Florida Foreclosures

WASHINGTON (AP) – Sales of new homes dropped sharply last month to the slowest pace on record, the latest sign that the economic recovery is fading.

The Commerce Department says new home sales fell 12.4 percent in July from a month earlier to a seasonally adjusted annual sales pace of 276,600. That was the slowest pace on records dating back to 1963.

Economists surveyed by Thomson Reuters had expected a pace of 330,000.

June’s sales figures were revised downward to an annual pace of 315,000. May’s figures were revised upward and are now the second-slowest pace on record.

The median sales price in July was $204,000. That was down 4.8 percent from a year earlier and down 6 percent from June.

Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer.

WALNUT CREEK, Calif. – Aug. 24, 2010 – Erin Kennedy-Florez was 10 months into a one-year lease on a home in Richmond, Calif., when she found a notice on her door saying the home was being foreclosed.

She said she called her landlord, who told her that he was trying to refinance the house and to keep paying him rent.

“I was paying the rent, but he was not paying the mortgage,” Kennedy-Florez said.

Soon after, the house went into foreclosure, and Kennedy-Florez immediately heard from a law firm representing Freddie Mac, the federal real estate lending agency that held the note on the home.

“I had to decide whether I still wanted to be living there while they were showing it (to potential buyers),” she said.

Kennedy-Florez’s situation reflects a problem that tenants rights’ groups say has been flying under the radar since the home foreclosure crisis began in 2008. They say thousands of renters have lost security deposits, paid rent to former landlords who no longer owned the house, and agreed to move on short notice because they didn’t know their rights.

Kennedy-Florez accepted a cash settlement to move three weeks after the foreclosure in November 2009. She received the check the day she moved out but struggled to come up with the security deposit for a new rental in El Cerrito, Calif.

The landlord still owed her a $3,200 security deposit and has been paying it back in $100 and $200 installments, she said.

“I jumped at the first place I could find,” she said. “I’m hoping this place isn’t shaky, too.”

Kennedy-Florez’s former landlord said the home had been foreclosed but that he had paid back the security deposit in full. He did not want to be named because of privacy concerns.

Some of foreclosure situations probably have been resolved to the satisfaction of landlords and renters alike, said Gabe Treves, program coordinator with rights group Tenants Together, which is based in San Francisco.

But Treves said his agency has helped 3,000 renters squeezed between landlords who are behind on their mortgage payments and lenders trying to recover their investments.

“The vast majority of the tenants we talk to are having their rights violated,” Treves said. “Banks are being very aggressive in trying to get the tenants out, because they are stuck on the idea that if tenants vacate the home that they can sell it.”

Wells Fargo Bank is committed to following all rules that protect tenants who are living in foreclosures, spokesman Jason Menke said. At the same time, Wells Fargo is in the business of lending money for home purchases, not in managing rentals, he said.

“Generally, it’s our object to get a new owner into the house as quickly as possible,” Menke said. “It’s in our best interest and that of the community to return properties to the market.”

California Attorney General Jerry Brown launched an investigation into the issue last month, partly in response to the Tenants Together report. Brown sent a letter in June to California banks, lenders, investors and law firms asking them to explain their procedures for dealing with tenants in foreclosed properties in an effort to find out whether laws are being broken.

Tenants are protected by a 2009 federal law that allows them to stay in their units for 90 days after a foreclosure notice is posted, but they have other rights as well:

• Renters can insist on staying in their units until the end of their leases, except when the new owner of a single-family home wants to move in.

• They can require banks and their agents to put all communication in writing.

• They are not required to take cash incentives to move out before the law requires.

• Harassment, such as changing locks without a court order, entering the home without permission or shutting off utilities, is illegal.

Wells Fargo sends tenants a letter outlining their legal options if it forecloses on the house where they live, Menke said. The bank often offers cash incentives for tenants to move out before the three-month period has passed. The bank also honors lease agreements as long as the tenant has a copy of the lease. But if the bank sells the house, tenants have 90 days from the sale to move, said Wells Fargo spokeswoman Mary Berg.

“If the new owner wants to move in, then the tenant is no longer protected unless the new buyer decides to keep the renters there,” Berg said.

Copyright © 2010 Los Angeles Times

WASHINGTON – Aug. 23, 2010 – Nearly half of the 1.3 million homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out.

The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday’s report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say.

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year.

“The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” said Mark Zandi, chief economist at Moody’s Analytics.

Besides forcing people from their homes, foreclosures and distressed home sales have pushed down on home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting their homes on the market.

Approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the government program have been cut loose through July, according to the Treasury report. That’s about 48 percent of the ones who had enrolled since March 2009. And it is up from more than 40 percent through June.

Another 421,804, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time.

RealtyTrac reported that the number of U.S. homes lost to foreclosure surged in July to 92,858 properties, up 9 percent from June. The pace of repossessions has been increasing and the nation is now on track to having more than 1 million homes lost to foreclosure by the end of the year. That would eclipse the more than 900,000 homes repossessed in 2009, the firm says.

Lenders have historically taken over about 100,000 homes a year, according to RealtyTrac.

Zandi said the government effort will likely end up helping only about 500,000 homeowners lower their monthly payments on a permanent basis. That’s a small percentage of the number of people who have already lost their homes to foreclosure or distressed sales like short sales - when lenders let homeowners sell for less than they owe on their mortgages.

Zandi predicts another 1.5 million foreclosures or short sales in 2011.

“We still have a lot more foreclosures to come and further home price declines,” Zandi said. He said home prices, which have already fallen 30 percent since the peak of the housing boom, would drop by another 5 percent by next spring.

Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork.

The banking industry said borrowers weren’t sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Obama officials dispute that they pressured banks. They have defended the program, saying lenders are making more significant cuts to borrowers’ monthly payments than before the program was launched. And some of the largest mortgage companies in the program have offered alternative programs to those who fell out.

Homeowners who qualify can receive an interest rate as low as 2 percent for five years and a longer repayment period. Those who have successfully navigated the program to reach permanent modifications have seen their monthly payments cut on average by about $500.

Homeowners first receive temporary modifications and those are supposed to become permanent after borrowers make three payments on time and complete all the required paperwork. That includes proof of income and a letter explaining the reason for their troubles. But in practice, the process has taken far longer.

The more than 100 participating mortgage companies get taxpayer incentives to reduce payments. As of mid-June only $490 million had been spent out of a potential $75 billion the government has made available to help stem the wave of foreclosures.
Copyright © 2010 The Associated Press, Martin Crutsinger, AP economics writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP Real Estate Writers Alan Zibel in Washington and Alex Veiga in Los Angeles contributed to this report.

FORT LAUDERDALE, Fla. – Aug. 19, 2010 – Homeowner associations throughout South Florida are becoming more assertive in the fight to maintain property values and their own bottom lines amid one of the worst housing collapses since the Great Depression.

A new legal strategy and a sweeping condominium reform bill are empowering boards hit hard by budget shortfalls after a deluge of foreclosures in recent years.

Associations now are attempting so-called reverse foreclosures, which force lenders to seize homes more quickly than they otherwise would. Banks often delay taking back these troubled properties to avoid having to pay past-due assessments.

Meanwhile, new legislation that went into effect July 1 gives condo boards statewide more authority in dealing with delinquent tenants and unit owners.

Plantation City Council member Bob Levy commends associations for aggressively dealing with the crisis, but Fort Lauderdale lawyer Donna DiMaggio Berger said they had little choice.

"Many of these associations have had their eyes opened," said Berger, executive director of the Community Advocacy Network, a statewide group for common-interest ownership communities. "They've seen that inaction makes the situation worse."

The crash in home prices during the past few years pushed thousands of owners into foreclosure, although banks have been slow to take back the properties. Widespread vacancies left the state's 50,000 community associations starving for cash to pay for such services as cable, water and maintenance.

