Gilbert starting to frown on apartments

July 12, 2008 - 6:42PM

David Biscobing, Tribune

The amendments were buried in Gilbert's Tuesday City Council meeting agenda. Items 23 and 24: Requests to rezone two land parcels near Higley and Queen Creek roads.

They were amendments proposed by developers to change town plans, essentially to allow construction for apartments. Several years ago, the motions may have passed.

But not Tuesday.

And nearly every council member and the mayor made one thing clear: Gilbert has enough apartments.

"I hope the planning department gets the message that we aren't looking for more (apartments)," Mayor Steve Berman said.

Apartments are becoming a concern in Gilbert, and not just for officials. Residents and police also have raised issues.

The concerns include worries of a demographic shift, a rise in crime and a drop in Gilbert's highly touted per capita income.

The town has nearly 30 apartment complexes with more than 6,000 units. With about 1,200 units under construction and even more proposed, some officials say it's becoming clear that developers are eroding the vision planned for the town.

"I worry about the trend of the nitpicking slowly," Councilman Dave Crozier said. "Eventually the complete complexion changes. I'm not sure of how much more of this type of housing we actually need. It's good to have balance, but it seems to be coming in waves."

Some council members are hedging the topic by calling for more discussion at the council's retreat on Aug. 15 and 16, but Councilman Don Skousen put it directly.

"I think we are building what's going to become slums and problem areas," he said.

Council members couldn't officially deny the amendments at Tuesday's meeting. They had to be withdrawn and rescheduled because of an error in the public notice that didn't correctly classify the rezoning, town planners said.

But if adopted, the amendments could allow more than 1,100 units to squeeze into two parcels of land, about 21 and 27 acres each. The moves would essentially triple the number of people designated to live on the parcels, expanding zoning from 3.5 to five housing units per acre to 14 to 25 units per acre.

"I understand as a real estate broker what they are doing," Councilman Steve Urie said at the meeting. "They are coming in and looking at a parcel that's zoned for lower density and then coming in with a general plan amendment so they don't have to pay the price of what land would cost if it was higher density.

"If they can pull it off, they save themselves a ton of money and can bring in their projects."

While developers look to Gilbert to capitalize on cheaper land, the issue of apartments appears to be more divisive than just money.

"The things I'm proud of in Gilbert are that we have the highest per capita income in Arizona, and we also have a very low crime rate," Berman said. "Both those things are driven by demographics. And frankly, the more we go to multifamily, it's going to drive down both those statistics."

Some apartments complexes have already become headaches for the police, particularly San Clemente apartments at Germann and Power roads.

While police officials hesitate to call the complex or others a problem, there has been a strong push to rein in criminal activity.

Apartment complexes accumulated more than 4,000 calls for police service last year and nearly 1,000 incident reports. San Clemente was the worst offender with 775 calls for service and 145 incident reports.

The community surrounding San Clemente also has taken issue with the complex.

Parents of students at nearby Power Elementary School resisted a school boundary shift last month that included children who lived in San Clemente.

"I've never seen the community come out and support apartments or ask for apartments," Berman said.

Gilbert's general plan includes zoning for higher-density multifamily housing. In years past, town officials have shifted zoning to allow for more.

While the council will weigh the apartment issue in greater detail next month, it seems clear the rise of apartments in Gilbert is reaching a ceiling.

"We have to push them back to where it's designated," Urie said. "It's where they should be. And sorry if the price of the land isn't where the buyer wants it."

Foreclosure-rescue legislation benefits both borrowers, lenders

by Julie Hirschfeld Davis - Jul. 13, 2008 12:00 AM
Associated Press

The foreclosure-rescue legislation moving through Congress would let financially strapped homeowners who would normally be considered too debt-ridden to qualify for safe, government-insured mortgages refinance their home loans through the Federal Housing Administration to get more affordable loans with lower monthly payments.

It would help those who have seen their mortgage rates balloon just as their home values are plummeting, allowing them to keep their homes if they show they can make the payments on a new loan.

It also carries substantial benefits for banks and other mortgage holders, which could avoid often-costly foreclosures. After taking some loss on their existing loans to homeowners, the lenders would be assured of a government payoff if their new replacement loans turn sour. The bank would have an incentive to put mortgages into the program in cases in which the losses they face are smaller than what it would cost to foreclose.

How the program would work

In the first example below, the homeowner could afford a new mortgage and the bank would have a clear incentive to allow an FHA-backed refinance. In the second, the borrower is so financially strapped that the mortgage holder would have little interest in agreeing to a refinance; the bank could do better by foreclosing. The examples do not include insurance premiums and property taxes that may be added to the monthly mortgage payment.

Example 1

Home bought in 2005 for $200,000 - now worth $150,000. Loan is $200,000.

