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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
 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
 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
 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.
 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.
 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
 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
 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
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.
 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
 A couple of noteworthy headlines from the S&P/Case-Shiller housing price index today: According to Case-Shiller data, L.A. still has America's biggest housing price gains since 2000 (aka America's biggest housing bubble), but L.A. prices are falling faster than any other city in America.
Falling prices: These are the biggest price declines measured by Case-Shiller from October 2007 to November 2007:
Los Angeles -3.6%
San Diego -3.4%
Las Vegas -3.2%
San Fran. -3.2%
Phoenix -3.1%
If you are keeping track, Case-Shiller reports L.A.'s price index has declined 11.9% in the past year.
Biggest bubble: These are the price indexes, which measure price appreciation from a base of 100 in the year 2000:
Los Angeles: 240.43
Miami: 237.99
Washington: 223.45
San Diego 209.60
Thoughts? Comments? Questions? E-mail story tips to peter.viles@latimes.com.
Photo Credit: "Cloudy morning at city hall," submitted to Your Scene at LATimes.com by Dan Simpson.
Here's a shocking (no irony intended) piece of news from Countrywide Financial this morning: "Countrywide Financial, the largest U.S. mortgage lender, Tuesday said more than one in three sub-prime mortgages were delinquent at year-end..." Countrywide said borrowers were delinquent on 33.64% of sub-prime loans it serviced as of Dec. 31, up from 29.08% in September, and that said borrowers were at least 90 days late on payments on 17.25% of sub-prime mortgages.
Now, here's a shocking (irony intended) piece of news from Countrywide: The company reported a loss of $422 million, or 79 cents a share, for the fourth quarter. No big surprise here, but the loss was deeper than analysts expected, and Countrywide's most recent guidance had been that it would make a profit in the fourth quarter.
In announcing a $1.2 billion loss in the third quarter, Countrywide said that would be the bottom: "We view the third quarter of 2007 as an earnings trough, and anticipate that the Company will be profitable in the fourth quarter and in 2008," Countrywide president David Sambol said in a press release on Oct. 26. "Over the longer term, we believe that prospects for the U.S. housing and mortgage markets, as well as for Countrywide, remain very attractive."
The L.A.Times reports that, while Bank of America says it has every intention of continuing with its announced purchase of Countrywide, some investors are betting the deal will be renegotiated: "At Monday's closing stock prices, Bank of America's offer was worth $7.50 a share. But Countrywide stock was at $5.95, reflecting sentiment that the price could fall if Countrywide's troubles persisted."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Median listing prices in greater L.A. slipped another $1,900 over the past week, and are now running 12.9% below year-ago levels, according to Housing Tracker's weekly analysis of MLS listing data.
Highlights: Listing prices dropped to $478,000; inventory of unsold homes and condos rose to 41,552, an increase of 33.8% over year-ago levels.
| Date |
Median listing price |
yoy change |
MLS inventory |
yoy change |
| 4/06 |
$579,666 |
n/a |
27,251 |
n/a |
| 4/07 |
$545,000 |
n/a |
35,489 |
n/a |
| 5/07 |
$545,000 |
n/a |
38,297 |
n/a |
| 6/07 |
$540,000 |
n/a |
40,766 |
+20.4% |
| 7/07 |
$535,000 |
n/a |
42,685 |
+14.5% |
| 8/07 |
$529,000 |
n/a |
44,483 |
+13.6% |
| 9/07 |
$520,000 |
n/a |
46,414 |
+16.9% |
| 10/07 |
$510,000 |
n/a |
46,603 |
+15.6% |
| 11/07 |
$499,900 |
n/a |
46,503 |
+19.0% |
| 12/07 |
$495,000 |
-10.0% |
43,174 |
+28.2% |
| 1/14/08 |
$480,000 |
-12.6% |
41,122 |
+34.9% |
| 1/28/08 |
$478,000 |
-12.9% |
41,552 |
+33.8% |
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
There, do I have your attention now?
