Mortgage And Real Estate News

Sunday, May 30, 2010

Market Recap - Week Ending May 28, 2010

The economic data took a backseat to events in Europe again this week. Improved sentiment about the troubles in Europe influenced the willingness of investors to purchase riskier assets such as stocks, hurting bond markets. As a result, after dropping to the lowest levels of the year, mortgage rates ended the week a little higher.

A report on Wednesday that China was considering a move to reduce its holdings of European debt rattled global financial markets. There had been speculation in recent weeks that China, with the largest pool of foreign exchange reserves in the world, might cut its exposure to European debt. Thursday, however, Chinese officials made rare public comments that China was not planning to make any changes to its portfolio of European investments. Relieved global investors responded by embracing riskier assets such as stocks and partially reversing the effects from a flight to safer assets, such as bonds and mortgage-backed securities (MBS), seen over the last few weeks.

This week's news from the housing sector was mostly positive. April Existing Home Sales rose 8% to an annual rate of 5.77 million units, the highest level in five months. Inventories of unsold existing homes increased a little, but the median home price was 4% higher than one year ago. First-time buyers accounted for 49% of all existing home sales. April New Home Sales rose 15% to an annual rate of 504K units, above the consensus forecast of 425K, and the highest level since May 2008. The homebuyer tax credit helped boost sales before its April 30 deadline.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 500K new jobs in May, of which 300K are the hiring of temporary census workers by the government. Before the employment data, the ISM manufacturing index will be released on Tuesday. Pending Home Sales, a leading indicator for the housing market, will come out on Wednesday. ISM Services will be released on Thursday. Productivity, Construction Spending and Factory Orders will round out the schedule. MBS markets will be closed on Monday for Memorial Day.

Wednesday, May 26, 2010

Banks tout new short-sale processes

by J. Craig Anderson The Arizona Republic May. 26, 2010 12:00 AM

Michael Schennum/The Arizona Republic A home is advertised as a short sale this month in Phoenix. While the short-sale process has been seen as a rocky and difficult experience for buyers and sellers alike, banks now hope speeding the transactions will help alleviate confusion and disappointment.
For a financially struggling homeowner, the decision to pursue a short sale does not come easily.

Homeowners who make that choice generally do so after months of searching and pleading for an alternative that would have kept them in the home.

Even when it goes smoothly, the short-sale process is painful for sellers. When it's bumpy and slow, the pain is far worse, said experts who met in Tempe this month for an educational conference on short sales.

Far too many short sales have been plagued by false starts, confusion, delays and disappointments, they said.

Phoenix-area short-sellers' many encounters with insult upon injury stem from a combination of problems, including sellers' lack of experience with the process and lenders' initial reluctance to adopt on a mass scale what they had long considered an obscure means of resolving bad mortgage debts.

Scottsdale resident Mary Purvis, 57, said Bank of America finally approved her short-sale application after 10 months of frustration and uncertainty.

But the pain didn't stop there.

"The sale finally went through last September, but now BofA reported my short sale as a foreclosure on my credit reports, which I have no idea how to fix," Purvis said.

Big mortgage lenders such as Bank of America and Wells Fargo are still smoothing out the wrinkles in their respective solutions to making short sales faster and more reliable. But they are now taking short sales
very seriously and have made many improvements, one bank representative said.

Just as the average Valley homeowner never imagined losing a home to financial hardship, the average mortgage lender never dreamed the bank would have to set up an assembly line to churn out short-sale approvals.

Purvis did not attend last week's conference to confront her lender directly, but Charlotte, N.C.-based Bank of America's Matt Vernon, the bank's top executive in charge of foreclosures and short sales, was there to face a roomful of like-minded consumers.

Vernon was quick to admit the bank's flawed handling of short sales, but he said Bank of America has since taken a 180-degree turn.

It has implemented an automated system - the first of its kind - for tracking the progress of short sales and has reduced the average number of days it takes for a short-sale to be approved, from 90 days to just over 50 days.

The bank approved 18,000 short-sale applications in April, Vernon said.

Unfortunately, it received more than 50,000 short-sale applications that month.

"Our system was never designed to handle this kind of volume," said Rick Sharga, senior vice president and chief economist at RealtyTrac, based in Irvine, Calif., which collects and analyzes nationwide data on short-sales and foreclosures. "Short sales were never intended to be a mass-market product."

That's exactly what they have become, said Sharga, who spoke Friday at a Tempe conference organized by the Distressed Property Institute, a San Diego-based business that has developed a certification and training program
for real-estate agents and other buyer and seller representatives in short-sale transactions.

Company founder and CEO Alex Chafen said the institute's twofold purpose is to teach real-estate professionals how to be more effective at negotiating short sales, while giving homeowners who need representation a way to separate the short-sale experts from the novices.

The company created a special designation, Certified Distressed Property Expert, which it hopes will become synonymous with short-sale expertise.

More on this topic

What is a short sale?

In a short sale, a homeowner seeks to sell the home for less than the amount still due on the mortgage. All lenders with a lien on the mortgaged home must agree to the short sale's terms, because they will not be compensated for the full amount of the mortgage when the home sells.

Tips for prospective short sellers

• Do not wait until foreclosure is imminent to initiate a short sale.

• The seller's agent bears the brunt of responsibility for making sure the sale is completed. When choosing an agent, ask for references from previous short-sale clients and other proof of expertise, such as Certified Distressed Property Expert certification.

• Be prepared to prove financial hardship. Lenders usually require the two most recent tax returns, bank statements, loan statements, pay stubs or other proof of income, along with a hardship letter explaining your circumstances, a detailed description of the home's current condition, closing documents from the home purchase and authorization for your representative to negotiate with the lender.

• Contact the primary mortgage lender for instructions on submitting a short-sale application. Be sure to include every document the lender requires.

• The seller or representative should call the lender every day until a short-sale negotiator is assigned, and then call the negotiator every day until he or she orders an appraisal or broker price opinion of the home's value.

• With an appraisal and comparable buyer's offer in hand, negotiate with the lender for approval.

Banks tout new short-sale processes

Falling home prices stir fears of a new bottom

Associated Press May. 26, 2010 12:00 AM

NEW YORK - The housing slump isn't over.

Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices nationally fell 0.5 percent in March from February, according to the Standard & Poor's/Case-Shiller 20-city index released Tuesday.

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

"It looks a little like a double-dip already," economist Robert Shiller said in an interview. "There is a very real possibility of some more decline."

Home prices in Phoenix, one of the 20 indexed cities, mirrored the national trend with a 0.5 percent monthly decrease. In terms of ranking from most improved to biggest decline, Phoenix was in the middle at No. 10.

The co-creator of the Case-Shiller index, who predicted in 2005 that the housing bubble would burst, says he worries that home prices rose last year only because of the federal tax credits.

That fear is shared by other economists.

They note that weak job growth, tight credit and millions more foreclosures ahead will weigh on the home market.

All that is discouraging for homeowners who have seen the value of their largest asset
deteriorate sharply over the past three years. Falling home prices tend to curtail consumer spending. And they make it harder for struggling borrowers to refinance into an affordable home loan.

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.

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

Falling home prices stir fears of a new bottom

New index forecasts housing prices

by Catherine Reagor The Arizona Republic May. 26, 2010 12:00 AM

Phoenix-area home prices will climb slightly in June, take a small dip in July and then start to climb again in late August.

This prediction on home prices doesn't come from a crystal ball or an economic forecast. Metropolitan Phoenix has a new pending-sales index compiled by the Arizona Regional Multiple Listing Service. The index, a leading indicator for the housing market, can give homebuyers and sellers an accurate view of home prices a few months out.

ARMLS' Pending Price Index tracks home-purchase contracts signed but not yet finalized. But the purchase price is usually set when the contract is signed. ARMLS began testing the index in January, and since then, it has been 96 percent accurate on price fluctuations.

ARMLS is the only group that has access to all of the data from homebuying contracts signed but not yet recorded as public records. The group's tens of thousands of real-estate agent members enter contract purchase prices into the ARMLS system. The Price Index is updated with data from home sales after they close.

"Everyone wants to know where Phoenix home prices are headed," said Bob Beamis, chief executive of ARMLS. "We are in the unique position of having in our system information on home prices that no one else has, and now we are able to use that information to predict with great accuracy where home prices are heading 30, 60, 90 and 120 days out."

According to the Price Index, metro Phoenix's average home price will climb to $177,000 in June, fall to $167,000 in July and then start climbing again in late August. The upward/downward trend for median home prices is similar for the next two months.

ARMLS is unveiling its Price Index and other real-estate data, including home sales, foreclosures and listings, to its members this month through the "STAT" newsletter.

Homebuilding boost

The federal tax credit helped new-home sales increase enough in April to beat last year's pace. There were 823 new-home sales in metro Phoenix last month, according to the "Phoenix Housing Market Letter." That compares with 789 in April 2009. It's the first month this year that new-home sales have topped last year's closings.

Homebuilding in the region slowed last month as builders prepared for demand from the tax credit to wind down. There were 604 single-family permits issued in April, compared with 908 in March.

New index forecasts housing prices

Toll Brothers posts smaller losses

Associated Press May. 27, 2010 12:00 AM

LOS ANGELES - Luxury homebuilder Toll Brothers Inc. posted a narrower loss in its latest quarter and saw a surge in orders for new homes, trends the company said were holding steady despite the end of two homebuyer tax credits.

New-home contracts jumped 41 percent in the February-April period and the value of the builder's backlog increased on an annual basis for the first time in four years, reflecting increased confidence among buyers, the company said.