FHA PLAN

Borrower: Shows he can afford a loan for 90 percent of the home's value: $135,000.

Lender: Agrees to lower the principal of the loan by 15 percent of the reassessed value: $127,500 (a 36 percent loss).

Borrower: Monthly payment of $1,470 at 8 percent balloon rate falls to $875 at 6.75 percent fixed rate.

FORECLOSURE

Borrower: Loses home.

Lender: Seizes home and pays foreclosure expenses, leaving $110,000 (a 45 percent loss).

Example 2

Home bought in 2006 for $150,000 - now worth $120,000. Loan is $150,000.

FHA PLAN

Borrower: Shows he can afford a loan for 75 percent of the home's value - $90,000.

Lender: Agrees to lower the principal of the loan by 30 percent of the reassessed value: $84,000 (a 44 percent loss).

Borrower: Monthly payment of $1,200 at 8.9 percent adjusted reset rate would fall to $600 at 7 percent fixed rate.

FORECLOSURE

Borrower: Loses home.

Lender: Seizes home and pays foreclosure expenses, leaving $87,600 (a 41 percent loss).

Source: House Financial Services Committee, Bankrate.com.

Foreclosed home: Buyer's dream or hidden nightmare

David van den Berg - Jul. 12, 2008 08:00 AM

The Arizona Republic

As the number of foreclosed houses in the Southeast Valley grows, potential buyers need to remember a simple message.

When buying a foreclosed property, you're getting it as is.

And, the financial institutions who have taken over the property may not know the history of the house, including major repairs made, as sellers do with non-foreclosed property.

"You have to inspect the home and look at the defects," said Ed Cassady, an associate broker with ReMax Alliance Group in Gilbert, who arranges free monthly tours of foreclosed homes. The next is scheduled for July 26.

"We have some foreclosed homes that are in excellent condition and some that are challenged."

Earlier in June, Cassady offered a bus tour of 11 foreclosed houses in Gilbert. Of the houses on tour, three needed significant repairs. Two were in move-in, nearly mint condition.

"I thought a lot of what we were going to see would need major repairs," said Andrea Ricketts , who with her husband, daughter and parents joined the tour in search of a family investment.

"It really kind of changes the way you think of them," said Sandy Sanford, Ricketts' mother.

As of June 26, 25 percent of houses listed for sale in Gilbert are either foreclosed or properties requiring lender or corporate approval for sale, according to Arizona Regional Multiple Listing Service data Cassady provided.

That's more than any other Southeast Valley municipality.

Percentages in much of the Valley, including in Mesa and Chandler, are in the 20s.

The number of foreclosed houses has jumped in the Southeast Valley.

In May 2007 in Gilbert, at least 10 foreclosed single family houses were sold, according to Realty Studies at Arizona State University's Polytechnic Campus in Mesa. From May 1 to May 15, 2008, the figure jumped to 75.

.In Mesa, the figure jumped from at least 25 to 125.

"I can't remember the last time I put a contract in on a regular, non bank-owned property," said Jason Williams, partner in The Solid Group, a firm that recently moved its offices to Rome Towers in Gilbert. The firm does most of its work in real estate, and works to help buyers find foreclosed houses.

Significantly reducing the Valley's inventory of foreclosed homes could take three years, Williams said Jason Williams, president of The Solid Group, a Gilbert firm that does most of its work in real estate, and works to help buyers find foreclosed

Buying foreclosed houses works best for investors, people who want to put work into their homes and adventurous first-time buyers, Cassady said.

Buyers of any background who purchase a foreclosed home should pay close attention to the neighborhood it's in, said Jay Butler, director of ASU's Realty Studies. Conditions that impact one household impact others in the area, he said, and income levels tend to cluster together.

"Homes in more traditional neighborhoods are likely to recover faster," he said. "You really don't want to buy into a hornet's nest problem."

Paying attention to the condition of the house, the neighborhood it's in and whether its priced right are tips buyers of non-foreclosed homes should follow anyway, said R.L. Brown, publisher of the Phoenix Housing Market Letter.

"It's just a different seller," he said. "There's a common misconception that there's some special status of a foreclosed house."

Prices of foreclosed homes can be cheaper, and financing can be favorable, Brown said.

"The terms might be more competitive," he said.

The number of businesses working to help home buyers find those terms is growing. Cassady's office has a group of agents who specialize in foreclosed homes, and he's one of the agents. Real estate is no different than any other sales business, in its need to respond to economic conditions.

"I came from a background that if something major is happening, you need to get into it," he said. "To increase my business, it's just a natural progression. It would be hard for me to believe that there are Realtors out there ignoring the foreclosures."

Michael Taylor, a Realtor with MoveTime Realty in Scottsdale, certainly isn't. .

His company provides personalized tours instead of the larger group bus tours. The firm is less than a year old and plans to specialize in working with buyers and banks on foreclosed house transactions. The company is finding a lot of work, especially in the part of the market under $250,000, thanks in part to increased usage of FHA loans. The loans are helping buyers get into houses with less or no money down, Taylor said.

"Real estate's on sale," he said.

Daxa and Naren Desai, who recently moved from Pennsylvania and are renting in Chandler, are confident in the local housing market and are looking for a house to buy.

They toured foreclosed or corporately owned houses in Chandler last month. In one, mail had piled up by the front door.

Daxa said she gave some thought to the stories of the people who had trashed foreclosed homes.

Housing-crisis worries deepen

Calif. lender IndyMac seized by regulators; 1st big bank to close since '90s S&L crisis

Jul. 12, 2008 12:00 AM
Washington Post

WASHINGTON - Senior government officials prepared emergency steps Friday to rescue troubled mortgage giants Fannie Mae and Freddie Mac but stopped short after a campaign of public statements eased immediate concerns about the stability of the institutions.

But federal regulators were forced Friday to seize California-based IndyMac Bancorp after a run by depositors led to the second-largest failure ever of a U.S. financial institution. The bank, which was taken over by the Federal Deposit Insurance Corp., became the first major bank to shutter its doors since the savings-and-loan crisis of the early 1990s. IndyMac saw its holdings battered by the downturn in the housing market.

Similar troubles have battered Fannie Mae and Freddie Mac. With the companies' stock value draining away in recent days, Treasury Department and Federal Reserve officials have been discussing several options, including allowing the companies to swap some of their holdings in troubled securities for public money as well as accessing government loans, according to officials. Fannie Mae and Freddie Mac might also be allowed to tap an expanded line of credit from the Treasury.

Gilbert among 10 fastest-growing cities

July 10, 2008 - 7:14PM

Blake Herzog, Tribune

Once again, the U.S. Census Bureau has named Gilbert one of the 10 fastest-growing cities in the nation. What's perhaps more surprising in today's economic climate is a jump in the number of new housing permits being issued by the town over the last two months.

Census: Mesa 3rd-largest AZ city, Chandler 5th

Census shows heavy Ariz. push to suburbs

Those selling real estate in Gilbert also report a somewhat improving picture, though home prices don't appear to be following suit just yet.

"It's not a bad time to be buying a house, with these prices that have adjusted so much," said Jim Nawrocki, a real estate broker with Remax Alliance Group in Gilbert.

The U.S. Census Bureau reported Thursday that Gilbert was the eighth-fastest-growing city with a population larger than 100,000 in the United States from July 2006 to July 2007, gaining 11,308 or 5.8 percent. The only other Arizona city that made the top 25 on this percentage-based list was Peoria, No. 23 at 3 percent.

The plummeting housing market of the last six months may have led some to wonder whether Gilbert will sustain that level of growth, but officials saw a substantial jump in the number of single-family housing permits pulled in recent months: 170 in May and 156 in June, compared to 87 in April and 43 in January.

Numbers such as these spurred the Town Council to eliminate 22 jobs and lay off 12 employees while putting together the budget for the fiscal year which has just begun.

Most of the affected positions were in the development services department, and despite the recent uptick, "We don't need to replace them yet; the numbers aren't that big," Town Councilman Don Skousen said.

Bobbi Smith, a member of Gilbert's Parks and Recreation Advisory Board, said that lulls in growth aren't always welcome in cities that have been scrambling to keep up with demand for services from new residents.

"The one good thing that has come about is that it's a good environment to buy land," she said.

Gilbert development fees run between $16,000 and $19,000 for single-family homes, town spokesman Garin Groff said. These cover the anticipated cost of new parks, streets, sewer capacity and other items the town will need to build.

Sales of existing homes don't bring the same immediate cash infusion into the town budget, but new residents do generate additional sales tax, utility fees and other revenue for the town.

Ken Boltz, a real estate agent at Remax Alliance Group, said "in the last three months I have seen a dramatic increase in sales," which could point to a recovery but there are other factors involved. Summer is typically the peak homebuying season, and real estate professionals who have stayed in the field may be picking up some of the slack from those who left when the market crashed.

Nawrocki said that personally, "I've had a nice string of sales lately, but none of them are in Gilbert." Overall, sales in the south East Valley are somewhat outpacing those in the rest of the Valley according to Multiple Listing Service data. In June, just over 1,700 homes were sold in the south East Valley, and in May, 1,787. There were about 1,500 in April, he said, "so we've seen a fairly substantial increase."

Roy Jackson with Century 21 Platinum, another Gilbert real estate office, said he's also seeing a pronounced increase in interest in Gilbert homes, compared to areas further southeast, but this doesn't appear to be driven by people trying to move further into the metro area to accommodate soaring gas prices.

"You'd think so, but that doesn't seem to be the case," he said. "I live in Gold Canyon, so I think you just get used to where you are."

Nawrocki said most of his clients appear to be people looking to live in their homes or investors who intend to rent properties for a period of time rather than flip them to another buyer, and that's one of the first signs of a true recovery.

The town continues to hold mixers for new residents, a tradition since 2002. Groff said 60 to 80 people are expected at the next one July 19. It will be 9:30 a.m. to 11:30 a.m. at the Southeast Regional Library at Gilbert and Guadalupe roads. A continental breakfast, maps and information about programs and volunteer opportunities will be provided. To reserve a seat, call (480) 503-6767

Kyl speaks before Senate panel on land swap

by Jerry Kammer - Jul. 10, 2008 12:00 AM
Republic Washington Bureau

WASHINGTON - There is "virtual total unanimity among the leaders of the state of Arizona" in support of a proposed land exchange near Superior sought by the Resolution Copper Co., Sen. Jon Kyl said Wednesday.

He urged quick action on the bill he is sponsoring to close the deal.

Testifying before the Senate Public Lands and Forests Subcommittee, the Arizona Republican said the federal land the company would receive includes a copper find "that is almost unsurpassed, perhaps in the history of the United States."

He said a mine there would bring enormous economic benefit to an area that has struggled since the nearby Magma Mine closed in 1996.

But Shan Lewis, president of the Inter Tribal Council of Arizona, opposed the bill, citing concerns about damage to lands that are culturally significant to the San Carlos Apache Tribe, including the massive escarpment overlooking Superior known as Apache Leap.

Lewis, vice chairman of the Fort Mojave Tribe, said Resolution Copper Co. is owned by two foreign companies, Rio Tinto and BHP Billiton. Lewis urged the panel to "resist being pressured into giving these foreign entities such incredible rights to land and resources."

Resolution Copper President David Salisbury said the mine would meet 20 percent of the nation's copper demand for about 50 years. He also projected that operations would generate 1,400 jobs.

Kyl said the demand for copper would "increase exponentially" as the U.S. auto market moves toward hybrid cars, which use far more copper wiring than conventional cars.

Kyl's bill would direct the secretary of Agriculture to transfer to the company 3,025 acres. The 5,500 acres the federal government would receive in return include environmentally sensitive land along the lower San Pedro River near Mammoth, a parcel adjacent to the Las Cienegas National Conservation area near Sonoita, and land within the Dripping Springs area near Kearny.

If the bill passes the Senate, action would switch to the House Subcommittee on National Parks, Forests and Public Lands. That panel's chairman is Arizona Democrat Rep. Raul Grijalva, who has expressed sympathy for the concerns raised by Indian tribes and environmentalists.

Roger Featherstone, a Tucson resident who represents the environmental group Earthworks, told the Senate panel the Kyl bill was "the height of special interest legislation."

Featherstone, who said he also was representing the Sierra Club's Grand Canyon chapter, said the Interior Department has a "bad record in valuing public lands" and ensuring that taxpayers get fair return for exchanged lands.

The Resolution Copper land proposal achieved national notoriety in February when Arizona Rep Rick.

Renzi was indicted on charges of attempting to pressure the company into buying land from a former business partner who owed him money. Renzi wanted the company to offer the land as part of the exchange with the federal government, officials said.

No deal was concluded, however. The company said in a news release that it "has cooperated with the U.S. Attorney's Office and other federal agencies since the early stages of this investigation."

Population Still Favors Sunny Localities

The U.S. Census Bureau has released 2007 population updates identifying fastest growing areas.

Here are the 10 cities with the largest numerical increase from July 2006 to July 2007:

Houston: 38,932
Phoenix: 34,941
San Antonio: 32,680
Fort Worth: 29,453
New Orleans: 28,926
New York: 23,960
Atlanta: 20,623
Austin, Texas: 17,648
Charlotte, N.C.: 17,471
Raleigh, N.C.: 15,148

Here are the 10 largest U.S. cities as of July 2007:

New York: 8,274,527
Los Angeles: 3,843,340
Chicago: 2,836,658
Houston: 2,208,180
Phoenix: 1,552,259
Philadelphia: 1,449,634
San Antonio: 1,328,984
San Diego: 1,266,731
Dallas: 1,240,499
San Jose: 939,899

Source: U.S. Census Bureau (07/10/2008)

Housing Inventories Fall in Major Cities

The supply of homes dipped 2.4 percent in a year-over-year change in 12 of 18 cities where ZipRealty Inc. does business, the brokerage says.

The data covers listings of single-family homes, condos, and town houses for sale on local multiple-listing services. This is the first decline since the firm began keeping tabs in mid-2006.

The data doesn’t include New York City, but Miller Samuel Inc., an appraisal firm, says the city’s inventory was up 31 percent compared to June of 2007 because Wall Street firms have cut jobs.

The following is a list of cities and their percentage of inventory decline:

• Boston: -10%
• Dallas: -10.6%
• Houston: -2.4%
• Las Vegas: -18.5%
• Los Angeles: -7.4%
• Minneapolis: -4.8%
• Orange County, Calif.: -15%
• Orlando: -3.1%
• Phoenix: -2.6%
• Sacramento: -22.4%
• San Diego: -6.7%
• Tampa, Fla.: -7%

Source: The Wall Street Journal, James R. Hagerty (07/10/08)

Bankruptcies hit year's high in June

by Russ Wiles - Jul. 10, 2008 12:00 AM
The Arizona Republic

Valley bankruptcies in June hit their highest level of the year, pushed up by lingering consumer-debt burdens and contrasting with easing financial strains nationally.

A total of 1,118 individuals and small businesses filed for creditor protection last month in metro Phoenix, representing a near-doubling from 582 filings in June 2007, according to the U.S. Bankruptcy Court in Phoenix.

That raised the first-half total to 5,711 filings from 3,110 Chapter 7 filings, which discharge most debts and provide for a fresh financial start, accounted for nearly 4 in 5 bankruptcies. Chapter 13 debt-repayment plans accounted for most of the rest.

Although resets on subprime adjustable-rate mortgages are expected to peak this summer, thousands of Arizonans may face pressure beyond that.

"I think we'll see a huge influx of bankruptcies in the fall and early winter," said Gilbert attorney Chris Dutkiewicz, noting that many recent filers have been struggling with debt burdens for months.

As a positive, Dutkiewicz hasn't noticed many people seeking protection due to job losses despite a mildly worsening employment situation.

Grim bankruptcy figures also have shown up elsewhere around the state, although the Valley appears among the hardest-hit areas. Compared with the 92 percent spike in Valley bankruptcies in June, the Yuma area had a 62 percent increase and Tucson, 43 percent.

Statewide, bankruptcies rose 76 percent in June from a year earlier. They're up 73 percent for the first six months.

Nationally, bankruptcy filings rose a milder 21 percent compared with June 2007 and actually fell 9 percent from May, reported the American Bankrutpcy Institute and National Bankruptcy Research Center.

For the first half, U.S. filings were up 30 percent over the same stretch in 2007. Subprime-mortgage pressures have been more acute in Arizona and a few other states.

"The overall trend of rising bankruptcies reflects the growing financial strain felt by U.S. households burdened by high debt, rising mortgage costs and falling home values," said the ABI's executive director, Samuel Gerdano, in a statement.

Down-payment aid debated

Home buyers turning to non-profits for cash

by J. Craig Anderson - Jul. 10, 2008 12:00 AM
The Arizona Republic

Arizonans treading in the housing market's choppy waters have found an unusual lifeline - a group of non-profit organizations that siphon down payments from home sellers to buyers.

Use of the decade-old practice known as down-payment assistance has dramatically increased since the demise of subprime lending because it offers another opportunity for buyers without substantial savings to obtain mortgage loans.

Advocates of down-payment assistance contend it has kept Arizona's failing real-estate market on life support by opening doors for responsible borrowers who simply lack the cash for a down payment.

Critics of the practice say it allows home sellers to kick back a percentage of bank-loaned money to buyers, which would be illegal if not done through a non-profit intermediary.

Housing statistics also indicate that charity-assisted loans default at higher rates compared with loans where the down payment comes from the buyer.

The Federal Housing Administration, which insures all loans involving down-payment assistance, has argued that such loans carry a higher default rate and could ultimately bankrupt the FHA.

A housing-reform bill up for vote in the U.S. Senate this week calls for eliminating the practice, while a competing resolution in the House would allow it to continue with some restrictions.

Phoenix loan originator Dean Wegner said nearly half of the home loans being issued involve seller contributions to special non-profit organizations that gift the money - usually 3 to 6 percent of the home's sale price - to buyers after charging a transaction fee of $400 to $600. Unlike other charitable contributions, the seller's donations are not tax-deductible.

"It's a loophole in the FHA guidelines that says the down payment can come from a 501(c)(3) charity," Wegner said.

Now that subprime loans and their creative financing schemes are gone from the market, lenders have returned in droves to FHA loans and the primary reason is down-payment assistance, he said.

"This is what everyone is talking about now," Wegner said, adding that sellers are generally willing to put up the money because it greatly increases their chances of finding a buyer.

The two leading providers of down-payment assistance are AmeriDream, based in Gaithersburg, Md., and Sacramento-based Nehemiah Corp.

Nehemiah was involved in 676 Arizona home-sales transactions in 2007 and is on pace to quintuple that amount this year, passing down payments from buyer to seller on 1,692 sales as of early July.

AmeriDream President Ann Ashburn said the two non-profits provide a vital service to low-income, minority and first-time home buyers while giving the economy a needed boost.

Ashburn opposes eliminating down-payment assistance programs that benefit "good, qualified people."

"The real tragedy will be that 100,000 to 200,000 home buyers annually will be locked out of homeownership," she said.

AmeriDream data indicates that roughly a million U.S. residents have used down-payment assistance in the past 10 years, including nearly 43,000 Arizonans.

Nationwide, $130 billion in loans have been generated by the practice, the non-profit says, with about $5.5 billion in Arizona.

Since its advent, down-payment assistance has faced several attempts by the federal government to ban its practice, but so far the courts have protected it.

In recent months, FHA Commissioner Brian Montgomery has launched a full-scale verbal attack on down-payment assistance, calling it a "shell game" that threatens to bankrupt his administration.

"We had to book an additional $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio," Montgomery said in June.

"Unless we take action to mitigate these losses, FHA will soon either have to shut down or rely on appropriations to operate."

Montgomery also said the federally insured value of those loans is often inflated, because many sellers simply tack on the amount of their charitable contribution to the home's sale price.

About 30 percent of all FHA loans now involve down-payment assistance, according to the U.S. Department of Housing and Urban Development, FHA's parent agency.

HUD data indicates that charity-assisted loans were more than twice as likely to go into default or foreclosure in recent years than loans with the down payment coming from buyers' pockets.

However, Wegner said all FHA loans have credit-score and income requirements, which make them far less risky than subprime loans.

"These people are still getting scrutinized heavily," he said.

One such buyer is Lawrence Smith, who recently purchased a vacant Phoenix home from an out-of-state investor. Although he had never heard of down-payment assistance, his real-estate agent recommended he look into it.

"I had gone through a divorce, so most of my assets were gone," Smith said.

He got an FHA loan with down-payment assistance through AmeriDream. Smith said the entire process was transparent and spared him the six to 12 months it would have taken to save up a down payment.

"I think if you have people that have decent credit and decent incomes, but for whatever reason can't come up with the down payment, it makes a difference," he said.

July 8, 2008 - 9:57PM

Waveyard development group puts team together

Beth Lucas, Tribune

A group of planners and engineers who will build a water adventure park in Mesa is beginning to take shape.

Waveyard Development announced Tuesday it had secured three major engineering and development companies to begin planning Waveyard, which is expected to open in 2011 in west Mesa.

The group is made up of Kentucky-based The Weber Group, Phoenix's Hunt Construction Group and the Neuman Group of Beaver Creek, Wis.

The companies are the first to become part of Waveyard's Liquid Evolution Adventure Parks, or LEAP, a group that will advocate for and design watersports parks nationwide. The group is proposed to help plan everything from small water parks to developments similar to the scope of Waveyard.

Ultimately, LEAP will include real estate developers, designers and engineers that will first focus on development of Waveyard before using their expertise elsewhere, said spokesman Bo Morris.

"They have the technology to bring projects as big as Waveyard to different cities," he said. "Or, if a city or community wanted to bring a smaller wavepool or any number of types of water sports facilities, they are capable of doing it."

Waveyard is planned on 125 acres near Dobson Road and the Red Mountain Freeway stretch of Loop 202, and will include a resort, a retail village, dining and entertainment and a variety of watersports including surfing, rafting, kayaking and scuba diving.

Mesa voters in November overwhelmingly approved a $20 million sales tax rebate over 10 years, plus interest, and $1.5 million in public improvements to build Waveyard.

The plan is to break ground by early next year, or as soon as late this year.

Waveyard co-founder Richard Mladick said in a news release that the group will work to create "the premiere outdoor adventure destination in the world."

The Weber Group, which will serve as master architect, has designed projects including Six Flags Kentucky Kingdom and Nickelodeon Central at Paramount's Carowinds in Charlotte, N.C.

Hunt Construction Group will lead commercial construction, and has experience including developing University of Phoenix Stadium in Glendale and Scottsdale's W Resort and Spa.

The Neuman Group will bring its experience in aquatic planning, which has included Pennsylvania-based Hershey Entertainment & Resorts and Wave Development.

South E.V. doing best in commercial real estate

Not real good news but apparently it is not so bad in the SE Valley

July 7, 2008 - 6:16PM

Edward Gately, Tribune

The south East Valley remains a bright spot in an otherwise severely struggling commercial real estate market across most of the region, according to a study by brokerage giant CB Richard Ellis.

Its second-quarter market analysis of the Valley's office, industrial and retail sectors shows much of the Valley saddled with unusually high vacancy rates and falling occupancy rates.

Valleywide, the office vacancy rate continued to increase, rising by more than 1 percent to 16.3 percent, more than 3 percentage points higher than at the same time last year. For the first time in nearly 10 years, the amount of newly occupied office space was in the red by more than 170,000 square feet.

"It is a very bad quarter," said Jerry Noble, first vice president of CB Richard Ellis. "We're in waters that Phoenix hasn't been in a long time."

The Central Avenue, Piestewa Peak and Camelback corridor office markets in Phoenix are all in bad shape, and Scottsdale has also slowed, Noble said.

"As far as the south East Valley goes ... quarter over quarter even through these slower times, we're seeing some of the biggest leases in town signed in the Chandler market, some of which are in that Chandler-south Loop 202 market," he said.

Tempe and Chandler recorded the two highest rates of newly occupied office space, "so we're continuing to see bigger employers trend down to those freeway-served markets," Noble said.

"There's still a ton of excitement and energy on the south Loop 202 down there, and I think there's going to continue to be tenants looking for space in that area of town, as well as the south Loop 101 in the Price (Road) corridor," he said. "You've got fantastic demographics, very good retail amenities, your work force, freeway access and an abundance of employers that are managing the economy. You're continuing to see technology companies emerge."

As for industrial, the south East Valley again presents a better picture than the rest of the Valley, said Mark Krison, senior vice president of CB Richard Ellis.

"The south East Valley has a different picture than the entire marketplace, and it's substantially better," he said.

Valleywide, there are 6,831 industrial buildings encompassing 260 million square feet with an 11.12 percent vacancy rate. The south East Valley includes 2,253 buildings encompassing 78.8 million square feet with a 9 percent vacancy rate, he said.

"The south East Valley has always been more of a demographic core relative to the supply of human beings for employment," he said. "There's more bodies, there's better bodies for what you're looking for than historically on the west side of Phoenix."

And now with fuel prices, and therefore the cost of commuting, on the rise, employers want to locate closer to their employees, Krison said.

"If you're going to look for a job, and you can go to work in Metrocenter or you can go to work in Chandler, and you live in Chandler, why would you go to Metrocenter and drive?" he asked.

Concerning retail, companies in that sector are continuing to curtail expansion plans throughout the Valley. The vacancy rate has increased for five consecutive quarters to 6.53 percent at the end of the quarter, according to the brokerage.

Apache Junction and the Mesa/Chandler/Gilbert submarkets remain the Valley's top performers, with higher rates of newly occupied retail space.

Fed to curb shady home-lending practices

Jul. 8, 2008 01:08 PM
Associated Press

WASHINGTON - The Federal Reserve will issue new rules next week aimed at protecting future homebuyers from dubious lending practices, its most sweeping response to a housing crisis that has propelled foreclosures to record highs.

Fed Chairman Ben Bernanke spoke of the much-awaited rules in a broader speech Tuesday about the challenges confronting policymakers in trying to stabilize a shaky U.S. financial system. To that end, Bernanke said the Fed may give squeezed Wall Street firms more time to tap the central bank's emergency loan program.

To prevent a repeat of the current mortgage mess, Bernanke said the Fed will adopt rules cracking down on a range of shady lending practices that has burned many of the nation's riskiest "subprime" borrowers - those with spotty credit or low incomes - who were hardest hit by the housing and credit debacles.

The plan, which will be voted on at a Fed board meeting on Monday, would apply to new loans made by thousands of lenders of all types, including banks and brokers.

Under the proposal unveiled last December, the rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.

"These new rules ... will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Bernanke said.

Consumer groups have complained that the proposed rules aren't strong enough, while mortgage lenders worry that they are too tough and could crimp customers' choices.

In an extraordinary action aimed at averting a financial catastrophe, the Fed in March agreed to let investment houses go to the Fed - on a temporary basis - for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.

The Fed's decision to act - temporarily at least - as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.

Bear Stearns was eventually taken over by JPMorgan Chase & Co., with the Fed providing $28.82 billion in financial backing.

Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk.

Bernanke, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.

In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.

"Allowing Bear Stearns to fail so abruptly at a time when the financial markets were already under considerable stress would likely have had extremely adverse implications for the financial system and for the broader economy," Bernanke said to the mortgage forum, organized by the Federal Deposit Insurance Corp.

