Foreclosures Happen

Foreclosure Homes Sold at 28% Discount Last Year as Supply Grew

2011-02-26T15:37:00.000-08:00

By Dan Levy

Feb. 24 (Bloomberg) -- Homes in the foreclosure process sold at an average 28 percent discount last year and may continue to drive down U.S. housing prices as the supply of distressed properties grows, according to RealtyTrac Inc.

A total of 831,574 homes that sold in 2010 had received notices of default, auction or repossession, the Irvine, California-based data seller said today in a statement. Properties in distress accounted for almost 26 percent of all home sales last year, down from 29 percent in 2009.

A “bloated supply of foreclosures and weak demand from homebuyers” are depressing the market, James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement. Residential real-estate prices dropped 4.1 percent in the fourth quarter from a year a earlier, according to the S&P/Case-Shiller index of home values in 20 cities.

“While accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices,” Saccacio said.

Foreclosure filings may rise 20 percent to a peak this year as unemployment remains high and banks resume seizing property after a slowdown to investigate documentation procedures, the company said Jan. 13.

Distressed properties sold at a discount of 27 percent in 2009 and 22 percent the previous year, according to RealtyTrac. The discount reflects the sales price of homes in the foreclosure process compared with those not in distress, the company said.

Foreclosure Sale Price

The average foreclosure sale in 2010 was $172,030, up from $170,775 in 2009 and down from $200,708 in 2008, Daren Blomquist, a RealtyTrac spokesman, said in an e-mail.

Sales of previously owned homes in the U.S. rose in January to the highest level in eight months as investors used all-cash transactions to snap up distressed properties, according to figures from the National Association of Realtors released yesterday. The share represented by foreclosures and short sales climbed to a 12-month high, pushing the median price to the lowest level in almost nine years.

Bank-owned properties sold for an average discount of 36 percent last year, up from 33 percent in 2009, RealtyTrac said. Such homes accounted for 16 percent of all U.S. sales, compared with almost 18 percent in 2009 and 13 percent in 2008. Residences in default or scheduled for auction sold for a discount of 15 percent, down from almost 17 percent in 2009.

Highest Distressed Sales

Nevada had the highest proportion of distressed sales of any U.S. state, with 57 percent of its residential transactions involving homes seized by banks or at risk of foreclosure. Arizona ranked second at 49 percent, and California was third at 44 percent.

Distressed sales accounted for at least a quarter of residential transactions in Florida, Michigan, Georgia, Idaho, Oregon, Illinois, Virginia and Colorado, RealtyTrac said.

Ohio had the highest average price discount for foreclosed homes at almost 43 percent, followed by Kentucky at 40 percent. Tennessee, California, Pennsylvania, Illinois, New Jersey, Michigan, Georgia and Wisconsin all had average distress discounts of at least 35 percent, RealtyTrac said.

The company sells default data from more than 2,200 counties representing 90 percent of the U.S. population.

--Editors: Daniel Taub, Kara Wetzel

A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style

2009-08-31T13:26:00.000-07:00

By MICHAEL POWELL
Published: August 30, 2009

The judge waves you into his chambers in the State Supreme Court building in Brooklyn, past the caveat taped to his wall — “Be sure brain in gear before engaging mouth” — and into his inner office, where foreclosure motions are piled high enough to form a minor Alpine chain.

"I don't want to put a family on the street unless it's legitimate," Justice Arthur M. Schack said.

Every week, the nation’s mightiest banks come to his court seeking to take the homes of New Yorkers who cannot pay their mortgages. And nearly as often, the judge says, they file foreclosure papers speckled with errors.

He plucks out one motion and leafs through: a Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner.

The judge’s lips pucker as if he had inhaled a pickle; he rejected this one.

“I’m a little guy in Brooklyn who doesn’t belong to their country clubs, what can I tell you?” he says, adding a shrug for punctuation. “I won’t accept their comedy of errors.”

The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. While national debate focuses on bank bailouts and federal aid for homeowners that has been slow in coming, the hard reckonings of the foreclosure crisis are being made in courts like his, and Justice Schack’s sympathies are clear.

He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.

His opinions, too, have been greeted by a cry of affront from a bank official or two, who say this judge stands in the way of what is rightfully theirs. HSBC bank appealed a recent ruling, saying he had set a “dangerous precedent” by acting as “both judge and jury,” throwing out cases even when homeowners had not responded to foreclosure motions.

