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THE PROMENADE SHOULD BE RENAMED “THE GHOSTWALK”

Dale Kasler did a follow up in the Sacramento Bee about General Growth Properties, Inc. it’s Reorganization Plan, and the prospects for the Promenade in the near future. Elk Grove’s unfinished megamall will likely remain stalled even though its developer has taken a major step toward exiting bankruptcy protection. General Growth Properties Inc. said it has reached agreement with lenders to restructure billions of dollars in debt, as part of a reorganization plan that would leave the Chicago mall developer largely intact. The plan needs the approval of creditors.

But unfinished projects, including the Elk Grove Promenade, aren’t part of the reorganization plan. General Growth is still negotiating with lenders on those projects, company spokesman Jim Graham said Wednesday.

The Promenade’s future “remains to be seen,” Graham said. Construction on the on the 1.1 million-square-foot mall ground to a halt in October 2008, and lawsuits from contractors seeking payment began piling up. Last February the project, surrounded by chain-link fence and sprouting weeds, was officially put on hold indefinitely. Two months later, buried under billions of dollars in debt, General Growthfiled for Chapter 11 bankruptcy protection. The site is now a steel ghost town, an e1ery site that looks like the survivor of a nuclear winter or an outtake from the Omega Man.

The company tried to sell the mall earlier this year but pulled it off the market several months ago. Graham said the Promenade’s fate is “subject to market conditions that are unrelated to the bankruptcy.” Analysts agree, saying the Promenade190 is a troubled project regardless of what happens to General Growth.

Another point of view might be that the market conditions that caused the bankruptcy was the failure of the developer and planners to adequately prepare feasbility studies and understand demographic trends. Ambition and greed may have factored into a ill fated decision to go ahead and build before the time was ripe. That’s of course the dual problem of being a developer, being a visionary and being accurately able to predict future growth patterns.

The Sacramento research director at commercial real estate broker Colliers International, Garrick Brown, said the Promenade won’t open “for three years at best, more likely four years.” Brown said the retail market is starting to improve, but the Promenade was built too far out in front of Elk Grove’s housing development. The mall is about two miles from the nearest housing. “Nobody wants to touch it until there are homes there,” he said. The mall, first proposed in 1997, has been a symbol of Elk Grove’s ambitions and frustrations. It spurred Elk Grove’s push for cityhood in 2000. Macy’s and Barnes & Noble were among the earliest anchor tenants committing to the project.

With unemployment officially at 10.2% nationwide, the State in Deep Financial crisis, Bankrupticies at all an all time high, and Chairman of the Fed Ben Bernanke saying Monday that the employment picture isn’t going to get dramaticallly better in the near futre, until economic circumstances change, the Promenade is going to be a symbol of ambition gone awry and failed dreams. The Promenade might now be known as the “Ghostwalk,” a regional symbol of the times, where the dreams of visionaries haunt the landscape, waiting without hope of a certain future.

Paul R. Bartleson
Sacramento Bankruptcy Lawyer.

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The Sacramento Bee reported today that General Growth Properties, Inc., the developer of The Elk Grove Mega Mall, called the Promenade, which remains unfinished, took a big step toward exiting bankruptcy today, but the project remains in limbo. General Growth said it had reached agreement with lenders on more than 90 malls, part of a bankruptcy reorganization plan that would keep the Chicago mall developer largely intact. But the agreement didn’t cover unfinished projects such as the Elk Grove Site known as the Promenade, said Jim Graham, company spokesman.

The company halted construction on the Promenade in October 2008; in February it said the project was on hold indefinitely. Contractor lawsuits and mechanics liens started piling up. The company tried selling the mall site to investors but pulled it off the market several months ago.

Market analysts believe the mall won’t get completed for several years, regardless of what happens to General Growth. There are obviously a variety of factors involved in this, included high unemployment and the State of California’s fiscal crisis.
Graham reportedly said the fate of Elk Grove mall is “subject to market conditions that are unrelated to the bankruptcy.”
General Growth filed for Chapter 11 Bankruptcy in April of 2009, staggered by billions in debts.

