The biggest foreclosure bailout of all ...

A quickie: Calculated Risk highlights St. Louis Fed President William Poole's worries that Fannie Mae and Freddie Mac are headed for trouble.

Poole: "I do not have any information on the GSEs [government-sponsored enterprises] that the market does not also have. Nevertheless, in assessing the risk of further credit disruptions this year, I would put the GSEs at the top of my list of sources of potentially serious problems."

Reality check: Fannie and Freddie reported combined losses of $6 billion in the fourth quarter.

And what happens if Freddie and Fannie get in deep trouble? Poole predicts a bailout: "... unfortunately, the GSEs probably can expect targeted aid. ... the GSEs ... might get assistance directly from Congress ... ."

This is a fair question for presidential candidates: Do you believe there is an implicit government guarantee standing behind Freddie and Fannie? That is, will you support a bailout if they get in trouble?

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Bloomberg News

Paulson's warning: Don't walk away

Interesting, and revealing, comments from Treasury Secretary Henry M. Paulson Jr. (pictured) in Chicago last night. With two of the nation's most influential newspapers reporting the same trend at the same time -- a rise in "jingle mail," or "walking away" from mortgages -- Paulson strongly urged homeowners not to walk away. He sounded a bit like a bill collector.

"Homeowners who can afford their mortgage should honor their obligations. And nearly all do," he said. "Homeowners who gambled in the housing market and viewed their purchase as a short-term investment may choose to walk away. Those who do this are nothing more than speculators, and they are not the focus of our efforts."

We have explored this issue to death on the blog, and the views here are pretty clear: Most of you believe that walking away from a mortgage is not a matter of honor, it is a financial decision, and sometimes the smart one, for borrowers.  It comes with serious consequences, but a majority of you have made clear you believe it is sometimes the best choice.

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

Market snapshot: Brokers' caravan in Burbank

I hitched a ride this morning on the Brokers' Caravan in Burbank with Judy Graff, who comments here as sfvrealestate, which is also the name of her blog. I know what you're thinking, and you're wrong. She does not drive a Mercedes. She drives a Toyota Prius.

Here's what we saw, most of it new on the market:

1100 and 1100 1/2 N. Buena Vista Street 91505 (pictured): $658,000 for two legal residences totalling 1,600 square feet -- a 2 plus 1 main house plus a one-bedroom guest house/carriage house, plus a small standalone office.  Nice, old-school Spanish revival with lots of original detailing. If you are into trees, the property has a massive eucalyptus tree in the back yard.

3022 N. Lamer Street 91504: On the market since last summer, reduced from $1.2 million to $999,999. An airy, 2,300-square-foot, 3 bedroom, 2 1/2 bath home with a heated, kidney-shaped pool and sweeping Valley views from the Burbank Hills. A handsome house with large public rooms, but no yard to speak of.

2223 N. Lamer 91504: $699,000 for a 2,122 square foot, 4-bedroom, 2-bath house that will have to find a very specific buyer. As in, a buyer who doesn't want much grass to maintain, because this house has a paved front yard and a pool in back. The marble floors are not for everyone, either.

2304 N. Sparks 91504: Reduced, from $699,000 to $575,000, this is a short sale, and a house with a sad story to tell. The previous occupants clearly left in a hurry -- children's toys are strewn about, and his-and-hers college diplomas are still framed and mounted on one wall. Judy blogs about it here. UPDATE: The listing agent informs the owners are still in the process of moving out. So scratch the sad story and the leaving in a hurry -- it's the opposite. They're leaving slowly.

824 N. Parish Place 91056: $774,999 for a 2,012 square-foot, 4-bedroom, 2 3/4 bath home, half a block from the Chandler Bikeway.  Unremarkable.

1430 W. Valleyheart 91506: $1.65 million for an unusual house -- a horse-lover's paradise, zoned for five horses, and beautifully redone -- so unusual that I gave it a separate post.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Nick Tatone

Analyst: 5 to 6 million could "walk away" from homes

The New York Times tonight covers a story familiar to readers here: increasing numbers of homeowners are choosing to walk away from their mortgages and their houses.

The Wall Street Journal also tackles the story tonight, under the headline "Borrowers Abandon Mortgages as Prices Drop."

Behind the trend: If you didn't put much of your own money down when you bought the house, it's a lot easier to walk away. And a large number of recent buyers put very little down.

From the NYTimes: “Will everyone walk out?” asked Christian Menegatti, a real estate analys. “No. But there’s been a cultural shift. Buying a house used to be like entering a marriage, a commitment for life. Now, if you see something better, you go back into the dating market.”

When homeowners see houses identical to their own selling for much less than they owe, Mr. Menegatti said, “I wouldn’t be surprised to see five or six million homeowners walk away."

Bloviation: You may feel you've read this story before, but the NYTimes account goes well beyond the anecdotal and explores the cultural and financial changes driving this trend. It's well-reported and worth reading.

Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: LATimes
Hat tip: PJ via email.

Suburban cowboy: A horse-lover's oasis in Burbank

A confession: Writing this blog, with the constant drumbeat of doom and gloom, sometimes makes me forget why real estate in Los Angeles is such a local obsession in the first place. Then I visit a house like Stan Smith's in Burbank, and I understand again.

I'll give you the details, but won't do justice to it: 4 bedrooms, 3 bathrooms, 3,400 square feet, exquisitely redone (think Ralph Lauren if he was a real horseman), zoned for five horses (yes, horses in Burbank). It has 10 stalls, two tack rooms and a large pool on a huge lot (16,000-plus square feet). Four fireplaces, a three-car garage. Yes, it is very close to the 134. No, I couldn't hear freeway noise in the house. The owner, real estate agent Stan Smith, is embarking on a new chapter of life: he's buying an inn in southern Vermont. 1430 W. Valleyheart Drive, 91506. Listed for $1.65 million. More pictures below.