Justice Schack, like a handful of state and federal judges, has taken a magnifying glass to the mortgage industry. In the gilded haste of the past decade, bankers handed out millions of mortgages — with terms good, bad and exotically ugly — then repackaged those loans for sale to investors from Connecticut to Singapore. Sloppiness reigned. So many papers have been lost, signatures misplaced and documents dated inaccurately that it is often not clear which bank owns the mortgage.

Justice Schack’s take is straightforward, and sends a tremor through some bank suites: If a bank cannot prove ownership, it cannot foreclose.

“If you are going to take away someone’s house, everything should be legal and correct,” he said. “I’m a strange guy — I don’t want to put a family on the street unless it’s legitimate.”

Justice Schack has small jowls and big black glasses, a thin mustache and not so many hairs combed across his scalp. He has the impish eyes of the high school social studies teacher he once was, aware that something untoward is probably going on at the back of his classroom.

He is Brooklyn born and bred, with a master’s degree in history and an office loaded with autographed baseballs and photographs of the Brooklyn Dodgers. His written decisions are a free-associative trip through popular, legal and literary culture, with a sideways glance at the business pages.

Confronted with a case in which Deutsche Bank and Goldman Sachs passed a defaulted mortgage back and forth and lost track of the documents, the judge made reference to the film classic “It’s a Wonderful Life” and the evil banker played by Lionel Barrymore.

“Lenders should not lose sight,” Justice Schack wrote in that 2007 case, “that they are dealing with humanity, not with Mr. Potter’s ‘rabble’ and ‘cattle.’ Multibillion-dollar corporations must follow the same rules in the foreclosure actions as the local banks, savings and loan associations or credit unions, or else they have become the Mr. Potters of the 21st century.”

Last year, he chastised Wells Fargo for filing error-filled papers. “The court,” the judge wrote, “reminds Wells Fargo of Cassius’s advice to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’: ‘The fault, dear Brutus, is not in our stars, but in ourselves.’ ”

Then there is a Deutsche Bank case from 2008, the juicy part of which he reads aloud:
“The court wonders if the instant foreclosure action is a corporate ‘Kansas City Shuffle,’ a complex confidence game,” he reads. “In the 2006 film ‘Lucky Number Slevin,’ Mr. Goodkat, a hit man played by Bruce Willis, explains: ‘A Kansas City Shuffle is when everybody looks right, you go left.’ ”

The banks’ reaction? Justice Schack shrugs. “They probably curse at me,” he says, “but no one is interested in some little judge.”

Little drama attends the release of his decisions. Beaten-down homeowners rarely show up to contest foreclosure actions, and the judge scrutinizes the banks’ papers in his chambers. But at legal conferences, judges and lawyers have wondered aloud why more judges do not hold banks to tougher standards.

“To the extent that judges examine these papers, they find exactly the same errors that Judge Schack does,” said Katherine M. Porter, a visiting professor at the School of Law at the University of California, Berkeley, and a national expert in consumer credit law. “His rulings are hardly revolutionary; it’s unusual only because we so rarely hold large corporations to the rules.”
Banks and the cottage industry of mortgage service companies and foreclosure lawyers also pay rather close attention.

See Who's In Foreclosure - Celebrity Foreclosures and Evictions

2009-08-28T09:33:00.000-07:00

Celebrity Foreclosures and Evictions

By Amy and Nancy Harrington, GetBack.com

Sometimes even the rich and famous find themselves kicked to the street. Check out this list of celebrities who've faced eviction and foreclosure due to bankruptcies, unpaid taxes, and missed mortgages.

Let Aretha Franklin's story be a cautionary tale to all of you who let your advisors manage your funds (and don't keep a watchful eye on them yourselves). According to the Queen of Soul, she almost lost her Detroit home in 2008 because of a clerical error her attorney made years earlier. It seems the hoopla was brought about over $445 in unpaid taxes and late fees from 2005. By 2007, unpaid taxes had reached a total of $19,192. Aretha had no intention of losing her home, but she did not take PETA up on their offer either. The animal rights group had said they would pay Franklin's tab if she promised to stop wearing fur. Stephen BaldwinStephen Baldwin should be careful when he says, "I'm a Celebrity, Get Me Out of Here." The actor and sometimes-reality TV star recently faced foreclosure on his Nyack, New York, home when he defaulted $824,488.36 on his mortgage. His financial troubles didn't end there. On July 21, 2009, Baldwin and his wife filed for Chapter 11 bankruptcy with an overall debt of an estimated $2.3 million.

