2010 worst for home sales in more than a decade

Home prices are dropping in the nation's largest cities and are expected to keep falling next year, as fewer people purchase homes and millions of foreclosures come on to the market.

The Case-Shiller 20-city home price index released Tuesday fell 1.3 percent in October from September.  All cities recorded monthly price declines. The last time that happened was in Feb. 2009.

Atlanta recorded the largest decline. Prices there fell 2.9 percent from a month earlier. Home prices in Washington dropped 0.2 percent in October, the second monthly decline after five straight increases.  Home prices in Dallas, Portland, Ore., Charlotte, N.C., Tampa, Fla. and Denver have fallen for four straight months.

The 20-city index has risen 4.4 percent from their April 2009 bottom. But it remains 29.6 percent below its July 2006 peak.

Foreclosures likely will remain high for the next two years.

IMPORTANT!!! Today's vote will define the Internet

Imagine if Comcast customers couldn't watch Netflix, but were limited only to Comcast's video-on-demand service. Imagine if a cable news network could get its website to load faster on your computer than your favourite local political blog. Imagine if big corporations with their own agenda could decide who wins or loses online. "The internet as we know it would cease to exist.

The US Federal Communications Commission (FCC) is today expected to formally approve controversial new rules on how internet users access content such as YouTube and Skype.

Dubbed by one US senator as "the most important free speech issue of our time", the rules drawn up by the country's media and telecoms regulator would effectively create two levels of internet access.

FCC members Michael Copps and Mignon Clyburn last night said they would support the proposal laid out by chairman Julius Genachowski. The five-member FCC panel is expected to approve the proposal in Washington later today.

However, the new framework would allow mobile internet service providers to charge content companies for more efficient delivery to US homes. Wireless providers will also be allowed to block applications or services, providing that they are not competitors. Fixed-line and wireless provider Verizon, for example, would not be allowed to block access to Skype because it provides a rival voice service.

The new rules allow providers to charge customers more for using high-bandwidth services such as downloading or streaming videos on YouTube or online movie rental site Netflix.

Today's vote represents the first time the principle of net neutrality – where all internet content is treated equally – has been formally ratified in the US. It is the culmination of five years of heated discussion over the future of the internet.

Public interest groups and technology companies called the framework "fake net neutrality" and said the rules "create a vague and shifting landscape, open to interpretation", rather than enshrining principles of the open internet. Netflix, Skype and Amazon have also previously expressed reservations about the plans.

Who rules the web? Important

High Credit Card Rates & Fees * Thanks to the Supreme Court

Have you ever wondered why all your credit card bills seem to get mailed to South Dakota, Nevada or Delaware? Or how credit card companies can ignore your state's usury law, which limits the amount of interest that can be charged on a loan?

The answer lies in a couple of Supreme Court Rulings. A 1978 Supreme Court ruling, Marquette National Bank of Minneapolis vs. First of Omaha Service Corp. and the other Smiley vs. Citibank.

The first ruling let credit card issuers "export" nationally whatever interest rate was allowed in the state in which they were headquartered. To induce the companies to relocate, some states simply dropped their usury laws. Several large issuers bit on the deal, relocated and it became anything goes for credit card rates.

A couple of states deciding their economic development plan was going to be to attract the credit card export industry,deregulated their consumer credit marketplace and said, 'If you come plop your little headquarters in Delaware or South Dakota, you can export our interest rate cap -- look at us, we don't have any!' Other states said, 'They're getting banks to headquarter there; we should take our interest rate caps off as well to compete for credit card issuance.' It became a tool to deregulate credit card rates."

South Dakota was the first to offer what amounted to unlimited interest rates to lure card issuers into relocating their headquarters. A quick look at the membership of the state's Chamber of Commerce shows how big of an impact the offer made -- and continues to make -- on the state's employment base.

It's no coincidence that South Dakota is the home state for subprime card issuer First Premier Bank, which gained notoriety for offering a card with an interest rate of 79.9 percent.

In the other case mentioned, Smiley vs. Citibank, a California woman, Barbara Smiley, had filed a class action lawsuit against Citibank's South Dakota-based credit card division, claiming that the $15 late fee she was charged on her credit card bill violated California state law. Citibank responded that the late fee was, in effect, interest and was covered under the National Bank Act. The Supreme Court agreed; the result was an increase of late fees and other fees from $10 or $15 to the $39 fee that credit card customers may see today.

The pair of decisions caused terrific abuses in the credit card market, and probably stunted the growth of an honest credit card market for over 20 years. They also killed off State Usury Laws for Credit Card Rates, increased late fees and other fees and encouraged predatory lending. The result, were the kinds of tricks and traps based on legal gimmickry that led to the need for some protection for Consumers. That's why we now have the Credit CARD Act of 2009 and the Wall Street reform law that included a Consumer Financial Protection Bureau.

Don't expect those Acts to protect us from being charged rediculously high rates though, to take it that far would come across as anti-capitalism, socialistic or even downright unamerican.

Republicans may trade Unemployment Benefits for extension on Tax Cuts

Unemployment benefits extensions are set to expire on Tuesday, Nov. 30. At the moment, there doesn't seem to be many on Capitol Hill overly concerned that another two million people, many of whom seem the extensions as their only financial lifeline in a flat economy, will soon see their unemployment benefits disappear. According to OpenCongress.org, there is nothing about unemployment benefits scheduled for introduction or debate in Congress on the last two days of November.

The lame duck House of Representatives is in session. For Republicans, that means that anything they oppose can be delayed, voted against, tabled, shelved, or sent on to the Senate to be filibustered. The lame-duck Congress is not only in session, it is in season -- and Republicans are loaded and prepared to kill off as much of the Democratic legislation as they can push through in the next few weeks before the Republican-heavy 112th Congress convenes.

Part of that lame-uck legislation is emergency unemployment benefits and the Tier unemployment extensions. Republicans already knocked down a proposal to extend unemployment benefits through February 2011. They argued that the Democratic proposal did not pay for the extensions and would therefore increase the deficit and the national debt. Instead of compromise or finding the means to pay for the unemployment benefits extensions, Democrats simply fell back on the argument that the unemployment extensions were necessary for a sluggish economy and that there had never been an instance where the unemployment rate was above 7 percent and the U. S. Congress had denied unemployed Americans emergency benefits.

In short: the Republicans are crying fiscal and future expenditure responsibility (something their record indicates they know little about) to deny benefits while the Democrats cry economic and humanitarian necessity (while ignoring fiscal responsibility and therefore playing into Republicans' hand).

But as the last unemployment benefits extension package reaches expiration, there are rumblings of a deal in which Republicans, who are exceptionally interested in continuing the Bush tax cuts to all Americans (including the 2-3 percent of the income earners that are among the wealthiest in the nation), might be open to a compromise with Democrats, who only want to extend the Bush tax cuts for those making less than $250,000 per year. Some believe that Republicans might find leeway in their opposition to the unpaid-for unemployment benefits extensions if the Democrats allow the passage of continuation legislation for the Bush tax cuts, which will expire at the end of the year. This deal would include President Obama's signature of approval.

In order for millions that might see homelessness, financial ruin, and/or another financial lifeline extinguished in the next few weeks (or months, if benefits remain unextended through January and so on), Congress will be working on a December deal where the richest and those able to afford the cessation of the Bush tax cuts, not to mention adding nearly a trillion dollars to the national deficit over the next decade.

Sounds like a deal being negotiated by people who have the time and money to do so. While millions are watching their unemployment benefits (which average -- with an emphasis on average -- around $300 per week) expire in an economy that is producing only one job (and usually one that underpays the unemployed prospective job seeker) for every individual looking for work, a group of legislators that count amongst themselves 261 millionaires (according to OpenSecrets.org) will try to reach a compromise on legislation that will extend benefits to the jobless and extend tax cuts to the nation's wealthiest.

Having plenty of money and receiving a paycheck that exceeds $3,346 per week (which is the current regular salary of each member of Congress -- $174,000 per year) apparently dulls one's senses to the urgency of those struggling to simply maintain their household and find meaningful employment. As the Bush tax cuts expiration date nears, it will be interesting to note how quickly Republicans and Democrats come together to get something passed in the lame duck Congress. Because there is little doubt that the Bush tax cuts -- all of them -- will now be extended in order for both parties to get what they want. It is now just a matter of negotiating the terms of compromise.

And how lame the Democrats really are will be seen in the number of months of unemployment benefits extension they command in order to give the Republicans (and the wealthy) their precious tax cuts. Given the economic expectations of the coming year (unemployment to remain relatively level with its current rate) and the damage to the national debt the Bush tax cuts will incur in the next decade, anything less than a year of unemployment benefits extensions would be lame indeed.

New Unemployment Claims Drop

New U.S. claims for unemployment benefits last week dropped to their lowest level in more than two years while consumer spending rose in October, pointing to a moderate strengthening in economic activity.

Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 407,000, the Labor Department said on Wednesday, the lowest since mid-July 2008. That was well below economists' expectations for a fall to 435,000.

The news was tempered by a surprise drop in new home sales last month, a reminder that growth would remain sluggish.

Small investors permanently soured on stocks?

In 2008, $234 billion flowed out of equity mutual funds; the selling really intensified in the fourth quarter. In 2009, some thought the worst was over, but $9 billion still flowed out of equity funds. In 2010, the outflows picked up again.

As of the end of August, about $19 billion had left stock mutual funds.

So, what to make of this?   Reuters suggests that the break between retail investors and the stock market is deep and lasting. The worry now is that a Lost Decade will create a Lost Generation of investors who avoid the market in a way not seen since the Great Depression.

Video from HUD - Closing the Deal

3 banks may be nearing deal on foreclosures

Three big U.S. banks are nearing a settlement in which they would compensate borrowers whose homes were improperly foreclosed upon, according to a CNBC report.

Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. would also agree not to start foreclosure proceedings until they have exhausted all efforts to modify a borrower's mortgage, CNBC is reporting. Many borrowers have complained of receiving foreclosure notices while they're negotiating to lower their loan payments.

CNBC attributes its report of the potential settlement to officials at the banks and among state attorneys general investigating foreclosure practices. It comes as Bank of America and JPMorgan are testifying on the topic to a hearing of the Senate Banking Committee.

Actions in the foreclosure / modification puzzle

The attorney general of Florida has wrapped up his meeting with five lenders and mortgage servicers, Ally, PNC, Bank of America, JPMorgan Chase and Goldman Sachs' Litton Loan Servicing, which has also put foreclosures on hold temporarily. Florida Attorney General Bill McCollum sought the meeting way back on October 12, according to Bloomberg, to "discuss ways to promptly and effectively redeem the integrity" of foreclosures.

Elsewhere, Iowa Attorney General Thomas Miller is moving the 50-state investigation task force forward, but there's also a lot of specific activity by states.

Other meetings between banks and AGs have already been wrapped up. Colorado's AG met with several. Maine may join a class action suit against Ally/GMAC. Ohio's AG has already sued Ally/GMAC.

So it remains unclear exactly how the AGs will move toward a solution. FOX Business has reported, however, that a settlement is coming in December, one that will require judge-driven modifications, better processes and perhaps a fine. You do get the sense that solutions rather than punishment is a priority. But I am not sure if forced modifications will speed up the process. The current modification wave has hardly been inspiring.

Video from HUD - Shopping for Your Loan

Time is right to buy a retirement home

Money Magazine is urging people a few years from retirement who plan to move when they quit work to consider buying now while home prices and mortgage rates are low.

Buyers who intend to use the place as a second home will pay the same rate as they would pay for a primary residence. If they intend to rent the property out until they retire and they need the rental income to qualify for the mortgage, lenders will consider that an investment property and charge a half to a full percentage point more.

Before foreclosing, judges must hear out homeowners?

In a ruling likely to create more headaches for lenders, a state appeals court ruled that judges can't give banks the go-ahead to foreclose until they respond to defenses raised by homeowners.

A three-judge panel of the 4th District Court of Appeal said that Broward Circuit Judge Peter Weinstein erred when he granted Deutsche Bank a $337,000 summary judgment against Margate residents Judith Alejandre and Sergio Terron, even though the bank ignored their defenses. His decision allowed Deutsche to take title to the couple's property and evict them in February. The case has been sent back to the trial court.

Like many other homeowners fighting foreclosure, the couple raised several defenses. But in what lawyers say has become customary in South Florida courts, the bank didn't answer the defenses, and Judge Weinstein allowed the bank to take title to the house.

The decision comes amid accusations that lenders, servicers and foreclosure law firms are falsifying affidavits and forging signatures to speed the foreclosure process.

Many of the issues raised by Alejandre and Terron in defense of Deutsche's foreclosure suit are similar to ones other homeowners have asserted against other lenders.

The couple said Deutsche failed to attach the original note and assignment of mortgage to its complaint; that it collected payments but failed to credit the homeowners; that it deceived the couple when they tried to modify their delinquent loans; and that it "participated in a full-scale venture to induce the homeowners to borrow funds at exaggerated rates."

It's the process of the motions for summary judgment that the banks have been using to foreclose en masse, even though there exist file defenses. It's the rocket docket.

There's hope the 4th DCA decision will help reform the process. From now on, according to the law.  If the defendant raises affirmative defenses, and there are factual disputes, the defendant deserves a trial.

The ruling gives Alejandre and Terron hope they may be able to get their home back. They are living in a rental apartment in Margate with their four children.

"I would love to get it back if I could," Terron said. "We can pay the mortgage if they lower our payments," he said. "We tried to work that out before, but the lender wouldn't call us back."

Terron paid $95,000 for the house in 1997. In 2005, he refinanced the home for about $200,000 and was paying about $1,500 per month. Things began to go wrong in 2006 when he took out two mortgages with First NLC Financial Services, a Deerfield Beach subprime wholesale lender.  NLC provided Terron and his wife with a first mortgage of $292,000 and a second mortgage of $73,000. The couple's monthly payment jumped to $2,500.  Terron said he refinanced the house to try to keep his struggling restaurant business afloat. But he had to shut down the restaurant and could no longer afford the payments. In 2008, Deutsche Bank, acting as a trustee for a securitized mortgage trust, filed a foreclosure action.

The couple's home is listed for sale for $129,000 with Altisource.

Terron and Alejandre may be lucky that their house has not sold, but that won't be the case with many foreclosure cases that could end up being appealed and sent back to a trial court.  The 4th DCA has typically refused to put foreclosure sales on hold while a case is being appealed.  That was the case with Terron's foreclosure.

"What we commonly saw is the court would condition a stay upon the payment of a large bond," Bleil said. "If the homeowner had the ability to pay this large bond, they wouldn't be in foreclosure in the first place, so in essence it was a denial of the stay."

The ruling could change how judges look at the cases. While the circuit court judges were thinking they could push these things through without getting reversed, they weren't as worried, but this case is going to change things.

Link to the ruling

Video from HUD - Shopping for Your Home

Banks Found Flubbing Foreclosures

Already fragile US financial firms are facing a raft of law suits and potential fines after three major mortgage lenders admitted to mishandling thousands of home foreclosures.

Major mortgage lenders Bank of American, JPMorgan Chase and GMAC have in recent days announced they were suspending tens of thousands of foreclosure processes across the country due to apparent improper handling of documents.

Attorney generals in six states are already investigating claims by borrowers that lenders have committed errors in the foreclosure documentations.

Foreclosures have evolved into a massive industry since the start of the economic crunch as Americans faced massive debts, with the number of mortgage defaults soaring from an annual average of one percent before 2008 to 10 percent today.

In 2010, more than three million foreclosures were expected to take place in the United States, figures show.

Documentation problems "are in all probability" likely to exist in 80 percent of them, according to Richard Kessler, an attorney that heads a company dealing with foreclosures.

The influx of hundreds of thousands of foreclosures led lending institutions to employ people who processed the paperwork as quickly as possible in order to put the property on the market in what has become known as "robo-signing".

"This is a case of someone being understaffed cutting corners and trying to get the work down. I didn't see this story as a malicious attempt against borrowers," said Michael Moskowitz, CEO of Equity Now, a Manhattan-based mortgage lender.

Most of the foreclosures are expected to remain in place once the lending institutions re-examine the myriad of cases, even though the process may take years, said Kessler.

"This is something that in all likelihood may also result in disciplinary proceedings and fines but it will not stop the foreclosures because the money is still owed."

But still, the reviews were likely to reveal serious documentation flaws in several cases, which will place the lenders under heavy pressure and risk of big lawsuits from people whose homes have already been foreclosed.

"The likelihood is that people currently facing foreclosure have a better chance to negotiate some kind of compromise with the lender" that will prevent foreclosure, Kessler said.

"There is a potential for class action liability in the United States for billions and billions of dollars on behalf of homeowners who lost their homes in proceedings where lenders used these kinds of phony documents."

Even without massive lawsuits, the suspension was bound to damage the already fragile financial market and housing industry, Moskowitz said.

"It is going to encourage people who are in default already to drag it out. In most of the cases it means they will have to start the process again, even though actually speaking, they defaulted," he said.

"This isn't healthy for the market. It is unhealthy for the real estate market because the values are artificially high because all the foreclosures are not on the market yet.

"It is bad for the finance market because the lenders can't get their money for years. The losses for the banks will be much bigger."

Why the banks don't go along - The people get screwed over again

New Home Sales Hit Lowest Level

Sales of newly built homes dropped to their lowest level since the government started tracking the numbers more than four decades ago, with demand for home purchases down in all four regions of the country.

The Commerce Department reported Wednesday that new homes sold in July at an annual rate of 276,000, down 12.4 percent from June and down 32.4 percent compared with the same time last year.

The economy is backsliding a little bit. While it's too soon to tell if that's going to result in another recession, it seems clear that consumers are holding back on committing to major purchases, such as buying a home.

The drop was led by the Northeast, where new home sales fell nearly 35 percent. Sales declined 25.5 percent in the Midwest, 15.1 percent in the South and 9.8 percent in the West.

The underlying demand is extremely weak, despite rock-bottom mortgage interest rates.

The poor new-home sales results follow another damaging report on the existing-home sales. Those sales fell in July to their lowest level in more than a decade to an annual rate of 3.83 million, down 27.2 percent from June's pace.

Housing Market Indicators

Florida existing home sales: 15%  (month-to-previous-year comparison)

Florida existing condo sales: 33%  (month-to-previous-year comparison)

Florida existing home median price: $143,400

Florida existing condo median price: $95,000

Florida consumer confidence: 65

National existing home sales: -5.1% (month-to-previous-month comparison; all housing types)

National existing home median price  $183,700

National (Freddie Mac) mortgage rate 4.42%  (all housing types)

Reasons to Buy Your Dream Home Now

Low mortgage rates serve as an equity shock absorber. When buyers borrow at today's record-low rates, they start building equity as soon as they close. That means they can absorb a few ups and downs as the still-recovering housing market gains traction.

Houses are in move-in condition. Home owners have continued to spend on maintenance and repair, according to the Harvard Joint Center on Housing. As these houses enter the market, they are in marked contrast to tattered foreclosures.

Terrific houses are coming on the market. Foreclosures are finally starting to clear the system, and they are being replaced by some very attractive properties.

Appraisal regulations are finally aligned with market realities. Fannie Mae has adjusted its appraisal guidelines, giving appraisers more flexibility to set values that reflect the current market.

Plenty of programs. Many programs that encourage middle-class families to buy homes continue to exist, despite market downturns. Buyers who qualify can get a big boost by combining one of these programs with today's low mortgage rates.

Suburban Century Is Over

At a recent meeting of the Urban Land Institute of Minnesota, Senior Fellow John McIlwain said "a new normal" will be created in the housing market over the next 10 years, and he marked the end of "the suburban century."

He noted that markets offering "a vibrant 24/7 lifestyle" will see the most robust activity, "net-zero-energy" units will become the norm, and the rental market will expand as homeownership rates fall to more historic levels.

Suburban town centers will gain popularity among those wanting an urban lifestyle without living in a big city.

Over the next decade, McIlwain said four demographic groups will fuel the housing market. He said older baby boomers increasingly are moving back to the central city, while younger baby boomers are finding it more difficult to relocate for jobs because they cannot sell their suburban houses. Meanwhile, millennials are more environmentally aware and will seek urban lifestyles, and immigrants who cannot afford large suburban houses to shelter multiple generations will increase demand for rentals.

With 1.5 million housing units per year needed to accommodate the shift to normal levels of household formation, McIlwain said zoning, financing, and regulations need to be rethought to meet housing demand.

Mixed Market Messages

Local housing markets home prices appears to be growing. For instance, 13 metropolitan areas in the S&P/Case-Shiller 20-city index experienced price appreciation over the 12-months ending in May, compared to 11 in April and 10 in March.

“However, existing home sales in June slowed to an annualized pace of 4.37 million units, the fewest since March. Moreover, although new home sales jumped by almost 24 percent to 330,000 dwellings, it represented the second slowest rate since 1963.”

Mortgage Rates - fall to all-time record lows

Freddie Mac released the results of its Primary Mortgage Market Survey, with the 30-year and 15-year fixed-rate mortgages reaching record lows. (The 30-year fixed-rate survey began in 1971, and the 15-year began in 1991.) 30-year fixed-rate mortgage averaged 4.54 percent. Last year at this time, the 30-year FRM averaged 5.25 percent. 15-year FRM this week averaged a record low of 4.00 percent. A year ago at this time, the 15-year FRM averaged 4.69 percent.

Rents Rise as Apartment Vacancies Fall

Apartment vacancies were down and rents were up last month as people got tired of living in their parents’ basements and rented a place of their own.  Nationally, the apartment vacancy rate was 7.8 percent at the end of June, down from 8 percent in the first quarter.  Rents rose 0.7 percent from April to June, the largest quarterly gain in two years.

Mortgage Rates New Low

Mortgage rates fell for the second straight week to the lowest point in five decades, but they may not be enough to jump-start the housing market.

Mortgage company Freddie Mac said Thursday the average rate for 30-year fixed loans dropped to 4.57 percent. That's down from the previous record of 4.58 percent set last week and the lowest since Freddie Mac began tracking rates in 1971. The last time rates were lower was in the 1950s, when most long-term home loans lasted just 20 or 25 years.

Rates have fallen over the past two months. Investors, concerned with the European debt crisis, have poured money into the safety of Treasury bonds. Treasury yields have fallen and so have mortgage rates, which tend to track yields on long-term Treasurys.

However, low rates have yet to fuel home sales. The housing market has slowed since federal tax credits for homebuyers expired at the end of April.

To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

Rates on 15-year fixed-rate mortgages increased to an average of 4.07 percent, up from 4.04 percent last week. That was the lowest on records dating to September 1991.

Rates on five-year adjustable-rate mortgages averaged 3.75 percent, down from 3.79 percent a week earlier. That was also the lowest on Freddie Mac's records, which date back only to January 2005.  Average rates on one-year adjustable-rate mortgages fell to 3.75 percent from 3.80 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for all types of loans in Freddie Mac's survey averaged 0.7 a point.

Job Market Still Holding Back Housing

The one factor that would certainly push up demand for homes is increased employment, but many analysts are now predicting that employment won’t revive significantly until 2011. This doesn’t bode well for the immediate recovery of the housing market. "If you're looking for a silver lining in housing, you aren't going to find it here," Mike Larson of Weiss Research said in a report.

"The overall economy is rolling over, consumer confidence is slumping, and, most importantly, we just aren't creating jobs," Larson added. "With so many Americans unemployed or underemployed, the housing market is going to keep hurting."

Key West Single Family Sales Stats for June 2010

Listings Sold % Change From June 2009 -32.1%

Average Selling Price $529,684

Sold Price % Change From June 2009 -19.5%

National Flood Insurance Program Extension Granted

Congress once again reauthorized a short-term extension for the National Flood Insurance Program to Sept. 30, 2010. The bill, HR 5569, makes the program retroactive to May 31, 2010, the date the program went on hiatus.

Homebuyer Tax Credit closing deadline Extended to September 30, 2010

The Senate passed HR 5623, which extends the mandatory closing date to qualify for the homebuyer tax credit. The contract deadline does not change - homebuyers must have a contract signed by April 30, 2010 (an exception for active duty military) - but the previous closing deadline of June 30, 2010, has been extended to Sept. 30, 2010.

Foreclosures: One-third of Florida Sales

RealtyTrac says 31% of national sales were foreclosures in first quarter, and they sold for 27% less than non-foreclosures.

3-year backlog of foreclosures in courts

Shortly after Orlando Eslava’s bank started to push him through the foreclosure process last year, he got some good news: He was eligible for a government mortgage relief program that would lower his loan payments. But the lender plowed ahead with the foreclosure sale anyway, taking back the condo in Aventura, Fla., even as Eslava made payments under the federal plan.

When a Florida judge learned of the foreclosure, she threw out the case and nullified Eslava’s existing mortgage balance.

Eslava’s case reflects the state of confusion among lenders and courts as they struggle to keep up with a backlog of millions of delinquent homeowners making their way through the foreclosure process. Bank repossessions jumped more than 40 percent in May, to more than 90,000, compared with the same period last year, according to data released Thursday by RealtyTrac, an online service that tracks the foreclosure market.

That uptick is likely to continue this year, and it could take at least three years to work through the backlog of delinquent borrowers, economists say. In many cases, lenders are pushing their cases through overwhelmed courts and facing emboldened homeowners challenging the repossession of their homes on technical grounds.

By the time HSBC began the foreclosure process last year, Eslava, 53, had been trying to get a loan modification for more than a year. In November, a judge approved HSBC’s request to proceed with the repossession and set an April 9 sale date. But after discovering that HSBC could not produce proof that it held Eslava’s mortgage note, the judge ordered the bank to post a $414,000 bond.

The next day, Eslava learned that he was eligible for the federal foreclosure prevention program, which would lower his mortgage payments to $620 a month from about $1,000.

“It was a big relief. Like it was finally going to be over,” Eslava said.

The loan modification should have prevented the foreclosure. But HSBC continued to oppose efforts by Eslava’s attorney, Sheleen Khan, to cancel the foreclosure sale. “All he was looking to do was modify the loan,” Kahn said. “It was very trying for him and nerve-racking for me because we didn’t know what would happen.”

Eslava made several payments under the government relief program, but HSBC foreclosed on the home in April. Kahn filed a motion to overturn the sale, pointing out that in addition to ignoring the loan modification, the bank had not posted the bond required by the judge.

Miami-Dade Circuit Court Judge Jennifer Bailey agreed and brought both sides back to court in early May. Noting that 60,000 foreclosure filings were made in Miami-Dade County last year and that every hearing takes precious minutes, Bailey lambasted the bank’s attorneys for wasting time.

“It doesn’t sound like much, but [every case] represents a situation where the bank’s position is constantly shifting and changing because they don’t know what the Sam Hill is going on in their files,” Bailey said, according to a transcript of the hearing.

“Why did you lose the note? Because you’re operating at the same level of chaos and disorganization that caused you to oppose the motion to cancel the sale when” Eslava had been given a loan modification, Bailey said. A few minutes later, Bailey sanctioned the bank by wiping out Eslava’s mortgage debt. The mortgage note “is null and void. Mr. Eslava is relieved of the debt,” Bailey said.

Eslava, who was not at the hearing, was shocked by the news. He had hoped that the foreclosure would be reversed and that he would remain in the government program. “It’s naturally a good feeling,” he said. “I did everything I was supposed to do.”

HSBC, which as the trustee owns the legal title to Eslava’s loan on behalf of a group of investors, said it does not comment on the specifics of legal matters.

Wells Fargo, which acted as the servicer on the loan, said in a statement: “We work hard to comply with all applicable legal requirements and we expect the firms we work with – in this case, Florida Default Law Group – to do the same. Although this was a technical error on their part, if we make a mistake, we fix it and we hold others we work with to the same high standards.”

Florida Default Law Group, which represented both banks in court, declined to comment.

There have been similar cases in New York and Illinois in which frustrated judges have wiped out a homeowner’s mortgage, but it is still far from a trend, said Diane E. Thompson, attorney on foreclosure issues at the National Consumer Law Center. “I don’t think that homeowners or their advocates should step into court and expect judges to do this for them, even if the lender can’t come up with the note,” Thompson said.

Many states are dealing with the backlog of homeowners winding their way through the process with mediation programs, requiring lenders in some cases to consider a loan modification before moving forward with a foreclosure. Maryland lawmakers approved a similar program this year. “That is a more hopeful trend, and it has the potential to resolve these disputes for everybody,” Thompson said.

Ocean currents likely to carry oil to Atlantic

U.S. Household Numbers Fall

The number of American households dropped by an estimated 1.2 million between 2005 and 2008, even though the population increased by 3.4 million in 80 of the largest metropolitan areas during that time, according to a new study by a professor at the University of Southern California. While the analysis incorporates data only through 2008, the decline in household formation likely continued through 2009.

More young people are living with their parents instead of moving out, postponing the creation of their own households. Meanwhile, more families are combining households for economic reasons, including the loss of a home due to foreclosure.

The decline in the number of households contributed to the excess supply of apartments and single-family homes on the market. The housing and mortgage industries will feel the impact of this reduction in the number of households for years to come.  Also, the recession caused a five-fold increase in the rates of overcrowding, he said. A household that has more than one person per room indicates overcrowding.

The national homeownership rate has fallen to just above 67%, from above 69%. Renter household formation dropped even more than the formation of homeownership households.

Household formation should begin a return to a more normal level by 2012, as unemployment rates decline.

Rural News Wire

Pickup Truck Stoled

Canaan, NH — Police said this ain’t the first time by a long shot a truck been stoled round these parts past few months.  In July, Doug Hensley had his half-ton dually took from the Hardee’s parking lot, even though he weren’t in there but for 15 minutes.

Natl report: The housing slump isn't over

Real estate prices could fall below the levels of April 2009. That was the lowest point since the peak in July 2006. 

Economist Patrick Newport forecasts prices will fall an additional 6 percent to 8 percent and bottom out in the third quarter of 2011. "Foreclosures have either peaked in the first quarter or are going to peak soon, but they will remain very high for several years."

Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices fell 0.5 percent in March from February, according to the Standard & Poor's / Case-Shiller 20-city index released Tuesday. Prices in 13 of the 20 cities tracked by the index fell. Only six metro areas recorded price gains. One, Boston, came in flat.

In the first quarter of 2010, U.S. home prices fell 3.2 percent compared with the fourth quarter.

That marks six straight months of declines -- a sign that the housing market is going in reverse.

 

Weak job growth, tight credit and millions more foreclosures ahead will weigh on the home market.

Falling home prices tend to curtail consumer spending, and makes it harder for struggling borrowers to refinance into an affordable home loan.

The numbers are especially disturbing because they show that improved sales due to tax credits didn't translate into higher prices, said David M. Blitzer, Chairman of the S&P index committee.

 

Mortgage delinquencies reached a record high in the first quarter. More than 10 percent of homeowners with a mortgage missed at least one payment from January through March, the Mortgage Bankers Association said last week.

Since 2006, nearly 5 million homes have been lost to foreclosures or other distressed sales, according to Mark Zandi, chief economist at Moody's Analytics. Zandi expects 3 million more to hit the market over the next two years.  Zandi noted that 15 million homeowners still owe more than their homes are worth. And 26 million Americans are either unemployed or underemployed. The underemployed include people who have given up looking for work and part-timers who would prefer to be working full time.

Organic Food Benefits Study Results

ROFLMFAO  ;-)

NEW YORK (Reuters Health) – Consumers who opt for organic foods often believe they are improving their health, but there is currently no strong evidence that organics bring nutrition-related health benefits, a new research review finds. 

A "disappointingly small" number of well-designed studies have looked at whether organic foods may have health benefits beyond their conventional counterparts', according to the review, by researchers with the London School of Hygiene and Tropical Health in the UK.

Moreover, they found, what studies have been done have largely focused on short-term effects of organic eating -- mainly antioxidant activity in the body -- rather than longer-term health outcomes. And most of the antioxidant studies failed to find differences between organic and conventional diets.

The review, published in the American Journal of Clinical Nutrition, adds to findings reported last year by the same research team.

DAMN, it's in the loop

NOAA: Current Offshore Surface Oil Trajectory Map  Click map to enlarge

NOAA's latest observations indicate that a small portion of the oil slick has reached the Loop Current in the form of light to very light sheens. NOAA noted that in the time it would take for oil to travel to the vicinity of the Florida Straits, any oil would be highly weathered and both the natural process of evaporation and the application of chemical dispersants would reduce the oil volume significantly.

NOAA spill specialists continue to advise the U.S. Coast Guard on cleanup options as well as advising all affected federal, state and local partners on sensitive marine resources at risk in this area of the Gulf of Mexico.

Admiral Mary Landry noted that weather has aided spill cleanup in recent days, allowing for several controlled burns and collection of fairly high concentrations of oil-water mix. Admiral Landry closed the press conference on an optimistic note. “If top kill works we will demob,” she says. “Let’s all cross our fingers and say our prayers.”

BP is preparing for a "top kill" (shooting mud down the well to halt the spill) operation next week.

GM Things Looking Better

General Motors Co. rode expense cuts from its bankruptcy and strong sales of redesigned models to its first quarterly net income in nearly three years, drawing the company closer to a stock offering that would repay at least part of its government aid.

The $865 million first-quarter profit is a dramatic reversal from the huge $6 billion loss in the same period last year.

New models such as the Chevrolet Equinox small sport utility vehicle and the Buick LaCrosse luxury sedan lifted GM's North American operations to a $1.2 billion profit, compared with a $3.4 billion loss in the year-earlier quarter.

Ouch! Real Estate Continues to Pinch Natl News

Highflying property prices drove the most-recent economic boom, and a collapse in real-estate values hammered it back down. Now, as the economy struggles to regain strength, real estate is expected to continue to act as a brake, rather than an accelerator.

Despite clear signs of revival in the larger economy, including upturns in manufacturing and consumer spending, the nation's market for homes and office buildings remains mired in foreclosures and oversupply. That imbalance will be worked out over time, but in the meantime, it is slowing the recovery in myriad ways.

Here's how it breaks down:

Less construction means fewer jobs. Construction is a big employer and one of the better-paid sectors for men who lack a college degree. The sector has shed 2.1 million jobs from its peak in March 2007 to April 2010. The 5.6 million construction jobs that are left comprise 4% of U.S. jobs, down from 6% when employment peaked in December 2007.

With the glut of houses, offices and malls already pressuring the real-estate market, many of these jobs will not come back for a while, putting added pressure on unemployment even as growth resumes.

Indeed, construction spending is running 13% below its year-ago level and about 25% below the boom-year peak.

Home owners who once felt rich are feeling poorer. Throughout the boom, consumers used their home equity to borrow and spend as they watched housing prices soar. The ratio of dollars taken out of homes to total personal income—a gauge of how much consumers are pulling out of their homes relative to how much they make in wages and other income—fell the last three quarters of 2009. During the boom years, that ratio got as high as 9% nationwide, according to Moody's Analytics.

While real-estate prices have stabilized, they are unlikely to regain prerecession values for years. That has left many consumers with a pile of debt but not much home equity to be used for investment or spending, a big reason why economists believe recent gains in consumer spending aren't sustainable.

"The housing market, since it was the epicenter of the crisis, is also central to the feeble recovery," says Ethan Harris, an economist at Bank of America Merrill Lynch.

Small businesses aren't borrowing as much. While bigger companies can access the now-recovered market for bonds and other debt, many smaller companies—which are key job generators—use the value of their own property to secure bank loans. As the value of those holdings has fallen, so too has their ability to get loans, crimping investment and hiring at a time when the recovery is gaining steam.

Some 49% of small businesses own at least part of the commercial buildings in which they are located, and the majority of them have mortgages, according to the National Federation of Independent Business. But as real-estate values have fallen, so has this source of equity, limiting how much a bank can lend them.

U.S. nonfinancial companies had $6.3 trillion in real-estate assets at the end of 2009, down 33% from 2007, according to the Federal Reserve. That drop is a big reason why corporations' total net worth fell to $12.9 trillion from $15.9 trillion over the same period.

With the value of collateral so depressed "the ability for many small employers to borrow will be constrained precisely as sales begin to strengthen and new investments are warranted," wrote the National Federation of Independent Business in a recent report on small-business credit conditions.

Lower real-estate values translate into lower property taxes, crimping government spending. State and local governments employ 20 million police officers, teachers and other employees, roughly 15% of the work force and more than in all of manufacturing. But much of the money to provide services and pay employees comes from property taxes, which depend on property values. Even as the economy and job market recover, Local governments are cutting employees as they grapple with the worst budget deficits in a generation.

Property taxes continued to grow through the recession and recovery, in part because local governments calculate the levy based on property assessments that are often years old. Property taxes grew 5.7% to $170 billion in the last three months of 2009 versus the same period in 2008. That won't last as tax assessments catch up with reality.

In California, one of the first states into recession, Santa Barbara County saw its 2009 property taxes decline for the first time since 1978.

Property taxes "have only just begun to slump, meaning that cities and other localities will be contending with increasing budget pressure for the next several years," writes the Brookings Institution, a left-leaning Washington think-tank, in a recent report on local government.

Real estate itself is but a small share of the U.S. economy, but its tentacles are far-reaching.

Unemployable

One of every five men 25 to 54 isn't working.

Even more alarming, the jobs that many of these men, or those like them, once had in construction, factories and offices aren't coming back. "A good guess…is that when the economy recovers five years from now, one in six men who are 25 to 54 will not be working," Lawrence Summers, the president's economic adviser, said the other day.

Demand for workers who haven't much education -- which includes many men, particularly minority-group men -- is waning. A shrinking fraction of them are working. Some are looking for work; some have given up. Some are collecting disability benefits or an early-retirement pension. Some are just idle.

For 50 years, the fraction of men with jobs in what once were prime earning years has been trending down. Over the same decades, the share of women who work has been rising, a significant social change that lately has cushioned the blow of Dad's unemployment for many couples.

Women have suffered less in this recession. They were more likely to be in health care and other jobs that weren't hit as hard as construction and manufacturing. They are increasingly likely to have the education so often required to get or keep a good job these days.

That's good for their families. But will there be good-paying jobs in the future for prime-age men, particularly the ones who don't go to college?

Americans have worried for decades that the economy won't produce enough jobs. But the economy always provided. As farm jobs were eliminated by mechanization, factories hired more. As factories increased productivity and moved work offshore, more Americans got jobs in health care and other services. And the economists said to all those who had been worried about perennial, persistent unemployment: We told you so!

Yet nothing in the textbooks says that the supply and demand for workers will intersect at a wage that is socially acceptable. At the high end, demand for skilled workers and those who rely on their brains will return when the economy does. At the other end, jobs in restaurants, nursing homes and health clubs -- the jobs that are hard to automate or outsource -- will come back, too.

In the middle, there will be some jobs for workers without much education, for the plumbers, electricians and software technicians. But not enough to go around.

Men who in an earlier era would have been making good money on the assembly line are, and will be, working security or greeting at Wal-Mart, jobs that almost anyone can do and thus jobs that don't pay well.

If they're working at all. Today, 6.5 million workers have been out of work for six months or more, and that includes only those who are still looking for work. History suggests the longer they're unemployed, the less likely they are ever to work again. Faster economic growth would help a lot, but won't suffice.

One way to resist these market forces is to reduce the supply of workers who aren't in demand and increase the supply of workers who are. That is, educate more and better: Fix K-12 schools, improve worker-training programs, strengthen community colleges, give more aid to college students. All this is wise, but most of it will take a long time.

Reader's Point Made

"Since quite a large portion of the Real Estate meltdown appears to be the fault of unscrupulous lenders flipping risky mortgages, might it be wrong to encourage legislation that would reattach mortgages to the banks that made them originally"?

Fed: Low Rates Likely Through 2010

Interest rates are likely to remain low into 2011, Federal Reserve policymakers hinted in at least two presentations.

Fed Governor Daniel Tarullo said, "The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon.”

Martha's Stats Flash

U.S. home sales in the first three months of this year increased 34 percent over the first quarter of 2009

Will anyone ever want to live here again?

A dozen bouquets of flowers and a tiny figurine of an angel form a makeshift memorial to Brian Betts, a widely admired middle school principal who was shot to death in his suburban home recently.

The death has been ruled a homicide, and police are still searching for the killer. Meanwhile, some area residents grieving his death are also pondering a bizarre twist: Betts' cozy brick house was the scene of a separate 2002 murder of a man and his 9-year-old daughter.

The real estate agent who helped Betts buy his home in 2003, Therese Cox, told The Gazette, a Maryland newspaper, that Betts learned about the 2002 double murder from a neighbor after the purchase.

Rules about what real estate agents must disclose vary from state to state. Only two – Alaska and South Dakota – require that sellers inform all prospective buyers about a previous murder or suicide. Disclosure laws have become less relevant in the age of Google. In addition to scouring traditional real estate databases, it might be good to conduct a thorough Internet search on a property address as well.

Homes that have been the site of a horrific event such as a murder or suicide usually sell quickly, and a "haunted" property can even have added appeal, some sellers say. Real estate agents and prospective homebuyers across the USA say that's a common view. Stigmatized properties often sell at a discount, though a tragedy actually appeals to some buyers because it gives them a story to tell.