By Jeff Harrington, Saint Petersburg Times Staff Writer Posted: Sep 28, 2010
Tampa Bay area home prices have fallen 3.2 percent compared to a year ago, the third highest drop among 20 metro markets tracked in the S&P/Case-Shiller home price index.
The index released Tuesday morning showed home prices nationwide were up 3.2 percent from a year ago, with half the cities up for the year, some strongly. But the growth rate weakened considerably in July with the phase-out of homebuyer tax credits crimping sales this summer.
Hardest-hit markets over the year were Las Vegas, down 4.9 percent, and Charlotte, N.C., down 3.5 percent. On the flip side, California led the market rebounders: San Francisco prices were up 11.2 percent since July 2009, followed by San Diego (up 9.3 percent) and Los Angeles (up 7.5 percent).
Between June and July, Tampa Bay home prices were down a fraction, 0.2 percent., one of eight metros with a monthly drop.
Unlike some home price measures based strictly on current sales, Case-Shiller's index tracks the actual value of specific single-family homes over time. Condominiums are not included.
Comment: As is the case, all median pricing is considered micro market and Case-Shiller paints with a very broad brush. I have found that school districts are playing a very significant role in home valuation dynamics. My research has shown evidence indicating median sales price increases in those areas where public schoools are A rated. Something to ponder.
Tuesday, September 28, 2010
Monday, September 20, 2010
Real estate crash doesn't play favorites: Values fall across Pinellas County
By David DeCamp and Darla Cameron, St. Petersburg Times Staff Writers -Sunday, September 19, 2010
ST. PETERSBURG — Brad Dieringer's first thought when he opened his property tax bill? Pop a beer.
Taxes for his Euclid-St. Paul home stand to fall almost $660 from last year.
Better to focus on that decrease than the more depressing figure on the notice. His home is worth 25 percent less than last year, according to the Pinellas County Property Appraiser's Office.
"What else can you do?" said Dieringer, 33, a construction project manager.
Dieringer and his wife, Emily, bought the 1940 home for $205,000 near the market's peak in 2006. They've spent thousands improving its foundation, roof and siding.
Like most Pinellas County homeowners, this year's bill reflected a continual slide in values. Their home is now valued at $94,000.
On average, home values fell 14.6 percent in Pinellas, according to a St. Petersburg Times review of assessments by the Property Appraiser's Office. It was slightly worse than the 13.6 percent decline in Hillsborough County, and the 12.8 percent average loss in Pasco County.
The real estate decline hasn't discriminated, striking ritzy beach enclaves like Belleair Shore and foreclosure-ridden Bartlett Park in St. Petersburg. Both areas saw a roughly 15 percent decrease.
"It's dropping about everywhere," said Pinellas County Property Appraiser Pam Dubov.
Factoring out businesses, apartment complexes and new construction, nearly every neighborhood dropped. In the few good ones, the average rise was meager, such as 1.5 percent in Historic Roser Park.
"The only reason I can see for it is, people aren't selling," said Debra Camfferman, 56, who has lived in the historic St. Petersburg neighborhood for 14 years.
Harbordale, a community south of downtown dotted with rentals and empty homes, didn't fare as well. Homes there fell 34 percent in value, on average.
Resident Early Bryant, 57, rents a home for $400 but might someday buy, he said. It's tough to even find renters sometimes, he said, but neighbors are trying to keep up. He mowed a vacant house's lawn Thursday.
"I try to keep my alley clean," Bryant said.
Values are as of Jan. 1, and don't include costs for real estate transactions, which drive sale prices higher. But the Pinellas Realtors Organization reported sale prices falling in August from last year, too.
Fewer owners are contesting their values this year, likely because no one wants to quibble with a lower tax bill even though the number means their home is worth less.
Dubov said appeals topped out in 2008, and have been falling since. Last year, there were only 2,900 contested properties.
In isolated instances, Dubov said, some are appealing because they want a higher value to help sell the home.
As real estate rocketed, many people benefited under the Save Our Homes cap that limits taxable value from going up more than 3 percent each year.
Now, values have plummeted so much that 70 percent of owners don't qualify for the cap. The ones who benefit will see their taxable value rise — and probably their tax bill go up — because their home is still assessed below market value. For example, Camfferman will pay $1,412 in property taxes for her Roser Park home, up $65 — despite a market value actually falling $12,000.
The market crash hasn't been enough to erase inequities in Florida's system. Homes with similar values can have drastically different tax values because longtime owners enjoy protection from increases.
"I call it the gotcha of moving to Florida. You're new — gotcha!" said Dieringer, a Texas native, as he rued bigger nearby homes with lower bills.
For example, Ron Wulfeck and his wife, Paulette, stand to pay $57 in property taxes this year. (Yes, that's $57 total.) They've owned their south Dunedin house — valued at $113,000 — since 1987.
"I love my tax bill," said Ron Wulfeck, 72, a retired firefighter.
Even so, their home and neighborhood bear the mark of recession. Wulfeck said he sees a few more renters, and homes selling for drastically less than they would have gone for a few years ago.
He wanted to sell the house and retire to Ohio. That's off until values rise again.
It's the real estate pause. It cuts across homeowners young and old. People just aren't moving.
Jason Jensen, 33, an architect, bought his two-bedroom Crescent Heights home in St. Petersburg in 2002 for $142,000. He watched as the value went up, and now down. In between, he had kids and watched neighboring homes ride the same wave.
Although homes in Crescent Heights lost 15 percent in value on average, Jensen said it's a good place to live. The recession makes him take a harder look at spending money, but he's optimistic about the future there.
He has to be. He won't move soon.
ST. PETERSBURG — Brad Dieringer's first thought when he opened his property tax bill? Pop a beer.
Taxes for his Euclid-St. Paul home stand to fall almost $660 from last year.
Better to focus on that decrease than the more depressing figure on the notice. His home is worth 25 percent less than last year, according to the Pinellas County Property Appraiser's Office.
"What else can you do?" said Dieringer, 33, a construction project manager.
Dieringer and his wife, Emily, bought the 1940 home for $205,000 near the market's peak in 2006. They've spent thousands improving its foundation, roof and siding.
Like most Pinellas County homeowners, this year's bill reflected a continual slide in values. Their home is now valued at $94,000.
On average, home values fell 14.6 percent in Pinellas, according to a St. Petersburg Times review of assessments by the Property Appraiser's Office. It was slightly worse than the 13.6 percent decline in Hillsborough County, and the 12.8 percent average loss in Pasco County.
The real estate decline hasn't discriminated, striking ritzy beach enclaves like Belleair Shore and foreclosure-ridden Bartlett Park in St. Petersburg. Both areas saw a roughly 15 percent decrease.
"It's dropping about everywhere," said Pinellas County Property Appraiser Pam Dubov.
Factoring out businesses, apartment complexes and new construction, nearly every neighborhood dropped. In the few good ones, the average rise was meager, such as 1.5 percent in Historic Roser Park.
"The only reason I can see for it is, people aren't selling," said Debra Camfferman, 56, who has lived in the historic St. Petersburg neighborhood for 14 years.
Harbordale, a community south of downtown dotted with rentals and empty homes, didn't fare as well. Homes there fell 34 percent in value, on average.
Resident Early Bryant, 57, rents a home for $400 but might someday buy, he said. It's tough to even find renters sometimes, he said, but neighbors are trying to keep up. He mowed a vacant house's lawn Thursday.
"I try to keep my alley clean," Bryant said.
Values are as of Jan. 1, and don't include costs for real estate transactions, which drive sale prices higher. But the Pinellas Realtors Organization reported sale prices falling in August from last year, too.
Fewer owners are contesting their values this year, likely because no one wants to quibble with a lower tax bill even though the number means their home is worth less.
