They want us to refinance. They are offering a 4.375% interest rate if we qualify and $500 credit at closing.

Wow. The Citi never sleeps, and it likes to scare the beejesus out of it’s mortgage holders.

“…I started working on Fannie and Freddie reform from the day I arrived in Washington, and it took the impending failure of those two institutions to get the authorities (we needed at Treasury).”

Paulson confirms that he did indeed get down on his knees to Nancy Pelosi, but only to break the tension. Oh and Vanity Fair’s Todd Purdum got it wrong: he did not have a stomach virus. Enjoy.

As much as folks were bragging about their private jet “wheels up” trips a few years ago, I predict that everyone will be soon playing a game of my bankruptcy lawyer’s better than yours:

“My lawyer got my $60,000 credit Citibank bill down to $5,000.”

“Yeah, well we threw $150K in medical expenses on our Chase card and guess what, we didn’t pay one penny of it.”

By the way, non-recourse means that the lenders cannot come after your other assets for what you owe. So your lender gets the property but that’s it. Seems like our era of “free credit” is going to bring us an era of “no credit”.

However, the White House is mulling requiring ALL foreclosure candidates to  get into the HAMP program, the Home Affordable Modification Program that has thus far helped only 116,297 underwater homeowners in a year, before filing any foreclosure.

Maybe we can just bury all the unpaid debt like we do toxic waste?

Paulson: “Basically I found economics pretty much worthless during this thing. Now that’s an overstatement — Bernanke’s skill as an economist and practical skill and knowledge of economic history was incredibly valuable. But the economic models were worthless. The economist’s ability to predict what was going to happen when we were in the middle of a crisis was just…”

Tapper: “Very few of them saw it coming.

Paulson: Yeah.

It reminded me of last week’s crazy real estate headlines:

Home sales plunge 7.2% lowest since  June 2009

Dallas home prices up 3% in December.

Housing Continues Weak

Dallas/Fort Worth Foreclosures at Lowest Levels in Three Years

Northeast Home Sales Up 7% From Year Ago Levels, Prices Up 9%

Let’s look at the indicators.

Commerce Department’s January New Home Sales report was flat out terrible this morning: down more than 11 percent from the prior month, significantly worse than the 3.5 percent RISE economists had expected. New home sales, as I told you yesterday, at the lowest levels on record since 1963, when many of you weren’t even yet around!

This despite extending the homebuyer tax credit.

I know Case-Shiller said San Francisco, Dallas and San Diego area home pricing (existing homes, no condos) was up 2.7%, but honestly, really? Please tell me if you have sold a home recently for more than it was listed for last year. Commerce Department also reported that  median home prices for new homes last month fell 5.6 percent from December.

And good old Commerce Department telling us the brutal truth: contrary to hopes of getting supply levels down further, inventory levels of new homes have been slowly creeping up to a  9.1 months supply in January, up from 8.0 months in December and 7.8 months in November. That’s national, and way below the record high level of 12.4 months back in January 2009. Locally, Collin County reported 69 days on the market Q4 of 2009, down from 71 in Q4 of 2008, Dallas County 81 days on market versus 77 in Q4 2008.

See how much better off we are?

The Mortgage Bankers Association (MBA) reports that applications for home mortgages have fallen and notes weakness in mortgage applications for purchasing homes. Applications for purchases of homes fell 7.3 percent to its lowest level in nearly 13 years. (MBA blamed it on the weather, OK.) But the Association also admitted that it’s “another indication that housing demand remains relatively weak.”

And I’m looking at another press release from the MBA announcing a new program to allow qualified homeowners/borrowers who have lost their jobs to stay in their homes while they seek employment. Loan servicers would reduce the borrower’s mortgage payment to an affordable amount (based on household income) for up to nine months while they job hunt. Wow – -when have you heard of mortgage bankers being this touchy-feely? Once employed, the borrower would be evaluated for a loan mod under the Obama administration’s HAMP program. (And then it gets tacked on to the life of the mortgage but hey, better than losing your home.)

