Land bank proposal deserves more funds

San Diego Foreclosure & Real Estate News

Article Abstract: With San Diego foreclosure rates continuing to increase many are asking for help. With the Land Bank figures just released, many consider the amount to be insufficient to properly assist homeowners facing foreclosure in San Diego. On the positive side, the Land Bank has continued to provide affordable housing, a scarcity within the San Diego area. The proposals will also aid San Diego banks unload some of their foreclosure properties as well. Full article below.

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After two years of declining home prices and rising foreclosures, Capitol Hill is finally churning out proposals that are – nominally at least – aimed at dealing with the Great American Mortgage Crisis.

But if a bill that came out of the Senate last week is any indication, it seems that our friends in Washington are much more interested in helping out the businesses that created the mess than distressed homeowners who are frantically trying to pay their bills before their homes get taken away from them.

The biggest item on the ticket provides $6 billion in tax relief for businesses that are losing money from the downturn. That's a little more than ironic, since some of the biggest corporate losses right now are at Wall Street investment banks that played such an active role in creating the crisis.

In the meantime, one of the proposals that could have been most useful in the nation's foreclosure-ravaged neighborhoods was gutted. When the bill was first floated in the Senate, it set aside $10 billion to help community groups and municipalities build so-called land banks, which would buy defaulting or foreclosed-upon homes so they wouldn't remain vacant or uncared for.

In a compromise to gain Republican support for the proposal (the Republicans also pushed for the tax breaks), the Senate agreed to slash that proposal to $4 billion – $2 billion less than the tax break for corporations. And that's bad news for places like San Diego County, which have been hoping for government funding to cope with the rising wave of foreclosures.

“Four billion dollars is not going to do a whole lot,” said Norm Miller, real estate specialist at the University of San Diego.

“I hate to say it, but this proposal seems more like public relations than an actual attempt at a solution,” said Timothy A. Canova, who teaches international economic law at Chapman University in Orange.

Canova said the land bank program and a $10 billion program to establish a bond authority to refinance subprime mortgages were the only pieces of the proposal that seemed directly aimed at resolving the crisis – and they're woefully inadequate.

“If you put them both together, they amount to $14 billion, which is a drop in the bucket compared to a problem that could run into the trillions of dollars,” he said.

Jim Bliesner, director of the City-County Reinvestment Task Force in San Diego, laughed out loud when he heard the amount of money the Senate had earmarked.

“Four billion dollars is almost a joke,” said “It was one of the few things Congress could have done with those homes to be of significant benefit to local communities. And it had potential for returns.”

Over the past few months, Bliesner has been pushing to create a land bank – either as a nonprofit or government agency – that would aim to buy homes valued at $400,000 or less that have been on the market for six months or more. His goal is to sell them to people who have long been priced out of the San Diego market.

Land banks have a dual purpose. They can help create more affordable housing, since the land bank typically sells its properties at low prices. That would be useful in San Diego, which has long had a dearth of affordable housing. And they are designed to help prevent urban blight, which tends to grow around vacant homes. In general, vacant homes tend to drag down the property values of the entire neighborhood, so it's to everyone's benefit to get a new owner in.

“It would be like turning lemons into lemonade,” Bliesner said.

Bliesner has been trying to interest banks, credit unions and savings and loans in the project – which he envisions costing $40 million to $50 million – but in this tight credit environment, he hasn't met with much success.

“Banks can benefit from getting these properties off their balance sheets,” he said. “When a bank forecloses on a property, they have to increase their reserves in an amount equal to what they just wrote off. If someone else buys the property, they can reduce their reserves.”

On the other hand, given the current state of the banking industry, few banks are eager to jump back into the property market. So Bliesner is also applying for grants from government agencies and nonprofits.

Hoping that the feds would step in, he recently spent some time in Washington trying to get politicians to fund land bank programs. But $4 billion – which sounds like a lot of money to you or me – is actually pretty small when you divvy it up among a nation of municipalities hit by foreclosures.

Bliesner said the money included in the Senate bill will probably be no help at all to San Diego.

“So many communities throughout the nation will be competing for the money that nobody is going to fare well,” he said. “In San Diego's case, we'll be up against the Central Valley, Ohio and Florida, where the money's needed a lot more.”

Since San Diego County was one of the first regions to lead the country into the mortgage crisis, we tend to think that the problem is bigger here than elsewhere. In the first two months of this year alone, roughly 3,700 notices of default were filed in San Diego County and 3,400 properties were foreclosed upon, according to RealtyTrac, a firm in Irvine that monitors property transactions.

But those figures – which have jumped nearly 200 percent in the past year – didn't even land us in the top 25 markets in the country when ranked by foreclosure rates. In California alone, 15 regions ranked ahead of us, led by Stockton, Modesto, Merced and Riverside-San Bernadino. That suggests that they will likely be among the first ones to get to the trough for government aid.

Even though Bliesner was hoping that the feds might do more for us, he's not surprised that they aren't. “It's very difficult for the federal government to address local needs,” he said.

 

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Orange County Foreclosure & Real Estate News

Article Abstract: While bids at the Ladera Ranch foreclosure auction were starting off as low as can be, the highest bid was set at 705,000 almost a $500,000 discount. What many foreclosure seekers don't know is the bid still has to be accepted by the lender. Many times the bank or lender will accept low offers depending on how long the house has been foreclosed or due to other real estate market factors. However, there are instances where the lender will reject a bid if they think the house has a greater value, even due to the nature of the foreclosure market. Read more below.

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What really happens at foreclosure auctions? I've posted an latimes.com video and a photo gallery that take you inside the foreclosure auction staged last week by DoveBid and Catalist Homes at the Fairplex in Pomona.

We focused on the bidding for the Orange County house at left: 3 Magnolia Drive in Ladera Ranch, probably the nicest house of the 75 homes that went up for auction. Four bedrooms, 3 bathrooms, it sold for $1.2 million in 2005, but in this market was put up for auction with a scheduled opening bid of just $429,000. Because the opening bid was so low, there was a spirited bidding war for the home.

I'd like to think the video is worth watching for the surprise ending -- which itself is an education in how foreclosure auctions work. Those of you who can't wait can click on the link below and I'll explain what happened.

Here's what happened: The winning bid for this home came in at $705,000. Remember, the bidder agrees to pay an additional 5% premium to the auction companies. So the total bid was $740,000 -- a 38% discount from the peak sales price of $1.2 million. However, the bank or lender that owns the home reserves the right to reject the high bid as too low, and that is what happened here.

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More about foreclosure auctions. If you are new to the foreclosure investing industry and want to learn more about the California foreclosure auction processs- visit the Foreclosure Learning Center. This page will give you foreclosure buying tips from scouting out the right foreclosure to properly bidding on a foreclosure at auction. The Learning Center also provides information for those facing foreclosure. If you are facing foreclosure, get familiarized with the California foreclosure laws.

 

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Around California:

Lake Tahoe Foreclosure News

Foreclosures, pre-foreclosures up in South Lake Tahoe, El Dorado County

Wendy Schultz, The Mountain Democrat, Tahoe Daily Tribune

As the volume of foreclosures grows daily, up 57 percent this January from January 2007, the foreclosures on homes in South Lake Tahoe and El Dorado County grow as well — fortunately not as seriously as in other parts of California.

A search today by the Tahoe Daily Tribune has found that currently there are 206 homes in South Lake Tahoe that are either in active foreclosure or pre-foreclosure, according to foreclosure.com. In the past 30 days 24 homes have been foreclosed on, while 182 homes sit in pre-foreclosure.

On the West Slope as of the middle of February there were approximately 128 homes that have been foreclosed on, slightly fewer than reported on Foreclosures.net for the month of January, with El Dorado Hills and Placerville being the areas of highest concentration.

The new Economic Stimulus plan signed into law by President Bush on Feb. 13 includes a provision for raising the limit on the amount of insured single-family home loans from 87 percent to as much as 175 percent of the loan, depending on geographical area. For Freddie Mac and Fannie Mae conforming loans the limits would increase from $417,000 to $729,750. In less expensive markets the increase in loan limit will be less.

'We're looking at the plan and wondering if it will just delay relief to homeowners or really improve it,' said Kathie DeBord, Board of Directors treasurer for the El Dorado County Association of Realtors. 'Lenders in the past haven't wanted to work with homeowners about loan payments, but I think it's going to be a lot more user-friendly since there is an increasing amount of inventory on the books for the big seven lenders.'

DeBord said she thinks the new loan limits could give homeowners an opportunity to clean up their finances and encourage people to stay in their homes rather than to upgrade and move.

'If people can refinance their homes and clean up existing second mortgages and consolidate their outstanding debt, they'll tend to stay put and wait for things to settle. New buyers will have much bigger buying power because they'll qualify for cheaper loans and more money,' she said.

Her advice to people struggling to make payments is to talk to their lender and tell them the situation.

'See if they will rewrite the loan. With the president's initiation of new directives, they may be more open to working with you,' said DeBord.

How the new loan limits will be implemented in El Dorado County depends on whether the county is lumped in with the greater Sacramento area market or in another market.

'No one knows yet how it will be combined,' said DeBord, ' but there is some urgency - this plan ends on Dec. 31, 2008. It will be a temporary solution but right now we'll take anything we can.'

As for the million dollar-plus homes in Serrano in El Dorado Hills, DeBord said the highest number of homes ever sold in Serrano in a month was 10 and they are averaging selling two to four homes each month in Serrano now.

'The outstanding inventory is about half of what it was because builders stopped building the spec homes and the custom homes are doing fine,' she said.

The next two months are traditionally shopping months for home buyers, according to DeBord, with May typically being the biggest closing month of the year for El Dorado County.

'I still think we'll have a good spring,' said DeBord.

— Tahoe Daily Tribune Web Editor Jeff Munson contributed to this report.

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