Friday, November 30, 2007

How We Got Here

From the court documents in the fallout of the Duke Cunningham bribery case. Former Congressman Cunningham is currently serving eight years for taking bribes from a number of individuals, including the Thomas Kontogiannis mentioned here:

"The government’s investigation indicates that Kontogiannis’s typical mortgage fraud involved the following scenario. (With regard to the following narrative, see Exhibit 5 and Exhibits 12-19.)
Kontogiannis would have a loan application prepared in the name of a putative home purchaser, sometimes with the knowledge of the person (who might be paid a fee) and sometimes without the person’s knowledge, for a property that Kontogiannis either had developed or had planned to develop. Fraudulent paperwork would be prepared related to, for example, income, assets, or appraisal. (Kontogiannis presumably would pay a kickback to the individual preparing these documents.) Applications would then otherwise be submitted for approval to various financial institutions in accordance with normal industry practices. At closing, all title documentation (such as the mortgage and note, the uniform settlement statement (HUD-1 form), title-insurance paperwork, and affidavits pertaining to the purchaser’s identity and intent of occupancy) would be fraudulently executed by a loan officer controlled by Kontogiannis. ... The mortgage and note, however, would never be recorded, the taxes never paid, and title insurance never purchased. Instead, the funds that had been disbursed for these purposes would eventually be steered to another company ostensibly owned by one of Kontogiannis’s daughters but controlled by Kontogiannis.
These fraudulent loans would ultimately be sold into the secondary-mortgage market to a lender who would be led to believe, based on the loan documentation provided by Kontogiannis’s agent, that the loan had been sent for recording and that all taxes and recording fees had been paid....
One company alone had purchased over 100 of the loans in the secondary market, with an average loan amount of approximately $500,000. That publicly traded and federally chartered bank thus had approximately $50,000,000 in loans that were potentially worthless because, as a result of Kontogiannis’s scams, none of the mortgages were recorded in primary position as the bank had assumed. That, in turn, meant that if any of the loans defaulted, the bank would not be able to foreclose on any real property and thereby recoup any of the losses. ”

Published speculation says the "one company" may be Washington Mutual, which you may remember surfaced in another matter.

Thursday, November 29, 2007

People Feel At Home in Their Kitchens

A friendly reminder from eBay, and you've only yourself to blame if you click through.

New Home Sales Drop 23.5% in October

New home sales dipped 23.5% in October to a seasonally adjusted annualized rate of 728,000 units, according to the most recent figures from the Census Bureau. That figure was reported widely as an month-to-month increase, but while it was a 1.7% increase over the revised September rate, it was well below the initially reported rate of 770,000 units in September.
Through the first ten months of 2007, some 689,000 new homes have been sold, down 24.2% from the same period last year.
The median new home price for October was $217,800, down 8.6% from September's median and down 13.0% from October, 2006's median price. Builders were reckoned to have 8.5 months worth of unsold inventory. The average house sold had been on the market nearly six months, up from 3.7 months in October, 2006.

October Foreclosures Level Off, But Are Still Nearly Double 2006's Pace

Some 224,451 foreclosure notices were filed in October, up 94% from the same month last year, according to online marketplace RealtyTrac®. However, the mark was up just 2% from September. The national foreclosure rate for the month was one foreclosure filing for every 555 households.
Overall foreclosure activity continues to register at a high level compared to last year, but it appears to have leveled off over the past two months after hitting a high for the year in August,” said James J. Saccacio, chief executive officer of RealtyTrac. “Default notices were down nearly 9% in October, indicating that some of the efforts on the part of homeowners, lenders and advocacy groups to find alternatives to foreclosure may be starting to have an impact. On the other hand, bank repossessions were up nearly 35% , evidence that more homeowners who enter foreclosure are losing their homes.”

Wednesday, November 28, 2007

October Existing Home Sales Drop Below 5-Million-Unit/Year Pace

The National Association of Realtors reported that existing home sales slipped below a 5 million units per year pace in October. October sales reached a 4.97-million-unit seasonally adjusted annualized rate, down 20.7% from the same month last year. Single family existing home sales fell to a rate of 4.37 million units, down 20.8% from October, 2006.
Through the first ten months of 2007, some 4.90 million existing homes have been sold.
Lawrence Yun, NAR chief economist, said, “As noted last month, temporary mortgage problems were peaking back in August when many of the sales closed in October were being negotiated. We continue to see the biggest impact in high-cost markets that rely on jumbo loans,” he said. “Mortgage availability has improved as evidenced by much lower mortgage interest rates and a sharp jump in FHA endorsements for home purchases.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.38% in October, unchanged from September; the rate was 6.36% in October 2006. Last week, Freddie Mac reported the 30-year fixed rate fell to 6.20%.

November Consumer Confidence Dips 17%

The Conference Board's Consumer Confidence Index was just 87.3 (1985=100) in November, down 17.1% from the same month in 2006. The month’s mark was 8.3% below October’s revised Index.
Said Lynn Franco, Director of The Conference Board Consumer Research Center: "This month's deterioration in confidence was due primarily to the sharp decline in the Expectations Index. Consumers' apprehension about the short-term outlook is being fueled by volatility in financial markets, rising prices at the pump and the likelihood of larger home heating bills this winter. In fact, consumers' inflation expectations have surpassed the spike experienced this spring and a larger percentage than last month expect stock prices to decline.” Just 10.8% of consumers expect more jobs in the months ahead, while 23.1% expect the number of jobs to decrease. And 11% of consumers expect their incomes to drop over the next six months.

October Starts Down 16%

The Census Department reports that housing starts for October racked up a 1.23-million-unit seasonally adjusted annualized rate, down 16.4% from the pace for the same month in 2006. Single family starts fell to an 884,000-unit annualized rate, down 25.1% from October, 2006.
Through the first ten months of this year, some 936,400 homes have been started, down 27.5% from the same period of 2006.
Building permits for October dipped 24.5% from the same month last year to an annualized rate of 1.18 million units. Through the first ten months of this year, nearly 1.22 million permits have been issued, down 24.7% from the same period last year.

Home Price Index Hits Record Low

The Standard & Poor’s /Case-Shiller® U.S. National Home Price Index for the third quarter of 2007 dipped 1.7% from the second quarter of the year, the largest quarter-to-quarter decline in its more than 20 years of history. The mark was down 4.5% from the same period last year, the largest year-over-year decline ever and the second consecutive record low. All 20 metropolitan areas tracked by S&P were in decline in September over August.

Friday, November 16, 2007

Have a Happy Holiday

K + B DeltaVee will be dark until November 28th. Everybody have a happy Thanksgiving day!


According to CNBC, financial giant Merrill Lynch offered Larry Fink the position of CEO, only to withdraw the offer when Fink said he wanted to see a full account of the brokerage's exposure to sub-prime mortgage woes. The position went to John Thain instead.

Thursday, November 15, 2007

J.D. Power: Extended Warranties Not Needed for Appliances

About 25% of consumers buying a major appliance also get an extended warranty, although appliance reliability seems to make that unneccessary, according to a new study by J.D. Powers & Associates.
The study measures customer satisfaction in nine segments of appliances: dishwashers; free-standing ranges; built-in cooktops and wall ovens; freezer-top refrigerators; side-by-side refrigerators; clothes washers; clothes dryers; over-the-range microwave ovens; and countertop microwave ovens. Customer satisfaction was measured based on performance in six factors: operational performance (including how well the appliance functions, noise level and energy efficiency); operational features (such as the number of settings available and appliance capacity); ease of use; styling and feel; price; and warranty.

Suddenly White Castle Doesn't Sound So Bad...

Reuters reports that the Modern Toilet diner chain in Taipei features seats made out of toilet bowls, dishes shaped like toilet bowls, toilet paper instead of napkins, and food that...well, you've been warned. (You've only yourself to blame for clicking there.)

"Most customers will bring their cameras in because the place is quite special," says one of the chain's managers, and I doubt I would have believed it without the photos, either.

Construction Wages Slip Slightly in October

Average hourly earnings in October for workers in construction trades slipped 0.3% from September to $21.23, according to the most recent figures from the Bureau of Labor Statistics. That figure was 3.8% over earnings for October of 2006.
Weekly construction trade earnings for October were virtually flat with September at $838.59, 3.3% above October, 2006 earnings.
For all U.S. workers, average weekly earnings fell by 0.2% from September to October to $595.22.
The BLS also reported that the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in October before seasonal adjustment. The October level of 208.936 (1982-84=100) was 3.5% higher than in October, 2006.

Wednesday, November 14, 2007

NAR: Slight Recovery For Existing Home Sales in 2008

The latest forecast from the National Association of Realtors sees a modest recovery for existing home sales in 2008 to 5.69 million units. That will be up from 5.67 million units in 2007.
Median existing home prices will dip 1.7% this year to $218,200, and remain virtually flat next year at $218,300.
NAR pegs new home sales at 796,000 units in 2007 and 693,000 next year; no real improvement is seen for new homes until 2009. Starts, including multifamily units, are forecast at 1.35 million this year and 1.14 million in 2008. The median new-home price is estimated to drop 1.6% to $242,500 in 2007 before rising 0.4% to $243,600 in 2008.

Tuesday, November 13, 2007

Home Depot Sales Drop 3.5% for Quarter

Home Depot reports that its fiscal third quarter sales dipped 3.5% from the same period in 2006 to $18.9 billion.
The Atlanta-based home center giant reported that sales for the first three quarters of its fiscal year were down 3.1% from the same period last year to $59.7 billion.
We are facing a tough environment as housing indicators continue to deteriorate. Our financial performance in the third quarter reflects these tough conditions," said Frank Blake, chairman & CEO.

Monday, November 12, 2007

Cost vs. Value Declines in 2007

Remodeling magazine's annual Cost vs. Value Report finds that kitchen and bath remodeling have declined in value, along with other home improvements across the board. While 10 of 22 projects tracked, including kitchens and baths, returned more than 90 cents on the dollar in 2005, none performed that well in this year's report.
A minor kitchen remodel (refacing plus laminate countertop) returns 83% in increased home value of its $21,185 investment, while a major kitchen remodel (semi-custom cabinetry, laminate countertop) returns 78.1% in resale value of its $55,503 investment. An upscale major kitchen remodel (custom cabinets and stone countertops) returns 74.1% in increased home value of its $109,394 cost.
A bathroom addition costing about $37,000 will return 66% of its cost as increase home value, while a $73,000 investment in additional bathroom returns 69% of its cost. Some 78.3% of the cost is recouped from a $16,000 bath remodeling job, but just 68.4% of a $51,000 bath remodeling job is added to the home's value. And investing nearly $100,000 to add a master bedroom/bathroom suite will recoup 69% of its cost in increased home value.

Wednesday, November 7, 2007

Let Me Know When It Hangs Them in the Closet

Via The Boy Genius Report comes word of an Electrolux dryer in the UK that uses steam to reduce or replace ironing.

Friday, November 2, 2007

October Construction Employment Virtually Flat

Some 7.6 million workers were employed in construction jobs during October, virtually unchanged (-0.1%) from September, according to the most recent figures from the Bureau of Labor Statistics.
For all workers, nonfarm payroll employment rose by 166,000 in October, and the unemployment rate was unchanged at 4.7%.

Thursday, November 1, 2007

Foreclosures Nearly Double in Third Quarter

There were more than 635,000 foreclosure filings nationwide in the third quarter of this year, 99.5% more than in the same period of 2006, according to RealtyTrac. The figure was 30.0% higher than levels for the second quarter of 2007, and marked one foreclosure for every 196 U.S. households.
August and September were the two highest monthly foreclosure filing totals we’ve seen since we began issuing our report in January 2005,” said James J. Saccacio, chief executive officer of RealtyTrac. “Although not all areas are being hit as hard as others, the rise in foreclosures is quite widespread, with 45 out of the 50 states documenting year-over-year increases in the third quarter. Given the number of loans due to reset through the middle of 2008, and the continuing weakness in home sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets.”

WaMu, First American Probed for Mortgage Scam

ABC News is reporting that New York state is investigating an apparent fraud scheme by Washington Mutual, the nation's largest savings and loan; mortgage and property services company First American Corporation; and its wholly owned subsidiary, eAppraiseIT. According to court papers said to include internal e-mails, the three entities inflated the value of homes appraised beyond actual market value, to allow the S&L to write an increased amount of loans for more money, inflating its value for investors. Unlucky homeowners caught in the scheme now may owe more than their property is worth if they attempt to sell or refinance their property.

KBB Green

Newly added to "Sites to See": KBB Green, a blog by Jeff Holloway, CKD, CBD, and K+BB magazine to discuss all things ecologically responsible.

Fed Drops Rates A Quarter-Point

Trying to stave off recession due to the sub-prime crisis, the Federal Reserve announced a quarter-point drop in the federal funds rate, to 4 1/2%.