It’s uncertain what Mr. Graham meant by “market conditions that are unrelated to the bankruptcy,” but those might include problems in obtaining financing and investment capital. Another factor might be grossly overestimating the region’s ability to absorb growth based on demographics, rather than housing projections. Harry Dent, the same guy who wrote the Roaring 2000s, wrote an interesting book called the “Great Depression Ahead,” in which he predicted a stock market and real estate crash based upon sheer demographics, that the real estate market was bound to decline simply because the baby boomers were starting to retire, and the generation following up behind was smaller in number, and in addition, holds different values and buying habits. As the era of rampant consumerism and free wheeling credit winds down, it appears to be anybody’s guess when, if ever , the project will be completed.

paulbar Uncategorized Baby Boomers, Bankruptcy Reorganization, Chapter 11 Bankruptcy, Chicago Mall, Company Spokesman, Elk Grove, Elk Grove Mall, Estate Crash, Fiscal Crisis, General Growth Properties, General Growth Properties Inc, Great Depression, Harry Dent, Mall Developer, Market Analysts, Mechanics Liens, Mega Mall, Reorganization Plan, Roaring 2000s, Sacramento Bee, Unfinished Projects

CNN — The total number of bankruptcies filed in the third quarter surged 33% in 2009 and is at the highest level since 2005, according to data released Wednesday.

The American Bankruptcy Institute, an industry research firm, said 388,485 bankruptcies were filed during the last quarter, compared to 292,291 filed during the same period in 2008, according to data released by the Administrative Office of the U.S. Courts.

Filings for the first nine months of the year climbed 35% to 1,100,035, compared to 841,496 filings during the same period in 2008. A total of 1,117,771 bankruptcies were filed last year.

“The spike in bankruptcy filings for both consumers and businesses reflect the continuing effects of today’s weak economy,” said ABI executive director Samuel Gerdano in a statement. “With unemployment surpassing 10% and credit to businesses remaining tight, consumers and businesses are increasingly turning to the financial relief of bankruptcy.”

Bankruptcies are at the highest level since 2005, when 2,078,415 were filed before Congress passed amendments to the Bankruptcy Code, said ABI.

In October 2005, Congress implemented legislation making it more difficult for filers to prove they should be allowed to clear their debts in a Chapter 7 bankruptcy, forcing more to file under Chapter 13. The law triggered more Americans to rush to file for bankruptcy in the months before the law went into affect.

The ABI report said business bankruptcy filings rose 32% in the third quarter of 2009 to 15,177, and filings for the first nine months of the year totaled 45,510, topping the total 43,546 business bankruptcies filed in 2008.

Personal bankruptcies increased 33% to 373,308 during the last quarter, led by a 42% hike in Chapter 7 filings, which totaled 265,721. The number of consumers filing Chapter 13 bankruptcies rose 15% to 107,142 filings in the third quarter, according to ABI.

During a twelve-month period ending Sept. 30 2009, the report said total filings increased more than 34% to 1,402,816, compared to 1,042,993 in the same period of 2008.

Nevada had the highest rate per capita filings in the country, with 10.49 residents per thousand filing for bankruptcy in the year ended Sept. 30. The state also had the highest rate of filings for chapter 7 bankruptcies at 7.53.

Tennessee had the highest rate of filings for Chapter 13 bankruptcies in the 12-month period with 4.36 people per thousand.

In the Eastern District of California, filings were up 51.% over the same period from the year before:  According to the clerk’s office, here are the statistics

UNITED STATES BANKRUPTCY COURT
Eastern District of California

STATISTICAL REPORT
YEAR TO DATE COMPARISON

Total filings were up 49.3%, as indicated.  Significantly, Chapter 11 filings were up 78.9%, and total filings were 23,853.  These statistics of course do not reflect those ineligible for Chapter 7 because of the means test, or those who were bankruptcy candidates but unable to confirm a plan because of the means test and therefore did not file.