Fantasia Barrino didn't have it easy growing up. But the high school dropout, who became a mother at age 16, fought hard and became the winner of "American Idol" Season Three. Still, success doesn't guarantee an easy path, and somewhere between her 2004 "A.I." win, the release of her debut single, "I Believe," her turn on Broadway in "The Color Purple," and the Grammy-nominated album "Fantasia," Barrino found herself in trouble again. As her best-selling memoir and TV movie warned, "Life Is Not a Fairy Tale." In 2008, the singer was at risk of losing her 6,500-square-foot, $1.3 million home in Charlotte, North Carolina. But Fantasia's fairy godmother must have been looking after her: a settlement was reached, and Barrino's home never went to auction.

In 2008, baseball All-Star Jose Canseco admitted that he had foreclosed on his $2.5 million, 7,300-square foot home in Encino, California. According to Jose, "It didn't make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else." Maybe that's why he decided to crash in that "Surreal Life" house for a couple of weeks.

Boxing champ Evander Holyfield almost lost his Fayette County, Georgia, home not once but twice. That's an especially big blow when you live on a street named after you (in this case, that's Evander Holyfield Highway). But, luckily, the Real Deal was able to sidestep foreclosure auctions against his $10 million mortgage and has kept his modest 109-room, 54,000-square-foot home. After all, could any man live without his three kitchens, a bowling alley, and 235-acre spread? Maybe he should try downsizing and avoid going through this whole mess a third time.

Not sure who had the job of telling Victoria Gotti, daughter of mob boss Sam Gotti, that she might lose her Long Island mansion (the backdrop for her former reality series, "Growing Up Gotti") to foreclosure, but we're glad it wasn't us. Still, she couldn't have been caught off-guard. She allegedly hadn't paid her mortgage in more than two years and owed $650,000 on the home. Gotti blames her ex-husband, Carmine Agnello, for getting her into the financial mess.

From "The Real Housewives of Orange County"It's hard to feel sorry for someone when you hear they are in foreclosure on one of their FOUR homes. So when news broke that Jeana Keough from "The Real Housewives of Orange County" had a notice of default for roughly $37,000 filed on her Coto de Caza estate, we weren't really all that upset for her. Turns out that she was in the process of getting loan modifications on all four of her homes (three are rental properties) and quickly got things squared away. But the now single mother who lives with her son, Colton, says she's going to sell the $5 million house anyway. As she herself said in a letter to the Orange County Register, "8,500 feet with a guest house on a 1.2 acre lot with six garages is more than Colton and I need." Life can be so hard.

In 2008, it was announced that everyone's favorite sidekick, Ed McMahon, was about to be kicked out of his Beverly Hills home. Ed was in arrears $644,000 on his $4.8 million mortgage. Enter Donald Trump. The real estate mogul offered to buy Ed's home and rent it back to him. Known as a cutthroat businessman, Trump said he wasn't out to make a dollar on this one. He was simply lending a hand to a celeb in need. Turned out that Ed didn't need help after all; he sold the home to an anonymous buyer not long after.

Early in 2008, Michael Jackson faced eviction from his former sanctuary, Neverland Ranch. The suit filed against Jackson stated that he owed $24,525,906.61 and that if Neverland went to auction, not only would the house be put on the block but so would all of its contents, including lighting fixtures, furniture, and "all merry go round type devices." Colony Capital investment firm swooped in, and bailed Michael out. But still, we're really amazed that Jermaine Jackson was fighting so hard to make sure his brother was buried at Neverland Ranch -- it doesn't really sound like a very peaceful resting place after all.

Best Cities for a Housing Recovery

2009-08-24T09:45:00.000-07:00

by Matthew Woolsey

Increased transactions and relatively low foreclosure resales spell good news for these markets.
The stock market is up 50% from its lows in March, and consumer spending increased in May, June and July. But when will housing turn around?

Even the wisest can't answer that, and experts caution against putting too much hope in rising home prices given the country's unemployment situation and high rate of mortgage defaults. But key measures indicate that some metros are more on their way to recovery than others.

