legal obligations during the mortgage boom — and in the subsequent rush to expedite foreclosures.

The country’s mortgage lenders contend that any problems that might be identified are technical and will not change the fact that they have the right to foreclose en masse.

“We did a thorough review of the process, and we found the facts underlying the decision to foreclose have been accurate,” Barbara J. Desoer, president of Bank of America Home Loans, said earlier this week. “We paused while we were doing that, and now we’re moving forward.”

Some analysts are not sure that banks can proceed so freely. Katherine M. Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.

“The misbehavior is clear: they lied to the courts,” she said. “The fact that they are saying no one was harmed, they are missing the point. They did actual harm to the court system, to the rule of law. We don’t say, ‘You can perjure yourself on the stand because the jury will come to the right verdict anyway.’ That’s what they are saying.”

Robert Willens, a tax expert, said that documentation issues had created potentially severe tax problems for investors in mortgage securities and that “there is enough of a question here that the courts might well have to resolve the issue.”

As the legal system begins sorting through the competing claims, one thing is not in dispute: the pell-mell origination of mortgage loans during the real estate boom and the patchwork of financial machinery and documentation that supported it were created with speed and profits in mind, and with little attention to detail.

Once the foreclosure wheels started turning, said analysts, practices became even shoddier.

For example, the foreclosure business often got so busy at the Plantation, Fla., law offices of David J. Stern — and so many documents had to be signed so banks could evict people from their homes — that a supervisor sometimes was too tired to write her own name.

When that happened, Cheryl Samons, the supervisor at the firm, who typically signed about 1,000 documents a day, just let someone else sign for her, court papers show.

“Cheryl would give certain paralegals rights to sign her name, because most of the time she was very tired, exhausted from signing her name numerous times per day,” said Kelly Scott, a Stern employee, in a deposition that the Florida attorney general released on Monday. A lawyer representing the law firm said Ms. Samons would not comment.

Bill McCollum, Florida’s attorney general, is investigating possible abuses at the Stern firm, a major foreclosure mill in the state, involving false or fabricated loan documents, calling into question the foreclosures the firm set in motion on behalf of banks.

That problem extends far beyond Florida.

As lenders and Wall Street firms bundled thousands of mortgage loans into securities so they could be sold quickly, efficiently and lucratively to legions of investors, slipshod practices took hold among lenders and their representatives, former employees of these operations say.

Banks routinely failed to record each link in the chain of documents that demonstrate ownership of a note and a property, according to court documents, analysts and interviews. When problems arose, executives and managers at lenders and loan servicers sometimes patched such holes by issuing affidavits meant to prove control of a mortgage.

In Broward County, Fla., alone, more than 1,700 affidavits were filed in the last two years attesting to lost notes, according to Legalprise, a legal services company that tracks foreclosure data.

When many mortgage loans went bad in the last few years, lenders outsourced crucial tasks like verifying the amount a borrower owed or determining which institution had a right to foreclose.

Now investors who bought mortgage trusts — investment vehicles composed of mortgages — are wondering if the loans inside them were recorded properly. If not, tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.

For years, lenders bringing foreclosure cases commonly did not have to demonstrate proof of ownership of the note. Consumer advocates and consumer lawyers have complained about the practice, to little avail.

But a decision in October 2007 by Judge Christopher A. Boyko of the Federal District Court in northern Ohio to toss out 14 foreclosure cases put lenders on notice. Judge Boyko ruled that the entities trying to seize properties had not proved that they actually owned the notes, and he blasted the banks for worrying “less about jurisdictional requirements and more about maximizing returns.”

He also said that lenders “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance.” Now that their practices were “put to the test, their weak legal arguments compel the court to stop them at the gate,” the judge ruled.

Yet aside from the actions of a few random judges, little was done to force lenders to change their practices or slow things down. Since March 2009, more than 300,000 property owners a month have received foreclosure notices or lost their home in a foreclosure, according to RealtyTrac, which tracks foreclosure listings.

What finally prompted a re-examination of the foreclosure wave was the disclosure in court documents over the last several months of so-called robo-signers, employees like Ms. Samons of the Stern law firm in Florida who signed affidavits so quickly that they could not possibly have verified the information in the document under review.

Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.

People who have worked at loan servicers for many years, who requested anonymity to protect their jobs, said robo-signing and other questionable foreclosure practices emanated from one goal: to increase efficiency and therefore profits. That rush, they say, allowed for the shoddy documentation that is expected to become evidence for homeowners in the coming court battles.

For example, years ago when banks made loans, they typically stored promissory notes in their vaults.

But the advent of securitization, in which loans are bundled and sold to investors, required that loan documents move quickly from one purchaser to another. Big banks servicing these loans began in 2002 to automate their systems, according to a former executive for a top servicer who requested anonymity because of a confidentiality agreement.

First to go was the use of actual people to determine who should be liable to a foreclosure action. They were replaced by computers that identified delinquent borrowers and automatically sent them letters saying they were in default. Inexperienced clerical workers often entered incorrect mortgage information into the computer programs, the former executive said, and borrowers rarely caught the errors.

Other record-keeping problems that are likely to become fodder for court battles involve endorsements, a process that occurs when notes are transferred and validated with a stamp to identify the institution that bought it. Eager to cut costs, most institutions left the notes blank, with no endorsements at all.

Problems are also likely to arise in court involving whether those who signed documents required in foreclosures actually had the authority to do so — or if the documents themselves are even authentic.

For example, Frederick B. Tygart, a circuit court judge overseeing a foreclosure case in Duval County, Fla., recently ruled that agents representing Deutsche Bank relied on documents that “must have been counterfeited.” He stopped the foreclosure. Deutsche Bank had no comment on Wednesday.

Cynthia Veintemillas, the lawyer representing the borrower in the case, Patrick Jeffs, said the paperwork surrounding her client’s foreclosure was riddled with problems.

“Everybody knows the banks screwed up and loaned out money to people who couldn’t pay it back,” she said. “Why are people surprised that they don’t know what they are doing here either?”

Meanwhile, another judge on Wednesday indicated that the courts would not simply sign off on the banks’ documentation. Jonathan Lippman, the chief judge of New York’s courts, ordered lawyers to verify the validity of all foreclosure paperwork.

“We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs — such as a family home — during this period of economic crisis,” Judge Lippman said in a statement.

Frisco's Exide Plant ready to make Upgrades to cut Lead Emissions

2010-10-26T13:38:00.001-04:00

Dallas Morning News

Upgrades are scheduled next week to help reduce lead emissions from a battery recycling plant in Frisco.

Plant manager Don Barar said he has already made several changes at Exide Technologies Inc.'s local facility. It's in one of up to 17 areas around the country not expected to meet new federal air-quality standards for lead, a toxic metal that causes serious health issues. The Environmental Protection Agency is scheduled to finalize the proposed areas as early as Friday.

Barar said the plant will shut down operations for a week beginning Monday to improve its bag houses to capture even more lead particles.

"I'm encouraged by the work done at the facility," Barar said. "I believe we're on the verge of compliance" with the new standards, he said.

But Frisco City Manager George Purefoy said Wednesday that's not enough. He and other city leaders issued an ultimatum in a letter to residents released last week. City leaders want Exide to be the "most environmentally advanced plant in the country." If Exide can't do that, then it doesn't belong in Frisco, Purefoy said.

New standards

Battery recycling companies are looking at improvements because of new standards for lead issued in 2008 that are 10 times as stringent. The only area in the south-central U.S. not expected to meet that new standard is in Frisco. State regulators have proposed a 2.4-square-mile area around Exide Technologies that stretches from Frisco High School north to Pizza Hut Park and includes City Hall, several neighborhoods and businesses.

The proposed boundaries are based on maximum emissions allowed under the company's permit rather than actual lead emissions. Last year, Exide emitted 1.67 tons of lead. Its permit allowed up to 6.9 tons per year.

Exide officials and Frisco city leaders have been trying to reduce the proposed boundaries of the area to more accurately show where lead levels are too high. Doing so could spare a large number of properties.

Purefoy said property values are a concern, but the bigger issue is making sure the boundaries reflect reality rather than relying on the company's outdated permit levels.

"There is no doubt that it has caused a lot of concern in a lot of people's minds," he said. "If [the permit levels are] not relevant, why would you continue to worry those people?"

To bolster their case, Exide applied for a permit reduction Oct. 5. State regulators approved it a day later. Gov. Rick Perry has since sent a letter asking the EPA to consider new boundaries based on the reduced permit.

EPA spokesman Dave Bary said he doesn't know whether the boundaries will be changed this late in the process.

Barar, Exide's plant manager in Frisco, said that a new area could be as much as 50 percent smaller than the one proposed. The size of the area won't affect upgrades that the plant needs to make to reduce lead emissions. But it could allay some people's concerns. Barar said he was unsure whether the last-minute change would be considered.

"A smaller nonattainment area ... does a better job helping people understand who is and who may not be at risk," Barar said. "The goal here is to try and develop something that accurately reflects the data that we have and what real emissions are."

Pollution controls

Meanwhile, the city hired a consultant to investigate technology installed at a battery recycling facility in Southern California that reduced emissions well beyond the new standard for lead and other compounds. Dallas-based RSR Corp. has said lead emissions from its Quemetco plant in Los Angeles County dropped from 915 pounds a year to 10 to 12 pounds.

The pollution reduction has been remarkable, said Barry Wallerstein, executive director of South Coast Air Quality Management District, the regulator in that part of the state.

He said RSR has pushed the agency to approve more stringent air-quality regulations that would essentially force Exide to spend $20 million on similar pollution controls at its California plant 15 miles away.

Ohio Coca-Cola Plant in line for City Tax Incentive

2010-10-26T13:38:00.000-04:00

Columbus Biz Journal

The city of Columbus is offering beverage giant Coca-Cola Co. a tax incentive package as the company mulls a $120 million expansion of a south-side plant that could create up to 35 jobs.

The incentive package for Coca-Cola up for consideration at Columbus City Council’s Monday meeting includes a 75 percent, 10-year Enterprise Zone Tax Abatement and a six-year, 65 percent Job Creation Tax Credit. They’re valued at up to $10.5 million over the term.

Coca-Cola says it’s looking to expand its Watkins Road syrup plant and add 35 full-time job to the site’s 116-worker payroll to upgrade advanced manufacturing lines along with automated storage and retrieval systems. The project could begin as early as January and is set to be completed before November 2012, contingent on approval of the incentives.

According to documents from council, Coca-Cola’s annual payroll in Columbus totals about $7 million. The new jobs, mostly production positions paying about $21 an hour, would add about $1.7 million.

What Does the 'Foreclosure Crisis' Mean for You?

2010-10-25T16:40:00.000-04:00

The Wall Street Journal

For the vast majority of homeowners, new questions about the state of foreclosures appear to be irrelevant. Few people seem to have been wrongly thrown out of their homes, and those who have been are generally months or years behind on their mortgage payments.

But the fallout from the crisis is beginning to be felt in real-estate markets across the country, particularly in places dominated by vacation homes and investment properties. Some of the worst-hit areas could be Western ski towns, because fall is the busiest time of the year for sales.
Real-estate salespeople in some of those places are worried. "September and October are usually the height of the selling-season for us," says Rich Armstrong, who owns the brokerage Rare Properties in Jackson Hole, Wyo. "Now we are seeing a number of what we call 'fence sitters,' people who would have leapt in even a month ago, but now are waiting on the sidelines."

The "foreclosure crisis" is a result of the frenzied real-estate boom and bust of the past decade. Banks made foolish loans, and borrowers signed up for them—only to default later, as the economy slumped. Banks rushed to reclaim properties, launching a record number of foreclosure proceedings.