Many boards felt they had little recourse, except to charge higher fees to the remaining owners.

Last fall, though, the Association Law Group in Miami decided to try something different for one of its clients. The firm, representing the Keys Gate Community Association in Homestead, maneuvered to force a lender into court for a hearing that resulted in the bank seizing a home within the development.

The association, which already had taken title when the owner stopped paying fees, asked a judge to assign a certificate of title to the lender on the same day as the hearing. The judge granted the request, making the bank the legal owner. And with that came the responsibility of paying association fees.

Since then, the firm has completed at least 10 reverse foreclosures in Miami-Dade and Broward counties and has dozens more in the pipeline, said Ben Solomon, co-founder of the Association Law Group.

"We came up with this new legal strategy to address the flagrant stalling of lenders," Solomon wrote in an e-mail. "Each month of delay by the bank in its foreclosure process will typically turn into an additional month of bad debt to the association, which then must be paid unfairly by the [existing] owners."

Alex Sanchez, president of the Florida Bankers Association, said lenders aren't dragging their feet but instead are trying to work with borrowers to keep them in their homes. "If that's wrong," he said, "go ahead and accuse us of that."

The Jacaranda Lakes Homeowners Association is facing $45,000 in total delinquencies at the 1,150-home development in Plantation.

In two cases, the board took title to run-down homes after the owners stopped paying fees, said Nathan A. Tarler, secretary-treasurer. The lenders still have mortgages on the two properties but have yet to initiate foreclosure proceedings.

To get the lenders to take back the homes and assume responsibility for renovating them and paying past-due fees, the association filed for reverse foreclosure. A Broward judge last week denied one of the requests, but another judge could rule differently at a later date, said Robert Kaye, Jacaranda's lawyer.

Despite delays and uncertainty, Jacaranda residents say they're thrilled that the association is trying to address the situation. The two homes have mold problems and need new roofs.

"Whether you live next door or not, it impacts all of our values," homeowner Lynn Albertelli said.

The condo reform legislation, SB 1196, allows associations to demand rent from tenants if the owners are delinquent. If the tenants don't pay, the boards can evict them with court approval.

The law also gives homeowner associations the right to restrict common-area uses and suspend voting privileges for owners who are 90 days delinquent. Critics argue, however, that parts of the bill are poorly worded and leave too much open to interpretation.

The Verano at Delray Beach Condominium Association Inc. is gaining possession of five units and evicting those tenants, said Steve Cohen, a receiver hired by the association. It also may gain control of an additional 20 vacant units.

Many of the individual unit owners owe more on their condos than they're worth and aren't paying association dues even though they're still collecting rent from tenants. That resulted in a shortfall for the board of about $10,000 a month, Cohen said.

In two months on the job, he said his firm, Community Concepts, has boosted Verano's collectibles by about 20 percent. The situation at the 242-unit development will improve even more once the association takes possession of the units and is able to renovate and lease them to new tenants.

"What we want to do is improve the quality of life of the condo for all the residents," Cohen said.

Sharon Dodge, board president of Venetia Condominium Association in Miami, said her 382-unit development on Biscayne Bay was plagued by squatters and non-paying unit owners.

"Lots of people were taking a free ride," Dodge said. "When some stopped paying, others said, 'Why should I pay?'"

Outraged, the board fought back, Dodge said. It moved to foreclose on 140 units, which prompted some owners to pay past-due fees. The association still has title to 23 of the condos and is renting those.

At one point, the Venetia homeowners association was $3 million in debt, but it has since reduced that to about $900,000, she said.

"We're really in good shape," Dodge said. "And we did it strictly by being tough."

WASHINGTON – Aug. 19, 2010 – Federal housing policy offers the wealthiest Americans billions in tax breaks without delivering much bang for the buck in increased homeownership, critics told government policymakers Tuesday.

“We aren’t getting our money’s worth,” Mark Zandi, chief economist of Moody’s Analytics, said at a government conference on reforming housing policy.

