Almost 10% of California mortgages were FHA-backed in 2008, compared with 2% in 2007. "Agency Copes With a Mortgage-Insurance Overflow" in Friday’s Wall Street Journal calls into question the Federal Housing Administration’s ability to handle the increase from across the nation:

Hundreds of private lenders, using the latest technology and paying high salaries, failed to adequately manage mortgage credit risk during the housing boom. Now, the Federal Housing Administration, using 24-year-old computer programs and civil servants who still handle some loan documents by hand, is trying to do better.

"Can the agency handle the responsibility it has already been given?" the WSJ story asks.

Steve Preston, the outgoing secretary of Housing and Urban Development, of which the FHA is a part, says the answer is yes. "We are handling the volume," he said in an interview, adding that the department moved resources from lower-priority projects earlier this year. The FHA, which insures lenders against defaults on home mortgages that meet the agency’s standards, saw its share of new mortgages increase to 26% in this year’s third quarter, up from 3% for all of 2007, according to Inside Mortgage Finance.

Not everyone agrees, however:

Congress in March increased loan limits on FHA-backed loans to $729,000 in the most expensive housing markets, up from $329,000. Next year, those limits will fall to $625,000 in the most expensive housing markets. Still, some housing experts worry that an outsized share of the FHA’s new business is coming in these high-cost housing markets. "It’s getting into markets that are a lot riskier than it has in the past," says Ann Schnare, a housing consultant.

Interesting that the FHA hasn’t changed its ground rules while other lenders have been tightening standards. Down payments as low as 3% will increase to 3.5% next month, but still. Who else is accepting 3% down these days?

– Lauren Beale

Thoughts? Comments?   

Photo: Steven C. Preston. Credit: Gerald Herbert / Associated Press

In "What Happened to the Neighbors?," GQ sends writer Charles Bowden "to live in one of the loneliest neighborhoods on the planet" in Lake Elsinore, part of what they refer to as "Southern California’s Foreclosure Alley."
                     
For his rental he picks a place not far from where bobcats took up residency in August in a foreclosed home. Bowden gets to know his landlords, who are struggling to hang on to an "underwater" house, as well as neighbors in similar situations, and concludes the area won’t be bouncing back any time soon:

These houses are seventy-five miles from jobs in a world where oil gets ever scarcer. They are large and thus expensive to heat and cool. And forgive me, Southern California contractors, but they are junk. The market for $450,000 houses with ARMs waiting like assassins in the financial tall grass is over for good. It is quite possible that we have built and financed houses, developments, whole towns, without futures, that will collapse and become curious ruins.

That’s a sobering  thought as this slice of life plays out in one neighborhood after another across the Southland. A hat tip to Pete from Mar Vista for calling the article to L.A. Land’s attention.

– Lauren Beale

Thoughts? Comments?

Photo: Bobcats photographed in August at a vacant foreclosure in Lake Elsinore. Credit: Karen Brown

The price just got cheaper for an under-construction 6,000-square-foot Malibu manse with sweeping ocean views. The spec house — partially framed with steel beams — came on the market last month  at $3.95 million and, in the words of Malibu Prudential agent and blogger Mike Gardner, who brought the matter to our attention, "just got a whopper of a price slash" to $2.9 million. The MLS description goes even further, saying the seller "will consider all serious offers." The property, Gardner says, is in a neighborhood of homes valued at $5 million to $7 million.

Still too rich for your blood? Then you might want to skip the $27.5-million Point Dume property Gardner also blogs about.

–Ann Brenoff

Thoughts? Comments?

U.S. home sales and prices continued their rapid descent in November, according to reports out today on resale and new homes. Sales declines were more than anticipated, and the price drop was the steepest monthly decline in four decades. From the New York Times:

“They’re about as god-awful as they can get,” said Robert Barbera, chief economist at ITG. “This is pretty breathtaking stuff.”

