No-fault default, anyone?

A Georgia developer, trying to scare up takers for some luxury condominiums, hopes to allay fears of job losses and falling home prices with a novel buyer incentive program that goes well beyond carpet and tile upgrades.

The deal is special financing at 10 Terminus Place, a 32-story condo tower in Atlanta’s upscale Buckhead district where the asking price for units starts at $335,000 and ascends to more than $3 million.

Cousins Properties, which owns the development, is providing the financing itself – loans fixed for three years at just 4% annual interest. At any time during that period, buyers can mail back the keys and walk away – no harm, no foul, no damage to credit – and the condo becomes the property of Cousins once again.

Borrowers must make a 5% down payment for the first year, then pay in an additional 2.5% in each of the second and third years -- a far cry from the 20% down payments generally required these days for jumbo mortgages, like most will be at the high-end development.

Alternatively, borrowers who put down 20% can choose to skip payments for a full year – an option designed to give them time to sell another property in a tough market.

After three years the buyers must refinance with another lender or turn the condo back over to Cousins.

In a news release, the company noted that it has become commonplace for developers to auction off blocks of unsold condos or to drastically reduce prices. Such discounting "doesn’t help," according to Cousins Chief Executive Tom Bell.

"If you discount 15%, the buyer will wait for you to discount 30%," Bell said. "Some buyers are trying to time the bottom of the market and I don’t want to chase that ball downhill."

The program echoes Hyundai’s offer to buy back cars from new owners who get laid off – a plan that General Motors and Ford said today that they would match.

It’s also similar to a recent Toll Brothers Inc. offer to insure buyers. For homeowners who lose their jobs within 24 months of purchasing a Toll Brothers home, the builder will cover six months of principal, interest, fire insurance and property taxes, up to a maximum of $2,500 a month.

Toll Brothers builds higher-end homes on the East Coast and in California, Arizona, Nevada, Texas, Colorado, Illinois, Michigan and Minnesota. In Southern California, the company currently has developments in Yorba Linda, Corona, Chatsworth, Moorpark, Rancho Cucamonga, Highland and La Quinta.

"These days, people really want assurances," said Realtor.com Chairman Joe Hanauer, who has been pitching a separate insurance plan, this one offering homeowners protection against price declines of up to 10% if they resell the home after three years or more.

-- E. Scott Reckard

Case-Shiller: L.A./O.C. home prices down 39% from peak

     It's another record-breaking decline for the 20-city Case-Shiller index of home prices. Nationwide, prices were down 19% in January from a year ago. In the Los Angeles/Orange County area, prices dropped 26% from a year ago, reported in the Times today.

     Case-Shiller also splits markets into price tiers: high, low and middle. In the L.A. area, high-end prices were down 29% from their peak, but the low end is down 50%, while the mid-priced range is down 40%. 

     The low end was certainly hit harder by foreclosures and subprime lending. High-end areas tend to lag in real estate cycles, though, so there could be more room to fall in the top end.  

     The Case-Shiller index is favored by some over median sales prices to measure market changes. It compares sales of homes to their previous sales and factors in changes to the properties like remodeling.

     It uses an index number rather than prices. An index score of 100 is equivalent to January 2000 prices. The L.A./O.C. index for January 2009 is 166.54, down 39% from its 2006 peak.

— Peter Y. Hong

Even the banks are walking away from some homes

Banks walking away from foreclosures is the topic of a New York Times story out of South Bend, Ind.:

City officials and housing advocates here and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal --  from legal fees to maintenance -- exceeds the diminishing value of the real estate.

The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.

Two things struck me here. First, I found it striking that some homes and the land they sit on don't hold enough value to even cover carrying costs. Second, the bundling and reselling of mortgages that caused so much trouble with the subprime collapse is still causing problems.

In the example given in the story, the company servicing the loan on the house is out of business, as is the parent company, and the original bank can find no record of it.

“It is what some of us think is the next wave of the crisis,” said Kermit Lind, a clinical professor at the Cleveland-Marshall College of Law and an expert on foreclosure law.

Another layer of wrinkle, the home was trashed and the city will charge the homeowner to pay for demolition. Amazing. I'm not hoping not to see this development anytime soon in Southern California.

-- Lauren Beale

Thoughts? Comments?

Photo: Ross D. Franklin / Associated Press 

Foreclosures increase for prime borrowers

An alliance of mortgage servicers is reporting a jump in prime-loan foreclosures from January to February. From Inman News:

HOPE NOW put the number of foreclosure starts on prime loans during February at 157,000, a 25 percent increase from the month before. Foreclosure starts on subprime loans fell by 5 percent, to 86,000.

The record 243,000 foreclosure starts recorded in February represented a 12 percent increase from the month before and a 36 percent increase from a year ago.

Not every home headed for foreclosure ends up there.

Nevertheless, completed foreclosure sales of homes purchased with prime loans jumped 86 percent in February, to 56,000. Foreclosure sales of homes bought with subprime mortgages fell 16 percent, to 32,000.

The 87,000 foreclosure sales for the month represented a high point not seen since July, when 92,000 foreclosed homes were sold.

Completed foreclosure sales as a percentage of starts rose to 46 percent, up dramatically from the recent low of 30 percent in December. The percentage was even higher for homes purchased with prime loans -- 54 percent, compared with 25 percent in December.

Although not unexpected, it's dramatic nonetheless, and another sign that the housing market is still on the downward slope.

-- Lauren Beale

Thoughts? Comments?

Photo: Chris Rank / Bloomberg News  

Attacking foreclosure-rescue scams on more fronts

The push to crack down on foreclose-rescue scams is coming from all quarters these days. Locally, latimes.com reports:

State Atty. Gen. Jerry Brown pledged Saturday to investigate and prosecute businesses that charge struggling homeowners fees to help get more favorable terms for repayment of their mortgage loans.

"We have lawyers, we have investigators, and we will go after those who break the law by falsely representing what they can do," Brown said at a congressional hearing in South Los Angeles.

Brown, a Democrat planning to run for governor next year, vowed to focus specifically on bogus television ads that lure homeowners into expensive mortgage consulting deals that are useless.

"We will document the rip-offs that are over the mass media as best we can," he said.

On the federal level, part of the plan is to educate homeowners with theater ads. From the Wall Sreet Journal:

The Federal Reserve is coming soon to a theater near you.

The subject won't be the drama inside the central bank or its role in the current financial crisis. Rather, Fed officials plan to launch advertisements in movie theaters to warn homeowners about foreclosure scams.

Intended to extend the reach of consumer warnings on the Fed's website, the ads will run in 14 cities with high-foreclosure housing markets and an outbreak of scam artists charging for guidance that is free from nonprofits working with the government.

The point of both the local and federal efforts: Don't pay for what you can get free and you won't get ripped off.

—Lauren Beale

Thoughts? Comments?

Tree of the Week: Cork Oak

The Cork Oak -- Quercus suber

Cork grows as a thick protective layer of outer bark, much thicker in the cork oak than in any other tree. Strange as it is to see a stripped cork oak with its lower 12 or 15 feet of dark inner bark exposed, the cork can be safely hand-harvested every 10 years or so as long as the underlying cambium is not damaged.

Cork, which is the oak's way to protect itself from a harsh environment, has unique properties: it is very light, resilient, waterproof, fire retardant, abrasion resistant, insulating, buoyant, and a poor conductor. The cork oak is native to the Western Mediterranean and North Africa. Portugal produces half the world's cork supply; it started protecting the trees in the 13th century and has developed a unique half wild production landscape.

A fairly fast grower, this evergreen tree initially grows taller than wide; eventually it becomes 30 to 60 feet tall and wide. It may live to 250-plus years old. Light gray, thickly fissured ridges cover the trunk and the heavy limbs. The cork oak tends to form co-dominant (i.e. equal thickness, competing) upright trunks. Three- inch-long leaves are toothed, oval, dark green above, gray green below. Inconspicuous flowers develop into short pointed acorns, three-quarters to 1 1/2 inches long, sitting in bowl shaped caps.

The tree tolerates many garden conditions, including drought and desert environment, but it wants full sun and good drainage. 

Cork is an excellent bottle stopper material: its suberin, a natural waxy substance, makes it impermeable to gas and liquids and prevents it from rotting. Cork stoppers were found in Egyptian tombs. In 1688 Pierre Perignon found the material unsurpassed to seal champagne bottles with. But screw tops and plastic stoppers may soon make cork obsolete for this purpose; then the greater half of the cork industry and the way of life that depend on it may simply disappear.

--Pieter Severynen

Thoughts? Comments?

Photo: Pieter Severynen

The agents who passed the sniff test

Candy Spelling's selection of agents to list her $150-million Holmby Hills estate is also mentioned in the Associated Press story:

Spelling told the Associated Press that she let her dog Madison, a soft-coated Wheaten terrier, help pick out the best real estate agent for the task. She had her security bring the dog into the room every time she met one of the candidate agents and watched how the dog reacted. If Madison didn't like them, Spelling crossed them off the list.

So who passed the sniff test? From the Wall St. Journal:

Sally Forster Jones of Coldwell Banker Previews has the listing together with Jeffrey Hyland and Rick Hilton, both of Hilton & Hyland/Christie's Great Estates.

Hopefully the commissions will make up for knowing they were selected by a terrier.

-- Lauren Beale

Thoughts? Comments?

Photo: Candy Spelling, mother of actress Tori Spelling and widow of television producer Aaron Spelling, with her dog Madison in her palatial Los Angeles home.

Defining the top of the market: $150 million

Candy Spelling, widow of producer Aaron Spelling, has listed her Holmby Hills estate for $150 million, reports The Times' L.A. Now blog. From the Associated Press story:

The widow of producer Aaron Spelling is placing "The Manor" in the exclusive Holmby Hills neighborhood on the market for a jaw-dropping $150 million, making it by far the most expensive home for sale in the U.S.

The French chateau-style mansion has 56,500 square feet of space on more than 4.6 acres and is the largest home in Los Angeles County.

Interesting market to be setting the benchmark for the high end. A check of Realtor.com shows the next most expensive listing in the 90049 ZIP Code at $65 million -- for 11,000 square feet of living space.

Wonder how many years this will take to sell.

-- Lauren Beale

Thoughts? Comments?

Photo: A 1993 shot of "The Manor" in the Holmby Hills section of Los Angeles. Credit: Mark J. Terrill / Associated Press

Commercial landlord Meruelo Maddux seeks Chapter 11

Meruelo Maddux Properties Inc., the largest landlord in downtown Los Angeles, said today that it and several of its subsidiaries have filed, or will file, for bankruptcy protection under Chapter 11.

The Los Angeles real estate company warned last week that it might seek Chapter 11 status when it reported steep losses in the fourth quarter. Excluded from the bankruptcy filing is a 35-story apartment tower Meruelo Maddux is building on 9th Street near Staples Center. Meruelo Maddux is heavily invested in industrial real estate, including large properties in the city’s produce district. It also owns a handful of mixed-use projects and some residential buildings.

"The company worked with diligence to avoid a reorganization filing," said Chairman and Chief Executive Richard Meruelo in a statement. "Despite our best efforts and careful consideration of all other alternatives, the filing became necessary given the challenging economic climate. Now, our goal is to implement a comprehensive reorganization and continue to seek additional outside financing which we believe will allow us to move forward."

The company "expects to continue to manage its real estate portfolio and does not currently anticipate any disruption to its tenants," it said in a statement.

Founder Meruelo has been a longtime advocate of downtown and is a well-known figure in the Latino community. He was the largest individual contributor to Antonio Villaraigosa’s 2005 mayoral campaign, donating nearly $200,000.

Last week Meruelo Maddux reported a loss of $85.8 million, or 98 cents a share, in the three months ending Dec. 31, compared with a loss of $2.6 million, or 3 cents, in the same period a year earlier. The company said that it was experiencing "significant, recurring cash shortfalls" and was unable to service most of its debt. Shares of Meruelo Maddux closed at 20 cents a share Thursday on Nasdaq, down from a high of more than $10 in 2007.

-- Roger Vincent

Online town hall references refi lifeline

Was this online town hall question for the president from L.A. Land? From the Associated Press:

WASHINGTON -- As rates on 30-year mortgages fall to their lowest levels on record, President Barack Obama is pointing to refinancing as a lifeline for homeowners being stung by plunging home values.

Obama was asked as part of his first online town hall meeting about what help is available to Americans who are still making their mortgage payments but are struggling. He replied that his administration has made it easier for Americans to refinance. He says 40 percent of mortgages are now eligible for refinancing. And he said homeowners need to take advantage of that.

Obama says the number of refinanced mortgages is already starting to go up "significantly."

He says it's a way for homeowners to cut their monthly payments.

Commenter RZ, who watched the event, reports on the earlier thread that very few questions were asked and only the one regarding housing.

-- Lauren Beale

Thoughts? Comments?

Photo: President Obama holds the first online town hall done in the White House. Credit: Ron Edmonds / Associated Press