Dubov said appeals topped out in 2008, and have been falling since. Last year, there were only 2,900 contested properties.
In isolated instances, Dubov said, some are appealing because they want a higher value to help sell the home.
As real estate rocketed, many people benefited under the Save Our Homes cap that limits taxable value from going up more than 3 percent each year.
Now, values have plummeted so much that 70 percent of owners don't qualify for the cap. The ones who benefit will see their taxable value rise — and probably their tax bill go up — because their home is still assessed below market value. For example, Camfferman will pay $1,412 in property taxes for her Roser Park home, up $65 — despite a market value actually falling $12,000.
The market crash hasn't been enough to erase inequities in Florida's system. Homes with similar values can have drastically different tax values because longtime owners enjoy protection from increases.
"I call it the gotcha of moving to Florida. You're new — gotcha!" said Dieringer, a Texas native, as he rued bigger nearby homes with lower bills.
For example, Ron Wulfeck and his wife, Paulette, stand to pay $57 in property taxes this year. (Yes, that's $57 total.) They've owned their south Dunedin house — valued at $113,000 — since 1987.
"I love my tax bill," said Ron Wulfeck, 72, a retired firefighter.
Even so, their home and neighborhood bear the mark of recession. Wulfeck said he sees a few more renters, and homes selling for drastically less than they would have gone for a few years ago.
He wanted to sell the house and retire to Ohio. That's off until values rise again.
It's the real estate pause. It cuts across homeowners young and old. People just aren't moving.
Jason Jensen, 33, an architect, bought his two-bedroom Crescent Heights home in St. Petersburg in 2002 for $142,000. He watched as the value went up, and now down. In between, he had kids and watched neighboring homes ride the same wave.
Although homes in Crescent Heights lost 15 percent in value on average, Jensen said it's a good place to live. The recession makes him take a harder look at spending money, but he's optimistic about the future there.
He has to be. He won't move soon.
Monday, September 13, 2010
Tampa Bay home prices hit 10-year lows in August, report says
By Jeff Harrington, St. Petersburg Times Staff Writer - Posted September 10,2010
Home prices in the Tampa Bay area fell to a 10-year low in August, according to a report Friday from Ybor City consultancy Home Encounter.
Home Encounter estimates that area sales prices averaged $89 per square foot last month, down 7 percent from a year ago and down 4 percent from July. Home prices and total home sales fell substantially in July following the expiration of homebuyer tax credits.
Home Encounter president Peter Murphy said there was no doubt the tax credit pushed prices higher, at least temporarily.
"Sellers asked a premium for their homes, which buyers were willing to pay to take advantage of the tax credit," he said.
Four months later, he said, prices have dropped by an average of $13,000, indicating tax credit-buyers overpaid.
The monthly report — which is drawn from Multiple Listing Service information on home closings in Hillsborough, Pinellas, Pasco and Polk counties — is a precursor to more extensive sales data from the National Association of Realtors. The Realtors' August report, which includes numbers for all of Florida, should be released Sept. 23.
Home prices in the Tampa Bay area fell to a 10-year low in August, according to a report Friday from Ybor City consultancy Home Encounter.
Home Encounter estimates that area sales prices averaged $89 per square foot last month, down 7 percent from a year ago and down 4 percent from July. Home prices and total home sales fell substantially in July following the expiration of homebuyer tax credits.
Home Encounter president Peter Murphy said there was no doubt the tax credit pushed prices higher, at least temporarily.
"Sellers asked a premium for their homes, which buyers were willing to pay to take advantage of the tax credit," he said.
Four months later, he said, prices have dropped by an average of $13,000, indicating tax credit-buyers overpaid.
The monthly report — which is drawn from Multiple Listing Service information on home closings in Hillsborough, Pinellas, Pasco and Polk counties — is a precursor to more extensive sales data from the National Association of Realtors. The Realtors' August report, which includes numbers for all of Florida, should be released Sept. 23.
Wednesday, September 8, 2010
Florida's citizens Says Sinkhole Claims Forcing Proposed Rate Hike
By Timothy F. Kirn - Insurance Journal Southeast News - 09/08/2010
At a hearing yesterday before the Florida Office of Insurance Regulation, Citizens Property Insurance Corp. officials blamed sinkholes as the major reason the public insurer needs a rate increase.
Testifying at the public hearing in Tallahassee, Paul Palumbo, a senior vice president for underwriting, said Citizens took in $19.6 million for sinkhole coverage in
2009. But the company paid out $97 million in claims costs.
Citizens is asking for an average rate increase of 8.4 percent. The average increase being asked for policies that cover homes, condominiums, mobile homes and vacation or rental homes is 9.3 percent. The rate increases would vary quite a bit depending on the area, however. Some areas would have a decrease, while in others the increase could be as high as 11 percent, Citizens said.
The rising cost of sinkhole coverage in Florida has hit all home property insurers. Last month, Insurance Commissioner Kevin McCarty announced that the
Office was surveying insurance companies about claims to get a better idea about why, suddenly, Florida insurers are paying so much more in claims costs.
Some say the reason for the raft of claims is that the public has learned about sinkholes, and people have begun making claims for any cracks they see in their
homes. Investigating possible sinkhole damage, which an insurer is required to do, can cost tens of thousands of dollars.
At the hearing, Palumbo said there has never been a catastrophic claim for sinkhole damage in Citizens history. The claims have been for cracks in driveways and other relatively minor, possible damages.
He also noted that many of the claims are coming from areas outside of the region near Tampa Bay that has historically had the majority of sinkhole problems, the so-called "sinkhole alley" of Pasco and Hernando counties. According to Citizens, there have been about 300 claims made in the Miami area since the start of 2008.
Lynne McChristian, florida representative of the Insurance Information Institute, said in a telephone interview that the fact that Citizens is having a sinkhole problem is not a shock. But the extent of its problem is striking.
At a hearing yesterday before the Florida Office of Insurance Regulation, Citizens Property Insurance Corp. officials blamed sinkholes as the major reason the public insurer needs a rate increase.
Testifying at the public hearing in Tallahassee, Paul Palumbo, a senior vice president for underwriting, said Citizens took in $19.6 million for sinkhole coverage in
2009. But the company paid out $97 million in claims costs.
Citizens is asking for an average rate increase of 8.4 percent. The average increase being asked for policies that cover homes, condominiums, mobile homes and vacation or rental homes is 9.3 percent. The rate increases would vary quite a bit depending on the area, however. Some areas would have a decrease, while in others the increase could be as high as 11 percent, Citizens said.
The rising cost of sinkhole coverage in Florida has hit all home property insurers. Last month, Insurance Commissioner Kevin McCarty announced that the
Office was surveying insurance companies about claims to get a better idea about why, suddenly, Florida insurers are paying so much more in claims costs.
Some say the reason for the raft of claims is that the public has learned about sinkholes, and people have begun making claims for any cracks they see in their
homes. Investigating possible sinkhole damage, which an insurer is required to do, can cost tens of thousands of dollars.
At the hearing, Palumbo said there has never been a catastrophic claim for sinkhole damage in Citizens history. The claims have been for cracks in driveways and other relatively minor, possible damages.
He also noted that many of the claims are coming from areas outside of the region near Tampa Bay that has historically had the majority of sinkhole problems, the so-called "sinkhole alley" of Pasco and Hernando counties. According to Citizens, there have been about 300 claims made in the Miami area since the start of 2008.
Lynne McChristian, florida representative of the Insurance Information Institute, said in a telephone interview that the fact that Citizens is having a sinkhole problem is not a shock. But the extent of its problem is striking.
Almost 44,000 South Floridians file for Foreclosure This Year
By TOLUSE OLORUNNIPA - Miami Herald - 09/08/2010
South Florida has been home to more than $62 billion in loan defaults and 250,000 foreclosure filings since 2007, according to a report released Tuesday by Bal Harbour-based Condo Vultures.