Seriously, the headline comes from a quote in a fun profile today of one of my favorite mystery bloggers, Manhattan Beach Confidential, whose identity is cause for speculation in the South Bay: "I call him Deep Throat," said
Greg Maffei of RE/MAX Execs. "I like how he's no-holds-barred, says
what he feels. But the thing that gave it validity is that I had
clients asking me what I thought about the site."
If you haven't read the blog, its reporting is very specific -- down to individual listings, how long they've been languishing on the market, and how they compare in price and value to similar listings in Manhattan Beach. Great for readers, but a little bit too much information for some real estate pros: "People who do this kind of thing have nothing
better to do," grumbles Jack Gillespie of South Bay Brokers. "To just prey
on the real estate community, that's fine, but have the guts to stick
your name out there and your number. To me, it's just a gutless act."
What say you, MB Confidential? He (she?) tells the Daily Breeze: "I am trying to help potential buyers (as well as
home sellers) see through the fog," he writes in an e-mail. "I'm trying
to provide the sort of service I would have appreciated having in the
past. All of that is not meant to feed some jihad against Realtors, but
out of a desire to see a more fair marketplace."
A sliver of news in the story: MB Confidential's blog posts were being published in a local print paper, the Easy Reader, but the newspaper pulled the column after complaints about the writer's anonymity.
Full Disclosure: MB Confidential has generated many, many items for this blog. I have no earthly idea who writes the blog, but I like it.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: LATimes
 We live in a speed-of-light world. Brand-new problem? Go to www.solveyourbrandnewproblem.com. Is it a scam? A wonderful new business? A public service? Who knows, but it's there in an instant. Internet surfers, beware.
In that spirit, two links that readers have sent my way: Make The Bank Wait -- a website advertising a book (only $9.95!) that promises to tell you ways to delay foreclosure. For only $9.95, you can "Read the story of how a seemingly helpless and unfortunate homeowner excercised his right to keep his home ... and there was absolutely NOTHING the bank could do but wait!"
For those with itchy feet and a budget of roughly 100 times that -- $995 -- there is You Walk Away, which promises to tell you the best, simplest way to, yes, walk away from your mortgage. I'm not sure why it requires three payments of $332 to learn how to walk, but this website encourages you to "Unshackle yourself today from a losing investment and use our proven method to Walk Away."
Blogger's bloviation: Please do not take this post as an endorsement or recommendation of these links. I post them only for the (small) news value that they embody -- the news that American businesses are finding ways every day to profit from foreclosure and foreclosure anxiety. Relatedly, remember that the entire mortgage crisis developed in part because government lacks the ability, the interest and the imagination to effectively monitor and regulate fast-changing industries like the mortgage industry. It's a safe assumption that the government cannot keep up with new businesses like these. You're on your own out there. Be careful.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: LATimes.com
A programming note, and a bit of self-promotion: I'll be a guest on the Patt Morrison show on KPCC radio today discussing the foreclosure crisis at roughly 1:20 p.m. local time. But here's the bigger news: Also on the program is Condoblue, the commenter here who set off a small firestorm by writing about walking away from a mortgage. Should be an interesting discussion.
Update: You can find a link to the audio about halfway down this page. Enjoy.
 Good morning. "60 Minutes" again demonstrates why it is the best in the business -- the business of for-profit television news -- with this takeout on the mortgage crisis, titled "House of Cards."
Highlights of the Steve Kroft report: "It sounds complicated but it's really fairly simple: Banks lent hundreds of billions of dollars to homebuyers who can't pay them back."
A Stockton real estate agent on homeowners facing foreclosure: "They were never really invested. Most of the people who lost the houses didn’t lose any money because they never put any money down. Though their credit is damaged, and they could face legal action in some circumstances, they got to live in a new house for a couple of years, and some of them even managed to get some money with home equity loans or by refinancing."
