Original Article published in The Daily Business Review
November 5, 2009
by : Vanessa Blum
The Florida Supreme Court was asked Wednesday to adopt statewide mandatory mediation for residential foreclosures to help judges manage the flood of filings clogging courthouses.
The high court heard arguments on a task force report recommending mandatory mediation as part of a streamlined and uniform approach to the foreclosure crisis.
While questioning some specifics of the plan, justices seemed eager to help circuit courts deal with an onslaught of foreclosure cases — many involving unrepresented homeowners with a limited understanding of the legal process.
“What is the solution to what this court system has — a tsunami of these filings?” Justice Barbara Pariente asked a banking industry lawyer.
Lenders oppose some aspects of the plan, which they say would place an unfair financial burden on them.
“The goal is taking the burden off the court,” Pariente said in response to that concern. “We’re not just trying to, quote, help the borrower.”
Miami-Dade civil administrative judge Jennifer Bailey, who chaired the statewide task force, said mediation was not recommended to favor the interests of either borrowers or lenders, but to help courthouses manage an overload of cases.
“We are imposing structure on an extremely chaotic situation,” she said.
Through September, more than 291,200 foreclosure actions were filed statewide this year, Bailey said.
In Miami-Dade County, the court experienced a 474 percent increase in foreclosure filings from 2006 to 2008. The caseload has climbed 516 percent in Broward County and 496 percent in Palm Beach County.
The filings are swamping the courts and taking judicial energy away from other cases, said former Florida Bar president Alan Bookman of Pensacola, who served on the task force. “We’re not trying to favor the homeowner over the lender.
We’re trying to create a level playing field,” he said.
During the 90-minute hearing, lawyers discussed one example of how cases get dragged out and tie up court resources — the canceled foreclosure sale.
In Miami-Dade County, 65 percent of scheduled foreclosure sales each month are canceled. One reason is borrowers and loan servicers are working toward an agreement, lawyers said. Justice R. Fred Lewis called that 11th hour approach “nonsensical.” “Wouldn’t it be a better policy for a trial court to make sure that process is completed before the final judgment?” he asked. Lewis said it would be essential for each circuit to ensure the independence of mediation agencies, saying a bias toward either side would be “devastating to the process.” He also wanted to know when results from each program should be expected. “Will the crisis be passed before we have them in place?” Lewis asked.
Justice Charles Canady suggested financial interests, not negotiation, might delay some foreclosure sales.
“Lenders are making a business decision that they don’t want the sale to go forward,” he said. “They would rather inventory these houses and wait for a better time in the market.”
Fort Lauderdale attorney Marc Ben-Ezra, whose law firm, Ben-Ezra & Katz, has represented lenders in about 30,000 foreclosures in two years, said Canady’s concern is an “urban myth.” Lenders want foreclosures resolved as quickly as possible, he said.
“We’re generally graded by our clients on how efficiently we can complete the process,” Ben-Ezra said.
A more significant reason for delay is borrowers who don’t appreciate the seriousness of their situation until “a final judgment is bearing down on them,” he said.
Improving early communication between borrowers and lenders is a major goal of the task force. The plan calls for mediation on homestead property at the lender’s expense unless the lender and borrower agree otherwise.
In addition, the task force recommended a central foreclosure Web site to provide information on foreclosure counseling, access to court dockets and resources for borrowers.
Under the proposals, lenders would be required to verify the contents of their complaint at the time of filing, and parties wishing to cancel or reschedule foreclosure sales would have to file a motion listing their reasons.
In cases where borrowers have not been located, the task force recommends a new form for process servers to fill out to demonstrate the steps they took before abandoning a search.
Three circuits including Miami-Dade already have adopted mediation programs administered by the Collins Center, a nonprofit Tallahassee think tank. The service costs $750 per case.
Chief Justice Peggy Quince said embracing mandatory mediation could create a monopoly for the center, and she called that prospect “disturbing.”
Critics of the task force plan mainly object to the financial burden and legal hurdles placed on lenders, which already lose money on most foreclosure actions.
Mediation fees alone could cost banks more than $20 million a year, said task force member Lee Haworth, chief circuit judge in Sarasota County. He wrote a dissenting report suggesting borrowers and lenders should split the cost of mediation when possible.
“People who have the ability to contribute toward the mediation process should step up and do it,” Haworth told the court. “Both sides need skin in the game.”
He said a determination could be built into the mediation process itself so it would not burden judges. Without such protection, he said, the “Donald Trumps of the world” could get a free mediation.
But most homeowners who default on their loans are not sophisticated investors and are overwhelmed and confused by the foreclosure process, Bailey told the panel.
“Most of the people we’re talking about, this is the most complex transaction they have ever dealt with in their entire life.”
Re-posted by Joseph Sloboda
Thursday, November 5, 2009
Tuesday, August 18, 2009
Believe it or not, get ready for possible property tax increase !
Originally from the South Florida Sun-Sentinel.com
Get ready homeowners: County and most cities in Broward propose tax hikes
By Scott Wyman
South Florida Sun Sentinel
4:30 PM EDT, August 17, 2009
Twenty-six of 31 cities, as well as Broward County government, both hospital districts and the local children services agency, are looking at raising tax rates and fees on property owners this year.
Rates in five cities — Pembroke Pines, Weston, West Park, Miramar and Hillsboro Beach — could jump more than 25 percent. Eighteen communities also are considering charging property owners more for fire protection next year.
The proposals are in response to the worst decline in Broward's tax roll in decades. The rate hikes would allow officials to avoid severe cuts to public safety and communities. Still, local governments are looking at reducing hours at parks and libraries, laying off employees and freezing salaries.
Charlotte Greenbarg, president of the Broward Coalition, an umbrella group of homeowner and condo associations, predicts a tax revolt because people expected lower taxes as a result of falling home values. She fears the tax bills will drive more families into foreclosure by adding to existing financial problems.
"It is an outrageous lack of responsibility," Greenbarg said. "These governments are living in a world that doesn't exist any more and are literally bleeding people dry."
The Property Appraiser's Office mailed the first batch of preliminary tax notices to residents last week, detailing their new property value and tentative bill. The agency expects to finish the mailing by Aug. 21 and is bracing for a deluge of complaints.
"I don't ever remember rate increases this high," Property Appraiser Lori Parrish said.
The impact will vary according to how long residents have owned their property.
Longtime owners built large tax exemptions during the real estate boom and would pay higher taxes in many cases this year. Because of their exemptions, they do not pay taxes at their home's full market value and won't benefit from the decline in real estate prices. Residents who bought homes more recently could see some savings despite higher rates because their homes are taxed more closely to current values.
A longtime owner of a home valued last year at $200,000 in Hollywood, for example, would pay an extra $222 to the city in taxes and fees, while a new owner of the same home would pay $76 more if the property's value declined at the county average.
Local governments lived off the windfall from rising property values during Florida's real estate boom, allowing officials to keep tax rates stable while collecting more money. But the taxable value of property in Broward has declined two consecutive years, falling 10.5 percent this year from $166.4 billion to $147.2 billion.
Some officials argue higher tax rates are all but unavoidable given the harsh economic realities. Under the proposed rates, most local governments are looking at bringing in no more in taxes than they did last year.