"It appears our business has finally emerged from the tunnel and into a bit of daylight," said Robert Toll, chairman and CEO. He said sales held up in May even though two tax credits expired last month.

Toll said he believes customers are becoming more confident in their job security, their ability to sell previous homes and the outlook for home prices.

He did sound a cautious note, however, saying he expects a gradual recovery as the market faces headwinds from high unemployment and volatility in the financial markets.

"We don't expect housing to roar back right away," said Toll, who announced last week that he will step down from the CEO post on June 16 after more than four decades. He will stay on as chairman.

The company said it lost $40.4 million, or 24 cents per share, down from $83.2 million, or 52 cents per share. Analysts expected a loss of 23 cents per share.

Revenue dropped 22 percent, to $311.3 million from $398.3 million. Analysts expected $321.9 million.

Toll Brothers posts smaller losses

State trust land sold at auction for $2 million

by Peter Corbett The Arizona Republic May. 26, 2010 12:00 AM

Amid some confusion, the head of a Seattle-based firm was the winning bidder Tuesday for 4.7 acres of state trust land in Scottsdale.

Perry Koon bought the parcel northeast of Loop 101 and Frank Lloyd Wright Boulevard for the minimum bid of $2.15 million or $451,681 per acre. His company is Koon-Boen Inc.

Koon could not be reached for comment on his plans for the commercial site he acquired from the Arizona State Land Department.

A second bidder, BYPG Holdings LLC, represented by broker George Haugen, thought it had signaled the only bid during the two-minute auction. But auctioneer Dana Brown recognized Koon's bid first with the No. 4 paddle.

Haugen and an associate, seated three rows ahead of Koon, apparently thought Brown had recognized their bid with the No. 1 paddle.

Brown called out three times that No. 4 had the bid at $2.15 million before banging the gavel to end the auction.

Just before the bidding closed, Scottsdale broker Jim Keeley asked for a clarification that the No. 4 bidder had the high bid.

Haugen's group did not realize they had missed their chance to bid until the auction closed and they got up to pay a $285,200 deposit for the land.

Haugen declined comment when asked about the bidding confusion.

BYPG Holdings includes the L.L. and P.A. Van Tuyl Revocable Trust.

State Land Commissioner Maria Baier, who witnessed the bidding, said the proper auction procedure was carried out with the bidders identified by number.

She also noted that developers are showing renewed interest in state trust lands.

Builders largely backed off buying or leasing state land the past two years because of the recession.

"I'm deadly serious when I say that in the last 30 days we've had a few large buyers in to see us," Baier said. "To me that says more about the potential economic recovery than all the economic forecasts."

It appears builders are ready to build up their land inventory again, she said.

State trust land sold at auction for $2 million

Phoenix puts property-tax hike on hold

by Jahna Berry The Arizona Republic May. 26, 2010 12:00 AM

Phoenix city leaders will wait two years before deciding whether to increase a property-tax rate that has stayed the same for 14 years.

Because of falling property values, the city is collecting less money from its secondary property tax, which is used to pay bond debt.

Those voter-approved bond projects include building police stations and parks and roadwork.

If the property-tax slide continues for several years, Phoenix could have trouble making debt payments.

Instead of voting to increase the tax rate, the City Council voted on Tuesday to keep the current fixed combined property-tax rate, which is $1.82 per $100 of assessed valuation.

If the property-values problem persists in two years, the council either will vote to change the city's secondary tax rate, change the primary tax rate or use the city's general fund to cover debt payments, said Councilman Bill Gates.

The city also voted to delay $200 million in bond projects, refinance some debt and closely monitor the situation.

At Tuesday's meeting, many residents were prepared to speak out against a proposal that would have raised the property-tax rate beginning in July 2013.

Residents are hard-hit and paying too much for taxes, several residents said, noting that the city started a 2 percent food tax and that voters recently approved a 1 percent increase in the state sales tax.

The council is scheduled to take a formal vote on the property-tax levy at its July 7 meeting.

Phoenix puts property-tax hike on hold

2 big solar projects mulled for W. Valley

by Rebekah L. Sanders The Arizona Republic May. 25, 2010 12:00 AM

Two solar arrays that could become among the country's largest are being planned in the West Valley.

Luke Air Force Base in Glendale is preparing to install solar panels this fall that would generate 60 percent of the base's electricity by 2011 and could eclipse solar projects at other U.S. military bases, according to Lt. Col. John Thomas, head of the base's civil-engineer squadron.

"We want to take care of the land we have and leave it better for tomorrow," he said.

Meanwhile, homebuilder DMB Associates is proposing a solar field nearly twice the size of Luke's on 200 acres at its Buckeye housing development Verrado, senior vice president of operations Tom Lucas said this week.

Verrado is near Interstate 10, west of 195th Avenue. Solon Corp., a photovoltaic solar-panel manufacturer based in Tucson, would supply the panels.

DMB's project is one of 50 renewable-energy proposals that Arizona Public Service is considering. APS had requested proposals for projects that would add to the utility company's alternative-energy portfolio.

APS would not say when a winning project would be chosen. Luke is not part of the APS proposals.

"We've cared about the environment ever since we started building master-planned communities," Lucas said. "We want to add solar energy to the portfolio of DMB."

The solar plans were touted as advances toward sustainability in the West Valley at a panel discussion May 18 sponsored by Valley Forward, a non-profit that promotes balancing economic development and environmental quality.

Glendale Mayor Elaine Scruggs, a panelist, noted the city's efforts to cut electricity use by replacing incandescent bulbs with more efficient lighting and partnering with a company that turns the city's landfill gas into power.

Scruggs advocated better statewide transportation planning to improve sustainability.

Funding for transit has plummeted with the economy and state budget cuts, forcing cities to reduce bus and transit services, she said.

2 big solar projects mulled for W. Valley

Sunday, May 23, 2010

Market Recap - Week Ending May 21, 2010

This week, uncertainty about the pace of the economic recovery caused investors to shift to relatively safer assets, including government insured mortgage-backed securities (MBS). Also positive for mortgage markets, the economic data released this week showed that inflation remains extremely low. As a result, mortgage rates declined during the week, reaching the lowest levels of the year.

Concern about the level of global economic growth drove financial markets this week. Troubled European countries will be forced to reduce government spending, and Chinese officials indicated that they will tighten monetary policy to reduce inflation. In the US, it's not clear to what degree the new financial regulation bill will cause banks to reduce lending, leading to slower economic growth. In response to periods of uncertainty such as this, investors seek to reduce risk by moving to safer assets such as bonds, and greater demand for MBS pushes mortgage rates lower.

This week's news from the housing sector was mixed. April Housing Starts increased above the consensus forecast to the highest level since October 2008. Building Permits, a leading indicator, declined moderately. The May NAHB Homebuilder confidence index rose to the highest level since August 2007. Even with the end of the homebuyer tax credit, the builders surveyed remained optimistic about the next six months.

Next week, a wide mix of economic data will shed some light on the level of economic growth. Existing Home Sales will be released on Monday, and New Home Sales will come out on Wednesday. Durable Orders, an important indicator of economic activity, will also be released on Wednesday. Thursday, a revised figure for first quarter Gross Domestic Product (GDP) will come out. The Chicago PMI manufacturing index and Personal Income are scheduled for Friday. Consumer Sentiment and Consumer Confidence will round out the Economic Calendar. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Market Recap - Week Ending May 21, 2010

American made ... Chinese owned - May. 7, 2010

By Sheridan Prasso Fortune May 7, 2010: 9:35 AM ET

(Fortune) -- About a mile past the Bountiful Blessings Church on the outskirts of Spartanburg, S.C., make a right turn. There, tucked into an industrial court behind a row of sapling cherry trees not much taller than I am, past a company that makes rubber stamps and another that stitches logos onto caps and bags, is a brand-new factory: the state-of-the-art American Yuncheng Gravure Cylinder plant. Due to open any day now, it will make cylinders used to print labels like the ones around plastic soda bottles. But unlike its neighbors in Spartanburg, Yuncheng is a Chinese company. It has come to South Carolina because by Chinese standards, America is darn cheap.

Yes, you read that right. The land Yuncheng purchased in Spartanburg, at $350,000 for 6.5 acres, cost one-fourth the price of land back in Shanghai or Dongguan, a gritty city near Hong Kong where the company already runs three plants. Electricity is cheaper too: Yungcheng pays up to 14¢ per kilowatt-hour in China at peak usage, and just 4¢ in South Carolina. And no brownouts either, a sporadic problem in China. It's true that American workers are much more expensive, of course, and the overall cost of making a widget in China remains lower, and perhaps always will.

But for hundreds of Chinese companies like Yuncheng, the U.S. has become a better, less expensive place to set up shop. It could be the biggest role reversal since, well ... when Nixon went to China. "The gap between manufacturing costs in the U.S. and China is shrinking," explains John Ling, a naturalized American from China who runs the South Carolina Department of Commerce's business recruitment office in Shanghai. Ling recruited Yuncheng to Spartanburg, and others too: Chinese companies have invested $280 million and created more than 1,200 jobs in South Carolina alone.

Today some 33 American states, ports, and municipalities have sent representatives like Ling to China to lure jobs once lost to China back to the U.S.: Besides affordable land and reliable power, states and cities are offering tax credits and other incentives to woo Chinese manufacturers. Beijing, meanwhile, which has mandated that Chinese companies globalize by expanding to key markets around the world, is chipping in by offering to finance up to 30% of the initial investment costs, according to Chinese business sources.

