Tag Archives: investing

Foreclosure Activity Up 53% Over June 2007

Default notices, auction sale notices and bank repossessions were reported on 252,363 U.S. properties during June 2008, a 3 percent decrease from the previous month but still a 53 percent increase from June 2007, according to the latest RealtyTrac Foreclosure Market Report.

The report also shows that one in every 501 U.S. households received a foreclosure filing during the month.

“June was the second straight month with more than a quarter million properties nationwide receiving foreclosure filings,” said James J. Saccacio, chief executive officer of RealtyTrac. “Foreclosure activity slipped 3 percent lower from the previous month, but the year-over-year increase of more than 50 percent indicates we have not yet reached the top of this foreclosure cycle. Bank repossessions, or REOs, continue to increase at a much faster pace than default notices or auction notices. REOs in June were up 171 percent from a year ago, while default notices were up 38 percent and auction notices were up 22 percent over the same time period.”

Nevada, California and Arizona continued to document the three highest state foreclosure rates in June.  Florida, Michigan, Ohio, Colorado, Georgia, Indiana and Utah were other states that made the top ten.

For the third month in a row, California and Florida cities accounted for nine out of the top 10 metropolitan foreclosure rates among the 230 metropolitan areas tracked in the report.

RealtyTrac noted that “Foreclosure filings were reported on 8,713 Nevada properties during the month, up nearly 85 percent from June 2007, and one in every 122 Nevada households received a foreclosure filing — more than four times the national average.”

“One in every 192 California properties received a foreclosure filing in June, the nation’s second highest state foreclosure rate and 2.6 times the national average.”

“One in every 201 Arizona properties received a foreclosure filing during the month, the nation’s third highest state foreclosure rate and nearly 2.5 times the national average. Foreclosure filings were reported on 12,950 Arizona properties, down less than 1 percent from the previous month but still up nearly 127 percent from June 2007.”

“Foreclosure filings were reported on 68,666 California properties in June, down nearly 5 percent from the previous month but still up nearly 77 percent from June 2007. California’s total was highest among the states for the 18th consecutive month.”

“Florida continued to register the nation’s second highest foreclosure total, with foreclosure filings reported on 40,351 properties in June — an increase of nearly 8 percent from the previous month and an increase of nearly 92 percent from June 2007. One in every 211 Florida properties received a foreclosure filing during the month, the nation’s fourth highest state foreclosure rate and 2.4 times the national average.”

“Foreclosure filings were reported on 13,194 Ohio properties in June, the nation’s third highest state foreclosure total. Ohio’s foreclosure activity increased 7 percent from the previous month and 11 percent from June 2007. The state’s foreclosure rate ranked No. 6 among the 50 states. Other states in the top 10 for total properties with filings were Arizona, Michigan, Texas, Georgia, Nevada, Illinois and New York.”

“Seven California metro areas were in the top 10, and the top three rates were in California: Stockton, with one in every 72 households receiving a foreclosure filing; Merced, withone in every 77 households receiving a foreclosure filing; and Modesto, with one in every 86 households receiving a foreclosure filing. Other California metro areas in the top 10 were Riverside-San Bernardino at No. 5; Vallejo-Fairfield at No. 7; Bakersfield at No. 8; and Salinas-Monterey at No. 10.”

“The top metro foreclosure rate in Florida was once again posted by Cape Coral-Fort Myers, where one in every 91 households received a foreclosure filing — fourth highest among the nation’s metro foreclosure rates. The foreclosure rate in Fort Lauderdale, Fla., ranked No. 9. LasVegas continued to be the only city outside of California and Florida with a foreclosure rate ranking among the top 10. One in every 99 Las Vegas households received a foreclosure filing in June, more than five times the national average and No. 6 among the metro areas.”

“Metro areas with foreclosure rates among the top 20 included Phoenix at No. 12, Detroit at No. 13, Miami at No. 15 and San Diego at No. 17”

RealtyTrac does not expect foreclosure activity to ease up until 2009.