But here’s what sends the biggest chill down my spine: mortgage rates. I cringe when I think of April Fools Day, when the Fed ends its program of purchasing mortgage securities in March. Several mortgage brokers have said that anyone looking to buy or refinance might do better to get it done before April 1.

Are the drugs making me euphoric? Tell me what you think?

Folks, we are back in business!

Do you agree?

What I don’t understand is why buyers and Realtors are not telling the second guys to take a hike. ( Apparently, though, the feds are getting tough.) Perhaps the second lien holders threaten to jam up the sale somehow, which jeopardizes the Realtor’s commission, the buyer’s deal, so everyone just  pays to get the deal done?

Can someone explain? And is this happening here in Dallas or even Texas? If so, please contact me (off the record)!

That’s right. Once again, same story: what is killing this real estate market is the buyer’s inability to obtain financing, even after all the bail-outs.

Of course, maybe it didn’t help that the Wall Street guy already had three homes!

PS:  Her home in Southlake: the builder threw in the pool!

So here’s the deal, Steve. You buy drinks and I’ll give you the run-down on what I’ve got on tap for next week, and all your real estate stories will be sewn up for the year!

Confusing.

]]> http://dallasdirt.dmagazine.com/2009/12/02/barneys-ny-inc-is-owned-by-dubai-world/feed/ 0 http://dallasdirt.dmagazine.com/2009/11/30/should-you-just-walk-on-your-mortgage-dallasdirt-version-take-it-while-its-hot/ http://dallasdirt.dmagazine.com/2009/11/30/should-you-just-walk-on-your-mortgage-dallasdirt-version-take-it-while-its-hot/#comments Mon, 30 Nov 2009 17:25:05 +0000 Candy Evans http://dallasdirt.dmagazine.com/?p=6938 Mr. Allison beat me to posting something I was debating recently with my son-in-law: how lenders and banks, as usual, are profiting off the Obama administration’s $75 billion dollar “Making Homes Affordable” program. My son-in-law is an attorney who told me weeks ago (think I posted) that mortgage companies are making big bucks off the loan modification programs and sucking more money out of people they know will never be able to afford the homes they are in. As Jake explained it to me, the programs are not really modifications, but tacking the (inevitable) payments on the back-end of the mortgage.

In other words, extending the agony for perhaps another administration to deal with? Jake feels the program is a sublime failure on the part of the Obama administration.

So today we hear that Obama’s mortgage relief program plans to pressure banks to help borrowers long term. The borrowers will have to supply more information — what the beejesus were they supplying in the first place? I had lunch with a sub-prime lender a few weeks ago — he’s now a realtor – -and after saying shame on you, asked how he could have accepted a loan document that looked suspicious. Like the school teacher who said she earned $150k per year. Well, he said, you have to understand, there are so many ways folks could get back at you for, say, discrimination. Or — (and I think this is the reality) — if you didn’t make the loan, the next guy would.

Take it while it’s hot. Isn’t that the way our system works?

But the real estate world must be laughing at this nugget:

“…after the homeowner fails to graduate from the trial period, the servicer is still going to put the homeowner in foreclosure, kick the homeowner out and sell the house. However, because of the collapse of the housing market, the sale of the house is unlikely to cover the outstanding debt, resulting in a deficiency judgment.”

Which benefits — guess who? All lenders make out like bandits when they foreclose on a home if the home is a deed of trust. They toss out the mortgage holder for non-payment —  Texas is actually a pretty quick foreclosure state,  get a default you post it and give 21 days notice — buy back the home on the courthouse steps, turn around and sell it.

Then this  eureka:

“Some 650,000 homeowners are currently in this preliminary phase, but only a small fraction have received permanent assistance. About 375,000 people should receive long-term relief by year end, said Treasury officials in their first estimate of how many permanent modifications would be made this year. The administration is set to release its first report on the conversions in coming weeks.”