"I'm sensitive to what residents are facing and I want to try to keep the rate the same as last year, but I don't know if it's doable," said Hallandale Beach Mayor Joy Cooper, whose city is exploring a 19.9 percent rate hike. "Services cost money, and the main way to pay for them is property taxes and service charges."
Weston has not raised its rates in 15 years, but lists a 27.6 percent increase on the preliminary tax notice. Mayor Eric Hersh believes residents will understand an increase this year because the city won't have to cut police or fire protection or reduce amenities like recreational programs."
When you start acting like a distressed city, you become one," Hersh said.
Among Broward cities, only Fort Lauderdale, Pembroke Park, Lauderdale-by-the-Sea and Sea Ranch Lakes have not proposed higher tax rates. Fort Lauderdale is avoiding an increase by tapping rainy day reserves, not filling vacant jobs and even letting the grass in city parks grow longer.
Some governments set high rates on the preliminary notices to give officials flexibility as they further discuss their budget deficits. Governments will set the final tax rates in late September following public hearings on their budgets.
County commissioners have vowed not to raise rates this year, but County Administrator Bertha Henry included a 6.7 percent increase on the tax notices because budget negotiations with Sheriff Al Lamberti continue over how much he should cut. The Sheriff's Office comprises about half of the county's operations funded by property taxes, and commissioners want him to cover about half the $109 million budget deficit.
Parkland listed a 21.9 percent increase on the tax notices, but Mayor Michael Udine doubts if the final result will be that high. The city has made cuts in its building department and parks programs, and Udine expects the city will wind up with a combination of a higher tax rate and additional cuts.
"Everyone out there is having financial issues and we need to bring this budget in as bare bones as possible," Udine said.
Originally posted by
Scott Wyman can be reached at swyman@sunsentinel.com or 954-356-4511.
Get ready homeowners: County and most cities in Broward propose tax hikes
By Scott Wyman
South Florida Sun Sentinel
4:30 PM EDT, August 17, 2009
Twenty-six of 31 cities, as well as Broward County government, both hospital districts and the local children services agency, are looking at raising tax rates and fees on property owners this year.
Rates in five cities — Pembroke Pines, Weston, West Park, Miramar and Hillsboro Beach — could jump more than 25 percent. Eighteen communities also are considering charging property owners more for fire protection next year.
The proposals are in response to the worst decline in Broward's tax roll in decades. The rate hikes would allow officials to avoid severe cuts to public safety and communities. Still, local governments are looking at reducing hours at parks and libraries, laying off employees and freezing salaries.
Charlotte Greenbarg, president of the Broward Coalition, an umbrella group of homeowner and condo associations, predicts a tax revolt because people expected lower taxes as a result of falling home values. She fears the tax bills will drive more families into foreclosure by adding to existing financial problems.
"It is an outrageous lack of responsibility," Greenbarg said. "These governments are living in a world that doesn't exist any more and are literally bleeding people dry."
The Property Appraiser's Office mailed the first batch of preliminary tax notices to residents last week, detailing their new property value and tentative bill. The agency expects to finish the mailing by Aug. 21 and is bracing for a deluge of complaints.
"I don't ever remember rate increases this high," Property Appraiser Lori Parrish said.
The impact will vary according to how long residents have owned their property.
Longtime owners built large tax exemptions during the real estate boom and would pay higher taxes in many cases this year. Because of their exemptions, they do not pay taxes at their home's full market value and won't benefit from the decline in real estate prices. Residents who bought homes more recently could see some savings despite higher rates because their homes are taxed more closely to current values.
A longtime owner of a home valued last year at $200,000 in Hollywood, for example, would pay an extra $222 to the city in taxes and fees, while a new owner of the same home would pay $76 more if the property's value declined at the county average.
Local governments lived off the windfall from rising property values during Florida's real estate boom, allowing officials to keep tax rates stable while collecting more money. But the taxable value of property in Broward has declined two consecutive years, falling 10.5 percent this year from $166.4 billion to $147.2 billion.
Some officials argue higher tax rates are all but unavoidable given the harsh economic realities. Under the proposed rates, most local governments are looking at bringing in no more in taxes than they did last year.
"I'm sensitive to what residents are facing and I want to try to keep the rate the same as last year, but I don't know if it's doable," said Hallandale Beach Mayor Joy Cooper, whose city is exploring a 19.9 percent rate hike. "Services cost money, and the main way to pay for them is property taxes and service charges."
Weston has not raised its rates in 15 years, but lists a 27.6 percent increase on the preliminary tax notice. Mayor Eric Hersh believes residents will understand an increase this year because the city won't have to cut police or fire protection or reduce amenities like recreational programs."
When you start acting like a distressed city, you become one," Hersh said.
Among Broward cities, only Fort Lauderdale, Pembroke Park, Lauderdale-by-the-Sea and Sea Ranch Lakes have not proposed higher tax rates. Fort Lauderdale is avoiding an increase by tapping rainy day reserves, not filling vacant jobs and even letting the grass in city parks grow longer.
Some governments set high rates on the preliminary notices to give officials flexibility as they further discuss their budget deficits. Governments will set the final tax rates in late September following public hearings on their budgets.
County commissioners have vowed not to raise rates this year, but County Administrator Bertha Henry included a 6.7 percent increase on the tax notices because budget negotiations with Sheriff Al Lamberti continue over how much he should cut. The Sheriff's Office comprises about half of the county's operations funded by property taxes, and commissioners want him to cover about half the $109 million budget deficit.
Parkland listed a 21.9 percent increase on the tax notices, but Mayor Michael Udine doubts if the final result will be that high. The city has made cuts in its building department and parks programs, and Udine expects the city will wind up with a combination of a higher tax rate and additional cuts.
"Everyone out there is having financial issues and we need to bring this budget in as bare bones as possible," Udine said.
Originally posted by
Scott Wyman can be reached at swyman@sunsentinel.com or 954-356-4511.
Wednesday, July 8, 2009
Obama mortgage plan needs work
Many borrowers are not getting help under president's modification or refinancing plan. Officials don't expect problems to be fixed until the fall.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: July 8, 2009: 8:10 AM ET
NEW YORK (CNNMoney.com) -- Mr. President, help us get one of your mortgage workouts now.
That's what many borrowers are saying nearly five months after President Obama unveiled his housing rescue plan. The program is beset with problems, say borrowers, housing counselors and even the president himself.
Loan servicers are overwhelmed by the numbers of homeowners applying for loan modifications or refinancing. Borrowers are frustrated that their paperwork is being lost, and calls are not returned. Administration officials are racing to roll out new features to improve the program.
Even Obama acknowledges that the program is failing to stem the foreclosure tidal wave.
"Our mortgage program has actually helped to modify mortgages for a lot of our people, but it hasn't been keeping pace with all the foreclosures that are taking place," Obama said last month.
CNNMoney.com has heard from hundreds of troubled homeowners who've run into roadblocks. The complaints are often the same: a lack of responsiveness by servicers.
Even many of those whose applications are deemed complete say they never receive final approval or are told they can't be helped now because they haven't missed a payment.
"We are trying to refinance but are getting the runaround from the bank," Janeen, a Los Angeles homeowner, wrote on a CNNMoney.com Talkback. "[T]hey keep stalling, missing appointments and forgetting to send us paperwork."
Administration officials say they are well aware of the problems and are leaning on the banks to do better. Servicers will have to report the results of their efforts within the next month or two, opening them up to public and government scrutiny, said Seth Wheeler, senior adviser at the Treasury Department.