What would Henry Luce think?

The enticements are working. Chinese companies announced new direct investments in the U.S. of close to $5 billion in 2009 alone, according to New York City-based economic consultancy the Rhodium Group, which tallied the numbers for Fortune. That's well below Japanese investment in the U.S., which peaked at $148 billion in 1991, but a big jump from China's previous investments, which had been averaging around $500 million a year. Chinese firms last year acquired or announced they were starting more than 50 U.S. companies. And when China finally allows the value of its currency, the yuan, to appreciate -- and it's just a question of when -- Americans can expect to see Chinese projects, small today, really take off and have an impact on the U.S. economy. This could be a good thing for relations between the two countries. "It will take many years to balance out the flow of U.S. investment into China," says Dan Rosen, a principal at the Rhodium Group. But, he says, China's aggressive interest in U.S. investment suddenly gives Washington some leverage as it seeks to negotiate with Beijing on tariffs, trade issues, and economic policy.

None of that matters much in Spartanburg. Skilled workers at American Yuncheng will earn $25 to $30 an hour, line operators $10 to $12. That's a lot more than the $2 an hour that unskilled labor costs in China, but the company can qualify for a state payroll tax credit of $1,500 per worker (for any company creating more than 10 jobs). And by being closer to companies like Coca-Cola, Yuncheng can respond more quickly when they need new labels designed to show that a product has reduced its fat content or added more flavor. If business goes well, company president Li Wenchun expects to double the size of his operation, maybe in five to 10 years, and employ up to 120 Americans. "I'd like it to be next month, but it depends on how fast we develop the market here," he tells me through a Mandarin interpreter.

So far there's little sign of anti-Chinese sentiment among South Carolinians, who watched their state lose its cotton-based textile-manufacturing industry to low-cost countries like China. Fortune asked Sen. Jim DeMint, a Republican torchbearer for conservative causes, what he thinks of communists creating work in his home state. "South Carolina is one of the best places in the world to do business, and that's why so many international companies are moving jobs into our state" is his only reply.

Brenda Missouri, a 43-year-old leaks tester who works for appliance maker Haier, speaks about her employer in glowing terms. Haier was the first Chinese company to build a factory in the U.S. -- a refrigerator plant in Camden, S.C., in 2000. "They're good business folks; they get the job done," she says. As for communism? "Doesn't matter," she shrugs. "It's money that makes the difference."

Chinese companies, American workers

Last December the National Committee on U.S.-China Relations dispatched me to Corpus Christi to give a speech about the Chinese and their economy. Why? Because, they told me, the region is about to become home to the largest-ever Chinese-built factory in the U.S., a $1 billion plant by Tianjin Pipe Group to manufacture seamless pipe for oil drilling. If everything proceeds as planned -- the company received its air-quality permit on April 14 and hopes to break ground by fall -- Tianjin Pipe expects to employ 600 Texans by 2012 and to provide an estimated $2.7 billion to the local economy over the next decade. Corpus Christians, it turned out, wanted to know more about their new neighbors who are expected to relocate 40 to 50 families to Texas.

Upon arrival, I find it impossible not to notice the resemblance of Corpus Christi's long, curving coastline on the Gulf of Mexico to the one near Tianjin on the Bohai Sea between northern China and Korea. Some 75 U.S. locales competed for the factory, but when Chinese delegations from Tianjin Pipe visited Corpus Christi, the townspeople made them feel at home by welcoming the visitors to backyard barbecues. They even enlisted the Taiwan-born former owner of the local Chinese restaurant, Yalee Shih -- perhaps the only woman in town who could speak Mandarin -- to help them navigate cultural nuances. Shih, who also sits on the board of the Texas State Museum of Asian Cultures, delicately helped prevent a multimillion-dollar translation error over building costs that might have cost Corpus Christi the project, and also quashed what would have been an impolitic gift of clocks -- which to the Chinese symbolize death or the end of a relationship -- from a local retailer. She and others in the region's business community plan to help guide their new residents through life in America, like how to buy a car, how to rent a house, as well as where to go to buy fragrant rice instead of Uncle Ben's.

In the end, while feeling at home helps, it does come down to business, says J.J. Johnston, executive vice president and chief business development officer of the Corpus Christi Regional Economic Development Corp. "They like the strategic location of our region, the convenient access to materials coming in -- mostly scrap metal and pig iron -- and the ability to export to North and South America through the port of Corpus Christi," he says.

There are other incentives. On April 9 the U.S. Commerce Department imposed import duties of up to 99% on the type of seamless pipe that is to be manufactured by Tianjin Pipe -- a reprisal prompted by the United Steelworkers union. The Chinese company, the world's largest maker of steel pipe, had said it could not afford to export to the U.S. if tariffs were over 20%. Now its pipe will be made in America. "It's just another reason they have to have a U.S.-based production facility," says Johnston.

Even without tariffs, Tianjin had been looking to expand -- as are many Chinese companies once they reach about $100 million in annual sales. "Chinese companies, as they get bigger, have to start thinking about their global positioning," says Clarence Kwan, who runs the Chinese Services Group at Deloitte, which advises Chinese companies on doing business in the U.S. Officially the Chinese government has given approval to over 1,200 Chinese investments in the U.S., but that number is considered low because it doesn't count those made via Hong Kong -- where many Chinese companies earn equity capital from being publicly traded -- or tax havens like the Virgin Islands, where Chinese investment may stop first before flowing to the U.S. Plus, investments below $100 million don't need Beijing's nod and may be approved at the local level.

Chinese companies see America as more than a manufacturing center. So far this year they have announced plans to build a wind-energy turbine plant and wind farm in Nevada that will create 1,000 American jobs; purchased the 400-employee Los Angeles Marriott Downtown out of foreclosure; and acquired a shuttered shopping center in Milwaukee, with plans to turn it into a mega-mall for 200 Chinese retailers. In some cases Chinese companies are resuscitating American outfits that had been left for dead. About 70 miles west of Spartanburg, near the Georgia border, past signs reading "24-hour fried chicken," another Chinese company is hiring engineers -- metallurgical and mechanical, some from nearby Clemson University. In June 2009, Top-Eastern Group, a tool manufacturer based in China's coastal city of Dalian, acquired a factory here along with three other facilities from Kennametal, one of America's largest machine-tool makers, after the U.S. company, based in Latrobe, Pa., reported a $137 million loss (citing a slowdown in industrial activity) in the quarter before the sale.

This plant, in Seneca, S.C., makes drill bits. And in the months since his purchase of it for $29 million, Top-Eastern founder Jeff Chee has invested another $10 million to upgrade machinery, built a $3 million logistics center, brought back Kennametal's furloughed workers, hired 120 more, and now has his 260-employee plant working overtime filling orders for the Cleveland Twist Drills, Chicago Latrobe, Putnam, and Bassett brands he acquired. He brought back the company's old name, which was Greenfield Industries before Kennametal acquired it in 1997, and emblazoned it on a sign out front.

General Electric's former CEO , Jack Welch, he volunteers, is his inspiration. "I've read a lot of books, and I learned a lot from him," Chee says in broken English amid the sharp smell of grinding steel. "One person can change a lot." As one of China's self-made entrepreneurs, who started Top-Eastern in 1994 with just $500, Chee now has worldwide sales of more than $120 million, 4,000 employees, and factories in Germany and Brazil. He visits the South Carolina plant monthly to make sure all is proceeding as planned, and employs American managers to run it in his absence rather than bring over Chinese. "There's good, experienced people and good know-how already here," he says.

How can he make a drill bit factory profitable where Kennametal had struggled? By increasing productivity with new equipment and cutting costs, he says. Plus, Chee forges his own steel, and he owns the mines back in China for two of its more expensive components, tungsten and molybdenum. The fact that he can source from himself means he keeps the margins -- and now his tools are officially made in the U.S. The cost of making those products is much higher than in China, he says, "but the problem is customers just accept 'made in U.S.A.' products, so I have no choice. Lots of customers here have government contracts that have 'made in U.S.A.' requirements."

And how do the employees feel about having a Chinese entrepreneur come to their rescue? "Just because it's a Chinese owner, they don't really care," says Scott Henderson, a 47-year-old manufacturing manager who had been furloughed one week a month along with his workers before Chee bought the factory. "They're all happy to be working 40 hours a week." They also have the opportunity for overtime, and a third, graveyard shift has been added to serve a nearly 40% rise in orders. "I feel great about it," says Sam Marcengill, a 24-year-old technician at the plant. Last year he was laid off for six months before Chee's purchase gave him his job back. Now he's on overtime, 48 hours a week. "The work's a lot more steady. It's better. Personally I'm a lot better off. It's a great thing."

Never mind the hiccups Chinese companies experienced when they tried to enter the U.S. before. In 2005, Washington famously blocked China's National Offshore Oil Corp. (CNOO C) from buying Unocal, and Chinese appliance maker Haier failed to acquire Maytag. Now, like the Japanese in the 1980s -- when U.S. trade frictions combined with Japan's boom blossomed into Honda and Toyota manufacturing plants -- the Chinese are here to stay. Their presence initially made some folks uneasy. A few years ago a caller to The Rush Limbaugh Show complained that as he was driving past the Haier plant in Camden, the Chinese flag was flying higher than the American flag and the South Carolina state flag out front. It was an easy mistake to make by anyone looking at the three equal-height flagpoles from an angle.

Conservative media joined in and called for protests, and the public rang the factory to complain. The Chinese executives at Haier had no idea flags were such a big deal, and it became their bugaboo. The complaints continued until about a year and a half ago when Haier America factory president Joseph Sexton, who was new to the job, decided to fix it. He had two of the poles lowered so that the U.S. flag looks highest from all angles.

It took Haier some time to work through the issues of being a Chinese employer in a small, historic Southern town (pop. 6,682) lined with stately antebellum houses and home to two Revolutionary War battlefields. "Having a Chinese manager didn't work. That's why they took all the Chinese managers out of here," says Haier's human resources director, Gerald Reeves, who was one of the first hired by Haier and guided the Chinese through the realities of American-style personnel management -- including convincing them that they needed to offer health insurance. He once even asked John Ling, South Carolina's man in Shanghai, to fly home from China to talk to a manager who was arousing employee resentment by publicly embarrassing the workers, Chinese-style, for their mistakes.

Now the only way to know you're in a Chinese factory is by looking up at the large Chinese flag hanging from the rafters -- alongside an American one, of course -- and by the very Chinese motivational slogans on the walls: "Spirit of entrepreneurship -- strive for a clearly defined objective and make the impossible possible without an excuse" reads the banner over the refrigerator testing line. And if you come in February, Sexton organizes a Chinese New Year party with food and outdoor firecrackers.

What is perhaps most startling about the Haier factory is that it is actually shipping goods back to China. Best known for its mini-fridges for dorm rooms and studio apartments, Haier's U.S. plant also makes large units, good for supersized American McMansions but too large for a typical Chinese household. Now a growing number of wealthy people in China want to supersize too, so Haier has realized it can ship a small number, maybe 4,000 a year, of its highest-end refrigerators home and sell them for $2,600 apiece -- more than China's average annual income of around $2,000. (Haier also ships U.S.-made refrigerators to India, Australia, Mexico, and Canada.) There aren't enough wealthy customers yet to make it worthwhile retooling any of the 29 Haier factories in China, but the nearby deepwater port in Charleston, S.C., makes export easy enough. "There are folks in China who want high-end products," says Haier America factory president Joseph Sexton. "China is a much different place than people think."

Chinese newcomers would do well to learn from Haier's missteps as well as its great strides. "They're coming with little experience into a highly sophisticated market, and they are bound to make mistakes," says Karl Sauvant, executive director of the Vale Columbia Center on Sustainable International Investment at Columbia University and a law lecturer there, who in February published an edited volume titled Investing in the United States: Is the U.S. Ready for FDI From China?

"This is the thing the Japanese did fairly successfully: You have to be a good corporate citizen, source locally, contribute to causes and charities in the local community, and be familiar with how to navigate the corridors of Washington," says Sauvant. "And in key managerial positions you should have Americans." Legal questions, such as whether Chinese companies operating in America would be subject in U.S. courts to the Foreign Corrupt Practices Act for business practices in, say, India or elsewhere have yet to be tested, he says. And then there's the issue of the local sensitivities exhibited in the Haier flag-flying incident.

Unlike Japan, China is no U.S. military ally -- despite President Obama's naming China a "strategic partner," instead of the "strategic competitor" label it had under the Bush administration. Politically it remains a communist country, despite its capitalist economy. There's obviously more to overcome.

Chinese investors say they don't care too much about politics, but hope their entry into the U.S. can be a positive force. "This will definitely help U.S.-China relations," remarks Li, the manager of the print-cylinder factory Yuncheng, as he guides me on a tour. "Increasing communication makes the two sides closer." Even if it doesn't, business is business. "Good products are borderless," he notes. And there's always a Chinese proverb to cite: "It takes 10 years to make a sword," says Li. In other words, keep at it till you get it right, and the outcome will be strong and lasting. And perhaps transform into the plowshare that sows a mutually beneficial harvest for America and China both.

American made ... Chinese owned - May. 7, 2010

6 simple steps to fix the financial system: full version - May. 5, 2010

By Allan Sloan Fortune May 5, 2010

(Fortune) -- The first thing you learn when you start looking at Wall Street, which I've been doing for 40 years, is to never trust the salesmen. What they promise you isn't necessarily what you get. You need to use common sense, watch out for your own interests, and at least make an attempt to understand the fine print.

The same principle applies when you examine plans to reform Wall Street. The Street certainly needs to be fixed, heaven knows. Its excesses are largely responsible for the financial crisis that brought markets crashing down in 2008 and plunged the economy into recession. The government needs to step in to stop people from being cheated, to help capitalism regain some of the public trust it's lost, and to make markets transparent enough that people other than a handful of elite insiders can figure out what's going on.

Salesmanship, however, isn't confined to Wall Street. President Obama's recent speech at New York City's Cooper Union college, just north of Wall Street, sure was a great pitch. Who can disagree with wanting "a commonsense, reasonable, non-ideological approach to target the root problems that led to the turmoil in our financial sector and ultimately in our entire economy"?

But what we'll get from the actual legislation isn't necessarily what we heard from the Salesman-in-Chief.

As I write, it's impossible to predict exactly what will emerge from the legislation -- one bill passed by the House, one pending in the Senate -- kicking around in Washington. But something will. Hey, even Goldman Sachs chief executive Lloyd Blankfein seems to think so. "Clearly the world needs more regulation," he told the Senate. 'Nuff said.

The point of the legislation shouldn't be to do what's easily sellable or to punish Goldman (GS, Fortune 500), everyone's favorite whipping boy. It should be to make the financial system work better for all of us.

So, with assistance from some of my Fortune colleagues, I'd like to propose Six Simple Steps to help fix the financial system. They would change Wall Street's incentives to make game-playing more expensive for the firms and the players; force both institutions and individuals to put serious amounts of their own money at risk, which would reduce future taxpayer losses; and give regulators, creditors, and the general public access to information that Wall Street now hoards to enhance its profit margins.

These proposals aren't a perfect solution -- nothing is. But had they been in place, AIG (AIG, Fortune 500) probably wouldn't have melted down, Lehman Brothers' collapse wouldn't have been as messy as it was, and Goldman's infamous Abacus deal, in which taxpayers in Britain and Germany indirectly forked over $990 million to Goldman -- which in turn sent $990 million to John Paulson's hedge fund -- might never have taken place.

I'll get to the Simple Six in a minute. But as someone who's seen many "reform" plans -- remember Sarbanes-Oxley? -- fail to achieve their goals, let me offer my negative take on two widely touted ideas that sound great but that just don't seem workable in the real world.

First, it would do more harm than good to create a new systemic-risk office. We already have a body that's supposed to guard against risks to the financial systems of the U.S. and the world. It's called the Federal Reserve. The Fed's primary job, like that of the world's other central bankers, is to keep the financial system functioning properly. We don't need a startup bureaucracy trying to do that. The new office and the Fed would end up tripping over each other. Worse, the giant "systemically important" institutions subject to the riskocrats' rules would carry an implicit federal guarantee against failure. It would give them an unfair advantage by allowing them to raise money more cheaply than smaller institutions that the market knows would be allowed to fail. That would encourage financial gigantism, which is not good.

Second, we shouldn't adopt the Volcker Rule. This rule, named after former Fed chairman (and current Obama adviser) Paul Volcker, is a cornerstone of Obama's proposal. But like Obama's speech, the Volcker Rule is better as a sound bite than a solution. Volcker's idea -- separating risk taking from insured deposit taking -- sounds great. But actually implementing it strikes me as impossibly complicated. It's much better to inject more capital -- and more fear of failure -- into the system than to try to define "proprietary trading" and micromanage complex financial companies.

So let's move on to what we should do. Elements of our Six Simple Steps are in the pending legislation. If they're part of what's adopted, we may get true and lasting reform. If they're not, it won't be long before Wall Street is back to business -- and bailouts -- as usual.

1. Demand more skin in the game. Any reform plan worth its salt should greatly increase capital requirements -- the amount of money that stockholders have at risk, relative to an institution's assets -- for financial institutions. This is what people mean when they talk about reducing leverage. Lower leverage would make institutions less likely to fail, and any bailout of them less expensive.

Our most recent financial crisis, in which a relative handful of U.S. mortgages metastasized into a worldwide financial cancer, started with loans in which borrowers had nothing or almost nothing at risk. Neither did the companies that made the loans and sold them to other companies that bundled them, turned them into securities, and sold the securities to investors. At the end, these players walked away at little or no cost to themselves from the mess they had created, and stuck investors -- and society as a whole -- with a huge cost.

The fix? First, require any institution that turns loans into securities to keep at least 5% of each issue in its portfolio. Second, require a cash down payment from the homebuyer's own resources of at least 10% for any mortgage that's sold as part of a security or package of loans. (Lenders could make and hold lower-down-payment loans, but not sell them as securities.)

0:00 /2:51Buffett's recipe for reform
In addition, Congress should revisit the policy allowing the Federal Housing Administration and the Veterans Administration to guarantee mortgages made with down payments of as little as 3.5% and 0%, respectively. This program made sense in the long post--World War II boom era, when house prices almost always rose and home ownership was a route to wealth. However, it may not make sense now. If those loans are continued, the government should sharply increase the insurance charged to borrowers, because residential mortgage lending is far riskier than it used to be.

2. Increase the Fear Factor. If any financial institution fails or needs extraordinary help from the government, the government should be able to claw back five years' worth of stock grants, options profits, and cash salaries and bonuses in excess of $1 million a year. That would apply to the 10 top executives, current and former, with a five-year look-back period. It would also apply to board members, present and past. (People brought in by regulators for rescues that ultimately fail would be clawback-exempt.) Anyone subject to the clawback would be permanently barred from executive positions or board seats at any institution that has federal deposit insurance or SIPC protection for brokerage customers. This provision would give executives and directors a huge incentive to make sure institutions they supervise don't take on excessive risk.