375,000 by year-end? We have 30 days, several of which are holidays, the administration is dumping more hoops and paperwork on these guys and — “servicers must explain to Treasury how they will communicate the decision to borrowers.”

And who is paying for this yet (another) perk for financial institutions? You and me.

No wonder some lawyers are advising people to walk on their mortgages, both homeowners and investors who put zero down.

Our Trisha Wilson did the design work on the Dubai Atlantis Hotel built on a $1.5 billion dollar man-made island shaped like a palm tree, featuring $4 million plus homes with private boat docks and landing strips. (Pardon the metaphor, but I have been told the sand on which some of the homes were built is not all that solid.) Atlantis opened last fall with a gala party after a fire just two weeks prior to opening festivities? Here’s what I reported for you on DallasDirt.

“Overall, 14.41% of all U.S. home loans were in foreclosure or at least 30 days past due at the end of the third quarter — 1 in 7 — and up from 13.16% in the second quarter.”

I have heard reports that by the end of 2010, one out of every two homeowners may be underwater on their mortgage. God help us: Barney Frank now thinks the government ought to make emergency loans to homeowners.

Oh, you say, we are not affected in Dallas, right? Our market is so strong and robust, particularly the lower end market. A group of Mississippi appraisers in town for a seminar recently remarked at how great our economy was because the restaurants here were busy — when folks in Mississippi have no money, they eat at home.

And as one prominent realtor told me off the record the other day: our market may be better than most, but the last time I looked, Dallas was still in the USA. The negativity around us still affects us.

I so do not like being Debbie Downer, truly, but the prognosis isn’t looking too positive. Your thoughts?

Update: Today’s New York Times downplays the disaster scenario I envisioned last night. Apparently this is a pre-packaged, “different kind of bankruptcy” that allows the company to re emerge from court protection by the end of the year, which is a pretty speedy recovery.

I’m torn. I think the credit was necessary, and not only do I think it should be extended, I think it should be expanded. Goldman Sachs, otherwise known as Government Sachs, has said it pushed up home prices by 5%. There are simply too many people who bought adjustable rate mortgages in the past few years, too many people who, if they have to sell their homes, will have to carry cash to closing. What if they don’t have it? I’ve heard that many banks are shelving some bad loans, others making deals as low as 2% interest rates just to keep folks in the home, the property off the courthouse steps.

Almost makes you want to stop paying your mortgage. But then, who said life was fair?

The housing market is a vital component of our economy, and when people move and buy homes, they tend to spend money — movers, hardware, paint, soft goods, hard goods.

As for the government propping up an industry, I have this to say: Amtrack.

Maybe there’s hope for jumbos after all.

“Tim Jackson, a Collin County custom builder who is president of the Home Builders Association of Greater Dallas, predicts new-home prices will rise next year unless starts increase.

“We just can’t get the funding to start new houses,” Jackson said. “I’m fortunate to have a good relationship with a local lender, and they allowed me to start a speculative home four or five months ago.

“But I doubt they would allow me to start another one,” he said. “Even if we have a customer who wants to build, they are oftentimes finding it difficult to find construction financing, too.”

What’s my fear? That all the elements putting the brakes on the market — in effect, constipating it — will ultimately raise prices on construction costs, new homes, taxes, closing costs, materials and labor so much that homes will be out of the average or lower-income individuals grasp.

“Ms. Goodman uses data from the Mortgage Bankers Association to estimate there are 55.9 million American homes with mortgage debt. She notes that at the end of the second quarter, an MBA survey found that more than 13% of single-family home mortgages were at least 30 days delinquent or in foreclosure.

Then Ms. Goodman looked at “cure” rates, the percentage of delinquent loans that return to current status. Those cure rates lately have been puny. The report assumes that about 99% of loans that are 90 days or more overdue will result in homes lost to foreclosure. The assumption for those 60 days or more delinquent is that 96% are toast, and for 30 days or more, 72%.  All in all, she estimates that 12.4% of the mortgages outstanding as of June 30—representing about 7 million homes—are going to end up changing hands on the courthouse steps.”