I also got an interesting email from Mike Dillard with a Technicolor view of the recession by county

The Decline: The Geography of a Recession

Things don’t look too much better, either statistically or in color.

paulbar Uncategorized Administrative Office, Amendments, American Bankruptcy Institute, Bankruptcy Code, Business Bankruptcies, Business Bankruptcy Filings, Chapter 13, Chapter 7 Bankruptcy, Cnn, Debts, Executive Director, Filers, First Nine Months, Gloom, Last Quarter, Months Of The Year, Personal Bankruptcies, Recession, Spike, Unemployment

The New York Times reported today that Simmons Beautyrest mattress is headed for Bankruptcy.  Simmons has changed hands seven times in little more than two decades,

After being owned for short periods by a parade of different investment groups or private equity firms, which try to buy undervalued companies, mostly with borrowed money, and as part of the investment “strategy”, liquidate the company, at the expense of creditors and investors.

For many of the company’s investors, the sale will be disastrous. Its bondholders alone stand to lose more than $575 million. Not only will the demise of the company affect bondholders,  the company’s downfall has also devastated employees who will have been or will be laid off.

But Thomas H. Lee Partners of Boston, its present owner, it has not only escaped unscathed, it has made a profit. The investment firm bought Simmons in 2003 and has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars in “speical dividends” from the company. The New York Times also reported that it also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise.

At the same time as the Wall Street investment banks were cashing in, collecting millions for helping to arrange the takeovers and for selling the bonds that made those deals possible, making around $750 million in profits from Simmons over the years, the company was driven into insolvency by putting Simmons deeper into debt. The financial dealings resulted in Simmons borrowing d more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably.

An otherwise healthy company, Simmons was weightened down and today owes $1.3 billion, compared with just $164 million in 1991.

The strategy of private equity firms did at Simmons, and scores of other companies like it, eerily reflected the boom and bust of subprime mortgage meltdown. Fueled by easy money from not only from banks but also endowments and pension funds, buyout kings like THL upended the old order on Wall Street. It was, they said, the Golden Age of private equity — nothing less than a new era of capitalism.

These private investors were able to buy companies like Simmons with borrowed money and put down relatively little of their own cash. Then, not long after, they often borrowed even more money, leveraging the company’s assets as collateral — For the financiers, the rewards were enormous.  For the company the effects were devastating.

Just as with the housing market, the good times ended when the economy fell into recession and the credit markets froze, and the investors were no longer able to refinance or leverage the assets of the company.  With the recession, Simmons is now groaning under a huge amount of debt at a time when its sales are slowing. And the game of refinancing and leveraging is over.

Simmons, however, is unfortunately not a unique phenomenon.  According to Standard & Poors, more than 220 companies that have defaulted on their debt in some form this year were either owned at one time or are still controlled by private equity firms. Among them are household names like Harrahs Entertainment and Six Flags, the theme/amusement park operator.

This brings up the question of what is the liability, if any, of the investment companies to shareholders when a company is systematically drained of equity.  Perhaps the bankruptcy code should be amended to consider profits like these to insiders as a preference, recoverable by the Bankruptcy Trustee.

paulbar Uncategorized Bondholders, Creditors, Downfall, Financial Dealings, Fortunes, Insolvency, Investment Banks, Investment Firm, Investment Groups, Investment Strategy, Lee Partners, New York Times, Private Equity Firms, Seven Times, Short Periods, Simmons Beautyrest Mattress, Simmons Mattress, Takeovers, Thomas H Lee, Wall Street Investment

One of the frequently asked questions is that if you file bankruptcy, can you do a loan modification while awaiting  discharge?  The answer  is yes.  How you go about it may depend on whether you file a Chapter 7 or Chapter 13.

In a Chapter 7, the debtor may not be able to keep the property and make  the payments unless the lender consents to a modification, because the lien survives the discharge.  In a Chapter 7 case, there is no provision in the Bankruptcy Code for modifying a mortgage loan.  Your case lasts about 3-1/2 to four months and so you need to reinstate the loan before the discharge is entered and the cases close.  You either need to bring the loan current or work something out with the lender in between.   There is no provision or program to cure the default over time, and once the discharge is entered, the automatic stay is lifted.  That means that if any arrearages on the loan have not been cured by that time, the lender can proceed to foreclose on the property.  The lien is not discharged in the bankruptcy, even thought the personal debt or obligation is wiped out.  If you can’t bring the payments up or make arrangements with the lender during the bankruptcy, the the debtor should seek a loan modification outside bankruptcy in order stay in the house.

