More toxic waste bagholders found, this time its children.

The biggest unknown during this speculative mania has been who will end up with the losses from holding this toxic waste. We have so far seen counties and states with these impaired assets on this their books and the impact can be severe (see the Florida posts).

From the NY Times we find the latest bag holders, to come clean, and they turn out to be a children's charity. How nice of the guys on Wall Street to unload this crap on minors:

THE Indiana Children’s Wish Fund, which grants wishes to children and teenagers with life-threatening illnesses, got an early Christmas gift nine days ago. Morgan Keegan, a brokerage firm in Memphis, made an undisclosed payment to the charity to settle an arbitration claim; the Wish Fund said it had lost $48,000 in a mutual fund from Morgan Keegan that had invested heavily in dicey mortgage securities

Coming less than two months after the charity filed its claim, and as a reporter was inquiring about its status, the settlement is a rare consolation for an investor amid all the pain still being generated by the turmoil in the once-bustling mortgage securities market. Before the Wish Fund reached its settlement, its mortgage-related losses meant that nine children’s wishes would go ungranted.

Against the backdrop of all the gigantic numbers defining the subprime debacle, the Wish Fund’s losses look like small potatoes. The crisis has generated almost $100 billion in losses or write-offs at the world’s largest financial institutions, cost a couple of Fortune 100 chief executives their jobs, wiped out billions of dollars in stock market value and hammered the reputations of the nation’s top credit rating agencies. Reports of the devastation that foreclosures are wreaking on borrowers also bring home the effects of this remarkable financial mess.

Still, the Wish Fund’s experience is instructive because so little has emerged about the losses that investors have incurred in these securities, perhaps because few holders have wanted to disclose them. Some investors may still not know how much they have been hurt by the crisis.

As this debacle unfolds, accounts of investor losses in mortgage securities will come to light. And Wall Street’s role as the great enabler — providing capital to aggressive lenders and then selling the questionable securities to investors — will be front and center.

Crisp commercial building repossessed

Bakersfield Californian:

A Stockdale Highway office building real estate salesman David Crisp bought in April has been foreclosed on.

Earlier this year, Crisp said the $2.5 million building would serve as the sales office for a luxury condominium project he and one-time business partner, Carl Cole, had proposed to develop on the Cal State Bakersfield campus. Cal State ended project negotiations with the former Crisp & Cole Real Estate agency principals in July.

Crisp owed more than $2 million on two loans borrowed against the 10,000-square-foot space on Thursday, when it was put up for public auction on City Hall’s steps.

The property was repossessed by the lender, the Los Angeles-based Lone Oak Fund LLC, after no buyers responded to the opening bid of $1,534,000.

Here is the building when it was first listed for sale. Along with a few pictures.

City sales tax revenues dropped a sharp 13 percent this quarter

Another prediction coming true. I sure hope our city leaders are not really surprised by this, because it will probably get worse when the state starts taking more money to shore up their $14 billion dollar deficit.

From the Bakersfield Californian:

City sales tax revenues dropped a sharp 13 percent this quarter compared with last year, becoming "something we're going to have to deal with," officials reported Friday.

Those revenues are the single largest contributor to the city's general fund, said City Manager Alan Tandy.

"It's been an uncomfortable trend when it was a 1 or 2 percent decline," Tandy said. "When it accelerates to a 13 percent decline, it becomes something we're going to have to deal with."

Tandy said the declining revenues correspond to the housing market slowdown. During the recent boom, people earned more and spent more. But with the dip in real estate, consumer habits have changed.

He said it's too soon to tell what the declining revenues will mean for next year's budget. Planning for the 2008-09 fiscal year will begin in January. Budget planning for next year will be "constrained to anything that incurs new costs or expenses," Tandy said.

Troubled Crisp & Cole properties spread beyond Kern

From the Bakersfield Californian:

BY VANESSA GREGORY

The trail of troubled properties linked to the former Crisp & Cole Real Estate agency appears to extend beyond Kern County.

At least one high-priced property in Fresno County’s mountainous Shaver Lake region was shuffled between a Crisp & Cole company and two former staffers, according to the Fresno County Recorder’s office.

The $1.3 million property was foreclosed on last month, according to records reviewed by Fresno County Assistant Recorder Gilbert Carter.

One-time Crisp & Cole salesman Jeriel Salinas bought the property, one of a dozen on Shaver Lake’s Yellow Lupin Lane, last December, Carter said records show.

Salinas bought the property from Julie and Charles Farmer, and Aiden, Logan & Associates Inc., a company created by former Crisp & Cole’s principals, David Crisp, 28, and Carl Cole, 60. Julie Farmer, who was a Crisp & Cole sales agent, was also a company director, California Secretary of State filings show.

“Find a life,” Salinas said when asked about the foreclosure Friday. “Find something else to report about. Call everybody else who’s in foreclosure in Bakersfield.”

Salinas financed the purchase with a $1 million mortgage and a $325,000 second loan, both from Novato-based Kay-Co Investments Inc., Carter said.

A number of Crisp & Cole-related homes that have been foreclosed on, or are now in default, were bought and sold in a fashion similar to the Yellow Lupin Lane transaction, The Californian’s analysis of Kern County records shows.

As of the first week in December, at least 105 defaulted and foreclosed properties can be traced to associates of the former Crisp & Cole companies, according to an ongoing Californian tally.

More than $64.6 million in loans were borrowed against the homes, according to the tally.

Bakersfield prices now down 13.9% YOY

November 2007 numbers are out:

Bakersfield DOWN 13.92%

While the rest of California was DOWN 11.9%

If you add in the incentives, we are down even more. I would go back and look at the predictions made by the local experts on what prices would do this year, but we all know they were dead wrong!

DELUSION DRIVE

From the REO website for B of A: (hat tip waitingtobuy):

Property ID: 30010159
Address: 10731 DELUSION DRIVE, BAKERSFIELD, CA 93311

I think this street name sums up most of the real estate activity in this town for the last 3 years!

This home was purchased on Feb 20, 2004 for $225,503. It was foreclosed on by B of A on October 2, 2007 for $239,0000. It is now listed for sale for $288,000, at 2,025 square feet ($142.22), they are smoking something if they think that is the fair market value. Good luck, you are going to need it.

The original sale of this home occurred on October 8, 1999 for $134,712. I would not be surprised if this was closer to the true FMV.

Housing Trouble Spills Over into Commercial Real Estate

From the Voice of Sandiego: (hat tip Tyrone)

The slump that has plagued the San Diego County housing market is beginning to show on the commercial side.

The trouble defies the industry mindset, prevalent even up until a few months ago, that commercial and residential real estate share little more than a surname -- that the health of the real estate market for apartment investors, offices and industrial space would remain untouched by the housing market's troubles.

"I think we'd all like to think that the meltdown in the housing market hasn't affected the commercial side," said Kraig Kristofferson, senior vice president with CB Richard Ellis. "But the reality is people look at real estate in one big basket, often."In a direct correlation, the cutbacks in the San Diego operations of local and national homebuilders and other housing-related companies sap some demand for commercial space.

National homebuilder Lennar, for example, recently listed 50,000 square feet of its office space for lease to other tenants in order to cut costs, said Jason Hughes, principal with local firm Irving Hughes. And then there are mortgage companies, title companies, escrow companies -- going out of business or cutting back on staff, and space, he said."It goes on and on," Hughes said. "Anyone that says that residential is not affecting commercial is nuts, because it simply is. There are a ton of tenants who are in a difficult situation because of the housing market, residential real estate offices are closing their doors. ... And that's happening at the same time as the credit crunch."

Wall Street's Next Crisis - Commerical Real Estate

From Portfolio.com:

So far, the current credit crisis has zeroed in on mortgages for the less affluent. But easy credit was a sprawling millipede whose wobbly legs reached into the farthest corners of the financial markets. This is the year the other 999 shoes start to drop.

Any loan to any borrower can begin to seem subprime if there's too little down and too much debt. And that, unfortunately, brings us to the commercial-real-estate market.

For the past several years, the market for commercial property—offices, malls, apartment buildings, industrial plants, warehouses, and the like—has enjoyed the very best of times. Prices soared, and lenders lent readily. Owners had no problem meeting their payments. By early 2007, delinquencies had fallen to record lows.