Thought: using 1.25 million during the peak of the real estate boom may not be the greatest of benchmarks, however: 7 million homes in foreclosure is almost mind-boggling. That’s like one whole city the size of Chicago of foreclosures!

Not a bad Great Room for a bachelor pad, but I think we need some more pillows. Guys just LOVE pillows.  Do we agree the exercise room, which used to be a baby’s room, needs a paint job? (Or do we want to keep the tree tops for treadmill stim?) The upstairs game room where Ernie tucked away his media apparatus. What do we think about the (lavendar?) wall color in there?

The wonderful Nancy Keating’s story on Texas Modern in the Wall Street Journal is a real estate junkie must-read. (Hurry, the free article vanishes in a few days.) She talks to our fabulous Lionel Morrison, who I am tempted to say has tilted downtown Dallas into an architecturally sleek city, but we have to give his wife, designer Susan Seifert,  equal credit. Pictured here is Morrison’s latest masterpiece, the Ricks Circle/Northaven home of Darren and Amy Kozelsky. Here is one down the street from that number built by Ms. Cheatham herself. No doubt, Dallas architectural tastes are leaning modern: even spec home builders dare to erect “Austin contemporaries” in lieu of the sales-safe Frenchette McMansions.  Mr. Morrison tells me he is working on an East Texas vaca home for a client that will knock our modern socks off even more. But I digress: my only dispute with Ms. Keating’s piece is location. We who live here know that Urban Reserve and Kessler Woods  are in two different geographic worlds. Diane Cheatham’s moderns-only development is on the periphery of the LBJ-635 Loop in a location that, like the new student at Beverly Hills High, is desperate to fit in. Facts are, Urban Reserve is east of Central. Kessler Woods is down skirting Kessler Park, in an area enjoying urgent revitalization and an influx of stylish young buyers. I see Kessler as thriving as Uptown in ten years. Wish I could say the same for Urban Reserve, because I love the concept. Years ago Big Sky near Denton tried to create a “only moderns need apply” dictum that didn’t work out so well. I’m told the development has since dropped the modern-only requirement, while this home langishes on the market. So while I think we will continue to see more — and better — fabulous modern homes in Dallas, I think we will see them as higher-end single family custom homes rather than neighborhood developments.

No inflation is going on right now, the government is trying to stop de-flation. Almost all the experts agree that we may see eventual inflation because of the economic stimulus — that money pumping into our systems. We may have a window of about 12 to 16 months before interest rates will have to rise to control it.  The Fed can and will monitor inflation tightly 24/7 and may in fact want to see a bit of inflation, say 2 to 4%, anything but hyperflation or deflation.

The banks still aren’t lending, what will it take to move them? Maybe higher interest rates. Cox doesn’t think you can pass laws forcing banks to lend money.

“When the risks and rewards are in balance, they will lend,” he says.

Our day of reckoning for the stimulus package will be when we convince China and Japan that treasuries are worth buying.

Why are the banks doling out TARP funds to the “troubled” banks rather than the solid banks, so the solid banks could lend the funds?

Good question, said Cox.

Unemployment is starting to affect everyone, even in the higher net worth classes. Though Texas thankfully lags the nation in unemployment, layoffs may not be over yet. Two solid businesses now: healthcare and education.

And these men think Americans’ spending habits have changed dramatically, maybe forever for a generation. Just as they did after the Great Depression, people are tightening their belts. Whether they keep them tight and how many years they live lean depends on how affected they are by this economic downturn, how long it lasts. We may not see mega leverage for another twenty years.

Higher taxes may force people out of states like New York and California, and we could see another wave of  sunbirds heading here for our sensibly valued homes. Watch: commercial real estate failings. Be glad we live in a city that continues to attract business and generate jobs as well as technology (intelligent medical systems being developed at Texas Instruments) and varied corporate headquarters. Buffalo, New York was home to the largest number of wealthy individuals in the U.S…  once upon a time.