If you filed Chapter 13, you cannot modify a mortgage loan secured on a debtor’s primary residence under provisions of the Bankruptcy Code.  However, if the lien on the house is totally unsecured, no equity protecting the lien and house is totally underwater) you can strip it off in a “cram down.”  Obama said that he would sign such a bill if presented to him, but legislation that would have allowed that died in Congress earlier this year, after much outcry from people complaining that the law should not help people when most people were making their payments, and strong opposition from the Banking Industry.

In a Chapter 13, the debtor needs to get approval for any kind of modification, refinancing or sale of the property, from both the Chapter 13 Trustee and the Court.  The debtor may not be able to confirm a Chapter 13 plan unless a 1st deed of trust consents to a loan modification.  The question is feasibility.  If the debtor’s plan does not propose to cure the default in the Chapter 13, the plan cannot be confirmed.  In this case, the debtor may not be able to confirm a plan and will as a result end up losing the house.  Another question is whether the loan modification would alter the debtor’s disposable income and increase the amount available to unsecured creditors.  If the debtor is able to cure default, the language of Chapter 13 provides that all disposable income must be pledged into the plan.  That might mean that if the debtor obtains a loan modification during the pendency of the Chapter 13 plan, both the plan payments and the plan need to be modified to reflect the change in disposable income reflecting decrease in mortgage payments.

The bottom line is that if you can’t afford the payments, contact your lender.  The sooner you get started on a loan modification, the better.   There have been numerous articles about the effectiveness of loan mod programs.  Anyone working in the industry will tell you that it is not easy to make contact with the lenders who have been besieged with loan mod requests.  At the same time, while the banks are attempting to ramp up their loan mod programs and have been adding staff, the number of loans in default is expected to increase over the next two years.  Like anything, it takes persistence and consistency.

paulbar Uncategorized Arrearages, Banking Industry, Bankruptcy, Bankruptcy Code, Chapter 13, Chapter 7, Congress, Consents, Cram Down, Debtor, File Bankruptcy, Four Months, Iff, Legislation, Loan Modification, Mods, Mortgage Loan, Obligation, Opposition, Outcry, Personal Debt, Provision, Provisions

The Saramento Bee ran a number of interesting articles recently which contrasted the decline in the housing market, the fall from grace of local Titans Reynand & Bardis, CC Meyers and others, at the same time as “Active Adult” living seems to be doing quite well.  The question I had in the early 2000’s when houses were growing faster than weeds in Roseville, Lincoln, and Elk Grove, was how many people can afford these kind of houses.  Well the answer was, not that many.  Harry Dent wrote an interesting book called the Great Depression Ahead (he was the same guy who wrote The Roaring 2000’s, if you’ll recall) and one of the significant things he points out that the housing boom was caused by simple  demographics, baby boomers raising families, upsizing and acquiring stuff.  But as the Baby Booms started to leave the job market and started becoming empty nesters and moving to retirement or active adult communities, there was going to be less of a demand for consumers goods and upscale housing.  Gen Xers following behind, are fewer in number and also have different lifestyle values, perhaps not as family oriented and not holding the same kind of materialistic work ethic.

So as developers like Angelo Tskapolous, Pulte and Centex acquire properties to develop at bargain basement prices, and new players enter the market, what kind of housing do they plan to build?  Not only was the housing market artificially overpriced, it appears to have been grossly overbuilt, so if you’re are going to build today, the successful market is going to consider the market, and build what people want to buy, not what they want to sell based on how much profit can be made on large houses.  It appears the housing trend will be toward smaller, lower maintenance living.  If the real estate industry is going to recover, it is going to have consider marketing demographics and do a better job in feasibility studies.

paulbar Uncategorized Active Adult Communities, Baby Boomers, Bardis, Bargain Basement Prices, Booms, Centex, Elk Grove, Empty Nesters, Fall From Grace, Feasibility Studies, Great Depression, Harry Dent, Housing Market, Lifestyle Values, Marketing Demographics, Pulte, Saramento Bee, Significant Things, Upsizing, Work Ethic

Eighty more restaurants fell victim to the weak economy including 10 TGI Fridays in Sacramento and the Pacific Northwest.