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Real Estate Values Per Square Foot Down More than 20% in Six Major Markets

Real estate prices continue to fall in most markets, according to Radar Logic Incorporated, a real estate data and analytics company that calculates per-square-foot valuations.

Among the key findings of the latest report from Radar Logic:

  • The broad housing slump continued as consumers showed persistent lack of confidence and difficulty in financing home purchases.
  • April 2008 continued to exhibit price per square foot (PPSF) weakness compared to last year in almost all markets. One MSA showed net year-over-year PPSF appreciation, one was neutral, and 23 declined.
  • The Manhattan Condo market showed a 3.6% increase in PPSF year-over-year coupled with an increase in recent transactions despite a modest decline of 0.7% in month-over-month prices.
  • Charlotte’s increase of 1.5% in year-over-year PPSF moved its rank among the 25 MSAs to number 1. This represents an increase over the 0.1% year-over-year PPSF appreciation last month.
  • Columbus showed year-over-year PPSF appreciation of 0.2% for April 2008, which is an increase from last month’s year-over-year decline of 4.3%.
  • New York declined 3.0% year-over-year in April 2008, its second decline in Radar Logic’s published history (beginning in 2000).
  • Sacramento, the lowest-ranking MSA, showed a 31.7% decline from April 2007, which is consistent with last month’s decline of 30.6%.

 The ten biggest declines in per-square-foot values from last year were in these markets:

Sacramento (-31.7%)

Las Vegas (-29.9%),

San Diego (-28.1%)

Phoenix (-25.6%).

Los Angeles/Orange County (-23.4%).

Miami (-22.4%).

St. Louis (-19.8%).

San Francisco (-19.7%).

Tampa (-16.6%).

Detroit (-16.1%).

You can read the full Radar Logic report here.

Major Law Firm Creates “Distressed Real Estate” Section as Crisis Deepens

In what could be a new and significant trend in American legal practice — and a sign that the real estate crisis is expanding — the prestigious Philadelphia-based law firm Ballard Spahr Andrews & Ingersoll LLP has announced that it is establishing a “distressed real estate” section. 

The firm’s “Distressed Real Estate Initiative” will involve at least 16 core lawyers in ten offices throughout the country, including those in Mid-Atlantic and Western locations hardest hit by the housing bust and the mortgage crisis, including Los Angeles and Las Vegas.

The purpose of the section, according to the firm, will be “to provide representation in acquisition, restructuring and bankruptcy matters.”

 “In this period of turmoil in the financial markets and economic uncertainty, new real estate opportunities and challenges present themselves,” said Michael Sklaroff, chair of Ballard’s Real Estate Department. “We stand ready to serve clients with respect to existing positions and also in assisting them in acquisitions and debt and equity investments in troubled projects.”

Ballard Spahr Andrews & Ingersoll was founded in 1886 and now employs more than 550 lawyers in twelve offices located throughout the mid-Atlantic corridor and the western United States.

When there is blood in the water, the sharks will appear.

State of Washington Fines Countrywide for $1 Million for Discriminatory Lending — Will Seek to Revoke Countrywide’s License to Do Business in State

Washington Governor Christine Gregoire today announced plans by her state to fine Countrywide Home Loans $1 million for discriminatory lending.

In addition, the company will be required to pay more than $5 million in back assessments the company failed to pay.

Gregoire also announced the state is seeking to revoke Countrywide’s license to do business in Washington for its alleged illegal activity.

Joining Gregoire at today’s announcement was Deb Bortner, director of consumer services at the Washington state Department of Financial Institutions (DFI), and James Kelly, president of the Urban League of Metropolitan Seattle.

“The allegation that Countrywide preyed on minority borrowers is extremely troubling to me,” Gregoire said. “And I hope to learn eventually just how much this may have contributed to foreclosures in our state. The allegation offers evidence that Countrywide engaged in a pattern to target minority groups and engage in predatory practices.”

“That’s why we intend to bring the full weight of the state on Countrywide to rewrite home loans for minority borrowers who may have been misled into signing predatory mortgages,” the governor noted. “My job is to protect hard-working Washingtonians, and protect them we will.”

