Squeeze: Lenders pulling back on HELOCs

News item just breaking on LATimes.com: "Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They’ve been told by their lender that they can no longer take money out on their credit lines because sinking home prices have put them 'upside down' on their mortgages.

More: "Countrywide Financial Corp. sent letters to 122,000 customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off."

Tell us about it: Have you been told by your bank or lender you can no longer borrow against a credit line? If you have, and want to tell your story to the LATimes, click here.

Comments, of course, are also welcome. Let loose. Email story tips to peter.viles@latimes.com

Democrats push 'ownership preservation' agency

A couple of news items today at the intersection of politics, government and the foreclosure crisis. Bloviation at no extra cost.

News item from LATimes.com: "Senate Democrats today demanded a much more forceful response to the crisis of home foreclosures, including the possible creation of a new government body that would purchase failing mortgages and help troubled borrowers refinance into new loans."

More: The idea "prompted criticisms of a government 'bailout' that would put taxpayers on the hook for costs that should be borne by speculators and unwise lenders. 'I am concerned that further government action will expose taxpayers to excess risk or be a bailout,' said Sen. Jim Bunning (R-Ky.)," who is pictured at left.

Bloviation: The man from Kentucky is right, this is a big-time bailout. There's a reason no one -- not even the Chinese -- wants to buy these failing mortgages: They are bad investments. Why should the government bail out lenders by stepping in to buy a $500,000 mortgage backed by a $350,000 home? Especially when the home will probably be worth about $320,000 a year from now.

News item from Sacramento via LATimes.com: "Legislation aimed at slowing residential foreclosures in California failed by a single vote in the state Senate on Wednesday, after Republicans balked at requiring lenders to talk personally with borrowers before they start the default process."

Bloviation: An intriguing idea but completely unrealistic. Lenders and servicers are barely capable of answering their phones and their mail -- this is one of the main reasons the Bush administration told them to hurry up and make decisions on large groups of loans rather than individual loans. It's unrealistic to expect them to suddenly get organized and start reaching out to homeowners. If I had a nickel for every story of incompetent lenders and servicers that has been e-mailed to this blog, I could buy Lefty the most expensive drink at Starbucks.

What can government do? For starters, it would be wonderful to see a local government that's facing a foreclosure problem -- say, the city of Los Angeles -- stop complaining and instead start playing hard-ball with banks and lenders regarding the upkeep of foreclosed houses. Mosquitos in the pool? Tagging? Broken windows? How about a city ordinance calling for heavy fines against the (corporate) homeowners who fail to keep up these foreclosed properties? And how about a city website that names names of corporate owners who let houses and neighborhoods go to seed?

Enough of my thoughts. Yours? E-mail story tips to peter.viles@latimes.com.
Photo credit: www.bunning.senate.gov

Blogging real estate agent sued for $25 million

Good morning. This one is worth noting: "Developer Tibor Hollo has filed a $25 million defamation lawsuit against a Miami real estate agent who blogged that the octogenarian went bankrupt in the 1980s and is headed for a fall with the upheaval in the condo market."

More, from the Miami Herald: "Hollo last week sued agent Lucas Lechuga and the Coral Gables brokerage Esslinger-Wooten-Maxwell alleging they have engaged in a smear campaign against him and his Opera Tower condo development on Lechuga's Miami Condo Investments blog."

The blogger, Lucas Lechuga, was terminated by the brokerage, but is still blogging: "The reason why I wrote the post is because I was receiving a lot of phone calls from contract holders of the development telling me that they had no intention on closing on their condos. In my opinion, a blog is a vehicle to share opinions, thoughts and concerns. I was merely sharing these concerns with potential buyers and contract holders. About three weeks ago, a local newspaper disclosed a story about a class-action lawsuit against the developer filed by contract holders wanting to get out. This topic was an area of concern, and one that I felt needed to be addressed to my readers."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Hat tips: Tony Pierce (the LATimes.com's boss of blogs), Take Five via e-mail

L.A. Land on ABC's "Nightline"

Good morning. If you have a spare 4 minutes and 36 seconds, check out this video from last night's "Nightline" on ABC, featuring your friendly blogger, and a homeowner who's thinking of mailing the keys back to the bank.

Turns out a "Nightline" producer in New York is a fan of the blog and was particularly interested in the discussion here in recent days about "jingle mail" and the ethical questions raised by walking away from a mortgage. So, to those of you who participated, thanks.

Bernanke's Fed: an "academic in a china shop?"

A few thoughts and links about the Fed's rate cut today. First of all, what's happening is nothing short of stunning: the central bank has now slashed interest rates twice in eight days while the Congress argues over how best to thrust $100 billion into the hands of American consumers.

As one of my favorite Wall Street guys, Art Hogan, said recently, the good news is that the government is acting quickly to give the economy a double shot: serious fiscal and monetary stimulus; the bad news is, the economy needs it.

Will the rate-cutting and dollar-mailing help? Of course they will.  But the economy, and housing, are still on a downward trajectory.

A commenter passed this along -- economic analysis from the blog of former Labor Secretary Robert Reich: "Most consumers are at the end of their ropes and can’t buy more. Real incomes are no higher than they were in 2000, while food and energy and health care costs are all rising faster than inflation. And home values are dropping, which means an end to home equity loans and refinancing. ... Add all this together and there’s just not enough consumer demand out there to keep the American economy going."