In the past several weeks flaws have emerged in that complex process. Because of the high volume of foreclosures, the documentation supporting legal actions was prepared hastily, and some homes were seized improperly.

Yet the far bigger worry is what happens next. A frenzy of lawsuits and banks' examinations of their own practices could throw more of the millions of foreclosures of the past few years into legal jeopardy. Attorneys general in all 50 states are investigating, and plaintiffs' lawyers are working hard to perfect their legal strategies for suits on behalf of people who have been foreclosed on.

The suits might well fail. But just the threat that past foreclosure rulings might be overturned could result in collateral damage. In some places, banks are rushing foreclosed properties to market. In others, buyers are stepping back, refusing to buy foreclosed properties or "short sales"—homes sold by owners for less than the mortgage balance. In markets already beset with large inventories of foreclosed properties, the result could be a slower recovery.

Coastal markets and ski areas are feeling the most anxiety. Some already are littered with foreclosures—in part because they're dominated by second-home and investment properties. Those owners are more willing to walk away from a house that isn't their primary residence.

Foreclosure tracker RealtyTrac estimates that, nationwide, 30% to 35% of properties in foreclosure are owned by investors or were second homes. In Aspen, Colo., the figure is about 60%, says Kim McKinley, owner of McKinley Sales Real Estate in Basalt and Aspen, Colo. If foreclosure proceedings slow from here, inventory could jump, leading to price weakness later.

"We're concerned that the phantom inventory buildup will cause a more rapid and drastic drop in prices in Aspen, which is just getting started in terms of foreclosures coming to the market," says Ms. McKinley.

The timing of the foreclosure mess is especially inconvenient for ski towns, given the fall selling season.

Property owners are growing nervous. In Park City, Utah, lenders are quickly unloading foreclosed homes ahead of what could be a long, stalled foreclosure process, says Joe Trabaccone, a real-estate agent there.

On Oct. 11, for example, J.P. Morgan Chase put up for sale an 8,000-square-foot home adjacent to a private gated golf course. Mr. Trabaccone initially recommended the property be listed for $1.6 million, but Chase opted for $1.26 million. "They are offering these homes far too low just to hurry up and sell them," Mr. Trabaccone says.

Even so, it hasn't worked. A buyer made an offer and signed a contract, but then backed out.

In South Lake Tahoe, Calif., on Thursday, Freddie Mac, the big government-sponsored guarantor of mortgages, put a foreclosed home that had just been listed for sale on hold, freezing the property until paperwork could be straightened out. The foreclosure mess "seems to be filtering down and it could be an impact," says Doug Rosner, the broker who had listed the home. Three other properties in town were also frozen, another real-estate agent says.

The "sand states" of Arizona, California, Florida and Nevada are being hit as well. These areas, too, have a lot of vacation and investment properties—and a lot of foreclosures.

Robin Speronis, a real-estate broker in Cape Coral, Fla., says business had been picking up recently, with several inquiries a day—until the latest foreclosure scandal broke. Since then, she says, inquiries have shriveled to just one in the past week.

Susan Weeks, 55 years old, and her husband, Eddie, aren't optimistic. The couple had expected to retire and downsize when they bought a condo in Clermont, Fla., near Orlando, in 2007 for $192,000. Their plan was to sell their primary residence 10 minutes away and live in the condo. The trouble: They can't sell their first home.

The Weeks paid $269,000 for their three-bedroom home in 2004. The house next door, a bit larger, is listed at $185,000, Ms. Weeks says.

The couple has decided to move back to their primary home and take a renter for the condo. But while that brings in $850 a month, the Weeks take a $450-a-month hit on the condo —on top of the $2,400 a month they pay every month on their primary home.

"We're just going to wait it out," she says.

The possible foreclosure wars to come loom so largely over Florida markets that Ms. Speronis is urging condo sellers to consider any offer they get, even if it is far below asking price or what is owed on the mortgage.

Dianne Cloutier, a records supervisor in Chelmsford, Mass., had been looking for a retirement property in Cape Coral, but decided to wait because of the foreclosure mess. "It's left us on hold until we are sure the banks have legitimately foreclosed on people and that nobody can come back on us to get their property back," she says.

Foreclosures aren't the only problem. Short sales are getting more difficult to pull off, too.

In Bend, Ore., agents say buyers are avoiding short sales or even backing out of contracts because they don't want to deal with paperwork hassles or the chance of a court challenge later.

"I have some people saying 'I don't want to mess with bank-owned properties or short sales,'" says Dianne Willis, principal broker with RE/MAX Sunset Realty in Sunriver, Ore. "They're reluctant because it can be a frustrating process, especially for those who are looking to make a big move."

The short sales "can be very frustrating," adds Becky Ozrelic, of with Steve Scott Realtors in Bend. "You just have buyers waiting and waiting."

For sellers, lining up a short sale was tough even before the latest foreclosure crisis. Banks and mortgage "servicers," the outfits that process payments, already had been scrambling to handle surging workloads.

Mike and Kim Schwarz of San Jose, Calif., are coming up on the one-year mark on their short-sale saga.

The couple had acquired several investment properties over the past few years, including one in Thousand Oaks, Calif., for $751,000. After the tenants stopped paying rent, the Schwarzes couldn't cover the payments and decided to sell, Mr. Schwarz says.

They lined up a buyer in November 2009, and started working with their loan servicer on the short sale. For lenders, short sales are ugly because they guarantee a loss, but they often are preferable to a foreclosure, in which the lender is saddled with a tough-to-sell house.

The servicer, Residential Credit Solutions, took six months to process the paperwork, the Schwarzes say. Faxes and emails were sent, but nothing happened, Mr. Schwarz says.

"We typically don't hear from borrowers about long delays," says Dennis Stowe, president of Residential Credit.

The buyer walked away from the deal in June. The couple found another buyer in August, and resubmitted the short-sale paperwork. Mr. Schwarz says he has sent paperwork to Residential Credit four times since.

On Friday, Mr. Schwarz says, Residential called to tell him the short-sale paperwork looked good and the sale should close in mid-November.

Says Mr. Schwarz: "They didn't make it easy."

Other Ways the 'Foreclosure Crisis' Could Sting Homeowners

The foreclosure mess could hurt homeowners in another way: The costs of buying a home and paying off the mortgage are likely to go up, say housing experts.

The rising costs will come both during the closing and throughout the life of the loan.

At the closing, the cost of title insurance, which protects a property buyer from claims of ownership made by other people, is likely to rise, industry officials say. Title insurance is one of those annoying costs that can sneak up on a buyer during a close; premiums average around $2,000 across states, says Tim Dwyer, CEO of insurer Entitle Direct Group.

The foreclosure mess has sent insurers scrambling. One of the largest, Old Republic Title Insurance, told its agents on Oct. 1 not to issue policies on homes that have been foreclosed by GMAC Mortgage or J.P. Morgan Chase. And on Wednesday, the nation's largest title insurer, Fidelity National Financial, said lenders must vouch for the accuracy of their paperwork before it will insure properties.

Just like homeowners-insurance rates rise after a hurricane, the rates for title insurance are expected to rise, to compensate for the added risk.

The turmoil will likely lead to pricey premiums for new homeowners, says McLean, Va.-based housing economist Tom Lawler. Adds Cameron Finlay, chief economist at mortgage lender Lending-Tree.com: "Any time there is uncertainty in the market or risk implied, it follows that costs go up."

Other costs could be felt during the life of the loan. Until the current mess, servicing loans was a low-margin, high-volume business. Servicers collect mortgage payments from borrowers and send them off to mortgage holders, and if the loan gets into trouble, they manage the foreclosure. Few doubt this process will get costlier now that it is under scrutiny from regulators and the courts. That higher cost likely will show up in higher interest rates for borrowers.

Both of these higher costs also would hit homeowners who refinance their loans.

How much the costs of buying a home will rise is unknown. Mortgage industry officials say it is too soon to tell. And no one believes the costs will significantly change the price of a home. But with the housing market still weak, the uncertainty is making the prospect of buying—or selling—a home that much dicier.

Apartments good Investments for Some

2010-10-25T15:40:00.000-04:00

USA Today

The property in Fort Lauderdale was originally valued at $285,000. Clint Gordon, a private investor in multifamily properties, offered the bank $50,000, and within 10 days, had closed the deal. A few days later, he began renting it for $15,000 a year.

"Anybody who's getting into this business now, you get a whole lot of return if you're paying cash for properties," he says. "You're just buying them so cheap."

Prices for apartment buildings are "incredible" in Indianapolis, as well, says Barb Getty, who owns 27 apartment properties in the downtown area. "You can start small like I did; 20% of 40 thousand bucks isn't a lot of money."

Just as there have been massive price drops for single-family homes in the past three years, there have been big price declines for apartment buildings. That suggests that it's a good time for investors who want to be landlords to start buying.

But as with all investments, the story isn't quite so simple. Investors who thought that a tsunami of dirt-cheap multifamily properties would wash over the U.S. market in the past two years have been largely disappointed.

The economic distress that led to lower prices was limited to certain places and property types, says Hessam Nadji, managing director at real estate investment services firm Marcus & Millichap. "The pain was concentrated where we had gross overbuilding in overall housing: Florida, Phoenix, Las Vegas, Southern California, and to some degree, smaller markets like Tucson, Charlotte and Atlanta."

Marc Solomon, whose Solomon Organization owns 10,000 garden apartments in New York, New Jersey, Connecticut and Pennsylvania, says that it's difficult to find opportunities that make good business sense in his markets, which still offer slow, steady returns. There are "a lot of dollars out there chasing these deals," he says.

While there were big price cuts for multifamily housing in North Carolina's Research Triangle area near Winston-Salem, competition is driving down yields, says Jim Scofield, senior investment adviser at multifamily real estate broker Apartment REP. The yield is called the "cap rate" and is net operating income for one year divided by the sale price. Last October, an investment firm "got a steal" on a community in Raleigh called Autumn River, he said, with a cap rate of about 7.75%. The most recent transaction in the area involved a community called Southern Oaks, which had a 5% cap rate. Average cap rates are still around 6.5%.

"This is not just a phenomenon in the Triangle, but in all the major markets, and especially all the apartment markets," Scofield says. "Manhattan, Washington, D.C., Los Angeles, Denver, Chicago, Boston."

Risk and return

There is less competition in markets where the supply is more fluid, but the risks are also higher.

"We landlords are happy," says Getty, adding that the only thing preventing her from buying more properties is the ability to manage them on her own. Still, she hasn't been able to increase rents as much as she normally would.

Gordon says his vacancies used to average three to five days. "Now, I can have a vacancy for up to 60 days," he says.

Despite all the qualifiers, there is opportunity in rental apartments because the timing is good, Nadji says. "I don't think you're going to get fire-sale prices," he says. "But you can get that kind of return ahead of the job growth and ahead of the economic recovery."

Rental occupancy rates shrank dramatically during the recession, as people doubled up and young adults boomeranged back home. Vacancies nationwide hit a high of 8% in the last quarter of 2009, according to real estate research company Reis. But industry insiders argue that rentals will bounce back quickly and dramatically. In the third quarter of this year, vacancies fell to 7.2%, Reis says.

"Apartment rents are short term; they adjust to market conditions very quickly," Hessam says. "We've seen a record demand for rental apartments so far this year, the strongest in over 10 years."

Wide-ranging perspective

Apartment buildings can be attractive because investing in residential real estate seems similar to owning a home. But rental properties are different, starting from the purchase decision.

Home buyers tend to look for a place they love that fits their needs and budget. But you have to see investment properties through the eyes of your tenant, Getty says. If your tenants won't have cars, is it near public transportation?