But don't expect the hurdles to go away anytime soon.
"Immediately, we want to see an improvement in borrower experience, but I don't think that means we will see a resolution of every hiccup in the process," Wheeler said. "We should see over the course of the summer real improvement, but those challenges will linger well into the fall certainly."
Under the Obama plan, people with little or no equity in their home can refinance to take advantage of today's low mortgage rates. The plan allows people to participate even if they have loans of up to 125% of the value of their property, as long as they meet other criteria.
Also, eligible borrowers who are in or at risk of default may be able to lower their monthly payments to no more than 31% of their pre-tax income through a loan modification. Homeowners, servicers and mortgage investors can receive incentives to entice them to participate.
Announced in February and implemented by most servicers starting in April, the program has produced more than 200,000 trial modifications and 20,000 refinancings. Borrowers in the loan modification program must make three on-time payments before the adjustment is considered official.
Foreclosures rising
While the administration often highlights that the program has helped a lot of people in a short period of time, it has a long way to go if it is to truly stem the foreclosure crisis, experts say.
Nearly 1.5 million homes have received a foreclosure filing in the first five months of the year, according to RealtyTrac. Defaults are on track to hit 3.5 million this year, according to Mark Zandi of Moody's Economy.com.
Foreclosures in process jumped in the first quarter by 22% over the previous quarter, according to data released last week by the Office of the Comptroller of the Currency and Office of Thrift Supervision. The number of mortgages that were more than 60 days past-due rose 7%, but delinquencies among prime borrowers with the best credit backgrounds soared nearly 20% as rising unemployment takes its toll.
"This system is not running at the level of efficiency that it has to," said Barry Zigas, director of housing policy for the Consumer Federation of America.
Getting through to the banks isn't easy.
Distressed borrowers have told CNNMoney.com that they are in danger of losing their homes because their banks are not able to handle the flood of applications for the president's foreclosure prevention plan. In addition to problems with lost documents and endless waits on hold, borrowers complain they never receive an answer or are told they can't be helped because they are still current with payments.
Tanya in Jacksonville, Fla., wrote in the Talkback that she has contacted her servicer 27 times since applying for a loan modification in April, faxed all the documents six times and is still not getting help. "So still I wait. Still I have no assistace[sic] in my loan!"
"Now it has been a month since I returned all the proper paper work and have received no correspondence," wrote Craig of Howell, Mich., who is seeking to refinance. "I call the loan officer I spoke with at least once a week and she refuses to return my phone calls!! Getting a person on the phone who is [knowledgeable] is next to impossible since everyone there makes Forest Gump look like Albert Einstein. I'm simply fed up with this whole process."
Housing counselors, who help distressed borrowers navigate the system, are quite familiar with stories such as these. Much of the bottlenecks stem from the fact that servicers have not hired nor trained enough staff, nor have they fully updated their computer systems to handle the administration's program, said Bruce Dorpalen, director of housing counseling for Acorn Housing.
"There's no excuse for this," he said. "The servicers are not able to make decisions, or good decisions."
Still ramping up
Banks and government officials say the foreclosure prevention program is very complicated, requiring a lot of training, system upgrading and documentation. Therefore, the institutions need time to ramp up.
"We have a new plan that's also more complex than any other plan," said Faith Schwartz, who heads Hope Now, a coalition of servicers, community groups and mortgage investors working to stem foreclosures. "The banks have tripled, quadrupled their staffs. It will be effective. We'll see more in the fall."
Citigroup (C, Fortune 500), for instance, said it is trying to resolve cases as expeditiously as possible, while JPMorgan Chase (JPM, Fortune 500) has touted the fact that it had approved 87,000 applications by June 30. Both banks said they are looking to improve.
TheTreasuryDepartment is pressuring servicers to streamline the application process. And officials say they will check to make sure banks are following the guidelines.
The soon-to-be-issued reports will include how many loan modifications and refinancings have been extended and how many are underway at each institution. Servicers with low approval levels or high complaint figures will raise red flags. Also, the administration has hired Freddie Mac (F, Fortune 500), the mortgage finance firm now under the government's control, to check the applications that have been approved and rejected.
"It's not just that we're hoping that servicers get out there and get results," Wheeler said.
First Published: July 8, 2009: 4:49 AM ET
Many borrowers are not getting help under president's modification or refinancing plan. Officials don't expect problems to be fixed until the fall.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: July 8, 2009: 8:10 AM ET
NEW YORK (CNNMoney.com) -- Mr. President, help us get one of your mortgage workouts now.
That's what many borrowers are saying nearly five months after President Obama unveiled his housing rescue plan. The program is beset with problems, say borrowers, housing counselors and even the president himself.
Loan servicers are overwhelmed by the numbers of homeowners applying for loan modifications or refinancing. Borrowers are frustrated that their paperwork is being lost, and calls are not returned. Administration officials are racing to roll out new features to improve the program.
Even Obama acknowledges that the program is failing to stem the foreclosure tidal wave.
"Our mortgage program has actually helped to modify mortgages for a lot of our people, but it hasn't been keeping pace with all the foreclosures that are taking place," Obama said last month.
CNNMoney.com has heard from hundreds of troubled homeowners who've run into roadblocks. The complaints are often the same: a lack of responsiveness by servicers.
Even many of those whose applications are deemed complete say they never receive final approval or are told they can't be helped now because they haven't missed a payment.
"We are trying to refinance but are getting the runaround from the bank," Janeen, a Los Angeles homeowner, wrote on a CNNMoney.com Talkback. "[T]hey keep stalling, missing appointments and forgetting to send us paperwork."
Administration officials say they are well aware of the problems and are leaning on the banks to do better. Servicers will have to report the results of their efforts within the next month or two, opening them up to public and government scrutiny, said Seth Wheeler, senior adviser at the Treasury Department.
But don't expect the hurdles to go away anytime soon.
"Immediately, we want to see an improvement in borrower experience, but I don't think that means we will see a resolution of every hiccup in the process," Wheeler said. "We should see over the course of the summer real improvement, but those challenges will linger well into the fall certainly."
Under the Obama plan, people with little or no equity in their home can refinance to take advantage of today's low mortgage rates. The plan allows people to participate even if they have loans of up to 125% of the value of their property, as long as they meet other criteria.
Also, eligible borrowers who are in or at risk of default may be able to lower their monthly payments to no more than 31% of their pre-tax income through a loan modification. Homeowners, servicers and mortgage investors can receive incentives to entice them to participate.
Announced in February and implemented by most servicers starting in April, the program has produced more than 200,000 trial modifications and 20,000 refinancings. Borrowers in the loan modification program must make three on-time payments before the adjustment is considered official.
Foreclosures rising
While the administration often highlights that the program has helped a lot of people in a short period of time, it has a long way to go if it is to truly stem the foreclosure crisis, experts say.
Nearly 1.5 million homes have received a foreclosure filing in the first five months of the year, according to RealtyTrac. Defaults are on track to hit 3.5 million this year, according to Mark Zandi of Moody's Economy.com.
Foreclosures in process jumped in the first quarter by 22% over the previous quarter, according to data released last week by the Office of the Comptroller of the Currency and Office of Thrift Supervision. The number of mortgages that were more than 60 days past-due rose 7%, but delinquencies among prime borrowers with the best credit backgrounds soared nearly 20% as rising unemployment takes its toll.