Another Stockton agent, Jerry Abbott: "They were getting loans in excess of 100 percent of the value of the property," Abbott says. "That type of thing. So, most of 'em were actually putting a little bit of money in their pocket at close of escrow."
"So, they were getting paid to buy a house?" Kroft asks.
"They were getting paid to buy a house. Yes. Yeah," Abbott says.
The entire piece is worth reading, or watching. Plenty of blame to go around, Wall Street does not get off easily. And there is the (now) requisite interview with homeowners who are thinking about walking away from their mortgage. Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Photo Credit: CBS News
 Late news from the AP tonight: "Countrywide Financial CEO Angelo Mozilo, under fire over the size of his potential payout from the proposed sale of his troubled mortgage company, says he is forfeiting some $37.5 million in severance pay, fees and perks he was scheduled to receive upon his retirement."
More: "Mozilo, however, will still retain retirement benefits and deferred compensation that he has already earned, Countrywide said in a statement being released Monday."
Here's the Countrywide press release, in which Mozilo (pictured) says, "I believe this decision is the right thing to do as Countrywide works toward the successful completion of the merger with Bank of America."
The AP figures Mozilo still has roughly $44 million coming to him: "Now, he'll leave with a pension plan and supplemental executive retirement plan that totaled $23.8 million as of December 2006, according to the most recent proxy statement the company filed with the Securities and Exchange Commission. Mozilo also accrued about $20.6 million in deferred compensation, according to the filing."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Bloomberg News
Good morning. I see rays of sunshine in the back yard this morning, which is a welcome, if temporary, sight. I also see some blooming flowers, which is a reminder that even in the rainy days of January, L.A. dazzles. Pieter Severynen does too, with another installment of "Tree of the Week."
The Evergreen Pear - Pyrus kawakamii
"The 20-odd species of pear trees come in two kinds: (edible) fruiting and ornamental. The evergreen pear is one of the ornamentals. Left to its own devices this mainland China and Taiwan native grows into a sprawling 15-25’ tall and wide big shrub, but our custom and taste is to shape it into a bare-trunked single or multi stem tree. This is accomplished by staking the trunk until it is self-supporting, cutting off any would-be branches sprouting along the trunk and selecting and shortening the long branches in the crown that grow in every direction to upward and outward facing buds, thus establishing a structural framework. Treated this less-than-natural way, the evergreen pear becomes an elegant open-structured small weeping tree with gracefully pendulous branches and drooping branchlets.
"Part of the Rose family, the tree is evergreen when the climate cooperates; in cold winters it may be partially deciduous. But the glossy, oval, 2-4” long leaves turn purple or red in winter. New growth is shiny light green. During good years spectacular clusters of white flowers completely cover the tree anytime from November to spring. Hard pruning prevents flowering. The tiny, ½” fruit, if it forms at all, is buff to black in color. The rough, deeply furrowed charcoal gray bark looks attractively picturesque, especially after rain.
"Once established, the tree needs little pruning. It can live from 50 to 150 years. Very tolerant of a range of soils, it loves full sun and gets by on moderate watering. But it suffers from fireblight, especially in wet winters. This bacterial disease turns isolated shoots and branches brown or black, making them look as if they went through a fire. The remedy to this usually non-fatal but contagious pest problem is to remove the affected branches 8-12” below the dieback point. Lesser problems that may also diminish the value of this otherwise beautiful small tree are a leaf spot disease that causes partial defoliation and sometimes aphids or scale."
Thanks, Pieter.
Email Pieter: plseve@earthlink.net
Photo Credit: www.sheridangardens.com
An update this morning from Condoblue. For those of you just joining us, Condoblue is the poster who plans to walk away from a mortage and move into a new home -- even if it means foreclosure. Reaction here was split on whether Blue's decision was a smart business move, or a sign of poor personal character. Condoblue read your comments and responds this morning:
"As the original poster, I'd like to add some facts to the story since there have been so many assumptions made about my situation. Apparently, it hit quite a nerve, judging from the torrent of postings.