The region -- including Palm Beach, Broward and Miami-Dade counties -- has experienced 43,980 foreclosure filings so far this year, and a total of $11.6 billion in loan defaults.
Between January 2007 and September 2010, Palm Beach County had $18.8 million in loan defaults associated with 74,399 foreclosure filings. Broward County had $26.5 million in loan defaults associated with 110,571. Miami-Dade County had $18.3 million.
The average amount for defaulting loans in South Florida is $ $253,529.20, according to the report, based on county records.
South Florida has been home to more than $62 billion in loan defaults and 250,000 foreclosure filings since 2007, according to a report released Tuesday by Bal Harbour-based Condo Vultures.
The region -- including Palm Beach, Broward and Miami-Dade counties -- has experienced 43,980 foreclosure filings so far this year, and a total of $11.6 billion in loan defaults.
Between January 2007 and September 2010, Palm Beach County had $18.8 million in loan defaults associated with 74,399 foreclosure filings. Broward County had $26.5 million in loan defaults associated with 110,571. Miami-Dade County had $18.3 million.
The average amount for defaulting loans in South Florida is $ $253,529.20, according to the report, based on county records.
Tuesday, August 24, 2010
Homes sales tumble 19 percent in Tampa Bay area
By Jeff Harrington, Saint Petersburg Times Staff Writer - Posted: Aug 24, 2010
The expiration of homebuyer tax credits took a heavy toll in July as home sales in the Tampa Bay area plunged 19 percent from year-ago levels.
Statewide, existing home sales fell 14 percent compared to a year ago. The drop-off between June and July was even more stark, with sales off 25 percent statewide and 29 percent in the bay area.
Sales prices also turned south year over year, falling 9 percent to a median price of $130,500 in the bay area and dropping 7 percent statewide to $138,000.
Sean Snaith, director for the University of Central Florida's Institute for Economic Competitiveness, said the loss of the federal tax credit geared toward first-time homebuyers "added a double dip to what has already been a harrowing ride in the Florida housing market."
The association representing Florida Realtors took heart that condominiums sales were improving, with activity up 11 percent compared to a year ago. However, the median condo sales price last month was $87,200, down 20 percent from the year-ago level of $108,500.
Nationally, the steep drop pushed homes sales down to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.
July's sales fell by more than 27 percent from June to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.
Jennifer H. Lee, senior economist for BMO Capital Markets, called the numbers "truly gut-wrenching."
Those on the front lines of real estate describe an absolute standoff between buyers and sellers.
"What few buyers are out there circle a listing like a vulture, waiting from the day of its debut until it's left for dead, contacting us only after it has left the market to ask what it sold for and whether it's taking backup offers," said Glenn Kelman, chief executive of the online brokerage Redfin.
Times wires contributed to this report.
The expiration of homebuyer tax credits took a heavy toll in July as home sales in the Tampa Bay area plunged 19 percent from year-ago levels.
Statewide, existing home sales fell 14 percent compared to a year ago. The drop-off between June and July was even more stark, with sales off 25 percent statewide and 29 percent in the bay area.
Sales prices also turned south year over year, falling 9 percent to a median price of $130,500 in the bay area and dropping 7 percent statewide to $138,000.
Sean Snaith, director for the University of Central Florida's Institute for Economic Competitiveness, said the loss of the federal tax credit geared toward first-time homebuyers "added a double dip to what has already been a harrowing ride in the Florida housing market."
The association representing Florida Realtors took heart that condominiums sales were improving, with activity up 11 percent compared to a year ago. However, the median condo sales price last month was $87,200, down 20 percent from the year-ago level of $108,500.
Nationally, the steep drop pushed homes sales down to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.
July's sales fell by more than 27 percent from June to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.
Jennifer H. Lee, senior economist for BMO Capital Markets, called the numbers "truly gut-wrenching."
Those on the front lines of real estate describe an absolute standoff between buyers and sellers.
"What few buyers are out there circle a listing like a vulture, waiting from the day of its debut until it's left for dead, contacting us only after it has left the market to ask what it sold for and whether it's taking backup offers," said Glenn Kelman, chief executive of the online brokerage Redfin.
Times wires contributed to this report.
Plunging home sales could sink recovery
Here is an article from CNN Money regarding the latest national housing trends.
By Hibah Yousuf, CNN Money staff reporter - August 24, 2010: 4:03 PM ET
NEW YORK (CNNMoney.com) -- With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.
Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.
That credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April's tax incentive-induced peak.
"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."
The sales pace of all homes -- single-family homes, townhomes, condominiums and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.
Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.
5 most affordable cities to buy a house
The combination of weak demand and glut of homes has put downward pressure on prices.
And as the recession proved, the housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.
"Falling housing prices strain the overall confidence in the economy and discourage Americans from spending," Dales said. "They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy.
The NAR report showed that the median price of homes sold in July was $182,600, up 0.7% from a year ago. Just under a third of homes sold during the month were distressed properties.
Though prices have yet to fall back, Dales expects they will decline about 5% from current levels over the next six months.
On the bright side, Dales said while a drop prices will put a dent in the economy recovery, it won't lead to another recession.
"The bulk of the downward adjustment in housing prices has been achieved over the last several years, so we're not headed for a complete disaster," said Dales. "We're going to see a double-dip in housing prices, but not a double-dip in the overall economy."
Sales by property and region: Sales of single-family homes sank 27.1% in July compared to the prior month, while condominium and co-op sales tanked 28.1%.
The Midwest fared the worst last month, with sales dropping 35% to an annual pace of 800,000 units in July. that's 33.3% lower than a year earlier.
Resales in the Northwest dropped 29.5% from the previous month to an annual pace of 620,000 units.
They fell by 25% in the West and 22.6% in the South.
By Hibah Yousuf, CNN Money staff reporter - August 24, 2010: 4:03 PM ET
NEW YORK (CNNMoney.com) -- With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.
Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.
That credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April's tax incentive-induced peak.
"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."
The sales pace of all homes -- single-family homes, townhomes, condominiums and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.
Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.
5 most affordable cities to buy a house
The combination of weak demand and glut of homes has put downward pressure on prices.
And as the recession proved, the housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.
"Falling housing prices strain the overall confidence in the economy and discourage Americans from spending," Dales said. "They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy.
The NAR report showed that the median price of homes sold in July was $182,600, up 0.7% from a year ago. Just under a third of homes sold during the month were distressed properties.
Though prices have yet to fall back, Dales expects they will decline about 5% from current levels over the next six months.
On the bright side, Dales said while a drop prices will put a dent in the economy recovery, it won't lead to another recession.
"The bulk of the downward adjustment in housing prices has been achieved over the last several years, so we're not headed for a complete disaster," said Dales. "We're going to see a double-dip in housing prices, but not a double-dip in the overall economy."
Sales by property and region: Sales of single-family homes sank 27.1% in July compared to the prior month, while condominium and co-op sales tanked 28.1%.
The Midwest fared the worst last month, with sales dropping 35% to an annual pace of 800,000 units in July. that's 33.3% lower than a year earlier.
Resales in the Northwest dropped 29.5% from the previous month to an annual pace of 620,000 units.
They fell by 25% in the West and 22.6% in the South.
Saturday, August 21, 2010
Mortgage defaults among Florida's high-value loans highest in U.S.
By Becky Bowers, Saint Petersburg Times Staff Writer - August 22,2010 — Five years ago, Florida's real estate market was a rollicking beachfront casino where you couldn't make a bad bet.
The reckoning hit high-rollers harder than anyone. Now home loans over $1 million are failing at a higher rate than the rest, and nowhere is that failure as severe as in Florida.
