Sunday, October 31, 2010

The Daily Progress Reports on a Niche Market: Local Builders Finishing Bank-Owned Properties For Resale

It's an interesting story about some guys staying afloat in these tough times.  The article goes on to explain the downward price pressure that short sales and foreclosures are putting on pricing in this market,  then  accurately describes the Shadow Inventory.

But the article takes a left hand turn into Wha--huh? when the reporter says,
The local market reflects national trends, but the market here remains more stable than in the country as a whole.
No.  Not even close.  This lil ole market has seen a 225% YOY increase in foreclosures (as recently reported by same writer), sales have plunged down to the 1990's levels, every month sellers have about a 6% chance of unloading their property, the current 18 months of inventory is nearly twice the national level (8+ months for new homes, 10+ for existing); while 1 in 4 Virginia homewners owes more than the house is worth, and local private sector employment is vanishing.

If by "stable" it's meant that this market is going to continue with these negative trends for the next several years--then yes,  this market is "stable."

Saturday, October 30, 2010

Kluge Estate Winery Faces Foreclosure Auctions Totalling $35 Million As Lenders Take Control of Business, Seize Property

c-ville broke the story about Albemarle County's largest winery, owned by millionaire Patricia Kluge and husband Bill Moses.  The 220 acre operation has been open since 1999. 

In response to requests for comment from c-ville's editor, Kluge CEO Bill Moses called it a "perfect storm" of economic collapse and went on to say
"We have been, and are continuing intense discussions with various potential partners....From our perspective, it is disappointing that at the very moment when these talks appear to be most productive, [the banks] have chosen to take the initial steps towards dismantling the winery as an operating business as well as an auction of the property."
The Hook details the millions in loans taken from various creditors during 2007 and 2009, with the Vineyard and various contents as collateral:
"The latest foreclosure notice claims a total debt of $34,785,000 and lists assets of the Kluge Estate Winery and Vineyards to be auctioned off, including 907 acres in southern Albemarle, 164 of which are vineyards.  The sale would also include the well-known Farm Shop and tasting room, as well as offices, production buildings, six employee houses, and a 34,000 square foot former carriage museum."
The auctions aren't scheduled until December; Kluge and Moses have several weeks to cure the debts.

Read at c-ville.
Read at The Hook. 

Last February, the duo faced a foreclosure auction on a house at their planned, but primarily unbuilt, development Vineyard Estates, but bought back the parcel (co-owned by other investors) at auction.  Mrs. Kluge's primary residence Albemarle House was listed for $100M last year; the February price reduction of $52M was national real estate news.  This past summer, the contents of Albemarle House were auctioned, fetching about $20M.  At its current asking price of $48M, Albemarle House has not sold.

Wednesday, October 27, 2010

Failed Biscuit Run Development May Open As State Park in 2014

Update, below 

Will Goldsmith has the cover article at c-ville, and takes the reader through everything that had to happen in order for Hunter Craig and Forest Lodge LLC to get their Commonwealth of Virginia bailout of $9.8M cash for the 1,200 acre Biscuit Run parcel  in December 2009. The cash price was 78% less than what the developers paid in 2005--$46.2M--which was the largest price ever paid for land in Albemarle County.  The failed 3,100 unit housing development was the largest ever approved in the County.

Additionally, Craig and other investors, including Coran Capshaw and Boyd Tinsley, received tax credits.   The number may be as high as $30M.  This would only be possible by successfully claiming the land was worth nearly $90M--during the largest economic and housing downturn since the Great Depression.  As local RE sales continue to languish at 1990's levels, Craig seems like, as did previous BR owners David and Elizabeth Breeden in 2005, the savviest seller in town.

In the preface to the article, Goldsmith says:
As far as I can tell, the story of Biscuit Run isn’t a story of illegal corruption. It is about something far more prosaic, and possibly more disturbing—how influential people align their interests and justify their actions by saying they did it for you and me.
Read the whole article.


The Hook also has a cover story on Biscuit Run and the $ trail.