Read more 'Condoblue' explains: Why I'm walking away »
Good morning. Countrywide Financial is leading the cheers this morning for the new "junior jumbo" mortgage loan limits. "It's the single most effective step they could take to stabilize the housing and mortgage market," said Countrywide spokesman Rick Simon.
The details: Simon was praising the stimulus deal cut by the administration and Congress, which would include "...a significant increase in the maximum loan limits for the Federal Housing Administration and quasi-governmental secondary mortgage operations best known as Fannie Mae and Freddie Mac."
More, from LATimes.com: "The precise hike in loan limits was still being debated late Thursday. House Republicans said they had agreed to temporarily raise the limit for Fannie Mae and Freddie Mac loans to $625,500, although Democrats were proclaiming that the deal would hike limits to $729,750. Either way, the increased limit on loans guaranteed by Fannie Mae and Freddie Mac would be temporary, expiring Dec. 31 of this year."
Why it's such a big deal, and such a boost for homeowners, in California: The move would likely mean lower interest rates on loans in the $417,000 to $729,000 range (which I'll now call "junior jumbo" loans). That would help buyers in that price range, and owners in that price range who are looking to refinance into fixed-rate loans. Maybe more important, it helps lenders like Countrywide find a willing buyer for their junior jumbos. Win, win, win for those folks.
The arguments against higher limits: They would newly expose Freddie and Fannie -- and ultimately taxpayers -- to some of the least stable housing markets in America, which are the expensive ones. As Mike P said here yesterday, "In other words, taxpayers all across the country are now on the hook for California-sized mortgages. I bet they're thrilled." Also: As Cal points our here, Fannie and Freddy's limited capital "will be soaked up by California (and other parts of the country) Jumbos, leaving a lot less for everyone else." In other words, explain to someone in Cleveland why the government should back one big California mortgage instead of three normal-sized Ohio mortgages.
Why it won't be temporary: Because on Dec. 31, 2008, it says here, the housing market in California and other bubble markets will still be weak. The lame-duck Congress will have a choice: let the junior jumbos expire, which would hurt already weak markets, or extend the junior jumbos. Congress, lame or otherwise, rarely crosses the financial industry. The junior jumbos will survive.
Why the Bush administration rolled over on this issue: Its opposition to higher loan limits for Fannie Mae and Freddie Mac is well known. From NYTimes.com: Treasury Secretary Paulson, at a news conference, acknowledged that he was not happy about the higher limits. “I got run down by a bipartisan steamroller,” he said. “Republicans and Democrats reunited on this.”
Your thoughts? Insights? Anybody out there believe these higher limits would be temporary? E-mail story tips to peter.viles@latimes.com.
A first at L.A. Land -- a reader poll. Yesterday's post on whether it makes sense to "Walk Away" from an upside-down mortgage drew so much comment and discussion, I'll pose it as a poll question:
 Get ready for the new Jumbo loan cutoff: call it the Jumbo Jumbo: $625K and above.
News item from LATimes.com: "The [stimulus] package also includes a provision to make refinancing mortgages easier by raising the limit to $625,500 for most government-backed housing loans. That is expected to make more funds available to homeowners in expensive real estate markets such as Southern California who want to get out of their adjustable rate mortgages."
That's pretty big news, a shot in the arm to California real estate, and to lenders like Countrywide looking to unload jumbo loans. It means lower interest rates for jumbos, among other things. It's also a tribute to the accuracy of commenters on this blog, who were chattering about rumors to this effect earlier in the week -- even though those rumors were not widely covered by the mainstream press. Good on you, you unwashed bloggers.
More, from L.A. Times: "Currently, the government's mortgage guarantors, Fannie Mae and Freddie Mac, can purchase mortgages only up to $417,000, and funds have largely dried up for homeowners who want to refinance mortgages above that limit. The legislation would temporarily raise that limit to $625,500, making it easier for banks to make loans to homeowners who owe more than $417,000 on their mortgage. It would also raise the limit on loans insured by the Federal Housing Administration to $729,000."
