Tuesday Report, July 5, 2011
Special to the Texas Low Income Housing Information Service
Two big banks are now taking re-emptive measures to head off mortgage defaults. J.P Morgan and Bank of America are now searching-out risky loans and contacting the borrowers to lower the principles that were often inflated during the housing boom. In a related move, BoA is taking steps to reconcile its differences with mortgage bond investors; BoA will eat $20 billion in charges from the investors.
Meanwhile, HUD is releasing $1 billion to help homeowners whose income has been reduced during the recession.
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Emergency Homeowners’ Loan Program accepting ‘lottery’ applicants
By Audrey Spencer Lufkin Daily News July 2, 2011
U.S. Department of Housing and Urban Development’s Emergency Homeowners’ Loan Program is accepting pre-applicants through July 22 for a “lottery” for homeowners who have become unemployed or underemployed due to the economic downturn or a medical condition to gain help paying their mortgages.
The Dodd-Frank Wall Street Reform and Consumer Protection Act provided $1 billion to the U.S Department of Housing and Urban Development to implement the EHLP, according to the website for NeighborWorks America, the organization administering the program.
“The amount of assistance depends on the homeowner’s level of need,” stated Alesha Larkins, compliance and community coordinator with Business and Community Lenders of Texas, selected as one of 11 participating organizations in the HUD program. “We’ll go into the specifics with the homeowner, but basically, they’ll pay a part and HUD will pay a part for two years.”
A Stimulus Success Story
By Shawn Zeller CQ June 25, 2011
The debate over the efficacy of President Obama’s $787 billion economic stimulus package may never be resolved, but in at least one respect, it does appear to have unambiguously succeeded: It kept the number of homeless people from soaring.
Earlier this month, the Housing and Urban Development Department reported that despite the deep recession, from 2009, when the law was enacted, through 2010, the number of homeless people remained basically unchanged, rising by just 2 percent. Nearly 1.6 million people spent at least one night in an emergency shelter or transitional housing in 2010, according to HUD.
The stimulus bill included $1.5 billion for states, territories and localities to spend over three years on permanent housing for the homeless and to help prevent homelessness.
HUD Secretary Shaun Donovan was quick to take credit on the administration’s behalf. He said in a statement that it was clear “that had it not been for President Obama’s Recovery Act, many hundreds of thousands of persons may have fallen into homelessness.”
Big Banks Easing Terms on Loans Deemed as Risks
By David Strethfeld New York Times July 3, 2011
As millions of Americans struggle in foreclosure with little hope of relief, big HYPERLINK “http://topics.nytimes.com/your-money/investments/brokerage-and-bank-accounts/index.html?inline=nyt-classifier”banks are going to borrowers who are not even in default and cutting their debt or easing the HYPERLINK “http://topics.nytimes.com/your-money/loans/mortgages/index.html?inline=nyt-classifier”mortgage terms, sometimes with no questions asked.
Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.
Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.
Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it.
Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.
Bank of America expects loss after settlement
By Joe Rauch and David Henry Reuters June 29, 2011
CHARLOTTE, N.C./NEW YORK – Bank of America Corp said it expects to take more than $20 billion of charges after settling with mortgage bond investors, resulting in a second-quarter loss.
The sum, which includes an $8.5 billion settlement, removes a question mark that had been hovering over the bank since October, and Bank of America’s shares rallied.
“Investors can now start attaching a number to these unknowns and what they will cost the bank. With the swipe of a pen, they’ve dealt with a large chunk of these issues,” said Paul Miller, a banking analyst with FBR Capital Markets.
Chief Executive Brian Moynihan is working hard to move past the mortgage crisis, and this settlement is the latest step in that process.
But the large dollar amounts linked to the settlement and the bank’s other efforts to clean up mortgage exposure in recent months could weigh on the bank’s capital levels as most banks are looking to boost capital and return more money to shareholders.
Wrongful home foreclosures rare – but devastating
By Rick Daysog Sacramento Bee July 2, 2011
Kamal Sharma almost lost his house in a foreclosure auction the other day. The funny thing is: He doesn’t even owe any money on it.
Sharma’s story – an extreme case even in Sacramento’s chaotic real estate market – shows that lenders continue to make foreclosure mistakes despite extensive publicity and promises to fix problems, which include sloppy paperwork and communication breakdowns.
“There are a lot of people that have been wrongly foreclosed upon,” said Kevin Stein, associate director of the San Francisco-based California Reinvestment Coalition.
Sharma’s troubles started last month when he arrived at his West Sacramento house one day to find a foreclosure notice from the servicing arm of Bank of America taped to the front door.
Sharma, 34, had paid $85,000 in cash for the three-bedroom home in March, using money from a settlement he received from a workplace accident in which he lost half of his left foot. He planned to rent the house out for income.
After the foreclosure notice arrived, other curious things happened. A potential buyer came snooping around the neighborhood, and then a property management firm refused to list the house as a rental due to the foreclosure notice.
Mortgage exec gets 30 years for $3-billion fraud
Associated Press June 30, 2011
ALEXANDRIA, Va. — An executive convicted of orchestrating a nearly $3-billion fraud as chairman of one of the largest mortgage companies in the U.S. was sentenced Thursday to 30 years in prison by a judge who accused him of showing no remorse.
Federal authorities say the case against Lee B. Farkas, former chairman of Florida-based Taylor Bean & Whitaker, was one of the largest prosecutions arising from the nation’s financial crisis. The fraud put thousands of employees out of work and contributed to the collapse of Colonial Bank of Montgomery, Ala., which authorities described as the sixth-largest bank collapse in U.S. history.
“He deserves to be punished severely in light of the enormity of his crimes. The losses from this case are, in fact, off the charts,” federal prosecutor Patrick Stokes said in urging a judge to send Farkas, 58, to prison for life. “He has destroyed lives and institutions.”
Full story at: http://www.ocala.com/article/20110630/APA/1106300640
North Texas leads U.S. in apartment leasing growth
By Sandra Baker Fort Worth Star-Telegram June 29, 2011
Strong job growth has boosted demand for apartments in Dallas-Fort Worth, pushing the area to the top among metro areas in increased leasing activity during the second quarter.
There were 8,390 additional apartments occupied in North Texas in the April-June period compared with the previous three months, according to MPF Research. That was 2,040 more than Chicago, which ranked second among quarterly leaders.
“Job growth has come back more sharply in Dallas-Fort Worth than just about anywhere else across the country, so it’s not surprising to see housing demand on the upswing,” said Greg Willett, MPF Research vice president. He added that more potential first-time home buyers are opting to rent instead.
Firm plans four Austin apartment complexes worth $200 million
By Shonda Novak Austin American-Statesman July 2, 2011
In its first push into luxury apartment development, Austin-based Cypress Real Estate Advisors plans to build four complexes in Austin that will total $200 million worth of new development and add 1,112 units to a multifamily market where rents and occupancies have risen to record levels.
Cypress’ projects call for a 318-unit complex at South Lamar Boulevard and Manchaca Road; 302 apartment units at University Park, a planned mixed-use development on the former Concordia University campus north of downtown ; 262 units in Corazon, a project planned in the block bounded by East Sixth, East Fifth, San Marcos and Medina streets; and a 230-unit complex set for the South Lakeshore Boulevard area off East Riverside Drive and Tinnin Ford Road, where older apartments have been razed to make way for the new upscale units.
Homeless shelters feeling the heat of a hot summer
By Alex Branch Fort Worth Star-Telegram July 2, 2011
People gathered on the scalding hot sidewalk around the Presbyterian Night Shelter have a keen interest in the thermostat.
“Can you please call time and temperature?” asked Claire Griffin, 41, spotting someone with a cellphone from under a blue umbrella that shielded her fair skin from the sun. “We get to go in if it hits 100.”
It’s actually the heat index that has to hit triple digits before the shelter opens its doors early. Inside, employees were hurriedly preparing for another rush of homeless people escaping what is already a sizzling summer, even by Texas standards.
The heat is already straining some shelter and relief agencies’ budgets and supplies. The night shelter’s electric bill is approaching $13,000 a month for all its campuses — an amount typically seen in August.
The overnight population has spiked to about 550 on the hottest days.
Full story at: http://www.star-telegram.com/2011/07/01/3195490/homeless-shelters-feeling-the.html#tvg
City works to limit vacant isle houses
http://galvestondailynews.com/contact/amandacasanova By Amanda Casanova Galveston County Daily News July 3, 2011
GALVESTON — The city is working to limit rundown and vacant houses on the island and keep up with other damaged homes waiting for rehabilitation or reconstruction assistance in the island’s housing recovery program. “There are still a lot of people waiting to be processed through the program,” city spokeswoman Alicia Cahill said. “It’s possible that many of the properties that people are asking, ‘Why is that property allowed to sit there like that?’ that those may be the ones that are in some state in the program. It’s not that we allow deteriorating properties to sit there.” According to a report in late June, more than 2,000 people applied for assistance in the housing recovery program. More than 100 units damaged during Hurricane Ike are under construction and another 37 are complete. Vacant Buildings Vacant properties on the island often are pinpointed as neighborhood eyesores and hide-outs for vagrants.
Full story at: http://galvestondailynews.com/story/242170