The Fed's consideration of giving Wall Street firms more time to tap the Fed's emergency loan program is part of an ongoing effort by the central bank to bring back stability to fragile financial markets and help to bolster shaky confidence on the part of investors.

Policymakers - in the White House, in Congress and other federal agencies - will need to work together to come up with ways to make the U.S. financial system more resilient and stable and to prevent a repeat of the types of problems that brought about the end of Bear Stearns, an 85-year-old institution, Bernanke said.

Although those efforts are already under way and will be the focus of a House Financial Services Committee hearing Thursday, it will fall to the next president and next Congress to settle them. Both Bernanke and Treasury Secretary Henry Paulson are scheduled to testify at Thursday's hearing.

The Bush administration has proposed revamping the nation's financial regulatory structure. That plan would make the Fed an ubercop in charge of financial market stability. But the Fed would lose daily supervision of big banks. Bernanke said the Fed must maintain this power if it is to be an effective overseer of financial stability.

The Fed, which regulates banks, and the Securities and Exchange Commission, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system.

Over the longer term, though, Congress may need to adopt legislation to bolster supervision of investment banks and other large securities dealers, Bernanke said.

Bernanke recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the SEC's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.

Arizona law now requires loan officers to be licensed

Arizona Republic

Jul. 6, 2008 12:00 AM

Arizona's nearly 10,000 loan officers will have to have a license starting in 2010.

At almost the end of the state's legislative session in the wee hours of the morning, lawmakers approved a bill that requires loan officers and mortgage originators to pass a test, pay a fee and notify the Arizona Department of Financial Institutions where they are working. The move follows at least three failed attempts to pass similar legislation.

Many from the state's mortgage and real-estate industries backed the bill and even protested when it appeared it had stalled.

"This will bring more accountability to the lending industry and is the start of repairing that badly damaged industry," said Sen. Jay Tibshraeny, R-Chandler, who introduced the legislation.

The Department of Financial Institutions, which already regulates mortgage brokers and lenders, received a record number of complaints about bad loans last year.

Absent from the late-night debate and vote over the bill was Sen. Pamela Gorman, R-Anthem, who argued that government regulation wasn't necessary. She had introduced legislation that called for a voluntary registration of mortgage originators with the secretary of state.

A civil settlement has been reached in Phoenix with Wells Fargo Bank and Ticor Title Agency of Arizona over alleged false claims submitted to FHA on "pre-foreclosure sales."

The U.S. Attorney's Office of Arizona has worked out a deal for Wells Fargo to pay $4 million, and Ticor to pay $265,370, though both firms deny the government's allegations. The government contends it suffered losses of $2.1 million from 70 false claims to the FHA.

That housing agency's pre-foreclosure sales program sometimes allows homeowners with federally insured loans to avoid foreclosures by selling their homes for less than what is owed. Then the lender can submit an insurance claim to FHA for the balance of the loan.

The investigation leading to the settlement was conducted by the U.S. Department of Housing and Urban Development and the Office of Inspector General.

Indicted broker

Phoenix mortgage broker Rick McCullough has pleaded not guilty to fraud and theft charges, according to the Arizona attorney general. McCullough, president of CactusCash, was indicted by a state grand jury in late June for the charges.

The indictment alleges he devised a fraud scheme to tap the equity of homes owned by elderly Phoenix residents. He supposedly persuaded homeowners to refinance their homes through his business and then invest most of that money into the real-estate market through him. Then McCullough supposedly failed to invest the homeowners' funds in real estate and didn't have assets to guarantee the loans.

McCullough's next court appearance is scheduled for Aug. 4. He was released on $46,000 bond.

If convicted of all charges, McCullough faces up to 25 years in prison.

The indictment is the result of an investigation by the Securities Division of the Arizona Corporation Commission and the Department of Financial Institutions.

Banks selling assets to raise capital reserves

Friday, July 4, 2008

East Bay Business Times - by Jessica Saunders

More banks may join Bank of America Corp. in selling off assets, including real estate, as they try to raise federally required capital reserves, brokers said.

Regional banks, especially those in California, Nevada and Arizona, are having to set aside much higher risk capital reserves to offset potential losses on loans related to real estate, said Anton Qiu, a principal with TRI Commercial/CORFAC International, who specializes in acquisition and disposition of investment properties.

The federal Office of the Comptroller of the Currency sets the minimum percentage of capital banks are required to hold in reserve, Qiu said. Banks will try to raise the capital, but if they can't they may have to sell off assets, he said.

The higher reserves are being required to cover possible losses in construction and land acquisition loans as more and more real estate development projects are called off due to the economic downturn, Qiu said. Many banks went after construction and land financing business in order to compete with Wall Street lenders who were making big profits in realty transactions on the secondary market.