Treasury, FDIC working on $500-billion mortgage workout plan

Federal officials are moving closer to a plan that would provide government guarantees for as much as $500 billion in troubled mortgages, helping millions of people stave off foreclosure.

The Treasury Department and the Federal Deposit Insurance Corp., are working on details of a plan outlined last week by FDIC Chairwoman Sheila C. Bair (pictured). The plan, which would cost $40 billion to $50 billion, would be modeled on mortgage modification programs being implemented by Bank of America Corp.’s Countrywide unit and by the FDIC for mortgages serviced by the failed IndyMac Bank.

The idea is to use loan guarantees and other enhancements to encourage lenders to modify mortgages, lowering monthly payments to a point that borrowers could afford them.

Andrew Gray, an FDIC spokesman, said the agency has had “productive conversations” with Treasury and other Bush administration officials, but it was too early to speculate about the framework or size of a potential program.

Treasury spokeswoman Jennifer Zuccarelli said, “the administration is looking at ways to reduce foreclosures, and that process is ongoing. We have not decided on a particular approach.”

-- Jim Puzzanghera

Photo credit: Bloomberg News

What, me worry?

Home prices are sinking, but that fact hasn't sunk in with many homeowners. About half of U.S. homeowners say their home's value has either increased or remained the same over the past year, according to a survey by real estate site Zillow.com.

In fact, says Zillow, about three-quarters of U.S. homes lost value in the past year, according to their calculations.

For the first time, a bare majority -- 51% of homeowners-- said their home had declined in value in the past 12 months. Of the rest, 32% think their home increased in value in the past 12 months, while 17% said they believe their value remained the same.

The survey was taken in the first week of October. Zillow's previous survey, taken in July, found that 62% of homeowners thought their property had increased or remained the same in value.

Here in the West, 65% of us think our homes have declined in value in the last year. That percentage, while higher than the rest of the nation, also understates reality. Zillow estimates 85% of homes in the region have lost value in the past year.

-- Peter Y. Hong

Tracking 90066: A Mar Vista short-sale lingers

I like to track Mar Vista prices and trends as a proxy for the sub-$1-million Westside market. My gut is that if and when there is going to be real weakness in the Westside market, it will show up in the $600,000 to $800,000 price range first, in ZIPs such as 90066.

That said, I bring you two Mar Vista anecdotes, saying two very different things about the market. The picture at right says the market is weakening: a short-sale listing at 3258 Rosewood. Tiny house -- 900 square feet on a small (4,800 square feet) lot; sold in 2005 for $725,000, now listed for $599,000; and sitting on the market at that price since mid-August.

Here's the other side of the coin: A tear-down at 12706 Stanwood, which sold earlier this month for $832,000. That's the tear-down price. Essentially $832K for the lot. An average-sized lot for the neighborhood, in the 5,000- to 6,000-square-foot range. No view to speak of. To me, that's not consistent with a weak market.

That said, here are the numbers, from Redfin, for 90066:

Date                              Oct. 6       Oct. 29

-- Listed for sale             106            163
(home and condos)
-- Foreclosures for sale       4                6
-- Median list price        $795,000    $719,000
-- Median sales price*    $757,000    $655,000
-- Median sales price/sf   n/a            $476
- -Median days listed        63.5            72
-- % reduced in price        34.8%          39.7%
-- Median total reduction   6.6%            6.5%

*Based on homes sold or taken off the market in the previous 90 days

-- Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles.
Photo: L.A. Land

Photo of the Day: Coastal reflection

Spotted this morning at the corner of Centinela and Washington in Mar Vista.

Credit: L.A. Land

--Peter Viles

Credit card crackdown: We know who you owe

The New York Times tonight weighs in on the next credit squeeze consumers will feel -- what the paper calls "the credit card crisis:"

After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers.