On the numbers:

Sales of existing homes declined 8.6% last month, to a seasonally adjusted rate of 4.49 million, according to the National Assn. of Realtors. The median price of a home plunged 13% from October to November, to $181,300 from $208,000 a year ago. That was the lowest price since February 2004 …

The Commerce Department also reported that new home sales dropped to a seasonally adjusted annual rate of 407,000 in November, from a downwardly revised rate of 419,000 in October.

Housing values have plummeted since the peak of the market in July 2006, when the median home price in America was $230,200.

The Commerce Department said that the median price of a new home sold in November was $220,400, down 11.5% from the period a year ago. It was the biggest year-over-year price decline since a 12.7% drop in March.

The capper on those existing home sales figures: 45% of all were distressed or foreclosure related. And it isn’t nearly over yet. 

– Lauren Beale

Comments? Thoughts?

Calling Sunday’s story "White House Philosophy Stoked on Mortgage Bonfire" on the housing crisis "irresponsible reporting by the New York Times," White House Press Secretary Dana Perino released this statement today:

Most people can accept that a news story recounting recent events will be reliant on "20-20 hindsight." Today’s front-page New York Times story relies on hindsight with blinders on and one eye closed. The Times’ "reporting" in this story amounted to finding selected quotes to support a story the reporters fully intended to write from the onset, while disregarding anything that didn’t fit their point of view. To prove the point, when they filed their story, NYT reporters were completely unfamiliar with the President’s prime time address to the Nation where he laid out in detail all of the causes of the housing and financial crises.

Among "the three most egregious claims" is one I touched on in Sunday’s L.A. Land blog post:

The New York Times wrongly accuses President Bush and his Administration of disregarding signs of danger from Government Sponsored Enterprises (GSEs) and ignores the President’s prime time address to the Nation where he laid out in detail all of the causes of the housing and financial crises, arguing that "as early as 2006, top advisers to Mr. Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming." (Jo Becker, Sheryl Gay Stolberg, Stephen Labaton, "White House Philosophy Stoked On Mortgage Bonfire," New York Times, 12/21/08)

The New York Times completely ignores the fact that while the Administration was pushing for more transparent lending rules and reining in Fannie Mae and Freddie Mac, Congress had for years blocked attempts at stronger regulation and blocked reform of the Federal Housing Administration.

–House Financial Services Committee Chairman Barney Frank (D-MA) criticized the President’s warning saying: "these two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis…. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." (Stephen Labaton, "New Agency Proposed To Oversee Freddie Mac And Fannie Mae," New York Times, 9/11/03)
–Senate Committee on Banking, Housing and Urban Affairs Chairman Christopher Dodd also ignored the President’s warnings and called on him to "immediately reconsider his ill-advised" position.

Over the past six years, the President and his Administration have not only warned of the systemic consequences of failure to reform GSEs but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform at least 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President’s repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems. Many prominent Democrats, including House Finance Chairman Barney Frank, opposed any legislation correcting the risks posed by GSEs.

Since this story has received a lot of comments here at L.A. Land, including some faulting the journalism and tiring of blaming the administration, I thought some of you might be interested in the government’s response.

– Lauren Beale

Thoughts? Comments? 

Photo: White House Press Secretary Dana Perino. Credit: Ron Edmonds / Associated Press

U.S. home prices marked nine straight months of depreciation, according to just-released October statistics from First American CoreLogic, for a 10.4% decline from October 2007.

But the headline for Californians: The state is home to nine of the 10 of the worst performing markets.

No surprise here for the Golden State. Note that these statistics don’t match up with those reported by MDA DataQuick, for example, because this outfit looks at repeat sales transactions. Also note the lag time here. They’re looking at October still and we already have the November figures from MDA DataQuick. Remarkably, some statistical areas actually saw gains for the same period. The top 10:

California was the decline leader, down 28.3% annually; Nevada dropped 25.4%, Arizona 20.1% and Florida 17.8%. The only states showing what the number crunchers considered "meaningful price increases" were West Virginia, up 5.9%; South Dakota, 2.9%; and Texas, 2.7%.