Randall Gorman, president of La Jolla Capital Group in California, says prospective investors need to take the emotion out of their purchases.

"I don't care if you're buying a condo, a duplex or a 10-unit building," Gorman says. "Just because you've always loved that cottage-style apartment building that you drove by taking your kids to school doesn't mean the cash-flow fundamentals work at a given price."

If considering a property, Gorman advises making sure you can run a cash-flow model. Figure out property rents by researching online and in the neighborhood. Calculate annual revenue, and thoroughly survey costs such as maintenance, taxes, utilities and incentives. (Property managers typically charge about 10% of a month's rent.)

Add a couple of months of vacancy, and don't disregard higher interest rates for commercial properties. According to PricewaterhouseCoopers, the national average interest rate for apartment loans in the third quarter was 5.68%. For the first week of October, Fannie Mae reported that the average 30-year fixed rate for a primary home was 4.27%. If your final annual net income is $16,000, seeking a 10% cap rate puts the purchase price at $160,000.

"Don't buy on what might happen, but on what is happening," Scofield says. "Only buy a property if it is cash flowing to meet your investment return requirement on day one."

Once you buy, it's not a smart idea to treat your investment like a home. "Investors make a huge mistake when they spend a lot of money on bells and whistles in their rental property," Getty says. "A rental needs to compare well to others in the neighborhood, but don't make it a palace — you won't get that money back."

Florida Activists read between the Lines on Foreclosure Paperwork

2010-10-24T11:29:00.000-04:00

The Washington Post

Michael Redman and Lisa Epstein, at the Palm Beach County Courthouse, joined forces with two other people in Florida in investigating potentially fraudulent foreclosure paperwork.

WEST PALM BEACH, Fla. - Nearly a year before the national furor over foreclosures began, Lisa Epstein, a nurse, ran into three other amateur sleuths who separately were investigating shoddy practices at mortgage companies.

While meeting for the first time in November at an old one-story law office in this city, the four strangers compared notes and began to piece together the scope of the problem: All over the United States, big financial firms might have been using fraudulent paperwork to evict struggling borrowers from their homes.

Now tight-knit, the group is largely responsible for setting off the growing firestorm over foreclosures.

Epstein, a Fairfax County native who became an activist after she lost her job and became unable to pay her mortgage, launched a grass-roots movement against the country's largest banks, which are facing the prospects of billions of dollars in soured loans and legal expenses.

Joining her were Michael Redman, whose foreclosure blog drew the White House into the controversy, and Thomas and Ariane Ice, who run a boutique law firm that was the first to depose "robo-signer" Jeffrey Stephan of Ally Financial's GMAC mortgage unit in December.

In addition to trying to educate the public about the issue, the group had also been quietly passing along stacks of problematic documents to state and federal regulators, lawmakers, judges and law enforcement officials.

They pointed out that document processors such as Stephan had admitted in sworn depositions that they had signed off on up to 10,000 foreclosure documents a month, even though they had not reviewed them as legally required. They also shed light on foreclosure cases in which the paperwork appeared to have been backdated, forged or improperly notarized.

Now, at least five major mortgage companies have frozen some foreclosures. Attorneys general from each state have joined forces to investigate, and a federal task force is considering criminal charges in the matter. Some bank stocks have fallen on concerns that the issue of flawed paperwork could be a coverup for something even more serious. And economists worry that the fragile housing market, where one in four houses on sale is in foreclosure, could take a devastating hit.

Although the uproar over foreclosures might seem sudden, for the activists, it was a long time coming.

Epstein, 45, a George Mason University graduate who moved from the Washington area to Florida for the sunshine 13 years ago, first began to suspect something was wrong in February 2009 after she was served foreclosure papers without any acknowledgment that she had applied for a loan modification.

Redman, 35, said he knew there was a problem as early as January 2008, when he was trying to help his fiancee fight foreclosure and noticed that one of the key documents that proved ownership of the loan had suspicious signatures.

The Ices' eureka moment came late one night in early 2009 when Ariane was looking at the 700 cases in their database and noticed that a lot of the problematic paperwork had been signed by the same people.

As the four of them continued to investigate the issue, the months became filled with self-doubt.

"Plaintiffs' attorneys were scoffing at us; judges were laughing. You get to the point where you think, 'Maybe I'm the crazy one,' " said Thomas Ice, 50.

The group members, who are on the east coast of Florida, where nearly half of the homes on the market are in foreclosure, was soon joined by like-minded lawyers, homeowners and activists on the west coast. Together, the growing movement began to organize events at bar association meetings, host happy hours for distressed homeowners, and follow prominent public officials wherever they were speaking to get their attention. They launched Web sites to get the word out to homeowners' attorneys around the country.

Larry Schwartztol, a New York-based staff lawyer with the American Civil Liberties Union, has been working with Epstein's group to investigate whether Florida courts violated due process by short-circuiting normal procedures in foreclosure cases. He said the research the group is doing is "extremely impressive" and "indispensable."

Although there was no formal organization behind their effort, each of the activists took on distinct roles.

The Ices and seven other lawyers at their firm began deposing "robo-signers" at major mortgage companies, and, in an unusual move in the competitive legal industry, they began distributing the transcripts online.

Homeowners' lawyers nationwide began using the documents to defend their clients. Thomas Cox, a lawyer in Maine, saw Ice Legal's deposition of Stephan, the Ally robo-signer, and decided to depose him again for a case in his state in June. Cox was able to get his client's foreclosure judgment vacated.

Redman, who had been working in marketing for the online department of a local car dealership, set up a Web site, 4closurefraud.org, where he aggregated and analyzed key court documents related to faulty foreclosures. It was an instant hit - the Huffington Post of foreclosures - with Redman's snarky commentary, use of large pictures and graphics to explain complex subjects and his apparent glee - signified by an animated laughing "Jerry"- when he discovered a new way to attack the banks.

It was Redman's Web site, which is now being funded by a local lawyer, Carol C. Asbury, that took the lead in drawing President Obama into the foreclosure controversy this month by making a major issue out of a little-known notary bill, several lawyers around the United States said. Redman said that a reader had e-mailed him about the bill that had sailed through the Senate and was sitting on Obama's desk. The bill would make it easier to foreclose because notary signatures would be valid across state lines.

Epstein, a single mom who once worked as a cancer nurse, became the group's liaison to homeowners, setting up an online discussion site for them to vent their frustrations and debate strategies.

For months, she fired off up to five letters a night to officials, judges or anyone she could think of after her daughter went to sleep. Her letters were prone to hyperbole, but her explanations of the potential for fraud in various steps of the foreclosure process were laid out. In one, she wrote to the Florida Supreme Court: "I am outraged by the perfidious harvest poisoning the financial and emotional well being of individuals worldwide due to the appalling opportunism of Wall Street's historic, unrequited love affair with mortgage backed securities."

The first major lender to take corrective action on foreclosures - Ally Financial, which is majority-owned by the U.S. Treasury - has declined to comment about what prompted it to freeze foreclosures Sept. 20, but Epstein, Redman and the Ices say they and others who are defending homeowners applied so much pressure on the company that it would have been difficult for it not to act.

On April 28, one week after the four activists had staged a rally at the courthouse in the state capital, they had their first major breakthrough: The Florida attorney general's office announced an investigation into a "foreclosure mill" law firm called the Florida Default Law Group for allegedly presenting misleading or false documents to courts.

Knowing that the law firm had been hired by some of the nation's largest lenders, Epstein and Redman went to the local courthouse and began delving into its filings.

It wasn't until last month that their work began to draw national attention. The Florida Default Law Group confirmed in court filings Sept. 7 that the foreclosure documents that had been signed by Stephan, the robo-signer, "may not have been properly verified."

Redman posted the news on his Web site on Sept. 14. "ALL OF THESE AFFIDAVITS FROM THESE CHARACTERS ARE INVALID IF CHALLENGED!!!," he wrote, predicting it would affect "HUNDREDS OF THOUSANDS OF CASES!!!"

One week later, Ally Financial announced that it would halt foreclosure sales in nearly two dozen states. At least four other major mortgage companies followed suit.

Area Builder wins Construction Award for Nordic Naturals' new Watsonville Headquarters

2010-10-22T19:46:00.000-04:00

Mercury News

WATSONVILLE, California - Nordic Naturals' new 89,384-square-foot headquarters and national distribution center in Watsonville has won a national award for innovative construction.

The builder, Ausonio Incorporated of Castroville, used concrete tilt-up construction to achieve the look of a Norwegian fishing village for Nordic Naturals, which makes fish oil supplements.

The award was one of nine office projects in six states recognized by the Tilt-Up Concrete Association. It was the only one in California to be honored.

"We were in pretty amazing company," said Ausonio project manager Jim Staniec, of Santa Cruz, who accepted the award at an Oct. 1 ceremony in Irvine.

Other winners included an entertainment center in Fredericksburg, Va., a high school in Round Rock, Texas and the Lauderhill, Fla., municipal complex.

The Watsonville building contains 41,402 square feet of office space at 111 Jennings Drive. It's 340 feet long with walls that are 45 feet high.

"I've been a California concrete contractor here for 30 years and this is one of the biggest ones I've seen built," said Staniec, comparing it to the 121,000-square foot Costco warehouse store in Santa Cruz. "The challenge was how to get as much light into the building as possible."

Staniec said he sketched a preliminary design using skills he learned in high school, with the final design executed by Carl Pelke, Ausonio's in-house architect. Capitola interior designer Vivian Gunnerengen selected the interior finishes and acted as the owner's representative during design and construction.

The colors for the building exterior - rust red, mustard yellow and sage green, were chosen by Gunnerengen and Joar Opheim, founder and chief executive officer of Nordic Naturals, to match those in Norway.

"They approached us because we do design-build," Staniec said. "This makes it so much simpler."

To create a wood siding look, Ausonio used liners with a wood grain pattern in the concrete panel forms, and then added cementitious boards, about eight inches wide, to the face of the panels.

"It looks like wood," said Staniec, noting 20,000 screws were needed to hold those boards in place. "It was tedious but it looks good."

The building project took 11 months. Though construction is complete, only the warehouse portion is in use.

Last winter was so rainy that moisture got into the floor slab, requiring a special drying out process, according to Staniec, who expects office workers to move in by the end of the year.

Tiffany Diehl, Nordic Naturals' strategic project manager, said she is not sure of the relocation timetable.

Ausonio is aiming for Gold Leadership in Energy and Environmental Design certification from the U.S. Green Building Council for the project.

Last month, the builder earned LEED Platinum for the Monterey College of Law, its second LEED project at the former Fort Ord in Seaside. The first was Chartwell School.

Ausonio has 11 other projects registered for LEED certification in various stages from design to concrete construction, none in Santa Cruz County.

The economy is "a bit of a struggle," Staniec said. "People want to build stuff but the financing is so difficult."

U.S. Foreclosure Mess chills Investors, Clouds Market

2010-10-22T17:16:00.000-04:00

Reuters

Investors who have been snapping up foreclosed homes are backing off in the wake of the U.S. foreclosure fiasco, driven by sagging inventory and fears over legal title, and some economists say the trend could hurt the overall housing market.

With foreclosed properties accounting for a large portion of housing sales, and investors accounting for a large portion of buyers -- particularly in some key markets with very high foreclosure rates -- the implications for the broader economy could be serious.

Investors who would buy, rehabilitate and then sell or rent foreclosures were playing a "huge role," in helping to clear the market, said housing economist Tom Lawler.

But many of those investors are now staying on the sidelines.

