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Home Front: Competition frustrates first-time buyers….

Wednesday, August 12th, 2009

Laurel Bane, 28, is a working professional with a down payment in hand. Hunting for her first home in Natomas, she’s made six offers since March. And she’s lost every house.

“It’s been a bidding-war hell,” Bane said. “I increased my offer by $12,000 on one, and I still lost out. I was $13,000 over asking price on another and still didn’t get it.”

Welcome to the punishment being inflicted this summer on first-time buyers. Considered saviors of the region’s real estate economy, thousands like Bane are trudging through minefields where their homebuying dreams are repeatedly blown up.

That’s because at the lower end of the price scale there are far more potential buyers than homes for sale.

Horror stories increasingly abound across a Sacramento housing market dominated by repos and short sales.

Home Front is hearing from buyers who expected it to be easy but are being outbid by investors. When they do offer more than investors, the bank often takes the lower bid because it’s cash.

Others say offers are made without getting any response.

The only way to compete is to bid well above the listing price. But when appraisals come in below the offer, the deal is killed.

The alternative is short sales, in which banks take less than owed to avoid the higher costs of foreclosures, but they can take months to complete.

Another snag: Home sales increasingly involve “flippers,” said Smith, referring to investors who buy properties that they try to quickly resell for a profit.

But if the so-called flipper hasn’t held the home for at least 90 days, the first-time buyer can’t get a Federal Housing Administration loan, which requires only 3.5 percent down.

“Minefield? That’s an understatement,” said Smith.

For Bane, who’s looking for a house below $200,000, it’s not been easy.

“I’m just looking for a small, manageable house for myself and one roommate. Yet everything I find is sold within the day,” said Bane, a facilities business coordinator at Rancho Cordova-based Vision Service Plan. “We’ll write an offer and submit it, and then find it was already sold.”

Bane had expected she’d be moved into her first home by now. With the federal Nov. 30 deadline for an $8,000 first-time buyer tax credit approaching, she’s fretting.

What’s roughing up buyers like Bane is a shortage of bank repos – and an unwillingness of most private homeowners to sell at today’s prices. For reasons that aren’t fully understood, banks have held thousands of repos off the market. The result is bidding wars, especially for homes listed below $200,000.

With defaults and foreclosures back on the rise regionally, I believes a “substantial” new supply of repos may hit the market next month.

“I am hoping that’s true because right now, I’m telling you, it’s tough on buyers.”

In Rocklin, would-be buyer Karin DeFoe said she’s just had her fourth offer fall apart. DeFoe, house hunting for her college-age son, said, “We haven’t had any luck.”

Last month, she told Home Front she’s lost offers on three houses to cash investors. All made lower bids than hers.

“All the repos are priced real low to start bidding wars,” she complained.

To Bane, it’s just plain frustrating.

“We’ll go into houses and people are there before us, and people are there after us,” she said. “Every house we look at has lines of buyers.”

Sacramento-Area Prosecutors Focus on Mortgage Fraud …

Wednesday, August 12th, 2009

About two years ago, El Dorado County District Attorney Vern Pierson hired a forensic auditor and increased training for his prosecutors in the area of real estate fraud and other financial crimes.

He dedicated two prosecutors and two investigators to handle a majority of the fraud cases.

As a result, more financial schemes that in the past might have been dismissed as belonging in civil court are instead being prosecuted as criminal offenses, El Dorado prosecutors and investigators said.

Pierson said his office has made mortgage fraud crime cases a priority. “The magnitude of the loss is so great on the individual victim and also on our economy as a whole,” he said.

Prosecutors in the Sacramento area have taken varying approaches to the surge in real estate fraud. Some, such as El Dorado County, have devoted more resources, while others have used existing anti-fraud units.

Nationwide, the number of suspected cases of mortgage loan fraud has increased from 52,868 in 2007 to 64,816 in 2008, the FBI says.

Former U.S. Attorney McGregor Scott said that about 2 1/2 years ago his office started receiving reports of mortgage fraud on an increasingly regular basis.

“It was just a recurrent theme I was hearing over and over again,” said Scott, now a partner with Orrick, Herrington and Sutcliffe.

Scott pushed for a mortgage fraud task force that included the Internal Revenue Service, the FBI and the state’s real estate board.

As the cases poured in, Scott said his office and the task force realized that “we need to find allies in the region.” The task force started to offer training to law enforcement agencies and local district attorney’s offices in the investigation and prosecution of mortgage fraud cases.

“We realized we were ground zero here for mortgage fraud in this district,” said Assistant U.S. Attorney Matthew Stegman.

