Bo McCarver’s weekly housing news compilation – 7/14/2009

Slowly the nation realizes that banks are not in the business of financing mortgages but rather the business of making money – a lot of money. And refinancing risky mortgages and even new, solid ones does not generate enough cash to spark their interest.

One alternative, a nationalized banking system, looms closer as government returns to its traditional role of supporting unprofitable public works. Another tactic is to let the foreclosures fall as they will and return to the days when renting was the norm and homeownership was rare.

For a pdf version of the full articles, plus contextual stories in social, economic and legal areas, contact Bo McCarver at bmccarver@austin.rr.com

At Current Rate, Nine Million Homes Face Foreclosure by 2012

By Mary Kane   Washington Independent July 13, 2009

The time may be ripe for a shift in strategy as the foreclosure machine grinds on, and new foreclosure notices reach the troubling milestone of 10,000 per day.

A weak economy has added job losses and falling home values to the mix of toxic loans that prompted the crisis two years ago, making an already difficult situation even more severe. Government measures from foreclosure freezes to loan modifications have only served, so far, to stall the inevitable – and to create an ominous backlog of millions of pending foreclosures. Plus, more than one in five homeowners now owe more on their mortgages than their homes are worth, according to the real estate website Zillow.com. No one can predict with assurance whether those underwater homeowners will keep paying on their loans, or take a walk.

Tight Mortgage Rules Exclude Even Good Risks

By David Streitfeld   New York Times July 10, 2009

BOSTON — Inna Komarovskaya was ready to do her part to revive the economy: She found a “really cute” condo to buy.

Despite a good credit score, a six-figure income and an ample down payment, Dr. Komarovskaya, a recent dental school graduate, could not get a loan. Her mortgage broker told her she ran afoul of new rules requiring two years of sufficient tax returns from some home buyers, instead of only one.

“Everyone says this is a buyer’s market, but they wouldn’t let me buy,” said Dr. Komarovskaya, 30. “It’s not fair.”

From Treasury to Banks, an Ultimatum on Mortgage Relief

By Joe Nocera   New York Times July 10, 2009

Remember that infamous meeting last October at the Treasury Department, the one where then-Secretary Henry Paulson locked the chief executives of the nation’s nine largest financial institutions in a room, and wouldn’t let them out until they agreed to accept billions of dollars in government bailout money — whether they wanted it or not?

O.K., that’s a bit of an exaggeration. But I was reminded of that meeting on Thursday night when I was shown a letter that the administration had just sent out calling for yet another big meeting at Treasury with yet another sector of the financial industry. Signed by Treasury Secretary Timothy Geithner and Shaun Donovan, the housing and urban development secretary, the letter demanded that representatives from the top 25 mortgage servicers assemble in Washington on July 28. It is likely to be every bit as painful for them as that Paulson meeting last October was for the bank C.E.O.’s.

13 Indicted In $100 Million Mortgage Fraud Case

By Lisa Chow   NPR July 9, 2009

Prosecutors in New York have charged 13 people with running a massive mortgage fraud scheme. They say everyone was in on the alleged scheme: lawyers, appraisers and mortgage brokers.

According to the indictment, mortgage company AFG Financial Group, based on Long Island, targeted properties whose owners were starting to default on their mortgages.

Loan servicers deluged by homeowners seeking new terms

By Barry Schlachter   Fort Worth Star-Telegram July 13, 2009

Celina Gallegos of Arlington has taken a second, part-time job on a loading dock but still can’t afford her $930 mortgage payment.

The solution her mortgage company offered? Payments of $1,100 a month aimed at helping her get caught up on back payments.

“My income is about $1,600 a month, and I cannot afford the $930 payments,” she said.

Gallegos is one of a growing number of homeowners struggling to stay in their homes despite recent efforts by the federal government to encourage lenders to work with borrowers and renegotiate terms when possible. A backlog of cases spurred by the Obama administration’s $75 billion Making Home Affordable program has contributed to the crush of borrowers seeking help.

Gallegos, 34, a house cleaner and single mother in Arlington, was facing a foreclosure sale of her home on the courthouse steps Tuesday. It wasn’t until she called the activist group ACORN, which planned a courthouse protest, that Litton Loan Servicing, a division of Goldman Sachs, agreed at the eleventh hour to postpone the sale for 30 days and offered to negotiate a loan modification.

Most of Tarrant sees decline in June home sales

By Sandra Baker   Fort Worth Star-Telegram July 13, 2009

The area around Texas Christian University in Fort Worth and four Arlington neighborhoods were the only sections of Tarrant County that saw gains in single-family home sales in June from a year ago.