RealCentralVA has a long post, with lots of links.

The Hook mentions the nearly $90M appraisal needed to generate $30M in tax credits.  This info, in rumor format, has been making its way around C'ville since last Winter.  It appeared in the comments section of this blog in February.  Eventually, the number will get itself known.  

One $ bit neither The Hook or c-ville mentioned: the "rumor" that it was necessary for Hunter Craig/Forest Lodge LLC to pay, before the Commonwealth deal could go through, Charlottesville Habitat for Humanity their $1M proffer for the connector road for the Southwood Mobile Home project.

Friday, October 15, 2010

The 2010 Third Quarter Charlottesville Area Real Estate Market Report From the CAAR Isn't About the Third Quarter

...It's about the first nine months of 2010. 

Why is it an important distinction? Because this report is not a tool for buyers or sellers. The Charlottesville Area Association of Realtors Third Quarter Market Report does not reflect what is actually happening in "The New Normal" of this housing market, which began in the Third Quarter of 2010. 

And because the report will be picked up by local news media** and reported as if the housing market is "recovering." When taken in aggregate, the first nine months of this year have done "better" than in 2009, the midst of the Great Recession. 

The Charlottesville Area Association of Realtors Third Quarter Report fails to mention:

 The Charlottesville Albemarle area real estate market changed drastically in the Third Quarter, as it did everywhere else in the United States, absent the Homebuyer Tax Credit, which had been available for the previous 2 years.  Sales plummeted, and buyers exited the market.  We're back to the 1990's in sales, and prices are dropping faster than ever.
If you're bored, see what's presented in the report below.  But don't base a a pricing decision on this.  In order to sell a house, or buy one in a declining market, without losing your proverbial shirt, you need much more information than this PR report, IOHO.

Related Reading:
CAAR's Mid-Year Market Report 2010:  Sales Below 2002 Levels, Even W/Tax Cred Still In Place
CAAR's First Quarter 2010 Report: Here's What's Missing

**UPDATE Like So:  Newsplex and Daily Progress

Graph copyright RealCentralVA; Market Report Copyright CAAR.


"Fraudclosure" - Residential and Commercial Real Estate Purchases Since the 1980's in Doubt; $45 Trillion At Stake; Could Take Decades to Sort

Grab your coffee, or your Irish coffee, to watch this clip featuring a family that poured $100k into a loan servicer and were still foreclosed. Then listen to Dylan Ratigan joined by foreclosure lawyers discussing the depth and breadth of banking fraud and property rights issues.

Visit for breaking news, world news, and news about the economy

Thursday, October 14, 2010

30 Year Mortgage Rates Hit Record Low of 4.19%

As if a low mortgage rate is going to make somebody run right out and buy, when the entire mortgage market, TBTF banks, and consequently the US economy, are imperiled....

RealtyTrac: Foreclosures Reach Record High in Q3

When foreclosures are so easy to process, it's surprising there aren't more than 100,000 homes per month being re-po'd.   Read.

"The Mortgage and Real Estate Markets Are Now In Collapse"

"The system for financing mortgages and regulating that financing has failed, completely and utterly. The mortgage and real estate markets are now in collapse." - Charles Hugh Smith

Foreclosure-Gate: Systemic, Negligent, Greedy Practices With a Willful Disregard For the Average Citizen

"This is not about keeping deadbeats in their homes, as a few idiots and liars have asserted. The corporate sympathizers who are too busy fellating the bank to recognize what is going on should be ignored. This is about fundamental property rights and the Rule of Law in the United States — nothing less." - Barry Ritholtz

Who Holds Your Mortgage? Protect Your Property Rights, and Future, By Knowing

"Whether you are facing foreclosure, have an underwater mortgage, or are just a concerned homeowner, it’s important that you contact your bank and demand to see the original note on your mortgage."
Zero Hedge highlights an online tool to discover where your mortgage is, saying  "Wondering if you are one of those suckers paying a mortgage in limbo, with all the payments due to some non-existent mortgage noteholder getting retained at the servicer banks?"