Photo credits: Stan Smith

Wells Fargo calls L.A. market 'severely distressed'

A quickie: Wells Fargo has designated Los Angeles County a "severely distressed" housing market, which means tighter mortgage guidelines for L.A. borrowers, effective this week. From Biz Journals: "In a move that could have far-reaching ramifications for home buyers in the Golden State and elsewhere, Wells Fargo & Co. is tightening its mortgage lending guidelines in more than 200 markets across the country, including Los Angeles County, that it has labeled severely distressed or distressed."

More: "In markets considered severely distressed, for example, it will not make a loan for more than 75 percent of the value of the home. Twenty counties in California, including Los Angeles County and Orange County, are on the severely distressed markets list."

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Hat tips: Beth and Better Village

Foreclosure victim on bailout: 'No way, Jose!'

Blogger's note: A reader, C. Benedicto, e-mailed this commentary.

"I lost my house to foreclosure after the 1994 Northridge Earthquake. At the time, the house I purchased in 1989 for a premium was worth less than the mortgage, plus I needed to come up with additional funds for repairs to the damage caused by the earth movement.

"Losing a home, which was my family's major investment, was painful, and to date my wife and I are still trying to recover financially and emotionally. However, despite the grave loss we feel, we believe we have no one to blame but us -- for being so stupid buying a house just to keep up with the Joneses and as an investment. We now stay in a modest abode and live a lifestyle within our means. 

"When a Realtor neighbor encouraged me during the height of the real estate frenzy to go aboard the bandwagon and buy a piece of property, which I believe was overpriced, because, she said, I could make a hefty profit within a year, I asked her how possibly I could afford to pay the mortgage once the teaser rates expire. To my amazement, she looked at me in disbelief like I was stupid. 

"These banks and speculators knew exactly what they were getting into. Many of them made a lot of money flipping houses like burgers when the market was going higher into oblivion everyday. Now that the housing market turns against them, they want me to help them out and pay for their greed. No way, Jose!!!!"

Thanks. A reminder, the blog is an open forum. If you'd like to defend bailout proposals, now is your chance.  E-mail story tips to peter.viles@latimes.com.
Photo credit: AP

Valley Meltdown: Home prices down 24% in seven months

News item from the Daily News: "The median price of a San Fernando Valley home plunged a record $113,000 in January from a year ago and sales sank to an all-time low as credit and foreclosure problems further pounded the market, a trade association said Wednesday."

At $500,000, median sales prices in the Valley have now fallen a staggering 23.7% since peaking at $655,000 last June. That's 23.7% in seven months.

More: "Still, prices would have to fall further to make them affordable and turn around the sluggish sales market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. 'I'm still not seeing a light at the end of the tunnel,' Blake said."

Hat tip: Brad Greenberg
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Aerial view of Ventura Boulevard in Sherman Oaks, from L.A. Times.

Update: Bush says no bailout for lenders, speculators

As banks lobby for what has been described as an "epic rescue plan" for the mortgage industry, President Bush today hardened his oppostion to bailout plans he said would help "lenders and speculators." Bush said such plans would be unfair to millions of homeowners who pay their mortgages on time.

USA Today: "Echoing Treasury Secretary Henry Paulson, Bush says a Senate proposal to deal with the foreclosure crisis would 'do more to bail out lenders and speculators than to help American families keep their homes.' "

Update: It's worth noting the specific objections the administration has to the Senate bill on foreclosures. From CNN Money: "Earlier this week, the Bush administration said the president would veto the Foreclosure Prevention Act of 2008 if it passes Congress because it objected to two key elements. The first is a provision that would change the bankruptcy law to let judges reduce the amount of principal and interest due on mortgages of those filing for bankruptcy. ... The administration also objects to a provision in the bill that would provide $4 billion to let state and local government buy and rehabilitate foreclosed homes, and improve disclosure of subprime mortgage loans in hopes that borrowers won't be surprised by big payment increases."

Commentary: It's impossible to separate politics from principles here. The president knows that bailouts are unpopular, so he argues the bankruptcy changes -- which have nothing to do with a bailout for lenders -- are part of a bailout for lenders. Ah, very clever. Very cute. And completely consistent with the lack of intellectual honesty that dominates American politics at the moment. If you don't like changes in the bankruptcy law, why not step up and say so?

It's also disappointing that, at today's news conference, none of the reporters bothered to follow up on this. 

Still, Paulson's comments (see below) were pretty clear. Paulson shot down talk of a real bailout for lenders. So, some politics, some principle.

The president's comments came a day after his Treasury Secretary dismissed called for a massive rescue plan for the mortgage industry. From the Wall Street Journal: "The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners."

This would be the "epic rescue plan" cooked up by Bank of America that the New York Times reported on last Friday.

More: "In an interview yesterday, Treasury Secretary Henry Paulson branded many of the aid proposals circulating in Washington as 'bailouts' for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers."

From Smart Money: "President Bush and other administration officials have voiced skepticism before about a major government effort to ease the burden of the nation's housing slump. But Paulson's comments are the most explicit to date in laying out the administration's opposition to the recent spate of rescue plans.

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

Paulson: No bailouts for the "reckless"

A quick, important news item tonight from The Wall Street Journal: "The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners."

This would be the "epic rescue plan" cooked up by Bank of America that The New York Times reported on last Friday.

More: "In an interview yesterday, Treasury Secretary Henry Paulson (pictured) branded many of the aid proposals circulating in Washington as 'bailouts' for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers."

Thoughts? Comments? Email story tips to peter.viles@latimes.com.
Photo Credit: AP