3. Expose derivatives to the light of day. Warren Buffett famously called derivatives "financial weapons of mass destruction." My colleague Carol Loomis somewhat less famously calls them "the risk that won't go away." They're both right. Simply put, derivatives are contracts whose value is derived from the value of an underlying asset. They were once relatively simple, socially useful things -- instruments that allowed a farmer to lock in the price he'd get for his wheat or an airline to know how much it would pay for jet fuel. But over the years the derivatives market has morphed into a huge, monstrous game consisting of speculation piled on speculation piled on speculation. At the end of last year there were $30.4 trillion of credit default swaps outstanding -- almost as much as the entire U.S. debt market -- according to the International Swaps and Derivatives Association. There were also $426.8 trillion of interest rate derivatives outstanding. A lot of this is double (or triple or quadruple) counting, but any way you look at it, the numbers are scary.

The market is essentially a vast black box in which no one ever knows who's got what obligations outstanding. So when problems began appearing in mid-2007, fear froze the financial system because many big institutions didn't know who was solvent and who wasn't. Regulators, lenders, and stockholders couldn't tell either.

The widely agreed-upon fix is for derivatives to be handled by clearinghouses that guarantee payment and require collateral to be posted, and for them to be traded on exchanges. That way regulators, creditors, and regular investors can see the price at which the market values them. Derivatives players wouldn't have to worry as much about whether the "counterparties" on the other side of their contracts could make good on their obligations, thus solving much of the too-interconnected-to-be-allowed-to-fail problem.

Under this system AIG wouldn't have been able to guarantee a staggering $80 billion of subprime (i.e., junk) mortgage loans without posting collateral. So even if AIG had failed -- it also had a huge problem with its "stock loan" business -- it wouldn't have required anything approaching the $180 billion bailout package Uncle Sam gave it.

4. Beef up the bankruptcy laws. In a perfect world, step 3 would solve the derivatives problem. But in the real world, lobbyists are making sure that won't happen. Inevitably the new rules will let many derivatives players get their contracts deemed "custom." Custom derivatives won't have to trade on exchanges, and may not even be subject to clearinghouses. (And, of course, the more custom derivatives there are, the happier Wall Street will be, because the profit margins on them are far larger.)

This means we have to worry about what happens when institutions holding custom derivatives fail. That forces us to fix the flaws in the bankruptcy code that made Lehman Brothers' bankruptcy much worse than it had to be. Because of changes that have crept into the code since the 1980s, Lehman's counterparties could terminate their deals and dump vast numbers of hard-to-unload positions onto the market without being subject to the "automatic stay" of bankruptcy. Chaos ensued.

Stephen Lubben, a bankruptcy professor at Seton Hall Law School, is one of the many academics who say the law needs to be changed. (Among bankruptcy mavens, it is a topic of raging debate.) "Derivatives counterparties should be treated like other secured creditors," he argues, rather than be able to seize and sell collateral without bankruptcy court permission. Secured lenders get to seize their collateral relatively quickly, but you don't get chaotic messes like the Lehman bankruptcy.

Together, steps 3 and 4 would prompt derivatives players to demand far more collateral and would make the derivatives markets far smaller and less liquid. The folks at ISDA, the aforementioned derivatives trade association, argue that forcing derivatives into clearinghouses and exchanges would introduce "excessive rigidity" into the system. And they warn that changing the bankruptcy law would have negative consequences. "Reform proposals encourage or require use of collateral, but collateral will only reduce risks if a party can use it when it matters most, when its counterparty goes bankrupt," says ISDA executive vice chairman Robert Pickel.

Call me a troglodyte, but I think we'd be a lot better off with a lot fewer derivatives, a lot more players' capital at risk, and an orderly process rather than a free-for-all when a counterparty goes broke.

5. Create a mortgage security database. One of the major problems that led to the meltdown was that it was impossible for many investors to figure out what collateral supported the mortgage-backed securities and derivatives they owned. We can solve that problem by setting up a publicly available database for all mortgage-backed securities that would include the up-to-date payment status of each mortgage in each security, and the estimated market value of each house. Investors, regulators, and creditors could use this powerful tool to do their own analysis rather than having to rely on credit-rating agencies. Such a database would help close the information gap between the big players (who have access to customized information through high-priced, high-powered services) and the rest of us.

"We could use some of the TARP money like a Super Fund and clean up financial toxic waste," says Richard Field of financial consulting firm TYI, who has been trying to get backing for years to set up such a database. There's talk in Washington of adopting the idea. Let's hope it gets done. Quickly and effectively.

6. Rein in the credit raters. A major reason for the worldwide mortgage disaster is that Moody's (MCO), Standard & Poor's, and Fitch, the big three credit-rating agencies, rated toxic waste securities AAA when they should have been rated ZZZ. Investors slavishly subservient to the ratings stocked up on this trash, to their detriment.

A widely recognized part of the problem is that the agencies are paid by the issuers of the securities, which want the highest ratings possible. But the bigger problem is that the world has become too complicated and fast-paced for the agencies' formulas to work as well as they once did. They've missed corporate debt problems, been late to downgrade European sovereign debt, and so on. When house prices began falling rather than continuing to rise, as rating formulas assumed they would, the ratings were toast.

Washington is flogging the agencies in public. But the dirty little secret is that the government relies on their ratings heavily and shows no sign of changing. Regulators use credit ratings to decide how much capital banks should set aside for securitized loans, what qualifies as good collateral under government borrowing programs, and what kind of securities retail money-market funds can own.

If nongovernment investors want to use these ratings rather than doing their own research, good luck to them. But Washington should open the market for government-sensitive ratings to the upstart raters who are paid by investors, not issuers. Let the big three raters and the upstarts compete -- on quality, speed, and track record -- for the right to have their ratings used by the government. Competition is better than oligopoly.

Much of what I'm saying is unconventional, maybe heretical. But conventional fixes haven't served us well. We can't just tinker at the margins and set up a new agency or two and expect Wall Street to give up greed. Salesmen will always be salesmen. But if we change incentives and add transparency, they'll be pitching us a less toxic product.

6 simple steps to fix the financial system: full version - May. 5, 2010

Commercial foreclosures pick up speed - Phoenix Business Journal

by Jan Buchholz Phoenix Business Journal May 21, 2010

Mesa Financial Plaza, the 17-story office tower that lights up the night sky with a neon-blue silhouette, has been noticed for trustee sale.

The 309,000-square-foot midrise at the southeast corner of Southern Avenue and Alma School Road was built in 1986 by Valley developer Conley Wolfswinkel. It now is owned by BPG Properties Ltd. of Yardley, Pa.

The $40.6 million default is just one of many that are starting to drop in the Valley. The number of defaults for loans of more than $20 million is increasing rapidly for all product types, including office, industrial, retail and large apartment complexes.

Chris Toci, executive director of the capital markets group at Cushman & Wakefield of Arizona Inc., said Phoenix is at the front end of a major crash.

“I have always felt that when the commercial levee breaks, there will be a cascade of properties that drive prices to levels that we have not seen in a very long time, if ever,” Toci said.

He describes himself as a lone voice in the wilderness, given more optimistic prognostications by other brokers. But he said borrowers with loans that are underwater “have thrown in the towel ... and are simply sending the keys back to lenders. The general public is largely unaware of this trend, because it takes so long for these properties to migrate through the system.”

He points to the Viad Tower, the first major office building to go into foreclosure during this real estate bust. The tower, at 1850 N. Central Ave., is considered a signature building for Phoenix with its unique soap-bar shape. Originally, it was the corporate headquarters for the Dial Corp.

Costa Mesa, Calif.-based real estate investment firm McCarthy Cook & Co. went into default on the Viad Tower. It was placed in the hands of a special loan service in March 2009 and is scheduled for a trustee sale May 24.

“This is a classic case of kick the can, hope and copy, and extend and pretend,” Toci said.

Because of the need for approvals from multiple corporate levels and investors, Toci sees the process in a quagmire — and that is only delaying the Valley’s recovery in commercial real estate, he said.

Toci expects it to take at least five years before market fundamentals are anywhere near what they were before the recession.

Two investment brokers with Cassidy Turley/BRE Commercial peg that time frame more in the 18- to 24-month range. Russ Warner and Brent Moser said many commercial transactions financed from 2006-07 were disasters waiting to happen.

“There were a lot of deals that shouldn’t have been done,” said Warner, a former appraiser.

He sees the same stall tactic Toci is observing, but he believes in some cases the delays are a matter of survival for vulnerable banks. If they write down the value of a loan, “that one deal could break the bank.”

By looking at other factors in the market­place, Moser is more optimistic about what’s to come.

“Home builders are making land plays. That’s the first sign of rebounding in the residential market,” he said. “We’re also starting to hear from developers about projects they want to start in late 2011 or 2012.”

As for the Viad Tower hitting the auction block, they both know of multiple parties who are interested in acquiring it.

“Light rail has changed the world, so there is good potential all along Central Avenue,” Moser said.

Mesa’s signature blue-neon midrise may be a harder sell. Although high-profile national companies have leased space there in the past, most of them have moved to Phoenix or Scottsdale.

Still, said Warner, “there will always be tenants who want to be located in Mesa. The rents will equalize, property taxes will go down and it will be sold.”