In their own way, however, commercial-real-estate loans were no less foolish than those made to home buyers with speckled credit. And as with the subprime mess, the reckoning will come. Just like what happened in other sectors already hit by the credit crunch, these loans will cause problems that will probably find their way beyond the obvious players in the commercial-real-estate market. Judging by the aspects of the credit crisis we've already seen, commercial-real-estate trouble will probably emerge sooner than people expect—and will be worse than they anticipate.

The implosion is going to be a refreshingly simple and familiar story. The commercial-real-estate frenzy has none of the nagging complications found in the residential market. There aren't any targets of predatory lending. There are no huge failures by government regulators. The aftermath won't see people thrown out of their homes—an unadulterated societal ill regardless of whether they should have known better or were tricked into taking on loans they couldn't afford.

Commerical Real Estate the next local shoe to drop

I just finished reading the just released print edition of Bakersfield Life (a monthly magazine from the Bakersfield Californian); I wanted to make a note of some predictions for 2008. There are a couple of predictions for Commercial Real Estate (CRE) that are not on the above website, they are only in the print edition.

These same individuals (one in particular) were predicting, in the summer of 2005, that residential real estate would boom for 5-7 more years. As we all know now, that prediction was 100% dead wrong!

Before we look at their sales pitch, I mean predictions, please read the CRE posts by Calculated Risk and Mish's Blog. These are two excellent blogs that have been predicting that CRE would be the next shoe to drop in 2008.

I believe this will happen locally as the amount of commercial retail space that has been built far exceeds the realistic demand. In the next year several hundred thousand square feet of additional space will come onto the market and depress prices and rents. The weak hands will fold and we will see many players lose their properties to foreclosure. Those properties built in the last few years, on inflated land, will be the most vulnerable. The sales pitches made below will turn out to be false, as were the ones made about residential real estate during the boom time! What amazes me about these predictions, is the total lack of foresight into the CRE bubble. They all acknowledge residential real estate bubble bursting and yet make no connection to CRE, which usually adjusts 1-2 years later.


Bakersfield Life:

Duane Keathley, CB Richard Ellis:

"Looking forward to 2008, the sharp downturn in our residential market will undoubtedly have a cooling effect on the retail sector. Many retailers are anticipating a decline in sales volumes due to pressure on disposable income levels and consumer confidence. Fortunately for Bakersfield, we are not overbuilt as it relates to retail space."

Bruce Freeman, Castle & Cooke:

"2008 will be an extremely difficult year for residential real estate. Fortunately, at Castle & Cooke, we forecast 2008 to be a very strong year for commercial development..."

Kym Moore, Raboank:

"I see 2008 as a continuance of 2007 in the residential real estate market. I don't think the single family housing market has reached bottom...On the bright side, commercial real estate development acvitivity has increased in this area."

Ca Atty Gen Jerry Brown investigating Countrywide

From the LA Times.com:

The nation's No. 1 home lender, Countrywide Financial Corp., said today that it was being investigated by California Atty. Gen. Jerry Brown and the attorney general in Illinois.

Countrywide said it had received subpoenas from both officials but declined to elaborate, citing a company policy of not commenting on the status of investigations. The Calabasas company said it was cooperating in the two probes.

In a recent interview with The Times, Brown, who is looking into the practices of mortgage bankers and mortgage brokers, said he was interested particularly in loans that involved yield spread premiums.

In these mortgages, people who could qualify for a lower interest rate are lent money at a higher rate, with a rebate -- the yield spread premium -- being paid by the lender as a commission to brokers.

Many in the mortgage industry say the rebate can be used to offset borrowers' closing costs, making the loan more attractive to borrowers trying to hold down costs. But critics say the yield spread premium more often is simply pocketed by the brokers to make more money on loans

$900 million dollar default

Apartment owner to default on $900 million:

MBS Cos., one of the largest multifamily property owners in the country, is delinquent, in default or in danger of becoming so, on more than $900 million in loans. For Michael B. Smuck (the MBS in the company name), that means he is in danger of seeing his apartment empire dissipate for the second time in his nearly 30-year real estate career.

Based in the New Orleans area, MBS Cos. owns and operates more than 65 apartment complexes totaling about 17,000 units - all in Texas.

Smuck's debt problems have been the subject of whispered conversations among financial firms and analysts for the past month as the extent of the company's financial problems slowly came to light. Those same financial analysts fear if MBS defaults, it could spell losses for many and affect property recovery operations, potentially for years to come. It will also generate a huge spike up in CMBS delinquencies, expected to be reported this week or next.

Pacific Theatres to lay off 93 in Bakersfield?

The following is from HOZ (near the bottom):

Valley Plaza (Pacific Theatres) is laying off 93 employees at 2000 Wible Road in Bakersfield on Dec. 13.

Alliance Title RIF

From the Bakersfield Californian:

The local office of Alliance Title, a large title company, is shutting down as of 5 p.m. Thursday along with all of Alliance's California operations, an official said Wednesday.

In Kern County, 36 people will likely lose their jobs, said Brynn Powers, vice president/general manager of Bakersfield operations.

The closure is not due to local economic conditions, he said. He said the local branch is financially healthy.

He said he couldn’t speak to the company’s finances at a larger level.

From our local realtor:

What I heard was they were planning to close in January, but then they were told today to get ready to hand over files today at 5 pm to First American Title. First American Title is taking files ONLY, no escrow officers.

Foreclosures reach a new record. $2.1 billion of defaults so far this year!

Looks like the "bailout" is going to be another Bush/Clinton failure.

We have now set a new record for foreclosures. From the Bakersfield Californian:

Some 412 Kern properties foreclosed last month, by far the most in a single month since the county began tracking filings in 1995, trustee’s deeds recorded with county officials show.

Likewise, 985 default notices were sent to property owners in November, a number that also sets a new monthly record. The filings were up from October numbers, which totalled 372 and 945, respectively. October’s filings were new records at the time.

A year ago November, trustee’s deeds and default notices stood at 78 and 382, respectively.

The PDF files are here for foreclosures and here for NOD's.

BAILOUT! Open your wallets American taxpayers.

All the years of reporting the misdeeds by the REIC (by all the bloggers) have failed. We tried to let the public know exactly what was going on during the speculative mania. However, as usual, the powers that be chose to ignore the problem when it could be solved - in 2003, 2004, 2005 and 2006 - instead they are now trying to fix the un-fixable. We will follow Japan's lead of not recognizing the debt and drag this speculative mess out over the next 10 years. This will be done with taxpayers money.

Thanks George Bush and Hank Paulson for the freeze plan we are going to hear about. Open your wallets American taxpayers you get to pay for this mess. Meanwhile, The Tan Man and all of the REIC shills made out with billions and the American Taxpayer gets to clean up your mess.


From the WSJ.com:

Bush Is Set to Unveil Relief Plan for Homeowners

WASHINGTON -- President Bush is expected to unveil a broad plan Thursday afternoon aimed at helping homeowners struggling with their mortgages, two people familiar with the matter said
Wednesday.

A senior administration official confirmed that Bush planned to speak about housing Thursday.
The plan has multiple parts, including a proposal to freeze interest rates on certain subprime loans for five years, fast track other borrowers toward refinanced loans and allow state and local governments to use more tax-exempt bond programs to fund refinancings.

Add Orange County, California to the list of potential toxic waste bagholders

"They're all highly rated assets" - Until they are downgraded!


From Bloomberg:

Dec. 4 (Bloomberg) -- Orange County, California, the county that in 1994 was bankrupted by bad bets on interest rates, has about 20 percent of a fund it runs invested in structured investment vehicles that may face credit-rating cuts.

In the $2.3 billion short-term fund, the county holds $460 million under review for a possible downgrade by Moody's Investors Service, said Keith Rodenhuis, a spokesman for the treasurer.

In all of its funds, the county holds a total of $837 million of SIV debt, including $152 million in its $3.5 billion of money-market fund that isn't under ratings review, he said.