"We're like a plane flying around in a holding pattern, waiting to land," said Tony Alvarez, an investor in southern California who is currently renting out 40 former foreclosed homes. "Nothing is going on, and why? Fear has taken hold in the marketplace."

Allegations that banks failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties spurred a joint investigation by the attorneys general of all 50 states and triggered foreclosure moratoriums by some of the biggest U.S. lenders.

Bank of America and GMAC Mortgage have retreated from their foreclosure suspensions.

The investors are so essential to the housing recovery, Amherst Securities managing director Laurie Goodman wrote in a paper in Financial Analysts Journal, that an extension of federal loans for them is "the single most important demand-side action that could be taken."

The pall cast over foreclosure sales by the growing questions over the use of shoddy documents in processing foreclosures has adverse implications for the housing market and the broader economy, said IHS Global Insights economist Patrick Newport.

Fewer sales to investors means fewer sales altogether, which will further elevate supply. That, in turn, will keep a lid on home prices, making consumers feel poorer.

"Falling home prices make consumers less likely to spend," Newport said. "In general, uncertainty is not a good thing for the economy."

Consumer spending accounts for two-thirds of the U.S. economy.

PULLING BACK

The role of investors in helping to clear the huge supply of inventory has been substantial. In August, investors generated 21 percent of existing home sales, according to the National Association of Realtors.

In markets like Orlando, Florida, and Phoenix, where rampant risky lending and speculation during the housing boom left the most foreclosures behind, those numbers can hit 40 percent and higher, Lawler said.

Nearly one-third of all homes sold in September were in the foreclosure process, according to real estate data company RealtyTrac.

The number of homes taken over by banks topped 100,000 in a month for the first time in September, though foreclosures are likely to slow as lenders review their paperwork, RealtyTrac said.

Distressed real estate investor Bruce Norris said the volume of his business in southern California has dropped 75 percent in the past two weeks as the sudden decline in inventory has led to a spike in prices.

"We're being much more cautious," Norris said. "Everything is getting bid up to a ridiculous number. There isn't any profit."

Current higher prices are not the only disincentive. Investors see lenders cutting foreclosure prices sharply at some point next year when they try to reduce the logjam that is now building up by pushing more inventory out onto the market.

"Investors are pulling back," said John Burns, whose national real estate consulting firm is based in Irvine, California. "They think it'll be cheaper next year."

Alvarez also said the uncertainties hanging over the industry will keep smaller foreclosure investors like himself on the sidelines at least through the end of the year.

"We're still going through the motions of doing our typical business," he said. "But it's like a doctor, you want to monitor a patient's stats. Well, try operating without any of that information, you'd be losing patients left and right."

Timing is the investor's most pressing concern, said John Anderson, a real estate agent who specializes in foreclosures in the Minneapolis and St. Paul, Minnesota, area.

"They want to buy these properties and have them back on the market in a short time," Anderson said. "If there are major delays, they could be stuck."

FALSE TITLE?

The picture is not as bleak for larger players, said Jamie Rand, whose Prime Asset Fund LLC, based in the suburbs of Tampa, Florida, bought and sold over a thousand foreclosures in the past year.

When the uproar subsides, lenders and government investigators will find only a very small percentage of truly wrongful foreclosures, Rand said.

And should one of those crop up in his business, he can absorb the cost, he said.

"For me, it's an opportunity," he said. "Because of the limited amount of inventory, it'll help me as I take my assets on the market."

Still, smaller investors say they have more reasons to sit back than to act.

They worry that their title insurance will not cover them if past owners sue to reclaim their property, said Anderson, the Minneapolis-area real estate agent.

In southern California, Norris said he sees the foreclosure mess gaining momentum.

"The cat's out of the bag," he said. "And the lawyers are going to have a new cottage industry stopping foreclosures and going after people who have already purchased them."

Norris has received calls from foreclosure buyers who had upgraded the homes and were ready to sell them when a former owner sued for their return.

"There still might be concern about past foreclosures," Lawler, the economist, said. "We don't know if refiled papers will be accepted or approved by the courts. And it could be different depending on the state."

Grand Estates Auction Co. Offers Waterfront Ford Plantation Estate

2010-10-20T01:26:00.000-04:00

Kansas City Star

Home in Exclusive Sporting Community near Savannah to Be Sold at Oct. 26 ‘Absolute’ Auction

Grand Estates Auction Co., the leading luxury real estate auction firm, is offering an elegant Low Country estate close to historic Savannah, Ga., with private water frontage on the famed Ford Plantation Yacht Basin. The auction on Tuesday, Oct. 26, will be “absolute,” where the lack of a minimum bid or reserve assures a prompt sale that benefits both buyer and seller.

Located in a plantation that was the former winter home of industrial magnate Henry Ford, the five-bedroom, five-bathroom home with a separate guest cottage is an ideal retreat in an exclusive, gated coastal resort community. The 1,800-acre, sporting-oriented community features world-class equestrian facilities, a Pete Dye-designed championship golf course, a full-service marina accommodating yachts up to 65 feet long, sport fishing and sporting clays, a full-time naturalist, a day spa, fine dining and swim, tennis and fitness facilities with an on-site personal trainer.

The custom home offers panoramic views of the yacht basin, marsh and Ogeechee River from most of its 6,000 square feet, including a top-floor cupola with 360-degree views of the Ford Plantation grounds. The homeowner can relax in a master suite with a separate sitting area and fireplace or conduct business in a main-level office with built-in cabinetry. Family and friends can gather in a great room with heart-pine paneling, a more formal dining room and a screened porch with gas grill, fine cabinetry with sink and sweeping views that’s perfect for year-round entertaining.

Grand Estates has an 11-year track record of representing one-of-a-kind properties and attracting a well-qualified group of bidders. “By using an absolute auction, the seller knows the home will be sold on a predetermined day, avoiding the hassles of inconvenient and disappointing showings and open houses. The buyer knows the seller is committed to selling the home at a price that reflects the true market value,” said Stacy Kirk, president of Grand Estates, with offices in Atlanta, Charlotte, Dallas, La Jolla, Calif., Naples, Fla., and Vail, Colo.

At a time when multi-million-dollar homes can languish on the market for years, Grand Estates’ extensive marketing program has attracted an average of 266 buyer inquires for each home sold so far in 2010, including $10.7 million worth of premier properties sold during five absolute auctions in June.

Largest Bank Will Resume Foreclosure Push in 23 States

2010-10-19T09:40:00.000-04:00

NY Times

Bank of America announced on Monday that it would resume home foreclosures in nearly two dozen states, despite the running controversy over how banks handled tens of thousands of cases of homeowners facing eviction.

Bank of America, the nation’s largest bank and the servicer of roughly one in five American mortgages, insisted that it had not found a single example where a foreclosure proceeding was brought in error.

The move is also likely to encourage other giant lenders, like JPMorgan Chase, to resume the foreclosure process that threatens two million homeowners.

Meanwhile, GMAC Mortgage, whose procedures helped prompt the controversy when one its executives testified that he had signed 10,000 documents in a month, is also proceeding with foreclosures.

“We announced a temporary suspension of evictions and foreclosure sales in the 23 judicial states several weeks ago so we could commence the appropriate review,” said Gina Proia, a spokeswoman for GMAC. “As cases are being reviewed and, when needed, remediated, the foreclosure process moves forward as appropriate.”

Guy Cecala of Inside Mortgage Finance, an industry publication, said: “This draws a line in the sand that the banks expect this problem will be over in relatively short order and it will be back to business as usual. If Bank of America can do it, certainly the smaller ones will follow suit.”

Bank of America plans to begin filing new paperwork for 102,000 foreclosures by Monday.

Consumer advocates and lawyers for homeowners expressed skepticism that Bank of America could complete a review of the paperwork so quickly. But the banking industry has come under increasing pressure from investors to resolve the problem.

Investors have fled bank stocks in recent days, worrying that the foreclosure halt would cost banks billions of dollars and inflict further harm on the nation’s struggling housing market. Bank of America is scheduled to report its latest quarterly results on Tuesday. Its shares have suffered more than those of other big banks, so any sign that the crisis is easing is likely to be greeted favorably by shareholders.

Reports of improper procedures at mortgage servicers, like having officials sign thousands of documents a month — so-called robo-signers — also have set off a political furor. On Wednesday, all 50 state attorneys general announced an investigation of mortgage servicing.

Bank of America said it would resume foreclosures in the 23 states where judicial approval was required after an internal review turned up no evidence that cases were filed in error.

However, Bank of America’s suspension will remain in effect in the 27 other states that do not require a judge’s approval to foreclose, as the bank’s paperwork review proceeds state by state. It was the only bank to initiate a nationwide freeze.

“We did a thorough review of the process, and we found the facts underlying the decision to foreclose have been accurate,” said Barbara J. Desoer, president of Bank of America Home Loans. “We paused while we were doing that, and now we’re moving forward.”

In the other 27 states, Ms. Desoer said, she expects foreclosures to resume within weeks.

Bank of America was careful to note that the major holders of mortgages — Fannie Mae and Freddie Mac — as well as private investors had signed off on its decision and had been consulted during the review. Of the 14 million mortgages it services — about $2.1 trillion worth — about half are owned by Fannie Mae and Freddie Mac, the giant mortgage holding companies now controlled by the Treasury.

About 30 percent are owned by institutional investors, like hedge funds, pension funds and insurance companies, while Bank of America holds 20 percent.

“We voluntarily paused our process in the 23 judicial states, not because there was evidence of problems — there was not — but because we wanted to ensure our customers they are being treated fairly,” said Dan Frahm, a bank spokesman.

Even as Bank of America and GMAC signaled their resumption of foreclosures, a Citigroup executive said the company was confident in its procedures. “The integrity of Citi’s foreclosures process is sound,” John C. Gerspach, Citigroup’s chief financial officer, said on a conference call.

In Bank of America’s case, the foreclosures are resuming in the 23 states where judicial procedure is required because the halt was initiated there first, on Oct. 1. It was extended to the other 27 states on Oct. 8.

From the beginning, Bank of America signaled that it did not expect the review to go on for an extended period. On Oct. 8, its chief executive, Brian Moynihan, promised a quick conclusion.

“We haven’t found any problems with the foreclosure process, and what we’re saying is that we’ll go back and check our work one more time,” he said at the time. “We expect to be done in a few weeks’ time.”

Still, it is far from certain that banks will be able to calm the public controversy easily or quickly. Besides the robo-signers, lawyers for homeowners have found evidence that documents were lost or even thrown out. Armed with this information, lawyers are gearing up for protracted court battles.

Peter Ticktin, a lawyer in Deerfield Beach, Fla., questioned how Bank of America could validate the paperwork in its foreclosure cases so quickly, particularly for those loans that were repackaged as mortgage-backed securities.

“This wasn’t just a simple little mistake of forgetting to dot the ‘i,’ ” Mr. Ticktin said. “There was a whole system put in place to make false affidavits. How are they going to erect a new system to do 102,000 affidavits unless they are going to use the same old law firms to make a second generation of bad affidavits?”

Ira Rheingold, executive director of the National Association of Consumer Advocates, also expressed skepticism that Bank of America could clean up its problems with foreclosures so quickly.

“These are lawyers. These are banks going to court and committing fraud,” he said. “For them to say this is a minor technical problem is mind-boggling.”

It was good news for real estate agents, who had watched sales grind to a halt since major banks halted foreclosures late last month and in early October.

Kevin Corasio, a Realtor in Fort Myers, Fla., who specializes in foreclosed properties, said his business had fallen 60 percent in recent weeks. “I hope what you are telling me is true,” he said. “It’s going to mean a lot of property on the market.”