In a related series of closures, 70 Jack in the Box restaurants from Fresno to Redding shut their doors in midweek, only to open days later after four controlling entities sought bankruptcy protection from creditors.

The closures followed as the financial woes of troubled Roseville real estate developer Abe Alizadeh continued.  He is listed as president of each of those companies and has controlling interest in half of the newly closed T.G.I. Friday’s restaurants.  The closures temporarily affected about 2,100 employees, not including people thrown out of work at the T.G.I. Friday’s restaurants.in the recording.  According to a representative for Alizadeh and the company, Alizadeh controls two corporations that own and operate five T.G.I.Friday’s restaurants: two in Sacramento two in Roseville and one in Elk Grove.

The corporations, Ten Forward Dining Inc. and TGIA Restaurants, Inc., are headquartered in the same Lava Ridge Court address in Roseville, according to records on file with the California Secretary of State’s Office.

Five other T.G.I. Friday’s in Oregon and are controlled by Alizadeh’s brother, Mike Alizadeh through a company, Great Northwest Restaurants Inc., of Roseville.

The four entities that own and operate the Jack in the Box franchises in the Central Valley, Sierra Valley Restaurants, Inc., Food Service Management, Inc., Central Valley Food Services, Inc., and Kobra Associates, Inc., which filed separate Bankruptcy Petitions under Chapter 11 of the Bankruptcy Code on Friday. Kobra Properties, Inc., another of Alizadeh’s companies, the real estate development corporation, has been in Chapter 11 since November, seeking to restructure approximately $277 million debt.

These Bankruptcy filings suggest the fallout of not only the decline of commercial and retail properties, but also reflect the downturn in consumer spending available to support such restaurant establishments.  These filings likely demonstrate a correlation between falloff in consumer spending, the residential retail market, and the health of retail and commercial properties.

paulbar Uncategorized Abe Alizadeh, Bankruptcy Code, Bankruptcy Filings, Bankruptcy Petitions, Bankruptcy Protection, Brother Mike, California Secretary Of State, Court Address, Elk Grove, Financial Woes, Food Service Management, Food Services Inc, Kobra Properties, Lava Ridge, Northwest Restaurants, Protectin, Real Estate Developer, Retail Properties, Roseville Real Estate, Sierra Valley, Tgi Fridays, Tgia, Valley Restaurants

Jim Wasserman in the Bee had some interesting reporting on machinations at the State Capitol. As financial train wreck from the housing crash continues across California, state lawmakers have sent several bills that crack down on mortgage fraud to Gov. Arnold Schwarzenegger’s desk.

Recently the Assembly and Senate jointly passed bills to ban loan modification companies from asking for upfront fees and make mortgage brokers put their customers’ financial needs ahead of their own commissions. The Bills also propose to limit the size of pre-payment penalties and would add California to the roster of states that allow prosecutors to file specific felony charges for those accused of mortgage fraud.

These measures are of course reactive and not proactive.

One of the Bills most sweeping mortgage reform bills this year, Assembly Bill 260, bans so-called subprime “negative amortization” loans where the amount owed grows even as the borrower makes payments. It also prevents mortgage brokers from receiving thousands of dollars in special fees for originating subprime loans and those with pre-payment penalties. The bill also limits the size of pre-payment penalties for borrowers who pay off their loans early.

Lastly, it requires that mortgage brokers have a fiduciary duty to borrowers – that is, they must place the “economic interest of the borrower ahead of the broker’s own economic interest” when making loans.

That provision is especially opposed by the California Association of Mortgage Brokers. Fred Arnold, a Santa Clarita-area broker and the group’s past president, said the bill’s definition of fiduciary duty is vague and an invitation to “frivolous lawsuits.” “It’s not necessary,” said Arnold, “We already have a fiduciary duty under the Department of Real Estate.”

Last year, the governor vetoed a similar broad-based bill by Lieu.

The bills land on Schwarzenegger’s desk as California continues wrestling with more than 410,000 foreclosures since the start of 2007, the aftermath of unfettered lending (and borrowing) practices earlier this decade.

During the housing boom, mortgage brokers could earn fees of $20,000 or more for making risky subprime adjustable-rate loans, often to unsuspecting borrowers. A contrary view would be the borrowers knew what they were doing and decided to roll the dice in a surging market. many unqualified buyers got into homes they knew they could not afford but decided to roll the dice anyway in hopes that the anticipated record appreciation in value would continue.

Among groups backing changes in mortgage practices is the California District Attorneys Association, which is pushing for new felony penalties for mortgage fraud. The group sponsored a bill now before the governor, Senate Bill 239, by Sen. Fran Pavley, D- Agoura Hills. It would create a specific category of felony mortgage fraud, which the DA’s group calls “one of the linchpins in the demise of the California real estate market and the related crises in the financial sectors.”

The group says Sacramento ranks seventh among U.S. metropolitan areas in reporting mortgage fraud complaints to the FBI.

Finally, Schwarzenegger faces a choice of two bills that would bar loan modification companies from asking struggling borrowers to pay upfront fees.

Both bills banning upfront loan modification fees – Assembly Bill 764 by Assemblyman Pedro Nava, D-Santa Barbara, and Senate Bill 94 by Sen. Ron Calderon, D-Montebello – passed the Legislature earlier this week. The governor has 30 days from a bill’s passage to sign it, veto it or let it become law without his signature.

Finally, nowhere does there seem to be any discussion of the borrowers responsibility to become educated and knowledgeable about their own finances. There was also no discussion of effects of Governmental pressure to promote those programs, such as the Community Reinvestment Act. In fact, anyone who has read Thomas Sowell’s book “The Housing Boom and Bust” can understand how government deregulation of the banks and over-regulating requiring funds to make “affordable housing” available, actually created the bust.

While much of the commentary seems to focus on finding fault with the lending industry, it leads one to believe that all borrowers in trouble were just unwitting victims.  This simply is not the case.  There were two parties to the transaction, a willing buyer and a willing lender.  It’s time that people woke up and realized that it worked on both sides of the deal.  Personal gain and profit were the motivators for both parties, not in long term thinking about cost or value.

PR: wait… I: wait… L: wait… LD: wait… I: wait… wait… Rank: wait… Traffic: wait… Price: wait… C: wait…

paulbar Uncategorized Area Broker, Arnold Schwarzenegger, Assembly Bill, Assemblyman, Association Of Mortgage Brokers, California Association Of Mortgage Brokers, Department Of Real Estate, Economic Interest, Felony Charges, Fiduciary Duty, Frivolous Lawsuits, Governor Jim, Jim Wasserman, Loan Modification, Mortgage Fraud, Mortgage Reform, Negative Amortization Loans, Reform Bills, Risky Loans, State Lawmakers, Subprime Loans, Train Wreck, Upfront Fees

If you file bankruptcy, can you do a loan modification while awaiting  discharge?  The answer depends on whether you file a Chapter 7 or Chapter 13.

In a Chapter 7, the debtor may not be able to keep the property and make  the payments unless the lender consents to a modifcation.  In a Chapter 7, there is no provision in the Bankruptcy Code for modifying a mortgage loan.  In Chapter 13, you cannot modify a mortgage loan secured on a debtor’s primary residence.  However if the lien on the house is totally unsecured, you can strip it off in a cram down.  Legislation that would have allowed that died in Congress earlier this year after opposition from the Banking Industry prevailed.  In Chapter 7 cases the case only lasts about 3 1/2-4 months.  There is no provision or program to cure the default over time, and once the discharge is entered, the automatic stay is lifted.  That means that if any arrearage or default has not been cured by that time, the lender can proceed to foreclose on the property.  The lien is not discharged in the bankruptcy, the the debtor should seek a loan modification outside bankruptcy in order stay in the house.