The U.S. attorney’s office for the Eastern District of California, which handles cases from the Oregon border to Bakersfield, had the most mortgage fraud indictments in the nation during fiscal year 2008, Stegman said.

Training provided by the federal government and organizations such as the California District Attorneys Association is helping smaller district attorney’s offices to handle the increasing workload as a result of the mortgage meltdown, said Bob Cosley, supervising investigator with the El Dorado County District Attorney’s Office.

Larger agencies such as the Sacramento County District Attorney’s Office usually have an established unit that handles real estate fraud and other types of white-collar crimes

Lender targets Nevada County for housing ban at golf course

Thursday, August 6th, 2009

A Walnut Creek commercial lender that has repossessed two troubled golf course communities near Auburn has filed a claim against Nevada County, alleging a failing sewage treatment plant at DarkHorse Golf Club has halted home building at the upscale development.

“This has gone on for two years. We can’t build any more houses,” said Bob Bridge, vice president of real estate assets at Owens Financial Group.

Owens loaned $18 million to DarkHorse developers Ed and Chad Fralick in late 2004 to finish the luxury golf community, then repossessed the course and 75 lots in 2007 after the Fralicks sold only 32 homes, Bridge said Tuesday.

Now, stuck with lots that are losing value and unable to build on them, Owens is paying nearly $14,000 a month to haul DarkHorse wastewater two miles to a treatment plant at the nearby Lake of the Pines community.

“This golf course is like most golf courses,” said Bridge. “If you lose only a little bit, you’re doing good.”

Owens also repossessed the Auburn Country Club, which went into foreclosure in June.

The lending company’s claim, precursor to a lawsuit if negotiations fail, marks the latest drama in the region’s troubled-racked luxury golf club industry, which was soaring high just as the housing bubble burst.

A number of golf course residents who bought million-dollar homes have watched as memberships declined, clubs reverted to lenders, and private courses turned public to gain needed revenue. Now, lenders, too, must contend with unforeseen problems inherited after repossessing large golf properties.

The Owens claim alleges that Nevada County didn’t adequately inspect the developer’s incomplete water treatment system and shouldn’t have allowed residences to hook up to it. New-home permits at DarkHorse have been blocked until the sewage treatment system is brought up to state standards.

Nevada County officials declined comment Tuesday.

9.5 percent of Sacramento-area mortgages are late

Thursday, August 6th, 2009

This just in from First American CoreLogic:  showing that almost 10 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties are 90 days or more delinquent. That’s up from 6.7 percent a year ago.

Document1

Cont… Meet Kevin Johnson, NBA Player turned mayor

Saturday, August 1st, 2009

If you’re a basketball fan, this is the Kevin Johnson you remember: K.J., the all-star point guard for the Phoenix Suns. Whether running the Suns’ offense or dunking over seven-footers like Houston’s Hakeem Olajuwan, the combative Johnson was more than a match for almost any opponent.

But take a look at what he’s up against now. Today, K.J. is mayor of Sacramento, Calif., and, if the meltdown had a hometown, this might be it.

Kevin Johnson: The big challenges for the city of Sacramento are no different than the ones that we’re facing nationally and statewide.

Sacramento is — in some ways — a bellwether for the economic state of the nation. It cratered faster and deeper into the foreclosure crisis than almost any city in the country. With an unemployment rate somewhere north of 11 percent, the California’s capital city is a full two points higher than the national average.Pretty tough going for the multi-millionaire hometown sports hero who’s brand new to politics.

Kevin Johnson: I’m living the dream.  I’m living the dream.  I mean, a kid who grows up in an inner-city, poor part of Sacramento, California, first in my family to go to college.  Luckily to graduate and play 12 years in the NBA. I didn’t think my life could get any better.

Johnson’s election last November made history. He’s the first African American mayor of a city that is only fifteen percent black. And, Kevin Johnson is a child of Sacramento’s Oak Park neighborhood.

Oak Park began as Sacramento’s first suburb; it was working class when Johnson was growing up here. But it became the part of town where people lock their doors when they drive through.

Johnson’s mother was only 16 when he was born here. His father drowned when Kevin was three, and he was raised in this house by his maternal grandparents. His grandfather, a sheet metal worker, would become a model for young Kevin.

Kevin Johnson: The number one lesson he taught me in life is that you have to be a good neighbor, a Good Samaritan, at all times.

Johnson excelled at baseball before becoming a basketball star at Sacramento High. But the athlete who was such a good student that he skipped a grade in grammar school was in for a reality check when he won a scholarship to the University of California-Berkley.