Take Miami. Sales are up 27% over last year and only 3.5% of those are the result of foreclosure resales. In Lincoln, Neb., where sales are 15% higher this year than last, only 3.6% of them involved bank-owned properties Both top our list of markets on their way to health.

Behind the Numbers

In compiling our list, Forbes looked at 161 of the country's largest metropolitan statistical areas (or metros)--geographic entities defined by the U.S. Office of Management and Budget (OMB) for use by federal agencies in collecting, tabulating and publishing federal statistics--where sales activity had picked up over the last year, but where foreclosure sales, as a percentage of overall sales were the lowest. Our data came from Zillow.com, an online housing data firm based in Seattle, Wash. Our list doesn't profess to call the turnaround, but rather point out which cities are in the lead on the road to recovery.

To be sure, the national real estate picture remains grim. In Las Vegas and Madera, Calif., for example, respective sales are up 40% and 64% from a year ago. But 67% and 71% of those respective sales are from foreclosure resales.

Short Sale v. Foreclosure

2009-01-10T08:41:00.000-08:00

Is it better to negotiate with a short seller or look for a house that is already bank owned?

Q: I am thinking of relocating to Miami Beach, as I've read that there are deals there. Is it better to negotiate with a short seller or look for houses already owned by the bank? And if I go for the latter, how low should my offer be—and will the lender offer me financing?

A: There's no shortage of distressed properties in Miami Beach. RealQuest.com currently lists 442 homes there that are somewhere in the foreclosure process, and 58 that have gone back to the bank. And Fannie Mae just launched a test program that will preapprove short sales, making it easier for buyers like you. However, the program is not available in your area.

But bear in mind that in the case of both short sales and bank-owned homes you are negotiating with lenders rather than sellers. In a short sale, the seller might be desperate to accept any offer to avoid foreclosure, but that doesn't matter if the primary and junior lien holders don't agree to it. With bank-owned properties, you will be dealing with the "real-estate owned" or REO department of the lender who took ownership of the house at the auction. In both cases, you should be prepared to be patient, since lenders are overwhelmed with distress sales these days and may take weeks to respond to your offer. According to a survey of real-estate agents conducted in November by Campbell Communications the average wait time to get an answer from a lender on a short sale is 8.1 weeks, up from 4.5 weeks in a survey conducted earlier in 2008.

It's hard to know whether or not you'll get a better deal on a short sale or a bank-owned home because the situation varies with each property. Some short sales are priced higher because the seller has junior lien holders who won't sign off on the deal unless they're paid something. But some foreclosures are priced higher than corresponding short sales because the bank needs to recover costs for repairs, especially if an angry former owner decided to punch holes in the walls, steal the light fixtures and flush cement down the toilet.

Because the back stories of properties differ, you should begin your quest by finding a buyer broker that specializes in distressed properties (many won't touch them, since deals typically take a long time to close, and commissions tend to be minimal). A good buyer broker will be able to provide a comparative market analysis that shows sales of similar homes, and may also be able to get a sense from other brokers of prices of pending sales. That's important to know because lenders are going to try to hold out for fair market value for the home, even in a declining market, and will insist on an appraisal to justify the sales price to their shareholders. The broker should also investigate how long the property has been on the market, what's owed on it and how many offers it has received.

While it isn't unusual to see both short sales and bank-owned properties listed at prices far below those offered by traditional sellers, don't expect them to sell for much more than 20% below asking price, says Fort Lauderdale, Fla., broker Scott Coloney, who has assembled a "foreclosure response team" of financial and legal partners to facilitate distress sales. In fact, properties in good condition and in desirable locations may even spark bidding wars. "So low-balling is a waste of time," he says.

Moreover, with your bid you'll have to show that you have the cash to buy the property, or a letter from a lender pre-approving you for a loan. That letter can be from the bank that owns the property—and you'll probably be taken more seriously as a bidder if it is—but don't expect the bank to offer you special low financing terms to close the deal.

Write to June Fletcher at fletcher.june@gmail.com

New North Carolina law cuts into foreclosures

2008-10-24T12:44:00.000-07:00

A new state law requiring lenders to give homeowners 45 days notice before filing a notice of default drove down foreclosures in North Carolina in September.

RealtyTrac Inc. of Irvine, Calif., says there were 2,477 properties with foreclosure filings in the state, or one for every 1,627 households, during the month.

