Saturday, March 17, 2007

High-Cost Home Loans More Common in Pr. George's -
This is a troubling report. The article discusses several different explanations.
Residents of majority-black Prince George's County are much more likely to be saddled with high-interest home loans than residents of predominantly white areas in the rest of the region, placing them at greater risk of financial distress and foreclosure. About 43 percent of Prince George's County residents who refinanced their homes in 2005 received high-cost loans, compared with 24 percent of homeowners regionwide, according to Federal Reserve data compiled for The Washington Post by the Consumer Federation of America. Similarly, 43 percent of people buying homes in the county in 2005 financed their purchases with high-cost loans, compared with 20 percent regionally...People can find themselves with high-cost loans for many reasons. Prince George's County is the nation's wealthiest majority-black jurisdiction, and housing costs there are high. If homeowners also have high car payments, student loans or credit card balances, that could raise their debt-to-income ratio, forcing them into costly loans. Overspending or paying bills late can also hurt people's credit.

AHRC "Editorial": HOA HACK!!
Here is a vague "editorial," whatever that means, from the AHRC site claiming (without any evidence offered) that AHRC was down because it was "hacked" by person or persons unknown. But the author of the piece has a whole list of possible culprits to speculate about:

On January 18th, 2007, the homeowner advocate's American Homeowner Resource Center (AHRC) website was hacked into and shut down. The spell binding mystery and intrigue of this 'HOA Hack' adds a new twist and chapter to what have been referred to as the HOA life dramas: "The Stepford Lives" and "As the HOA Turns". The tales of "who dunnit" are many - pointing the finger to greedy HOA lawyer groups, angry political opposition, corrupt property managers, a rival homeowner advocate green with envy over AHRC's growth, HOA "bored of neighbors", and even bored cyber sleuths.
The Star Beacon; Ashtabula, Ohio - Charges filed against condo management firm co-owner
More on the Ohio property management firm scandal:

SAYBROOK TOWNSHIP - - The co-owner of the firm that managed Mariners Point Condominium Association has been charged with one count of mail fraud. Kathleen DeSalvo, who co-owned MultiVest Management Inc. in Willoughby with her husband, James, is accused of transferring funds from MultiVest's clients' bank accounts and depositing the funds into MultiVest's accounts since 2000. She is also accused of creating false bank statements which reflected inflated balances in the clients' accounts. Kathleen DeSalvo allegedly provided the false statements to the accounting department which unknowingly created false financial statements that were mailed to MultiVest's clients each month, according to the information filed against her by the U.S. Department of Justice. No charges have been filed against James DeSalvo yet.

Friday, March 16, 2007

Water-use restrictions start next week in South Florida: South Florida Sun-Sentinel
I think this will be the Summer of the Brown Grass in the sunshine state. All those common area open spaces will look like one of those orange pool tables they used to sell at Sears.

City inspectors, armed with citation books, will cruise the streets ready to pounce if they find a sprinkler operating illegally. Neighbors will be encouraged to rat each other out for watering on the wrong day. Helicopters will hover above farms and golf courses, taking satellite coordinates of pumps operating in violation of water-shortage orders. This is the new era of water restrictions. It begins next Thursday, when rules approved by the South Florida Water Management District take effect...Almost half of all drinking water in South Florida goes toward watering lawns, according to the district, which controls water supply and drainage for 16 counties in Central and South Florida. District officials said the restrictions may become permanent and that tougher rules may be necessary.
Top investor sees U.S. property crash: Reuters
I said long ago there was going to be a bubble-popping ceremony in the real estate market, and I said that a lot of people with bizarre high-risk mortgages were going to get hurt when it happened. But I think this fellow is carrying things a bit too far. It can't be that bad. At least, I don't think so. But then, I don't have enough money to afford a $15 million home, so who am I to talk?

MOSCOW (Reuters) - Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets. "You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York. "It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops. "It is going to be a huge mess," said Rogers, who has put his $15 million belle epoque mansion on Manhattan's Upper West Side on the market and is planning to move to Asia.

Wednesday, March 14, 2007

CAI's objections to AARP HO Bill of Rights
I have read the full 3 1/2 page letter from Tom Skiba to AARP objecting to the AARP Homeowners' Bill of Rights, drafted by attorney David Kahne. I see no reason to amend my earlier comments that were based on the summary I linked to from Ungated, the CAI blog that Tom writes.

To sum up, here are the main points of the AARP document:

Security against Foreclosure
Resolve Disputes without Litigation
Fairness in Litigation
Be Told of All Rules and Charges
Stability in Rules and Charges
Individual Autonomy
Oversight of Associations and Directors
Vote and Run for Office
Reasonable Associations and Directors
An Ombudsperson for Homeowners

CAI objects to this. Why?

They don't like the process of developing the document because it didn't include CAI or other industry representatives. I have already addressed that issue. And they don't like the substance because it involves increased state legislation, and more state oversight of HOA board activities. It imposes limits on what HOA BODs can do to people. I think it needs to be pointed out that this type of reform legislation really limits the powers of the attorneys and managers who constitute CAI. Because make no mistake about this: for all this talk of local democracy and consumer choice, the real power in the HOA universe is in the hands of attorneys. They are the ones who exercise the powers of the BOD, when owners don't go along with the program. And that is the power--lawyer power--that gets limited by state regulatory legislation that gives owners some rights. What David Kahne is trying to do (among other things, but centrally) is give the owners some way to stand up to the association's attorney. He does that by giving them some enforceable rights and relief from the boilerplate language that puts the owners in an essentially powerless position from the moment they take the deed to their property.

CAI also want to get AARP corralled into the cozy little UCIOA amendment process that the Uniform Law Commissioners are undertaking (with a CAI stalwart as the ABA advisor to the committee). The AARP project, because it is apart from that ULC process, could throw a monkey wrench into creating an industry-friendly "new" legal structure that would leave the current power dynamics intact.

Here's how I think CAI wants things to end up: The BODs would have nearly absolute power over homeowners, whose only options, if they feel they have been mistreated, would be to elect a new board or sell their home and move somewhere else. The association attorney and property manager would (and do) control the BODs. CAI trains and organizes the attorneys and property managers. The states would require certification of property managers. CAI would provide that certification. The out-of-control owner-run insurgent groups would be shut out of the policy process and branded as loons and nutcases, and their websites would be shut down. The press would get off the "HOA abuses abound" angle, and instead go to CAI for comment on community association issues, and print the PR line. Particular complaints about abuses would be conclusively presumed to be either a) lies and distortions spread by neighborhood malcontents who couldn't get along with Mother Theresa, or b) unrepresentative anecdotes that fail to capture the true level of mass satisfaction with HOA life. And the state legislatures would pass UCIOA and move on from HOA legislation to other matters, like selling the state tollway system to Spanish and Australian corporations to finance free health care and early childhood education for all. Happy ending. That's the desired endgame as I see it. Maybe Tom can correct me if I am wrong.

Here's the problem with that scenario: things were basically like that in the early 1990s, but things have changed. Too many people are now aware of what's going on in Privatopia for that status quo ante to be reinstituted. When a mega-interest group like AARP weighs in, and when half a dozen state legislatures have reform legislation on the books or in the hopper, and when I can name you probably two dozen law professors and at least that many reporters who understand this issue area very well...when all this happens, it is too late to silence or co-opt all the dissenting voices and have everybody speak with a single tongue.

Change is happening right now, and I don't think it can be stopped. I don't know if all the change will be for the good, and I have been critical of some of the reform legislation. But it is coming. And that AARP document is going to give owner rights a much bigger place at the table than they would have had if the industry had their way. That's a good thing, not only for owners but for the industry, if they would just take the long view. I wish I could get CAI to understand that some of their own policy positions are actually adverse to their own long-term interests. But I'll leave that for another post.
AARP: A Bill of Rights for Homeowners in Associations: Basic Principles of Consumer Protection and Sample Model Statute
I thought I'd link this to make sure that anybody who hasn't read it has a quick way to find it. This is the document that Tom Skiba and CAI are reacting to as linked in the post earlier.

Tuesday, March 13, 2007

Late Mortgage Payments Reach High, New Foreclosures Hit All-Time High
This probably means that HOA assessment delinquencies are up as well. People don't ordinarily stiff the bank and pay their HOA.

WASHINGTON (AP) -- Late mortgage payments shot up to a 3 1/2-year high in the final quarter of last year and new foreclosures surged to record levels as borrowers with tarnished credit histories had trouble keeping up with monthly payments.
Ungated :: AARP, Community Associations, Rights, and Responsibilities
Here is Tom Skiba's take on AARP's Homeowners Bill of Rights. Follow link to his blog and there you will find a link to the full CAI position paper on AARP's B of R:

- The paper was prepared by a homeowner advocate attorney in Texas [note from Evan: that would be David Kahne], and not by AARP staff. As you might imagine, there was very limited input from industry representatives including CAI, NAHB, the National Council of Commissioners on Uniform State Law (who drafted UCIOA and similar legislation) and others.

- AARP has not adopted the proposed Bill of Rights as an official legislative position, although the report has been sent to their state offices.

- Sadly, the paper also seems to intimate that mature Americans are incapable of managing their own affairs and protecting their own interests. Personally, I think that seriously underestimates AARP's own members.

Yet the report raises some important issues and includes some potentially beneficial ideas on ensuring that communities serve all of their owners fairly, equitably, and harmoniously.

While we disagree on many of the details, we believe that this process can have positive outcomes.

I think it is great that Tom sees the AARP as raising important issues and containing some good ideas. I have to read the full CAI reaction, but these bullet points do stir some preliminary thoughts. First, what is a "homeowner advocate attorney"? David is an attorney, and he has represented homeowners. Is there something wrong with that? I don't see how that comment has any bearing at all on the AARP document, much less deserving to be given bullet point status as though it was some sort of "gotcha." The document went through outside review as well, so it isn't as though it went from David's computer to the publisher with nobody checking it out. Seems to me lots of "industry attorneys" have been doing all the drafting for about fifty years, so can somebody else take a crack at it for a change?

Second, why should there be input from industry representatives in the drafting of the AARP document? The premise of the document--the reason it needs to be written, in other words--is that the law as written in most states is heavily loaded for the industry (lawyers and other professionals) and for the BODs, and against the owners. The whole point here is to give the owners some protections. The AARP document is a starting point. The time for the industry to weigh in is now, I would say--not while the owner protections were being drafted.

And finally, the idea is not that owners are little children who need paternalistic policy. The need for a bill of rights comes from the untenable legal position HOA owners find themselves in, courtesy of the cozy relationship between real estate developers and local governments. I am talking about blanket imposition of reams of lawyer-drafted, non-negotiable, boilerplate, developer-friendly, board-friendly, and often repressive rules on owners who have to take the whole package or forget about the home they wanted to buy. And with so many of these projects having similar substantive and procedural content, and with so little choice left in the market due to municipal mandates and developer preferences, the case for a little legislative protection of owners is compelling.

That's why the trend in so many state legislatures is now pro-owner. And I don't think the genie can be put back in the bottle. I will read CAI's take on the AARP proposals carefully and hope for the best. But I think David Kahne and AARP are definitely deserving of high praise, and I hope good things come of their efforts.
State budget crisis heats up
Actually, it's worse than that for the state of Michigan and its local governments. It's no wonder they are building condos in Kalamazoo (see below). When local governments are strapped for cash, condos and HOAs are the preferred form of real estate development because of the double taxation benefits--fewer services to provide, but a full share of property tax paid by all owners:

LANSING -- Wall Street is turning up the heat on Gov. Jennifer Granholm and the Legislature to find a quick solution to Michigan's deepening fiscal crisis or face a credit downgrade -- which would make it more expensive for the state and some local governments to borrow money. "From a credit perspective, this is probably the most important legislative session in more than a decade," James Wiemken, managing director of Standard & Poor's Ratings Services, said in a report released Monday.

Nation's second largest sub-prime mortgage lender looking shaky...
March 12 (Bloomberg) -- New Century Financial Corp., the nation's second-biggest subprime mortgage lender, said it doesn't have the cash to pay creditors who are demanding their money, increasing speculation that the company will go bankrupt. The New York Stock Exchange, citing the credit crisis, halted trading of New Century this morning until it decides whether to keep listing the company's securities. Shares of the Irvine, California-based company, already down 90 percent in 2007, lost half their remaining value in pre-market trading, and rivals fell as much as 25 percent today. ``They're one step closer to bankruptcy,'' said Bose George, an analyst at Keefe Bruyette & Woods in New York who rates the shares ``market perform.'' ``The only possibility for survival now is for someone, potentially an investment bank, to step in.'' New Century may be insolvent because too many of its own customers -- most of whom have poor credit histories or heavy debt burdens -- aren't repaying their loans. Bad U.S. subprime mortgages are at a seven-year high, forcing more than two dozen lenders to close or sell operations. Their woes may contribute to more than 1.5 million Americans losing their homes and 100,000 people losing their jobs, according to real estate executives, economists, analysts and a Federal Reserve governor. New Century said in a federal filing it doesn't have funds to repay lenders including Morgan Stanley, Citigroup Inc. and Goldman Sachs Group Inc. The creditors want New Century to repurchase all outstanding mortgage loans they financed.

Monday, March 12, 2007

Condo boom Builders back away from single-family homes for condominium construction: Kalamazoo Gazette
I remember when people used to tell me that condos only existed in Florida. They were wrong then, but now condos are the big thing even in Kalamazoo.

The latest residential-construction reports for Kalamazoo County show that local builders increased their condominium building last year considerably. Construction of the retiree-friendly units more than quadrupled in 2006; at the same time, the building of single-family homes declined by 27 percent.