Case in point: A squat concrete block home in St. Petersburg's Snell Isle Shores cost $1 million in 2006. The $2 million mortgage also bankrolled demolition and the building of a 7,000-square-foot waterfront dream house.
By May 2009, the home was in foreclosure, and sold a year later. The winning offer? $1.13 million, a 60 percent discount from the asking price.
Developers and home buyers alike had banked on quickly rising home prices, said Sam Khater, senior economist at real estate analytics firm CoreLogic.
"The average person was basically betting, repeatedly," he said. High-value loans were an even worse bet.
The bulk of million-dollar loans were written in California, and to a lesser degree in New York and Florida, according to CoreLogic. But while California's and New York's default rates on those high-value loans were near or under the national average of 13 percent in April, nearly a third of Florida's were in default.
During the boom, Florida's dramatic price appreciation enticed buyers, said Mark Vitner, a senior economist at Wells Fargo who's been tracking the Florida real estate market since the mid '80s. If you could stretch to buy a high-end home, its rising value could make you rich.
"I know people that bought … would not think of themselves as speculating on a house. But they bought a lot more house than they should have because they could get the credit, and prices were going up," he said.
Alternative mortgages, such as five-year interest-only loans, made it easy to buy more house than you could afford, he said.
It wasn't just alternative mortgages that suffered, says Khater, the economist for CoreLogic, which compiled Florida and Tampa Bay default rates for the St. Petersburg Times. CoreLogic compared types of mortgages — from standard fixed rates to "funny" products — and saw the same trend, he said.
Khater points out that this recession, unlike earlier ones, hit middle- and high-income brackets especially hard. Home values dived at the same time stock portfolios suffered.
But it's also generally true that very small and very large loans tend to perform worse than those in the middle, said Michael Fratantoni, the vice president of research and economics for the Mortgage Bankers Association. Think of a "U" shape. That's why so-called "jumbo" loans typically have higher rates, even though those who get them have mostly higher incomes.
Why would a well-heeled buyer be riskier? A higher-value property tends to have a much more volatile price because the pool of potential buyers is smaller.
"In a down market, if it sells at all, it's going to sell for a much steeper discount," Fratantoni said.
And if it sits on the market as prices fall — and bay area prices fell more than 40 percent from 2006 — the mortgage holder is more likely to owe more than the home is worth. That increases the chances of becoming delinquent, even with the best intentions to sell and pay off the mortgage, he said.
Matthew Weidner, a St. Petersburg lawyer who focuses on foreclosures, said high-end bay area buyers were able to hang on longer as home values fell and investments and jobs disappeared. But this year he's seen a spike in foreclosures among people at the top of the economic ladder.
"It went from service workers to high-end professionals who got into trouble," he said.
Weidner said they used savings and assets to supplement their mortgage payments.
"Now they're in my office saying, 'I can't do this anymore.' "
Still, those high-value foreclosures remain a small fraction of the hundreds he's seen.
Indeed, it's not clear how many million-dollar mortgages face delinquency in the bay area. Nationally, huge mortgages represent a tiny slice of home loans, less than 1 percent, according to CoreLogic, which doesn't release its raw numbers.
At that price range, buyers are more likely to use cash, or get a loan for just part of the purchase price at a lower rate. And while Florida was among the top three states for such loans, many were concentrated in Miami.
So while the Tampa Bay area had a default rate of just over 24 percent on million-dollar loans in April, the actual number of loans may be very small, CoreLogic's economists cautioned. It's more accurate to concentrate on the state and national numbers, they said.
But where those struggling loans existed in this area, there were some mighty deals.
Take local short sales, in which a bank agrees to a price that's lower than what's owed, said Frank Malowany, a St. Petersburg real estate agent who specializes in higher-priced waterfront property.
This year, among about 80 sales in Pinellas and Hillsborough counties over $1 million, about a half dozen were distressed: bank-owned homes or short sales. Those numbers don't reflect homes in default that aren't yet for sale or remain unsold, or homes with million-dollar mortgages that sold for less than $1 million.
The discounts were hefty. One St. Petersburg home was listed for $2.95 million and sold for just over $1 million in March. Another in Redington Beach had a loan for $1.5 million and sold for $1 million flat.
Short sales let banks get at least some of their money back. And they've picked up in the past few months, said Glenn Goldberg, a 43-year-old St. Petersburg real estate attorney.
Like that dream home in Snell Isle Shores. Goldberg and his wife bought it for $1.13 million in May.
"We have two kids. We wanted to buy a bigger house, and we said, 'Why not?' "
Peter Krauser, president of Mark Maconi Homes of Tampa Bay, had built it in 2007. He recalls putting $2.4 million into the project. Property values kept soaring, so they kept adding custom features.
"The banks told us that anything we could build, we could sell," he said. Then banks started to realize how many speculators they had on their hands — and stopped writing big loans. And that was it, he said. "We just ran out of cash."
The bank filed to foreclose, but let him sell it instead. He owes the bank $200,000 in the deal. At the moment, he's not building anything.
"His product was fantastic. His timing wasn't so fantastic," Goldberg said. "It's like everything you do. Timing is everything."
The reckoning hit high-rollers harder than anyone. Now home loans over $1 million are failing at a higher rate than the rest, and nowhere is that failure as severe as in Florida.
Case in point: A squat concrete block home in St. Petersburg's Snell Isle Shores cost $1 million in 2006. The $2 million mortgage also bankrolled demolition and the building of a 7,000-square-foot waterfront dream house.
By May 2009, the home was in foreclosure, and sold a year later. The winning offer? $1.13 million, a 60 percent discount from the asking price.
Developers and home buyers alike had banked on quickly rising home prices, said Sam Khater, senior economist at real estate analytics firm CoreLogic.
"The average person was basically betting, repeatedly," he said. High-value loans were an even worse bet.
The bulk of million-dollar loans were written in California, and to a lesser degree in New York and Florida, according to CoreLogic. But while California's and New York's default rates on those high-value loans were near or under the national average of 13 percent in April, nearly a third of Florida's were in default.
During the boom, Florida's dramatic price appreciation enticed buyers, said Mark Vitner, a senior economist at Wells Fargo who's been tracking the Florida real estate market since the mid '80s. If you could stretch to buy a high-end home, its rising value could make you rich.
"I know people that bought … would not think of themselves as speculating on a house. But they bought a lot more house than they should have because they could get the credit, and prices were going up," he said.
Alternative mortgages, such as five-year interest-only loans, made it easy to buy more house than you could afford, he said.
It wasn't just alternative mortgages that suffered, says Khater, the economist for CoreLogic, which compiled Florida and Tampa Bay default rates for the St. Petersburg Times. CoreLogic compared types of mortgages — from standard fixed rates to "funny" products — and saw the same trend, he said.
Khater points out that this recession, unlike earlier ones, hit middle- and high-income brackets especially hard. Home values dived at the same time stock portfolios suffered.
But it's also generally true that very small and very large loans tend to perform worse than those in the middle, said Michael Fratantoni, the vice president of research and economics for the Mortgage Bankers Association. Think of a "U" shape. That's why so-called "jumbo" loans typically have higher rates, even though those who get them have mostly higher incomes.
Why would a well-heeled buyer be riskier? A higher-value property tends to have a much more volatile price because the pool of potential buyers is smaller.
"In a down market, if it sells at all, it's going to sell for a much steeper discount," Fratantoni said.
And if it sits on the market as prices fall — and bay area prices fell more than 40 percent from 2006 — the mortgage holder is more likely to owe more than the home is worth. That increases the chances of becoming delinquent, even with the best intentions to sell and pay off the mortgage, he said.