The site, "Where's the Note," sponsored by the SEIU, provides all the data needed.  If the bank doesn't have the note, ZH  encourages the next "logical" (!) step:
In a few days your mortgage bank will have no choice but to tell you if they do in fact have your original mortgage note. And if not - welcome to cost-free living, courtesy of MERS and millions of rushed and fraudulent mortgage note assignments. Yes, it will mean the end of the GSEs, but it will also mean the accelerated write downs on thousands of MBS tranches which will rapidly collapse into insolvency (there is only so much Mark to Unicorn can cover up) and eventually take the insolvent TBTFs banks with them.
Read the entire Zero Hedge post.

Meanwhile, the Federal Housing Finance Agency has outlined the procedure for "orderly and expeditious resolution of foreclosure process issues" to avoid destroying the GSEs and Too Big To Fail banks.  Read pdf or see CalculatedRISK's synopsis.

The details of Foreclosure-Gate just keep getting more egregious.  Testimony shows banks hired hairstylists, teens, former Wal-Mart workers to process foreclosure documents.

Wednesday, October 13, 2010

CitiBank Report: "Foreclosures Gone Wild"

Below is CitiBank's report on the problem, and the consequences, for the housing market. Via The Market Ticker.

Adam Levitin, a law professor at Georgetown, says there are three possible outcomes for the "robo-signing" debacle:
  • In the best case scenario, the issues are simply technical, the situation is resolved and the foreclosure process continues. Many believe housing won’t recover until the glut of foreclosed homes clears the market.
  • In the medium-case scenario, litigation ensues and the matter takes years to sort out. That will inflict more pain onto the already troubled housing market.
  • In the worst case, the issues become a “systemic problem” that grinds the mortgage market to a halt and title insurers refuse to insure mortgages involving existing homes. In other words, housing Armageddon.
CitiBank document removed from Scribd.

VA Attorney General Ken Cuccinelli to Join With 40...Make that ALL 50... State AGs Investigating Foreclosure Fraud

Read about the AG  and other Foreclosure-Gate Issues.

Foreclosure Fraud: Systemic, Negligent, Criminal

With a 225% YoY rise in foreclosures in this area, the ongoing local private sector job desert, and many homes that will never sell because the market's gone down the toilet, foreclosure issues loom large in this market. 

Experts now caution the mortgage fraud issues will be a bigger shock to the financial system than the 9/08 bankruptcy of Lehman Brothers.

*VA Attorney General Ken Cuccinelli to Join 40 50 States AGs Investigating Foreclosure Fraud.  KC may not be popular in this area due to other "investigations," but this particular look-see is at a creature whose legs grow longer by the second.  ALL 50 AGs now...Oct. 13.

*Ally Financial has called a foreclosure moratorium in all 50 states.  (Formerly GMAC, and now majority owned by Uncle Sam).  Ally joins BofA in putting foreclosures on hold. 

*Unclear Titles Will Sideline Buyers of Foreclosed Properties For Many Months - Mish 

*Death of the Housing Market? Larry Kudlow gets worried - video - includes WSJ's Brett Arends.

"Anyone Who Says the banks will fix this in a few months is seriously delusional" says Diana Olick, Realty Check, CNBC.  Olick spoke with Adam Letvin, a Georgetown U law prof, who limned the issues:
"The mortgage is still owed, but there's going to be a problem figuring out who actually holds the mortgage, and they would be the ones bringing the foreclosure. You have a trust that has been getting payments from borrowers for years that it has no right to receive. So you might see borrowers suing the trusts saying give me my money back, you're stealing my money. You're going to then have trusts that don't have any assets that have been issuing securities that say they're backed by a whole bunch of assets, and you're going to have investors suing the trustees for failing to inspect the collateral files, which the trustees say they're going to do, and you're going to have trustees suing the securitization sponsors for violating their representations and warrantees about what they were transferring."
 *And...What if middle-class Americans just start saying Fuckit to the banks?

