'Dumbest moments' of 2008

Taking a look back at 2008, Fortune offers a list of this year's 21 dumbest moments in business. More than a few relate to housing and mortgages. Among them, Angelo Mozilo's famous e-mail:

If you thought the former Countrywide CEO couldn't sink any lower, think again. Already under attack as the overpaid, over-tanned and over-zealous pioneer of subprime mortgages, Angelo Mozilo doesn't do himself any favors in May after reading a customer's e-mailed plea for help with his home loan.

Intending to forward the missive to a colleague, Mozilo instead hits "reply all" and sends a response calling the beleaguered homeowner's request "unbelievable" and "disgusting." "Most of letters now have the same wording," grouses Mozilo. "Obviously they are being counseled by some other person or by the internet."

Mozilo's heartfelt reply makes its way onto the Internet -- and the onetime real estate king finds himself out of a job after Bank of America acquires Countrywide in July.

Fannie Mae's "delusions of grandeur" and Chief Executive Daniel Mudd's forecasting:

Fannie Mae CEO Dan Mudd proves once again that his crystal ball is malfunctioning. In May, Mudd predicts that the government-sponsored mortgage lender will "feast" on weakened competition in the mortgage market -- even as its own prospects dim amid mounting credit losses and asset writedowns.

By September, on the brink of collapse, Fannie gets a new owner -- Uncle Sam -- and Mudd loses a job.

The housing rescue:

Remember Hope for Homeowners? We didn't think so. In July, Congress passes the only housing rescue to date: a plan to guarantee up to $300 billion worth of mortgages and prevent more than 300,000 foreclosures.

But to participate, banks must take steep losses -- and doing so is voluntary. The anti-climactic upshot: A piddling 321 applications have been filed since the program's Oct. 1 launch -- and not one loan workout has been completed, according to the U.S. Department of Housing and Urban Development.

Read the Fortune list or make up your own. There were certainly enough gaffes to go around.

-- Lauren Beale

Thoughts? Comments?

Photo: Angelo Mozilo. Credit: Jay Mallin / Bloomberg News

Will mortgage rates drop again?

Will the latest nugget of news about the Federal Reserve's plan to buy mortgage bonds send home-loan rates plummeting again?

Borrowers and analysts will be closely watching quotes from lenders Wednesday, especially because another key mortgage player is predicting a sharp decline.

The Fed said late today that it would begin purchasing $500 billion in Fannie Mae, Freddie Mac and Ginnie Mae securities early next month.

When the Fed initially announced that plan in November, and when it reaffirmed it two weeks ago, rates promptly plunged -- although only for solid, creditworthy borrowers with big down payments or lots of equity in their homes. These borrowers discovered recently that they could get 30-year fixed mortgages in the 4.5% range.

They have since edged back up to just under 5% for solid borrowers who pay a 1% upfront fee and shoulder about $3,000 in closing costs, mortgage brokers said.

There was not much movement in rates from that level today. But as bankrate.com's Greg McBride points out, the Fed spoke today "after market close, so we might see some reaction to that tomorrow."

More encouraging words: Separately today, Federal Housing Finance Agency Director James Lockhart, the regulatory supervisor of Fannie Mae and Freddie Mac -- said on CNBC that he expects mortgage rates to fall again by a half percentage point to a whole point.

-- E. Scott Reckard

Photo credit: Home sale signs are visible on a street corner in Portland. AP Photo/Don Ryan

L.A.-area home prices are down, down, down (Are you surprised?)

Prices in Los Angeles and Orange Counties dropped 34% from October 2007 to October 2008, according to the Standard & Poors/Case Shiller Index released this morning.

The worst declines were among homes priced lower than $351,000, which lost 39% of value during the year. Those same homes have lost 46% of their value since the bubble's peak in 2006.

Higher priced homes, by comparison, have lost 24% since 2006.

-- David Pierson

Is commercial real estate only for jocks?

Spend a little time around the commercial real estate business -- one day at an industry convention will do -- and you'll notice how much the guys tend to look alike. That's because almost all of them are guys. White guys, to be specific.

It's hardly news that such fields as real estate brokerage and property development are still the near-exclusive province of white males, but it is astonishing that so little has changed in appearance since I first started covering commercial real estate in the mid-1980s.

The industry's premiere trade group, the Urban Land Institute, is frustrated by the seemingly intractable status quo and is about to launch a program to boost minority membership in the organization that also includes architects, lenders and colleagues in other real estate-related fields. Right now, only 1.8% of the ULI's 40,000 members nationwide are racial and ethnic minorities, and only 20% are women. Polyglot Los Angeles is the group's diversity leader, with a 3% minority membership in its local chapter.

The managing director of ULI Los Angeles, Philip S. Hart, has been given the task of attracting more minorities to the business, no small challenge in the middle of a devastating real estate slump. He hopes to persuade members to craft real estate deals that are "diverse and inclusive" when the business finally improves.

--Roger Vincent

Tree of the Week: Lemon-scented gum

Lemon-scented gum -- Corymbia citriodora 

Tall and towering, with a smooth, pinkish white, bare trunk extending for half its height and graceful open foliage borne in distinct layers, the lemon-scented gum stands out in the landscape. Most people would call this native from the central and northern coasts of Queensland, Australia, a eucalyptus but it was reclassified as a Corymbia.

Fast growing to 45 to 90 feet, this widely planted evergreen tree remains rather narrow at 20 to 40 feet. Eventually it produces a dense, sturdy wood, but initially it grows so fast that judicious cutting back is needed to strengthen the trunk. But since pruning practices too often leave a lot to be desired, here we still see many horizontal branches cut off which shouldn’t be, or indiscriminate heading back taking place. Powdery bark on the tree sheds in thin curling flakes. The tree is deep rooted and often planted closer than normal to walks and walls. The drooping, narrow, adult leaves are 3 to 7 inches long, yellowish green and smooth; the juvenile leaves look similar but have a more sandpapery feel. Crushing a leaf produces a strong lemon smell due to the presence of citronella and other essential oils. Winter and spring blooming white flowers are not very flashy; the urn shaped seed capsules are hard as wood. The tree takes a variety of soils, needs full sun and is medium drought-tolerant. But if its internal moisture content goes down too low the tree becomes quite susceptible to pests and diseases. Introduced tiny predatory wasps are gradually bringing the sometimes fatal attacks by aphid related psyllids under control; this biological control is far preferable over chemical sprays, which have undesirable consequences. 

Unlike the strongly scented oil from the blue gum, Eucalyptus globulus, of vapor rub and lozenge fame, the more delicately scented oils from the lemon-scented gum are used for perfumes, antiseptics, insect repellents, medical applications and aromatherapy. The tree is grown in many subtropical countries for timber and firewood production.

-- Pieter Severynen

Thoughts? Comments?

Photo: Pieter Severynen

More Californians turning to the FHA

Almost 10% of California mortgages were FHA-backed in 2008, compared with 2% in 2007. "Agency Copes With a Mortgage-Insurance Overflow" in Friday's Wall Street Journal calls into question the Federal Housing Administration's ability to handle the increase from across the nation:

Hundreds of private lenders, using the latest technology and paying high salaries, failed to adequately manage mortgage credit risk during the housing boom. Now, the Federal Housing Administration, using 24-year-old computer programs and civil servants who still handle some loan documents by hand, is trying to do better.

"Can the agency handle the responsibility it has already been given?" the WSJ story asks.

Steve Preston, the outgoing secretary of Housing and Urban Development, of which the FHA is a part, says the answer is yes. "We are handling the volume," he said in an interview, adding that the department moved resources from lower-priority projects earlier this year. The FHA, which insures lenders against defaults on home mortgages that meet the agency's standards, saw its share of new mortgages increase to 26% in this year's third quarter, up from 3% for all of 2007, according to Inside Mortgage Finance.

Not everyone agrees, however:

Congress in March increased loan limits on FHA-backed loans to $729,000 in the most expensive housing markets, up from $329,000. Next year, those limits will fall to $625,000 in the most expensive housing markets. Still, some housing experts worry that an outsized share of the FHA's new business is coming in these high-cost housing markets. "It's getting into markets that are a lot riskier than it has in the past," says Ann Schnare, a housing consultant.

