News item from your government today: "The Securities and Exchange Commission today filed securities fraud charges against the promoters of a real estate investment scheme targeting the African-American community in the Los Angeles area and other locations in Nevada and Georgia."
In short, the alleged scheme was this: an Altadena woman named Jeanetta M. Standefor, through a Pasadena company called Accelerated Funding Group, operated an allegedly fraudulent "foreclosure reinstatement" scheme. More than 600 people invested $18 million in the scheme between 2005 and 2007, believing they could reap returns of up to 50% within 30 to 45 days, the SEC says. Investors were led to believe that their wildly profitable investments would also help distressed homeowners avoid foreclosure.
The SEC press release alleges this was the crudest, most primitive kind of financial fraud: there was no "foreclosure reinstatement" program at all. It was just a ponzi scheme -- you "invest" money with me, and later I give some of it back to you, telling you that is your profit. I raise more money, and pay some of it back as "profit" to the new investors, keeping some of that money too. It's not complicated: I raise money and keep some of it. I don't invest any of it in anything.
From the SEC: "Standefor also used more than $1.9 million of investor funds for personal expenses such as her lavish wedding and honeymoon, cars, jewelry, tickets to entertainment event and home renovations. Standefor and AFG also misused investor funds to pay $121,000 in 'consulting fees' to Standefor's husband Darrell R. Dansby."
My attempts to reach Standefor for comment at Acclerated Funding Group were unsuccessful. The company still has a working phone line, but it goes to voicemail and the mailbox is full.
Bloviation: This is a bit harsh, but I'll say it anyway: The investors in this case may have been defrauded, by they were chasing a really silly dream. Anyone who believes they can make an investment relating to foreclosure, and then get a return of up to 50% within 30 to 45 days, is asking to be separated from their money. There's a name for that kind of thinking: greed.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 From L.A. Times staff writer Scott Reckard:
Will California become the central feeding ground for real estate vulture investors?
That’s what was suggested today in a report from London describing something called the California Distressed Land Fund Ltd.
The fund’s manager, David Michelson, plans to raise $150 million from European investors to buy raw land from developers and banks in places like the Inland Empire where home values have sunk lowest.
Michelson told Bloomberg News that he has developed and managed residential projects in California for more than 25 years. He said he's currently bidding for Riverside County land at “Armageddon” prices -- 20% of what it had been valued by builders.
The idea is to hang onto the property for six or seven years and then resell it. Michelson predicted he will eventually be buying from some updated version of the Resolution Trust Corp., the federal agency that liquidated the property the government inherited from 700 failed savings and loans in the 1980s.
He said his fund won't compete with dozens of hedge funds that are raising capital to buy securities whose prices have been battered by defaults on exotic mortgages.
“They're all looking to buy paper, we're looking at the dirt,” Michelson told Bloomberg. “We're builders. They wouldn't know how to file a building permit.”
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Cape Vultures in South Africa, via A.P.
 No, it's not Lefty. NF, A longtime reader, writes to describe his recent change of heart and purchase of a single family home in Pasadena. (Update: NF added a few more comments at the bottom of the post).
"It is funny, at first while I was on the sidelines and simply browsing for homes I agreed wholeheartedly with the majority of your readers; don’t buy, wait it out, the bottom is not even close. It was great hearing about the price drops and seeing the rift between those who commented. The smile on my face when thinking of the greedy speculators who were now in despair was often wiped away when thinking of those individuals who work beyond belief at minimum wage and were swindled by the sketchy mortgage brokers.
"As I continued shopping around and heard the stories of individuals that purchased homes during the boom I realized how fortunate I was to be in my current position. My wife and I had the opportunity to have a checklist of all we wanted; nice-sized back yard (with fruit trees), 3 bedrooms, remodeled kitchen, a safe and quiet street etc. We found a handful that fit the bill and that we would be happy to own. We did not have to worry about competing offers. We had the peace of mind to think things through rationally. We quickly got pre-approved by several banks and put in offers at about 10% below asking price – we went back and forth with a few homes and ended up paying about 8% below asking price. I was fortunate enough to put 20% down on the house – I am 28 and my wife is 27 but we have tried our best to live frugally the past few years in anticipation of the impending purchase.
"Yes, the prices of home may/most likely will continue to decrease, but we do not plan on leaving this property for at least 4-7 years; plus the mortgage interest rates are pretty darn good. The tax benefit from the interest payment lowering my taxable income will be embraced with open arms come this April – Thank you Republicans. Plus, I still don’t know what it feels like, but I imagine the pride of owning your own home will feel pretty good.
"I just wanted to say thanks for educating me on the real estate market. I think most commenters on your site are hoping to enter the market at a bottom so they can get the best bang for their buck. The thing is you can never determine when the market hits its bottom, and plus with the tax benefits from owning a home/mortgage and the ability to pick and choose your home stress free, perhaps entering a little prematurely isn’t that bad."
Update: Click below to see additional comments that NF added in the comment section.
Read more "Update: Meet today's homebuyer, an L.A. Land reader" »
 California's foreclosure crisis passed another ominous milestone in April, when more than 1,000 foreclosed homes were auctioned off every weekday at courthouses across the state, the auction tracking firm ForeclosureRadar reported today.
The April total of foreclosure sales at auction -- 22,838 for the state -- represents a jump of 44% over March totals and the highest level ever in California, ForeclosureRadar reports.
A separate estimate of foreclosures by DataQuick Information Systems had counted 47,171 foreclosures in the first quarter, a rate of more than 500 per day from January to March. The new statistics show every category of foreclosure statistics rose in April.
It appears the pipeline of potential foreclosures is jampacked, too: the ForeclosureRadar reported 44,101 new "Notices of Default" filings in April, a new record for California. Notices of Default are the first step in the foreclosure process.
"We expected a significant increase in auction sales based on previous default patterns," said Sean O'Toole, founder of ForeclosureRadar. "Unfortunately, the continued increases in defaults tell us that the worst is still ahead."
As lenders grow more desperate to avoid taking possession of foreclosed homes, they are offering bigger discounts at courthouse auctions, with "discounts of 40% to 50% from prior sales price common in many parts of the state," ForeclosureRadar reports. Still, the auctions are usually uneventful, and usually do not attract serious bids. "The majority of these sales received no third-party bid and reverted back to the lender despite the largest across-the-board discounts ever offered at trustee sales auctions," ForeclosureRadar reported.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo: Eviction notice posted in Orange County. Credit: Getty Images
Listing prices in Greater Los Angeles slipped by a statistically insignificant $100 over the last week, according to Housing Tracker's weekly analysis of MLS listings. (Oddly enough, this is exactly what I predicted on the blog earlier today. Pure dumb luck, trust me.)
The trend this spring is clear: Listing prices have been flat and inventory of homes and condos for sale has also been flat, consistent with a listless market that is neither deteriorating nor showing signs of life.
Date Median listing price Inventory
4/06 $579,666 27,251
4/07 $545,000 35,489
5/07 $545,000 38,297
6/07 $540,000 40,766 (up 20.4% y/y)
7/07 $535,000 42,685 (up 14.5% y/y)
8/07 $529,000 44,483 (up 13.6% y/y)
9/07 $520,000 46,414 (up 16.9% y/y)
10/07 $510,000 46,603 (up 15.6% y/y)
11/07 $499,900 46,503 (up 19.0% y/y)
12/07 $495,000 (down 10.0% y/y) 43,174 (up 28.2% y/y)
1/08 $479,900 (down 12.6%) 40,850 (up 33.3% y/y)
2/08 $475,000 (down 13.5%) 43,625 (Up 38.3%)
3/08 $464,900 (down 15.5%) 42,098 (Up 31.4%)
4/08 $450,000 (down 17.4%) 42,430 (up 16.7%)
5/5/08 $450,000 (down 17.4%) 42,647 (up 13.7%)
5/12/08 $449,900 (down 17.4%) 42,532 (up 11.1%)
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 You asked some good questions, as always. I'll answer the easy ones.
Jackie at 2:38 asks, "Is it possible that even though foreclosures are skyrocketing and prices are plummetting, some neighborhoods (I guess you could call them the better ones) are still competitive when it comes to buying?"
Yes, definitely. What I sense in "better" (more expensive) neighborhoods is that even though prices have softened, it's still common to see multiple offers for good houses in move-in condition.
EG at 2:38 asks, "What are the chances of an 'overcorrection' downward?
Very good in the hardest-hit areas. That said, it's hard to define an overcorrection. Is that when prices fall below market values? No, because the market value and the price are pretty much the same thing. But I think I know what you mean -- in the downturn, prices will fall to a point below what buyers will later decide is a fair price. I think that will happen in some areas.
IToldu2CashOut at 2:49 asks, "What do you see happening with downtown real estate in the next few years? Where you aware of the how the Chapman Flats condos (now rentals) had been misrepresenting square footage? I feel downtown apartments are nice but grossly overpriced for the state of redevelopment, do you agree?"
I'd put downtown somewhere in the middle of the market -- it won't suffer as much as foreclosure hot spots, but will lose more value, on a percentage basis, than established neighborhoods. I was not aware of a controversy over Chapman Flats. I agree that prices downtown are on the high side -- but then I feel that way about L.A. in general.
Candice at 2:57 asks, "What do you think will happen to Countrywide? Relatedly, Greginthevalley at 3:35 asks, Do you think BofA will complete the Countrywide merger given the enormous downside?" (click below for the answer to this, and more questions)
Read more "Ask Pete, Chapter 3: Your questions, answered" »
 What is the third in the series called? The threequel? Whatever, "Ask Pete" is back, your biweekly chance to pose questions to the blogger.
You know the drill: Use the comment section to ask questions about real estate, the housing market, the news business, the blog, etc. You ask them, I answer the easy ones. Get your questions in by 4 p.m. today, I'll publish answers by 6 p.m.
See previous Ask Pete columns here (#1), and here (#2).
Photo Credit: Getty Images.
The L.A. Times today strongly criticizes Proposition 98, which would bar the government from taking private property by eminent domain for the ultimate purpose of private development. Proposition 98 would also phase out local rent-control ordinances, which The Times views as a separate issue best settled locally: "Statewide abolition of rent control must not sneak its way onto the books as a hidden addendum to an ostensible eminent domain reform. Including it in Proposition 98 is cynical and devious -- and reason enough to reject the measure."
The Times notes that a company run by Sam Zell has donated $50,000 in support of Proposition 98. Zell, chairman and CEO of Tribune Co., which owns The Times, also chairs Equity Lifestyle Properties, which owns 27 mobile home parks in California, some of which are subject to rent control. It was Equity Lifestyle Properties that made the donation to Proposition 98. In other words, the Times editorial page has crossed its new owner, and made a point of informing its readers it was doing so.
The Times gives a half-hearted endorsement to the other "eminent domain" question, Proposition 99, saying the measure is flawed because it protects only property owned by individuals, and not business-owned property.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 Regular readers know I am a fan of mortgage broker/Fed watcher/pundit Lou Barnes, and his column this week is worth your time. The final years of the housing bubble were not complicated, he argues: Bad loans were made to financially suspect borrowers, by the millions. Excerpt:
"The elephant in the room, who cannot be mentioned in polite company: We gave mortgages to a few million households with deficient long-term financial behaviors, hopelessly incompatible with home ownership.
"That’s a hell of a thing to say about fellow citizens, but it is the case. 'Sub-prime' by definition meant below the minimum standards of the FHA. Roughly $1.5 trillion will default: half of sub-prime and a like amount of the worst of Alt-A.
"A year of all-out foreclosure prevention by traditional means has failed: recasting, forbearing, capitalizing interest, refinancing, canceling adjustment ... all. The new measures include writing down loans to the level of fallen market value and refinancing the remainder. Fairness aside (deeply unfair to families who tough out this cycle), two realities will defy the new efforts. First, write-down/recast will leave these households still with no equity, no up-side to defend, and new monthly payments still higher than rent on equivalent housing. That ownership-rent gap has gaped throughout the cycle; the good news for a foreclosed family: Replacement housing is cheap and plentiful.
"Those in authority demanding foreclosure rescue, Barney Frank and most of Congress, joined by compassionate Americans, cannot conceive the financials of a 575 FICO sub-prime applicant. A dozen or more late payments, several defaulted loans, and a large mass of consumer debt outstanding; poor job stability (temporary, seasonal, intermittent, commissioned sales); also no money, no savings, retirement or otherwise, often tens of thousands in consumer debt, huge negative net worth ... before purchase.
" 'But, you bailed out Wall Street -- why can’t you do the same for these people facing foreclosure?'
"Bear Stearns was not 'bailed out.' It was liquidated in an orderly manner.
"Wise, tough-love policies would encourage rapid recycling of foreclosures, enabling quick acceptance of short-sale offers by servicers terrified of value second-guessing, and above all, making financing available for strong households to buy the foreclosures. The marketplace can absorb the volume, but it needs help. Orderly liquidation.
"(Before you come after me with tar and feathers, know that my mother lost her Ada, OK., home as a teenager in the 1930s. I know what foreclosure means.)"
Your thoughts? Comments?
Photo Credit: AP
Though the market showed a few signs of life in April, Los Angeles home sales continue to slide dramatically from year-ago levels, with median prices also slipping, according to HomeData Corp.
HomeData numbers first reported in the Los Angeles Business Journal show:
--Sales for April increased 15% from March, but were still 43% below year-ago levels when April 2008 numbers are adjusted to show a four-week selling period.
--The median sales price slipped to $456,000.
--LABJ leads its story with the March-to-April jump in sales: "Los Angeles County home sales continued their rebound in April as warmer weather and falling prices coaxed home buyers back into the market." But the Journal adds, "While prospective buyers are leaving the sidelines, real estate observers believe it will take the market a few years or more to recover as foreclosures continue to muddy the market."
Separate stats from the SoCalMLS, however, show almost no April bounce from March sales levels, and show the median home price flat at $475,000.
One caveat: The most widely quoted and reported stats on SoCal home sales are the DataQuick numbers, due out later in the month. I generally err on the side of publishing too much information rather than too little. You guys are smart enough to deal with two sets of data. Or three.
Hat tip: To Cal, via comments, on both sets of data. Thanks, Cal.
Comments? Thoughts? E-mail story tips to peter.viles@latimes.com.
« Previous Posts
|
|
Del.icio.us:
