South Florida homeowners who lost their jobs or owe more than their property is worth could be in line for a big new dose of federal housing aid.
President Barack Obama on Friday unleashed $1.5 billion to help homeowners in Florida and other states hit hardest by unemployment and a flood of foreclosures.
"It's going to allow lenders to help homeowners who are underwater," Obama said, referring to those whose houses are worth less than their mortgages. "And it will help folks who've taken out a second mortgage modify their loans."
The announcement raised hopes that the aid could be used to help homeowners avoid foreclosure by making payments affordable.
Four of every 10 owners of single-family homes with a mortgage in South Florida owe more than the property is worth, according to Zillow.com, a real estate research firm based in Seattle.
While Florida's property values have plunged, the unemployment rate statewide has soared to nearly 12 percent.
State officials were delighted by the unexpected burst of federal spending and began devising plans to apply for it.
"The exciting thing about it is that we are looking at actual help, real money on the street, for a fair number of people who are in a difficult situation," said Cecka Rose Green, spokeswoman for the Florida Housing Finance Corp.
The money will not flow for weeks or months, however.
The Treasury Department will decide over the next two weeks how to dole out the $1.5 billion among Florida and at least four other states – California, Nevada, Michigan and Arizona. State housing agencies will then submit plans for how to use it to meet local needs.
The Florida Housing Finance Corp., a state-funded group, cannot refinance loans, Green said, but may be able to bring in other agencies and partners to help homeowners.
Some analysts foresee short-term loans at no interest or low interest or deferred payments to help unemployed Floridians keep their homes until they find jobs.
"It could be used to pay off second loans so that whoever holds the first mortgage can refinance it," said Mike Larson, a housing analyst with Weiss Research in Jupiter.
"This is an add-on program targeted at those states where the crisis is most acute, and Florida is at the top of the list," Larson said. "It's not some huge game-changer, but another way to help."
Source: http://articles.sun-sentinel.com/2010-02-19/business/fl-obama-housing-help-20100219_1_florida-housing-finance-corp-obama-sets-federal-housing-aid
William E. Gibson can be reached at Wgibson@SunSentinel.com or 202-824-8256.
The Criscitos has been selling South Florida luxury and commercial real estate for over a decade and has sold over $1 billion dollars of property. They work as a multi-lingual team speaking english, Spanish, Italian and Portuguese. They carved out a niche as a leading boutique real estate company with two distinct divisions -residential and commercial- both personally overseeing by Marcela and Anthony Criscito.
Monday, February 22, 2010
Friday, February 19, 2010
Should you buy a home that's been vacant?
A for-sale house that's been vacant may look like a bargain, but buyers should be cautious because expensive problems often lurk inside homes that have been unoccupied for some time.
A home can become vacant due to a marriage, job relocation, death or other life event. But vacancies today are more often due to a bank foreclosure or short sale in which the lender accepts less than the mortgage balance. It's these bank-owned properties, sometimes called "real estate-owned," or REOs, that tend to be "problem homes," says David Tamny, owner of Professional Property Inspection in Columbus, Ohio, and 2010 president of the American Society of Home Inspectors in Des Plaines, Ill.
Vacant homes can suffer from a wide variety of ills due to neglect, deferred maintenance on the part of the prior cash-strapped homeowner and vandalism, Tamny explains. Broken water pipes, stolen copper wiring, damaged appliances and unhealthy molds are but a few examples of the potential problems that may await buyers of these homes.
The risks for buyers are front and center since the number and percentage of for-sale homes has increased during the housing slump. More than 2.2 million for-sale houses in the U.S. were vacant in 2008, according to the U.S. Census Bureau. That figure was more than double the 1 million vacant for-sale homes in 2000. Vacant homes exist throughout the country, but the percentage of vacancies in 2008 was higher than the national average in the South, Midwest and West, and lower in the Northeast.
Turned-off utilities limit home inspection
Homebuyers typically hire a professional to conduct a visual inspection of the home and prepare a report on its condition. That's a wise precaution, but not even a well-qualified and thorough home inspector can see inside walls. Nor can an inspector assess the condition of a home's plumbing, electrical wiring, heating-and-cooling system or major appliances if the water, gas or electricity has been shut off.
"Buyers often don't understand that if there is no electricity, they are going to get a very limited inspection," Tamny says. "You could end up with a lot of surprises if you don't have those systems turned on prior to the inspection."
Swimming pools, which naturally are more common in such states as California, Arizona, Nevada and Florida -- where foreclosure rates have been high -- are also a special concern if a home has been vacant. Some inspectors won't include a pool as part of a basic inspection. Others will include the pool, but again, it may be impossible for the inspector to check out the equipment if the utilities have been shut off in the vacant home.
"You probably will have to accept the pool (as-is because) it's unlikely that you'll be able to get the whole thing up and running just for the purpose of an inspection and then shut it back down," Tamny says. "You could have thousands of dollars in repairs."
As-is home purchase can be risky
Some banks have procedures in place that allow prospective buyers to turn on the utilities, but the buyer may be required to pay a deposit to the utility company and put his or her own name on the account, even though he or she doesn't own the vacant home. That inconvenience may prompt some buyers to forgo parts of the home inspection that can't be performed unless the utilities are on.
That can be risky because unanticipated repairs can cost thousands or even tens of thousands of dollars, and the buyer typically will have no recourse to the bank. That means the buyer will be stuck with whatever problems the house has.
"Buyers are attracted to a house because it's discounted from what it sold for a number of years ago and they are hoping to get a bargain. They don't always understand that sometimes the problems make up the difference between the cost of the house and what they are getting for a discount," Tamny says.
Vacancy may affect homeowners insurance
Homebuyers also should know that insurance companies may decline to issue a homeowners insurance policy until the agent looks at the vacant home, according to Dick Luedke, a spokesman at State Farm in Bloomington, Ill. The agent's once-over isn't the same as a professional home inspection, but can mean extra expense if the home is in poor condition.
"If the home is uninsurable, we wouldn't write the policy. If the problems just increase the risk of the potential of a future claim, then that might increase the premium," Luedke says.
A homeowners insurance policy also may require a vacancy endorsement, again at an extra charge, if the home will continue to be vacant for more than 30 days after the sale. If the vacancy is due to major repairs, a dwelling-under-construction rider may be necessary as well.
A home can become vacant due to a marriage, job relocation, death or other life event. But vacancies today are more often due to a bank foreclosure or short sale in which the lender accepts less than the mortgage balance. It's these bank-owned properties, sometimes called "real estate-owned," or REOs, that tend to be "problem homes," says David Tamny, owner of Professional Property Inspection in Columbus, Ohio, and 2010 president of the American Society of Home Inspectors in Des Plaines, Ill.
Vacant homes can suffer from a wide variety of ills due to neglect, deferred maintenance on the part of the prior cash-strapped homeowner and vandalism, Tamny explains. Broken water pipes, stolen copper wiring, damaged appliances and unhealthy molds are but a few examples of the potential problems that may await buyers of these homes.
The risks for buyers are front and center since the number and percentage of for-sale homes has increased during the housing slump. More than 2.2 million for-sale houses in the U.S. were vacant in 2008, according to the U.S. Census Bureau. That figure was more than double the 1 million vacant for-sale homes in 2000. Vacant homes exist throughout the country, but the percentage of vacancies in 2008 was higher than the national average in the South, Midwest and West, and lower in the Northeast.
Turned-off utilities limit home inspection
Homebuyers typically hire a professional to conduct a visual inspection of the home and prepare a report on its condition. That's a wise precaution, but not even a well-qualified and thorough home inspector can see inside walls. Nor can an inspector assess the condition of a home's plumbing, electrical wiring, heating-and-cooling system or major appliances if the water, gas or electricity has been shut off.
"Buyers often don't understand that if there is no electricity, they are going to get a very limited inspection," Tamny says. "You could end up with a lot of surprises if you don't have those systems turned on prior to the inspection."
Swimming pools, which naturally are more common in such states as California, Arizona, Nevada and Florida -- where foreclosure rates have been high -- are also a special concern if a home has been vacant. Some inspectors won't include a pool as part of a basic inspection. Others will include the pool, but again, it may be impossible for the inspector to check out the equipment if the utilities have been shut off in the vacant home.
"You probably will have to accept the pool (as-is because) it's unlikely that you'll be able to get the whole thing up and running just for the purpose of an inspection and then shut it back down," Tamny says. "You could have thousands of dollars in repairs."
As-is home purchase can be risky
Some banks have procedures in place that allow prospective buyers to turn on the utilities, but the buyer may be required to pay a deposit to the utility company and put his or her own name on the account, even though he or she doesn't own the vacant home. That inconvenience may prompt some buyers to forgo parts of the home inspection that can't be performed unless the utilities are on.
That can be risky because unanticipated repairs can cost thousands or even tens of thousands of dollars, and the buyer typically will have no recourse to the bank. That means the buyer will be stuck with whatever problems the house has.
"Buyers are attracted to a house because it's discounted from what it sold for a number of years ago and they are hoping to get a bargain. They don't always understand that sometimes the problems make up the difference between the cost of the house and what they are getting for a discount," Tamny says.
Vacancy may affect homeowners insurance
Homebuyers also should know that insurance companies may decline to issue a homeowners insurance policy until the agent looks at the vacant home, according to Dick Luedke, a spokesman at State Farm in Bloomington, Ill. The agent's once-over isn't the same as a professional home inspection, but can mean extra expense if the home is in poor condition.
"If the home is uninsurable, we wouldn't write the policy. If the problems just increase the risk of the potential of a future claim, then that might increase the premium," Luedke says.
A homeowners insurance policy also may require a vacancy endorsement, again at an extra charge, if the home will continue to be vacant for more than 30 days after the sale. If the vacancy is due to major repairs, a dwelling-under-construction rider may be necessary as well.
Thursday, February 18, 2010
Simon Could Corner South Florida Mall Market
MIAMI-Simon Property Group's $10-billion bid for General Growth Properties could be a game-changer for South Florida more than other major retail markets statewide. Simon owns 41 malls, outlets and shopping centers throughout Florida, while General Growth has just 15.
Merging the portfolios of the two companies would give Simon an unparalleled position in South Florida's retail sector, experts say. "Simon would be the most dominant player in the region,” says Thomas Godart, managing director of Fort Lauderdale real estate firm Godart Florida Real Estate Investments.
The acquisition would also give Simon the upper hand in a South Florida retail market where tenants are getting rent relief and other concessions from cash-strapped landlords. By eliminating a major competitor in General Growth, Simon would exert even more influence on national tenants who are trying to expand into South Florida.
Simon would gain leverage over multi-center tenants, observes Jim Soble, an attorney and partner at Ruden McClosky who represents retail developers and heads the firm's real estate department. "If a tenant is in one of Simon's centers but not in one of the General Growth centers, it might have to be in both to stay" in the preferred retail space, Soble says.