The government spent $230 billion last year to promote homeownership through tax breaks and spending programs. The biggest chunk – $80 billion – went toward the mortgage interest deduction, according to the Congressional Budget Office.

Michael Stegman, housing policy specialist at the MacArthur Foundation, said the mortgage tax break goes primarily to the wealthiest households. A study this year by the Tax Policy Center of the Brookings Institution and the Urban Institute noted that the mortgage deduction was worth just $91 a year to families earning less than $40,000 – and $5,459 a year to those making more than $250,000.

The government, seeking to overhaul the housing market after the collapse of mortgage giants Fannie Mae and Freddie Mac, is unlikely to touch the politically sacrosanct deduction anytime soon.

But analysts suggested that the government’s debt – $8.8 trillion and growing – meant that housing subsidies might one day face the knife. “We can’t afford it,” Zandi said.

The U.S. homeownership rate (66.9 percent) is about the same as Canada’s and is lower than Australia, Ireland, Spain and Britain’s even though “these countries provide far less government support for homeownership,” Michael Lea of San Diego State University wrote this year.

For now, the government is neck-deep in housing. Private money has fled the market in the wake of a housing-market meltdown. Fannie, Freddie and other government agencies have filled the gap, guaranteeing more than 90 percent of new mortgages.

“Without government guarantees, mortgage rates would be hundreds of basis points higher, resulting in a moribund housing market,” said William Gross, managing director of bond fund Pimco. “We don’t want government in the housing market, but it’s a necessity.”

Treasury Secretary Timothy Geithner told the conference “there’s no clear consensus yet” on reforming the way mortgages are financed. He promised “fundamental change” in the way Fannie and Freddie do business: They used an implicit government guarantee to borrow cheap money and make big bets in the housing market. When their gamble went bad, taxpayers picked up the tab.

Copyright © 2010 USA TODAY, a division of Gannett Co. Inc., Paul Wiseman.

WASHINGTON – Aug. 16, 2010 – Fannie Mae launched a new website to help consumers understand their options when facing foreclosure and the possible loss of their home. Called KnowYourOptions.com, it outlines the choices available to homeowners struggling to make mortgage payments, and provides guidance on how they can contact and work with their mortgage company to find a back-up plan.

KnowYourOptions.com provides information in both English and Spanish. Features include:

• Interactive Options Finder helps homeowners identify options.
 
• Calculators help borrowers understand how many of the options would work in their situation, including calculations about refinance, repayment, forbearance, and modification.

• Videos feature real homeowners discussing how they received help; others feature housing counselors giving advice.

• Forms – including a financial checklist and contact log – to help borrowers prepare for a meeting with their mortgage company or housing counselor.

• Information on refinancing, repayment plans, forbearance, modifications and Deed-for-Lease.

• Out-of-the-box alternatives, including short sales and deeds-in-lieu for homeowners who recognize that they can no longer afford their mortgages, but want to avoid a foreclosure on their credit history

More info: www.KnowYourOptions.com.

© 2010 Florida Realtors®

WASHINGTON – Aug. 13, 2010 – Just how much should Uncle Sam do to help Americans buy their own homes?

For 70 years – and for the last 15 in particular – the answer has been: Whatever it takes.

Now, policymakers are pausing to reconsider. In the next few months, they’ll weigh whether there can be too much of a good thing when it comes to helping families finance the American Dream.

The rethink could mean a shake-up for a mortgage market addicted to government subsidies.

“This process of figuring out the government’s role is going to involve some hard choices,” says Alyssa Katz, author of Our Lot: How Real Estate Came to Own Us. “The moment you start changing the nature of what is guaranteed by the government, what is subsidized, you start to change the alignment of winners and losers. ... We took for granted that anyone could get a mortgage.”

Using guarantees and tax breaks, the government pushed homeownership past 69 percent in 2004. Then it all came crashing down.

Housing prices started crumbling in 2007, panicking financial markets, forcing the government to seize mortgage giants Fannie Mae and Freddie Mac, and pushing the economy into the worst recession since the 1930s. Homeownership has fallen below 67 percent.