Matthew Weidner, a St. Petersburg lawyer who focuses on foreclosures, said high-end bay area buyers were able to hang on longer as home values fell and investments and jobs disappeared. But this year he's seen a spike in foreclosures among people at the top of the economic ladder.
"It went from service workers to high-end professionals who got into trouble," he said.
Weidner said they used savings and assets to supplement their mortgage payments.
"Now they're in my office saying, 'I can't do this anymore.' "
Still, those high-value foreclosures remain a small fraction of the hundreds he's seen.
Indeed, it's not clear how many million-dollar mortgages face delinquency in the bay area. Nationally, huge mortgages represent a tiny slice of home loans, less than 1 percent, according to CoreLogic, which doesn't release its raw numbers.
At that price range, buyers are more likely to use cash, or get a loan for just part of the purchase price at a lower rate. And while Florida was among the top three states for such loans, many were concentrated in Miami.
So while the Tampa Bay area had a default rate of just over 24 percent on million-dollar loans in April, the actual number of loans may be very small, CoreLogic's economists cautioned. It's more accurate to concentrate on the state and national numbers, they said.
But where those struggling loans existed in this area, there were some mighty deals.
Take local short sales, in which a bank agrees to a price that's lower than what's owed, said Frank Malowany, a St. Petersburg real estate agent who specializes in higher-priced waterfront property.
This year, among about 80 sales in Pinellas and Hillsborough counties over $1 million, about a half dozen were distressed: bank-owned homes or short sales. Those numbers don't reflect homes in default that aren't yet for sale or remain unsold, or homes with million-dollar mortgages that sold for less than $1 million.
The discounts were hefty. One St. Petersburg home was listed for $2.95 million and sold for just over $1 million in March. Another in Redington Beach had a loan for $1.5 million and sold for $1 million flat.
Short sales let banks get at least some of their money back. And they've picked up in the past few months, said Glenn Goldberg, a 43-year-old St. Petersburg real estate attorney.
Like that dream home in Snell Isle Shores. Goldberg and his wife bought it for $1.13 million in May.
"We have two kids. We wanted to buy a bigger house, and we said, 'Why not?' "
Peter Krauser, president of Mark Maconi Homes of Tampa Bay, had built it in 2007. He recalls putting $2.4 million into the project. Property values kept soaring, so they kept adding custom features.
"The banks told us that anything we could build, we could sell," he said. Then banks started to realize how many speculators they had on their hands — and stopped writing big loans. And that was it, he said. "We just ran out of cash."
The bank filed to foreclose, but let him sell it instead. He owes the bank $200,000 in the deal. At the moment, he's not building anything.
"His product was fantastic. His timing wasn't so fantastic," Goldberg said. "It's like everything you do. Timing is everything."
Sunday, February 21, 2010
OneWest Bank accused of pushing home loan borrowers into foreclosure
Blog Editor's note: Although this article highlights a situation taking place in California, I thought it prescient, as it does have national significance.
By Jim Wasserman - Sacramento Bee - Published: Sunday February 21st, 2010
Nineteen months after the catastrophic failure of one of Sacramento's top lenders, Pasadena-based IndyMac Bank, a flurry of local lawsuits alleges that the bank's successor – OneWest Bank – is systematically working to push home loan borrowers into foreclosure.
The allegations filed in the Eastern District of U.S. Bankruptcy Court claim that OneWest can make more money by foreclosing than by keeping borrowers in their homes. That's due to its so-called "shared-loss" agreement with the Federal Deposit Insurance Corp., at least 10 local lawsuits allege.
A video made in Fairfield and circulating widely on the Internet also alleges that OneWest stands to earn millions from taxpayers by foreclosing on borrowers as a result of its shared-loss agreement with the FDIC.
OneWest declined to comment on either the lawsuits or the video.
The FDIC, which seized IndyMac in July 2008, sold the failed institution to Pasadena-based OneWest in March 2009.
As part of the deal, the FDIC agreed to absorb some losses from the troubled loan portfolio. That's after OneWest absorbs the first $2.5 billion in losses, the FDIC said.
But Sacramento bankruptcy lawyer Peter Macaluso claims the shared-loss agreement will reward OneWest for foreclosing on homes. Here's how, he said: The company bought IndyMac's troubled portfolio at a 30 percent discount. It can count on the FDIC eventually reimbursing 80 percent or more of its losses – and also can keep proceeds from the foreclosure sales.
"They're deliberately blowing people out in a systematic pattern," said Macaluso.
He has filed eight lawsuits in U.S. Bankruptcy Court on behalf of area IndyMac borrowers who have filed for Chapter 13 bankruptcy protection.
Macaluso alleges that OneWest improperly boosted his clients' monthly loan payments – sometimes by more than $1,000 – by doing a new escrow analysis after they had filed for bankruptcy protection. He said his clients can't afford the increases and are in danger of losing their homes.
On Friday, he said OneWest has since rescinded the extra payments in three cases.
Elk Grove bankruptcy attorney Mark Wolff makes similar allegations in two lawsuits in U.S. Bankruptcy Court.
"We made the allegations that it's a systematic approach they've employed, and it's a violation of bankruptcy code," said Wolff. He said he previously filed similar actions against Bank of America and JPMorgan Chase. His clients also are still in their homes.
A third attorney, Sean Gjerde of Elk Grove, recently filed a civil suit against OneWest in Sacramento Superior Court. It alleges violations of the Truth In Lending Act, claiming that OneWest is unresponsive to attempts to modify an Elk Grove client's IndyMac mortgage.
"As soon as OneWest took over, the communication stopped," Gjerde said. "My client has been in default for a long time and it's been like heck to even get them to talk to me."
The local lawsuits represent another messy aftermath of IndyMac's implosion in July 2008, a development that added to fears of an imminent U.S. financial collapse.
IndyMac was a leading Sacramento lender, ranking 10th in loan volume during the riskiest part of the housing market: mid-2005 to mid-2007. Statistics from researcher MDA DataQuick show IndyMac made 5,312 home loans worth $1.4 billion during this period in Sacramento, Placer, El Dorado, Yolo, Sutter and Yuba counties.
A Treasury Department performance report last week showed that OneWest has temporarily or permanently modified 25 percent of its loans that are 60 days or more late. Twelve lenders reported higher modification rates and nine reported worse rates. The report said OneWest had permanently modified 3,087 of its 112,000 delinquent loans by the end of January.
The video criticizing OneWest and the FDIC has gone viral on the Internet in real estate and lending circles. It was produced by partners in a Web-based real estate and mortgage firm, thinkbigworksmall.com.
The FDIC said the video had "no credibility."
OneWest wouldn't weigh in. "We're not commenting at all," said bank spokeswoman Diane Henry. "I think the FDIC was pretty clear."
The FDIC said the insurance corporation – established in 1933 to protect customers' bank deposits – currently has 94 shared-loss agreements in place with financial institutions that assumed troubled loan portfolios. The agency said OneWest must absorb the first 20 percent of its loan losses – $2.5 billion – before it can receive government funds to cushion the rest. Then, OneWest can be reimbursed for 80 percent or more of its losses.
The FDIC said it hasn't yet paid a penny to OneWest. It also noted that OneWest owns just 7 percent of the loans covered in the shared loss agreement. The rest are owned by investors.
FDIC officials also noted that they can rescind the deal if OneWest isn't complying properly with its agreement to modify loans.
FDIC spokesman David Barr offered no comment on the Sacramento lawsuits filed against OneWest.
In Roseville, Emily Touchstone is not among those suing OneWest. But she is soon to leave for the East Coast after losing a house refinanced with a IndyMac adjustable-rate loan in 2006. She said she couldn't get a OneWest modification after starting the process in March 2009. In October she lost her job.
Touchstone told a story familiar in Sacramento: months of phone calls, fielding requests for more information and then still more. Months behind on payments, she recently lost the house to OneWest. She called it a "preventable thing."