A Florida local-government investment pool lost half its $27 billion in assets to withdrawals from cities and school districts after they learned it held downgraded and defaulted commercial paper sold by SIVs. Florida officials froze the fund to prevent a further run on assets.

Finance officials with the Orange County Treasurer's office said the SIV debt it holds continues to meet its obligations and there is virtually no exposure to risky mortgages in them. All the debt still carries top ratings.

``We don't have the same kind of debt that Florida has,'' said Paul Cocking, the chief portfolio manager for the county. ``They're all highly rated assets.''

Crisp mansion repossessed after failing to sell at auction

From the Bakersfield Californian:


Crisp mansion repossessed after failing to sell at auction
By VANESSA GREGORY, Californian staff writer

After two delays, real estate agent David Crisp’s lavish Seven Oaks mansion has been repossessed by the lender.

The home was up for public auction on the steps of City Hall Monday, with an opening bid of $1.8 million.

With no bidders ready to swallow that price, the 6,666-square-foot home at 10509 New Quay Court went back to the lender, identified in county records as Irvine-based X Bancorp.

Crisp defaulted on $2 million borrowed against the home earlier this year.

Crisp could not be reached immediately for comment Monday.

The home, located in one of the city’s most exclusive gated communities, was among 13 locations searched by FBI and IRS agents in September.

Crisp and his former business partner, Carl Cole, are under investigation by the FBI. No charges have been filed.

Montana and Connecticut join Florida in local government investment mess. Will California's LAIF soon follow?

From Bloomberg:

Dec. 3 (Bloomberg) -- Montana and Connecticut state-run investment funds hold debt tainted by the subprime mortgage collapse that was cut or put under review by Moody's Investors Service, leaving local governments vulnerable to losses.

Moody's lowered its rating on commercial paper issued by the Orion Finance structured investment vehicle, or SIV, to ``Not Prime'' on Nov. 30, saying its net asset value is inconsistent with Orion's former Prime-1 rating. Montana owns $50 million of the paper. Moody's put another $105 billion of SIVs on review for a possible downgrade, of which Montana holds $80 million and Connecticut holds $300 million, records show.

``This just reinforces the fact that we have a serious issue,'' said State Senator Dave Lewis, of Helena, Montana, a member of the Legislative Audit Committee.

Schools, fire departments and towns across the U.S. that use state- and county-run funds like a bank account are seeing the far-ranging effects of the housing slump, as complex investments once sold as high-yielding, safe havens are now backed by collateral investors don't want.

Modeled after private money-market funds, the investment pools are supposed to hold safe, liquid, short-term debt.

In Florida, disclosures that a state-run pool for schools and cities held $1.5 billion of downgraded and defaulted debt prompted governments to pull out almost half of the fund's $27 billion in assets. Officials halted further withdrawals on Nov. 29 as they consider options to address the crisis.

Montana's $2.2 billion fund has already had $250 million of withdrawals since the fund's $90 million holding of Axon Financial was cut to ``D,'' or default, by Standard & Poor's last week. It was lowered to ``Not Prime'' by Moody's on Oct. 23.

Montana SIVs

The Montana pool, managed by the Montana Board of Investments, has 25 percent, or $550 million, invested in SIVs, all of which carried top investment ratings when purchased.
SIVs are typically offshore companies created by banks and other firms to sell short-term debt to buy mortgage securities and finance company bonds with higher yields. They profit on the spread between the two. Moody's last week said it may lower ratings on $105 billion of debt sold by SIVs after the average net asset values of those sponsored by firms including New York- based Citigroup Inc. declined to 55 percent from 71 percent a month ago. The assets were valued at 102 percent in June.

Connecticut Investments

Connecticut's Short-Term Investment Fund, which invests cash for state agencies and municipalities, is holding $300 million in debt issued by SIVs that may be downgraded by Moody's. The state's $5.8 billion fund held notes issued by SIVs affiliated with Citigroup as of Sept. 30: Beta Finance, Dorada Finance and Five Finance, according to its most recent quarterly report.

Connecticut also holds $100 million in defaulted SIV notes issued by Cheyne Finance.
Lewis, a member of the Legislative Audit Committee in Montana, questioned whether the state board's policy of allowing pool participants to remove their money at full value, which concentrates the risk among those with money still entrusted to the pool. The majority of the money in the pool belongs to state agencies.

``I think we may need a special session of the state Legislature,'' he said

Florida crisis not resolved. Will the California LAIF meet the same fate?

Notice two things from this story - 1) the fox guarding the hen house! 2)Taxpayer bailout!

From Bloomberg:

Dec. 3 (Bloomberg) -- Florida schools and towns with money frozen in a state-run investment account are unlikely to get their cash back tomorrow, when officials meet to discuss a crisis prompted by withdrawals that drained almost half of the fund's $27 billion in assets, a policy officer said.

``If we reopen the window without limitations on Tuesday, and we see behavior like we've seen up to now, there's simply no way to meet that demand without having a fire sale on assets,'' said James Francis, senior policy officer for the State Board of Administration, manager of the Local Government Investment Pool.

Officials raised the possibility of paying less than 100 cents on the dollar to governments seeking cash in a conference call with participants Nov. 30, a day after freezing withdrawals. The board also hired BlackRock Inc., the largest U.S. publicly traded money manager, as an adviser.

Florida counties and schools pulled out $13 billion in assets last month after learning the pool, described by state officials as a money-market fund, held $1.5 billion of downgraded and defaulted debt tainted by the subprime mortgage market collapse. The crisis shows the far-ranging effects of the housing slump, as complex investments once sold as high-yielding havens are now backed by collateral investors don't want.

The Florida fund's daily yield plunged to 2.77 on the day withdrawals were banned from 6.25 percent on Nov. 16.

Money Back

A newly formed advisory panel of school and local governments still stuck in the Florida pool told officials on the Nov. 30 call they expected to get all of their money back. The panel rejected the board's plan to survey participants to see if they would accept as little as 90 cents on the dollar as the price for getting access to their money this month.

The two-and-a-half hour call ended with a decision to poll pool investors on how much cash they absolutely need to withdraw over the next 90 days, as well as how much they plan to deposit. Governments are accustomed to drawing on the fund for routine expenditures.

``The very fact that you're out here talking to us about taking less than 100 percent is in my mind unacceptable,'' said MaryEllen Elia, superintendent of Hillsborough County Public Schools, which has $573 million tied up in the pool, more than any other school district. ``You need to figure out how to make the taxpayers in Florida whole.''

Meeting Tomorrow

The State Board of Administration's three trustees, Republican Governor Charlie Crist, state Chief Financial Officer Alex Sink and Attorney General Bill McCollum, will meet tomorrow to discuss possible solutions to the crisis. The board also manages $37 billion of additional short-term investments and Florida's $138 billion pension fund.

``We do need our political leaders to muster up some intestinal fortitude,'' said Dave Gaylor, superintendent of Charlotte County Public Schools and a member of the new 16- member advisory panel of participants, on the Nov. 30 call. ``You have leadership from the soldiers, that's who we are. It's not going to help if the generals aren't providing us with some leadership

Crisp and Cole Update

From the Bakersfield Californian:

Carl Cole, former managing broker of now-defunct Crisp & Cole Real Estate, counted his first two foreclosures Thursday, trustee's deeds recorded with the county show.

They are so far the only foreclosures in the Cole family, but just a pair among more than 100 defaulted and foreclosed properties associated with the former company's employees, family members and associates, according to an ongoing Californian tally.

Cole borrowed more than $1 million total against the two homes in January 2006, property records show, while banks repossessed them last week for a total $722,325.

Only first loans are typically counted in the default and foreclosure process. Second loans, which both properties held, are often eaten by lenders.

The foreclosed properties are at 5208 Glacier Canyon Court in the southwest and 12212 Great Country Drive in the northwest.

As of Thursday, 102 troubled properties with more than $62.3 million in total loans can be pegged to former Crisp & Cole associates, according to The Californian's ongoing tally.

Of those, at least 57 have so far foreclosed.

On Monday, the Seven Oaks mansion of Cole's former partner, David Crisp, is scheduled for the auction block.

It will be the third time the 10509 New Quay Court home could foreclose. Two previous auctions were postponed.

Credit crisis is no longer contained. Florida teachers to miss paychecks

Look for the FED to drop rates by 50 bps in their December meeting. This credit crisis is no longer contained. I hope the local city and county officials check their investments in LAIF (the California equivalent).


From Bloomberg:

Nov. 29 (Bloomberg) -- Florida officials voted to suspend withdrawals from an investment fund for schools and local governments after redemptions sparked by downgrades of debt held in the portfolio reduced assets by 44 percent.

The Local Government Investment Pool had $3.5 billion of withdrawals today alone, putting assets at $15 billion, said Coleman Stipanovich, executive director of the State Board of Administration, at a special meeting held to address the crisis. The board manages the fund along with other short-term investments and the state's $137 billion pension fund.

``If we don't do something quickly, we're not going to have an investment pool,'' Stipanovich said at the meeting, held at the state capitol in Tallahassee. The fund was the largest of its kind, managing $27 billion before this month's withdrawals.

Local governments including Orange County and Pompano Beach that use the pool like a money-market fund asked for their money back after the State Board of Administration disclosed in a report earlier this month that holdings in the fund were lowered to below investment grade. The disclosures followed a month of inquiries by Bloomberg News to Florida officials.

Paychecks Threatened

Hal Wilson, chief financial officer for the school district in Jefferson County, located 30 miles (42 kilometers) east of Tallahassee, said he had decided not to pull the district's $2.7 million from the fund. He said he relied on assurances from the state board that the money would be secure for his 1,559-student school system, with 220 employees.

``I might not be able to pay our employees tomorrow,'' he said, referring to his $850,000 payroll. ``I am sure that those money managers who withdrew all their funds are feeling really smug right now, thinking they did the right thing. But it left the rest of us holding the bag.''



From the Florida Investment pool website:

By decision of the Trustees of the State Board of Administration at their November 29, 2007 Special Meeting, the Florida Local Government Investment Pool will temporarily not accept or process deposit or withdrawal requests after 11am November 29, 2007. On December 4, 2007, Trustees of the State Board of Administration will hold a regularly scheduled meeting and consider options with respect to resuming accepting and processing deposit or withdrawal requests.

Local Market Update

From our local real estate agent:


Ichabod said...
As of 10:15 am Tuesday, November 27:In Kern County on the MLS (Bakersfield Association of Realtors), there are 4,920 residential properties listed for sale. Of that, 797 (16%) are bank owned REOs, and 648 (13%) are short sales. Short sales have a horrible time selling because the lenders take FOREVER to approve them. I had a client submit an offer for a short sale property in August. We didn't hear a counter until the end of October! We quickly submitted a counter that was verbally accepted, and then waited for a response until my buyer got impatient and cancelled halfway through November! I finally heard from the lender the day after he cancelled- "we are about to submit your offer for final approval." They held on to the offer for almost three weeks and NEVER submitted it! I called that lady and e-mailed her on a daily basis- toward the end three times a day. Crazy!

Recession signals increase

The Sept S&P/Case-Shiller Home Price Index fell 4.9% y/o/y, the biggest drop since the data began in 1988.

The declines in the national figure are notable for two reasons. First, the 3rd quarter decline, at 1.7%, was the largest quarterly decline in the index’s 21-year history. And, second, the year-over-year decline posted its second consecutive record low at -4.5%. Consistent with prior 2007 reports, there is no real positive news in today’s data. Most of the metro areas continue to show declining or decelerating returns on both an annual and monthly basis.

All 20 metro areas were in decline in September over August. Even the five metro areas that still have positive annual growth rates -- Atlanta, Charlotte, Dallas, Portland and Seattle -- show continued deceleration in returns.

From Bloomberg:

Nov. 27 (Bloomberg) -- Winnebago Industries Inc., Thor Industries Inc. and other U.S. recreational-vehicle makers will probably say shipments fell in 2007 for the first time in six years, a sign the U.S. economy may be headed for a recession.

For the past three decades, deliveries of motor homes and travel trailers have dropped before each decline in the U.S. economy, giving the $15 billion industry a reputation as a bellwether. As the U.S. housing slump worsens, gasoline prices rise and consumer confidence wanes, RV sales are forecast to slide this year and next.


From Businessweek:

Some 5,400 Harley-Davidson Inc. workers are out of work this week as the motorcycle maker cuts production because of falling sales.

The Milwaukee-based company announced in September it would shut down production at plants in Wisconsin, Kansas City, Mo., and York, Pa., this week as part of a planned cut in production.

Happy Holidays! Now let the recession begin.

Hat tip to Ben Jones at the Housing Bubble Blog:

“Delia DeYulia was recently forced to take her first retail job. For the holiday shopping season, DeYulia is working part-time at Kohl’s, placing clothes on racks and cleaning dressing rooms. She resorted to taking the temporary work after not finding other employment.”

“After 15 years with Fremont Investment and Loan, she lost her mortgage job in Anaheim Hills in March.”

“‘I’m used to sitting in an office,’ said DeYulia, who audited loans at Fremont. ‘Now, I’m on my feet all day. I’m carrying a lot of stuff and my body has to get used to it. It’s hard work for a minimum-wage job.’”

“DeYulia’s position was one of 3,800 mortgage jobs cut in Orange County from Oct. 2006 to Oct, 2007, according to the state’s Employment Development Department. Many of those laid off have reluctantly turned to retailers for jobs to help pay the bills.”

“Robert Harrington and Shad and Corinna Vickers, are looking for retail jobs. Harrington of Tustin, was let go in September from Bankers Mortgage in Santa Ana. As its loan originator, he made about $75,000 last year. More than half of that was from commissions.”

“That’s why he thinks his best bet is to find a commission-based job at a luxury retailer or a store that sells big-ticket items. ‘I just need a commission-driven job because it’s better than hourly,’ he said. ‘I need the benefit of being able to make more money.’”

“Corinna Vickers was let go a year ago from Secured Funding in Costa Mesa. Then two months ago, her husband Shad Vickers, lost his job at Lending Tree in Irvine.”

“Combined, they had been making $200,000 a year.”

“Now they’re both unemployed and have been hunting for work to pay their bills and help them save for retirement and college tuitions for their four daughters. They have not had any luck and now the Vickers are both willing to take on holiday retail work.”

“‘I need to stop thinking about a career and start looking for a job,’ said Shad Vickers of Tustin.”
“Rhonda Struman of Laguna Niguel is not waiting around to get hired full time. Last month, she began working as a part-time salesperson at Nordstrom at The Shops at Mission Viejo. It pays $8 an hour. Before she was laid off in August from her underwriting position at Paul Financial in Irvine, she was making about $70,000 a year.”

“Her husband also got laid off from the mortgage industry. He was pulling in about $130,000 a year. Now, he’s working for $11 an hour at a Costco in San Juan Capistrano.”

“Because of their huge pay cuts, they’re having a hard time paying their $3,400 monthly mortgage. They sold off their boat to get rid of the monthly payments. They will soon sell their furniture.”

“‘I cry all the time and I’m stressed all the time,’ Rhonda Struman said.”

“By February, she and her husband will leave Orange County for Colorado to look for mortgage jobs or work that pays better than their current employers. They’ll rent out their Laguna Niguel house to help pay the mortgage and then rent in Colorado.”

“‘We have no choice,’ said Struman. There’s too much competition in Orange County. ‘There are too many people out of jobs’ who are looking for new work.”

97% of foreclosures going back to the bank

From the Central Valley Business Times.com:

October foreclosure sales increased by 40 percent from September with a total of 12,336 properties – with a loan value of $5 billion -- sold at auction statewide, according to figures compiled by ForeclosureRadar.

The Discovery Bay-based company operates a Web site that it says tracks every California foreclosure on a daily basis.

The October figure is a 568 percent increase over the same period in 2006.

There were 8,818 properties sold in September in foreclosure auctions with a value of $3.6 Billion dollars, according to ForeclosureRadar.

“We see no sign of a foreclosure peak at this point, and we don't expect to see one until the third or fourth quarter of 2008 at the earliest,” says Sean O’Toole, founder of ForeclosureRadar.

“The sales we are seeing now are from missed payments in March. So current auction sales really have not yet been impacted by either August’s liquidity crunch or the ARM reset peaks this month and again in March 2008,” he says.

The October ForeclosureRadar report notes that notices of default were up 11.9 percent though on a daily average basis they were down 8 percent due to the limited recording days in September. Notices of sale were up 33.5 percent to 18,929 – compared to 14,000 in September and 13,500 in August. Sales were up 39.9 percent from September.

The report also notes that third parties purchased 382 properties versus 11,953 that went back to the bank.

Defaults climb to unbelievable levels.

Weekly default update. We have now reached levels that no one could have imagined (well maybe me and a few other non kool-aid drinkers).

Here is the latest list from our friends at Fidelity.

From Fidelity Kern.com. You can check their website weekly for these updates at Fidelitykern.com

Real estate moguls going to work at IHOP, Dairy Queen and Denny's

What did I hear about all those great jobs that have been created, oh nevermind...


From Arizona:

Sean Kennedy and his wife, Katy, worked for about a year at Tucson-based First Magnus Financial Corp. before the company laid off most of its employees Aug. 16.

Now Katy Kennedy is a La-Z-Boy salesperson, and Sean Kennedy is working odd jobs including occasional shifts at his family's Dairy Queen while he looks for more permanent employment.

The couple earned about $70,000 combined at mortgage lender First Magnus but are now making do with significantly less and have dipped into savings to help make ends meet.

"There are jobs out there, but the problem is finding a job that is comparable to what you were making," said Sean Kennedy, 25.



St Petersburg:

Mark Kowalick always knew that if he didn’t like where he was working, he could drive down the street near his New Port Richey neighborhood and find another job. At 39, he has been pouring concrete about half his life. It’s what he does.

Or used to do. He has been laid off for nearly a year, a victim of the housing slump. And there’s nothing down the street anymore.

It’s so bad, Kowalick said, that pawn shops have stopped buying the tools contractors use because they’re overstocked, and some of his friends have been forced to sell their most prized possession: their pickup trucks.

‘Nobody talks about what’s happening to us,’ he said. ‘It’s unbelievable that I’m reduced to this. I used to own my own concrete business.’

On Wednesday, Kowalick applied for a job that is housing-related, sort of, as a cook at a local International House of Pancakes.

This is the first time since I was 12 that I haven’t worked,’ he said. ‘Five years ago I could quit this morning and have job this afternoon. Now I don’t even know anybody who’s pouring concrete.



Sac Bee:

The downturn in the housing market -- with job losses in the industry really kicking in during 2007 -- is starting to hit the region's breadwinners.

"Job growth has slowed down quite a bit in the first months of 2007," said Howard Roth, chief economist at the California Department of Finance. "Construction, home sales -- it's all going down." Which is not news to Rachel Brandon of Sacramento.

She shook an emphatic "no" when asked Tuesday if she is better off than she was in 2005. "My career for the past 10 years was in the mortgage industry," said Brandon, who is 39. "I have a license to do loans. Two years ago I was making lots of money -- I was making deals in my pajamas from home.

Now I'm waiting tables at Denny's for $8 an hour." Still, she's optimistic. "I really like my job at Denny's," she said. "I'm learning quite a bit, and someday I'd like to have my own cafe. But, two years ago if you asked me if I'd be working for $8 an hour today, I'd have said 'God, no way.'"

Early birds get screwed

We will see more and more stories like this one from the Fresno area; where the first purchasers listened to the REIC shills and they are now underwater by up 50%. Good luck ever getting out of that financial mess. Unfortunately the knife-catchers of today, who think they "stole" the properties, will be underwater a year from now also.

From the Fresnobee.com:

A frantic two-hour auction Saturday in downtown Fresno was a sign of the times as bidders snapped up 48 new houses -- most for thousands of dollars below the builder's original list price.

"We're giving away property, ladies and gentlemen," auctioneer Mike Carr of Atlanta told the crowd of about 300 bidders in the Fresno Convention Center's Valdez Hall. Jonathan Homes, based in Patterson, offered the houses in Kerman, Madera and Riverdale to the highest bidder.

The auction came as the area's housing market struggles in a slump, with many builders facing bloated inventories.

Carr kept the bidding going nonstop. Most final bids were between $200,000 and $300,000. Previous list prices on some of the homes had been as much as $498,000.

In another case, bidding started at $229,000 on a four-bedroom, three-bath Kerman house originally valued at $412,000. It sold for $295,000.

Trump holds all cards in bankrupt development

From the Fresnobee.com:

Nine years ago, Running Horse developer Tom O'Meara sat down with Anthony and Margaret Mello at their dining room table and offered the retired couple a deal.

Over the past 40-plus years, the Mellos had turned their 16 acres at California and Marks avenues in southwest Fresno into an oasis in the midst of fallow land, a home surrounded by orange and pomegranate orchards they hoped to leave to their children and grandchildren.

But where the fruit trees grew, O'Meara saw the 18th hole of a world-class golf course -- part of a 480-acre, 780-home multimillion- dollar development that he promised would bring a PGA Tour event and new prosperity to the Mellos and their neighbors.

"They made it sound so good," recalled Margaret Mello, 77.

The dream of Running Horse ended in bankruptcy last March, leaving the Mellos with about half of their orchard ruined -- trees that crews tore out even as the developer failed, the Mellos said, to follow through on promises to buy their land.

Now Fresno Mayor Alan Autry's administration is trying to work out a deal with celebrity developer Donald Trump to bring the Running Horse project back to life -- if the city will buy all the properties in advance.

And that worries the Mellos, who -- like other small property owners whose land is needed to build Running Horse -- worry they could be crushed by bigger players in the drama.

The Mellos aren't the only people worried over the fate of the Running Horse project, where a bankruptcy has left a messy tangle of jilted investors, unpaid landholders and competing claimants on a project burdened with up to $70 million in debt -- two to three times the property's likely value.

Trump has said he isn't interested in Running Horse unless the city can deliver all the properties needed to build the Jack Nicklaus-designed golf course that was approved by the PGA Tour.

Back in July, Trump offered $30 million to buy the project out of bankruptcy. But he backed out and withdrew a $1 million deposit two weeks later after learning of potential difficulties in designating much of the land around the project as a redevelopment area.

Central Valley homebuilder goes bankrupt

From the Central Valley Business Times.com:

Dunmore Homes says it has filed for Chapter 11 bankruptcy protection to restructure its debts.
The company’s subsidiaries are not part of the filing.

The homebuilder, based in Granite Bay, has been in business for more than 50 years and has built thousands of homes in communities from Bakersfield to Yuba City, with concentration in the greater Sacramento area.

“We have engaged our lenders in a process to restructure our debts,” says Michael Kane, Dunmore Homes’ owner, “and while certain creditors took positions requiring us to seek the protection of the bankruptcy court, we intend to continue focusing on our restructuring efforts while ensuring all creditors are treated fairly.”

Dunmore Homes was recently sold to Mr. Kane, a Sacramento businessman, who immediately began restructuring efforts and hoped to resume construction and development operations as quickly as possible.

Construction activity was suspended in August.

“This was an action we did not want to take, but the success of our restructuring progress must remain the primary focus of the company in order to protect the best interests of our contractors, employees, homeowners and business partners,” Mr. Kane says.

Real estate moguls, err....morons dropping lilke flies

Flipping homes in a hot market does not make you a real estate mogul!

Mr. NY Fed head who I had an email exchange with in late 2005 and early 2006 who claimed I was an idiot for not realizing this boom was "built on fundamentals and would not stop anytime soon", step out of your ivory tower during the next speculative mania and maybe you might find out what is really going on!

From the NY Times:

At 32, with just one semester of community college, he owned a BMW, a Corvette and a 5,000-square-foot house worth $1.2 million. He was a creation of the boom. “I was on top of the world,” Mr. Haupt said recently.

Then, last May, the real estate market stopped booming.

Now Mr. Haupt’s house is in the hands of his creditors, as are the cars, three small office buildings and 89 lots he bought in a subdivision in neighboring Lincoln County.

He owes about $6 million in personal and business debt, and as Mr. Haupt’s fortunes soured, so have those of plumbers, electricians, framers, landscapers, supply stores and others that relied on his business, which he estimated at $300,000 per month.

He now rents a small house for $1,275 a month. He became a born-again Christian in February, after his business and his marriage collapsed.

KUTV:

Bill Gephardt continues his series of special investigations into the business of questionable real estate deals. This isn’t just about one or two cases. This is about dozens of people pushed to the brink of financial ruin.

Dave Ormsbee has never been inside this Draper home, which he now owns. Dave says it was his good credit alone that bought a home in Draper and a house in St. George, both with no money out of his pocket.

Now at the age of 27, Dave owes more than a million dollars in mortgage loans. Sounds like he makes a lot of money, but quite the opposite is true. Dave is a college student and waits tables after school.

He makes maybe $11,000 a year, yet he bought the Draper house for more than $700,000. ‘You’re a server at a restaurant. How can you afford a $719,000 house? I can’t,’ says Dave.

Despite that, Dave was given mortgage loans on not just one but both of the homes. But how could a college student making $11,000 a year convince any lender to give him a million dollars in mortgages? Take a closer look at Dave Ormsbee’s loan application. It shows him as the owner of his own company, Ormsbee Graphic Design.

But there is no such physical company, it’s all created on paper, he says. ‘That’s
the company that they had me make up,’ says David.

And the loan documents show David doesn’t make $11,000 per year, but $18,500 a month. ‘Do you make $18,500 a month? Nope. I don’t make that a year,’ says David.

Dave says he didn’t fill-out the documents. He admits he made the mistake of never looking at what he was signing. ‘There just so much signing going on that you just don’t care what you’re signing after a while,’ says Dave.

Foreclosures and defaults reach new record

This is from the front page of the Bakersfield Californian (no link yet):

Local foreclosures and defaults hit new records in October, the latest county data show. Some 372 Kern properties foreclosed while 945 defaulted, the highest monthly counts in each category since January 1995 when the county recorder's office started tracking filings. A year ago October, 41 foreclosures and 351 default notices were recorded.

Based on my own count, it appears the local Hispanic community has not received the memo that there is a housing bubble. Unfortunately, they are now receiving the memo via a default notice. Hispanic surnames make up, on average, 70% of the weekly defaults.

California prices could plunge 35%, costing $2.6 trillion in lost wealth

From Marketwatch:


WASHINGTON (MarketWatch) -- Home buyers with the very best credit are still having a difficult time getting mortgages in California, raising concerns that the real estate market in the nation's most populous state could fall much further, sending home values spiraling lower and toppling the state's economy into recession.

The drop in home values could cost the typical homeowner as much as $200,000 in lost wealth, for a total hit of $2.6 trillion statewide.

"We could see rapid price declines," said Dean Baker, an economist with the Center for Economic and Policy Research, who's been warning about the housing bubble for years. "These are huge numbers," he said. "Consumption will fall off."

The whole system is corrupt

From yahoo news:

ALBANY, N.Y. (AP) -- New York Attorney General Andrew Cuomo said Thursday a major real estate appraisal company colluded with the nation's largest savings and loan companies to inflate the values of homes, contributing to the subprime mortgage crisis.

"This is a case we believe is indicative of an industry-wide problem," Cuomo said in a news conference.

Cuomo announced a lawsuit against eAppraiseIT that accuses the First American Corp. subsidiary of caving in to pressure from Washington Mutual Inc. to use a list of "proven appraisers" who he claims inflated home appraisals.

Driven by a hungry market for bonds backed by home loans, mortgage lenders expanded subprime lending dramatically in 2005 and 2006. In many cases, they made loans to people at low initial "teaser" rates, which reset substantially higher one to three years later at levels some borrowers couldn't afford.

The inability of many of those borrowers to cover loan payments once they reset led to the credit crisis. More than 50 lenders have gone out of business this year, tens of thousands of people have lost their jobs in the industry, foreclosures have soared nationwide and it has become more difficult for home buyers to get home loans.

"The independence of the appraiser is essential to maintaining the integrity of the mortgage industry," Cuomo said, citing several e-mails between the companies' executives.

"First American and eAppraiseIT violated that independence when Washington Mutual strong-armed them into a system designed to rip off homeowners and investors alike," he said. "The blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market.

"By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion," Cuomo said.
Neither company responded to messages left Thursday morning.

Cuomo said eAppraiseIT and the parent company knew its actions were illegal, citing an April 17, 2007 e-mail from eAppraiseIT's president to First American that said, "We view this as a violation of the OCC, OTS, FDIC and USPAP influencing regulation."

"This is another example where the federal government is asleep at the switch," Cuomo told reporters.

Former real estate moguls take everyting except the kithen sink?

Update:

From KGET.com, a bank requested Friday Bakersfield Police file a crime report regarding appliances taken from a home once owned by Crisp and Cole Real Estate agent Jeriel Salinas.

Officers arrived at the home in Seven Oaks just before 10 a.m. for an inspection.

The current listing agent said a $4,600-Viking stove was taken from the home, along with a microwave and dishwasher.

A witness said the alleged theft occurred a couple of days prior to the bank taking the home back due to foreclosure.



Original Post:

From KGET.com. “There’s a new problem with real estate foreclosures as some residents have resorted to stripping everything from appliances to door-knobs from foreclosed homes before the houses go back to the bank.”

“17 News has uncovered two cases where the homes that have belonged to former members of the Crisp and Cole Real Estate team. The first home was owned by Jeriel Salinas, a current agent with Crisp Realty.”

“‘When we came in, we noticed that the appliances were missing,’ said real estate agent Susan Ferguson, who said, after walking into a Seven Oaks home, ‘Oops, there’s no stove. Oh wait a minute, there’s no dishwasher. No hang on a minute, there’s a microwave missing.’”

“Salinas stopped making payments on the home, so the lender took it back. Workers at another home said what occured at the Seven Oaks home is a drop in the bucket, saying door handles have been taken before.”

“‘My boss just spent $1,300 replacing the door handles,’ said construction worker Robert Velez.”

“Velez walked 17 News through a million-dollar home formerly owned by Crisp and Cole Real Estate broker Jayson Costa. Velez said business is good.”

“‘We’ve done a lot of foreclosures, and yeah, a lot lot of houses,’ he said.”

Bakersfield housing market crashes!

Latest numbers for September 2007 are out. From DQNews.com:

Bakersfield DOWN 16.23% Year over Year.

Keep in mind this does not include incentives. If the incentives were included, prices would be down over 20%.

Another measure to use is price per square foot. Based on the numbers from KernData.com, we are now down 20% from the peak on price per square foot. Also, prices are now back to the level they were in early 2005.

All of you who chose to listen to the REIC and were told "it was a good time to buy", "they are not making anymore land", "real estate only goes up", etc... Remember this during the next speculative mania. If you ask barber if you need a haircut...

Finally, things are not going to get any better. Right now we are seeing 150-200 notices of default per week, sales are down 85% from the peak and credit has tightened. All of these things were predicted here on this crappy blog at the beginning of the year and over the last few years on all the other bubble blogs. Those who listened, you have been spared the misery and all those who didn't listen, good luck.

Horses escape and then the barn door closes

Central Valley Business Times:

With California an epicenter of the mortgage meltdown and housing slump, Gov. Arnold Schwarzenegger says he will sign three bills that he says will increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities.
"It is critical that we continue to take steps to protect Californians against unscrupulous lending practices and to ensure that consumers can make informed decisions," says Mr. Schwarzenegger in a written statement released by his office Wednesday morning.

The bills are:
• SB 223 by Sen. Mike Machado, D-Linden, which will make it a crime for licensed appraisers to engage in any appraisal activity that is connected to the purchase, sale, transfer, financing or development of property if their compensation is impacted by the final price generated by the appraisal.

• SB 385, also by Mr. Machado, which permits state agencies involved with residential mortgage lending and brokering to adopt emergency measures and new policies to ensure that all mortgage lenders and brokers are subject to federal guidelines on non-traditional mortgages. This law impacts the Department of Financial Institutions, the Department of Corporations and the Department of Real Estate.

• AB 929, by Assemblywoman Sharon Runner, R-Lancaster, which increases the amount of affordable housing in California by raising the total debt that the California Housing Finance Agency can carry by $2 billion. CalHFA issues bonds to finance housing for low and moderate-income families.

California’s foreclosure rate is more than twice the national average and the Mortgage Bankers Association is reporting that the state's homeowners hold 20 percent of the nation's subprime adjustable rate mortgages, a record number of which are expected to result in foreclosure.

"It's absolutely crucial that Californians facing the threat of foreclosure reach out to their lenders and discuss available options to save their homes," says the governor. "The worst thing someone can do is nothing -- most lenders would prefer not to foreclose, but 50 percent of borrowers who lose their homes never return calls from their lenders."

Mr. Schwarzenegger says he has ordered other actions to help homeowners facing financial distress or foreclosure as a result of non-traditional mortgages.

These include ordering the state’s licensing departments to adopt regulations to strengthen underwriting and consumer disclosures, in order to ensure that consumers have the tools to fully understand the ramifications of taking out a sub-prime loan. As part of this effort, licensees will use a new, multilingual consumer disclosure form to illustrate worst-case payment scenarios.

Mr. Schwarzenegger says the state’s licensing departments will work closely with law enforcement to discipline lenders and brokers who take unfair advantage of consumers. The departments are also currently training consumer counselors, non-profits and legal aid societies to help identify licensees who have defrauded consumers or otherwise violated state law, so enforcement actions can be taken against their licenses.

He says state agencies will continue to partner with local legislators in the areas hit hardest by foreclosures to connect borrowers with non-profit counselors who can help them negotiate with their lenders.

The state has already held events in Stockton, Riverside, Sun Valley and La Quinta.

The state has also set up a hotline for homeowners in mortgage trouble. The "HOPE Hotline" (888) 995-HOPE or online at www.995HOPE.org provides free mortgage counseling 24 hours a day, seven days a week

Seperated at birth?

(Jagels Photo by Felix Adamo)

According to the local DA "We have had remarkably few real estate fraud cases over the years" .

Obviously if you don't investigate anything, then there will be few cases. Mr Jagels, just because you don't see it, then its not a crime? Do some research before you make a statement like that - please!

Foreclosures slam local market:

BY VANESSA GREGORY

Nearly a quarter of Bakersfield homes listed for sale in September were "distressed," meaning they were offered by sellers acting under duress, according to a preliminary copy of The Crabtree Report, authored and released Tuesday by local appraiser Gary Crabtree.

Distressed properties include bank-owned homes, "short sales" where lenders agree to accept less than is due on a mortgage in exchange for skirting foreclosure and homes owned by relocation companies. Properties owned by relocation companies comprised a small portion of the distressed listings, Crabtree said. One in 4.2 residential sales listings in greater Bakersfield met the distressed criteria last month, according to the report.

"That figure is pretty stunning," said John Burns, an Irvine-based new construction consultant with clients in Bakersfield. "It tells you that it's a buyer's market, and you're going to have some distressed sellers here pretty reluctantly lowering prices."

Suncal defaults on loan:

BY GRETCHEN WENNER

Irvine-based SunCal Companies told The Californian Tuesday it is ending its involvement with the proposed Mission Lakes development.

SunCal owns 515 acres of the project, more than a third of its footprint, which spreads northwest from 7th Standard's intersection with the Calloway Canal.

The company last week defaulted on a $74 million loan against the property.

We have a winner. Net Bank FAILS, FDIC steps in.

From CBSMarketwatch.com:

The Office of Thrift Supervision closed down NetBank Inc. a thrift with $2.5 billion in assets, and appointed the Federal Deposit Insurance Corp. as receiver.

The OTS said the bank experienced significant losses beginning in 2006 due to defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls and failed business strategies.

It was only the second bank failure in the past three years.

The FDIC said ING Bank has agreed to assume $1.5 billion of the failed bank's insured deposits.

Now for the really bad news; from the same article:

"NetBank had about $109 million in 1,500 deposit accounts that exceeded the Federal deposit insurance limit of $100,000. Those customers will become creditors of NetBank's receivership, the FDIC said."

DMJ Custom homes raid!!

UPDATE:

According to sources:

"BPD tells me they served a search warrant yesterday at the company owner's home in the 11-thousand block of Brightwater. He was not taken into custody. The warrant was for an investigation into "theft of construction funds."

From KGET.com:

BAKERSFIELD - Bakersfield Police raided have the home of a local homebuilder accused by some of his clients of taking their money and running.

The Bright Water Way home of Donald Juhasz was searched Tuesday, according to Bakersfield Police.

No arrests have been made, and no charges have been filed.

Juhasz created DMJ Customs in 2005. Since then, close to a dozen people have come forward saying Juhasz took money and didn't complete work.

Here is the Original Story from the Bakersfield Californian (9/17/07):

BY VANESSA GREGORY

The fireplaces are gone. They were repossessed from the half-built structure Ammanda and Thomas Meek thought would be their dream home.

All Burt Valencia has to show for his effort to have a custom home built by DMJ Customs, a home builder, is a sign with his family name on it which stands on his empty one-acre lot at the corner of Renfro and Henderson.

Ammanda Meek's home was never completed. She says the contractor took her money, leaving her with a partially constructed home. "I hate coming here, it just kills me," she said as she walked through the partially built house.

"It was 2,600 square feet, full custom," Ammanda Meek said. "It's framed and it's got a roof. That's as far as it got."

Original Post:

Recall the story by the Bakersfield Californain (I cant find the link) on the DMJ Custom homes fiasco. We can now confirm the story posted by privateeye :

Finally local government is taking action with fraudsters!! BPD raided DMJ Custom Homes aka Don Juhasz home/office yesterday. No one was home at the time, however, 3 boxes were taken from his home. Hopefully IRS will be next to collect on unpaid taxes. Hope the coward shows his face soon. Maybe he could be on KGET's panel as a local rip-off artist.

CA Foreclosures up 300%

From the Central Valley Business Times:

California foreclosure filings were up a dramatic 300 percent in August, compared to the same time last year, according to Default Research Inc., a Mt. Pleasant, Pa., foreclosure information company

Kern County reported 911 foreclosure notices last month, compared to 238 a year earlier.

Four indicted in Central Valley mortgage fraud scheme

From the Central Valley Business Times:

Four Sacramento area men have been indicted by a federal grand jury on charges of bank fraud and conspiracy to launder money in connection with what prosecutors are calling a mortgage fraud scheme involving at least 19 homes with loans of more than $8 million.

Accused are James Martin, 36; Mario Fellini III, 38; Gabriel Viramontes, 44; and Joseph Gallo, 34.

According to Assistant U.S. Attorney Matthew Stegman, who is prosecuting the case, the indictment charges that from June 2006 through October 2006, the men individually and through VFM Investment Group, Esnian Mortgage Realty, and Freedom Capital Mortgage, engaged in a mortgage fraud scheme by asking people to act as straw purchasers of single family homes on behalf of others with bad credit who wished to purchase homes.

Those solicited were told they would benefit financially from the transactions, prosecutors say.
The defendants defrauded lenders such as Washington Mutual Bank and Fremont Investment and Loan by submitting fraudulent loan applications, representing straw purchasers of homes as actual purchasers of homes, the government contends.

The indictment further charges that the fraudulent loan applications submitted on behalf of the straw purchasers falsely inflated the buyers’ income, falsely stated that a buyer was employed at a specific job, and falsely stated that the properties would be owner-occupied.

The indictment alleges that the purpose of the scheme was to ensure that the home purchase transactions closed, so that defendants would receive substantial loan broker commissions and illegal kickbacks from real estate sales commissions.

KGET real estate forum

KGET will hold a real estate forum this Sunday. Hopefully it will not turn into a perma-bull love fest like the one in the summer of 2005. My favorite quote was when John Busby stated prices would continue to go up 10-15% for the foreseeable future. Unless he meant the next foreseeable 15 minutes, he was obviously dead wrong!

We complained about that last one, now we get some input on this one. Post any questions or comments you would like asked. Also, post any guests you would like to see as part of the panel.

