Is mortgage fraud really on the rise?

I love the Wall Street Journal, but think this story blew it:

The Federal Bureau of Investigation and the Department of Housing and Urban Development would get more funds to crack down on mortgage fraud under the fiscal year 2010 budget.

The budget would also boost funding to HUD to promote affordable housing, a key Democratic priority.

The proposed funding comes as evidence mounts that mortgage fraud is on the rise, and scrutiny of illegal or predatory practices intensifies in response to the housing-market crisis.

The number of suspicious activity reports filed by financial institutions related to suspected mortgage fraud increased 44% in the 12 months ended June 2008 compared with the prior year, the Financial Crimes Enforcement Network, a Treasury Department unit, said this week.

The truth: Banks are uncovering fraud committed mostly during the housing boom but only coming to light now as foreclosures mount.

This story leaves the incorrect impression that fraud intensified in 2008. Not likely. Buyers and sellers continue to cheat the system - I'm investigating at least one such scheme - but we're nowhere near the mass cheating of 2005.

Snubbing the surburbs: EPA notes trend toward urban redevelopment

The Environmental Protection Agency is on its soapbox again, promoting urban living as a way to save gasoline and green fields. It purports to have proof that Americans are shifting their preference toward the cities.

Unfortunately for Tampa-St. Petersburg-Clearwater, the agency admits it's hard to distinguish what constitutes urban redevelopment and what constitutes new suburban development. Places like New Tampa, though technically part of the city, are little more than distant leafy suburbs, not gritty urban cores.

Nevertheless, with that proviso in mind, the EPA says the urban core's share of residential building permits in the Tampa Bay area has grown from 8 percent in the early 1990s to 28 percent in 2007.

I don't need to remind you, however, that much of that construction sits vacant. Investors placed deposits on hundreds of condos in Tampa's Channelside but most lack mortgage paying residents.

The full report is here: Download epastudy.pdf

Should you buy now? Discounts look favorable

Here's a column from today's St. Petersburg Times:

It's a terrible time to buy a home, the naysayers claim. They cite the uncertain job market, the threat of further home price declines, the plundering of retirement accounts.

At the risk of raining brimstone on my head, I'll take the opposite view. Home buyers enjoy three discounts that might not survive 2009: a foreclosure discount, a tax credit discount and an interest rate discount.

Let's start with a typical $180,000, three-bedroom, two-bath home for sale in almost any city or suburb around the region.

Foreclosure houses — repossessed by the bank or soon to arrive at that dismal destination — have been selling for about 75 percent of the price of regular homes. The market is rich with such bargains. So let's take 25 percent — or $45,000 — off the top of that $180,000 home. That makes $135,000.

We'll move on to the $8,000 federal tax credit for first-time home buyers. The government defines that as someone who hasn't owned a primary residence in the past three years. And the beauty of the tax credit is that you won't have to pay it back. But to get the $8,000 you have to buy a house by Dec. 1.

Take that $8,000 off the $135,000. We're down to $127,000. So far, so good.

We still haven't added in the interest discount. Rates have fallen to historic lows. This week you could get a 30-year fixed mortgage for about 5.2 percent, as long as your credit's good and your job pays enough. That's a point lower than rates from 2006, when Tampa Bay area home prices peaked. Economists predict rates will rise next year as the economy recovers.

Shaving off that point saves you about $1,000 a year on your loan. Assume you'll live in the house six years. That's close to the average stay in these parts. That's an additional $6,000 to subtract.

So that's $180,000, minus $45,000 for the foreclosure discount, minus $8,000 for the tax credit discount, minus $6,000 for the interest rate discount.

Our home price is down to $121,000, a tad below the Tampa Bay area's median sales price for January.

Not a bad deal.

Six year slide: Tampa Bay area home prices revisit 2003

Tampa Bay area home prices took one of the largest one-month tumbles in history, falling 16 percent from December to January in a flurry of foreclosure sales.

The typical home sold for $122,400 last month in the Tampa Bay area, a return to prices not seen since mid-2003.

Bargain-priced rooftops did help drive up sales in January. Sales climbed 17 percent for the year, from 1,342 in January 2008 to 1,573 in January 2009, according to the Florida Association of Realtors.

The low-prices-equals-brisker-sales phenomenon is even more pronounced in Cape Coral-Fort Myers. Sales more than doubled in January. But it came at the cost of a 59 percent collapse in prices in the January-to-January period.

Here's a chart to chew on.

Boobs borrow boom time abode for beer blast

Lee County, the nation's foreclosure capital puts vacant property to questionable use. From The Smoking Gun:

A group of young Floridians invaded a foreclosed home over the weekend and threw a raucous bash that caused about $75,000 in damage and resulted in the arrest of 17 partygoers. According to police, the trashed Fort Myers home, now owned by Wells Fargo Bank, was overrun Friday night by partygoers who broke windows, punched holes in the home's walls, and spray painted graffiti inside the residence. Deputies with the Lee County Sheriff's Office arrested 10 juveniles and 7 adults (aged 18 to 25) on loitering and prowling charges. The underage arrestees were also charged with possession of alcohol by a minor, while the adults were hit with contributing to the delinquency of a minor counts. According to a probable cause statement, sheriff's deputies found cans of Bud Light beer in the 4000-square-foot home.

Let's give them a break: They probably watered and fertilized the lawn.

Lennar Homes Tampa office: Kids, grandparents shacking up

Mark Metheny, central Florida president for housing giant Lennar, notes a trends toward smaller, smarter homes. But there's a limit to the smaller-is-better trend, especially in a tight economy that encourages multi-generational living:

And while American families are shrinking in size---people have fewer children today---larger homes with multiple bedrooms are increasingly popular. The reason?         

“Many families today plan to accommodate more than one generation,” Metheny said. “Grandparents are moving in with their children and vice-versa, so many homes accommodate three generations in the same family and we have to design for that,” he said.            

Other lifestyle changes such as stay-at-home workers also account for design changes, Metheny added.            

“Offices are the most popular uses of extra bedrooms, and grandparents and crafts are running a close second,” Metheny said.

I keep hearing all about subdued expectations, about people shedding their energy hog McMansions for quiet cottages with solar panels. Call me unconvinced. If money is no object - and housing bargains abound - Americans generally prefer quantity over quality.

Just look at how truck sales took off - and hybrid cars dropped off the radar - the moment gas flirted with $1.60 per gallon.

Case-Shiller: Tampa home prices fallen 35 percent so far

Tampa area home prices are down 22 percent for the year and 35 percent since the July 2006 peak, according to the latest S&P/Case-Shiller home price index.

Once again, we rank 7th from the bottom on the 20-city index. Price drops have been more severe in Phoenix, Las Vegas, San Francisco, Miami, Los Angeles and San Diego.

The advantage of Case-Shiller is that its statisticians track repeat sales of individual homes, which helps keep things more accurate.

The disadvantage is that the index comes out a month behind other home sales reports. The current report takes in December home sales. Realtors are releasing January's sales figures on Wednesday.

Housing pain can't last forever in Florida

This seems like good news to me. From an article, written by a Florida guy, titled Cause for Optimism Amid Gloom:

The housing market, which everyone believes must be healed before recovery can begin, is quietly healing itself. Home sales in California, the eye of the housing storm, are rising. Lower prices are attracting buyers at a rate 85% above last years pace. Indeed, even as the median price fell over 40%, the total dollar volume of sales in December was higher than the same month last year. Florida has seen existing home sales rise for four consecutive months, although the rise is more muted than California, up only 27% over last year in December. The government’s actions last week to limit foreclosures not only angers responsible homeowners, it slows the process of moving houses from those who can’t afford them to those who can.

California approves $10,000 new home tax credit

California's budget is in the hole by tens of billions of dollars - compared to Florida's "modest" $3- to $4-billion shortfall - but Gov. Ahhh-nold and the Legislature will offer buyers of NEW homes a $10,000 tax credit if they buy between March 1, 2009 and March 1, 2010.

Is this a model for Florida? Not exactly. We already get a 100-percent tax credit - it's called NO STATE INCOME TAX. But I'm glad California is trying this approach. Despite its obvious shortcomings, California tends to be the nation's bellwether, trend setter and vanguard of experimentation, good and ill alike.

If that state's high-priced housing market can fight off the recent infection, Florida's healing probably isn't far behind.

Change is good: Interview with HUD secretary Shaun Donovan

The country's new HUD secretary, Shaun Donovan, is a Harvard University-trained architect who plied the affordable housing trade as an undersecretary in the Clinton administration and as head of New York City's subsidized housing endeavors.

An affordable housing bureaucrat with a sense of building aesthetics - you don't see that combination too often.

He granted the St. Petersburg Times a 10-minute interview today. As expected, Donovan inserted plenty of plugs for his boss, President Obama. Many answers were prefaced with a perfunctory "As the president said yesterday..."

Here's an edited transcript of the conversation:

TIMES: In light of the foreclosure crisis, what if any changes would you propose to the Community Reinvestment Act to avoid unsound lending (The CRA is a 1977 law that encourages lenders to make loans to lower income people in the inner cities)?

DONOVAN: I think it's one of the ingredients the president made clear in his speech. We need to fundamentally rethink the way we regulate the system. Clearly there was a failure to provide clear, transparent information to consumers. I think CRA is an example of that. You have had large changes in the mortgage market since the law was introduced and the regulatory system has not kept up. But the focus right now is to get out of the current crisis.

TIMES: You were successful  in limiting foreclosures to only a handful when you worked in New York. How applicable is that experience to limiting foreclosures in Florida and the nation?

DONOVAN: I think it’s very applicable. You need a back to basics approach, fundamental common sense values. We got ourselves into a period when we forgot those values and everyone thought there was a quick buck to be made. A mortgage that's no more than 31 percent of one's income is a widely accepted standard. It worked in New York and and it will work in the new plan as well.

TIMES: Florida was once thought of as a low cost state. Now it has an affordable housing problem. How can the federal government help?

DONOVAN: Clearly we've got to stabilize the foreclosure crisis there. In Tampa-St. Petersburg alone, 7.7 percent of all loans are either 90 days delinquent or in foreclosure, far higher than the national rate of 5.2 percent. I think the recovery bill has a lot to offer for affordability. There's $2-billion in neighborhood stabilization funding. One thing we forget is that more than a third of the victims of foreclosure are renters. They're innocent victims. There's $1.5-billion in emergency shelter grants to help the most vulnerable victims of foreclosure.

TIMES: Hope for Homeowners, approved by President Bush and Congress last year, has been pretty much a flop and has helped only a few dozen people. How do we ensure that other mortgage bailout plans succeed where Hope for Homeowners failed?

DONOVAN: We are proposing legislative changes to make Hope to Homeowners work better. Fees and other restrictions made the program pretty much unworkable. It’s clearly not being used at the scale that it needs to be. Hope for Homeowners was a program that included significant loan principal reduction. It's a good complement to the president's plan, which deals mostly with interest rate reductions.

TIMES: If the latest housing and mortgage bailout fails, what other weapons do you have at your disposal?

DONOVAN: I think one thing the president made clear is that this is no longer just a mortgage crisis. Our economic crisis is about jobs and the stability of the whole financial system.  The three legs of the stool are the housing plan, the recovery bill signed on Tuesday, as well as the financial stability plan Treasury Secretary Geithner announced last week. All have to work together to be successful.