That’s down by 27 percent from September 2007, RealtyTrac says.

RealtyTrac tracks default notices, auction-sale notices and bank repossessions. The company says that the downturn in North Carolina’s foreclosures came from a 66 percent decline in notices of default, which mortgage companies issue to borrowers as the first step in the foreclosure process.

State lawmakers passed a bill in July that requires mortgage servicers to give 45-day notice before starting foreclosure proceedings.

Across the country, RealtyTrac says, foreclosures increased by 21 percent in the 12 months ending in September. One in every 475 U.S. housing units received a foreclosure filing in September.

Nevada, California and Arizona posted the top statewide foreclosure rates in the country. North Carolina ranked 35th among all states.

Foreclosures come up in election

2008-09-21T15:50:00.000-07:00

LANSING, Mich.—An Ohio Republican county chairman says a Web site that made it sound as if he planned to use foreclosure lists to challenge voters owes him an apology.Franklin County GOP Chairman Doug Preisse said last week that a reporter for The Michigan Messenger took comments he made to the Columbus (Ohio) Dispatch out of context. Preisse was the second GOP official to take issue with a story published by MichiganMessenger.com saying Republicans were planning to challenge homeowners on foreclosure lists to keep them from voting.The story quoted Macomb County Republican Party Chairman James Carabelli, but Carabelli denies saying that the GOP will have a list of foreclosed homes and will make sure people aren't voting from those addresses.

Number of abandoned animals soars as foreclosures rise

2008-08-15T16:24:00.000-07:00

When Diane Hamilton and her neighbors discovered a wandering pony in their Boulder Creek neighborhood three weeks ago, they immediately put up signs with their contact information.

"I've heard about dogs and cats getting lost, but a horse?" said Hamilton. "Who loses a pony? Seriously?"

Hamilton said she figured she would find the owner in a day or two but no one has claimed the horse since she found it July 18.

"I don't think anyone's looking for this horse," Hamilton said.

She hopes to give it up for adoption to one of the stables or families that have shown interest after seeing her missing pony signs and Craigslist announcement.

It's not clear what happened to the pony's owners, but the Santa Cruz County SPCA was given three large animals in the last month because their owners' homes were foreclosed upon. In fact, officials from Santa Cruz County's SPCA say there has been a 30 percent increase in surrendered animals as a result of foreclosures in the past month.

"People are losing their houses and are being forced into apartments, but a rental that allows pets is very difficult to find in Santa Cruz," said Lisa Carter, executive director of the SPCA.
Despite a 20 percent drop in adoption rates, Carter was able to find homes for the three large animals, which included a miniature horse and a goat and a donkey that came from a Merced shelter due to overcrowding and foreclosures there.

"It's been a tough last six months," said Carter. "The economy is hurting everyone, including the animals."

Overcrowded animal shelters and rescue operations at maximum occupancy throughout the state have been contacting Carter in hopes of finding shelter for animals that run the risk of being put down. The SPCA's policy on killing animals is only to do it when they arrive too sick to be rehabilitated or are too aggressive to be safely placed in a home.

Carter hopes that the new law passed last week Assembly Bill 2949, that will require anyone who encounters an abandoned pet to immediately call Animal Control, will help crack down on animal abandonment.

Jessica Kipp, barn manager of Willow Pond Ranch, a sanctuary for rescued horses, says that because their budget is so tight, the ranch cannot open up the 17 stalls that they have available. The ranch has 15 rescued horses.

"We're being hit as hard as everybody," said Kipp. "We can't take any more in unless someone is willing to fully sponsor their horse but that isn't usually the case for owners."

Kipp said between the price of hay doubling, farriers raising their prices, and people's homes foreclosing there's a definite theme of economic hardship.

Hamilton, who cannot afford to take care of the lost pony, can only hope that the owners will turn up or she can give it to a farm that contacted her about adopting and training the horse.

"The pony is probably better off being somewhere else than where it has been," said Hamilton.

"It's negligent on so many levels." Contact Alia Wilson at 429-2436 or at jcopeland@santacruzsentinel.com.