Sunday, October 10, 2010

The Daily Progress Reports On Why Charlottesville Albemarle Home Prices Will Continue Declining For Years - "The New Normal" - Part V

The local newspaper has an article about the 225% YoY foreclosure increase, plummeting home prices, and the shadow inventory. 

The article locates the Charlottesville Albemarle real estate market in "reality"
  • many short sales 
  • increasing foreclosures
  • the growing "shadow inventory"
  • huge inventory overhang - every day more properties listed
  • few qualified buyers
  • vanishing private employment
--all of which mean declining home values.   And there's no way to predict the bottom, or the end.  Read.

 In the past, The DP has presented  the Charlottesville Area Association of Realtors quarterly reports that show plummeting home sales, glossed over the number of short sales and foreclosures, and simultaneously quoted local Realtors' hopes for a "recovery" or "rebound" that could always be "just around the corner."  The optimism seems to have been based on something other than the local or national housing markets and economies.

The New Normal in Charlottesville / Albemarle Real Estate - Multi-Part Series

Friday, October 8, 2010

Bank of America, Nation's Largest, Halts Foreclosures in 50 States, Indefinitely...What's the Impact on Local REO Sales?

Families facing foreclosure now have a reprieve...but what will happen to current REO purchases?

As this blog noted the other day,  three major banks halted foreclosures due to fraudulent procedures, and others were ordered to examine procedures.

Now the nation's largest bank has put the kibosh on foreclosures.  BofA services 14 million mortgages, and 14% or nearly 2 million of these are in default / foreclosure.  Hundreds of thousands of families are impacted. 

Last year, 1 million homes were taken back in foreclosure.  This year, the number is on track to reach 1.2 million.   It's difficult to know how many homes in the Charlottesville / Albemarle and surrounding Counties are impacted by this moratorium, but suffice it to say there are many mortgageholders breathing sighs of relief tonight in this area.

But what's this going to do to the national economy? 

Mortgage Consultant Mark Hanson says,
The domino effect cannot be underestimated.

"It will have an immediate negative impact on house sales volume, house prices, private label MBS investors, bank earnings, mortgage servicing values, and much more. It opens up all the servicers to a rush of litigation at an extent never experienced before from homeowners and investors alike. This scandal has the potential to make the Subprime crisis look like a minor market correction and at the end of the day, the nation's largest banks will feel the most pain...."


Nationally, the number of distressed sales hovers around 1/3.

The estimate of "distressed" sales in this area varies wildly, and monthly, in the range of 40-60% with short sales and foreclosures combined.

Bank-owned foreclosure resale listings move quickly here, as they are significantly cheaper than private party sales.  What will happen to REO properties currently under contract, here and elsewhere?  Will these resales be put "on hold"? Currently,  BofA has stated it will continue with the resale.  This may change.

Fannie Mae Homepath properties sell quickly in this area, and BofA serviced the mortgages.  This is what they're telling prospective buyers:
Fannie Mae, which owns a huge number of the loans Bank of America services, is obviously faced with a new conundrum now that the freeze has gone national. They have been giving REO (bank owned) property buyers the option to get out of deals where the foreclosure might be in question or to stay in while the servicer guaranteed all was fine. "All transactions on potentially affected properties are currently on hold until the servicer can verify the issue has been rectified," spokesperson Amy Bonitatibus tells me. Fannie Mae has a special program called Home Path which offers REO buyers incentives, as the mortgage giant tries to unload its vast supply of foreclosed properties.

BofA Press Release 
CNBC has numbers and Mark Hanson commentary
BofA Halts Foreclosures in All States - NYT
Flawed Documents Thwart Home Sales - NYT

Black swan copyright Baltimore Sun.

"The New Normal" - Part IV: 30% of Americans Can't Qualify For A Mortgage Due to Low Credit Scores

...And of those who can qualify, 50% don't have credit scores high enough to receive the current,  historically-low 30 year fixed rate of 4.22%.