"This system is not running at the level of efficiency that it has to," said Barry Zigas, director of housing policy for the Consumer Federation of America.
Getting through to the banks isn't easy.
Distressed borrowers have told CNNMoney.com that they are in danger of losing their homes because their banks are not able to handle the flood of applications for the president's foreclosure prevention plan. In addition to problems with lost documents and endless waits on hold, borrowers complain they never receive an answer or are told they can't be helped because they are still current with payments.
Tanya in Jacksonville, Fla., wrote in the Talkback that she has contacted her servicer 27 times since applying for a loan modification in April, faxed all the documents six times and is still not getting help. "So still I wait. Still I have no assistace[sic] in my loan!"
"Now it has been a month since I returned all the proper paper work and have received no correspondence," wrote Craig of Howell, Mich., who is seeking to refinance. "I call the loan officer I spoke with at least once a week and she refuses to return my phone calls!! Getting a person on the phone who is [knowledgeable] is next to impossible since everyone there makes Forest Gump look like Albert Einstein. I'm simply fed up with this whole process."
Housing counselors, who help distressed borrowers navigate the system, are quite familiar with stories such as these. Much of the bottlenecks stem from the fact that servicers have not hired nor trained enough staff, nor have they fully updated their computer systems to handle the administration's program, said Bruce Dorpalen, director of housing counseling for Acorn Housing.
"There's no excuse for this," he said. "The servicers are not able to make decisions, or good decisions."
Still ramping up
Banks and government officials say the foreclosure prevention program is very complicated, requiring a lot of training, system upgrading and documentation. Therefore, the institutions need time to ramp up.
"We have a new plan that's also more complex than any other plan," said Faith Schwartz, who heads Hope Now, a coalition of servicers, community groups and mortgage investors working to stem foreclosures. "The banks have tripled, quadrupled their staffs. It will be effective. We'll see more in the fall."
Citigroup (C, Fortune 500), for instance, said it is trying to resolve cases as expeditiously as possible, while JPMorgan Chase (JPM, Fortune 500) has touted the fact that it had approved 87,000 applications by June 30. Both banks said they are looking to improve.
TheTreasuryDepartment is pressuring servicers to streamline the application process. And officials say they will check to make sure banks are following the guidelines.
The soon-to-be-issued reports will include how many loan modifications and refinancings have been extended and how many are underway at each institution. Servicers with low approval levels or high complaint figures will raise red flags. Also, the administration has hired Freddie Mac (F, Fortune 500), the mortgage finance firm now under the government's control, to check the applications that have been approved and rejected.
"It's not just that we're hoping that servicers get out there and get results," Wheeler said.
First Published: July 8, 2009: 4:49 AM ET
Wednesday, June 24, 2009
Prison survival tips for Madoff
Experts don't see a 'camp cupcake' for Madoff as they offer suggestions to keep out of danger.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: June 24, 2009: 1:43 PM ET
NEW YORK (CNNMoney.com) -- When Ponzi scheme mastermind Bernard Madoff is sentenced on Monday, he'll be sent to a real prison with real bars and violent offenders, not a "country club" for white collar crooks, consultants say.
Madoff, age 71, faces a maximum sentence of 150 years in the federal prison system. This is based on his confession to 11 felony counts for orchestrating the largest Ponzi scheme of all time. For decades, Madoff stole billions of dollars from thousands of victims, while masquerading as a legitimate businessman through his investment firm.
The length of Madoff's maximum sentence, which is based on the sweeping magnitude of his crimes, gives him an incentive to escape and virtually ensures that he'll be sent to a prison instead of a minimum-security camp, according to prison consultants.
"Madoff, he's not going to a camp, ever," said Larry Levine, founder of Wall Street Prison Consultants and a former inmate of the federal prison system. "His sentence is too long, so he becomes a flight risk. And then it gets into the severity of his crime. If you have more than 10 years, you can't get a camp."
No camp for Madoff
Camps are generally preferred by convicts, because they're deemed as safer, with fewer restrictions, consultants said.
"Prison camps are open facilities," said Alan Ellis, an attorney, prison consultant and author of the "Federal Prison Guidebook." "They are not surrounded by a fence. They generally house first-time offenders, non-violent offenders, people who are not going to be troublemakers."
Larry Levine speaks from first-hand experience. During his 10-year sentence for ties to organized crime, he said he served in 11 federal facilities, including high, medium and low security prisons, and minimum-security prison camps.
He said his favorite facility was Federal Prison Camp Nellis, on an air force base near Las Vegas. That's where Martha Stewart's co-conspirator in insider trading, Peter Bacanovic, served five months. The facility has since closed.
Madoff will most likely serve time in a medium-security prison, consultants believe -- his non-violent history will keep him out of maximum-security, but his sentence is too long to justify low-security.
Madoff's next home
Madoff's lawyer, Ira Lee Sorkin, would not comment on whether he'll request a specific prison for his client. The Federal Bureau of Prisons has the final say in such matters. BOP spokeswoman Felicia Ponce said the bureau tries to place inmates within 500 miles of their families, but she would not comment on where Madoff will be sent.
But Alan Ellis believes Madoff will probably land in one of the closest medium-security prisons to his family in Manhattan, where he lived in a $7 million apartment until his March 12 guilty plea. Since then, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a temporary federal facility, prior to his prison transfer.
Ellis identified the most likely prisons for Madoff's term as Federal Correctional Institution Otisville, about 70 miles northwest of New York City, and FCI Fairton in nearby New Jersey. He said that Madoff might also be sent to FCI Ray Brook in upstate New York and FCI McKean in northwestern Pennsylvania. All are medium-security.
In a medium-security prison, prisoners are fenced behind a double-layered razor-wire perimeter with electronic detection systems, according to Felicia Ponce of the BOP. Inmates share cells, which are closely monitored after lights-out by patrolling officers, she said. They are subject to cell searches and pat-downs in the near-constant search for weapons and other contraband. They work menial jobs, often in kitchens or laundry rooms, where they are paid 12 to 40 cents an hour.
Madoff's prison survival strategy
"You're going to find a lot of people in medium who have a violent background," said Ellis, noting that the top concerns of his soon-to-be-incarcerated clients are "fear of prison assault" and "fear of the unknown."
Levine said that Madoff might be targeted by other prisoners as "an economic terrorist" and blamed as a general scapegoat for the financial woes of family members on the outside, even if they had nothing do with his Ponzi scheme.
"There will be people who think that Bernie can give them stock tips, but I don't see anyone being his big pal," said Levine. " I believe he'll be treated like an outcast."
Levine said that Madoff should always "maintain high visibility" as a security precaution.
"Try to stay in an area where there's a lot of people watching you, where the guards are watching you," Levine said, when asked what his advice would be for Madoff. "Do not become confrontational with anybody. Respect people; be polite. Don't borrow anything from anyone.
Don't become beholden to anyone."
If Madoff feels that he's in danger, then he can report the threat to correctional officers and request protective custody, said Ponce. If that happens, he would be separated from the general inmate population and put into a special housing unit while the prison staff investigated his claims, she said.
In this regard, Madoff's fame -- or infamy -- might actually help keep him out of danger, the consultants said.
"If he gets assaulted while he's in there, that's big news, and the BOP hates publicity," said Levine. "If anything comes down on Madoff, it's going to come down on the warden."
re-posted by Joseph Sloboda
Experts don't see a 'camp cupcake' for Madoff as they offer suggestions to keep out of danger.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: June 24, 2009: 1:43 PM ET
NEW YORK (CNNMoney.com) -- When Ponzi scheme mastermind Bernard Madoff is sentenced on Monday, he'll be sent to a real prison with real bars and violent offenders, not a "country club" for white collar crooks, consultants say.
Madoff, age 71, faces a maximum sentence of 150 years in the federal prison system. This is based on his confession to 11 felony counts for orchestrating the largest Ponzi scheme of all time. For decades, Madoff stole billions of dollars from thousands of victims, while masquerading as a legitimate businessman through his investment firm.
The length of Madoff's maximum sentence, which is based on the sweeping magnitude of his crimes, gives him an incentive to escape and virtually ensures that he'll be sent to a prison instead of a minimum-security camp, according to prison consultants.
"Madoff, he's not going to a camp, ever," said Larry Levine, founder of Wall Street Prison Consultants and a former inmate of the federal prison system. "His sentence is too long, so he becomes a flight risk. And then it gets into the severity of his crime. If you have more than 10 years, you can't get a camp."
No camp for Madoff
Camps are generally preferred by convicts, because they're deemed as safer, with fewer restrictions, consultants said.
"Prison camps are open facilities," said Alan Ellis, an attorney, prison consultant and author of the "Federal Prison Guidebook." "They are not surrounded by a fence. They generally house first-time offenders, non-violent offenders, people who are not going to be troublemakers."
Larry Levine speaks from first-hand experience. During his 10-year sentence for ties to organized crime, he said he served in 11 federal facilities, including high, medium and low security prisons, and minimum-security prison camps.
He said his favorite facility was Federal Prison Camp Nellis, on an air force base near Las Vegas. That's where Martha Stewart's co-conspirator in insider trading, Peter Bacanovic, served five months. The facility has since closed.
Madoff will most likely serve time in a medium-security prison, consultants believe -- his non-violent history will keep him out of maximum-security, but his sentence is too long to justify low-security.
Madoff's next home
Madoff's lawyer, Ira Lee Sorkin, would not comment on whether he'll request a specific prison for his client. The Federal Bureau of Prisons has the final say in such matters. BOP spokeswoman Felicia Ponce said the bureau tries to place inmates within 500 miles of their families, but she would not comment on where Madoff will be sent.
But Alan Ellis believes Madoff will probably land in one of the closest medium-security prisons to his family in Manhattan, where he lived in a $7 million apartment until his March 12 guilty plea. Since then, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a temporary federal facility, prior to his prison transfer.
Ellis identified the most likely prisons for Madoff's term as Federal Correctional Institution Otisville, about 70 miles northwest of New York City, and FCI Fairton in nearby New Jersey. He said that Madoff might also be sent to FCI Ray Brook in upstate New York and FCI McKean in northwestern Pennsylvania. All are medium-security.
In a medium-security prison, prisoners are fenced behind a double-layered razor-wire perimeter with electronic detection systems, according to Felicia Ponce of the BOP. Inmates share cells, which are closely monitored after lights-out by patrolling officers, she said. They are subject to cell searches and pat-downs in the near-constant search for weapons and other contraband. They work menial jobs, often in kitchens or laundry rooms, where they are paid 12 to 40 cents an hour.
Madoff's prison survival strategy
"You're going to find a lot of people in medium who have a violent background," said Ellis, noting that the top concerns of his soon-to-be-incarcerated clients are "fear of prison assault" and "fear of the unknown."
Levine said that Madoff might be targeted by other prisoners as "an economic terrorist" and blamed as a general scapegoat for the financial woes of family members on the outside, even if they had nothing do with his Ponzi scheme.
"There will be people who think that Bernie can give them stock tips, but I don't see anyone being his big pal," said Levine. " I believe he'll be treated like an outcast."
Levine said that Madoff should always "maintain high visibility" as a security precaution.
"Try to stay in an area where there's a lot of people watching you, where the guards are watching you," Levine said, when asked what his advice would be for Madoff. "Do not become confrontational with anybody. Respect people; be polite. Don't borrow anything from anyone.
Don't become beholden to anyone."
If Madoff feels that he's in danger, then he can report the threat to correctional officers and request protective custody, said Ponce. If that happens, he would be separated from the general inmate population and put into a special housing unit while the prison staff investigated his claims, she said.
In this regard, Madoff's fame -- or infamy -- might actually help keep him out of danger, the consultants said.
"If he gets assaulted while he's in there, that's big news, and the BOP hates publicity," said Levine. "If anything comes down on Madoff, it's going to come down on the warden."
re-posted by Joseph Sloboda
Monday, June 22, 2009
Foreclosures grind on as lenders fail to modify loans
After reading this article in Fridays USA Today I felt ill - it is amazing how many people are unable to get through this process because of the unwillingness of the lenders and servicers to help the homeowners. If you find yourself in a position like this, please call our offices as soon as possible for a "no cost" telephone consultation where we will hopefully be able to assist you and get you on the right track and eventually help save your home. (however to be clear, if you choose to retain us for our services there will be fees asscoiated with our service beyond the initial consultation)
Original Article from Thursday, June 18, 2009
By Stephanie Armour, USA TODAY
The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.
Details of the plan were unveiled in early March. The goal is to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments.
Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.
Homeowners who apply for mortgage modifications are finding that banks typically are taking 45 to 60 days to respond to inquiries, according to a report this month by NeighborWorks America, a provider of foreclosure-prevention counseling.
Some homeowners who applied for mortgage modifications five months ago still have no answer on whether they will be able to arrange smaller monthly payments, leaving them uncertain whether they'll keep their homes or lose them shortly.
"Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff at Naroff Economic Advisors. "No one will admit they're doing this."
Naroff also says banks today are dealing with even more demand for mortgages, including refinancings, than during the peak of the housing bubble in 2006, and the backlog is likely to get worse as more homeowners lose their jobs. Mortgage delinquencies have been growing in areas where unemployment has been rising fast, and even homeowners who successfully get modified mortgages could face trouble later if their incomes or home values fall.
Lenders say they're doing the best they can with a tsunami of requests, but some industry officials say delays are hampering efforts to revive the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," says Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
This month, Sen. Jack Reed, D-R.I., and 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan and called for a new strategy to get lenders to respond to homeowners faster.
"Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer," it said.
Robin and Craig Doyle of Woodland Hills, Calif., have been trying to get a loan modification through their lender, JPMorgan Chase, since February.
Robin, who does freelance writing from home, said she initially was told to send a letter describing her hardship, paycheck stubs, tax returns and other information.
She assembled a 200-page file and sent it along. A month later, she was told she had to redo the information because the file she'd sent had become outdated.
Another time, Robin says, she was told her file had been mistakenly closed altogether. On another occasion, she was told the request couldn't be processed because she hadn't included information about a homeowner association fee, even though her family doesn't belong to such an association.
"I've had to resend it four times," says Robin, 35. "It's making me sick. It's been five months. I've spent hours and hours on this and sleepless nights. It's foremost on my mind. I look at my beautiful home and wonder if I'll have it next month."