Both Mesa Financial Plaza and Viad Tower will be sold within a year, Warner predicted.

Wolfswinkel said the Mesa building will be marketable to the right investors.

“It’s a beautiful building, and anyone who owns it knows that,” he said.

It’s also had a long list of owners. Wolfs­winkel lost possession of the property in the late 1980s when the federal Resolution Trust Corp. took it back during the savings-and-loan debacle.

According to Phoenix trade publication Business Real Estate Weekly, the property’s past owners include DMB Associates Inc. in Scottsdale; local investor Dick Lund; Amerivest Properties, a Denver-based company that no longer exists; and Crescent Real Estate Equities Inc. of Fort Worth, Texas.

According to documents from the Maricopa County Recorder’s Office provided by Ion Data, a real estate research company based in Mesa, BPG assumed the $40.6 million loan from Crescent in July 2007. The foreclosure auction is scheduled for Aug. 11 with Don Miner, a partner at law firm Fennemore Craig PC, serving as trustee.

Recent foreclosures
Here’s a sampling of other recent notices of trustee sales filed at the Maricopa County Recorder’s Office with large
commercial properties as collateral:

Sonora Village United Artists
Type: Neighborhood shopping center
Address: 15656 N. Pima Road, Scottsdale
Borrower/owner: Westwood Financial Holdings
Original loan: $28.7 million
Beneficiary: CW Capital Asset Management LLC

Pima Center
Type: Office buildings
Address: Northeast corner of 90th Street and Via de Ventura, Scottsdale
Borrower/owner: PC 101 Inc.
Original loans: $22.8 million and $43.7 million
Beneficiary: Bank of America NA

Empirian on Central
Type: Apartments
Address: 4140 N. Central Ave., Phoenix
Borrower/owner: Empirian on Central LLC
Original loan: $40 million
Beneficiary: Wells Fargo Bank

Ironhorse at Tramonto
Type: Apartments.
Address: 34807 N. 32nd Drive, Phoenix.
Borrower/owner: GS Ironhorse LLC.
Original loan: $32 million.
Beneficiary: RFC CDO 2006 1 Ltd.

Airpark Design Center
Type: Office/retail/warehouse.
Address: 15551 N. Greenway-Hayden Loop, Scottsdale.
Borrower/owner: Loop 76 LLC.
Original loan: $23 million.
Beneficiary: Arizona Regional Real Estate.

Unnamed strip center adjacent to SkySong
Type: Retail.
Address: 7401-7475 E. McDowell Road.
Borrow/owner: PDG Los Arcos LLC.
Original loan: $26 million.
Beneficiary: ML Manager LLC, on behalf of Mortgages Ltd.

Commercial foreclosures pick up speed - Phoenix Business Journal

High-profile developer out of business - Phoenix Business Journal

by Jan Buchholz Phoenix Business Journal May 21, 2010

Grace Communities, a Scottsdale development firm that had several high-profile projects finished or in the works, is no longer in business.

“We shut our doors quite awhile ago,” said Ryan Zeleznak, one of the principals.

Four loans Grace obtained from commercial lender Mortgages Ltd. — to develop the Ten Wine Lofts in Scottsdale and the Hotel Monroe in downtown Phoenix, and to obtain two parcels of land in Scottsdale — are in default.

Grace also de­faulted on loans for property it purchased on the southwest corner of 44th Street and Camelback Road. Mortgages Ltd. had a second position on those loans and will not pursue settlements on them.

ML Manager LLC, the company administering Mortgages Ltd.’s loan portfolio following its Chapter 11 reorganization, has filed notices of trustee sales on all of the outstanding loans, but has postponed a few of them because of “ongoing negotiations,” according to Mark Winkleman, chief operating officer of ML Manager.

He would not elaborate on what those negotiations entail. Zeleznak would not comment, either.

The most recent notice of foreclosure was filed on a 9.7-acre plot of land near Highland Avenue and Scottsdale Road, dubbed Portales Place. Grace Communities was going to build high-end condos on the site, like downtown Phoenix’s 44 Monroe high-rise and the nearly completed Ten Wine Lofts near Scottsdale and Osborn roads.

Grace finished 44 Monroe, but failed to sell even a dozen units. In that case, the original lender was Corus Bank and the default was on an $87 million loan. The auction, which is being handled by trustee Brian Spector of Jennings, Strouss and Salmon PLC, has been delayed several times, but now is scheduled for May 28.

Grace also borrowed $27 million to restore a historic bank property down the street at Central Avenue and Monroe Street and convert it into the boutique Hotel Monroe. That property is vacant and little work was completed other than stripping the interior.

In all, Grace borrowed about $121 million from Mortgages Ltd.

High-profile developer out of business - Phoenix Business Journal

Freeport stock in meltdown along with metals - Phoenix Business Journal

by Chris Casacchia Phoenix Business Journal May 21, 2010

Share prices at Freeport-McMoRan Copper & Gold Inc. have declined steadily over the past month, taking the plunge along with the prices of precious metals.

On April 15, Freeport’s stock was trading at $84.22 per share, the highest mark in the past month. Since then, prices have dipped below $70 as volatility on Wall Street tempered investor confidence and Greece teetered on bankruptcy. The stock closed at $67.69 on May 19.

Anthony Rizzuto, an analyst with Dahlman Rose & Co. in New York, said the force behind the drop primarily concerns China and policymakers’ efforts there to control the country’s growth.

To a lesser degree, it involves European concerns and sovereign debt issues, Dahlman said. “It’s hard to tell if the volatility will continue.”

The price of copper also has declined steadily, nearly hitting $3.60 a pound April 15 and closing at $2.98 on May 19.

“Our sense that the sell-off, which has been very sustainable, probably has taken a lot out of the downside risk,” Rizzuto said. “I’m not saying all, but a good portion.”

Freeport’s first-quarter revenue was $4.36 billion, up from

$2.6 billion for the same period in 2009. Net income topped $897 million, or $2 a share, up from $43 million, 11 cents, a year earlier.

Freeport stock in meltdown along with metals - Phoenix Business Journal

Deciphering the full text of SB 1070

The Arizona Republic May. 23, 2010

"Have you read the Arizona law?"

It's a question that, with growing frequency, is cutting through the passions and politics surrounding the "Support Our Law Enforcement and Safe Neighborhoods Act," or Senate Bill 1070.

Everybody seems to have an opinion about the immigration law signed by Gov. Jan Brewer on April 24. But not everybody has actually read it.

It turns out U.S. Attorney General Eric Holder, whose Justice Department is considering legal action against Arizona over the law, had only "glanced" at it, at least as of his May 13 appearance before the House Judiciary Committee. Homeland Security
Secretary Janet Napolitano, a former Arizona governor who has said she would not have signed the bill, last week told Sen. John McCain, R-Ariz., during a hearing: "I have not reviewed it in detail. I certainly know of it, Senator."

The question about reading the bill has even been aimed at President Barack Obama, who also has not been sparing in his criticism of Arizona's law
. On Thursday, the White House confirmed Obama has indeed read the legislation, which, as amended, runs fewer than 20 pages.

Questions about reading the statute, which makes it a state crime to be in the country illegally, aren't limited to critics. No doubt many supporters of the measure have spoken out without having read it.

In response to the hue and cry over what the law actually says, The Republic is publishing the full text of SB 1070, with University of Arizona law professor Gabriel "Jack" Chin helping to decipher the legislation.

Deciphering the full text of SB 1070

Housing recovery threatened by homeowners' 'strategic defaults'

by Catherine Reagor The Arizona Republic May. 23, 2010 12:00 AM

Homeowners walking away from mortgages because they owe more than their homes are worth will make it more difficult for all borrowers to obtain loans. And a tougher lending climate could stifle sales and delay recovery of the battered Phoenix-area housing market.

That's just one take on the worst Phoenix housing market in history from a group of Arizona banking leaders approached by The Republic for a discussion on the market.

Five current and former banking executives were asked a series of questions on the causes behind the housing crash, prospects for a recovery, the notion of walking away from underwater mortgages and buying a house as a longtime home vs. a short-term investment.

Lenders have taken the brunt of the blame for most of the housing crisis and have been criticized on their efforts to work with homeowners facing foreclosure. Through a series of phone interviews and e-mail exchanges, this was their chance to respond and share their point of view on the housing market.

There is also concern that many homebuyers still see homes as speculative investments and not long-term places to live and invest in. The speculative mentality among Phoenix-area homebuyers led to the 2004-06 boom and contributed to the painful bust. Now, about 40 percent of all Phoenix-area homeowners are underwater. During the past year, more than 60,000 homes in the region have been foreclosed on.

Walking away

People abandoning houses and mortgages they can afford - or walking away, as it is now commonly known as - has become a polarizing issue between homeowners and lenders.

Thousands of Phoenix-area homeowners owe more than their houses are worth and don't want to wait as long as five to 10 years for home values to rebound. Others have unsuccessfully tried to work out loan modifications with their lender. Some believe it's a smart business decision to stop paying on an asset they can't sell for its current value. So a growing number of homeowners are considering walking away or have already done so, committing what has become known as a "strategic default."

Lenders see walking away as a broken contract. They are also concerned if enough homeowners walk away from mortgages, future mortgages will be harder to obtain for everyone as the market adjusts for added risk.

"When individuals walk away from a mortgage, there is a ripple effect that goes far beyond the immediate problem," said Bill Randall, a Phoenix resident and former president of First Interstate Bancorp. "It is likely banks and mortgage lenders will tighten credit standards."