Simon's largest malls in South Florida include Sawgrass Mills in Sunrise and The Galleria at Fort Lauderdale, along with a minority stake in Aventura Mall. General Growth's presence in the region includes Kendall Town Center, Mizner Park in Boca Raton and Pembroke Lakes Mall in Pembroke Pines.
Elsewhere in Florida, both companies have a somewhat fragmented presence. In Orlando, for example, Simon has the Florida Mall and Orlando Premium Outlets, while General Growth has Altamonte Mall and Festival Bay Mall at International Drive.
Simon's biggest malls around the state include Edison Mall in Fort Myers, Tyrone Square Mall in St. Petersburg and Pier Park in Panama City. General Growth dominates middle markets with malls such as Lakeland Square, Governor's Square in Tallahassee and Regency Square Mall in Jacksonville.
Beyond the strategic benefits of purchasing one of its major competitors, Simon would also gain substantial leverage over its tenant base in a South Florida market where landlords are struggling to maintain occupancy and fill vacancies, Godart says.
"Simon has certain assets that national tenants want to be a part of," he says. "They can use [the General Growth acquisition] as leverage to put those tenants in secondary locations as a condition for leasing space in a class A, strong location. This would also allow them to go aggressively after a bunch of different tenants."
The acquisition could also help Simon strengthen its position in a tenant-driven marketplace. The deal would force tenants to evaluate South Florida malls they occupy space in and where they want to be long-term, more than potential short-term issues like rent relief and sales performance, Soble says.
"Tenants will look again at the future of a particular mall and whether they want to stay in it," he says. "A lot of that depends on the strength of the recovery of Florida, which has always been known as a retail state."
Requiring prospective tenants to occupy space in less-desirable shopping malls in order to lease space at higher-quality centers is a commonly used tactic by major retail landlords like Simon, says Edgar Jones, vice president of Rockefeller Group Development Corp. RockGroup is currently building the Miramar Town Center, a mixed-use project, in partnership with retail REIT Kimco Realty, which specializes in shopping centers.
By gaining the leverage to apply the conditional leasing strategy, Simon would be able to significantly boost the value of its entire portfolio, Jones says. That, along with the presumed discount Simon would get on a per-property basis, could put Simon in a position to make some of its properties more competitive with reduced asking rents.
"This lets Simon reset the rents and be more attractive to tenants," Jones says. "This is a big win for Simon that raises the values of all of its properties."
(Carl Cronan of GlobeSt.com contributed to this story.)
Source: http://www.globest.com/news/1601_1601/florida/183599-1.html
Merging the portfolios of the two companies would give Simon an unparalleled position in South Florida's retail sector, experts say. "Simon would be the most dominant player in the region,” says Thomas Godart, managing director of Fort Lauderdale real estate firm Godart Florida Real Estate Investments.
The acquisition would also give Simon the upper hand in a South Florida retail market where tenants are getting rent relief and other concessions from cash-strapped landlords. By eliminating a major competitor in General Growth, Simon would exert even more influence on national tenants who are trying to expand into South Florida.
Simon would gain leverage over multi-center tenants, observes Jim Soble, an attorney and partner at Ruden McClosky who represents retail developers and heads the firm's real estate department. "If a tenant is in one of Simon's centers but not in one of the General Growth centers, it might have to be in both to stay" in the preferred retail space, Soble says.
Simon's largest malls in South Florida include Sawgrass Mills in Sunrise and The Galleria at Fort Lauderdale, along with a minority stake in Aventura Mall. General Growth's presence in the region includes Kendall Town Center, Mizner Park in Boca Raton and Pembroke Lakes Mall in Pembroke Pines.
Elsewhere in Florida, both companies have a somewhat fragmented presence. In Orlando, for example, Simon has the Florida Mall and Orlando Premium Outlets, while General Growth has Altamonte Mall and Festival Bay Mall at International Drive.
Simon's biggest malls around the state include Edison Mall in Fort Myers, Tyrone Square Mall in St. Petersburg and Pier Park in Panama City. General Growth dominates middle markets with malls such as Lakeland Square, Governor's Square in Tallahassee and Regency Square Mall in Jacksonville.
Beyond the strategic benefits of purchasing one of its major competitors, Simon would also gain substantial leverage over its tenant base in a South Florida market where landlords are struggling to maintain occupancy and fill vacancies, Godart says.
"Simon has certain assets that national tenants want to be a part of," he says. "They can use [the General Growth acquisition] as leverage to put those tenants in secondary locations as a condition for leasing space in a class A, strong location. This would also allow them to go aggressively after a bunch of different tenants."
The acquisition could also help Simon strengthen its position in a tenant-driven marketplace. The deal would force tenants to evaluate South Florida malls they occupy space in and where they want to be long-term, more than potential short-term issues like rent relief and sales performance, Soble says.
"Tenants will look again at the future of a particular mall and whether they want to stay in it," he says. "A lot of that depends on the strength of the recovery of Florida, which has always been known as a retail state."
Requiring prospective tenants to occupy space in less-desirable shopping malls in order to lease space at higher-quality centers is a commonly used tactic by major retail landlords like Simon, says Edgar Jones, vice president of Rockefeller Group Development Corp. RockGroup is currently building the Miramar Town Center, a mixed-use project, in partnership with retail REIT Kimco Realty, which specializes in shopping centers.
By gaining the leverage to apply the conditional leasing strategy, Simon would be able to significantly boost the value of its entire portfolio, Jones says. That, along with the presumed discount Simon would get on a per-property basis, could put Simon in a position to make some of its properties more competitive with reduced asking rents.