Now, Washington is preparing to rebuild the national mortgage market atop the ruins of Fannie and Freddie. The proposal, due early next year from the Obama administration, could make it harder to buy a home by reducing available credit or requiring bigger downpayments. Low-income renters might get more government help.

Congressional Republicans doubt the administration has the nerve to make bold changes. They say the White House squandered an opportunity to deal with what they see as the No. 1 problem – limiting taxpayer losses on Fannie Mae and Freddie Mac – in an overhaul of financial regulations Congress passed last month. “What you’ve seen is two years of lip service,” says Rep. Spencer Bachus of Alabama, ranking Republican on the House Financial Services Committee. “The administration and the congressional Democrats have not shown any willingness to address the issue other than to talk about it and have planning sessions.”

Other critics say eliminating or overhauling Fannie and Freddie isn’t enough: The government must reconsider such bedrocks of housing policy as the mortgage interest deduction and the tax exemption of most capital gains from home sales.

They say these misguided or outdated government policies encourage the United States to massively overinvest in housing, shortchanging other parts of the economy. “There’s only so much subsidy to go around at the end of the day,” Katz says.

The administration isn’t tipping its hand in advance of a conference next Tuesday on housing finance reform in Washington. But officials insist that big changes are coming to housing finance. Treasury Secretary Timothy Geithner has said the reforms must: continue to make mortgage credit widely available; promote affordable housing for homebuyers and renters alike; protect consumers from predatory lending; and promote financial stability.

“We have committed to having a proposal in place by early next year,” says Federal Housing Administration Commissioner David Stevens. “This is not about delaying. This is about being thoughtful.”

Policymakers are moving cautiously because the housing market is on government life support two years after the worst of the financial crisis. “Even today, private capital has not yet fully returned to this market,” Jeffrey Goldstein, the Treasury Department’s undersecretary for domestic finance, wrote recently. “Fannie Mae, Freddie Mac and other government entities guarantee more than 90 percent of newly originated mortgages. They are practically the only game in town.” (In 2005, they accounted for just a third of the market.)

Square 1: Fannie & Freddie

Whatever Washington does in the next few months will likely focus on Fannie and Freddie.

The housing giants buy mortgages from banks and other lenders. Usually, they package the mortgages into securities and sell them to investors. Sometimes, they keep the mortgages in their own portfolios. The idea: to create a thriving secondary market in mortgages. By selling their mortgages to Fannie and Freddie, the banks clear room on their balance sheets to make more, ensuring a plentiful supply and making it easier for homebuyers to find financing.

Fannie (established by Congress in 1938) and Freddie (1970) were private, profit-seeking companies, but they operated with the implicit understanding that taxpayers would bail them out if they ran into trouble. That assumption gave them access to low-cost financing. They made enormous profits, paid their top executives extravagant salaries and accumulated outsize influence in Washington. They used their clout to lobby for bare-minimum levels of capital to cushion against losses.

Thin capital proved lethal when Fannie and Freddie caught the virus that infected the rest of the financial system in the mid-2000s: irrational exuberance about housing prices. The mortgage giants had strayed from conventional mortgages. In 2000, they held few securities backed by subprime or undocumented Alt-A loans from private lenders; by 2007, those mortgages accounted for nearly a quarter of their portfolios.

When housing prices collapsed, Fannie and Freddie were sitting on huge losses. The government seized the two companies, making explicit Uncle Sam’s implicit guarantee. Geithner says regulators couldn’t just let the mortgage giants fail without risking “devastating consequences for the housing finance system and the broader economy.” The Congressional Budget Office estimates that bailing out Fannie and Freddie will cost taxpayers $389 billion between 2009 and 2019.

Just about everyone agrees that Fannie and Freddie, known as government-sponsored enterprises or GSEs, were built around a fatally flawed model – one in which investors and executives pocketed profits and taxpayers absorbed losses. “After reform, the GSEs will not exist in the same form as they did in the past,” Geithner told Congress in March. “Private gains will no longer be subsidized by public losses.”