Foreclosure Rescue: Who Gets Help

2008-07-28T07:38:00.000-07:00

The spate of hurricanes that battered South Florida three years ago blew the shingles off Tatrisha Harvin's modest house in Miami Gardens, Fla. But this year's housing catastrophe could do something much worse. Two years ago, Harvin, 44, a Miami-Dade corrections clerk, turned to interest rates that were at a historic low to ease her household finances. The apparent windfall came at a critical time: her husband was injured and a daughter was diagnosed with diabetes. She refinanced with an adjustable-rate mortgage, taking out a chunk of her home equity. But she says she never realized the ultra-low teaser rate would jump so high so soon, raising her monthly mortgage payment by more than $1,000. "That was never explained to me," she says.

"If it was, I never would have signed any documents." A year behind on her payments, Harvin faces foreclosure.

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She and thousands of others in her community. When America's category 5 housing hurricane hit Florida this year, its eye came ashore at Miami Gardens. More than 4,000 of its 22,000 residential units are in foreclosure, giving this predominantly African-American city just north of Miami one of the state's — and one of the nation's — highest mortgage failure rates. Few places were as glad to hear that Congress this week had passed a housing relief bill that could help some 400,000 desperate homeowners like Harvin keep their homes via mortgage refinancing aid.

They're happier still that President Bush said he'll sign it, despite his objections to the refinancing trust fund as well as $4 billion set aside to help local governments buy up and refurbish already foreclosed homes (the President described these provisions as giveaways).

"We feel a large measure of hope," says Miami Gardens councilman and real estate lawyer Andre Williams. "This isn't just about maintaining houses, it's about preventing the destruction of families and communities. A city's quality of life is also on the line."

But the daunting trick for cities like Miami Gardens will be making the federal dolars work effectively and, perhaps more important, equitably. The triage process may require local officials to identify not only those homeowners who are most likely to make the best use of the aid — the most long-term, credit-worthy bets — but also those who were genuinely victimized by predatory or unscrupulous lenders as opposed to those who simply made bad financial decisions (especially property flippers) and took on more housing debt than they and their salaries could ever afford.

"We want folks to be able to hold on to the American dream," says Daniel Rosemond, the Miami Gardens director of community development. "But at the same time, in a low-wage region like South Florida, we have to be realistic about people who, frankly, aren't ready to be homeowners yet."

Under the new legislation, which also provides billions to save the country's two largest mortgage banks, Fannie Mae and Freddie Mac, the Department of Housing and Urban Development (HUD) has 60 days to lay out a plan for how the homeowner aid will be disbursed via state and local agencies. After that it has 30 days to send it out. Officials like Rosemond, who this summer created a foreclosure prevention program in his city to help distressed homeowners buy more time, hope that lenders who are poised to pounce with notices will hold off until the money arrives to help debtors make up for delinquent mortgage payments and refinance into more affordable mortgages backed by the Federal Housing Administration.

One key, according to homeowner advocates, will be whether or not the program will prompt lenders in general to be more generous from here on out. "So far we're not seeing the loan modifications we need from lenders," says Jackie Duran, a foreclosure counselor for the non-governmental Neighborhood Housing Services, which has been overwhelmed in recent months by homeowners from all over the Miami area. "When you've got people whose [interest] rates have jumped to 11 or 12%, a 1% reduction isn't going to work. You need at least a 3% break."

The housing bubble was good to Miami Gardens, a working/middle-class city that prides itself on its family and community cohesiveness. The city was incorporated, in fact, in 2003, at the height of the boom, which has since helped its population of 110,000 reach a 71% homeowner rate. "It's the core of our existence," says Rosemond. The city's property tax revenue leapt by 65% last year — and its property values have risen 120% the past five years. But for a city with a median income less than $40,000, it was all a bit out of whack.

Rosemond notes that before the bubble burst last year the average Miami Gardens home value was nearing $300,000 when it should have been closer to $200,000. As a result, the city and its minority residents have been a special target of what Williams calls "scoundrels and criminals dressed as mortgage brokers" duping low income or subprime buyers with risky mortgage products.

Williams is quick to note that not all the lenders involved in the Miami Gardens disaster were disreputable — and he acknowledges that "there were too many folks here who were totally irresponsible as buyers and shouldn't be able to take advantage of this process." He agrees, for example, with a stipulation in the new bill that defaulting homeowners who get bailed out must return all or a significant portion of any profit they make on the subsequent sale of their house to the federal government. But he also stresses that one of the things he hopes the city can do with the federal aid is reform the reckless culture of home-buying by setting up tools like lender data bases and buyer workshops. "This has to become an educational process as well as a relief process," he says.