Timothy Disbrow, manager of Wells Fargo Home Mortgage Arizona, said it's never a good idea for borrowers to miss one payment, let alone walk away if they have the ability to pay.

"Strategic defaulters hurt us all. We simply have to be able to trust that when a borrower signs their name, they will honor their commitment," said Candace Wiest, president of Avondale-based West Valley National Bank. "Massive strategic defaults will result in less credit availability. Everyone loses in that scenario."

Amy Swaney, a past president of the Arizona Mortgage Lenders Association, said "a significant number of homeowners walking away will slow the recovery."

Speculating on homes

Part of what drove the housing market down, the lenders said, was an inordinate amount of speculation on houses and irrational expectations about home values.

The speculative mindset among metro Phoenix homeowners must change, they say, to ensure a long-term recovery of the housing market.

There's been a dominant shift from long-term to short-term motivations among metro Phoenix homebuyers during the past decade. Because of the region's reliable increases in home value, people began to count on houses for quick profits.

Swaney said all Phoenix homebuyers were speculators during the boom, even if they didn't realize it.

"As home prices continued to go up, and more people had access to equity in their homes, the pool of buyers continued to grow," she said. "The loans were easy. People didn't think they were doing anything wrong as long as the market kept going up. In 2007, the declining housing market uncovered a massive web of inexperienced speculation."

Swaney said the market can't repeat that cycle or the economy won't fully recover.

Wiest said the housing-speculation problem extended into all levels of the Phoenix housing market.

"A local hairdresser in her 30s told me she owned four homes," Wiest said. "I went home and told my husband either she was an exceptional hairdresser or I was an underachiever bank president because I had no idea how she could afford four homes."

Lenders say the majority of homebuyers cannot continue to think of homes as speculative investments that yield quick returns. The quick-flip mentality that led to Phoenix's boom and bust will push back any permanent rebound in home values.

"Trading houses or viewing them as a short-term investment involves risks that may far exceed the individual ability to deal with them," Randall said. "The financial obligation (of buying a home) is usually very large in relation to the individual's net worth. The (housing and mortgage) markets are volatile. It is not appropriate to think of a home in the same way you would trade stocks."

Housing recovery threatened by homeowners' 'strategic defaults'

Deciding Whether To Rent Or Buy A House | ThinkGlink

by Ilyce Glink ThinkGlink May 13, 2010

Summary: Deciding Whether To Rent Or Buy A House

If you are thinking of buying a home, you might want to consider whether you are better off renting or buying a house. As the real estate market has changed, many would be home buyers have become home renters and many renters have decided to go and buy a home. But the decision whether to buy or rent a home can be an emotional decision but a would be home buyer or home renter should also make the financial decision whether he or she is better off buying or renting a home.

Are you trying to decide whether to rent or buy your next home?

Due to the financial devastation caused by the recent recession, more Americans seem to be thinking about renting rather than buying their next home. According Experian’s Hitwise, the number of people visiting real estate websites dropped 22 percent. But visits to home and apartment rental websites increased 45 percent.

Hitwise also found that the most popular term ranked by overall share of search clicks is “apartments for rent,” which is up 162 percent from two years ago.

According to Peggy Abkemeier, president of, whether you decide to rent or buy your next home depends on four key factors: How much you’ll pay to either rent or buy and the difference between the two; lifestyle factors; where you are in your career; and, what your long-term financial obligations will be.

1: Rent Ratio. Abkemeier says that a common way of comparing the financial decision to rent or buy your next home is to create a rent ratio for your neighborhood.

Although it sounds complicated, the math isn’t too hard: Simply take the cost to buy the home you’d want to live in and divide that number by the amount of rent you’d have to pay to rent a similar home in the same location. For example, if you’re looking at 3-bedroom, 2-bath home that costs $500,000 to buy, but you can rent a similar home in the same neighborhood for $24,000 per year, the rent ratio is about 21.

“Experts vary in opinion where the tipping point is, but most agree that it is a rent ratio of 15 to 20. The higher the ratio, the higher a spike in housing prices you’d need in future years to justify the price you’re spending to buy the property,” Abkemeier explains. So if the rent ratio is 34, then you’d probably want to rent. If the rent ratio was 13, you might want to buy.

Just remember that the rent ratio only looks at the cost of purchasing the property. It doesn’t include property taxes, insurance, maintenance and upkeep, all of which could tip the scales back toward renting, Abkemeier adds.

2: Lifestyle Factors. Where do you want to live? What kind of amenities would you like to enjoy?

If you want to live on the beach, you have to understand that the beachfront property you love, though highly sought after by other buyers and renters, may not be located in a good school district. That might be fine for you, if you’re not married with kids.

But if you’re married and are thinking about having kids, you may want to rent a beach house for a couple of years to enjoy those amenities, and then buy a house
in a great school district when your kids are old enough to need it.

3: Career Stability. These days, there’s little point in buying property if you can’t stay that home for at least 5 to 10 years. It’s possible that home prices won’t appreciate for years in some parts of the country. And even if home values do rise, it will likely be a slow rise, rather than an 80 percent stock-market-like jump.

Career stability is an important factor to consider. If you like where you are, and feel you’ll have a job there over the long run, then you might want to look for a home to buy near where you work.

But if you’re hankering for a transfer, or if your job requires that you move every few years, you might wind up losing money on a property you buy. In this case, renting makes more sense, even if the rent ratio is below 15, Abkemeier notes.

4: Long-Term Financial Obligations. The rent ratio, lifestyle and career stability might all work in favor of buying. But if you have long-term financial obligations on the horizon, you might want the flexibility a rental lease would bring.

Deciding Whether To Rent Or Buy A House | ThinkGlink

Bankers lobby to soften overhaul rules

Tribune Washington Bureau May. 22, 2010 12:00 AM

WASHINGTON - Banking and business lobbyists prepared a last-ditch effort Friday to scale back ambitious new regulations governing the financial industry, hoping to sway congressional leaders who are putting finishing touches on the legislation.

Only a few key differences exist between the bill passed by the Senate on Thursday and an earlier version approved by the House, leaving opponents little time to push for changes.

"The House and the Senate will have one more opportunity to fix this legislation, and we will be engaged," said David Hirschmann, president of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness.

The center already has waged a $3 million campaign against the legislation's proposed consumer financial-protection agency. Now, the chamber also will lobby for retaining the House's broader exemption for non-financial businesses - such as airlines, farmers and big manufacturers - from rules governing complex financial instruments known as derivatives.

The bill would require most derivatives to be traded on public exchanges or through clearinghouses.

Auto dealers will renew their campaign to win an exemption from the consumer agency's oversight, as the House bill would allow. And large Wall Street banks will continue to fight a provision in the Senate version that would force them to spin off their lucrative derivatives businesses.

"The banks are still an enormously powerful presence in Washington," said Travis Plunkett, legislative director for the Consumer Federation of America. "They're going to do everything in their power to sneak through last-minute changes behind closed doors."

Time is running out. A House and Senate conference committee is expected to iron out differences in the two versions of the legislation and have a bill ready for President Barack Obama to sign before Congress breaks for the July 4 holiday.

Bank stocks have been falling for the past month, largely on fears about the European economy but also because of predictions that more government oversight would eat into profits.

A report this week by researchers at Goldman Sachs Group Inc. said the Senate version of the legislation could cut earnings at big banks by as much as 23 percent.

"It's going to be a material impact to revenue across the board if the bill is passed as is," said Paul Miller, an industry analyst at FBR Capital.

Obama warned Thursday, however, that his administration will be vigilant in shielding the bill's tough new regulations from being watered down.

"Now, we've still got some work to do . . . and there's no doubt that during that time, the financial industry and their lobbyists will keep on fighting," Obama said. "But I will ensure that we arrive at a final product that is both effective and responsible."

The major stock indexes broke their recent losing streak and gained Friday, but shares of big banks outpaced the market overall.

Significant differences between the bills are remarkably few.

"I can't remember ever seeing two major pieces of legislation - really historic pieces of legislation - come out of the two houses so close," House Financial Services Chairman Barney Frank, D-Mass., said after he and Senate Banking Committee Chairman Chris Dodd, D-Conn., met with Obama at the White House. "It's hard for me to think that this is going to take us more than a month."

Still, industry lobbyists and consumer groups are preparing their final push to shape the final wording of the legislation. Lobbyists have an advantage because the legislation is so complicated and small revisions can have enormous impact.

"This is the time when you could probably change one-third of the bill," said a lobbyist who has worked on banking issues for decades but declined to speak publicly. "It's so esoteric that no one knows what it means, and there are hundreds of ways to twist and turn it."

One fight involves auto dealers, who were largely exempted in the House bill from oversight by the new consumer agency. Facing strong opposition from the Obama administration, they were unable to get a vote on such an exemption in the Senate.

But on Monday, the Senate is expected to approve a motion instructing its members of the conference committee to add the exemption. The motion is non-binding, but it will add pressure to include the exemption in the final bill.

Auto dealers nationwide will be calling their local senators this weekend, pushing for the exemption, said Bailey Wood, a spokesman for the National Automobile Dealers Association.

"We're still going to kick it into overdrive because there is very strong White House opposition to this," he said. "We have to convince senators it is better to side with Main Street small businesses that had nothing to do with the financial crisis
instead of the White House."

On another major issue, large banks such as Goldman Sachs, JPMorgan Chase & Co. and Bank of America Corp. stand a decent chance of removing the Senate's requirement that they spin off their derivatives businesses.