House Republicans are calling for Fannie and Freddie to be put out of business within four years. Democrats don’t go that far: “We know we have to replace them,” says Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. Whatever supplants Fannie and Freddie in the mortgage business, Frank says, should be either 100 percent private or 100 percent public, not a hybrid.

In April, Treasury and the Department of Housing and Urban Development asked various players in the housing market, from lenders to advocates for the homeless, to weigh in on reform proposals. Many call for Fannie and Freddie to be replaced by private firms that enjoy straightforward government support but have a narrower mission and are far more tightly regulated than the failed housing giants.

Tinkering with housing finance is like playing with political dynamite, says Raj Date, executive director of the Cambridge Winter Center for Financial Institutions Policy. Fannie and Freddie “actually do provide a very large subsidy to homeowners who borrow money,” he says. “Here’s the thing about upper-middle-income suburban homeowners: They vote. When you take away a huge housing subsidy, they notice.”

30-year mortgages

One example: Freddie and Fannie, with their government backing, allowed the proliferation of 30-year, fixed-rate mortgages – a product that lenders would otherwise shun. Reason: Long-term, fixed-rate loans struggle in any interest rate scenario. If rates rise, banks are squeezed, because their revenue remains fixed even though they have to pay more for deposits and other funding. If rates fall, homeowners refinance. “No rational market participant is going to bear that risk,” Date says.

Long-term fixed-rate mortgages make sense only if the government is absorbing some of the risk. Reforming housing finance, Date says, could jeopardize the future of long-term, fixed-rate mortgages or raise interest rates on them, perhaps a quarter to half a percentage point.

Even if the government doesn’t make radical changes in the way housing is financed, it likely will shift emphasis away from encouraging homeownership and toward helping low-income families find affordable apartments to rent. “We have to be very pro-homeownership,” Housing Commissioner Stevens says. But “we strongly believe in a balanced housing policy. ... Not everybody was prepared to own a home.”

Until now, government policy has been lopsided in favor of putting people into privately owned houses. The Congressional Budget Office reports that government subsidies for homeownership, including the mortgage interest deduction, reached $230 billion last year. That compares with $60 billion in tax breaks and federal spending programs supporting the rental market.

A lot of renters could use the help, the CBO says. In 2007, 45 percent of tenants spent more than 30 percent of their incomes on shelter – the threshold for affordable housing – compared with 30 percent of homeowners.

Things are worse for the poorest renters, households earning 30 percent or less of the median income in their area: The National Low Income Housing Coalition found that 71 percent of the poorest households spent more than half their income on rent in 2008.

Rent consumes half of Dorotha Allamand’s $1,300 monthly Social Security check. The retired nurses’ aide lives in Gridley, Calif., alone except for her three cats. She’s on a two-year waiting list for Section 8 rental housing assistance and faces a three-year wait for a senior citizens’ housing program. “So here I am, hoping from month to month that I have a roof over my head and enough to eat,” she says.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., asked recently “whether federal policy is devoting sufficient emphasis to the expansion of quality affordable rental housing.” Owning a home, she said, might not work for everybody.

A post-WWII push

Before World War II, would-be homebuyers faced huge obstacles. Banks demanded 50 percent downpayments for mortgages that would last just five or six years; then, the homeowners would have to cough up the balance in a balloon payment. Homeownership remained mired around 40 percent.

Then came government support for homeownership through Fannie, Freddie, the Veterans Administration and the Federal Housing Administration, a government agency that insures mortgages. The new long-term, fixed-rate mortgages, encouraged by Fannie and later Freddie, made housing payments affordable to ordinary families. The mortgage interest deduction, which cost the Treasury $80 billion in 2009 alone, made homeownership even more attractive.

Housing has an enormous impact on the economy: Harvard University’s Joint Center for Housing Studies reports, for instance, that cutbacks in home building and remodeling slashed a full percentage point off economic growth in 2007 and almost that much in 2008.

But urban studies specialist Richard Florida, author of The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity, says that federal programs to promote homeownership don’t make as much economic sense as they used to. When families bought suburban homes after World War II, the benefits rippled throughout the economy: U.S. manufacturers cranked out refrigerators and ovens for the kitchen, televisions and sofas for the living room, dressers and vanities for the bedroom, cars to carry Dad from the suburbs to his office downtown.

“It worked fabulously,” says Florida, a professor at the University of Toronto’s Rotman School of Management. “It really primed the pump of America’s industrial machine.”
These days, not so much: Appliances and furniture usually aren’t Made-In-America anymore. Neither, increasingly, are cars. A housing boom doesn’t deliver the bang for the buck that it used to, Florida argues.

High homeownership rates also impose economic costs. They lock workers into houses that can be tough to sell, especially in recessions, so it’s harder for them to move to find new jobs. The percentage of Americans changing addresses hit a record low 11.9 percent in 2008 before bouncing up a bit last year; the so-called moving rate exceeded 20 percent as recently as 1985.

Florida has found that U.S. cities with high homeownership rates tend to lag behind other cities in job creation and earnings. He argues that the government should nudge the homeownership rate lower, perhaps to around 55 percent, by cutting the subsidies that prop it up.

Would anyone in Washington risk political hara-kiri by killing housing subsidies to the middle class?

“What really causes the decline of nations is when they become sclerotic, when they get locked into public policy approaches that don’t work,” Florida says. “I’m an optimist. ... We have reinvented ourselves before.”

But for now, he says, “Everybody is talking around the problem. We need to wake up.”

Copyright © 2010 USA TODAY, a division of Gannett Co. Inc., Paul Wiseman.

LOS ANGELES – Aug. 12, 2010 – The number of U.S. homes lost to foreclosure surged in July, another sign lenders are moving quicker to take back properties from homeowners behind in payments.

Lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009, foreclosure listing firm RealtyTrac Inc. said Thursday.

Banks have stepped up repossessions this year to clear out the backlog of bad loans. July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.

Meanwhile, homeowners who are falling behind on their payments are being allowed to stay in their homes longer because lenders are reluctant to add to the glut of foreclosed homes on the market.

The number of properties receiving an initial default notice – the first step in the foreclosure process – rose 1 percent last month from June, but tumbled 28 percent versus July last year, RealtyTrac said.

Initial defaults have fallen on an annual basis the past six months.

The latest data reflect a foreclosure crisis that continues to drag on as many homeowners struggle to make their monthly payments amid high unemployment, slow job growth and an uneven rebound in home prices.

Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures. Initially, lax lending standards were the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures.

Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can’t qualify or fall back into default.

The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. More than 40 percent, or about 530,000 homeowners, have fallen out of the administration’s main effort to assist those facing foreclosure.

That program, known as Making Home Affordable, has provided permanent help to about 390,000 homeowners, or 30 percent of the 1.3 million who have enrolled since March 2009.

Still, RealtyTrac estimates more than 1 million American households are likely to lose their homes to foreclosure this year.

In all, 325,229 properties received a foreclosure-related warning in July, up 4 percent from June, but down 10 percent from the same month last year, RealtyTrac said. That translates to one in 397 U.S. homes.

The firm tracks notices for defaults, scheduled home auctions and home repossessions - warnings that can lead up to a home eventually being lost to foreclosure.

Among states, Nevada posted the highest foreclosure rate in July, with one in every 82 households receiving a foreclosure notice. The number of properties in Nevada receiving a foreclosure warning last month rose nearly 7 percent from June, but fell nearly 30 percent from the same month last year.

Rounding out the top 10 states with the highest foreclosure rate last month were: Arizona, Florida, California, Idaho, Michigan, Utah, Illinois, Georgia and Maryland.