In Elk Grove, Tom Cravalho said the Association of Community Organizations for Reform, the housing counseling group known as ACORN, dropped his case in December, saying it got little response from OneWest.
"They said there was no communication from your lender," he said.
Cravalho called his 2005 IndyMac adjustable-rate refinance loan a "mistake." Now, he and his wife fear losing a $200,000 down payment on the house they bought in 2002.
Trouble started in February 2008 when Cravalho lost his job running a Contractors State License Services School branch in Sacramento. Eventually he turned to attorney Gjerde for help with a modification.
Gjerde has tried, but recently filed suit against OneWest, saying the bank didn't respond to him, either.
"They aren't even paying lip service," he said. "At least some lenders pay lip service."
By Jim Wasserman - Sacramento Bee - Published: Sunday February 21st, 2010
Nineteen months after the catastrophic failure of one of Sacramento's top lenders, Pasadena-based IndyMac Bank, a flurry of local lawsuits alleges that the bank's successor – OneWest Bank – is systematically working to push home loan borrowers into foreclosure.
The allegations filed in the Eastern District of U.S. Bankruptcy Court claim that OneWest can make more money by foreclosing than by keeping borrowers in their homes. That's due to its so-called "shared-loss" agreement with the Federal Deposit Insurance Corp., at least 10 local lawsuits allege.
A video made in Fairfield and circulating widely on the Internet also alleges that OneWest stands to earn millions from taxpayers by foreclosing on borrowers as a result of its shared-loss agreement with the FDIC.
OneWest declined to comment on either the lawsuits or the video.
The FDIC, which seized IndyMac in July 2008, sold the failed institution to Pasadena-based OneWest in March 2009.
As part of the deal, the FDIC agreed to absorb some losses from the troubled loan portfolio. That's after OneWest absorbs the first $2.5 billion in losses, the FDIC said.
But Sacramento bankruptcy lawyer Peter Macaluso claims the shared-loss agreement will reward OneWest for foreclosing on homes. Here's how, he said: The company bought IndyMac's troubled portfolio at a 30 percent discount. It can count on the FDIC eventually reimbursing 80 percent or more of its losses – and also can keep proceeds from the foreclosure sales.
"They're deliberately blowing people out in a systematic pattern," said Macaluso.
He has filed eight lawsuits in U.S. Bankruptcy Court on behalf of area IndyMac borrowers who have filed for Chapter 13 bankruptcy protection.
Macaluso alleges that OneWest improperly boosted his clients' monthly loan payments – sometimes by more than $1,000 – by doing a new escrow analysis after they had filed for bankruptcy protection. He said his clients can't afford the increases and are in danger of losing their homes.
On Friday, he said OneWest has since rescinded the extra payments in three cases.
Elk Grove bankruptcy attorney Mark Wolff makes similar allegations in two lawsuits in U.S. Bankruptcy Court.
"We made the allegations that it's a systematic approach they've employed, and it's a violation of bankruptcy code," said Wolff. He said he previously filed similar actions against Bank of America and JPMorgan Chase. His clients also are still in their homes.
A third attorney, Sean Gjerde of Elk Grove, recently filed a civil suit against OneWest in Sacramento Superior Court. It alleges violations of the Truth In Lending Act, claiming that OneWest is unresponsive to attempts to modify an Elk Grove client's IndyMac mortgage.
"As soon as OneWest took over, the communication stopped," Gjerde said. "My client has been in default for a long time and it's been like heck to even get them to talk to me."
The local lawsuits represent another messy aftermath of IndyMac's implosion in July 2008, a development that added to fears of an imminent U.S. financial collapse.
IndyMac was a leading Sacramento lender, ranking 10th in loan volume during the riskiest part of the housing market: mid-2005 to mid-2007. Statistics from researcher MDA DataQuick show IndyMac made 5,312 home loans worth $1.4 billion during this period in Sacramento, Placer, El Dorado, Yolo, Sutter and Yuba counties.
A Treasury Department performance report last week showed that OneWest has temporarily or permanently modified 25 percent of its loans that are 60 days or more late. Twelve lenders reported higher modification rates and nine reported worse rates. The report said OneWest had permanently modified 3,087 of its 112,000 delinquent loans by the end of January.
The video criticizing OneWest and the FDIC has gone viral on the Internet in real estate and lending circles. It was produced by partners in a Web-based real estate and mortgage firm, thinkbigworksmall.com.
The FDIC said the video had "no credibility."
OneWest wouldn't weigh in. "We're not commenting at all," said bank spokeswoman Diane Henry. "I think the FDIC was pretty clear."
The FDIC said the insurance corporation – established in 1933 to protect customers' bank deposits – currently has 94 shared-loss agreements in place with financial institutions that assumed troubled loan portfolios. The agency said OneWest must absorb the first 20 percent of its loan losses – $2.5 billion – before it can receive government funds to cushion the rest. Then, OneWest can be reimbursed for 80 percent or more of its losses.
The FDIC said it hasn't yet paid a penny to OneWest. It also noted that OneWest owns just 7 percent of the loans covered in the shared loss agreement. The rest are owned by investors.
FDIC officials also noted that they can rescind the deal if OneWest isn't complying properly with its agreement to modify loans.
FDIC spokesman David Barr offered no comment on the Sacramento lawsuits filed against OneWest.
In Roseville, Emily Touchstone is not among those suing OneWest. But she is soon to leave for the East Coast after losing a house refinanced with a IndyMac adjustable-rate loan in 2006. She said she couldn't get a OneWest modification after starting the process in March 2009. In October she lost her job.
Touchstone told a story familiar in Sacramento: months of phone calls, fielding requests for more information and then still more. Months behind on payments, she recently lost the house to OneWest. She called it a "preventable thing."
In Elk Grove, Tom Cravalho said the Association of Community Organizations for Reform, the housing counseling group known as ACORN, dropped his case in December, saying it got little response from OneWest.
"They said there was no communication from your lender," he said.
Cravalho called his 2005 IndyMac adjustable-rate refinance loan a "mistake." Now, he and his wife fear losing a $200,000 down payment on the house they bought in 2002.
Trouble started in February 2008 when Cravalho lost his job running a Contractors State License Services School branch in Sacramento. Eventually he turned to attorney Gjerde for help with a modification.
Gjerde has tried, but recently filed suit against OneWest, saying the bank didn't respond to him, either.
"They aren't even paying lip service," he said. "At least some lenders pay lip service."
Wednesday, February 17, 2010
Florida Court Decision Could Impact Builders and Bank Foreclosure Processes
by Peter L. Mosca - Realty Times - Published: February 17, 2010
A ground-breaking South Florida court decision has paved the way to a legal solution for condominium and homeowners associations to address the under-reported but highly commonplace practice of banks stalling their foreclosures. Banks may engage in this tactic in an effort to delay taking title to financially upside down units and avoiding payment of past due assessments and legal fees due to associations. The new legal approach puts an end to this practice and is poised to dramatically strengthen the financial health of communities throughout the state of Florida.
From the firm that innovated "blanket receiverships" last year, now Association Law Group (ALG) has created the "reverse foreclosure" procedure in cases where an association has already acquired title to the property by its own foreclosure, but the bank’s foreclosure action is still pending or stalled. Under ALG’s new reverse foreclosure procedure, the association intentionally admits, in response to the bank’s foreclosure lawsuit, that the bank is entitled to take title to the financially upside down unit immediately. Under such procedure, the association knowingly waives its right of redemption and its right to a foreclosure sale, requests the court to grant a partial summary judgment against the association immediately, and further requests that the court direct the Clerk of Court to issue a certificate of title to the bank immediately, thereby making the bank the owner immediately and responsible for the association dues.