The Washington Post: "The package would temporarily increase the size of jumbo mortgages that can be bought by government-sponsored Fannie Mae and Freddie Mac, from $417,000 to as much as $625,500 in high-cost housing markets."
My take: I will be shocked -- shocked! -- if such an increase proves temporary.
Update: Why did the administration roll over on this issue? Its opposition to higher loan limits for Fannie Mae and Freddie Mac is well known. From NYTimes.com: "Mr. Paulson, at a news conference, acknowledged that he was not happy about that. “I got run down by a bipartisan steamroller,” he said. “Republicans and Democrats reunited on this.” I suspect if the truth were knowable, the higher limits had three powerful blocs of support: members of Congress from high-cost areas (Pelosi, etc.), the real estate lobby and, probably most important, banks and lenders. Bank of America has to be very, very happy with this.
The White House does not mention the higher loan limits in its description of the stimulus plan here. One argument against higher loan limits is that it increases Fannie and Freddie's exposure to the housing bubble, with predictably negative consequences.
Comments? Insights? E-mail story tips to peter.viles@latimes.com
Photo Credit: Treasury Secretary Paulson and President Bush, via Whitehouse.gov.
News item: The National Association of Realtors reports that sales of existing homes in December were 22% below year-ago levels, and 2.2% below November's sluggish sales pace. The AP via CNBC: "Sales of existing homes fell in December, closing out a horrible year for housing in which sales of single-family homes plunged by the largest amount in 25 years. The median home price dropped for the entire year, the first time that has occurred in four decades.
The NAR -- often criticized by readers here for its bullishness -- acknowledged that home sales "remain weak." From the NAR press relase: Lawrence Yun, NAR chief economist, said the market is experiencing uncharacteristic weakness. "Home sales remain weak despite improved affordability conditions in many parts of the country, but we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate," he said. "Home prices are lower, mortgage interest rates continue to decline and incomes are higher, but many potential buyers are delaying a purchase."
More to come.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 A homeowner who can't sell his house tells the L.A.Times, "Foreclose me. ... I'll live in the house for free for 12 months, and I'll save my money and I'll move on."
Banks and lenders fear this kind of thinking -- that walking away from a house could be the smart economic move -- appears to be on the rise. Wachovia, in a conference call yesterday, warned investors that increasing numbers of homeowners are walking away from their homes by choice: "... people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they've lost equity, value in their properties..."
Calculated Risk notes this is "one of the greatest fears for lenders ... that it will become socially acceptable for upside down middle class Americans to walk away from their homes."
A commenter on L.A. Land this morning writes, "I am one of these people. My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.
"Despite all this, I would be willing to stay if the bank would refi the loans to a 30 year fixed, but since I'm not a 'hardship' case they'd apparently rather foreclose. I guess the only way I could qualify for loan mitigation is to get my boss to fire me, stop making payments, and wreck my credit. In fact, my bank won't even talk to me until I miss a couple of payments.
"I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.
"I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.
"I don't really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: AP
A two-fer: A pretty map of foreclosures and a handy search tool. Use the search tool (you'll find it to the right of the photo) to track foreclosures by your ZIP Code. Or just look at the map.
Commenter Take Five points out an ominous little item over at Calculated Risk today: Wachovia reports that some homeowners who can afford to pay their mortgages are now opting instead to walk away from their homes and their debts:
"From the Wachovia conference call: 'Part of one of the challenges is, and we've mentioned this before, a lot of this current losses have been coming out of California and it's -- they've been from people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they've lost equity, value in their properties, and so in a way, we may have -- it's hard to know right now, but we may have seen somewhat of an acceleration problem loans as people have reached that conclusion and we're just going to have to see how the patterns unfold here.' "
CR points out that this is a growing worry among lenders -- that it will become socially acceptable for homeowners to walk away from their mortgages. Against that backdrop, the Bush administration's push for a rate freeze for some sub-prime homeowners takes on a slightly different tint: it's a subtle reminder from the government that home ownership is worth fighting for.