Interesting that the FHA hasn't changed its ground rules while other lenders have been tightening standards. Down payments as low as 3% will increase to 3.5% next month, but still. Who else is accepting 3% down these days?

-- Lauren Beale

Thoughts? Comments?   

Photo: Steven C. Preston. Credit: Gerald Herbert / Associated Press

Malibu's 'Shark' house joins bank-owned crowd

Among Southern California homes showing up as bank-owned in the for-sale listings is the Malibu house that was used to film the CBS drama "Shark." Listed last fall for $2,195,000 and featured as a Home of the Week, it's now being offered at $1,599,000. That's about a 27% drop.

The tri-level contemporary has three bedrooms and 2.5 bathroom home in 2,200 square feet of space sits on almost an acre of hillside.

The show was canceled after two seasons. You have to wonder if that extra income made the difference in the owner making the mortgage payments. A shout-out to the Malibu Real Estate blog for this one.

-- Lauren Beale

Thoughts? Comments?

Photo: Berlyn Photography

Putting his own bailout plan into action

Here's an alternative to letting homes sit empty. From the Associated Press story "Homeless advocates 'liberate' foreclosed houses":

Max Rameau delivers his sales pitch like a pro. "All tile floor!" he says during a recent showing. "And the living room, wow! It has great blinds."

But in nearly every other respect, he is unlike any real estate agent you've ever met. He is unshaven, drives a beat-up car and wears grungy cut-off sweat pants. He also breaks into the homes he shows. And his clients don't have a dime for a down payment.

Rameau is an activist who has been executing a bailout plan of his own around Miami's empty streets: He is helping homeless people illegally move into foreclosed homes.

"We're matching homeless people with people-less homes," he said with a grin.

Rameau and a group of like-minded advocates formed Take Back the Land, which also helps the new "tenants" with secondhand furniture, cleaning supplies and yard upkeep. So far, he has moved six families into foreclosed homes and has nine on a waiting list.

Any organized "squatting" happening here in Southern California?

-- Lauren Beale

Thoughts? Comments?

Photo: Max Rameau stands outside a "people-less" house in Miami. Credit: J. Pat Carter

Life in 'Southern California's Foreclosure Alley'

In "What Happened to the Neighbors?," GQ sends writer Charles Bowden "to live in one of the loneliest neighborhoods on the planet" in Lake Elsinore, part of what they refer to as "Southern California’s Foreclosure Alley."
                     
For his rental he picks a place not far from where bobcats took up residency in August in a foreclosed home. Bowden gets to know his landlords, who are struggling to hang on to an "underwater" house, as well as neighbors in similar situations, and concludes the area won't be bouncing back any time soon:

These houses are seventy-five miles from jobs in a world where oil gets ever scarcer. They are large and thus expensive to heat and cool. And forgive me, Southern California contractors, but they are junk. The market for $450,000 houses with ARMs waiting like assassins in the financial tall grass is over for good. It is quite possible that we have built and financed houses, developments, whole towns, without futures, that will collapse and become curious ruins.

That's a sobering  thought as this slice of life plays out in one neighborhood after another across the Southland. A hat tip to Pete from Mar Vista for calling the article to L.A. Land's attention.

-- Lauren Beale

Thoughts? Comments?

Photo: Bobcats photographed in August at a vacant foreclosure in Lake Elsinore. Credit: Karen Brown

Malibu home just got $1 million cheaper

The price just got cheaper for an under-construction 6,000-square-foot Malibu manse with sweeping ocean views. The spec house -- partially framed with steel beams -- came on the market last month  at $3.95 million and, in the words of Malibu Prudential agent and blogger Mike Gardner, who brought the matter to our attention, "just got a whopper of a price slash" to $2.9 million. The MLS description goes even further, saying the seller "will consider all serious offers." The property, Gardner says, is in a neighborhood of homes valued at $5 million to $7 million.

Still too rich for your blood? Then you might want to skip the $27.5-million Point Dume property Gardner also blogs about.

--Ann Brenoff

Thoughts? Comments?