Nicholas Bogos, a tax lawyer, said he was dealing with a foreclosure suit on his dead brother’s home in Tampa, filed by Bank of America. He said he had not heard that the bank had lifted its foreclosure suspension but nonetheless did not think it could sort out the problems so quickly.

“I don’t see how they could have cleaned up, straightened up the back-office messes,” he said. “I have utmost confidence that it’s a snafu.”

Housing Secretary Donovan: Forclosure Mess 'Shameful'

2010-10-18T00:41:00.000-04:00

The Washington Post

U.S. President Barack Obama's housing secretary Sunday said it was shameful that financial institutions may have made the housing crisis worse with mistakes in processing foreclosures.

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said in a column on the Huffington Post website that "a comprehensive review" of the foreclosure crisis was under way and that the administration would respond with "the full force of law where problems are found."

Speed equaled Money in Foreclosure 'Machine'

2010-10-17T19:45:00.000-04:00

The Washington Post

Millions of homes have been seized by banks during the economic crisis through a mass production system of foreclosures that was set up to prioritize one thing over everything else: speed.

With 2 million homes in foreclosure and another 2.3 million seriously delinquent on their mortgages - the biggest logjam of distressed properties the market has ever seen - companies involved in the foreclosure process were paid to move cases quickly through the pipeline.

Law firms competed with one another to file the largest number of foreclosures on behalf of lenders - and were rewarded for their work with bonuses. These and other companies that handled the preparation of documents were paid for volume, so they processed as many as they could en masse, leaving little time to read the paperwork and catch errors.

And the big mortgage companies overseeing it all - including government-owned Fannie Mae - were so eager to get bad loans off their books that they imposed a penalty on contractors if they moved too slowly.

The system was so automated and so inflexible that once a foreclosure process began, homeowners and consumer advocates say, there was often no way to stop it.

"The problem is when you try to fight back against this machine, well, it's a machine," said Michael Alex Wasylik, an attorney for homeowners in Dade City, Fla. "You have to be able to get your case off the mass production line and to someone who will take the time to read what they file, but in many mortgage firms that person doesn't exist."

"Their whole bureaucratic procedure," Stark said, "is working against helping homeowners."

The financial incentives show that the problems plaguing the foreclosure process extend well beyond a few, low-ranking document processors who forged documents or failed to review foreclosure files even as they signed off on them. In fact, virtually everyone involved - loan servicers, law firms, document processing companies and others - made more money as they evicted more borrowers from their homes, creating a system that was vulnerable to error and difficult for homeowners to challenge.

"This was a systemic problem. It's not like a few renegade employees made mistakes," said lawyer Peter Ticktin, who defends Florida homeowners facing foreclosure. "It was industry-wide and pervasive, and everyone knew about it."

$1,300 per case

The law firm of David J. Stern in Plantation, Fla., for instance, assigned a team of 12 to handle 12,000 foreclosure files at once for big financial companies such as Fannie Mae, Freddie Mac and Citigroup, according to court documents. Each time a case was processed without a challenge from the homeowner, the firm was paid $1,300. It was an unusual arrangement in a legal profession that normally charges by the hour.

The office was so overwhelmed with work that managers kept notary stamps lying around for anyone to use. Bosses would often scream at each other in daily meetings for "files not moving fast enough," Tammie Lou Kapusta, the senior paralegal in charge of the operation, said in a deposition Sept. 22 for state law enforcement officials who are conducting a fraud investigation into the firm. In 2009 alone, Stern's law firm handled over 70,000 foreclosures.

"The girls would come out on the floor not knowing what they were doing," Kapusta said. "Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents."

Fannie Mae, Freddie Mac and Citigroup said they no longer do new business with Stern's firm.

Law firms were rewarded with additional bonuses from document processing companies if they met deadlines for preparing and filing foreclosures in courts. One of the nation's major processors, Lending Processing Services in Jacksonville, Fla., confirmed that it had paid such bonuses but said it no longer offers them. The company is under investigation by federal and state law enforcement.

Meanwhile, Fannie Mae imposes a $100 fee on contractors for each day they fail to notify the firm that the foreclosure process was a success and that it has the right to move ahead with the resale of a home. On top of that, Fannie charges a penalty - which escalates for larger mortgages - on contractors who delay selling off such properties.

Fannie declined to comment on these fees. But in a memo to loan servicers dated Aug. 31, Gwen Muse-Evans, Fannie Mae's chief risk officer, warned mortgage servicers that fees may be imposed based on "the length of the delay and any costs that are directly attributable to the delay."

Speed is also rewarded by the nation's credit-rating agencies, which give higher grades to mortgage service firms that accelerate the foreclosure process and generally hand out lower grades to those who hold onto delinquent loans. A Fitch Ratings manual calls the speed of foreclosures "the key driver in the servicer rating," according to a report by the National Consumer Law Center.

Untrained hires

To keep up with the crush of foreclosures, document processors and mortgage service firms rushed to hire anyone they could - hair stylists, Wal-Mart clerks, assembly-line workers who made blinds - and gave them key roles in their foreclosure departments without formal training, according to court papers.

A number of these employees have testified that they did not really know what a mortgage was, couldn't define "affidavit," and knew they were lying when they signed documents related to foreclosures, according to depositions of 150 employees for mortgage companies taken by the law firm run by Ticktin, the Florida lawyer.

These problems were compounded as banks began to rely more heavily on computer systems to quickly move people through the foreclosure process. That automation came at a price for the homeowners who had difficulty fighting incorrect decisions by inexperienced, anonymous employees who took what was in the computer as fact even when homeowners said there were data-entry errors.

"These guys were caught off-guard with the onslaught of foreclosures," said Clifford Rossi, a former chief risk officer for consumer lending for Citigroup who now teaches at the business school at the University of Maryland. "So there were a lot of errors."

In one case in Fort Lauderdale in July, for instance, Bank of America foreclosed on a man after a computer glitch and resold his home even though he had paid his mortgage in full.

Homeowners and their attorneys say the automated system especially hurts borrowers who may qualify for loan modifications through federal rescue programs.

Chandra Anand, 59, a telecommunications consultant from Germantown, called his lender in the fall of 2008, before he missed any payments, to warn the company that his wife's open-heart surgery might cause the family financial difficulty. He was told that in order to qualify for a loan modification he needed to miss payments. So he did and applied for a modification. He never heard back from his lender until he got a foreclosure notice in January 2009.

Every time he calls his lender to resolve his situation, an official tells him "to be patient, that it could take 60 more days to review things," Anand said. "It's now been a year and a half."

Andrea Bopp Stark, a lawyer with the Molleur Law Office in Biddeford, Maine, said that a number of her clients should be eligible for loan modifications through a Treasury Department program but that servicers "are in such a state of disarray that they often can't give homeowners basic answers about the state of their loan modification request."

Then a few weeks or months later, the same servicers evict homeowners as if those applications were never filed.

"Their whole bureaucratic procedure," Stark said, "is working against helping homeowners."

Local Ripples appear as Big Banks halt Foreclosures

2010-10-17T15:42:00.000-04:00

St. Louis Post-Dispatch

Metro East real estate agent Kathy Shemwell thought it was a done deal. She had a signed contract to sell a foreclosed home in Caseyville.

GMAC, the mortgage company that owns the property, had approved the contract for the home listed at $105,000. The buyer's mortgage was approved. He'd lined up contractors to do repairs.

They were a few days from closing this month. Shemwell's commission check was practically in hand.

Then came the phone call; GMAC was putting the deal on hold.

"We're in limbo," said Shemwell. "We're afraid many other buyers will be disappointed, too."

What's the problem? "It's the moratorium," says Roger Roddy, the agent representing GMAC in the deal. GMAC is among several big players halting foreclosures, or foreclosure sales, in states such as Illinois, where court approval is needed to repossess a house. (Missouri doesn't require a court proceeding.)

Bank of America, the nation's biggest mortgage servicer, made its moratorium nationwide.

Lawyers defending homeowners had discovered a nasty secret: GMAC, Bank of America, Wells Fargo, JP Morgan Chase and perhaps other banks had been using "robo-signers" to sign thousands of court documents filed in foreclosure cases. Bank employees - some with little training - were swearing to the accuracy of records they'd never read in order to keep the foreclosure train rolling. One frazzled worker approved 10,000 foreclosures a month.

Mortgage servicing departments have long been a glamourless backwater of banking. They were overwhelmed when homeowners began defaulting by the millions in 2007, and they're still stumbling and bumbling today.

For three years, homeowners behind on their payments have been complaining about mass confusion at mortgage servicers, including those at the nation's biggest banks. Paperwork is lost, faxed in and lost again; agreements are made and mysteriously canceled; callers can never get the same person on the phone twice, letters from the bank contradict what their representatives say on the phone.

Until now, that's mainly affected people trying to keep their homes by working out mortgage modifications. This month, the organizational chaos began spilling out the other end of pipeline, calling into question the legality of foreclosures in 23 states that require court approvals.

It's not clear how long the foreclosure moratoriums will last, or whether they'll spread to other mortgage companies. In the meantime, some think the moratoriums will delay the recovery in home prices.

Banks often sell foreclosed properties cheap in order to get them off the books. That lowers the value of homes nearby. The quicker the foreclosure mess is over with, the faster prices can recover.

The banks say they're halting foreclosures so they can check their procedures, indicating that they will resume later. "All this does is delay the inevitable," says attorney Dan Engle, who co-chairs the real estate practice at Thompson Coburn in St. Louis. "All we're doing is prolonging the residential housing slump."

On the other hand, problems with foreclosures could encourage banks to modify more mortgages - accepting lower monthly payments rather than seizing homes.

While halting new foreclosures, banks seem to be taking different approaches to properties they already own. GMAC was halting pending sales, but Bank of America and other operators were still putting foreclosed properties on the market last week, real estate agents said.

That's a good thing, says real estate agent Roddy of Remax Preferred in Swansea. Better to sell houses then to let them sit untended. "No one is mowing the lawn, or keeping the sump pump running," he says.

Meanwhile, the confusion may frighten buyers away from foreclosed houses. In theory, a homeowner whose property was taken based on falsified papers could demand it back - even if it's now owned by someone else.

"That's highly unlikely," says attorney Engle. After all, people who can't make their mortgage payments can't afford lawyers.

In most cases, the homeowner really was far behind on mortgage payments, he notes. The issue is whether the bank could produce the paperwork to prove its right to foreclose.

That can be tricky, given that mortgages are packaged into securities by the thousands, sliced into pieces and sold multiple times, leaving the ownership trail a jumble.

Title insurance is the buyer's protection, says Engle. Title insurers must cover your loss if your ownership is challenged, and that applies to properties bought in foreclosure. As of last week, title insurers were still issuing policies for foreclosure purchases.

It's rare that a bank takes a property that it's not entitled to, but it does happen, says lawyer Greg White, who defends homeowners in foreclosure cases. If the home's been sold, judges will usually protect the innocent buyer.

Foreclosure Crisis Should not come as a Surprise

2010-10-14T09:44:00.000-04:00

NY Times

At JPMorgan Chase & Company, they were derided as “Burger King kids” — walk-in hires who were so inexperienced they barely knew what a mortgage was.

At Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage.

And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.

“I don’t know the ins and outs of the loan,” a Litton employee said in a deposition last year. “I’m not a loan officer.”

As the furor grows over lenders’ efforts to sidestep legal rules in their zeal to reclaim homes from delinquent borrowers, these and other banks insist that they have been overwhelmed by the housing collapse.

But interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials. The issue gained new urgency on Wednesday, when all 50 state attorneys general announced that they would investigate foreclosure practices. That news came on the same day that JPMorgan Chase acknowledged that it had not used the nation’s largest electronic mortgage tracking system, MERS, since 2008.

That system has been faulted for losing documents and other sloppy practices.

The root of today’s problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.

Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. Even after the housing bubble began to burst, many of these operations languished with inadequate staffing and outmoded technology, despite warnings from regulators.

When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to deal the foreclosure process.

“We waited and waited and waited for wide-scale loan modifications,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, one of the first government officials to call on the industry to take action. “They never owned up to all the problems leading to the mortgage crisis. They have always downplayed it.”

In recent weeks, revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes have caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and Ally Bank, which is owned by GMAC, to halt foreclosures in many states.

Even before the political outcry, many of the banks shifted employees into their mortgage servicing units and beefed up hiring. Wells Fargo, for instance, has nearly doubled the number of workers in its mortgage modification unit over the last year, to about 17,000, while Citigroup added some 2,000 employees since 2007, bringing the total to 5,000.

“We believe we responded appropriately to staff up to meet the increased volume,” said Mark Rodgers, a spokesman for Citigroup.

Some industry executives add that they’re committed to helping homeowners but concede they were slow to ramp up. “In hindsight, we were all slow to jump on the issue,” said Michael J. Heid, co-president of at Wells Fargo Home Mortgage. “When you think about what it costs to add 10,000 people, that is a substantial investment in time and money along with the computers, training and system changes involved.”

Other officials say as foreclosures were beginning to spike as early as 2007, no one could have imagined how rapidly they would reach their current level. About 11.5 percent of borrowers are in default today, up from 5.7 percent from two years earlier.

“The systems were not ever that great to begin with, but you didn’t have that much strain on them,” said Jim Miller, who previously oversaw the mortgage servicing units for troubled borrowers at Citigroup, Chase and Capitol One. “I don’t think anybody anticipated this thing getting as bad as it did.”

Almost overnight, what had been a factorylike business that relied on workers with high school educations to process monthly payments needed to come up with a custom-made operation that could solve the problems of individual homeowners. Gregory Hebner, the president of the MOS Group, a California loan modification company that works closely with service companies, likened it to transforming McDonald’s into a gourmet eatery. “You are already in chase mode, and you never catch up,” he said.

To make matters worse, the banks had few financial incentives to invest in their servicing operations, several former executives said. A mortgage generates an annual fee equal to only about 0.25 percent of the loan’s total value, or about $500 a year on a typical $200,000 mortgage. That revenue evaporates once a loan becomes delinquent, while the cost of a foreclosure can easily reach $2,500 and devour the meager profits generated from handling healthy loans.

“Investment in people, training, and technology — all that costs them a lot of money, and they have no incentive to staff up,” said Taj Bindra, who oversaw Washington Mutual’s large mortgage servicing unit from 2004 to 2006.

And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids.” In many cases, the banks outsourced their foreclosure operations to law firms like that of David J. Stern, of Florida, which served clients like Citigroup, GMAC and others. Mr. Stern hired outsourcing firms in Guam and the Philippines to help.

The result was chaos, said Tammie Lou Kapusta, a former employee of Mr. Stern’s who was deposed by the Florida attorney general’s office last month. “The girls would come out on the floor not knowing what they were doing,” she said. “Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents.”

Citigroup and GMAC say they are no longer giving any new work to Mr. Stern’s firm.

In some cases, even steps that were supposed to ease the situation, like the federal program aimed at helping homeowners modify their mortgages to reduce what they owed, had actually contributed to the mess. Loan servicing companies complain that bureaucratic requirements are constantly changed by Washington, forcing them to overhaul an already byzantine process that involves nearly 250 steps.

Foreclosure Freeze May Sideline U.S. Homebuyers on Legal Concern

2010-10-13T08:39:00.000-04:00

Bloomberg

A halt in home foreclosures at the largest U.S. mortgage firms may sideline buyers worried about legal issues, further depressing sales at a time when distressed properties account for almost a quarter of all transactions.

Revelations of mistakes in foreclosure proceedings are causing buyers to have misgivings about property titles, the right of home possession, said Richard DeKaser, chief economist at Woodley Park Research in Washington. Confidence in the legality of repossessions will cut foreclosure sales more than a reduction of available properties because the market already is flooded with repossessed homes, he said.

“The legal problems we’re seeing will hit sales as people worry about the legitimacy of the process,” DeKaser said. “The implications are that there’s been shoddy work.”

Bank of America Corp., the largest U.S. lender, extended a freeze on foreclosures to all 50 states Oct. 8 as concern spread among federal and state officials that homes are being seized based on faulty data. JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC Mortgage unit stopped repossession cases in 23 states where courts supervise home seizures, amid allegations that employees submitted documents with unverified or false information to speed the process.

Nevada, Arizona

Foreclosure sales accounted for 24 percent of all home transactions during the second quarter, according to a Sept. 30 report by RealtyTrac Inc., an Irvine, California-based data seller. They made up a greater share in the states hardest-hit by the housing crisis, accounting for 56 percent of purchases in Nevada, 47 percent in Arizona and 43 percent in California.

In Florida, Massachusetts, Michigan and Rhode Island, the share was about a third.

Some indicators show the U.S. real estate market had turned a corner in August. The number of contracts to purchase previously owned homes increased 4.3 percent, the second monthly gain, according to an Oct. 4 report from the National Association of Realtors. Sales of previously owned homes rose to an annual pace 4.13 million, up 7.6 percent from July’s record low, the Chicago-based group said last month. September sales likely won’t be affected by the foreclosure legal problems.

“Our preliminary review of September foreclosure activity doesn’t show any obvious or notable impact,” said Rick Sharga, senior vice president of RealtyTrac. The effects may show up in the October data, he said.

PNC Halt

In addition to the freezes by Bank of America, JPMorgan and GMAC, PNC Financial Services Group Inc. halted sales of foreclosed homes for a month to review documents in its mortgage servicing procedures, according to an Oct. 4 memo the bank sent to lawyers handling the lender’s foreclosures.

Litton Loan Servicing LP, a mortgage-servicing business owned by Goldman Sachs Group Inc., said last week it’s stopping some foreclosures to review how they’re handled. Vickee Adams, a spokeswoman for San Francisco-based Wells Fargo & Co., and Mark Rodgers, a spokesman for Citigroup Inc. in New York, said the companies are still processing foreclosures.

A reduction in foreclosure sales may result in a short-term boost to the nation’s median home price as buyers shy away from distressed properties, said Thomas Lawler, founder and president of Lawler Housing and Economic Consulting in Leesburg, Virginia.

In the second quarter, distressed homes -- those that had received a default or auction notice or were seized banks -- sold at an average 26 percent discount to properties not in the foreclosure process, according to RealtyTrac.

Temporary Boost

Any short-term boost to prices may be offset when a flood of properties are offered for sale after document problems are sorted out, Lawler said.

“Some people are breathing a short-term sigh of relief because the likelihood of distressed sales putting downward pressure on home prices has been put off,” Lawler said. “But no one is breathing a long-term sigh of relief because when these properties eventually come on the market, we’ll have both the confidence problem and the price problem.”

U.S. home seizures climbed to records in three of the last five months, RealtyTrac said Sept. 16. Banks seized 95,364 homes in August and issued foreclosure filings to 338,836 owners, or one of every 381 U.S. households, according to the company.

It isn’t known how many loans are included in the national review by Bank of America, said Sharga. Before the Oct. 8 announcement, as many as 200,000 properties were included in the 23-state freeze by the Charlotte, North Carolina-based bank, New York-based JPMorgan and GMAC of Detroit, he said.

‘No Excuse’

“The broader concern is that if banks took shortcuts here, what else did they do?” Sharga said. “Five years into this crisis, there’s no excuse for not having a process in place.”

A study of foreclosure court documents by Richard Kessler, an attorney in Sarasota, Florida, found errors such as missing or improperly handled documents in about three-fourths of the cases. The mistakes may allow former owners and other claimants to contest the legality of pending and previously completed foreclosures, he said.

Ownership questions may not arise until a home is under contract and the potential purchaser applies for title insurance, or even decades later as one deed researcher catches errors overlooked by another. A so-called defective title means the person who paid for and moved into a house may not be the legal owner.

In cases of lost or mishandled paperwork, attorneys in many cases are allowed to refile documents to correct omissions and establish a claim, said Kathleen Engel, a financial-services law professor at Suffolk University in Boston.

Most of the homes affected by the foreclosure freeze will eventually come on to the market because the dispute is about court documents, not about whether borrowers defaulted, said Lawler, the housing economist.

“Most of the delays will just be delays,” Lawler said. “All this is doing is creating severe uncertainty for people who were thinking of buying a distressed property.”

S&P: China Major Cities' Home Prices May Fall 10% In 6-12 Months

2010-10-12T07:21:00.000-04:00

The Wall Street Journal

Home prices in China's major cities could fall 10% from current levels in the next six to 12 months, an analyst for ratings agency Standard & Poor's said in a teleconference Monday.

However, the decline could be as much as 20% if the government introduces drastic new tightening measures, the country's economic growth rate falls below S&P's expectations of a 10% expansion this year and interest rates rise sharply, S&P credit analyst Bei Fu said.

Her comments come after China announced new measures on Sept. 29 to cool its overheated real-estate market, including halting third and subsequent home purchases and raising the minimum down payment for all first time home-buyers. These moves added to measures introduced in April that included raising down payments on home purchases to 30% for homes bigger than 90 square meters.

Home prices in cities such as Beijing, Shanghai, Shenzhen, and Guangzhou are now down less than 10% from their peak earlier this year, S&P said in a report.

Fu said China's property developers are in a healthier position than they were 2008, when home prices fell 20%-30%.

She said many of them have adequate liquidity, have already locked in a majority of their revenue for 2010 and are unlikely to face severe pressure from the government's new tightening measures. She said S&P reiterates its stable short-term credit outlook for the sector.

Fu said it may be a while before the government introduces a residential real-estate tax as part of its cooling efforts, and such a tax would be levied at the local level in various parts of China before being expanded to cover the entire country.

"(A real-estate tax) is heavily discussed now, but it's only one of the many tools the government can use to manage the market," said Fu. "There are still no detailed implementation guidelines."

Christopher Lee, another S&P credit analyst, said local government officials have previously resisted changes to real-estate taxes.

Local governments derive most of their revenue from land sales, and are generally resistant to policies that could effect such income.

"We have not seen the full implementation of the land-appreciation tax across the cities," Lee said, referring to another property-related tax that was recently increased in some cities.

Foreclosure Freeze could Undermine Housing Market

2010-10-11T16:41:00.000-04:00

Associated Press

Karl Case, the co-creator of a widely watched housing market index, was upbeat three weeks ago. Mulling the economy while at a meeting at a resort near the Berkshires, Case thought the makings of a recovery were finally falling into place.

"I'm a 60-40 optimist," he said at the time.

Today, Case's mood is far more subdued. In scarcely two weeks, he and other housing analysts have watched as the once-staid world of back-office bank procedures has spawned a scandal that threatens to further unhinge the housing market.

Allegations of possible mortgage fraud against financial giants GMAC, JPMorgan Chase and Bank of America read like a corporate thriller: forged documents, faked Social Security numbers, phantom titles, disappearing paper trails, "robo-signers" and mortgages sliced and diced so many times that nobody really knows who owns them.

On Friday, PNC and mortgage servicer Litton Loan Servicing joined those three financial institutions in suspending some foreclosures while they review how documents were handled. Bank of America, which had already announced a halt for 23 states, expanded the suspension to cover the whole nation. If other banks follow suit, it raises the specter of a national foreclosure moratorium.