Here's the paragraph that caught my eye:

Lenders are shunning consumers already in debt and cutting credit limits for existing cardholders, especially those who live in areas ravaged by the housing crisis or who work in troubled industries. In some cases, lenders are even reining in credit lines after monitoring cardholders who shop at the same stores as other risky borrowers or who have mortgages from certain companies.

That's kind of scary. Guilt by geography. Redlining, I believe it's called. You have perfect credit, manage your finances responsibly, and the credit card company dings you because you live in a neighborhood where people are behind on their mortgages? One more from the story:

Even those with good credit ratings are not excepted. American Express, which traditionally catered to more upscale cardholders, said it would be increasing effective interest rates by 2 or 3 percentage points for some of its credit card holders — a move that could, for example, push a 15 percent rate up to 18 percent.

Would love to hear your thoughts on this one.

--Peter Viles

Photo Credit: Getty Images

L.A. Land profile: Kal Wayman, "Not your mother's mortgage broker"

Who remembers Kal Wayman from the early days of this blog? Uncle Billy, you remember Kal, right? That's him pictured, partying recently at the Playboy Mansion in Holmby Hills.

Here's the back story: in May 2007, I wrote a snarky post about Kal, an Atlanta mortgage broker and party promoter who came to my attention because he used a babes-in-bikinis video on YouTube to promote his mortgage business.

After I climbed on my high horse and labeled the video "disturbing," a surprising thing happened: Dozens of Kal's mortgage clients came on the blog to comment in his defense. I learned that he had lots of clients who were remarkably loyal to him. This little chapter taught me a valuable lesson -- often a blog post is just the beginning of the story; the readers write the ending.

But that's the back story. The reason for this post is that Kal was in L.A. recently to party with Hef at the Mansion. No, I didn't go. But I did have lunch with him and one of his L.A. clients, and was so impressed with his marketing skills, and enthusiasm, that I thought he might spice up a dull day on the blog (falling prices, no sign of a bottom, falling prices, no sign of a bottom, etc). So I invited Kal to share his ideas and insights on marketing and building a mortgage business that targets younger borrowers.

Here's a teaser, with more below: Kal says one of his most successful marketing efforts was very old-fashioned: he printed 20,000 matchbooks advertising his business, and delivered them to the hottest bars and nightclubs in Atlanta. The word of mouth continued long after the matches were gone, he says. "As a matter of fact, I was at SkyBar in Los Angeles last year," Kal told me, "and two girls screamed out, 'Hey Kal, where's your matches??' "

Glut: 1.8 million units of "excess housing" in U.S.

Calculated Risk, a math whiz of a blog, crunches the numbers today and reports there are 1.8 million units of "excess housing" in the United States today.

Just to be clear, CR is not talking about vacant units -- there are always a lot of vacant homes and apartments; the exercise is to calculate the gap between current, elevated level of vacancies and normal levels of vacancy. Here's the math:

If we add this up, 760 thousand excess rental units, 825 thousand excess vacant homes, and 200 thousand excess new home inventory, this gives about 1.8 million excess housing units in the U.S. that need to be absorbed over the next few years. ...

These excess units will keep pressure on housing starts and prices for some time.

I would encourage those still looking for a bottom in the housing market to re-read the previous sentence. Or, read this sentence from Calculated Risk's coverage of today's Case-Shiller report:

Prices are still falling, and will probably continue to fall for some time.

Or, you can read this from LA Biz Observed blogger Mark Lacter's take on the L.A. housing market, which he wrote for the Financial Times:

“This is going to be a slow burn,” says Christopher Thornberg, a principal at Beacon Economics. ... “Eventually, prices will hit bottom and when they hit bottom they’ll stay there for years."

-- Peter Viles

Thoughts? Comments? E-mail story tips to Peter Viles.
Photo credit: Getty Images

Tracking: City of Los Angeles real estate trends

Faithful readers will know I am now officially enamored of Redfin's neighborhood tracking widget, which allows you to track price trends in any city or ZIP Code. Micro-medians, I call them.

