Tuesday Report, Jan. 11, 2011
Special to the Texas Low Income Housing Information Service
The twisting and murky maneuvers in white-collar crime come into focus as Goldman Sacks faces fraud charges from a partner that refuses to take the rap for unmerited profits from the housing meltdown. The complicated nuances of the sleazy dealings also bring the SEC’s settlement with Goldman Sacks into review.
As the recession ticks on, “declining cities,” with massive foreclosures that decimate neighborhoods, become sociological analogies for “rust belt” cities from another era.
In Galveston, a consultant firm hired in Oct. 2009 for $4.2 million to repair Ike-damaged houses has produced only nine contracts.
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Goldman Sachs sued over mortgage deal cited by SEC
By Greg Gordon McClatchy Newspapers January 6, 2011
WASHINGTON — A foundering bond insurer filed a civil fraud suit against Goldman Sachs Thursday over the same exotic mortgage securities deal in which Goldman paid $550 million last summer in a settlement with the Securities and Exchange Commission.
ACA Financial Guaranty Corp. charged that Goldman helped a major client, the hedge fund Paulson & Co., rig the billion-dollar deal by allowing the firm to pack it with securities backed by highly risky mortgages in early 2007 as the housing market was beginning to collapse.
ACA invested heavily in the deal, known as Abacus 2007-AC1, in the belief that Paulson had agreed to absorb the first losses, while Goldman concealed that the hedge fund was actually betting that the so-called synthetic securities would default, the suit said.
Goldman initially bet on the failure of the underlying bonds in the deal, but secretly sold its position to Paulson.
Banks lose key foreclosure ruling in top Massachusetts court
By Jonathan Stempel and Dena Aubin Reuters January 7, 2011
NEW YORK – In a decision that may slow foreclosures nationwide, Massachusetts’ highest court voided the seizure of two homes by Wells Fargo & Co and US Bancorp after the banks failed to show they held the mortgages at the time they foreclosed.
Bank shares fell, weighing on broader stock indexes, on fears the decision could threaten lenders’ ability to work through hundreds of thousands of pending foreclosures.
The Supreme Judicial Court of Massachusetts’ unanimous decision on Friday upheld a lower court ruling. It is among the earliest cases to address the validity of foreclosures done without proper documentation.
That issue, including the use of “robo-signers” who approved foreclosure documents without reviewing them, last year prompted an uproar that led lenders such as Bank of America Corp, JPMorgan Chase & Co and Ally Financial Inc to temporarily stop seizing homes.
“A ruling like this will slow down the foreclosure process” for lenders, said Marty Mosby, an analyst at Guggenheim Securities in Memphis, Tennessee. “They’re going to have to be really precise and get everything in order. It doesn’t leave a lot of wiggle room.”
Full story at: http://www.reuters.com/article/idUSTRE7063M620110107
A Little-Known Strategy for Cutting Mortgage Payments
By Lynnley Browning New York Times January 6, 2011
HOMEOWNERS looking to lower their monthly mortgage payments and also save some on interest may be able to do so without all the hefty fees and daunting credit requirements of refinancing.
A little-known strategy, called “recasting,” or “re-amortization,” is available through some mortgage lenders and servicers.
It involves paying off a lump sum of the principal amount and asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal, so your new monthly payments decrease slightly and you save on interest paid over the life of the loan.
Ghost Towns: Housing collapse will result in new types of ‘declining cities’
By Palash R. Ghosh Jobs and Hire January 6, 2011
U.S. metropolitan areas which have suffered the steepest drops in housing prices are poised to endure long-term deterioration similar to how certain cities in the Rust Belt were permanently damaged by the decline of manufacturing.
According to a new report published by the Research Institute for Housing America, a division of the Mortgage Bankers Association, a new kind of “declining city” will emerge in the U.S. that will witness neighborhoods with high rates of vacancies and a sustained drop in population.
“Some neighborhoods are going to suffer tremendously or are never going to come back or come back very, very slowly,” said James R. Follain, senior fellow at the Rockefeller Institute of Government and author of the study.
National homebuilders: Laggards on global warming
By Philip Langdon New Urban Network January 4, 2011
It probably won’t surprise anyone who loves walkable communities, but a new report shows that America’s biggest homebuilding firms score pathetically low on sustainable land use practices.
Calvert Asset Management Company, an investment fund based in Bethesda, Maryland, examined how the 10 largest publicly-held homebuilding firms in the US are doing on sustainability. The verdict: Most of them fare poorly.
Of the ten largest such firms, KB Home, based in Los Angeles, has taken the greatest steps toward environmental sustainability. Pulte Homes, based in Bloomfield, Michigan, is second-best. Meritage Homes of Scottsdale, Arizona; Toll Brothers of Horsham, Pennsylvania; and Standard Pacific of Irvine, California, rank lower on “green” performance, but have improved somewhat in the past two years.
Council looks at housing repair process
By Amanda Casanova Galveston County Daily News January 11, 2011
GALVESTON — While hundreds who lost their homes in Hurricane Ike continue to wait for hammers to swing, a consulting firm hired to administer a $167 million housing program has only started construction on nine houses and been paid $4.2 million. On Monday, city Council members told representatives from consulting firm Camp, Dresser and McKee they were frustrated with the company’s progress in more than a year. “I am not happy at all with this process,” said city council member Linda Colbert, who called the special meeting with council member Steve Greenberg. In October 2009, the city hired Massachusetts-based Camp, Dresser and McKee consulting firm to manage the spending of $107 million in federal money to repair or rebuild owner-occupied houses struck during Hurricane Ike. The firm also was hired to manage $25 million the city put toward rebuilding public housing units and to administer another $7 million earmarked to rehabilitate rental properties. Of more than 2,000 applications for the owner-occupied housing program, 1,483 applications met the basic eligibility criteria. As of the end of December, only 731 of those 1,483 applications have been approved for the next level before bids.
Full story at: http://galvestondailynews.com/story/203854
Fort Worth says homeless will probably have to leave large camp
Bu Alex Branch Fort Worth Star-Telegram January 10, 2010
FORT WORTH — People living in one of Fort Worth’s largest homeless campsites will likely have to relocate after city code officers reported many violations there.
The development has church members who provide outreach at the camp worried that occupants will have to leave before they can find another place to stay.
City code officers responded Friday to complaints about a camp that has “mushroomed in size” at Riverside Drive and Lancaster Avenue and found about 50 tents pitched on a ridge, said Brandon Bennett, Fort Worth’s code compliance director. They also found food and paper waste, as well as empty alcoholic beverage containers.
The camp is on private property, so officers contacted the owner, who said the campers did not have permission to be there.
Man with golden voice: A great story, but does it help cause of homeless?
The Cinderella story of Ted Williams, the man with the golden voice, is bringing hard-to-find attention to the cause of the homeless. ‘Homelessness is not sexy,’ says a Skid Row center official.
By Gloria Goodale Christian Science Monitor January 6, 2011
Los Angeles — The formerly homeless “golden-voiced” Ted Williams is strolling into his second act – professed to be clean and sober for more than two years and now the object of massive media attention, recipient of job and home offers, and participant in the requisite teary reunion with his mother.
A recession-weary nation clearly loves this Cinderella story. His YouTube video has received millions of views and counting.
But is this a good thing? Does a singular case of one down-and-outer-made-good really help when funding for homeless centers nationwide is drying up and record numbers of formerly middle-class Americans are on the streets?
“Absolutely,” says Deborah Billar, vice president of development for the Weingart Center, a Los Angeles Skid Row organization that serves up to 600 homeless people. “Anything that contributes to the dialogue around this urgent problem is a good thing,” she says.