Kevin Johnson: I was woefully unprepared. I remember sitting in an English class and they were talking about euphemisms. So, I didn’t know what the word meant.  I remember going back and feeling this small. And I made a commitment that day, that I was–  gonna go back to my community in Sacramento and make sure that kids just like me would not feel what I felt in college.

After college, Johnson passed on an opportunity to play professional baseball with the Oakland A’s and went to the NBA.

And he starting giving back to Sacramento. Using some of his NBA money, Johnson established a faith-based foundation called St. Hope in his old neighborhood.

It began as an after school program but over 20 years has expanded to include charter schools, including Sacramento high and a development corporation that’s brought an art gallery, a bookstore, a barbershop and a movie theater to oak park.

Josh Mankiewicz: How is Saint Hope different from charitable foundations that celebrities just kind of lend their names to?

Kevin Johnson: we’re very focused in education and charter schools. Last year’s graduating class, 83 percent got accepted to a four-year college. 

Josh Mankiewicz: And when they get into college, they’re gonna know what a euphemism is?

Kevin Johnson:  They’re gonna definitely know what a euphemism is. (laughter) Absolutely.  Absolutely.

He thought about politics when he was still with the Suns, courted by both parties … But he wasn’t ready to commit.

By 2008, after a stint as an analyst with NBC sports, he came home to work on St. Hope, ad he found that fire in his belly. He ran as a Democrat. But, he may not have seen what was coming.

Kevin Johnson: The historians of Sacramento have clearly said it was the dirtiest campaign that this city has ever seen.

The seven-candidate primary was brutal, but Johnson finished first and went on to defeat the two- term incumbent.

He’s been pretty much on his feet since then. Hizzoner’s day starts at 5 a.m. with a run with staffers. A strategy session in perpetual motion, time well spent.

Sacramento Bee columnist Marcos Breton:

Marcos Breton: He’s really going to be tested as a politician in the coming months. Huge budget deficit.  Huge cutback in city services.  Huge challenges in terms of investment and lack thereof in Sacramento.

Josh Mankiewicz: Not easy.

Marcos Breton: Not easy.  Difficult for the most seasoned politician and you’re still talking about a rookie having to do work that would humble a veteran.

Josh Mankiewicz: You could have done anything you wanted.  And what you want to do is sit in meetings and talk about municipal finance and how many positions you’re gonna have to cut?  (laughter)

Kevin Johnson: It’s a strange, strange, strange way things work out.  I’m in this job and this seat to solve problems, and to make people’s lives better.  So whatever that challenge is, I’m gonna meet it. 

And so a man who once played in front of huge crowds in the NBA making $6 million a year is now spending his evenings in city council meetings with an audience measured in dozens…for one fiftieth the money.

Josh Mankiewicz:  True that you haven’t touched a basketball basically since you hung it up?

Kevin Johnson: Touched a basketball one time in nine years/and my goal was, to see if I can dunk, on my 40th birthday.  I am sad to report that I was not able to dunk on my 40th birthday and have not touched it since.  (laughter)

Johnson has only been mayor since the end of November and he’s getting a lesson in politics, which it turns out, is more of a contact sport than the one he used to play.

Kevin Johnson: That’s, you know, politics they– they throw even more elbows, and they’re sharper.

Josh Mankiewicz: And they don’t all get called.

Kevin Johnson: Yeah, they don’t get called. 

Josh Mankiewicz: I can’t help but think that that was not what you expected.

Kevin Johnson: It wasn’t what I expected, but again (laughter), I say, “When you’re play in the NBA, you’re booed half the time.  And they’ll even boo you at home if you’re not playing well (laughter).

Johnson heard the crowd turn against him early this year after news reports about a Sacramento homeless encampment drew world- wide attention and pushed him onto the national stage.

The newly-minted mayor made the best of it.

Tent City was shut down. A new shelter opened for those homeless willing to move there. It may have been little more than a temporary solution. But the new mayor had faced–and finessed– his first public-relations challenge.

And, it turns out that who he was on the hardwood is who he is on City Hall’s marble floors.

Josh Mankiewicz: I talked to somebody today who said, “You know, this guy, when he was a player, he was exacting and he was– he knew exactly what he wanted and he used to yell at other players who didn’t move to the right spots, and he used to scowl at people when they didn’t play well enough, and he’s gotta learn that doesn’t work in politics.”

Kevin Johnson:  All that’s like, “I wanna win.  I want a sense of urgency.  I want people to feel like we have a chance.”    So, it– for me, it’s just this relentlessness of– just being the best and– and not wanting to let up.  And people respect that.