The Doyles pay $5,031 a month on a mortgage of $947,000. They have an interest-only loan at a 6.3% rate that will reset in about seven years. On interest-only loans, borrowers pay only interest for a specific period to temporarily reduce the payments. After that, they pay interest and principal.
Craig, a writer in the television and movie industry, is still finding work but not as much as before. This is the first month the family has failed to make its mortgage payment.
"I feel like Obama's plan has done absolutely nothing," says Craig, 38.
Jennifer Zuccarelli, a Chase spokeswoman, says there were miscommunications in the Doyles' case, and the bank is working to resolve the situation. It also has added about 950 loan counselors the past six months.
"We're hiring hundreds more every month," Zuccarelli says.
After USA TODAY contacted Chase for comment, the Doyles say the bank told them the next week to resubmit their application. They later were told they don't qualify for the Obama plan because their loan amount is too high.
Bonuses for mortgage collectors
Other major lenders say they are beefing up staffing to process modification requests. Some say it has taken time because details of the Obama administration's plan weren't outlined until March.
Under the plan, if the borrower's monthly payment is reduced by 6% or more but not below a 31% mortgage-debt-to-income ratio, the servicer can receive success payments of up to $1,000 for three years, provided the borrower stays current.
Once a three-month trial period is complete and loan documents are signed, the servicer is entitled to a one-time $1,000 incentive payment and the investor receives a $1,500 check.
The investor incentive is important because the program is targeted mainly at hard-to-modify loans in certain mortgage-backed securities.
Loan modifications can help borrowers by reducing mortgage principal, the interest rate or the term of the loan. The government also has set aside money to help up to 5 million families refinance into safer long-term mortgages from risky kinds of adjustable mortgages whose payments could soar to unaffordable levels.
Those who don't qualify for either refinancing help or loan modifications under the government's program are counseled on other alternatives to foreclosure, such as short sales where lenders agree to a home's sale for less than the mortgage balance.
Bank of America reports that it modified about 232,000 mortgages last year. During the first four months of this year, it has completed about 157,000 modifications — all before the Obama housing rescue plan went into effect.
To settle claims brought by attorneys general in 11 states, Bank of America last year agreed to modify loans for homeowners holding riskier loans that often balloon into larger monthly payments later. The claims involved mortgages that originated with Countrywide Financial, which Bank of America took over in 2008.
Bank of America expects to begin processing applications from homeowners who are current with their mortgage within a few weeks.
Treasury Department officials say 16 mortgage servicers — the companies that collect homeowners' monthly payments — have signed up to participate in the program. They say they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a Treasury spokeswoman.
Lenders say they need to take time to review each application so that the modifications are meaningful. Some economists also warn that rushing approvals could result in modifications that only delay foreclosures rather than prevent them.
'I don't know who to trust'
Some applicants who were turned down say they don't understand why.
Judy Lederman, 49, of Scarsdale, N.Y., a freelance writer after losing her full-time job in public relations a year ago, says she tried to get a modification with Chase about three months ago. She has an interest-only loan at 5.25% that resets in one year. How high it will rise depends on interest rates then.
She says Chase denied her request a few weeks ago because she has an adjustable-rate mortgage, but other borrowers with ARMs are getting modifications under the Obama plan.
"They kept me on hold and waiting for months. I bent over backwards to get them what they needed, but it was like no one was home," Lederman says. "I really don't know what else to do. I don't know who to trust."
The day after USA TODAY called Chase for comment, Lederman says the bank called her. She says the representative told her she was turned down because of missing information and that new forms to apply for a modification were being expedited to her home. "There was some miscommunication, but we have reconnected with the borrowers and are working on finding solutions for them," Zuccarelli says regarding the complaints about Chase
After reading this article in Fridays USA Today I felt ill - it is amazing how many people are unable to get through this process because of the unwillingness of the lenders and servicers to help the homeowners. If you find yourself in a position like this, please call our offices as soon as possible for a "no cost" telephone consultation where we will hopefully be able to assist you and get you on the right track and eventually help save your home. (however to be clear, if you choose to retain us for our services there will be fees asscoiated with our service beyond the initial consultation)
Original Article from Thursday, June 18, 2009
By Stephanie Armour, USA TODAY
The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.
Details of the plan were unveiled in early March. The goal is to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments.
Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.
Homeowners who apply for mortgage modifications are finding that banks typically are taking 45 to 60 days to respond to inquiries, according to a report this month by NeighborWorks America, a provider of foreclosure-prevention counseling.
Some homeowners who applied for mortgage modifications five months ago still have no answer on whether they will be able to arrange smaller monthly payments, leaving them uncertain whether they'll keep their homes or lose them shortly.
"Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff at Naroff Economic Advisors. "No one will admit they're doing this."
Naroff also says banks today are dealing with even more demand for mortgages, including refinancings, than during the peak of the housing bubble in 2006, and the backlog is likely to get worse as more homeowners lose their jobs. Mortgage delinquencies have been growing in areas where unemployment has been rising fast, and even homeowners who successfully get modified mortgages could face trouble later if their incomes or home values fall.
Lenders say they're doing the best they can with a tsunami of requests, but some industry officials say delays are hampering efforts to revive the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," says Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
This month, Sen. Jack Reed, D-R.I., and 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan and called for a new strategy to get lenders to respond to homeowners faster.
"Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer," it said.
Robin and Craig Doyle of Woodland Hills, Calif., have been trying to get a loan modification through their lender, JPMorgan Chase, since February.
Robin, who does freelance writing from home, said she initially was told to send a letter describing her hardship, paycheck stubs, tax returns and other information.
She assembled a 200-page file and sent it along. A month later, she was told she had to redo the information because the file she'd sent had become outdated.
Another time, Robin says, she was told her file had been mistakenly closed altogether. On another occasion, she was told the request couldn't be processed because she hadn't included information about a homeowner association fee, even though her family doesn't belong to such an association.
"I've had to resend it four times," says Robin, 35. "It's making me sick. It's been five months. I've spent hours and hours on this and sleepless nights. It's foremost on my mind. I look at my beautiful home and wonder if I'll have it next month."
The Doyles pay $5,031 a month on a mortgage of $947,000. They have an interest-only loan at a 6.3% rate that will reset in about seven years. On interest-only loans, borrowers pay only interest for a specific period to temporarily reduce the payments. After that, they pay interest and principal.
Craig, a writer in the television and movie industry, is still finding work but not as much as before. This is the first month the family has failed to make its mortgage payment.
"I feel like Obama's plan has done absolutely nothing," says Craig, 38.
Jennifer Zuccarelli, a Chase spokeswoman, says there were miscommunications in the Doyles' case, and the bank is working to resolve the situation. It also has added about 950 loan counselors the past six months.
"We're hiring hundreds more every month," Zuccarelli says.
After USA TODAY contacted Chase for comment, the Doyles say the bank told them the next week to resubmit their application. They later were told they don't qualify for the Obama plan because their loan amount is too high.
Bonuses for mortgage collectors
Other major lenders say they are beefing up staffing to process modification requests. Some say it has taken time because details of the Obama administration's plan weren't outlined until March.
Under the plan, if the borrower's monthly payment is reduced by 6% or more but not below a 31% mortgage-debt-to-income ratio, the servicer can receive success payments of up to $1,000 for three years, provided the borrower stays current.