(sorry for the slow posting, I have been busy and working on another project which is consuming most of my free time).

Thanks!

Mortgage rates go up twice today.

As expected, the FED drops rates; then the dollar drops like a rock and interest rates rise.

Dollar is in the crapper compared to the Canadian and European currencies. Oil at an all time high and gold keeps going up. Meanwhile all of wall street makes out big time and the little guy gets to spend $100 to fill up his tank.


From today's Brokers Outpost:

What caused rates to go up twice today.... they are MUCH worse than before
the Fed even cut the rates....

To all those who claim rates will now start to go down

From the Telegraph :

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.

"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.

The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.

The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.

Also from the Telegraph:

China threatens 'nuclear option' of dollar sales

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels. It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Californian reponds to criticism from us

From the Bakersfield Californian:

Did they or didn't they commit fraud? Will they or won't they get jail time?

Who knows? Certainly not me. I'll leave that to the experts.

Speaking of experts, I'm getting a little fed up with the "I told you so's" from the so-called experts these days. Mostly, they're having their say anonymously on blogs, but we've received a few e-mails and phone calls as well.

The number of people in Bakersfield who apparently KNEW what was GOING ON with Crisp and Cole is amazing, considering how many people our reporters contacted in the local real estate industry over the last two years who refusedto talk to us -- or would only talk about rumors off the record.

That's right, I'm taking the task takers to task.

Be back

Out on business for a week. Anon comments disabled until I return.

Also, the FED will drop rates by 25 bps on Tuesday. Which is a mistake!

On-Line Run on the Bank

From Northern Rocks online website:

Unfortunately, the system is currently very busy.

We apologise for any inconvenience caused and ask that you try again later.

Thank you for your patience in this matter.

Words of the day.

I have a feeling, :), we will be seeing these words in the future. Thanks to the reader who sent this in.

1) Title Company

2) Subpoena

3) Last Thursday

Bank Run. Could this happen in the US?

From the Financial Times:

The turmoil in global banking hit the streets of Britain on Friday as thousands of Northern Rock customers queued up to withdraw their savings from the UK mortgage lender after it was rescued by the Bank of England.

As regulators and politicians called for calm, Northern Rock – Britain’s fifth-biggest mortgage lender – scrambled to contain the fallout after it became the first British bank in decades to be bailed out by regulators. One person close to the situation said customers had withdrawn about $2bn Friday but Northern Rock declined to comment on the figure, which would amount to 4 per cent of its deposit base.

The rescue demonstrates the risks from a decade of financial innovation in the capital markets, which allowed a small regional lender to wield financial clout far greater than its network of 76 branches would suggest.

It also shows how the turmoil in the financial system that resulted from excessive lending to Americans with patchy credit histories triggered the failure of a bank with no direct links to the US mortgage market.

Also from the Financial Times:

“I’m completing on a house next week and I’m transferring funds today instead of then,” said another depositor. “It’s just a precaution.” Whatever problems Northern Rock had with call centres and websites, the branch opened at 9am sharp and a relieved group of customers trudged in to move their money.

Late on Thursday lenders and borrowers had reported problems accessing the bank’s website after news of the Bank of England’s move was reported. The volume of traffic from depositors and mortgage holders had caused the website to freeze in an indication of the level of customer concern about the bank’s situation.

KGET responds to media criticism

Whipping Boys Or Asleep At The Wheel? Crisp Coverage Uncovered :

Ouch. I won't speak for all the media here, nor will I speak for the reporting of others.

But I believe in transparency.

Since I was handed this story several months ago, we've been working diligently on getting the story on the air. It takes longer than I'd like. Television news is a different beast than Online or print reporting. Yes, we need video. Of houses in question, of people, and of documents. Add to that the time that it takes to pull these records at the hall of records. Then, we have to track down key players and give them a chance to respond. When we go out and do that, we get a small but strident minority who say we're being too agressive and unethical. When I put a story on the air, I stand behind my work. I can't go on the air with a story without backing it up with documents and multiple sources. And many sources on this story were reluctant or otherwise unwilling to come forward. I talked with scores of members of the real estate industry who knew about the transactions that we reported in July, but were unwilling to discuss them on camera or even mention David Crisp Or Carl Cole.

CPA Comfort Letters

This was emailed to me by a reader. I have to wonder if this is allowed by the State Board of Accountancy?

During this boom it took three people to make a stated loan (or other toxic mortgage) happen. A lender, an appraiser and a CPA. We have already seen how things worked out for the lenders and appraisers.

The CPA had to issue a "CPA Comfort Letter". This letter provides "comfort" to the lender that that amounts stated on the loan documents are accurate for a stated income amount or stated assets:

*** New Lower Price ***
cpaLetters.com
We Provide CPA Letters For Borrowers Who Do Their Own Tax Returns.
Web Site Tel. 818 248-8469
••••••••••••••••••••••••••••••••••••••••••••••••
Close More Loans!
••••••••••••••••••••••••••••••••••••••••••••••••
What We Do: With the increase in people preparing their own personal tax returns, and the banks requiring a letter from a Certified Public Accountant that the borrower is self-employed, we have filled the gap. Upon verification that the borrower has filed a Schedule C we will issue a letter from a Certified Public Account that the Borrower has been self-employed for the past two years.

Tel. 818 248-8469 Fax. 818 248-3081 Web Sit: www.cpaLetters.com email: info@cpaLetters.com

Other Possible reasons you may need our services:
1.) The CPA is a party to the transaction
2.) The CPA company is out of business
3.) The CPA died
4.) The CPA is no longer on good terms with the borrower
5.) The tax preparer is a bookkeeper, not a CPA

FBI RAID!

FLASH!!

CONFIRMED FBI RAID ON CRISP AND COLE!!!!

UPDATE#5:

Some video from tonights news:

From KBAK TV 29

From the Bakersfield Californian

From KGET.com

From KGET.com

From KERO TV 23


UPDATE #4:

Bakersfield.com
The home of Crisp’s mother, Tu Crisp, at 12716 Crown Crest, was also searched by FBI agents. And at around 11 a.m. Wednesday, two men were seen being led from the home in handcuffs and into a Bakersfield Police Department vehicle.Spokesman Steve Dupre also said agents were searching the home of Crisp's in-laws, Kevin and Leslie Sluga, who live at 12403 Crown Crest Drive




UPDATE #3:

Sources state the following agencies issued 13 search warrants and the locations were raided by FBI, IRS, DRE, Bakersfield Police and Kern County Sheriffs.



UPDATE #2:

I just left the scene and several locations. WOW!!

Bakersfield Californian:

Federal agents served search warrants on several homes and businesses connected to real estate agents David Crisp and Carl Cole early Wednesday morning.

Californian reporters at Cole’s offices on Gosford Avenue and White Lane tried to talk with employees who were outside dealing with customers while agents were inside the offices. But employees refused to talk about the situation.

FBI agents were visiting 13 locations Wednesday morning and were seizing documents, according to Steve Dupre, special agent and spokesman of the Sacramento division of the FBI.

UPDATE #1:

KGET.com:

FBI agents and other federal authorities were searching the home and offices of real estate agent David Crisp and his family and associates Wednesday morning.

KGET's Jim Scott and Kiyoshi Tomono, who are on the scene, said dozens of agents and technicians are inside the gates of the Grand Island neighborhood at Seven Oaks in Southwest Bakersfield. Agents are at 13 sites, including the office of a real estate appraisal company, the FBI said.

Seven Oaks is, perhaps, Bakersfield's most prestigious neighborhood, and Grand Island is one of the most exclusive parts of Seven Oaks. Houses are priced at $2 million or $3 million or more.
Agents also were at Crisp's home in an even more exclusive gated community, across Buena Vista Road, in the 10500 block of New Quay Court, near the Seven Oaks clubhouse. They were at the Crisp and Associates office in the Town and Country shopping center.

The raids began at about 8 a.m. KGET crews said authorities appeared to be conducting a search. No arrests were seen.

On Monday, the California Department of Real Estate issued a formal accusation that Crisp and his former partner, Carl Cole, deceived mortgage companies to secure huge loans on luxury homes in the Seven Oaks area.