Without further ado, an update on the City of Los Angeles -- which rarely shows up in housing stats, because the most widely reported numbers are county-wide.

Date                              August 13    Oct. 2        Oct. 28

--Listed for sale             16,859         16,127       16,003
(home and condos)
--Foreclosures for sale     1,698          2,032          2,040
--Median list price        $475,000       $459,000   $450,000
--Median sales price*    $400,000       $380,000   $365,000
--Median sold price/sf        n/a             n/a          $252
--Median days listed         85                 90              92
--% reduced in price         43.9%             44.7%       44%
--Median total reduction   9.3%            10.0%         10.1%

*Based on homes sold or taken off the market in the previous 90 days

Two cents: I don't see any sign of a bottom in these numbers. The Los Angeles market is absorbing foreclosed properties at roughly the same rate they are coming onto the market. In other words, the market is working, but it also weakening.

-- Peter Viles

Pictured: "Wolf's Lair," an eight-bedroom mansion overlooking Lake Hollywood. First listed for sale for $7.5 million, since reduced to $5.99 million.

Photo Credit: Michael McCreary

Case-Shiller: L.A. home prices down 26.7%

Housing prices in Los Angeles fell 26.7% in the year ending in August, as home prices continued to fall sharply across the Sunbelt, according to the widely watched Case-Shiller index of home prices. The national headline, from the Wall Street Journal:

The S&P/Case-Shiller home-price indexes, a closely watched gauge of U.S. home prices, showed prices in August continue to decline, with areas along the Sun Belt being hit hardest.

David M. Blitzer, chairman of Standard & Poor's index committee, noted there were "very few bright spots in the data." Among them is that the acceleration in decline from July to August was "only moderate."

The indexes showed home prices in 10 major metropolitan areas fell a record 17.7% in August from a year earlier and 1.1% from July. The drop marks the 10-city index's 11th-straight monthly report of a record decline.

More on L.A. prices: The rate at which prices are falling was slightly higher from July to August (1.8%) than it was from June to July (1.6%). The year-over-year price decline increased from 26.2% in July to 26.7% in August.

The steepest price declines remain concentrated in what one analyst has called the "sand states" -- Florida, Nevada, Arizona and California. Here are the cities suffering the largest year-over-year declines:

Phoenix 30.7%
Las Vegas 30.6%
Miami 28.1%
San Francisco 27.3%
Los Angeles 26.7%

A note about the Case-Shiller index: It does not translate prices into dollar figures, instead tracking prices from a base level of 100 in January of 2000. The index for Los Angeles is 189, indicating the city's housing is still much more expensive than it was eight years ago. The average for the 20 large cities tracked by Case-Shiller is 164.

Your thoughts? Comments? E-mail story tips to Peter Viles.

Economist Laffer: The age of prosperity is over

When a noted economist declares that an economic era is over, and does so in the Wall Street Journal, it's worth noting. In this case the economist is supply-sider and Reagan influencer Arthur Laffer, who writes in today's Journal, "The Age of Prosperity is Over."

Laffer's point, as I read it, is that the government's panicked responses to the housing slump and the financial crisis are wrongheaded in the extreme, and will not only prevent the free market from correcting current imbalances, but will sink the economy:

Twenty-five years down the line, what this administration and Congress have done will be viewed in much the same light as what Herbert Hoover did in the years 1929 through 1932. Whenever people make decisions when they are panicked, the consequences are rarely pretty. We are now witnessing the end of prosperity.

It's worth repeating what Laffer has to say about the housing bubble and bust (pet peeve: why is it so difficult for political leaders to acknowledge that much of our current crisis stems from a disastrous housing bubble?):

No one likes to see people lose their homes when housing prices fall and they can't afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house's value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.

Your thoughts? Comments? E-mail story tips to Peter Viles

--Peter Viles

Photo: A Newport Beach home. Credit: George Briggs

Hat tip: It All Happens on the Margin