Sacramento-area foreclosure total nears 42,000

Thursday, July 23rd, 2009

Two and a half years into the foreclosure crisis still engulfing the Sacramento region, the number of households surrendering keys to lenders has blown past the 40,000 mark – hitting a new housing bust high of 41,903.

It’s the newest count in a growing tally of foreclosures that claimed 4,448 more area homes in April, May and June, researcher MDA DataQuick reported Wednesday.

Statewide, lenders have taken back 410,744 homes since the start of 2007, including 45,667 in the second quarter, when they also sent default notices to 124,562 more homes. DataQuick said 10,682 of those defaults were in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.

Lenders issue the formal foreclosure warnings when homeowners fall three months or more behind on payments.

Analysts on Wednesday called the numbers a sign that the foreclosure crisis remains grim as the economy stumbles and unemployment has risen to 11.6 percent in the capital region and statewide. Widespread state government furloughs amounting to 14 percent wage cuts in thousands of area households – and the resulting economic contraction for other businesses – are also tightening the vise.

At area loan counseling centers like ClearPoint Financial Solutions, unemployment and lost income are now the new face of the loan crisis, said spokesman Bruce McClary.

“It doesn’t matter what kind of mortgage they have. It’s the change in income and financial circumstances,” he said.

The firm recently merged with By Design Financial Solutions, a nonprofit counselor with offices in North Highlands.

DataQuick’s quarterly report shows that many borrowers getting into trouble with mortgages aren’t escaping.

“It’s proof that there hasn’t been this huge shift toward workouts, whether that’s been a short sale or a loan modification,” analyst Andrew LePage said.

Santa Ana-based First American CoreLogic reported recently that 9 percent of home loans in Sacramento, Placer, El Dorado and Yolo counties were delinquent in May. DataQuick said that June counts of foreclosures and notices of default were up sharply from those in April and May, suggesting worse numbers in the third quarter.

In Roseville, Penny Krainz fears she will be one of those statistics. This week she got a 90-day notice that she would be losing her job at an area high-tech company.

“That ought to be right around the time they foreclose on my house,” she said Wednesday.

Krainz stopped making payments months ago, she said, on a house she bought in 2002 for $210,000.

A bigger house next door – a bank repo once valued at $379,000 – recently sold for $114,000, she said. That drove her into a category of borrowers who simply give up because they have high payments and owe so much more than the house is worth.

“This is so out of the realm of my upbringing,” Krainz said. “I would never in a million years not paid my mortgage.”

DataQuick reported that half the loans that defaulted in the second quarter were made before July 2006 and half were made afterward. Lenders that originated the majority of the troubled loans were Washington Mutual, a failed thrift taken over late last year by JPMorgan Chase; Wells Fargo; and Countrywide, the failed lender taken over by Bank of America in mid-2008.

Second-quarter foreclosures and defaults in area counties:

Amador County: 29 foreclosures and 85 defaults.

El Dorado County: 202 foreclosures and 632 defaults.

Nevada County: 98 foreclosures and 286 defaults.

Placer County: 515 foreclosures and 1,570 defaults.

Sacramento County: 3,019 foreclosures and 6,862 defaults.

Sutter County: 154 foreclosures and 355 notices of default.

Yolo County: 216 foreclosures, 541 defaults.

Yuba County: 215 foreclosures and 351 defaults.

Sales dip below last year with fewer repos on market

Monday, July 20th, 2009

After 14 months of year-over-year sales gains in the Sacramento region, June’s home sales fell below those of June 2008. Market watchers say the frenzy ignited last year by an abundance of bank repos in the market has waned some. But short sales are starting to pick up.

Here is today’s story with the region’s June statistics from MDA DataQuick.

Here is a more detailed sales and price chart by ZIP Code.

homsales

Mortgage defaults spread as even ’safe’ borrowers falter

Monday, July 13th, 2009

The mortgage default crisis has an ominous new face. It’s your neighbor with a traditional fixed-rate loan.

No longer is the real estate bust simply the result of exotic, subprime loans that doubled payments and blew up in homeowners’ faces. As the Sacramento economy buckles, even the safest mortgages have become part of a new wave of loan defaults, experts say.

With capital-area job losses reaching 45,000 in the past year and unemployment at 11.1 percent, lenders, bankruptcy attorneys and debt counselors all say they’re seeing rising delinquencies among prime borrowers with fixed-rate loans and good credit. Many of those slipping into trouble are state workers, the mainstay of Sacramento’s economy.

I think the tide has definitely shifted, w’re seeing more people with a loss of income.

Prime fixed-rate mortgages, with the most favorable interest rates and 15-, 20- or 30-year terms that guarantee the same monthly payment for the life of the loan, have long been the bulwark of American homeownership.

There are 3.3 million of them in California – 56 percent of all mortgages. But nearly 4 percent were delinquent in the first quarter, according to the Mortgage Bankers Association. That number was less than 1 percent two years ago, when the default crisis was dominated by subprime loans.

The MBA says layoffs are now hitting more educated borrowers.

“There tends to be a higher correlation there with having a fixed-rate mortgage,” said Jay Brinkmann, chief economist of the lender trade group.

It’s not just the layoffs creating trouble for traditionally safe loans. Many area workers have had to absorb wage cuts. Others who lost jobs have found new jobs that pay less. Or they have found only part-time work. Many workers who depend on overtime pay have also seen it disappear or dwindle.

Finally, in a capital region defined by a massive state government work force, furloughs have grown to three days monthly, approximating a 14 percent salary cut. Gov. Arnold Schwarzenegger is proposing still more pay cuts for an educated population that’s increasingly showing up at nonprofit mortgage counseling centers.

The upheaval has had a ripple effect on small-business owners throughout the Sacramento area. Theses business owners need some breathing room to get back into the business and start making profits again.

As the newest turn in a housing crisis that has seen 40,000 area foreclosures and heartbreak in thousands of other homes, trouble for prime borrowers is one more obstacle to a housing recovery any time soon.

Lending-industry officials say it’s harder to restructure loans for jobless people who can barely afford any payment. Worse, economists say rising defaults and the foreclosures to come among these borrowers are likely to persist long after unemployment peaks sometime next year.

“Foreclosures and delinquencies have a long tail, and we will see that continue for several quarters after a turnaround in unemployment,” said the MBA’s Brinkmann.

Forecasters at Stockton’s University of the Pacific predict unemployment in the capital region will peak late next year at 12.3 percent – and remain in double digits through 2011. If so, problems with prime loans are likely to linger in a region having a hard time catching a break.

So….What does all of this mean to the average cicizen who owns a home??? We will have alot more forclosures coming on the market and the price range will be much larger then what we have been seeing.

Repo business soars as Sacramento area home sales slump

Tuesday, July 7th, 2009

At the beginning, Alejandro Maybuena lost the Sacramento house he bought in April 2005 for $350,000. At the end, in early 2009, Kim Gish bought it for $109,000.

Stories like this have happened more than 40,000 times in the Sacramento area. Still, the tale in particular of one house in California’s capital region shows the sweeping change in a real estate industry that once involved mainly a mom-and-pop seller, a buyer and two real estate agents.

Today, an alternate universe – the repo business – dominates. And business is very good.

As the U.S. foreclosure crisis grinds on, the detailed work of processing, repairing and selling thousands of homes repossessed by banks is real estate’s new gold. In the past year, repo-related business has rapidly grown to national scale, fueling job growth in Colorado, Texas, Ohio and elsewhere to service the meltdown in markets like Sacramento and the Central Valley along with Phoenix, Las Vegas and Florida.

The nation’s housing collapse also has upended the pecking order of local real estate agents. Former top earners are on the sidelines, unable to move expensive homes. The new royalty is making good money in a real estate economy where things fall apart, where trackers can count almost a half-million repos on the U.S. market.

For Alejandro Maybuena, 60, and his wife, a three-bedroom house near Sacramento’s southern edge in 2005 represented a long-delayed accomplishment – their first house.

Remember how you felt when you purchased your first home.

Time to spring back into action.

Monday, June 8th, 2009

If I spent my days reading the news and listening to talk radio I’m not fully convinced my mind wouldn’t turn to jelly. A couple of times this year I’ve found myself doing so and have noticed how it begins to quickly affect me. So I get back on the wagon of putting the good stuff in and letting action rather than reaction define my days.

Now that does not mean I’m walking around with my head in the clouds; I know that we are in the midst of troubling times and this uncertainty can bring a feeling of imbalance and fear. Thing is, I cannot control the outcome…and none of us can. I can’t predict the future and neither can anyone else. So I focus on activities. I go to work on what my needs are for me today.

It is not my job to grind my teeth in frustration or disapproval. Neither is it my job to read comments on the economy from every crank out there with web access. My job is clear and that helps me stay focused.

A recession is a terrible thing to waste. Spring has sprung and there’s work to be done.