I've also been wanting to pass along this recent Fed analysis from another favorite, mortgage broker/pundit Lou Barnes. For months Barnes had been on the fence about Bernanke, but last week, after the emergency rate cut, Lou took a stand: Bernanke is in over his head, and not learning very fast: "Last Thursday, Mr. Bernanke went to Congress to ask for a stimulus package 'quickly.' A Chairman without confidence in his own resources immediately destabilized markets all over the world ...  The Fed Chairman never, ever goes to Congress to ask for stimulus: that’s the Administration’s job. ...  He has shown political ineptitude from the first months in office (blabbing intentions to a pretty reporter at a party), and does not appear to have learned a thing. ... The consequence of random, academic-in-a-china-shop behavior: an already fragile and illiquid bond market raised rates and slowed trading."

Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: Fed chairman Ben Bernanke by Bloomberg News.

Correction: Foreclosures up 435% in the Valley

Blogger's note: Several commenters pointed out a mistake in the original post. The Realtor's mortgage payment increased by $1,200, to $5,000 -- it did not increase from $1,200 to $5,000, as originally, and erroneously reported. The Daily News article was correct and clear; my summary of it was mistaken. This updated version of the post corrects the original mistake.

News item from today's L.A. Daily News: "Foreclosures soared 435.5 percent in the San Fernando Valley last year as nearly 3,000 homeowners surrendered to higher monthly house payments brought on by rising adjustable rate loans, a research center said Tuesday."

More: "A whopping 2,988 families lost their homes in 2007, up from just 558 in 2006, said the San Fernando Valley Economic Research Center at California State University, Northridge."

Story quotes a Realtor -- yes, a Realtor -- who can't afford her mortgage payments, can't refinance, and is "desperate to sell" her own home. Details: Realtor bought 2 1/2 years ago in Porter Ranch for $620,000, her monthly payment has jumped by $1,200 to $5,000, originally listed the home for $765,000, has dropped the price to $719,000.

Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Hat tip: Daily News via KNX radio
Photo credit: L.A. Times

Adieu, Santa Monica

A quick personal note: The Viles family has picked up stakes and moved a few miles -- out of Santa Monica and into a rental house on the Westside of L.A.  We're very happy to have a backyard, a garage full of bikes and surfboards, and a palm tree.

About now most of you are asking who gives a hoot. Well, a small number of you have expressed interest in my living situation. (Does he rent or own? Is he a bitter renter or smug owner?) Since it is, after all, a real estate blog, I've viewed it as within the expected transparency of the blog to answer.

This was not a carefully calculated rent vs. buy decision -- that's a calculation that comes after you've crossed the magical line of affordability. We're happy to be in a small house, and someday we'd like to own one.

Enough personal stuff. Back to the grind!

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: L.A. Times

California fourth in foreclosures per capita

RealtyTrac's year-end foreclosure report for 2007 finds California ranks first in foreclosure filings, but fourth when filings are considered on a per-household basis (That is first, as in worst, and fourth, as in fourth from worst).

First, here's how AP tells the overall story: "The number of U.S. homes that slipped into some stage of foreclosure in 2007 was 79 percent higher than in the previous year, a real estate tracking company said Tuesday."

Now some state numbers: RealtyTrac calculates the national "foreclosure rate" -- the percentage of households facing some sort of foreclosure filing -- at 1.033%. The states with the highest foreclosure rates, according to RealtyTrac, are:
Nevada    3.376%
Florida     2.002%
Michigan  1.947%
California 1.921%

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: L.A. Times

FBI investigating 14 firms in subprime crackdown

News item: A quickie from Rob via the comment section: Reuters reports, "The FBI has opened criminal investigations into 14 corporations as part of a crackdown on improper subprime lending, agency officials said on Tuesday. ... FBI officials told reporters the probes involved potential violations, including accounting fraud and insider trading."

Bloviation: It has been my contention the Justice Department has been very slow to investigate and prosecute mortgage fraud that is, by almost any account, widespread.  When Justice wants to move quickly and send a message, it is more than capable (Ask any former employee of Arthur Andersen what happens when Justice throws its weight around). That's not happening at the moment.

Your thoughts? Insights? Email story tips to peter.viles@latimes.com.

The view from the IE: Recession

No ifs, ands or buts: Chapman University's Anderson Center in Riverside is predicting a national recession. Like, right now. Negative GDP growth in the first quarter (-1.0%) and the second quarter (-1.9%) before a rebound in the third quarter.

A major factor: The Anderson Center says consumer spending will be hit by continued declines in the amount of cash consumers are pulling out of their houses.

In the Inland Empire, the Anderson Center predicts: "a sharp drop in home sales ... a sharp downturn in jobs in real estate-related sectors ... the weakest rate of job creation since 1993 ... higher unemployment rates," plus a 12.5% decline in the median selling price of single-family homes.

Will lower interest rates help? Anderson says they will not help some borrowers facing resets on their mortgages: "Those borrowers who want to refinance need to obtain an appraisal for their property matching or exceeding their current mortgage. This will not be possible for those borrowers who used 100 percent loan-to-value mortgages and are faced with declining home prices."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: LATimes