DFI is required to examine every home-lender licensed in the state of Washington. The agency conducted its fair lending examination of Countrywide last year. At that time, DFI looked at roughly 600 individual loan files and uncovered evidence that Countrywide engaged in discriminatory lending that targeted Washington’s minority communities. The agency also found significant underreporting of loans during its investigation.

“The Urban League is seeing far too many families caught up in the mortgage crisis who are being steered into bad loans,” stated James Kelly. “Today’s announcement from the governor is consistent with her message of protecting Washingtonians from national mortgage instability.”

DFI sent Countrywide a statement of charges on June 23, notifying the company of the fine and the back assessments the state plans to pursue.  Washington says that the investigation continues.

We have written on the disproportionate impact that the mortgage meltdown and housing crisis has had on minorities.

Washington’s action against Countrywide comes on the heels of lawsuits for fraud, deception, and unfair trade practices filed against Countrywide by the states of Illinois, California, and Florida.

 

Greed, Power and Sex: Con-Artist with “Vatican” Connections Indicted for Scamming the Rich and Famous

Here’s a story about greed, power and sex that’s a mixture of The Da Vinci Code, Bonfire of the Vanities, Moliere’s Tartuffe and Herman Melville’s The Confidence Man

It is about a scam and a scammer.

We’ve written about scams and how to avoid them

We don’t like scammers, especially those who prey on the desperate and the vulnerable, such as people facing foreclosure. 

But sometimes a scammer is so outrageous, so inventive, so over-the-top, and his victims so well-heeled and incredulous, that we have to admit at least an ambivalent admiration.

One such scammer is Raffaello Follieri, one of the very few scammers we’ve seen who deserves the name con-artist.

Follieri’s story reads more like a novel than a crime report.

For months, Americans who were in-the-know knew Follieri as a suave and sophisticated Italian businessman, real estate mogul, socialite, philanthropist, and Vatican representative.

He was none of these, except Italian.

Using charm, good looks, unbelievable gall, and a network of gullible and greedy New York socialites, Washington insiders and Hollywood A-list connections, Follieri moved easily in exclusive circles of money, power, and glamor. He lived in a $40,000 a month Fifth Avenue apartment and travelled the world, going to parties, conferring with the Pope (he said), and receiving awards for his generosity. 

Among those who fell under Follieri’s spell was actress Anne Hathaway.

Another was billionaire entrepreneur Ron Burkle, Burkle’s investment business Yucaipa Companies LLC, as well as Burkle’s friend, former President Bill Clinton.

Then the scam collapsed.

According to the New York Times,  “Raffaello Follieri, from San Giovanni Rotondo on the spur of Italy’s boot, is alive and kicking in his $40,000-a-month duplex on Fifth Avenue. Age 29, he used empty claims of church ties to befriend Douglas Band, a top aide to Bill Clinton. Band then smoothed the way to Clinton’s moneyed entourage, including the California billionaire Ronald Burkle.”

“Mr. Follieri received an onstage thanks from Mr. Clinton after pledging $50 million to the Clinton Global Initiative. The money has not been paid.”

“Mr. Follieri’s business cachet — his link to the Catholic Church — was contrived, the government said. It consisted of an administrative employee at the Vatican whom he paid.”

“Mr. Follieri also hired a relative of a former Vatican official as well as his own father, claiming that his father had a special relationship with the Vatican. In an apparent effort to build ostensible ties to the church, Mr. Follieri also met with clergy and traveled with a monsignor.”

In another story, the Times further explains that “Attractive and charming, [Follieri] rapidly moved into the world of billionaires and political figures. His entree was helped when he met and befriended Douglas Band, a top aide to Bill Clinton who brought Mr. Follieri into contact with the former president and Mr. Burkle.”

“That relationship birthed the unhappy union of Burkle’s Yucaipa investment operation, of which Clinton is a senior adviser, and the Follieri Group in a venture to acquire Catholic Church property Follieri said he’d get on the cheap.”

“From mid-2005, Burkle plowed $55.6 million into this enterprise, only to conclude Follieri was devoting a chunk of it to good living. A suit filed by Yucaipa in Delaware in May contends Follieri has been ‘systematically misappropriating the assets’ to indulge in ‘massive charges for five-star lodging’, ‘dog care’ and ‘inappropriate jet travel’ for himself and ‘his actress girlfriend’.  That’s Anne Hathaway, of The Devil Wears Prada.”

Burkle’s lawsuit against Follieri was dismissed after Follieri agreed to pay back more than $1.3 million.

Then, last week, Follieri was arrested in New York and charged with 12 counts of fraud and money laundering.  He could get life in prison.

The charges against Follieri include:

  • Six counts of wire fraud and each count carries a maximum sentence of 20 years in prison.
  • Five counts of money laundering with each count  carrying a maximum sentence of 20 years in jail.
  • One count of conspiracy to commit wire fraud, which carries a maximum penalty of 5 years behind bars.

According to the press release from the U.S. Attorney’s Office, “From June 2005 through June 2007, FOLLIERI ran a fraudulent real estate investment scheme, falsely claiming that he had close connections with the Vatican that enabled him to purchase Catholic Church properties in the United States at a substantial discount. FOLLIERI claimed that the Vatican formally appointed him to manage its financial affairs and that he met with the Pope in person when he visited Rome, Italy.”

“In reality, FOLLIERI’s connections consisted of an administrative employee at the Vatican who was paid by FOLLIERI; FOLLIERI’s hiring of a relative of a former Vatican official; meetings with clergy, FOLLIERI’s travels with monsignors; and a reporter for a news publication in Italy. None of these connections entitled FOLLIERI to purchase Church real estate at below-market rates.”

“Based on his fraudulent representations about his ties to the Vatican, FOLLIERI was able to access and misappropriate hundreds of thousands of dollars in investor money to live a luxurious lifestyle, including expensive restaurants and clothes;dog walking services; an opulent apartment in Manhattan that leased for approximately $37,000 per month, overlooked Rockefeller Center, and had views of Central Park; medical expenses for his girlfriend at the time and his parents,including a “house call” by FOLLIERI’s physician which cost privately chartered airplanes to various locations around the world.”

“In addition, FOLLIERI stole money from an investor by falsely claiming, among other things, that FOLLIERI needed money for an office in Italy that did not exist, and claimed that he spent over $800,000 for “engineering reports” relating to real estate that did not reflect engineering work and were almost worthless. FOLLIERI caused hundreds of thousands of dollars in fraudulently obtained proceeds to be wired to a bank account in Monaco that he controlled in order to hide and conceal the source and control of the funds. From late 2006 through early 2007,FOLLIERI’s scheme started to unravel, and FOLLIERI’s principal investor cut its ties to FOLLIERI and fired him.”

The Times reports that “Judge Henry B. Pitman set bail at $21 million, to be secured by $16 million in cash and property and guaranteed by five financially responsible persons. Mr. Follieri had to surrender all travel documents and was ordered confined to his home in Manhattan with the exception of legal, religious and medical needs. Any trips must be made with an electronic-monitoring device.”

And Anne Hathaway has gotten smart and is no longer taking his phone calls.

 

Home Prices Slip Again in Biggest Fall on Record

Home prices in 20 U.S. metropolitan areas fell in April 2008 by the most on record.

The Case-Shiller Index of 20 large cities for April 2008 shows housing price declines are accelerating, and are now falling at a rate of 15.3% from last year’s levels.

The report also showed that home prices fell 1.4 percent in April from a month earlier after a 2.2 percent decline in March.

There’s one bit of “good” news in the report: home price declines were less than expected.  According to economists surveyed by Bloomberg News, the index was forecast to fall 16 percent from a year earlier.

Not surprisingly, the housing bust continues to be most severe in previous boom areas in the West and Florida. 

Here are the markets where prices are falling fastest:

Las Vegas: -26.8%
Miami: -26.7%
Phoenix: -25.0%
Los Angeles: -23.1%
San Diego: -22.4%
San Francisco: -22.1%

Average of 20 large cities: -15.3%

The decline in home prices appears to be spreading.  Chicago showed a 9.3 percent decline and prices in New York City declined by 8.4 percent.  Charlotte, North Carolina, showed a decline for the first time.

According to Bloomberg.com, “One bright spot in the report was that more cities showed a gain in prices in April compared with the previous month. Houses in eight areas rose in value, compared with just two in March. Month-over-month gains were led by Cleveland and Dallas.”

 

More Housing Blues — U.S. Homeownership in Sharp Decline as Housing Crisis Forces More Families into Rentals

Even in the midst of the most serious housing and foreclosure crisis since the 1930s, the United States is still a nation of homeowners not renters. 

But recent data released by the U.S. Census Bureau show that Americans are now renting their living spaces at the highest level since 2002, and the percentage of households headed by homeowners has suffered the sharpest decline in 20 years

Households headed by homeowners fell to 67.8 percent from 69.1 percent in 2005. By extension, the percentage of households headed by renters increased to 32.2 percent, from 30.9 percent.

According to the New York Times, these figures “while seemingly modest, reflect a significant shift in national housing trends, housing analysts say, with the notable gains in homeownership achieved under Mr. Bush all but vanishing over the last two years.” 

“Many of the new renters, meanwhile, are struggling to get into decent apartments as vacancies decline, rents rise and other renters increasingly stay put. Some renters who want to buy homes are unable to get mortgages as banks impose stricter standards. Others remain reluctant to buy, anxious that housing prices will continue to fall.”

“We’re not going to see homeownership rates like that (the 1990s and the early 2000s) for a generation,” said Mark Zandi, the chief economist at Moody’s Economy.com.

“The bloom is off of homeownership,” said William C. Apgar, a senior scholar at the Joint Center for Housing Studies at Harvard University who ran the Federal Housing Administration from 1997 to 2001.  Apgar said the Joint Center had predicted an increase of 1.8 million renters from 2005 to 2015, given expected population trends. Instead, they saw a surge of 1.5 million renters from 2005 to 2007 alone. In the first quarter of this year, 35.7 million people were renting homes or apartments.

Zandi said minority and lower-income homeowners had been hardest hit. Nearly three million minority families took out mortgages from 2002 to the first quarter of this year. Since minority families were more likely to receive subprime loans, economists believe these families account for a disproportionate share of foreclosures.

As we’ve noted before, the collapse of the housing market and the rise in foreclosures have created an ideal market for apartment owners, especially in economically depressed regions.

As the demand for rental housing has increased, so has the cost of renting.  Nationally, rents are up about 11 percent from 2005.

Christopher E. Smythe, the president of the Northeast Ohio Apartment Association, which represents landlords in the Cleveland area, said the collapse of the housing market had improved the economic climate for apartment owners.

“Our apartment traffic is up, people are renting again and occupancies are up,” he said in a letter to members this year.

The Times also reports that in high-end markets like Los Angeles, the slump in the housing market has begun to push up vacancies as condominiums are converted into rentals.

On the other hand, “those new apartments are often out of reach of struggling families. And since many owners of rental properties are also going into default, the foreclosure wave has resulted in fierce competition for affordable apartments in some cities.”

In other words, the housing crisis is hitting the most economically vulnerable families the hardest. 

As we’ve discussed in an earlier post, minorities have been the most seriously affected by the subprime crisis and the bursting of the housing bubble.  Not surprisingly, the Census Bureau data shows that the percentage increase in renter households from 2005 to 2008 was nearly twice as high for Black families than for Whites.

We’re reminded of the old Billie Holiday song, God Bless the Child, written at the end of the Great Depression:

Them that’s got shall get
Them that’s not shall lose
So the Bible said and it still is news
Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own

Yes, the strong gets more
While the weak ones fade
Empty pockets don’t ever make the grade
Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own