Once a three-month trial period is complete and loan documents are signed, the servicer is entitled to a one-time $1,000 incentive payment and the investor receives a $1,500 check.
The investor incentive is important because the program is targeted mainly at hard-to-modify loans in certain mortgage-backed securities.
Loan modifications can help borrowers by reducing mortgage principal, the interest rate or the term of the loan. The government also has set aside money to help up to 5 million families refinance into safer long-term mortgages from risky kinds of adjustable mortgages whose payments could soar to unaffordable levels.
Those who don't qualify for either refinancing help or loan modifications under the government's program are counseled on other alternatives to foreclosure, such as short sales where lenders agree to a home's sale for less than the mortgage balance.
Bank of America reports that it modified about 232,000 mortgages last year. During the first four months of this year, it has completed about 157,000 modifications — all before the Obama housing rescue plan went into effect.
To settle claims brought by attorneys general in 11 states, Bank of America last year agreed to modify loans for homeowners holding riskier loans that often balloon into larger monthly payments later. The claims involved mortgages that originated with Countrywide Financial, which Bank of America took over in 2008.
Bank of America expects to begin processing applications from homeowners who are current with their mortgage within a few weeks.
Treasury Department officials say 16 mortgage servicers — the companies that collect homeowners' monthly payments — have signed up to participate in the program. They say they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a Treasury spokeswoman.
Lenders say they need to take time to review each application so that the modifications are meaningful. Some economists also warn that rushing approvals could result in modifications that only delay foreclosures rather than prevent them.
'I don't know who to trust'
Some applicants who were turned down say they don't understand why.
Judy Lederman, 49, of Scarsdale, N.Y., a freelance writer after losing her full-time job in public relations a year ago, says she tried to get a modification with Chase about three months ago. She has an interest-only loan at 5.25% that resets in one year. How high it will rise depends on interest rates then.
She says Chase denied her request a few weeks ago because she has an adjustable-rate mortgage, but other borrowers with ARMs are getting modifications under the Obama plan.
"They kept me on hold and waiting for months. I bent over backwards to get them what they needed, but it was like no one was home," Lederman says. "I really don't know what else to do. I don't know who to trust."
The day after USA TODAY called Chase for comment, Lederman says the bank called her. She says the representative told her she was turned down because of missing information and that new forms to apply for a modification were being expedited to her home. "There was some miscommunication, but we have reconnected with the borrowers and are working on finding solutions for them," Zuccarelli says regarding the complaints about Chase
Searching for a bottom in the housing market
Sales look like they could rebound soon, but you can't say the same for prices.
By Janet Morrissey, contributor
June 19, 2009: 4:23 AM ET
NEW YORK (Fortune) -- Sales in the decimated housing market may finally be bottoming, but don't expect home prices to stop dropping before mid-2010 at the earliest, analysts and economists say.
Indeed, prices in the battered housing market could get a lot worse before they get better as an avalanche of specialized adjustable rate mortgages, known as option ARMs and Alt-A mortgages, are slated to reset over the next 18 to 24 months, and rising unemployment causes a surge in the number of prime mortgages going into default. All of this is expected to trigger another round of foreclosures and cause home prices to tumble at least another 20% before the market rebounds, according to market analysts and economists.
Market bulls believe home prices could bottom in the second half of 2010, but the bears warn it could be 2013 before they finally trough. And once prices do reach a low, it could be years before they significantly rebound.
"This is clearly the worst housing crisis since the Depression," says John Burns, president of John Burns Real Estate Consulting. Losses from the housing meltdown totaled $3.6 trillion at the end of 2008, and will likely approach $5 trillion by the time the crisis ends, predicts Lawrence Yun, chief economist with the National Association of Realtors.
Nevertheless, there have been signs in recent months that the industry may be stabilizing -- at least when it comes to sales. Consumer confidence in May shot up to its highest level in eight months, housing starts jumped more than 17% in May from the previous month, and most importantly, a recent report by the National Association of Realtors shows sales of existing homes climbed 2.9% in April.
"We are at or near bottom in terms of sales," says Yun. "We are seeing strong buying activity, particularly in those boom and bust markets, where prices have declined significantly. Buyers are coming in and fighting over properties -- there is multiple bidding in California and Florida."
"Sales are the first indicator" of a bottom, concurs Elliot Eisenberg, a senior economist with the National Association of Home Builders. "Even though there's more pain to come in certain markets and the prices may go down further and there's more defaults ahead," sales are going up, he says.
Bob Curran, managing director at Fitch Ratings, is a lot more cautious, noting that one month of gains doesn't make a trend -- existing home sales are still off 3.5% from a year ago. "You'd want to see a string of months -- ideally three months -- to say with confidence that a bottom has been reached," he says.
Buying off the bottom
Much of the recent sales increase is related to distressed homes, as a stampede of homebuyers snap up properties in foreclosure or through short sales on the cheap. "Foreclosure sales have picked up pretty dramatically in the past four months," says Alex Barron, a senior research analyst at Agency Trading Group Inc.
Yun estimates about 50% of current sales involve distressed properties, and he expects this trend to continue as foreclosures soar in the months ahead. About 2 million properties were in foreclosure in 2008, and he expects this number to climb to 2.5 million this year.
The foreclosure floodgates are expected to swing wider in the second half of the year as rates reset on option ARMs, and high unemployment triggers defaults on prime mortgages. Many of the option ARMS issued over the past few years were in markets that saw the biggest run-up in home prices and are now seeing the biggest corrections.
At the end of the first quarter, one out of eight U.S. households with a mortgage was either late on its monthly loan payment or in the foreclosure process, according to the Mortgage Bankers Association. Jay Brinkmann, chief economist with the MBA, says defaults among prime mortgages accounted for 50% of the increase in foreclosures in the last quarter.
The pending flood of foreclosures could mean buying opportunities for bargain hunters -- as long as they're prepared to hang onto the house for a number of years. "If you're a renter who just missed this cycle and didn't get in, right now is a great time to buy if your issue is the monthly mortgage payment," says Burns.
Although prices may fall further, low mortgage rates and President Obama's $8,000 first-time homebuyer tax credit make current prices attractive, especially in heavily-beaten down areas, such as California, Arizona, Nevada and California. "I think there are great deals out there," says UBS analyst David Goldberg. "But you have to have a long-term time horizon."
Some speculate that the pending surge in foreclosures and recent uptick in mortgage rates could push fence-sitting homebuyers, worried about rising rates, to jump into the market. Also, some home seekers may rush to score a bargain before the Obama Administration's $8,000 credit for first-time homebuyers expires at year end. The tax credit has already helped to boost sales, especially in states, such as California, which are offering their own tax credit in addition to the federal one, says Curran.
Sales vs. prices
While sales may be increasing, home prices are a different story, in part because of rising interest rates and surging unemployment. The average rate on a 30-year fixed rate mortgage climbed to 5.59% last week -- its highest since Dec. 11 -- but retreated slightly to 5.38% this week, according to Freddie Mac. The nation's unemployment rate spiked to its loftiest level in more than a quarter of a century in May at 9.4%. Burns is predicting the jobless rate will hit 12% by 2011.
National home prices plunged 19.1% in the first quarter, according to the Standard & Poor's/Case-Shiller National Home Price index -- the biggest quarterly decline in the index's 21-year history. Home prices are off 32% on average from their peak in mid-2006. Average prices have not been this low since the fourth quarter of 2002, the Case-Shiller report says.