Attorney Ben Solomon of Association Law Group explains, "ALG’s reverse foreclosure procedure will finally help associations force banks to take title to financially upside down units much faster than ever before. This innovative new legal strategy holds banks accountable for paying their fair share of assessments and significantly reduces the amount of bad debt incurred by such associations." ALG’s new reverse foreclosure procedure cuts down on the bank’s opportunity to stall such foreclosure proceedings for an additional six months to a year or more (by intentionally delaying the setting of hearings, taking advantage of prolonged sale dates, etc.) because it forces the bank to take title to the upside down unit much quicker than usual because both parties agree they are immediately entitled to the property. Stalling by the bank typically adds to the amount of bad debt write offs an association eventually incurs when the bank finally does foreclose because by statute the bank is only obligated to pay the lesser of 12 months of past due assessments or 1% of the original mortgage for an HOA or 6 months of assessments or 1% for condos. The balance of past due assessments is then typically written off as bad debt and becomes a common expense to be paid by the rest of the unit owners.
This landmark case, HSBC Bank USA, et al. vs. Keys Gate Community Association, Inc., A Florida Non Profit Corporation, et al., was decided on January 12th in the 11th Judicial Circuit of Miami-Dade County. ALG represented Keys Gate Community Association, Inc. (Keys Gate), a homeowners association in Miami-Dade County with over 3,000 homes. In this precedential case, Keys Gate was awarded a partial final summary judgment of foreclosure against itself and in favor of HSBC Bank USA. As a part of that judgment, Keys Gate waived its right to public sale and requested a certificate of title be issued directly and immediately to the bank. Pursuant to the judgment, the Clerk of Court issued a certificate of title to HSBC the same day making the bank immediately liable for the payment of past due assessments and legal fees.
Based on the issuance of the certificate of title, the bank also was required to pay all current assessments as they become due. This new legal strategy saved Keys Gate a minimum of eight months or more of bad debt write offs because the association did not have to wait for the bank to get a foreclosure judgment, schedule a foreclosure sale, and sell the property at public auction. Importantly, this case sheds light on a little known banking practice that has been paralyzing homeowner and condominium associations across Florida -- namely that banks are significantly stalling their foreclosures to avoid paying the liabilities to the applicable association. This particular bank foreclosure case had been pending since 2007.
Specifically, in this case, Keys Gate filed and foreclosed its own claim of lien on the property and acquired title to the property through its own foreclosure sale back in April of 2007. The bank filed its foreclosure against the property in June of 2007 and through repeated stall tactics has still failed to complete the same for more than two and a half years. As a last resort, in November of 2009, ALG initiated its first reverse foreclosure procedure and moved the bank's foreclosure case forward by setting a hearing for summary judgment against its client Keys Gate. ALG then asked the court to issue a partial summary judgment in favor of the bank and to immediately grant the bank's request to take title to the unit as stated in its foreclosure complaint. As part of such reverse foreclosure, Keys Gate waived its rights to the property and, as the current unit owner, waived its right to public sale. The motion was granted and the Clerk of Court issued a certificate of title the same day transferring ownership of the property to the bank. The certificate of title then triggered HSBC Bank's requirement to pay its share of past due assessments, legal fees, court costs, and all assessments going forward. The bank's claim as to the other defendants is still pending.
The practice of banks delaying in foreclosure proceedings is not uncommon but it has a severe detrimental impact upon associations. Under the current law, a bank is not liable for condominium or homeowners associations' assessments until it takes title. As such, once a foreclosure is filed by a bank, there is little incentive for it to complete such foreclosure and take title to the unit until it has a buyer for the property or is otherwise ready to take responsibility for the liabilities associated with the property. It is this critical step in the process where banks have delayed -- sometimes for years -- to avoid having to pay assessments. Every month of delay equals another month of potential bad debt write off for an association. Until now, associations were left to fall further into debt and were powerless to encourage the banks to complete their foreclosures and collect back assessments. Some judges have tried to make banks liable for assessments if they did not aggressively pursue the foreclosure by granting a motion to compel, but that attempt to hold the banks accountable was recently ruled invalid by the Third District Court of Appeal.
ALG's innovative new legal strategy of reverse foreclosure has been enthusiastically endorsed by the Clerk of Court as another method to reduce their backlog of foreclosure sales. ALG has already been successful in implementing its "reverse foreclosure" procedure in both Miami-Dade and Broward counties and has plans to file dozens more in the upcoming months in multiple other counties.
Note: ALG has experience in representing all types of associations ranging from high rise condominium towers, to large master communities with thousands of homes, to smaller townhome and low-rise condominium projects.]
A ground-breaking South Florida court decision has paved the way to a legal solution for condominium and homeowners associations to address the under-reported but highly commonplace practice of banks stalling their foreclosures. Banks may engage in this tactic in an effort to delay taking title to financially upside down units and avoiding payment of past due assessments and legal fees due to associations. The new legal approach puts an end to this practice and is poised to dramatically strengthen the financial health of communities throughout the state of Florida.
From the firm that innovated "blanket receiverships" last year, now Association Law Group (ALG) has created the "reverse foreclosure" procedure in cases where an association has already acquired title to the property by its own foreclosure, but the bank’s foreclosure action is still pending or stalled. Under ALG’s new reverse foreclosure procedure, the association intentionally admits, in response to the bank’s foreclosure lawsuit, that the bank is entitled to take title to the financially upside down unit immediately. Under such procedure, the association knowingly waives its right of redemption and its right to a foreclosure sale, requests the court to grant a partial summary judgment against the association immediately, and further requests that the court direct the Clerk of Court to issue a certificate of title to the bank immediately, thereby making the bank the owner immediately and responsible for the association dues.
Attorney Ben Solomon of Association Law Group explains, "ALG’s reverse foreclosure procedure will finally help associations force banks to take title to financially upside down units much faster than ever before. This innovative new legal strategy holds banks accountable for paying their fair share of assessments and significantly reduces the amount of bad debt incurred by such associations." ALG’s new reverse foreclosure procedure cuts down on the bank’s opportunity to stall such foreclosure proceedings for an additional six months to a year or more (by intentionally delaying the setting of hearings, taking advantage of prolonged sale dates, etc.) because it forces the bank to take title to the upside down unit much quicker than usual because both parties agree they are immediately entitled to the property. Stalling by the bank typically adds to the amount of bad debt write offs an association eventually incurs when the bank finally does foreclose because by statute the bank is only obligated to pay the lesser of 12 months of past due assessments or 1% of the original mortgage for an HOA or 6 months of assessments or 1% for condos. The balance of past due assessments is then typically written off as bad debt and becomes a common expense to be paid by the rest of the unit owners.
This landmark case, HSBC Bank USA, et al. vs. Keys Gate Community Association, Inc., A Florida Non Profit Corporation, et al., was decided on January 12th in the 11th Judicial Circuit of Miami-Dade County. ALG represented Keys Gate Community Association, Inc. (Keys Gate), a homeowners association in Miami-Dade County with over 3,000 homes. In this precedential case, Keys Gate was awarded a partial final summary judgment of foreclosure against itself and in favor of HSBC Bank USA. As a part of that judgment, Keys Gate waived its right to public sale and requested a certificate of title be issued directly and immediately to the bank. Pursuant to the judgment, the Clerk of Court issued a certificate of title to HSBC the same day making the bank immediately liable for the payment of past due assessments and legal fees.
Based on the issuance of the certificate of title, the bank also was required to pay all current assessments as they become due. This new legal strategy saved Keys Gate a minimum of eight months or more of bad debt write offs because the association did not have to wait for the bank to get a foreclosure judgment, schedule a foreclosure sale, and sell the property at public auction. Importantly, this case sheds light on a little known banking practice that has been paralyzing homeowner and condominium associations across Florida -- namely that banks are significantly stalling their foreclosures to avoid paying the liabilities to the applicable association. This particular bank foreclosure case had been pending since 2007.
Specifically, in this case, Keys Gate filed and foreclosed its own claim of lien on the property and acquired title to the property through its own foreclosure sale back in April of 2007. The bank filed its foreclosure against the property in June of 2007 and through repeated stall tactics has still failed to complete the same for more than two and a half years. As a last resort, in November of 2009, ALG initiated its first reverse foreclosure procedure and moved the bank's foreclosure case forward by setting a hearing for summary judgment against its client Keys Gate. ALG then asked the court to issue a partial summary judgment in favor of the bank and to immediately grant the bank's request to take title to the unit as stated in its foreclosure complaint. As part of such reverse foreclosure, Keys Gate waived its rights to the property and, as the current unit owner, waived its right to public sale. The motion was granted and the Clerk of Court issued a certificate of title the same day transferring ownership of the property to the bank. The certificate of title then triggered HSBC Bank's requirement to pay its share of past due assessments, legal fees, court costs, and all assessments going forward. The bank's claim as to the other defendants is still pending.
The practice of banks delaying in foreclosure proceedings is not uncommon but it has a severe detrimental impact upon associations. Under the current law, a bank is not liable for condominium or homeowners associations' assessments until it takes title. As such, once a foreclosure is filed by a bank, there is little incentive for it to complete such foreclosure and take title to the unit until it has a buyer for the property or is otherwise ready to take responsibility for the liabilities associated with the property. It is this critical step in the process where banks have delayed -- sometimes for years -- to avoid having to pay assessments. Every month of delay equals another month of potential bad debt write off for an association. Until now, associations were left to fall further into debt and were powerless to encourage the banks to complete their foreclosures and collect back assessments. Some judges have tried to make banks liable for assessments if they did not aggressively pursue the foreclosure by granting a motion to compel, but that attempt to hold the banks accountable was recently ruled invalid by the Third District Court of Appeal.
ALG's innovative new legal strategy of reverse foreclosure has been enthusiastically endorsed by the Clerk of Court as another method to reduce their backlog of foreclosure sales. ALG has already been successful in implementing its "reverse foreclosure" procedure in both Miami-Dade and Broward counties and has plans to file dozens more in the upcoming months in multiple other counties.
Note: ALG has experience in representing all types of associations ranging from high rise condominium towers, to large master communities with thousands of homes, to smaller townhome and low-rise condominium projects.]
Monday, February 15, 2010
Recent appraisal rules open door to shady middlemen
Blog Editor's Note: The following article is an excellent example of the law of unitended consequences. When the Feds decided to enact the HVCC, it allowed unscrupulous players to enter the appraisal mangagement arena, where some created a new revenue stream for themselves under the guise of managing their mortgage vendor's accounts. Thank you to Susan Taylor Martin for her in depth article.
By Susan Taylor Martin, St. Petersburg Times Senior Correspondent
Sunday, February 7, 2010
Last year, Global Appraisal Solutions of Clearwater hired appraiser John Viscusi to do property evaluations in the New York metro area.
But Viscusi says the company failed to pay him for 20 appraisals. And when he tried to contact the owner, Larry Holzer, he got no response.
Then Viscusi made an unsettling discovery.
An Internet search for Global immediately linked him to another company, Appraisal Mediation Solutions. Its phone number: The same as Larry Holzer's. Its address: a UPS store in Clearwater close to Holzer's condo.
"I'm down about $6,000,'' Viscusi says. He wonders if he will ever get his money because Global no longer appears to be in business even though Holzer still is.
Critics of recent changes in the way home appraisals are handled say Viscusi's situation illustrates a major problem with companies like Holzer's: They are totally unregulated in Florida and most other states.
The changes, which took effect in May, were designed to prevent the appraisal-related fraud that helped drive housing prices to unsustainable heights. The new Home Valuation Code of Conduct forbids banks, mortgage brokers and Realtors from working directly with appraisers.
Instead, they now go through "appraisal management companies'' like Holzer's — middlemen who hire the appraisers.
The code "has created this huge opportunity, and everybody and their brother is trying to take advantage of it, and a lot are unscrupulous,'' says Frank Gregoire, a St. Petersburg appraiser and former chairman of the Florida Real Estate Appraisal Board.
Gregoire and the board are backing a bill by state Rep. Matt Hudson, a Naples Republican, that would require owners of appraisal management companies to disclose criminal histories and license suspensions or revocations.
"My anticipation is that the board would not grant a license (for a management company) to someone who had a disciplinary record,'' Gregoire says.
That would eliminate companies owned by people like Holzer.
In 2007, Florida regulators permanently revoked Holzer's appraisal license because he had approved an error-filled appraisal done by a trainee under his supervision. The report didn't even have photos of the correct house.
The revocation barred Holzer himself from appraising property in Florida. But it didn't keep him from starting an appraisal management company, Global Appraisal Solutions, that could do business in Florida and every other state.
After the code of conduct took effect last spring, Global contracted with Lend America on Long Island to arrange appraisals for the company. Viscusi, who had worked directly with Lend America's loan officers, signed on with Global so he could continue doing appraisals, mostly for homeowners seeking to refinance or get equity lines.
Holzer and Global "would never let me know what they were charging (homeowners), whether it was $400 or $800,'' Viscusi says. But his own payments "were absolutely less'' than they used to be, reflecting a common complaint that injecting a middleman into the appraisal process has meant higher costs for consumers but less money for appraisers.
Viscusi says Global paid him $250 to $300 apiece for five appraisals in June, then stopped paying. He wasn't worried at first because Global boasted on its Web site in July that it was having its best month ever.
But as Viscusi did 20 more appraisals in July and August with no payment, he grew anxious. Holzer, who did not respond to his phone calls, sent out an e-mail in October claiming that lenders owed Global "a large outstanding balance for completed appraisals.''
Viscusi didn't believe the explanation, because the homeowners had paid Global, not the lenders.
Viscusi contacted appraisers in Texas, Chicago and the Washington, D.C., area who claimed they too had been stiffed by Global.
In December, Viscusi received a call from a woman who used to work for Global but had left to start her own appraisal management company.
"I pretty much told her that if she didn't give up information (on Holzer's whereabouts), she'd be held liable in any pending litigation,'' Viscusi says. "She said, 'If you click on his Web site, it will direct you to a new company.' '
That company, Appraisal Mediation Solutions, boasts that it "is one of the most trusted providers of real estate valuations in the nation.'' State records show it was incorporated in October but no officers were listed, which is unusual. The address is 140 Island Way, Clearwater No. 245 — a $15-a-month box at a UPS store near Holzer's waterfront condo.
When a reporter knocked on his door last week, Holzer cursed and ordered her off the property. The condo has been in foreclosure proceedings for two years, but Holzer staved off foreclosure by declaring bankruptcy in 2008 and 2009.
Though Global had appraisers working for it all over the United States, the spokesman for an organization that represents appraisal management companies says its problems were not typical.
"The appraisal management industry does 4 million appraisals a year, and I'll bet that the number done by that company down in Florida that has caused so much consternation is just minuscule,'' says Jeff Sherman of the Pennsylvania-based Title/Appraisal Vendor Management Association.
Any regulation of appraisal management companies should be done on the federal level, not by states with their varying requirements, Sherman says. Several states have passed laws, and a New Mexico bill would, controversially, cap companies' profits.
Viscusi, who has had no luck contacting Holzer and is now considering legal action, says companies like Global need to be regulated, regardless of whether Congress or the states do it.
"There should be a regulatory board that keeps an eye on these companies, because basically what they are is a shakedown middleman,'' he says. "All they do is collect a fee to channel an appraisal to an appraiser.''
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