Rosemond agrees. He's already envisioning rules for the federal aid when it reaches Miami Gardens — such as prohibiting refinancing with adjustable-rate mortgages and requiring 30-year fixed loans in order to be eligible for relief. He also hopes to establish rent-to-own programs, providing landlords with incentives to give house and apartment renters the option to buy their units once they've saved enough and built a strong enough employment and credit history.

"We need people to rent longer before they buy houses, but we also need renters to feel like they have a stake in those properties," Rosemond says. "This would motivate them and create the kind of homeownership you want for a community, not the houses built on sand."

Residents like Harvin, however, don't have the luxury of looking that far ahead. When told about the new federal relief, she said it was the best news she'd had in years. "A lot of us in this community haven't even recovered yet from the 2005 hurricanes," she says. "Then the housing mess started hitting us, and you take into account we're all strugglin' to buy food and gasoline.

Seems the least they could do." Americans should know by Christmas whether that will be enough to preserve the quality of life in Miami Gardens and countless other U.S. cities still recovering from the housing storm.

US home foreclosures on the rise

2008-07-25T08:28:00.000-07:00

The number of US homes in some stage of foreclosure more than doubled between April and June from the previous year.

Figures from research firm RealtyTrac showed that one in every 171 US households was in the process of losing their home - up 121% on last year.

There was better economic news from the Commerce Department, with orders for big-ticket US manufactured items growing 0.8% in June.

But much of the bigger-than-expected rise came from big defence orders.
Meanwhile, sales of new homes fell 0.6% in June, also according to the Commerce Department.
It is the seventh fall in the figure in the past eight months.

It means that new home sales are down by 33.2% from a year ago.

Negative equity

Mortgage defaults by US homeowners have surged as millions of sub-prime loans are reset at higher interest rates, and the drop in house prices has pushed more homes into negative equity.
The housing crisis is causing serious problems for the wider US economy.

Almost 740,000 US homes entered the foreclosure process in the second quarter of 2008, according to RealtyTrac.

This includes receiving a default or bank repossession notice or warning of an impending auction.
The worst hit areas were Nevada, California, Florida and Arizona, which had seen the biggest house price rises during the boom years, and the largest volume of sub-prime lending.

But RealtyTrac said most areas of the country were seeing at least some levels of foreclosure activity.

Outlook
California had the most filings - 202,599 - which was up 198% from the same period a year ago.
Some help to homeowners may be available if the US Congress finally passes the housing bill, which aims to help hundreds and thousands of homeowners trapped in unaffordable mortgages.

The bill, if it became law, would allow these borrowers to refinance their mortgages with cheaper, fixed-rate mortgages backed by the government. It cleared the US House of Representatives this week and is expected to be passed by the Senate and signed by George W. Bush in the next few days.

But many analysts believe the housing market has not yet hit rock bottom, and falling house prices could put millions more at risk of foreclosure.

'Hardly thriving'

While the 0.8% growth in orders for durable goods, which are US manufactured items expected to last at least three years, was the highest since February, analysts cautioned against reading too much into it.

"With orders excluding defence falling at a 4% annualised rate in the second quarter, it is pretty clear manufacturing is hardly thriving," said Ian Shepherdson, chief US economist at High Frequency Economics.

Orders for motor vehicles and parts rose 1.8%, which was the strongest for almost a year.
But the increase was only a fraction of the big declines that have been seen in recent months.

"It says things were better than we generally expected as we look back into the second quarter but I think if you look forward into the third and fourth [quarters] the forward-looking indicators are pointing toward some weakness ahead," said Keith Hembre, chief economist at First American Funds.

With prison release, a foreclosure

2008-07-25T08:17:00.000-07:00

Former Universal Express CEO Richard Altomare was released from federal prison, but he may not have a luxury condo to live in much longer.

Altomare and his wife, Barbara Altomare, are facing a foreclosure lawsuit on their Highland Beach condo over a $2 million mortgage.

Altomare - who ranked No. 14 on the Business Journal's list of highest-paid CEOs, with about $2 million in compensation at the Boca Raton-based company in 2007 - hasn't broken bread in that condo for several months. He had been housed in a New York City federal prison since May 3.

New York federal Judge Gerard Lynch had ordered Altomare jailed until he paid a $1.7 million judgment disgorgement to the SEC or proved that he could not afford to pay.