While we're on the topic: Today's DataQuick report on California foreclosures also contains an ominous "below the headline" observation: "Of the homeowners in default, an estimated 41% emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 71%." If you do the math, that means homeowners going into default now are more than twice as likely to lose their homes as homeowners who went into default a year ago.
Hat tip: Take Five
Comments? Insights?
(Note: this is an edited version of an earlier post) A reader e-mails to disagree with my earlier post minimizing the impact of today's rate cuts on mortgage rates. That post quoted CNBC's Diana Olick, who wrote, "I’ve said it before, and I’ll say it again: the 30-year fixed is not tied to short-term treasuries. ... Fixed mortgage rates are tied to long-term bond yields that move based on the outlook for the economy and inflation. And guess what? The long-term outlook for the economy isn’t exactly rosy right now. Today's rate cut does affect short-term adjustable rate mortgages, but not really as much as you might think. Why? Because this rate cut was already priced into the market..."
Now the dissenting opinion: "The lender I work with at Bank of America in Glendale told me this morning that she is reducing the interest rates for the pre-approved buyers I'm working with .25%." In other words, the rate cut meant lower mortgage rates immediately.
Further, the dissenter points to this article in USA Today, which also points to immediate benefits of lower rates in the mortgage market: "The Fed's rate cut will also give the biggest boost to borrowers with variable-rate mortgages, says Keith Gumbinger, vice president of HSH Associates, which tracks mortgage rates. Home equity loans, which are typically half a percentage point above the prime rate, should fall to about 7% from an average 7.74% the first of the year, he says."
Why the edited version? A reader observed the illustration for the original post was "too tasteless" -- not just a little bit tasteless, like the earlier discussion here about "dead cat bounce," but too tasteless.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Breaking news from Peter Hong of the L.A.Times: "A record 31,676 Californians lost their homes to foreclosure in the three months ended Dec. 31, the third-straight quarter of record-breaking foreclosures, records released today show."
More from DQNews.com: "Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 31,676 during the fourth quarter. That's the highest since DataQuick began tracking Trustees Deeds in 1988. Last quarter's total rose 30.8% from 24,209 in the previous quarter, and jumped 421.2% from 6,078 in fourth quarter 2006. In the last real estate cycle, Trustees Deeds peaked at 15,418 in third quarter 1996. The all-time low was 637 in the second quarter of 2005.
More to come.
Random thoughts, bloviation and links on this morning's "surprise" Fed rate cut. (Why the air quotes around "surprise"? Ask yourself: was it really a surprise?)
--What does it mean for mortgages? CNBC's Diana Olick was up early and all over this. Diana blogs, "I’ve said it before, and I’ll say it again: the 30-year fixed is not tied to short-term treasuries. ... Fixed mortgage rates are tied to long-term bond yields that move based on the outlook for the economy and inflation. And guess what? The long-term outlook for the economy isn’t exactly rosy right now. Today's rate cut does affect short-term adjustable rate mortgages, but not really as much as you might think. Why? Because this rate cut was already priced into the market..."
--What does it say about the economy? It says things are bad. Or, as a Deutsche Bank analyst told Reuters, "The Fed is very, very, very worried." The largest rate cut since 1984, by my logic, means the largest economic problem since 1984. You can forget the parallels to the early '90s real estate slump -- this is worse; the Fed just said so.
--What will the markets do? If I knew I'd be golfing, and if you listen to me you're a dope, but in a fit of caffeine-induced late-night speculation, I made my predictions last night over at the Blown Mortgage blog: Dow loses 485 points in early trading, closes with a loss of 312. I believe I'm out of the money on that one.
Your thoughts? Insights? E-mail story tips to peter.viles@latimes.com.
A dab of humor before stocks open.