"We're about two-thirds of the way through the pricing correction on a percentage basis," says Joshua Shapiro, chief U.S. economist with MFR Inc., an economic consulting and analysis firm. He expects prices to slide at least another 20% over the next 18 months.
"There's still pain to come in parts of Florida, California and Michigan, where there's still a tremendous amount of oversupply," says Eisenberg. "Prices will have to come down further and it will take a while to burn off the excess inventory that's floating around there."
Brinkmann expects to see prices start to rebound in 2011. While a bottom may be reached within the next year, it will be many months, and possibly years, before prices significantly come back. "I think that once prices bottom out, they're going to stay flat for several years," says Burns
Re-posted by Joseph Sloboda
Sales look like they could rebound soon, but you can't say the same for prices.
By Janet Morrissey, contributor
June 19, 2009: 4:23 AM ET
NEW YORK (Fortune) -- Sales in the decimated housing market may finally be bottoming, but don't expect home prices to stop dropping before mid-2010 at the earliest, analysts and economists say.
Indeed, prices in the battered housing market could get a lot worse before they get better as an avalanche of specialized adjustable rate mortgages, known as option ARMs and Alt-A mortgages, are slated to reset over the next 18 to 24 months, and rising unemployment causes a surge in the number of prime mortgages going into default. All of this is expected to trigger another round of foreclosures and cause home prices to tumble at least another 20% before the market rebounds, according to market analysts and economists.
Market bulls believe home prices could bottom in the second half of 2010, but the bears warn it could be 2013 before they finally trough. And once prices do reach a low, it could be years before they significantly rebound.
"This is clearly the worst housing crisis since the Depression," says John Burns, president of John Burns Real Estate Consulting. Losses from the housing meltdown totaled $3.6 trillion at the end of 2008, and will likely approach $5 trillion by the time the crisis ends, predicts Lawrence Yun, chief economist with the National Association of Realtors.
Nevertheless, there have been signs in recent months that the industry may be stabilizing -- at least when it comes to sales. Consumer confidence in May shot up to its highest level in eight months, housing starts jumped more than 17% in May from the previous month, and most importantly, a recent report by the National Association of Realtors shows sales of existing homes climbed 2.9% in April.
"We are at or near bottom in terms of sales," says Yun. "We are seeing strong buying activity, particularly in those boom and bust markets, where prices have declined significantly. Buyers are coming in and fighting over properties -- there is multiple bidding in California and Florida."
"Sales are the first indicator" of a bottom, concurs Elliot Eisenberg, a senior economist with the National Association of Home Builders. "Even though there's more pain to come in certain markets and the prices may go down further and there's more defaults ahead," sales are going up, he says.
Bob Curran, managing director at Fitch Ratings, is a lot more cautious, noting that one month of gains doesn't make a trend -- existing home sales are still off 3.5% from a year ago. "You'd want to see a string of months -- ideally three months -- to say with confidence that a bottom has been reached," he says.
Buying off the bottom
Much of the recent sales increase is related to distressed homes, as a stampede of homebuyers snap up properties in foreclosure or through short sales on the cheap. "Foreclosure sales have picked up pretty dramatically in the past four months," says Alex Barron, a senior research analyst at Agency Trading Group Inc.
Yun estimates about 50% of current sales involve distressed properties, and he expects this trend to continue as foreclosures soar in the months ahead. About 2 million properties were in foreclosure in 2008, and he expects this number to climb to 2.5 million this year.
The foreclosure floodgates are expected to swing wider in the second half of the year as rates reset on option ARMs, and high unemployment triggers defaults on prime mortgages. Many of the option ARMS issued over the past few years were in markets that saw the biggest run-up in home prices and are now seeing the biggest corrections.
At the end of the first quarter, one out of eight U.S. households with a mortgage was either late on its monthly loan payment or in the foreclosure process, according to the Mortgage Bankers Association. Jay Brinkmann, chief economist with the MBA, says defaults among prime mortgages accounted for 50% of the increase in foreclosures in the last quarter.
The pending flood of foreclosures could mean buying opportunities for bargain hunters -- as long as they're prepared to hang onto the house for a number of years. "If you're a renter who just missed this cycle and didn't get in, right now is a great time to buy if your issue is the monthly mortgage payment," says Burns.
Although prices may fall further, low mortgage rates and President Obama's $8,000 first-time homebuyer tax credit make current prices attractive, especially in heavily-beaten down areas, such as California, Arizona, Nevada and California. "I think there are great deals out there," says UBS analyst David Goldberg. "But you have to have a long-term time horizon."
Some speculate that the pending surge in foreclosures and recent uptick in mortgage rates could push fence-sitting homebuyers, worried about rising rates, to jump into the market. Also, some home seekers may rush to score a bargain before the Obama Administration's $8,000 credit for first-time homebuyers expires at year end. The tax credit has already helped to boost sales, especially in states, such as California, which are offering their own tax credit in addition to the federal one, says Curran.
Sales vs. prices
While sales may be increasing, home prices are a different story, in part because of rising interest rates and surging unemployment. The average rate on a 30-year fixed rate mortgage climbed to 5.59% last week -- its highest since Dec. 11 -- but retreated slightly to 5.38% this week, according to Freddie Mac. The nation's unemployment rate spiked to its loftiest level in more than a quarter of a century in May at 9.4%. Burns is predicting the jobless rate will hit 12% by 2011.
National home prices plunged 19.1% in the first quarter, according to the Standard & Poor's/Case-Shiller National Home Price index -- the biggest quarterly decline in the index's 21-year history. Home prices are off 32% on average from their peak in mid-2006. Average prices have not been this low since the fourth quarter of 2002, the Case-Shiller report says.
"We're about two-thirds of the way through the pricing correction on a percentage basis," says Joshua Shapiro, chief U.S. economist with MFR Inc., an economic consulting and analysis firm. He expects prices to slide at least another 20% over the next 18 months.
"There's still pain to come in parts of Florida, California and Michigan, where there's still a tremendous amount of oversupply," says Eisenberg. "Prices will have to come down further and it will take a while to burn off the excess inventory that's floating around there."
Brinkmann expects to see prices start to rebound in 2011. While a bottom may be reached within the next year, it will be many months, and possibly years, before prices significantly come back. "I think that once prices bottom out, they're going to stay flat for several years," says Burns
Re-posted by Joseph Sloboda
Wednesday, June 17, 2009
Senator wants to sweeten home buyer tax credit
Posted by Carla Fried
June 16, 2009 2:59 pm
Last week Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia — who made his fortune as a real estate broker, I should point out — wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.
“The first-time home buyer tax credit has made a difference,” said Isakson when announcing the bill. “First-time home buyers used it and the market stabilized, but we don’t have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can.”
There’s just one big catch. If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers. Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.
A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson’s bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.
re-posted by Joseph Sloboda
Posted by Carla Fried
June 16, 2009 2:59 pm
Last week Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia — who made his fortune as a real estate broker, I should point out — wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.
“The first-time home buyer tax credit has made a difference,” said Isakson when announcing the bill. “First-time home buyers used it and the market stabilized, but we don’t have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can.”
There’s just one big catch. If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers. Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.
A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson’s bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.
re-posted by Joseph Sloboda
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