"This lets Simon reset the rents and be more attractive to tenants," Jones says. "This is a big win for Simon that raises the values of all of its properties."
(Carl Cronan of GlobeSt.com contributed to this story.)
Source: http://www.globest.com/news/1601_1601/florida/183599-1.html
Wednesday, February 17, 2010
Good real estate news: Home equity is rising again
With all the bad news about underwater homeowners and strategic walkaways, you might think that American homeowners' equity holdings are in the tank. But the least-publicized recent statistic on real estate is that, despite these scary reports, home equity is again on the rise.
Is that some piece of rosy propaganda put out by housing lobbyists to stimulate more home buying? Not unless you consider Federal Reserve economists to be shills for the real estate industry. The Fed conducts massive research into mortgage balances and home-value changes in hundreds of local markets around the country and reports its findings quarterly.
According to the Fed's most recent "flow of funds" survey, homeowners' net equity grew by nearly $1 trillion from the recession's nadir in the first quarter of 2009 through the third quarter. From June 30 to Sept. 30, net equity rose by $418 billion.
That's not all that impressive compared with the quarterly increases during the hyperinflationary housing boom years, but it could signal something important: After three years of unprecedented shrinkage in home equity -- and three years of rapid expansions in the number of underwater borrowers with negative equity -- there are signs that the down cycle may be shifting.
Last week, online real estate valuation researcher Zillow.com released its latest quarterly numbers on negative equity in major markets. The findings were sobering, but the study also offered some hints of modest improvements for housing. The overall negative-equity rate among American homeowners remained flat in the fourth quarter, at 21.4 percent. But like the Fed's numbers, that ratio represented a slight decrease from the first two quarters of last year, when 22 percent and 23 percent of owners owed more on their mortgages than the estimated market value of their real estate.
Zillow's study found that in dozens of housing markets -- including the District, Los Angeles, San Francisco, Detroit, Miami, San Jose, Seattle and Tampa-St. Petersburg -- the percentage of homeowners with negative equity appears to be on the decline. In the Washington area, 27.5 percent of homeowners had negative equity in the fourth quarter. That was down from 29.6 percent in the third quarter and 33.5 percent in the second.
Some of the largest declines occurred in cities hardest hit by the recession and the housing bust: Ann Arbor, Mich. (a decrease of 9 percentage points); Riverside, Calif. (-5.7); and Phoenix (-2). Florida markets that have struggled with major price devaluations also saw significant improvement in negative-equity rate in the fourth quarter, such as Fort Myers (-5.4), Miami (-5.1), Naples (-4.5) and Tampa-St. Petersburg (-1.4).
On the other hand, Zillow's study found historically high rates of negative equity continuing to prevail in key cities. In Las Vegas, for example, 81.3 percent of homeowners -- 256,000 households -- were underwater on their mortgages in the fourth quarter. This number is down from 82.5 percent in early 2009, but that's no consolation to the affected borrowers.
In Phoenix, 61.5 percent of borrowers were in negative territory. That's two percentage points lower than in the previous quarter but still scarily high.
Which major markets have the lowest underwater rates? As you might guess, they tend to be areas where the equity boom never quite boomed and where toxic mortgages and fog-the-mirror underwriting by lenders were never the rage: Tulsa, Okla. (4.2 percent); Harrisburg, Pa. (5.7 percent); Binghamton, N.Y. (5.6 percent); and Peoria, Ill. (8 percent).
Negative-equity rates are crucial barometers of local housing markets' propensity to experience high rates of mortgage default, foreclosure and strategic walkaways. Communities with single-digit negative-equity rates tend to have fewer walkaways and foreclosures.
The reverse is the case in areas where large numbers of underwater homeowners see no economic rationale for continuing to send in their monthly mortgage payments on properties worth tens of thousands, even hundreds of thousands, of dollars less than the principal balance owed to the bank. They feel they are throwing away money on real estate that might take a decade or more to be worth what they paid for it during the boom.
Mortgage market analyst Laurie Goodman, senior managing director of Amherst Securities, recently warned lenders to be especially vigilant about borrowers in markets where negative-equity ratios are high because, in her view, they are prime candidates to walk away from their loans. Once underwater borrowers miss a payment on their mortgage, Goodman said, there is a 75 to 80 percent probability they will chuck the whole deal.
Borrowers with even minimal positive equity, on the other hand, are far less likely to do the same.
Source: http://www.washingtonpost.com/wp-dyn/content/article/2010/02/11/AR2010021105251.html
Is that some piece of rosy propaganda put out by housing lobbyists to stimulate more home buying? Not unless you consider Federal Reserve economists to be shills for the real estate industry. The Fed conducts massive research into mortgage balances and home-value changes in hundreds of local markets around the country and reports its findings quarterly.
According to the Fed's most recent "flow of funds" survey, homeowners' net equity grew by nearly $1 trillion from the recession's nadir in the first quarter of 2009 through the third quarter. From June 30 to Sept. 30, net equity rose by $418 billion.
That's not all that impressive compared with the quarterly increases during the hyperinflationary housing boom years, but it could signal something important: After three years of unprecedented shrinkage in home equity -- and three years of rapid expansions in the number of underwater borrowers with negative equity -- there are signs that the down cycle may be shifting.
Last week, online real estate valuation researcher Zillow.com released its latest quarterly numbers on negative equity in major markets. The findings were sobering, but the study also offered some hints of modest improvements for housing. The overall negative-equity rate among American homeowners remained flat in the fourth quarter, at 21.4 percent. But like the Fed's numbers, that ratio represented a slight decrease from the first two quarters of last year, when 22 percent and 23 percent of owners owed more on their mortgages than the estimated market value of their real estate.
Zillow's study found that in dozens of housing markets -- including the District, Los Angeles, San Francisco, Detroit, Miami, San Jose, Seattle and Tampa-St. Petersburg -- the percentage of homeowners with negative equity appears to be on the decline. In the Washington area, 27.5 percent of homeowners had negative equity in the fourth quarter. That was down from 29.6 percent in the third quarter and 33.5 percent in the second.
Some of the largest declines occurred in cities hardest hit by the recession and the housing bust: Ann Arbor, Mich. (a decrease of 9 percentage points); Riverside, Calif. (-5.7); and Phoenix (-2). Florida markets that have struggled with major price devaluations also saw significant improvement in negative-equity rate in the fourth quarter, such as Fort Myers (-5.4), Miami (-5.1), Naples (-4.5) and Tampa-St. Petersburg (-1.4).
On the other hand, Zillow's study found historically high rates of negative equity continuing to prevail in key cities. In Las Vegas, for example, 81.3 percent of homeowners -- 256,000 households -- were underwater on their mortgages in the fourth quarter. This number is down from 82.5 percent in early 2009, but that's no consolation to the affected borrowers.
In Phoenix, 61.5 percent of borrowers were in negative territory. That's two percentage points lower than in the previous quarter but still scarily high.
Which major markets have the lowest underwater rates? As you might guess, they tend to be areas where the equity boom never quite boomed and where toxic mortgages and fog-the-mirror underwriting by lenders were never the rage: Tulsa, Okla. (4.2 percent); Harrisburg, Pa. (5.7 percent); Binghamton, N.Y. (5.6 percent); and Peoria, Ill. (8 percent).
Negative-equity rates are crucial barometers of local housing markets' propensity to experience high rates of mortgage default, foreclosure and strategic walkaways. Communities with single-digit negative-equity rates tend to have fewer walkaways and foreclosures.
The reverse is the case in areas where large numbers of underwater homeowners see no economic rationale for continuing to send in their monthly mortgage payments on properties worth tens of thousands, even hundreds of thousands, of dollars less than the principal balance owed to the bank. They feel they are throwing away money on real estate that might take a decade or more to be worth what they paid for it during the boom.
Mortgage market analyst Laurie Goodman, senior managing director of Amherst Securities, recently warned lenders to be especially vigilant about borrowers in markets where negative-equity ratios are high because, in her view, they are prime candidates to walk away from their loans. Once underwater borrowers miss a payment on their mortgage, Goodman said, there is a 75 to 80 percent probability they will chuck the whole deal.
Borrowers with even minimal positive equity, on the other hand, are far less likely to do the same.
Source: http://www.washingtonpost.com/wp-dyn/content/article/2010/02/11/AR2010021105251.html
Monday, February 15, 2010
Lennar Looks to Unlikely Helper: Bad Loans
The recovery of the home-building market promises to be slow and rocky, but builder Lennar Corp. has found what it thinks will be a way to juice its earnings: buying distressed real estate loans.
The Miami builder's shares surged nearly 9% on Thursday after it announced late Wednesday winning an auction for a portfolio of about 5,500 residential and commercial real estate loans from 22 failed banks. Lennar agreed to pay $243 million for a 40% stake in the portfolio. The rest will be held by the Federal Deposit Insurance Corp.
"I think this is a home run" for Lennar, said Ivy Zelman, chief executive of Zelman & Associates, a research firm. She said the return on capital should be at least 20% and could be far higher. Lennar is likely to make more such investments, though not immediately, and may raise capital to increase its capacity for them, she said.
Lennar, the fourth-largest U.S. home builder in terms of sales last year, has long been known at least as much for its financial skills as its ability to put up drywall. After the real-estate slump of the early 1990s, it pounced on assets being sold by lenders at knockdown prices.
In today's bidding for such assets, Lennar is mostly up against private-equity firms and asset managers including Och-Ziff Capital Management Group. In October, for instance, a group of investors led by Starwood Capital Group bought $2.77 billion of construction loans, many of them to condominium developers, made by Corus Bank of Chicago before regulators shut it down.
Analysts at Citigroup Inc. said they expect the latest transaction to add as much as $15 million in earnings in the fiscal year ending Nov. 30, followed by $20 million to $30 million the next year.
Lennar, the fourth-largest U.S. home builder in terms of sales last year, has long been known at least as much for its financial skills as its ability to put up drywall. Abivem a Lennar home construction entrance sign is displayed at one of its developments last month in Homestead, Fla.
.The loans have an average balance of $555,000, and 90% of them are classified as nonperforming, Lennar said. One-third of the loans in Georgia, while 19% are in Nevada and 11% in Arizona. One-fourth of the loans cover partially developed land, while 24% are on residences. The package also includes retail, office and industrial loans.
Lennar said it did "extensive due diligence" over four months, including a review of loan documents and local real-estate conditions. The company said it might foreclose on some loans and then sell the property or develop and operate it. In other cases, Lennar said it might be able to get borrowers to pay off loans for more than it paid for them.
Lennar and the FDIC are supplying $1.22 billion of capital to purchase the portfolio, which has a face value of $3.05 billion. Lennar is putting up $243 million in cash and $22 million of working capital, the company said, and its maximum loss is limited to that equity and working capital. The FDIC is to contribute $365 million in equity and $627 million of debt financing at 0% interest.
"It sounds like a good deal, but the jury's out," said Josh Levin, a home-building analyst at Citigroup Inc. "We'll only know a few years from now how good of a deal of it was."
Lennar's bid shows that "the land rush is on again," said Tony Avila, a San Francisco financial adviser to home builders who manages the $100 million Encore Housing Opportunity Fund. Mr. Avila said his fund and a private-equity firm jointly bid "substantially less" than Lennar did for the loan package.
Source: http://online.wsj.com/article/SB10001424052748703382904575059262041851780.html#articleTabs%3Darticle
By DAWN WOTAPKA And JAMES R. HAGERTY
Write to Dawn Wotapka at dawn.wotapka@dowjones.com
The Miami builder's shares surged nearly 9% on Thursday after it announced late Wednesday winning an auction for a portfolio of about 5,500 residential and commercial real estate loans from 22 failed banks. Lennar agreed to pay $243 million for a 40% stake in the portfolio. The rest will be held by the Federal Deposit Insurance Corp.
"I think this is a home run" for Lennar, said Ivy Zelman, chief executive of Zelman & Associates, a research firm. She said the return on capital should be at least 20% and could be far higher. Lennar is likely to make more such investments, though not immediately, and may raise capital to increase its capacity for them, she said.
Lennar, the fourth-largest U.S. home builder in terms of sales last year, has long been known at least as much for its financial skills as its ability to put up drywall. After the real-estate slump of the early 1990s, it pounced on assets being sold by lenders at knockdown prices.
In today's bidding for such assets, Lennar is mostly up against private-equity firms and asset managers including Och-Ziff Capital Management Group. In October, for instance, a group of investors led by Starwood Capital Group bought $2.77 billion of construction loans, many of them to condominium developers, made by Corus Bank of Chicago before regulators shut it down.
Analysts at Citigroup Inc. said they expect the latest transaction to add as much as $15 million in earnings in the fiscal year ending Nov. 30, followed by $20 million to $30 million the next year.
Lennar, the fourth-largest U.S. home builder in terms of sales last year, has long been known at least as much for its financial skills as its ability to put up drywall. Abivem a Lennar home construction entrance sign is displayed at one of its developments last month in Homestead, Fla.
.The loans have an average balance of $555,000, and 90% of them are classified as nonperforming, Lennar said. One-third of the loans in Georgia, while 19% are in Nevada and 11% in Arizona. One-fourth of the loans cover partially developed land, while 24% are on residences. The package also includes retail, office and industrial loans.
Lennar said it did "extensive due diligence" over four months, including a review of loan documents and local real-estate conditions. The company said it might foreclose on some loans and then sell the property or develop and operate it. In other cases, Lennar said it might be able to get borrowers to pay off loans for more than it paid for them.
Lennar and the FDIC are supplying $1.22 billion of capital to purchase the portfolio, which has a face value of $3.05 billion. Lennar is putting up $243 million in cash and $22 million of working capital, the company said, and its maximum loss is limited to that equity and working capital. The FDIC is to contribute $365 million in equity and $627 million of debt financing at 0% interest.
"It sounds like a good deal, but the jury's out," said Josh Levin, a home-building analyst at Citigroup Inc. "We'll only know a few years from now how good of a deal of it was."
Lennar's bid shows that "the land rush is on again," said Tony Avila, a San Francisco financial adviser to home builders who manages the $100 million Encore Housing Opportunity Fund. Mr. Avila said his fund and a private-equity firm jointly bid "substantially less" than Lennar did for the loan package.
Source: http://online.wsj.com/article/SB10001424052748703382904575059262041851780.html#articleTabs%3Darticle
By DAWN WOTAPKA And JAMES R. HAGERTY
Write to Dawn Wotapka at dawn.wotapka@dowjones.com
Friday, February 12, 2010
CitiMortgage launches program for distressed homeowners
Distressed Florida homeowners whose loans were financed by CitiMortgage may be able to stay put for a while and avoid the pain of foreclosure proceedings under a new program, the company said Thursday.
The deed-in-lieu program – which, beginning Friday, will be tested in Florida and five other states – allows those facing foreclosure to remain in their homes for six months, in exchange for signing over their property deeds to CitiMortgage at the end of the period.
It is designed “to help homeowners make a smooth transition into the next chapter of their lives,” according to a news release.
Deed in lieu of foreclosure is a process in which homeowners give away their property to the lender, which then sells it to retrieve a part or all of the loan balance owed.
While it may be welcome news for those facing the loss of their home, Weston-based foreclosure attorney Roy Oppenheim questions the timing.
“We are two years into the crisis, and now they are trying to get creative? This was the kind of stuff we wanted to see a year ago,” he said.
The program comes with several caveats: The homeowner must hold the first mortgage with a clear title owned by CitiMortgage and be at least 90 days delinquent. There can be no second mortgage.
Borrowers must maintain the property in its current condition and pay utility costs. Other costs, such as homeowner association and escrow fees, are to be determined on a case-by-case basis, depending on the homeowner’s ability to pay.
They also must agree to bi-monthly meetings with relocation counselors.
CitiMortgage will provide a minimum of $1,000 in relocation costs to help borrowers.
So, what’s in it for CitiMortgage? For one, it spares the lender the expense of going through a foreclosure, which is lengthy and expensive, noted Mark Rodgers, Citigroup’s director of public affairs.
Second, because the home must be maintained, its value is not diminished.
“Once the owner moves, we get the property that’s in better condition, so we can immediately market it,” Rodgers said. “It’s much more likely to sell quickly in good condition than in bad condition.”
Scott Coloney, of the Foreclosure Response Team in Fort Lauderdale, said he’s been hearing a lot about deed-in-lieu programs among those in the banking industry, but he doesn’t think it’s going to solve the overwhelming problem plaguing the real estate market – the glut of foreclosures.
“The idea is to create transactions,” he said. “To get the economy going, you need movement.”
CitiMortgage hopes that, by allowing homeowners to stay put for a while, it will keep more homes from being added to the existing backlog.
“If we can get them out in a more measured way, we can hopefully avoid that,” Rodgers said.
On Thursday, RealtyTrac reported that one in every 187 homes in Florida received a foreclosure notice in January.
Before borrowers can enter the program, they will be evaluated for a permanent mortgage modification. If they don’t qualify for that, a short sale, in which the company might accept a buyer’s offer for less than the outstanding amount of the loan, will be considered.
If that is unfeasible, the next step would be the deed-in-lieu program.
The program, however, may prove to be only a drop in the bucket when you consider how many homeowners nationwide face default.
Rodgers said that, within the entire six-state pilot program – which includes Texas, Illinois, Michigan, New Jersey and Ohio – the company expects just 20,000 may be eligible and only about 1,000 will actually participate.
However, he noted that it is a pilot program and, for it to work, it will have to achieve some scale.
“We are looking to see if this is successful, then maybe others will join us,” Rodgers said.
In November, Fannie Mae announced a Deed for Lease Program that lets borrowers who don’t qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease.
Under that program, borrowers pay rent, which, in most cases, is lower than the mortgage payment.
Source: http://southflorida.bizjournals.com/southflorida/stories/2010/02/08/daily40.html?s=industry&page=2
The deed-in-lieu program – which, beginning Friday, will be tested in Florida and five other states – allows those facing foreclosure to remain in their homes for six months, in exchange for signing over their property deeds to CitiMortgage at the end of the period.
It is designed “to help homeowners make a smooth transition into the next chapter of their lives,” according to a news release.
Deed in lieu of foreclosure is a process in which homeowners give away their property to the lender, which then sells it to retrieve a part or all of the loan balance owed.
While it may be welcome news for those facing the loss of their home, Weston-based foreclosure attorney Roy Oppenheim questions the timing.
“We are two years into the crisis, and now they are trying to get creative? This was the kind of stuff we wanted to see a year ago,” he said.
The program comes with several caveats: The homeowner must hold the first mortgage with a clear title owned by CitiMortgage and be at least 90 days delinquent. There can be no second mortgage.
Borrowers must maintain the property in its current condition and pay utility costs. Other costs, such as homeowner association and escrow fees, are to be determined on a case-by-case basis, depending on the homeowner’s ability to pay.
They also must agree to bi-monthly meetings with relocation counselors.
CitiMortgage will provide a minimum of $1,000 in relocation costs to help borrowers.
So, what’s in it for CitiMortgage? For one, it spares the lender the expense of going through a foreclosure, which is lengthy and expensive, noted Mark Rodgers, Citigroup’s director of public affairs.
Second, because the home must be maintained, its value is not diminished.
“Once the owner moves, we get the property that’s in better condition, so we can immediately market it,” Rodgers said. “It’s much more likely to sell quickly in good condition than in bad condition.”
Scott Coloney, of the Foreclosure Response Team in Fort Lauderdale, said he’s been hearing a lot about deed-in-lieu programs among those in the banking industry, but he doesn’t think it’s going to solve the overwhelming problem plaguing the real estate market – the glut of foreclosures.
“The idea is to create transactions,” he said. “To get the economy going, you need movement.”
CitiMortgage hopes that, by allowing homeowners to stay put for a while, it will keep more homes from being added to the existing backlog.
“If we can get them out in a more measured way, we can hopefully avoid that,” Rodgers said.
On Thursday, RealtyTrac reported that one in every 187 homes in Florida received a foreclosure notice in January.
Before borrowers can enter the program, they will be evaluated for a permanent mortgage modification. If they don’t qualify for that, a short sale, in which the company might accept a buyer’s offer for less than the outstanding amount of the loan, will be considered.
If that is unfeasible, the next step would be the deed-in-lieu program.
The program, however, may prove to be only a drop in the bucket when you consider how many homeowners nationwide face default.
Rodgers said that, within the entire six-state pilot program – which includes Texas, Illinois, Michigan, New Jersey and Ohio – the company expects just 20,000 may be eligible and only about 1,000 will actually participate.
However, he noted that it is a pilot program and, for it to work, it will have to achieve some scale.
“We are looking to see if this is successful, then maybe others will join us,” Rodgers said.
In November, Fannie Mae announced a Deed for Lease Program that lets borrowers who don’t qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease.
Under that program, borrowers pay rent, which, in most cases, is lower than the mortgage payment.
Source: http://southflorida.bizjournals.com/southflorida/stories/2010/02/08/daily40.html?s=industry&page=2
Thursday, February 11, 2010
Financing troubles loom for commercial real estate
While the real estate industry in South Florida and across the country may be showing some glimmers of hope, there still is likely to be more pain in 2010 -- particularly when it comes to commercial real estate financing.
That was the consensus Tuesday from a variety of local and national industry leaders gathered for the Urban Land Institute's South Florida Economic & Development Outlook.
``We are starting to see the bottom,'' said Eric Swanson, executive vice president of Flagler, a Coral Gables real estate firm, and chair of ULI's Southeast Florida/Caribbean Council. ``It's probably not going to be a great year, but it's going to be a better year than 2009. The mood is pretty optimistic for 2011.''
One of the major problems looming is a commercial real estate finance crisis, as commercial mortgages come due for refinancing on projects that are underwater.
Delinquencies on Commercial Mortgage Backed Securities are expected to steadily increase from the current level of about 4 percent, hitting a peak in late 2012 at 12 percent.
``This crisis could have a long tail,'' said Stephen Blank, senior resident fellow in finance for ULI. ``The aftershocks could go on forever.''
The issue is what the industry has dubbed the game of ``extend and pretend.'' That refers to a tendency by lenders to extend the term of a loan in order to avoid writing down the value of the asset, which could have seen as much as a 50 percent decline.
Some speakers blamed the government for failing to do anything about the problem and propping up the banks with federal support.
NO CATALYST
The question is whether what happened during the savings and loan crisis -- when properties were sold off at fire-sale prices by the Resolution Trust Corporation -- would have yielded better results.
``There is no catalyst today for things to move,'' said Merrick Kleeman, managing partner of Wheelock Street Capital, a real estate private equity firm. ``Last time the government was the enforcer. This time they're the bartender.''
Troy Taylor, president of Algon Group, which specializes in distressed asset workouts nationally, says the key to a successful workout is getting both lenders and owners to accept the new reality of what projects are worth.
Until that happens on a large scale, any recovery is going to be hampered.
``You're not going to see the bottom until you blow through all this stuff,'' Taylor said. ``Let's go have surgery and put it behind us.''
The worst thing a property owner can do, said Taylor and other speakers, is use available cash to keep making interest payments on a project that is already underwater. Taylor said that workouts are more effective if a firm such as his comes to the table before the final hour because a major restructuring can take six months to a year.
Cyril ``Sid'' Spiro, chairman and chief executive officer of Regent Bank, agreed that one of the biggest problems is borrowers who don't recognize issues ``quickly'' and bring them to the attention of lenders.
CROSSROADS
On a broader economic perspective, an executive with the Federal Reserve Bank of Atlanta suggested the economic recovery stands at a crossroads. The question is whether the recovery is a quick one (shaped like a V) or long and ``painful.''
Dr. David Altig, senior vice president and director of research at the Atlanta Fed, said he tends to take the more pessimistic view but wouldn't be surprised to see things go the other way.
What concerns Altig most is the level of unemployment, which is higher in Florida than the U.S. average. ``If the unemployment rate doesn't come down significantly, the lifting of the fog is not going to happen,'' he said.
Source: http://www.miamiherald.com/classifieds/real-estate/story/1471529.html
That was the consensus Tuesday from a variety of local and national industry leaders gathered for the Urban Land Institute's South Florida Economic & Development Outlook.
``We are starting to see the bottom,'' said Eric Swanson, executive vice president of Flagler, a Coral Gables real estate firm, and chair of ULI's Southeast Florida/Caribbean Council. ``It's probably not going to be a great year, but it's going to be a better year than 2009. The mood is pretty optimistic for 2011.''
One of the major problems looming is a commercial real estate finance crisis, as commercial mortgages come due for refinancing on projects that are underwater.
Delinquencies on Commercial Mortgage Backed Securities are expected to steadily increase from the current level of about 4 percent, hitting a peak in late 2012 at 12 percent.
``This crisis could have a long tail,'' said Stephen Blank, senior resident fellow in finance for ULI. ``The aftershocks could go on forever.''
The issue is what the industry has dubbed the game of ``extend and pretend.'' That refers to a tendency by lenders to extend the term of a loan in order to avoid writing down the value of the asset, which could have seen as much as a 50 percent decline.
Some speakers blamed the government for failing to do anything about the problem and propping up the banks with federal support.
NO CATALYST
The question is whether what happened during the savings and loan crisis -- when properties were sold off at fire-sale prices by the Resolution Trust Corporation -- would have yielded better results.
``There is no catalyst today for things to move,'' said Merrick Kleeman, managing partner of Wheelock Street Capital, a real estate private equity firm. ``Last time the government was the enforcer. This time they're the bartender.''
Troy Taylor, president of Algon Group, which specializes in distressed asset workouts nationally, says the key to a successful workout is getting both lenders and owners to accept the new reality of what projects are worth.
Until that happens on a large scale, any recovery is going to be hampered.
``You're not going to see the bottom until you blow through all this stuff,'' Taylor said. ``Let's go have surgery and put it behind us.''
The worst thing a property owner can do, said Taylor and other speakers, is use available cash to keep making interest payments on a project that is already underwater. Taylor said that workouts are more effective if a firm such as his comes to the table before the final hour because a major restructuring can take six months to a year.
Cyril ``Sid'' Spiro, chairman and chief executive officer of Regent Bank, agreed that one of the biggest problems is borrowers who don't recognize issues ``quickly'' and bring them to the attention of lenders.
CROSSROADS
On a broader economic perspective, an executive with the Federal Reserve Bank of Atlanta suggested the economic recovery stands at a crossroads. The question is whether the recovery is a quick one (shaped like a V) or long and ``painful.''
Dr. David Altig, senior vice president and director of research at the Atlanta Fed, said he tends to take the more pessimistic view but wouldn't be surprised to see things go the other way.
What concerns Altig most is the level of unemployment, which is higher in Florida than the U.S. average. ``If the unemployment rate doesn't come down significantly, the lifting of the fog is not going to happen,'' he said.
Source: http://www.miamiherald.com/classifieds/real-estate/story/1471529.html
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