Thursday, November 29, 2007

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.

Tuesday, November 27, 2007

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.

Wednesday, November 21, 2007

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.”

Tuesday, November 20, 2007

97% of foreclosures going back to the bank

From the Central Valley Business

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.

Tuesday, November 13, 2007

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 You can check their website weekly for these updates at

Monday, November 12, 2007

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.'"

Sunday, November 11, 2007

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

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

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.

Friday, November 09, 2007

Central Valley homebuilder goes bankrupt

From the Central Valley Business

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.


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.

Wednesday, November 07, 2007

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.

Monday, November 05, 2007

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."

Thursday, November 01, 2007

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.