In a Chapter 13, the debtor needs to get approval for any kind of modification, refinancing or sale of the property, from both the Chapter 13 Trustee and the Court.  The debtor may not be able to confirm a Chapter 13 plan unless a 1st deed of trust consents to a loan modification.  The question is feasibility.  If the debtor’s plan does not propose to cure the default in the Chapter 13, the plan cannot be confirmed.  In this case, the debtor may not be able to confirm a plan and will as a result end up losing the house.  Another question is whether the loan modification would alter the debtor’s disposable income and increase the amount available to unsecured creditors.  If the debtor is able to cure default, the language of Chapter 13 provides that all disposable income must be pledged into the plan.  That might mean that if the debtor obtains a loan modification during the pendency of the Chapter 13 plan, both the plan payments and the plan need to be modified to reflect the change in disposable income reflecting decrease in mortgage payments.

The sooner you get started on a loan modification, the better.   Recent articles and anyone working the industry will tell you that it is not easy to make contact with the lenders who have been besieged with loan mod requests.  While the banks are attempting to ramp up their loan mod program staffs, the number of loans in default is expected to increase over the next two years.  As a practical matter, doing anything and everything to reduce your expenses is a good idea.

paulbar Uncategorized 4 Months, Arrearage, Banking Industry, Bankruptcy Code, Chapter 13 Trustee, Chapter 7, Congress, Consents, Cram Down, Debtor, Deed Of Trust, Disposable Income, Feasibility, Legislation, Loan Modification, Mortgage Loan, Opposition, Provision, Refinancing, Unsecured Creditors

TransUnion, a major credit reporting company predicts that mortgage  delinquency rates will continue to rising in the Sacramento area– with 12 percent of homeowners falling at least two months behind on their payments by year’s end. That figure is nearly twice the national projection and a dramatic jump from just two years ago, when less than 2 percent percent of area homeowners’ notes were delinquent.

“There are serious issues confronting the housing industry, and it’s not out of the woods by the end of the year,” Becker added. He predicted the would begin falling in 2010. It analyzed trends in the for the second quarter and offered year-end projections for the Sacramento market and the state.

Today, 60-day mortgage loan delinquency rates, i.e, the percentage of homeowners at least 60 days behind on their mortgage payments, stood at 9.62 percent, just below the state’s rate of 9.7 percent. That compares to the national rate of 5.81 percent, which is projected to rise to 6.93 percent by the end of the year.

California, Arizona, Nevada, which has the highest delinquency rate at nearly 14 percent are a tracked closely as key indicators because the 60-day threshold is traditionally seen as a step toward foreclosure.

In markets where home values have dropped most sharply, delinquency and foreclosure rates are highest. By that measure, the capitol region remains in trouble. According to First American Core Logic, more than half of Sacramento area homeowners owed more on their homes than they were worth.

“As long as housing values continue to decline, the delinquencies and foreclosures are likely to continue,” particularly at the same time as unemployment is rising. turns around, there’s not much hope for those rates to reverse. And until the housing decline will probably not change course.

TransUnion also predicted that by the end of the year, 12.2 percent of Sacramento area homeowners and more than 14 percent of homeowners statewide will be at least two months behind on their mortgage payments, as a result of double-digit percentage unemployment and unpaid furlough days. The impact is also being felt on borrowers with conventional loans and are increasingly catching up with homeowners who have “safe” fixed-rate loans. Borrowers who borrowed to stay in the house and keep up with living expenses,are now being confronted with the choice between paying their mortgage loan or their living expenses.

Despite the ominous cloud of current darkness, Becker of TransUnion predicted the sun could come out in 2010. and further predicted that the delinquency rate would fall three times faster than in the nation as a whole. With the State’s budget in turmoil on the rise, housing sales flat, it is difficult to understand the basis for this prediction.

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