The Federal Reserve's Open Market Committee this morning: "... incoming information indicates a deepening of the housing contraction."
The ever-bullish Lefty, commenting yesterday: "If you're out of stocks now, what better place to put your money than your own beautiful home in sunny CA!! you'll be building equity in no time while the snow-bound east coast is getting even colder on wall street!"
You knew it was coming: a potentially trend-setting lawsuit in which buyers who paid too much for their house are now suing their real-estate agent. The New York Times' David Streitfeld reports tonight on a Carlsbad couple who paid $1.2 million for their home in August 2005 only to realize that similar homes in their neighborhood were selling for up to $175,000 less. Naturally, they are suing their agent.
Streitfeld reports the case is "likely to be the first of many in which regretful or resentful buyers seek redress from the agents who found them a home and arranged its purchase."
“They simply didn’t do what is expected of a knowledgeable, sophisticated buyer, and are now looking for someone other than themselves to take responsibility,” said Roger Holtsclaw, an agent who was hired as an expert witness for the agent being sued.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com.
Median listing prices and inventory of homes for sale held nearly steady over the past week, according to Housing Tracker's weekly analysis of MLS listing data.
Median listing prices dipped by $100, to $479,900, a decline of 12.6% from year-ago levels.
Inventory of homes and condos for sale dropped slightly, to 40,850, an increase of 33.3% from year-ago levels.
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)
1/14/08 $480,000 (down 12.6% y/y) 41,122 (up 34.9% y/y)
1/21/08 $479,900 (down 12.6% y/y) 40,850 (up 33.3% y/y)
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 Frivolous interlude: The ever-resourceful Real Estalker has photos and analysis of Conan O'Brien's new, $10 million plus Brentwood home, which was featured this week in Ruth Ryon's "Hot Property" column in the L.A. Times.
Real Estalker deems the ginormous house "classy," "dignified" and "restrained," which is high praise given the blog's generally picky standards.
That's Conan's new dining room pictured on the left. On the right? That would be Graceland. Yes, Conan appears to have purchased a house with an Elvis-inspired dining room. I know what you're thinking: who has time to think of bizarre coincidences like this, and hunt down the pictures on the web, and then place them side by side? That person would be Tony Pierce, author of busblog, and the boss of blogs at LATimes.com.
There is a sliver of news in this item: Real Estalker reports O'Brien paid slightly more than the asking price for the house -- she says the house listed for $10.495 million, and sold for $10.75 million: "Perhaps the sagging market has
yet to affect the small pool of buyers lucky enough to have seriously
deep pockets."
Photo Credit: busblog
 Monday night update: The news from Asia is not encouraging -- Asian stock markets were sharply lower Tuesday, continuing Monday's near-panic selling; Japan's Nikkei 225-share index was down 4.6% in midafternoon trading Tuesday in Tokyo, following a 3.9% slide Monday.
(Resume previous post) Good morning. The global stock market sell-off is a story worth tracking, as the U.S. housing slump slowly but surely does damage to investors and economies across the world. Who knew that liar loans and serial refis would end so badly? (I know, I know, you knew). Single-day losses of 5% to 7% in global markets (6.8% in France, 7.2% in Germany, 5.5% in Hong Kong) are eye-opening.
U.S. markets, of course, are closed for the King holiday, but futures trading today indicates Tuesday could be very ugly on Wall Street. From Reuters: "Dow Jones industrial average futures dropped 546
points or 4.5 percent. Should the Dow close lower on Tuesday by
the amount the futures suggest, it would rank as the
fourth-largest point loss ever for the index."
I'm guessing the Federal Reserve will say or do something before the markets open Tuesday in hopes of injecting a glimmer of confidence, or liquidity into the picture.