In all, the banks will have to review the paperwork for hundreds of thousands of mortgages. On top of that, class action lawyers and state attorneys general have filed lawsuits and called for foreclosure moratoriums.

In the near term, the freezes could actually benefit both homeowners and the housing market. Homeowners would have time to live rent-free and chip away at their debt. Prices might stabilize because so many homes are penned up.

But the long-term implications are grave. Only a month ago, housing watcher Mark Zandi, chief economist at Moody's Analytics, predicted that a housing recovery would be under way by the third quarter of next year. Now he believes the foreclosure scandal could prolong the housing depression for at least another few years.

The alleged document fraud could open up the entire chain of foreclosure proceedings to legal challenge. Some foreclosures could be overturned, others deemed outright fraudulent.

Before a housing recovery can occur, all those foreclosed properties have to be re-scrutinized by the banks and then sold. With any foreclosure-related deal open to legal challenge, that inventory could be taken off the market while the legal challenges make their way through the courts.

That's not to mention the questions being raised about missing paper trails on mortgages owned by people who have never missed a payment. What started as simple paperwork bungling in a Pennsylvania office park now threatens to bring to a standstill the nation's entire foreclosure machinery.

The development is especially troubling given how large the foreclosure market is. Before the scandal erupted, forecasters at John Burns Real Estate Consulting predicted that 41 percent of residential sales this year would be on distressed properties. Typically, distressed properties account for 7 percent.

Since housing is the engine that in the past seven recessions has pulled the economy out of recession, any further damage couldn't come at a worse time.

"As far as I'm concerned, anything that slows the foreclosure process is a bad thing," Case said this week.

The debacle injects yet more uncertainty into a frail recovery that is still trying to find its strength.

"This is definitely one of the last things anyone needed to have to deal with," says Diane Pendley, managing director of Fitch Ratings.

The news that GMAC, recently renamed Ally Financial, and JPMorgan Chase and Bank of America were stopping foreclosure proceedings in 23 states was merely the beginning. Federal lawmakers are calling for a federal investigation, saying the excuses from the industry are not credible, and on Wednesday the Ohio attorney general filed a fraud suit against GMAC, calling it "the tip of an iceberg of industry-wide abuse." GMAC denies the allegations.

In at least six states, attorneys general are calling for foreclosure moratoriums and launching their own investigations.

What's more, lawyers who have already filed class action lawsuits in Maine and Kentucky are now signing up entire neighborhoods as new clients. They're hiring private eyes to track down former industry employees and holding marathon conference calls to strategize on how to get every speck of dirt on the banks that they can.

The low-level bank employees in question were supposed to have reviewed mortgage documents in detail. Instead, they say they never so much as glanced at the papers. Nor did they even know where the papers were.

"They were just so haphazard and so gloriously incompetent to save a few pennies here and there," says Barry Ritholtz, director of equity research at Fusion IQ. "But a few pennies times millions of documents is a billion dollars."

The banks insist that most of the people involved in the foreclosure deals were legitimately behind on their payments. But even so, if the procedures that put them into foreclosure are deemed fraudulent, it will nullify the deals and require that the entire process start all over again.

The financial institutions insist that, in most if not all cases, there was no fraud, the borrowed missed their payments and the foreclosures are justified. Delays may occur, they say, but the outcomes will be the same. Moreover, they insist they are strengthening their procedures. They are chalking up much of the controversy to possible shoddy paperwork.

But the pronouncements have done little to assuage those connected to the mortgage industry, and the uncertainty is spreading fast.

On Sept. 23, Standard and Poor's warned of a possible downgrade on GMAC. The next day, Moody's Investors Service also placed GMAC on a watch. On Sept. 29, Fitch Ratings said it was reviewing the mortgage servicers' practices.

Perhaps most worrisome was the news on Oct. 1 that title insurer Old Republic National — which provides protection to the homebuyer and mortgage provider in case any unpaid taxes, questionable ownership or other problems turn up — had ordered its agents to cease offering policies on foreclosed properties owned by GMAC or JPMorgan Chase. On Oct. 7, another title insurer, Stewart Title, issued an internal memo making it incredibly difficult — if not impossible — for an agent to write a policy for any foreclosure property connected to any of the now-tainted banks.

"Right now everyone in the industry is trying to understand the scope and breadth of the problem, and is looking to lenders to get their paperwork in order so that sales can resume," says Kurt Pfotenhauer, chief executive of the trade group American Land Title Association.

Meanwhile, real estate agents who specialize in selling bank-owned properties say the market is locking up. Dorothy Buse, a Coldwell Banker agent in the Orlando, Fla., area, said that out of the 200 foreclosures she has listed for sale, 40 are now in the foreclosure freeze. Of the 40, 12 that were already under contract are now on hold. It's now unlikely that anyone would want to make an offer on any of the other 160 homes.

"There's nothing within my power — or my staff's power — that we can do, except try to reassure them that we're working on this," Buse says.

In addition, legal challenges are mounting. On Sept. 24, a district court judge in Maine threw out a ruling in favor of GMAC to foreclose on a house owned by an unemployed mother of two. Now that case will go to a bench trial in Portland.

The court also sanctioned GMAC about its paperwork process, noting that "this case is not the first time that GMAC's high-volume and careless approach to affidavit signing has been exposed."

Michael Holmes is one of the thousands of mortgage holders whose house was put into foreclosure by the now infamous "robo-signer," the GMAC employee who signed 10,000 foreclosure affidavits a month. On Oct. 1, GMAC informed Holmes that the foreclosure on his Belfast, Maine, home had been put on hold. The bank didn't say for how long.

The temporary halt has done little to subdue Holmes' stress. He spent the past year and a half fighting to get a loan modification from GMAC, a process he says yielded a file the size of a Manhattan phone book and virtually no response from the bank. He also claims he received no written notice of a foreclosure.

Now Holmes, a former hospitality executive at such Boston hotels as the Ritz-Carlton and the Copley Plaza, says he wants to fight to keep the Victorian he grew up in. But from one day to the next, he doesn't know what will happen.

"The one safe place you have is your home," Holmes says. "It's your comfort zone, and to have that in limbo, it feels like the wolves are on my porch."

Flawed Foreclosure Documents Thwart Home Sales

2010-10-08T11:27:00.002-04:00

NY Times

Richard Clark, left, with his agent, Kevin Corasio,
is trying to buy a foreclosed home in Florida.

Amanda Ducksworth was supposed to move in to her new home this week, a three-bedroom steal here in central Florida with a horse farm across the road. Instead, she is camped out with her 7-year-old son at her boss’s house.

Like many buyers across the country, Ms. Ducksworth was about to complete the purchase of a foreclosed house when it suddenly went off the market. Fannie Mae, the giant mortgage holding company that buys loans from commercial lenders, is pulling back sales of homes that might have been foreclosed in bad faith.

“I gave up my rental thinking I would have a house,” said Ms. Ducksworth, a 28-year-old catering assistant. “Now I’m sharing a room with my son. What the hell is up with that?”

With home sales this past summer at the lowest level in more than a decade, real estate is ill-prepared to suffer another blow. But as a scandal unfolds over mortgage lenders’ shoddy preparation of foreclosure documents, the fallout is beginning to hammer the housing market, especially in states like Florida where distressed properties are abundant.

“This crisis takes a situation that’s already bad and kind of cements it into place,” said Joshua Shapiro, chief United States economist for MFR Inc., an economic consulting firm.

Three major mortgage lenders — Bank of America, GMAC Mortgage and JPMorgan Chase — have said they are suspending foreclosures in the 23 states where they first need a judge’s approval. They are also waving off Fannie Mae from selling any of the foreclosed homes whose loans they sold to Fannie.

The companies say they are reviewing their operations after disclosures that employees signed documents without determining the accuracy of the material, as is required by law.

Those reviews are throwing into limbo hundreds of thousands of foreclosures and pending home sales, analysts estimate, though the lenders and Fannie Mae have been mostly silent about precise numbers and other specifics.

More broadly, the revelations about the sloppy paperwork are emboldening homeowners and law enforcement officials in many states to question whether lenders rightfully hold the notes underlying foreclosed properties — further chilling the housing market.

Distressed properties, many of which are in foreclosure, make up about a third of all home sales. “Foreclosures are going to slow to a crawl,” said Guy D. Cecala, publisher of the trade magazine Inside Mortgage Finance.

Of the 23 states where foreclosures need court approval, Florida has by far the most trouble — about a half-million cases clog its courts — and the moratoriums are having a noticeable effect.

Because most lenders sold their mortgages to Fannie Mae, it is largely that company that has been sending e-mails to real estate agents about putting off deals and removing houses from the market. In most cases, the agents are being told the freeze will last 30 to 90 days, but agents say there is no way to know for sure.

A snapshot of the problems can be seen at the real estate agency that sold Ms. Ducksworth her home, Marc Joseph Realty, based in Fort Myers.

The agency had 35 deals that were supposed to close this month. As of Thursday, Fannie had postponed 11 of them. Another handful of homes that did not have offers or were being prepared for market had also been withdrawn.

“If this wipes out half my inventory, that’s a scary thing,” said Bill Mitchell, the agency’s closing coordinator.

As he spoke, his computer pinged and another message from Fannie came through about withdrawing a house. It had the subject line, “Unable to Market Notice.”

Another client of the agency, Richard Clark, is caught in the foreclosure vise on both ends.

A delivery truck driver, Mr. Clark has gone through several rough years: his wife lost her banking job and they eventually separated; a vending business did not succeed; he fell behind on his home payments; and CitiMortgage rebuffed his efforts to restructure the mortgage.

With the prospect of being tossed out of his house in a foreclosure of his own, Mr. Clark, 62, cobbled together $58,000 — most of it from his parents — and successfully bid on a house in North Fort Myers that was in foreclosure. His offer on the house, with three bedrooms and two baths, a Jacuzzi tub in the master bedroom and a Key lime tree in the backyard, was finally approved on Oct. 1.

“It’s been a rocky two years,” Mr. Clark, a stocky man with a short pony tail, wire-rim glasses and a gold hoop earring, said while touring the rambling one-story home. “It’s a dream house for me.”

At least, it was. On Tuesday, Fannie suspended the deal. Mr. Clark said he did not know what to do. “I’m kind of hoping I have a place to live,” he said. “Now, who knows?”

It is possible the foreclosure on his current house in nearby Cape Coral — he has a court hearing on Dec. 7 — will also become caught up in the current problems, but Mr. Clark said he was not pleased by the prospect of staying there any longer.

“I’d rather just get on with it, get on with my life,” he said.

In the states far from Florida where foreclosures are an equally large problem but there is no judicial review — Nevada, Arizona and California — there were early signs this week that the document crisis was spreading. The only time a foreclosure in those states enters a courtroom is when the borrower sues the lender, something few of those in default have the money or the will to do.

In a telephone interview on Wednesday, Gary Kent, a foreclosure specialist in San Diego who has 80 listings, said he had not heard from Fannie or any lender about withdrawing a property. All his deals were on track, Mr. Kent said.

But a few hours later, Mr. Kent said he had received an e-mail about removing a home that was under contract.

The message was from his title insurer, who said that Pittsburgh-based PNC Bank was imposing a 30-day moratorium on all foreclosure sales. (PNC declined to comment to a reporter.)

Mr. Kent’s confidence was shaken. “My buyer’s upset, my agent’s upset and I’m a little nervous,” he said.

Several factors are likely to delay many more foreclosed houses from reaching the market and finding new owners.

Law enforcement officials in several states, including Texas, Maryland and Connecticut, are demanding a suspension of foreclosures until lenders can prove they are using legal methods.

It is unclear how many lenders will go along.

In a move that sets up a potential showdown in Texas, one major lender, CitiMortgage, is arguing that it is being considered guilty until proven innocent by the state attorney general.

“We have no reason to believe our employees are not following our process, and therefore have no reason to stop foreclosures,” a Citi spokesman said.

Another factor is the reaction of the title insurers, who defend homeowners in disputes over a home’s ownership. Lenders require title insurance before approving a mortgage.

The crisis took many title insurers by surprise, said Kurt Pfotenhauer, the chief executive of the industry’s trade group, the American Land Title Association.

One possibility the title insurers are discussing is obtaining warranties from lenders against errors in their foreclosures. Every title insurer, Mr. Pfotenhauer said, “understands there is a brand new risk that has to be evaluated. It’s not at all clear that courts across the country are going to be reversing their earlier decisions on foreclosures. But we don’t know.”

In the meantime, buyers like Ms. Ducksworth here in Ocala are at a loss for answers.

“She’s in a mess, actually,” said Jim Haston, Ms. Ducksworth’s agent.

“I really don’t know what to tell her,” he said.

Obama Won't Sign Bill Affecting Foreclosures

2010-10-07T15:07:00.000-04:00

The Wall Street Journal

President Barack Obama won't sign into law an overlooked piece of legislation that critics say would make it easier for banks and others to process foreclosure proceedings without human signatures, a person familiar with the matter said.

Mr. Obama will send the bill back to Congress using a process known as a "pocket veto." It's his second pocket veto, but the first one designed to scotch a bill the White House opposes. In December, Mr. Obama declined to sign a spending bill the White House said was unnecessary because Congress had passed another.

His decision comes amid growing complaints from lawmakers that the administration and regulators haven't done enough to intervene in a scandal tied to thousands of foreclosures that critics argue were processed with improper documentation.

Ally Bank, Bank of America Corp. and J.P. Morgan Chase & Co. have halted foreclosures in 23 states in recent weeks to review how many documents tied to these foreclosures might have been filed improperly. A central issue is the practice of "robo" signing, when documents are signed quickly by computers or people who don't review the documents.

The bill in question, HR 3808, passed the Senate on Sept. 27 by unanimous consent. The House passed the bill by voice vote in April. Many bills that aren't considered controversial pass this way, with members of both parties essentially letting it move through Congress without debate.

The bill is called the Interstate Recognition of Notarizations Act of 2009, and it was authored by Rep. Robert Aderholt (R., Ala.). A spokesman for Mr. Aderholt didn't return a call for comment.

The bill was co-sponsored by Reps. Bruce Braley (D., Iowa), Michael Castle (R., Del.), and Artur Davis (D., Ala.).

The bill would require state and federal courts to "recognize any notarization made by a notary public" licensed in any state. This would include electronic signatures. The bill would have been a big win for businesses who complained it was too easy for people to challenge notarized documents in court when notaries were licensed in different states.

"This legislation will help businesses around the nation by eliminating the confusion which arises when states refuse to acknowledge the integrity of documents notarized out of state," Mr. Aderholt said when the bill passed the Senate. "This bill offers a common-sense solution to a problem that is more widespread than is generally recognized."

It is unclear how the bill might have affected the current foreclosure scandal, but liberal groups have insisted in recent days that Mr. Obama veto it. A spokesman for Mr. Aderholt said: "Contrary to some blogs and reports, there is absolutely no connection whatsoever between Congressman Aderholt's legislation and the recent foreclosure-documentation problems."

Ohio Secretary of State Jennifer Brunner said Tuesday if the bill became law it would make it harder for consumers to challenge foreclosures.

The bill raised difficult policy decisions for government officials. Some argue it should be easier for banks and others to process documents electronically to help reduce the backlog of foreclosures and help the housing market. But there have also been questions about the loan-servicing and foreclosure-processing industry, which is loosely regulated and now faces accusations of fraud.

Attorney General Eric Holder said Wednesday that the Financial Fraud Enforcement Task Force was looking at the issue, but it is unclear if prosecutors have opened a formal investigation into the matter.

End Game for Developers

2010-10-04T18:45:00.001-04:00

The Wall Street Journal

Aby Rosen Battles to Shore Up His Empire; Buyers Circle Joe Moinian's W Hotel

It's crunch time for Aby Rosen, the real estate developer known for blending his properties with his flashy style and world-class art collection.

Mr. Rosen is negotiating an end to his partnership in the Gramercy Park Hotel with hotelier Ian Schrager, who transformed the century-old hotel with a redesign that includes contemporary artworks by artists such as Andy Warhol and Damien Hirst. In his battle to hold onto the boutique hotel, Mr. Rosen also is buying back a $140 million loan on the building from Union Labor Life Insurance for about $90 million, people with knowledge of the situation say.

A few miles uptown, Mr. Rosen is at risk of losing the property at 66 East 55th Street that houses the Core Club, an exclusive social club whose initial members included Stephen Schwarzman, co-founder of the Blackstone Group and the late Bruce Wasserstein, former head of Lazard Ltd. An $18 million loan backed by some 27,439-square-foot retail condominium space at the building has been in default since early last year.

Now the lender has hired Mission Capital Advisors to sell the loan, according to people familiar with the matter. Bids are due on Oct. 26. Some prominent real-estate families have expressed interest in buying the debt with the intention of owning the property, the people said. Mr. Rosen declined to comment.

Like most developers who piled on easy credit during the boom years, Mr. Rosen has been scrambling to shore up his empire since the recession hit. These latest deals are a sign that these efforts by Mr. Rosen and others are moving into the end game.

Until recently, lenders generally have been reluctant to foreclose on property even after borrowers defaulted because values were scraping bottom and the lack of financing made it virtually impossible to sell. But now, a growing number of lenders holding debt on troubled projects are resorting to selling the debt to opportunistic investors.

Lenders are betting that now is the time to sell because values have rebounded some and demand is increasing from investors who amassed large war chests of capital to go after troubled real estate. "With property values stabilizing, lenders have become more willing to sell," says Will Sledge, a managing director at Mission Capital. "Buyers, feeling the wind is at their back, are now more willing to incrementally increase the amount they'll pay for soured loans as a new way to get distressed real estate."

So far this year, the New York-based loan-sale adviser had sold $3.4 billion of commercial property loans nationwide, compared to a total of $2.9 billion for all of last year.

In another example of aggressive investors looking to own property by snapping up debt, scores of hotel buyers and private-equity funds are circling the W Hotel and condo tower downtown currently owned by developer Joe Moinian, according to people familiar with the matter. The lender is marketing a $25 million junior loan on the property, also through Mission Capital, with bids due on Thursday. The sale of the debt would set the stage for a battle between Mr. Moinian and the potential buyer for control of the property.

A spokeswoman for Mr. Moinian declined to comment. The 56-year-old Iranian-born developer, who went on a buying spree during the boom years, also is fighting to fend off a foreclosure attempt aimed at an office tower near Columbus Circle by a venture led by Stephen Ross's Related Cos. and Deutsche Bank AG. The venture recently bought at close to full face value of the $250 million mortgage on the tower at 1775 Broadway and is now seeking to foreclose on the 700,000-square-foot building.

Developers such as Messrs. Moinian and Rosen can fend off these opportunistic investors by paying off or buying back debt. But often, that is a challenging task because capital still remains difficult to come by.

Mr. Rosen, the son of Holocaust survivors, founded his company, RFR Holding LLC, with his childhood friend Michael Fuchs in the wake of the last real-estate crash of the late 1980s. The company has since built up a vast portfolio consisting largely of prime assets such as the iconic Seagram Building and Lever House. His extensive art collection includes works by Andy Warhol, Keith Haring and Jeff Koons.

What makes Mr. Rosen stand out in the crowded Manhattan real-estate scene is his penchant for art and ability to weave his flashy style into his property holdings. At the members-only Core Club, which occupies the first five stories of the building at 66 E. 55th St., there is an art gallery, a Tom Colicchio restaurant, a fitness center, private concierges and meeting spaces.

Mr. Rosen teamed up with Mr. Schrager, his long-time friend and a co-founder of Studio 54, in acquiring the Gramercy Park Hotel in 2003. The 185-room hotel, which overlooks the private Gramercy Park, features an extensive collection of modern art and has won kudos for its design. But the ownership defaulted on the $140 million loan on the property this year.

Now Mr. Rosen is buying back the debt at a discount of about 35%. He's also close to buying out Mr. Schrager, who's focusing on creating new hotel brands.

Distressed Homes Sell at 26% Discount in U.S. as Supply Swells

2010-10-02T09:48:00.000-04:00

Bloomberg

Homes in the foreclosure process sold at an average 26 percent discount in the second quarter as almost one-fourth of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.

A total of 248,534 homes that sold in the period had received a default or auction notice or been seized by banks, RealtyTrac said in a report today. The number was up 5 percent from the first quarter and down 20 percent from a year earlier, according to the Irvine, California-based data seller.

“We’re still clearly building up more distressed inventory,” Rick Sharga, RealtyTrac’s senior vice president, said in a telephone interview. “That will either put downward pressure on prices or keep them from going up.”

The discount reflects the average sales price of homes in the foreclosure process compared with properties not in distress, according to RealtyTrac. About 24 percent of all homes sold were in some stage of foreclosure, down from 31 percent in the first quarter. The average price of a distressed property was $174,198, up from $171,971, the company said.

Foreclosures are adding to a swelling U.S. housing supply as an unemployment rate of 9.6 percent and the end of a federal homebuyer tax credit dampen purchases. Home seizures in August reached a record for the third time in five months, with more than 95,000 repossessions, RealtyTrac said earlier this month. Home prices dropped in July, the eighth consecutive year-over- year decline, the Federal Housing Finance Agency said Sept. 22.

‘Extraordinary’ Spike

Distressed sales dropped as a portion of total transactions because the homebuyer tax credit of as much as $8,000 spurred an “extraordinary sales spike,” Sharga said. The benefit expired April 30.

Sales of homes with mortgage distress probably will account for a quarter to a third of all transactions through 2011, up from 1 to 3 percent before the housing crisis, Sharga said.

“Many people elected to use the $8,000 credit as their discount, rather than buy a house that needed $8,000 worth of work,” Sharga said.

Bank-owned properties sold for an average discount of almost 35 percent in the second quarter, little changed from both the previous quarter and a year earlier. Such properties accounted for 15 percent of all U.S. home sales, down from almost 19 percent in the first quarter and 20 percent a year earlier, RealtyTrac data show.

Short Sales

Properties in default or scheduled for auction sold for an average discount of almost 13 percent, down from 16 percent in the previous quarter and 19 percent a year earlier. These homes are often sold in short sales, where lenders accept less than the outstanding loan amount for the property, RealtyTrac said. Sales of properties either in default or headed for auction accounted for 9 percent of all transactions.

The average price was $154,147 for bank-owned properties and $204,932 for homes in default or scheduled for auction, RealtyTrac said.

Nevada had the highest proportion of distressed sales of any U.S. state in the second quarter, with 56 percent of all transactions involving properties seized by banks or at risk of foreclosure. Arizona ranked second at 47 percent, while California was third at 43 percent.

Distressed sales accounted for at least a quarter of total sales in Rhode Island, Massachusetts, Florida, Michigan, Georgia, Idaho and Oregon, RealtyTrac said.

Ohio had the highest average price discount for foreclosed homes at almost 43 percent. Kentucky followed at 41 percent and California was third at 39 percent.

Michigan, Tennessee, Pennsylvania, Georgia, Illinois, Iowa and the District of Columbia all had average distress discounts of at least 35 percent, RealtyTrac said. The company sells default data from more than 2,200 counties representing 90 percent of the U.S. population.