Every other area of the county saw declines in sales, though half saw slight-to-healthy gains in median home sales prices.

Southeast Arlington was the hardest-hit area, where home sales dropped 50 percent last month from June 2008, according to the most recent figures from the Real Estate Center at Texas A&M University. Grapevine was next, with a 47 percent decline.

Downtown Fort Worth was unchanged in the number of sales, yet the median sales price rose 93 percent, the highest increase. Kennedale saw the largest decline in the median sales price, which dropped 28 percent to $189,500.

Habitat for Humanity Finds Buying is Cheaper

By Josh Harkinson Mother Jones July 10, 2009

Charlotte, North Carolina, has found a silver lining in the housing crisis:

Charlotte’s Habitat is among the first in the nation to start buying up houses in troubled neighborhoods where up to a third of the homes are vacant due to foreclosure. Average cost: $38,000 to $55,000, less than half the original price.

“We’re getting them as low as $30,000, knowing we’ll put in $10,000 of repairs,” said Meg Robertson, an associate director with Habitat. “To build a new one is over $60,000 … we’re $20,000 to $30,000 cheaper per home.”

So what about Habitat’s commitment to sweat equity? To having energetic volunteers “build houses together in partnership with families in need?” Robertson told the Charlotte Observer that she thought it was more important to house as many people as possible.

Besides, subdivisions built in the boom are already falling apart on their own or at the hands of vandals, so there should be plenty of sweat required to restore and maintain them.

[End of story]

Land banks gain popularity as way to fight urban blight

By Kathleen Gray   USA Today July 13, 2009

In downtown Flint, the historic Durant Hotel sat empty for more than 30 years until a financial tool led to its current $30 million renovation.

That tool is the land bank, an idea gaining national attention for its positive impact on urban blight and abandonment at a time when most cities are dealing with more foreclosures.

Instead of selling abandoned or foreclosed structures at auction, the city or county creates a land bank of properties. Some homes are fixed up and sold. The worst of the homes are demolished, and the land is then sold to nearby homeowners or developers, explains Genesee County (Mich.) Treasurer Dan Kildee, who started that county’s land bank.

City design guide seen as threat to transit measure

By Mike Snyder   Houston Chronicle July 8, 2009

Fallout from the long-dormant Ashby high-rise development emerged Wednesday as a potential obstacle to the city’s effort to promote walkable, urban-style development along Metro’s planned light-rail lines.

Neighborhood opposition to the Ashby project, a planned 23-story mixed-use tower whose developers continue to await a permit almost two years after they first applied, inspired changes to an obscure city document known as the Infrastructure Design Manual. The changes include a review process intended to prevent high-density developments from worsening traffic congestion on surrounding streets.

Developer plans new community south of Avery Ranch

Land bought near commuter rail line at foreclosure sale planned as $250 million mixed-use project.

By Shonda Novak   Austin American-Statesman July 9, 2009

Within a few years, residents of Avery Ranch could have more than 2,000 new neighbors to the south.

Developer Bob Wunsch said Wednesday that he plans to build a $250 million project with about 700 homes and townhomes, two shopping centers and, possibly, an assisted-living or nursing-home facility on 178 acres near Lakeline Mall. International Bancshares is his partner in the project.

Local housing industry observers say the move is a sign that the housing market might be turning around.

Increase in FEMA funding saves millions locally

By Leigh Jones Galveston County Daily News July 9, 2009

Officials throughout Galveston County are breathing a sigh of relief now that the federal government has agreed to pay for 90 percent of the damage caused by Hurricane Ike.

Funding for the increased contributions was part of the supplemental appropriations bill approved by Congress and signed by President Barack Obama two weeks ago.

Until then, local officials expected to be on the hook for 25 percent of the storm repair costs.

The increased federal funding will save taxpayers throughout the county about $17 million and save some area governments from putting off repairs they couldn’t afford before.

Homelessness in suburbs, rural areas increases

By Wendy Koch USA TODAY July 11, 2009

As the recession took hold last year, homelessness shifted toward rural and suburban areas and gripped a growing number of families, the U.S. government reports today.

The number of homeless people receiving shelter, 1.6 million, was largely unchanged from 2007, but the number of those in families rose 9% from about 473,000 to 517,000, according to the Department of Housing and Urban Development report. The figures are for the fiscal year ending Sept. 30.

The number of homeless people in rural and suburban shelters jumped sharply: 32% of all people in shelters compared with 23% in 2007.