Your thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: AP
 Good evening. I published an item recently from "dog-walker," who, on the birth of a child, reflected that there is more to life than real estate. "Life is more important than lifestyle," dog-walker advised. Tonight, "Kosher Krab" responds:
"Dear Peter,
"I appreciated the Dog Walker letter but here's an opposing view; even with a new baby and pre-schooler, even while battling life-threatening illness, when one's spouse is transferred across the country, sometimes the ONLY thing that matters is selling the damn house. We've reduced the price 250k now and I've noticed interest is picking up, but I still feed my obsession with L.A. real estate with your website after the kids are in bed. Thanks for the outlet, and thanks to Lefty for a ray of hope as I prepare for our 30th open house tomorrow. Kosher Krab"
Thanks for writing, Kosher, and good luck in all of those things -- your health, your children, your move, and last -- but probably not least -- your house.
Photo Credit: L.A. Times
 Good evening. Will downtown L.A. ever achieve critical mass as a place to live? Will most Angelenos ever care? If you are among those who care, you will be interested in this item from Downtown News:
"A groundbreaking ceremony for the $3-billion Grand Avenue project has been pushed back from March until at least the summer, officials with developer Related Cos. confirmed last week. It marks the third time that the public kickoff for the massive Bunker Hill effort has been postponed."
LA Biz Observed reports the delay is "bound to raise questions on whether the much-ballyhooed project being developed by Related Cos. is running into financing problems. It wouldn't be surprising, given the scope of the project and the uncertain state of the commercial lending market."
For the recrod, Related Cos. President Bill Witte told Downtown News "the development is on track to meet its most recently announced timeline, with phase one slated for completion in 2011. He also maintained that the project's financing is in order."
Thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Photo credit: Gehry Partners LLP for Grand Avenue Committee
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"I did not get House #1 with a liar loan; it was fully documented. I could have put money down but chose to hold on to my cash. As it turns out, the value has dropped so much, it would have just been money down the drain anyway. I never planned to flip the place or make a quick buck (although I don't see anything wrong with making money). I just figured I'd sell or refinance it before the ARM readjusted. At the time I was looking, it was one of the cheapest condos I could find in a decent area.
"I don't have a grudge against big companies (hell, I work for one) or feel like I'm 'sticking it to the man.' Like many posters have said, it's just business.
I have a good income, credit, and savings, so am qualified to buy House #2 using my savings as a down payment. I have adequate income to meet the lenders' debt ratios to cover both homes, and then some. Servicing the debt is not an issue. Ironically, House #2 is a short sale.
When I applied for the loan on House #2, I expected the lender to question the upside-down status of House #1 (they can Zillow as well as I can), but they approved the loan with no questions or issues. I was surprised that they didn't even ask how much the new ARM payment on House #1 would be, but was told that they don't take that into consideration. Huh?
As for Big Lender on House #1, I called their loan department to see if I could refinance the mortgages and was told they don't refi homes with negative equity. I asked the loan officer if they have any programs available for people in my situation. He said he didn't know of anything, but that they did have loan counseling people available, but you have to fill out a questionnaire first before they'll talk to you. So I called another 800 number to get the questionnaire and requested it via their automated voice system. That was 2 weeks ago; no questionnaire (not that I have a hardship anyway). Later, buried on Big Lender's website, I saw where they supposedly contact borrowers 4 months before their loan reset, which would be early February. We'll see.
In terms of selling House #1, this is a cookie cutter condo in a town full of them, so it's easy to figure out its market value (zilch) and average days on market (eternity). There are plenty of short sales right here in the neighborhood, and they are not moving.
Finally, I realize my credit score will take a hit, but remember that I don't need to rent since I own House #2. I have stable long-term employment, decent car, and no debt so speak of. So what if my car insurance goes up a bit. Incidentally, the Federal tax-exempt status on mortgage debt forgiveness is only temporary, so if you are considering walking away from your equity-less home, better call your CPA and lawyer to find out the rules and start making plans..."
Thanks, Blue. Your thoughts? Comments? Be respectful, and please don't expect Condoblue to explain every intricate financial detail of these transactions. There's a lot of information here.Read below for Condoblue's first post.