MLS Real Estate
This is an update on a great series by Kelly Bennett of Voice of San Diego.
First a little background: According to Kelly, in 2008 – after the bubble burst – James McConville bought distressed condos from developers in bulk, and then sold them to straw buyers at inflated prices (individuals with solid credit records who agreed to sign for the loans for a fee). McConville pocketed the difference between the straw buyer price and the bulk price – approximately $12.5 million.
McConville promised to rent the properties, and pay the mortgages from the rental income. Good luck!
This was happening in 2008.
And the update from Kelly Bennett at Voice of San Diego: A Year Later, Losses Pile Up in Complexes Ravaged by Swindle
All of the 81 condos from the Sommerset Villas, Sommerset Woods and Westlake Ranch complexes involved in the scam have been repossessed. Twenty-four have yet to find new buyers. But the other 57 have resold for prices drastically lower than the mortgages were worth, let alone the initial purchase prices.The U.S. taxpayer is paying for the mounting losses. Across the complexes, the cost to taxpayers is at least $7.8 million.
When the units were just in the beginning stages of foreclosure, it was too soon to tell whether the government-sponsored mortgage companies, Freddie Mac and Fannie Mae, had definitely purchased the shaky loans.
There is much more in the article, but this ties into another article today from Bloomberg: Fannie, Freddie Ask Banks to Eat Soured Mortgages
Fannie Mae and Freddie Mac may force lenders including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.That’s the estimate of Oppenheimer & Co. analyst Chris Kotowski, who says U.S. banks could suffer losses of $7 billion this year when those loans are returned and get marked down to their true value.
Click on graph for larger image.
Kelly provided me with this graphic on the San Diego swindle. This shows the lenders that were swindled. Since most of these loans were sold to Fannie and Freddie, there is a good chance the loans will be pushed back on the lenders – if they still exist. We know JPMorgan is still around!
More from Bloomberg:
The banks have to buy back the loans at par, and then take an impairment, because borrowers usually have stopped paying and the price of the underlying home has plunged. JPMorgan said in a presentation last month that it loses about 50 cents on the dollar for every loan it has to buy back.
The losses will be much higher than 50 cents on the dollar on these loans.
Realpoint's latest report on commercial real estate is a doozy (PDF). You couldn't get a more sobering readout with a shower and a quart of hot coffee.
In January 2010, the delinquent unpaid balance for CMBS [Commercial Mortgage-Backed Securities] increased by another $4.3 billion, up to $45.94 billion from $41.64 billion a month prior. The overall delinquent unpaid balance is up 326% from one-year ago (when only $10.79 billion of delinquent unpaid balance was reported for January 2009), and is now over 20 times the low point of $2.21 billion in March 2007.
Overall, the total unpaid balance… for the January 2010 remittance was $797.3 billion… Both the delinquent unpaid balance and delinquency percentage over the trailing twelve months are… clearly trending upward.
The total balance of loans in Foreclosure and REO increased for the 27th straight month to $9.64 billion in January 2010 from $9.34 billion in December 2009 and $8.78 billion in November, despite ongoing liquidation activity. The chart also shows the rapid growth of loans reflecting 90-day delinquency in the past 12 months, transitioning swiftly from 30-day defaults into more distressed levels on a monthly basis in 2009, thus supporting our use of such as an early indicator of workouts to come for 2010.
Put simply: brace for more pain in the commercial real estate space.
Well, residential real estate must be improving, right? Not exactly. The following Blytic graphs depict the real estate price index (RPX) in various metro areas since the year 2000.
Here's the graph of home prices in Phoenix, Arizona. Gee, that home-buyer tax credit didn't really work, but at least he was historic, right, Melvin?
Say, Las Vegas is hopping.
Gun-free Chicago — my kind of town. Except for the hundreds of murders each year, thanks to the insane policies of Mayor Daley and the rest of the Democrat machine.
Miami – whyamee?
Mayor Kilpatrick (D-umb) and Governor Granholm (D-umber) certainly worked wonders in Detroit.
At least the masterful leadership in its city and surrounding counties — as well as ultra-careful land use policies — saved Atlanta from… oops.
Thankfully, the Obama administration has created or saved over ninety million green collar jobs. Secretary of the Treasury Tim Geithner's behavior has been beyond reproach. And the American Recovery and Reinvestment Act has brought much-needed tax relief for small businesses and 95 percent of all working families.
Thank heavens for President Obama and his crack staff of economic advisers who have brought so much real world experience to their current roles. If it weren't for them, I'm not sure what kind of shape this country would be in.
Hat tip: Mish.