Las Vegas continued to be the city with the highest foreclosure rate in the U.S., with one in every 71 homes receiving a foreclosure notice in July – more than five times the national average.
Copyright © 2010 The Associated Press, Alex Veiga, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

WASHINGTON – Aug. 2, 2010 – Federal regulators say a Florida company they accused of misleading borrowers who were seeking to avoid foreclosure has agreed to repay the consumers $2.4 million to settle those charges.

The Federal Trade Commission said last week that Home Assure LLC, based in Clearwater, Fla., promised borrowers mortgage relief in exchange for fees of up to $2,500 but delivered little or no help.

The company is now barred from selling mortgage and foreclosure relief services.

Consumer advocates and government officials say borrowers who need help should avoid for-profit outfits and instead contact nonprofit credit counselors who work with lenders at no charge.

The government has been pursuing numerous cases against companies it says prey on troubled homeowners.

Copyright © 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

WASHINGTON (AP) – Aug. 4, 2010 – Former shareholders of fallen mortgage giant Countrywide Financial Corp. are in line to recoup a fraction of their investments now that a Los Angeles judge has approved a settlement worth more than $600 million settlement.

The payoff doesn’t come close to compensating for the money lost by investors. But it could prompt more lenders to settle legal disputes at the center of the housing bust.

Bank of America, which bought Countrywide two years ago, agreed to pay $600 million to end a class-action case filed against the company. KPMG, Countrywide’s accounting firm, will pay $24 million.

Several New York pension funds that served as lead plaintiffs alleged that Countrywide hid how risky its business had become during the housing market’s boom years. Calabasas, Calif.-based Countrywide was once the nation’s largest mortgage lender.

The agreement stands to return about 40 cents per share of Countrywide’s common stock, before legal fees and expenses. Consider that the stock peaked at $45 a share in February 2007, before the financial crisis. So an investor who held 100 shares could bank on receiving $40 for an investment that was once worth $4,500.

Shareholders did receive 0.1822 shares of Bank of America’s stock for each share of Countrywide they owned when Bank of America acquired Countrywide. That worked out to about one share for every 5.5 shares of Countrywide stock. Shares of Bank of America closed at $14.34 on Tuesday. So that same 100 shares of Countrywide would be worth about $261 today in Bank of America stock.

Add the $40 from the settlement and those shares are now worth little more than $300.

Lawyers for the pension funds are requesting $56 million, or 4 cents per share, for fees and other costs.

Investors “will be compensated for a significant portion of the legal damages that they suffered as a result of what we believe was a violation of the securities laws,” said Joel Bernstein, a lawyer for the pension funds. “They won’t be compensated for every penny of that.”

Bank of America has been trying to put Countrywide’s legal problems behind it. In June, the Charlotte, N.C.-based company agreed to pay $108 million to settle the Federal Trade Commission’s charges that Countrywide collected outsized fees from about 200,000 borrowers facing foreclosure.

It reached a settlement Monday primarily to keep legal fees from escalating, a bank spokeswoman said.

“Countrywide denies all allegations of wrongdoing and any liability under the federal securities laws,” said Shirley Norton, a spokeswoman for Bank of America. “We agreed to the settlement to avoid the additional expense and uncertainty associated with continued litigation.”

Plaintiffs attorneys have pursed lawsuits against numerous lenders and investment banks in the wake of the housing market’s devastating downturn, and the Countrywide settlement could encourage even more such cases, said Paul Hodgson, a senior research associate at The Corporate Library, an independent corporate governance research firm.

“There are a lot of suits out there waiting to get launched,” Hodgson said. “I think this is the opening of the floodgates.”

Former Countrywide CEO Angelo Mozilo, former President David Sambol, former CFO Eric Sieracki and former board members were named in the litigation but are not contributing to the settlement.

But it does not end their legal problems. More than a year ago the Securities and Exchange Commission brought civil fraud charges against Mozilo and the two other former executives. Mozilo, the most high-profile individual to face charges from the government in the aftermath of the financial crisis, has denied any wrongdoing.

For Countrywide, “This is only a chapter and not the end of the book,” said John Coffee, a securities law professor at Columbia University.
Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved.