R.C. and Stacy Davis lost their condominium to foreclosure in 2009, a bad break that seemed destined to keep them from buying another home for many years.
Yet on Wednesday — only three years after their foreclosure — the couple signed the papers to buy a four-bedroom house in Livermore. Their avenue to homeownership? A loan backed by FHA.
“We’re as happy as can be,” Stacy Davis said.
The ability to get an FHA loan so quickly after a foreclosure could be welcome news to thousands of people who lost their homes during the housing bust. In the coming 12 months, about 22,000 Bay Area foreclosures will hit the three-year mark.
While mortgage giants Fannie Mae and Freddie Mac make people wait seven years after a foreclosure, the FHA will approve loans after three years, providing the buyer has established good credit and the ability to pay the mortgage.
“There’s definitely a movement of folks who have had a foreclosure to re-emerge and re-engage in the market,” said Dustin Hobbs of the California Mortgage Bankers Association. He said brokers around the state have picked up on the trend.
“It helps the housing market,” said Guy Schwartz of CMG Financial in San Ramon, which handled the Davis’ mortgage.
The FHA, which is self-supporting, provides mortgage insurance for loans with low down payments and more flexible household income requirements. The Davis loan came with a 3.5 percent down payment plus required monthly mortgage insurance and a 3.75 percent interest rate on a 30-year loan.
“An FHA loan is a good option for those who can qualify,” said Paul Leonard, California director of the Center for Responsible Lending. And there couldn’t be a better time to try, he said.
The Davis’ journey from foreclosure to new home began in 2005 when they bought a condo in Concord for $262,000 at the peak of the market.
The couple’s interest-only, 100 percent-financed loan was a classic bubble product that became a formula for foreclosure during the housing crash.
To make things worse, the condo was in a rough neighborhood, said Stacy Davis, who is a special-education teacher at Mission San Jose High School in Fremont. Her husband is a senior producer for the Golden State Warriors.
They tried to sell the condo after their daughter was born, but no one wanted to buy it, Stacy Davis said. “We decided we’re going to try to stick this out. We owned it and we would make it work.”
So they remodeled, put in a new kitchen and molding.
Meanwhile, the neighborhood deteriorated. Shopping carts piled up on the sidewalk, she said. Graffiti blossomed on walls.
After their son was born, they tried a short sale and found a buyer. “Within a week, an upstairs bathroom pipe busted open and flooded the whole place — the new kitchen, the molding, all destroyed. So the buyer backed out,” she said.
Their condo in ruins, they moved to a rented house in Dublin and the bank foreclosed. Their credit rating dropped to about 500, but they were able to build it back to about 700. “Within a year we were getting credit card applications. We didn’t feel like it affected our lives at all,” she said.
The purchase of the house in Livermore completed, the Davis family will begin moving in early next month.
WOODSTOCK, Ga. — A family in Woodstock, who just lost their home of 20 years to foreclosure and are preparing to move out, lost even more on Wednesday. And it was because of what they triggered when they posted a craigslist ad Tuesday night.
Their online post was just a well-meaning ad for a giveaway in their driveway outside the small house, a giveaway scheduled to begin at 10 a.m. Wednesday. But big crowds showed up and ended up taking practically everything inside the house, too.
Wednesday night, Michael Vercher walked 11Alive’s Jon Shirek through his family’s almost empty soon-to-be former home.
“Well, when we got to the house, I mean, pretty much — this,” he said as he stepped from the foyer into the living room. Their home — ransacked, ravaged, raked over. Almost everything inside — gone.
“They came in and just tore the place up,” he said.
People responding to the family’s craigslist ad showed up at the house earlier than 10 a.m., before Vercher arrived there from work to supervise the giveaway. And when he drove up to the house, he said, they had already broken into it, helping themselves to almost everything inside.
And he could not stop them.
“Everyone was inside the house; they were taking out items,” he said. “There were cars around the block. It was like ants in and out of the house.”
If you thought foreclosure signs were bad for home sales, wait till you get a load of this Brighton, Colo., homeowner’s spray-painted disclaimer. Titus Terranova, the implausibly named homeowner whose property abuts a home for sale in the rural Colorado town, has taken it upon himself to give prospective buyers the lay of the land.
In bright red letters painted on the side of his recreational vehicle, Terranova scrawled the following:
“WARNING / 3 Rottweilers / Loud Parties / Loud Music / Loud Cars / Anti-Horse / Fireworks / Call for more info.”
We understand the public nuisance warnings, but “anti-horse?” He lives in horse country! The sign can clearly be seen from Terranova’s neighbor’s master bedroom window and several other vantages that are bound to catch prospective buyers’ attention. The Realtor attempting to sell the home, Renee Lalonde, is at her wit’s end.
Millennials, of course, are sharing more than transportation: they’re also sharing living quarters, albeit begrudgingly, and with less gee-whiz technology involved. According to Harvard University’s Joint Center for Housing Studies, between 2006 and 2011, the homeownership rate among adults younger than 35 fell by 12 percent, and nearly 2 million more of them—the equivalent of Houston’s population—were living with their parents, as a result of the recession. The ownership society has been overrun by renters and squatters.
Nine out of 10 Millennials say they eventually want a place they own, according to a recent Fannie Mae survey. But this generation’s path to homeownership is fraught with obstacles: low pay, low savings, tighter lending standards from banks. Student debt—some $1 trillion in total—stalks many potential buyers as they seek a mortgage (or a car loan). At a minimum, homeownership rates are highly unlikely to soon return to the peaks they hit during the housing bubble.
Still, in the next decade, a group of people the size of California’s population—most of them Millennials—will likely come together to form new households. The question is: Where, and in what manner?
In some respects, Millennials’ residential aspirations appear to be changing just as significantly as their driving habits—indeed, the two may be related. The old cul-de-sacs of Revolutionary Road and Desperate Housewives have fallen out of favor with Generation Y. Rising instead are both city centers and what some developers call “urban light”—denser suburbs that revolve around a walkable town center. “People are very eager to create a life that blends the best features of the American suburb—schools still being the primary, although not the only, draw—and urbanity,” says Adam Ducker, a managing director at the real-estate consultancy RCLCO. These are places like Culver City, California, and Evanston, Illinois, where residents can stroll among shops and restaurants or hop on public transportation. Such small cities and town centers lend themselves to tighter, smaller housing developments, whether apartments in the middle of town, or small houses a five-minute drive away. An RCLCO survey from 2007 found that 43 percent of Gen?Yers would prefer to live in a close-in suburb, where both the houses and the need for a car are smaller.
Wholly apart from their urban sensibility, townhouses and other small houses are more affordable, all else equal, and developers know that to attract Millennials, they need to cater to tattered bank accounts. “The types of properties young people are buying now are different from what [that age group] bought five years ago,” said Shannon Williams King, the vice chair of strategic planning at the National Association of Realtors. “They are within walking distance of shopping centers. These buyers want bike shares and Zipcar. They like feeling connected.” In short, the future of the house might look a lot like the future of the car: smaller, cheaper, built for a new economy.
If the Millennials are not quite a post-driving and post-owning generation, they’ll almost certainly be a less-driving and less-owning generation. That could mean some tough adjustments for the economy over the next several years. In recent decades, the housing industry has usually led us out of recession. When the Federal Reserve lowered interest rates in the midst of the sharp recession of the early 1980s, for instance, a construction boom helped fuel the “Reagan Recovery.” With the housing market moribund, the Federal Reserve has lost a key means of influencing the economy with lower interest rates. The service-led recovery we’ve gotten instead is not nearly as robust.
Smaller houses built in dense, mixed-use neighborhoods generally take longer to build than McMansions on green-field sites. And of course, because they require fewer fixtures and furnishings, their construction spurs less economic activity.
What’s more, both construction and automaking are solidly blue-collar sectors. They employ millions of middle-class workers, who could be hurt by a transition away from home construction and auto manufacturing. The tech companies that sell personal electronics and provide high-speed Internet connections don’t need as many workers. And the jobs they do create—domestically at least—skew heavily toward the top of the socioeconomic ladder.
Yet in the long run, there’s good cause for optimism as well. Nobody is suggesting that the American consumer has bought her last house or car—only that houses and cars may lose some of the outsize importance they’ve had to the economy for the past 10 or 20 years or more. “There are a lot of countries, Germany for example, where homeownership rates are a lot lower than ours, and they have healthy incomes,” said Robert Lerman, an Urban Institute fellow in labor and social policy. Simple arithmetic says that if Americans spend less money on cars and houses, they’ll have more money left over to spend or save—and not all of that will go to electronic gadgets.
Education is the “obvious outlet for the money Millennials can spend,” Perry Wong, the director of research at the Milken Institute, told us, noting that if young people invest less in physical things like houses, they’ll have more to invest in themselves. “In the past, housing was the main vehicle for investment, but education is also a vehicle.” In an ideas economy, up-to-date knowledge could be a more nimble and valuable asset than a house.
What’s more, the shift away from traditional suburbs toward denser, urban-light living could have major economic-growth implications on its own. Economic research shows that doubling a community’s population density tends to increase productivity by anywhere between 6 percent and 28 percent. Economists have found that more than half of the variation in output per worker across U.S. states can be explained by density. Our wealth, after all, is determined not only by our own skills and talents, but by our ability to access the ideas of those around us; there’s a lot to be gained by increasing the odds that smart people might bump against each other. Ultimately, if the Millennial generation pushes our society toward more sharing and closer living, it may do more than simply change America’s consumption culture; it may put America on firmer economic footing for decades to come.
The House Oversight and Government Reform Committee issued a report today on Countrywide Mortgage and its so-called VIP loan program which the committee said was “a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company. In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed [Freddie Mac and Fannie Mae].” This is the second report the committee has issued on the VIP program.
Bank of America, which acquired the bankrupt Countrywide Mortgage in 2009, produced more than 120,000 pages of documents for the committee to enable it to enlarge on an earlier investigation conducted by Darrell Issa (R-Vista, CA) who was at the time the ranking member of the committee.
The VIP program, referred to internally as Branch 850, was established in 1991 to process loans for senior Countrywide officials and their friends. According to bank operating procedure information it had 13 full-time employees and the benefits available to its borrowers included program/underwriting and pricing exceptions.
Countrywide used the VIP unit to widely dispense discounted loans during the period of January 1996 and June 2008 when it processed a total of 17,979 loans.
Hundreds of these loans went to members of Congress, congressional staffers, staff of the executive branch, three top executives of Fannie Mae and Freddie Mac and many lower level employees of the two government sponsored enterprises, especially Fannie Mae which bought most of the loans originated by Countrywide. Many of the loans and discounts were personally approved by Countrywide CEO Angelo Mozilo and the recipients were known as “Friends of Angelo.”
These loans were not only aimed at gaining influence for the company, the report states, but to help Fannie Mae at a time it was under attack by legislators who were seeking to reform its mission and operation.
The names of prominent persons who received discounted loans have all been published earlier. They included six current and former members of Congress, former Senate Banking Committee Chairman Christopher Dodd (D-CT); Senate Budget Committee Chairman Kent Conrad (D-ND); Rep. Howard “Buck” McKeon (R-CA); Rep. Elton Gallegly (R-CA); Former Rep. Tom Campbell (R-CA) and Rep. Edolphus Towns (D-NY) former chairman of the Oversight Committee. Towns began the investigation into Countrywide but the report says that when he subpoenaed Bank of America for Countrywide documents the bank left out those related to Towns’ loan.
Other government recipients of Countrywide discounts were Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros and former Health and Human Services Secretary Donna Shalala. Both Cisneros and Shalala had left government service before the loans were made.
The House committee’s report said documents and testimony show that Countrywide “may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence.”
Thanks to reader “interesting” for passing this along yesterday, frombloomberg.com:
Blackstone Group LP, the biggest buyer of U.S. commercial real estate since prices bottomed, is jumping into residential property as housing recovers.
The private-equity firm has spent more than $250 million this year buying foreclosed single-family houses with the intention of renting them out, said two people with knowledge of the effort. The goal is to acquire enough assets to potentially take public as a real estate investment trust, or sell to another company or even to tenants, said the people, who asked not to be identified because the plans are private.
Blackstone, which has loaded up on strip malls, warehouses and suburban office buildings in the past two years, is turning to residential real estate after a 34 percent plunge in prices since the 2006 peak. The New York-based company is the biggest investor seeking to enter the single-family leasing market as rents climb and the U.S. homeownership rate sits at a 15-year low, joining rivals including KKR & Co. and Colony Capital LLC.
“It’s turning into a $10 billion industry,” said Colin Wiel, managing director and co-founder of Waypoint Homes, an Oakland, California-based company that has bought about 1,800 distressed homes for rent with backing from investors including GI Partners and Columbia University. “There’s a lot of competition.”
Blackstone’s real estate group has teamed with principals of Treehouse Group LLC of Tempe, Arizona, and Dallas-based Riverstone Residential Group to buy and fix up the homes, find tenants and maintain the rentals, said the people familiar with its strategy. Riverstone is an apartment-management company founded by brothers Nick and Peter Gould, owners of U.K. property-investment firm Regis Group Plc.
Distressed Properties
So far, Blackstone has acquired more than 1,500 houses around Phoenix and Southern California, the people said. It plans to buy in markets with the greatest supply of distressed properties, including Florida, Northern California and Georgia.
Thanks to booty juice for sending this in frombloomberg.com:
A week after Christine Lynch listed her house in the Brentwood neighborhood of Los Angeles for $3.625 million, she had seven offers. Within 10 days, a deal was reached for the five-bedroom, six-bathroom home — and for $225,000 more than she asked.
“My first reaction was, ‘Wow, I guess we’re really doing this,’” Lynch, 55, said in an interview. The all-cash transaction was completed on April 23. “I was really surprised by this level of interest and how quickly it sold,” she said.
Bidding wars are breaking out for luxury homes in such wealthy Los Angeles enclaves as Brentwood, Beverly Hills and Bel Air as an increasing number of buyers bet on rising home prices and investors return to the market. Even properties in need of extensive renovation are being fought over by shoppers who expect to resell them for more after a remodel or rebuild.
“The percentage of people who think prices are only going to go up is the greatest I have ever seen in my career,” said Syd Leibovitch, president of Rodeo Realty Inc. in Beverly Hills.
Sales of Beverly Hills homes priced at $2 million and higher climbed 11 percent in the first quarter from a year earlier to 39, according to DataQuick, a San Diego-based provider of property information. In Brentwood, whose residents include actress and singer Julie Andrews, they increased 56 percent to 25, and in Malibu they gained 64 percent to 23.
Better traffic and lean inventory levels support stable prices:
We saw our price index reach into positive territory in our March Survey of Real Estate Agents, the first time we have seen the price index at this level survey-wide since 2005. The better pricing environment will likely further buyer confidence, which has already been strengthening as of late. We also saw continued strong traffic, declining inventory, and a shorter time needed to sell homes – all positive indicators.
Price index exceeds 50 (first time turns positive):
Our home price index reached 50.2, the first time that it has exceeded 50 (a level that would indicate flat prices) in seven years. We recognize that this is barely above 50, but given the dismal trends in recent years, it seems appropriate to make note of it. In addition, the continued favorable affordability, rising rents, and improving confidence lead us to expect this trend to continue in the upcoming months.
Traffic index continue ahead of agents’ expectations:
Our buyer traffic index increased to 63.0 in March, up slightly from 62.3 in February. This high level of traffic is meaningful, for two reasons. First, we traffic above expectations in March (when expectations are higher than in February) is significant. Secondly, as the environment improves, expectations will likely increase (aside from seasonality) so we are pleased to see the traffic index well above 50 for the second consecutive month, and now the highest level since we started the survey. The continued strength in traffic coupled with the higher prices suggests that the strength is not a function of the better-than-normal weather this winter and spring.
Inventory falling, counter to the normal seasonal trend:
Our home listings index registered 62.9 in March, essentially unchanged from 62.6 in February. However, any level above 50 points to declining inventory (a positive for pricing, although not as positive for those searching for homes), and inventory levels typically increase in the spring season.
Time needed to sell a home continues to decline:
Our time-to-sell index improved to 62.0 in March, up from 55.9, in February (readings above 50 point to shorter times needed to sell). This is the best predictor of future pricing trends as it is a function of both inventory and traffic, and this is just the second month since we started the survey in which we have seen a reduced time needed to sell a home (February was the first month).
R.C. and Stacy Davis lost their condominium to foreclosure in 2009, a bad break that seemed destined to keep them from buying another home for many years.