Makes me wonder if prices dropped first in some areas and others will follow.

– Lauren Beale

Thoughts? Comments?

"The Reckoning: White House Philosophy Stocked Mortgage Bonfire," posted Saturday on the New York Times website, is an exhaustive report that attempts to answer President Bush’s own question, wondered aloud Sept. 18 when the credit markets froze up, "How did we get here?"

A big part of the answer, according to the article, is housing.

There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk….

From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.

He pushed hard to expand homeownership, especially among minorities…. But his housing policies and hands-off approach to regulation encouraged lax lending standards….

And he pushed to allow first-time buyers to qualify for federally insured mortgages with no money down. Republican Congressional leaders and some housing advocates balked, arguing that homeowners with no stake in their investments would be more prone to walk away….

There’s much, much more to the article, but among the warning signs along the way:

Typically, as home prices increase, rental costs rise proportionally. But Mr. Thomas [Jason Thomas, an economic analyst for President Bush] sent charts to top White House and Treasury officials showing that the monthly cost of owning far outpaced the cost to rent. To Mr. Thomas, it was a sign that housing prices were wildly inflated and bound to plunge, a condition that could set off a foreclosure crisis as conventional and subprime borrowers with little equity found they owed more than their houses were worth.

It was not the Bush team’s first warning. The previous year, Mr. [Lawrence B.] Lindsay, the former chief economics adviser, returned to the White House to tell his old colleagues that housing prices were headed for a crash. But housing values are hard to evaluate, and Mr. Lindsay had a reputation as a market pessimist, said Mr. Hubbard [Al Hubbard, Bush’s former chief economics adviser], adding, “I thought, ‘He’s always a bear.’ ”

In retrospect, Mr. Hubbard said, Mr. Lindsay was “absolutely right,” and Mr. Thomas’s charts “should have been a signal.”

Instead, the prevailing view at the White House was that the problems in the housing market were limited to subprime borrowers unable to make their payments as their adjustable mortgages reset to higher rates.

They weren’t the only ones who thought the subprime problem would be contained to a small segment of the market — I recall talking to several housing experts who assured me the same thing — and that expanding homeownership was a fine goal. If you can put party politics aside, I think there’s a lot to be gleaned here on how we got to this point.

–Lauren Beale

Thoughts? Comments?   

The elephant ear fig tree –- Ficus auriculata

"Elephant ear" may be an exaggeration, but the leaves of this tree are huge, as much as 1 1/2 feet across. Add to that the very large figs seemingly sprouting directly atop of the trunk and you have a most unusual tree. This very tropical-looking member of the Moraceae, or mulberry, family, also known as Roxburgh’s fig and F. roxburghii, is native to rain forest edges and clearings in grasslands in India, Nepal, China and Southeast Asia.

The elephant ear fig tree is a briefly deciduous, moderately fast-growing small tree reaches 25 feet high and wide. The fairly smooth, short, light gray trunk soon divides in stout laterals. Young leaves start out mahogany red, then turn lush green. They are oval- to heart-shaped, 15 inches across or more. Since they are easily torn by wind it is best to grow them in a protected place; they also make great indoor plants. Branches and leaves share the common ficus characteristic of oozing a milky white sap when wounded.  Also typical for the species is that flowers occur inside a receptacle,
which develops into the fleshy fig (technically called a synconium) once the
flowers are pollinated by their proper wasp.

The fruits are popular and sweet, but not commonly eaten outside their native area. They grow on short spurs on the trunk and branches; this cauliflory (stem-flower) is thought to have developed to give climbing or flying pollinators living far below the forest canopy their chance too. The tree likes fairly constant moisture; it is not drought-resistant.

In the Southland we grow this tree for its beauty or interest but in other parts of the world, such as Nepal, where growing populations seriously threaten natural resources, it is one of several valuable fodder trees. There, the leaves are fed to cattle, and the trees protect the soil from erosion.

– Pieter Severynen

Thoughts? Comments?

Photo: Pieter Severynen