Zillow looked at 25,000 prospective buyers from Sept. 1 - 15th; even when the low credit score applicants had a 15-25% downpayment, they received zero offers. Read the WSJ, the Zillow blog, and see Realty Check.

In Charlottesville / Albemarle,  there are many other issues besides credit scores that are keeping buyers out of the market.  
  • The large number of folks who come here for 2-4 years can't buy because they'll lose transaction costs plus however more home prices decline; 
  • Lots of potential  "move-up"  buyers would have to sign contingent contracts if they wanted to buy again--but if they purchased in the past 6 years, their asking price for current home will be deemed too high for today's buyer (a newly built home might cost less at this point....);  
  • The $500k - $1M market is gasping; 
  • The $$$ properties are languishing; 
  • Lots of folks who are selling are trying to leave the City for a new job, retiring, or trying to unload an albatross--that is, they're not buying again.  
  • Toss in a City rate of 23% poverty, County at 10%....
  • And then there's the pricing....
This isn't fancy economics.  It's not "lack of confidence" in the economy that's keeping inventory so high in this area.  It's lack of qualified buyers.  

"The New Normal" is a multi-part series examining local and national housing issues.  See posts here.

Thursday, October 7, 2010

"The New Normal" - Part III: HUD Earmarks $46.6 Million Aid For Virginia Homeowners At Risk of Foreclosure Due to Unemployment or Illness

The US Department of Housing and Urban Development has an Emergency Homeowners Loan Program that offers up to $50,000 to eligible borrowers at 0% interest rate for up to 24 months.  The $1 Billion program was announced in August, but the details were released on Tuesday, October 6.   Virginia is #9 in $ on the list of 32 states eligible for this program.  Designed for "low- to middle-income working families," eligibility requirements include:
  • Borrowers must have a record of making mortgage payments on time
  • Household's yearly income may not exceed 120% of the area median income 
  • Household must have income reduced by at least 15% in two years due to sudden unemployment, underemployment or a medical condition
  • The home must be the borrower's primary residence and at risk of foreclosure
According to Housingwire, "Borrowers must meet with their local NeighborWorks division or state finance agencies with HUD approved standards to receive funding."
Homeowners needing assistance: Piedmont Housing Alliance.   HUD has further resources for foreclosure avoidance/assistance in Virginia.  

Charlottesville / Albemarle area unemployment has more than doubled in the past two years.  
While the rate is lower than nationally, median home prices are significantly higher than the national number, which means somebody who is unemployed or underemployed,  let alone ill, may fall behind more quickly.  This is a much-needed program.  1 in 4 Va mortgage holders owe more than their house is worth--whether they're employed or not--but having to face moving while jobless (unless it's for a new job) can be tragic.

Related Reading:
The New Normal - Part I
The New Normal - Part II - Banks Halt Foreclosures Due to Widespread Fraud

"The New Normal" is a multi-part series looking at local and national issues impacting housing.  The Federal Government has many programs (with varying degrees of success) in place to help homeowners avoid foreclosure or achieve a short sale.   But the Gov't isn't just assisting current mortgageholders;  the Federal Government owns or guarantees more than 96% of mortgages originating in the past two years.

Tuesday, October 5, 2010

"The New Normal" - Part II - Major Banks Halt Foreclosures in 23 States; Other Lenders Ordered to Review Processes in Widespread Allegations of Fraud

The "New Normal" in housing?  Expect unanticipated consequences. 

In the Charlottesville / Albemarle area and surrounding counties, bank-owned foreclosures typically sell quickly, within a few days of listing (especially single-family homes), because they are usually 10% - 50% less than privately-owned "comps." But:
  • What if the house is foreclosed...and then the mortgage holder discovers the bank didn't have a clear right to evict?
  • What if a new buyer purchases a foreclosure...and then discovers that the bank didn't have clear title to sell it?
This is exactly the scenario that is playing out--and will continue to do so for years,  in a scandal brought to the American people by big banks.

JP Morgan Chase, Bank of America, and Ally Bank (formerly GMAC, General Motors Acceptance Co., primarily owned now by Uncle Sam, have all halted foreclosures in 23 states because the legal professionals signing off on the foreclosure packages were giving signatures to so many thousands that they didn't bother to read them, and are also unable to produce complete documentation to prove ownership.  

Other major banks ordered by the Office of the Comptroller of the Currency to review procedure include Citibank, HSBC, PNC Bank, Wells Fargo, and US Bank.  And as a consequence, some major title insurance companies will no longer offer their services to foreclosure purchases.

For the widespread impact, read this from Google news:
"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, [mortgage broker] 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."

Mark your calendar, because the housing "recovery" has just been set back several years.

Related Reading:

See current foreclosure offerings (caveat emptor, as is always the case) here and here and here.

Virginia has two kinds of foreclosure: Judicial, and Right to Sale.  Read

"7 Major Banks Ordered to Review Foreclosures" - WaPo

"Flawed Paperwork Aggravates the Foreclosure Crisis" - NYT 

'Foreclosure Errors Cloud Homeownership With Millions of "Blighted Titles"'  - Bloomberg

Title Insurer Will No Longer Do Foreclosures - NYT 

Monday, October 4, 2010

FHA Mortgage Insurance Increase In Effect October 4

The FHA, which now owns or backs the majority of new mortgages in the US, is suffering from low capital reserves (below the required 2%).  A series of changes were mandated last January, and the mortgage insurance fees increase today.   FHA loans are popular because they require a low downpayment (as little as 3.5%), offer seller concessions (which are changing from 6% to 3%) and credit score requirements can be less-than-perfect. 
Read here. 
See more info and links, plus mortgage math, at RealCentralVA.

Friday, October 1, 2010

The Charlottesville Albemarle Real Estate Market: "The New Normal" - Part I

This is the first of a multi-part series examining the Charlottesville Albemarle area real estate market in the context of local and national phenomena.  The posts will cover Where are we now, and where are we going?

The Charlottesville Albemarle Real Estate Market Correction--aka "The New Normal"-- began here, as it did everywhere else in the United States, on May 1, 2010.  This was the day after the Federal Homebuyer Tax Credit expired, which as part of much Government intervention, propped up sales for two years.

For Part I of this series, take a look at a C'ville Bubble Blog post from two years ago, which examined the local economy and housing market.  While reading, consider What Has Changed Since Then? 

"Our Economy: The Good, the Bad, and the Ugly" - And Some Perspective

This blog isn't the only one concerned with "The New Normal."  Not only is the term being used with frequency in the MSM, but RealCentralVA is focussing on this today.  That blog uses a question mark in its title; this blog sees "The New Normal" as a given.  Click for larger image in new window; graph via RealCentralVA.

Read the RealCentralVA post.

August Sales By County: Completed and Pending Remain Low
Homesellers in Charlottesville Albemarle Had a 6% Chance of Success in August
Graphs: Local Declining RE Sales

"The New Normal" - A Multi-Part Series Examining Local and National Issues in Housing

The New Normal - Part I - How Has the Economy and Housing Market Changed in the Past Two years?
The New Normal - Part II - Banks Halt Foreclosures Due to Widespread Fraud
The New Normal - Part III - Part III - HUD Earmarks $46.6 Million For Virginia to Prevent Foreclosure For the Unemployed or Ill
The New Normal - Part IV - 30% of Americans Can't Qualify For a Mortgage
The New Normal - Part V - The DP Reports on Why Prices Will Continue Dropping For Years in this Area 
The New Normal - Part VI - It's Not a Right/Left Paradigm Any More.  It's People v. Corporations. 
The New Normal - Part VII - Quantitative Easing II is Here.  May God Help Us All
The New Normal - Part VIII - Banks Must Clear 9 Years of Inventory 
The New Normal - Part IX - Millions Owed in Delinquent Property Taxes to C'ville, Albemarle County