Federal Reserve Chairman Ben Bernanke and Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., oppose the requirement. Treasury Secretary Timothy Geithner has suggested that the Obama administration does not like it either.

Many bankers were relieved that the legislation was not tougher on the industry.

For example, the Senate did not include proposals for some potentially onerous provisions, such as prohibiting large banks from speculating with their own money, a practice known as proprietary trading.

Bankers lobby to soften overhaul rules

Phoenix home sales show promising trends

by Catherine Reagor The Arizona Republic May. 22, 2010 12:00 AM

April figures for existing-home sales in metro Phoenix reveal several promising shifts for those searching for signs of a housing-market recovery.

The overall number of home sales in the region continued to hover near record levels last month.

Search Valley home sales

Beneath the sales figures were other encouraging numbers:

• Foreclosures did not dominate sales of existing homes in the Valley for the first time in more than a year.

• The number of investors purchasing homes from lenders dropped.

• More buyers purchased homes with the intent of living in them.

• More buyers financed their purchases with long-term mortgages.

April sales included the last wave of first-time buyers who rushed to buy before a federal tax credit expired. Many did not want to purchase foreclosure homes.

More than 1.8 million people nationally, most of them first-time buyers, used the tax credit to purchase homes, according to early government- and housing-industry estimates. The figures haven't been broken down by state yet, but Phoenix-area real-estate agents have seen a significant increase in first-time buyers.

The return of average buyers to the market suggests more people are buying for the long haul rather than for a quick resale. The shift away from foreclosures also means more Valley homeowners were able to sell their houses last month.

"It appears foreclosures may have finally made their downward turn," said Tom Ruff, analyst for real-estate-research firm Information Market. "The number of home sales might drop now, but prices could go up."

The uptick in first-time buyers may be temporary. But the shift from a market dominated by foreclosures and speculative buying may be more lasting.

Foreclosures and pre-foreclosures in the Valley also fell in April. So far in May, the number of bank-owned home sales is down compared with April.

Ruff calculated April's buyers and sellers through an analysis of property records. Bank-owned foreclosure homes accounted for about 33 percent of all Valley home sales last month. Foreclosures accounted for more than 50 percent of Phoenix-area home sales during 2009.

These new trends could mean there are more long-term buyers vs. short-term speculators buying homes in the Valley now, which could lead to home-price increases in the future.

Here's the breakdown of metro Phoenix's 8,955 home sales in April:

• Only 650 were new-home sales, and the median price of those houses was $213,483.

• Regular sales of existing homes totaled 5,287. The median price of these houses purchased from homeowners was $150,000.

• The remaining 3,018 home sales from the tally were bank-owned foreclosures, which had an overall median price of $106,000.

• The overall median price for all homes sales was $135,000.

• About 34 percent of all homebuyers paid cash.

• About 15 percent of all homes were purchased by investors who signed real-estate documents saying they intended to rent the property to tenants. A year ago, 20 percent of all Valley homebuyers recorded as investors. The rate was 19 percent in January of this year.

• Nearly half of the 5,953 homebuyers who financed their purchase through mortgages used Federal Housing Administration loans, which are primarily obtained by first-time buyers.

Tax credit

The federal tax credit expired April 30, so most last-minute sales for people trying to beat the deadline closed last month.

First-time homebuyers were eligible for an $8,000 credit, and existing-home owners were eligible for a $6,500 credit. Buyers had to have signed contracts by the deadline to receive the credit but have until June 30 to finalize their purchases. Those lagging home sales will show up in Valley figures for May and June.

Real-estate agents say it appears that in Phoenix, first-time buyers were the biggest group to tap the tax credit because they didn't need to sell a home to buy another. But a drop in foreclosures means regular homes will be drawing more attention from buyers. More demand for non-foreclosure homes will drive up values.


Investor purchases are dropping along with the number of inexpensive foreclosure homes for sale.

Among those investors still buying homes, some have shifted to short sales, which are recorded as regular sales and fetch higher prices than foreclosure homes, real-estate agents say.

The number of actual investors in the Valley is always higher than the number tallied on real-estate documents. Some investors fail to disclose the home is not their primary residence.

During the height of the Valley foreclosure-sales boom in April 2009, more than 60 percent of all home purchases were made by investors, according to realty industry estimates. Then, there were 8,156 home sales in the region, and the overall median price was $126,000.

Vicki Cox Golder, president of the National Association of Realtors, said there has been a change in housing-market psychology. "Buyer confidence is back, and homebuyers have long-term views," said Golder, a Tucson real-estate agent. "The typical buyer plans to stay in their home for 10 years, so we've put the flipping mentality behind us."

Phoenix home sales show promising trends

Developer faces foreclosure

by Beth Duckett The Arizona Republic May. 22, 2010 12:00 AM

A developer faces foreclosure on a 2,450-acre swath of land east of Fountain Hills where 1,000 luxury homes and a resort were planned.

The Ellman Cos., doing business as Goldfield Preserve Development LLC, defaulted on a $177.1 million loan for the land northeast of Scottsdale.

A trustee sale is set for Aug. 4, a company representative said.

"With regards to the Goldfield Project, we continue to work with our lenders and partners to resolve this issue and to maximize the property's value and marketability," said Don Kile, Ellman's president of master-planned communities.

The project, called the Preserve at Goldfield Ranch, is part of the existing 5,000-acre Goldfield Ranch community flanking Arizona 87 and the Fort McDowell Reservation.

Ellman, based in Phoenix, acquired 2,200 acres for the development in 2006 for $133 million.

The difference in the loan amount includes additional land acquisition and entitlement costs, said Nicole Traynor, director of Ellman's public relations.

In 2007, the Maricopa County Board of Supervisors approved a master-plan amendment for the project despite some concerns about water supply and fire coverage. At the time, Ellman predicted groundbreaking in as little as two years.

On its website, the company said the property is slated for a resort and 1,016 single-family lots ranging from 1 to 8 acres. A Canyon Ranch spa would serve as anchor.

The outcome of the Preserve will not affect the companies' other U.S. real-estate projects, which are independently financed, operated and managed, Kile said.

That includes a 1,350-unit community in Fountain Hills.

The homes are planned on nearly 2 square miles of former state trust land in the northeastern crook of Fountain Hills.

Developer faces foreclosure

Developer awarded $47 million in lawsuit

by Luci Scott The Arizona Republic May. 22, 2010 12:00 AM

A jury in Maricopa County Superior Court has returned a verdict of $47 million in favor of an Arizona child-care-center developer who sued an Australian company for breach of contract.

The May 14 verdict arose from a lawsuit that Arizona-based RCS Capital Development filed against Australian-based ABC Learning Centres Ltd. and its U.S. subsidiary.

ABC had been the world's largest provider of child-care centers.

ABC had agreed to buy 31 child-care centers from RCS. The lawsuit
was to recover lost profits for ABC's failure to buy them.

Representing the winner were attorneys Daryl Williams and Michael Blair, partners at Baird Williams & Greer of Phoenix.

"This will probably be one of the largest verdicts in the U.S. this year," Williams said.

With interest, the judgment is expected to reach $55 million, he said.

Rick Sodja of Paradise Valley and his sister, Cheryl Sodja of Scottsdale, are principals of RCS, under which they developed child-care centers, including Tutor Time franchises in Arizona.

After RCS signed a contract with ABC in 2008, the Australian company ran into financial trouble and fell into receivership in November of that year.

"They became the Australian equivalent of Enron," Williams said. "They were taken over by some banks, who were owed in excess of a billion dollars."

The banks and receivers told the Phoenix business they weren't going to comply with the contract. "They just decided they were going to spurn any overtures toward settlements," Williams said.

ABC Australia filed a lawsuit against RCS Capital in Nevada, seeking to recover $30 million advanced for development of child-care facilities there. Last week's verdict against ABC is likely to end that lawsuit, Williams said.

ABC's attorney David Cash of Phoenix did not return calls.

Developer awarded $47 million in lawsuit

BofA: Lenders getting better on short sales

by J. Craig Anderson The Arizona Republic May 23, 2010

Hundreds of real-estate agents in Tempe on Friday witnessed a rare guest appearance by the boogeyman.

While only willing to accept partial responsibility for past misdeeds, he reassured the group gathered at the Tempe Mission Palms Hotel for a short-sale conference hosted by Distressed Property Institute LLC that he had seen the light and was mending his ways.

The boogeyman was Bank of America, represented by Matt Vernon, a personable and wholesome-looking fellow in charge of foreclosures and short sales.

His message was simple: The lending industry realizes it has done a poor job of processing short-sale applications, but don't judge it too harshly, because short sales are complicated.

Part two of the message was that banks are getting better at short sales, and Vernon presented some data to back him up.

In April, Bank of America approved 18,000 short sales, compared with just 12 short sales in November 2007, the month in which home foreclosures first showed a noticeable spike.

"The industry I work in was not set up to facilitate short-sale transactions at the scale we have to (in the current housing market)," he said. "You've got a complex transaction, with many interested parties."

Those parties often include multiple lenders, mortgage insurers, private investors and others, he noted.

Vernon admitted the banking industry was slow to assemble a short-sale bucket brigade once it was clear foreclosures were about to explode.

It has dramatically shortened the amount of time short sales take - from an average of 89 days to 52 days.

Read more:

BofA: Lenders getting better on short sales

Real Estate News

Reuters: Business News

National Commercial Real Estate News From CoStar Group

Latest stock market news from Wall Street -


Recent Comments