The Bradenton Herald reports from Florida. “Christine Walker, some might say, should have known better. As a mortgage branch manager and then an account executive for wholesale mortgages for Bank of America, Walker had intimate knowledge of the mortgage process. But in 2005, when homes sales were so hot in Florida there were often bidding wars, Walker and her husband, John, thought they knew a good investment bet when they saw one.”
“When a friend backed out of a contract for a new four-bedroom, three-bath home to be built in Twin Rivers in Parrish, the Walkers decided to take it over. ‘It seemed like it was no risk at that time,’ she said. ‘I was trying to get ahead by putting my money in a sure thing.’”
“The Walkers, who had near perfect credit, even put 10 percent down on the $435,000 home. But they still ended up with a 8.45 percent subprime interest rate.”
“‘But I wasn’t worried because I knew we were going to turn around and sell it when it was finished,’ Walker said. They also owned their residence in Twin Rivers and another home out-of-state.”
“But when the home was finished in July 2006, the housing market had started to fall and home sales were stagnant. They put the home on the market and priced it in the low $500,000s, which was ‘on the low side in the neighborhood,’ she said.
“The couple still thought they had a chance to make some money on their investment. ‘It wasn’t so shockingly clear that it was going to be a total disaster,’ she said. ‘But then, every month things got worse and worse.’”
‘In November, they rented the home for $1,650, still leaving them to make up the difference in their $3,000-plus monthly mortgage payment. It was a rent-to-own situation, Walker said, but when the renter moved out in July 2007, the couple knew they were in a losing battle.”
“‘We looked at each other and said, ‘we can’t do this any more,’ she said. ‘We had spent every piece of money cash flow to not lose our credit.’”
“In October 2007, Walker lost her job when Bank of America did away with the commercial division she was working in. The couple lost all three houses through foreclosure and filed for bankruptcy. Today, they and their three children rent a house in their old neighborhood.”
“She gets tired of seeing everyone pointing the finger at the next guy and not taking responsibility for their actions ‘I take total responsibility for what happened,’ she said. ‘It was a risk. But I’ve moved on. It was much more stressful thinking about losing everything than accepting and moving on.’”
“And she won’t be buying real estate as an investment anytime soon. ‘Investing in real estate is for the rich,’ Walker said.”
“Real estate agent Joseph Kandel made lots of money buying and reselling residential properties in Southwest and Central Florida before and during the 2004-06 housing boom. During one 18-month period, he said, he made $440,000 flipping five properties.”
“He used those proceeds to qualify for subprime, adjustable-rate loans to buy more houses. Then the sizzling local housing market fizzled, much to his surprise. ‘I know nothing lasts forever, but I didn’t see it coming,’ he said. ‘All I knew was I was making cash and making it big.’”
“His income, which had been in six figures, dropped to $17,000 last year – far less than his mortgage payments, which totaled $19,600 a month.”
“He managed to sell one property in Orlando for more than what he owed, but lost a Sarasota condominium to foreclosure earlier this month. He’s facing the same prospect on three Manatee County properties he still owns – the house and a condominium in Lakewood Ranch, and a house in University Park.”
“Kandel’s now hoping to sell them through short sales. But none have sold so far, and Kandel blames lenders instead of himself.”
“‘They lost $12,500 because of their stupidity,’ Kandel said. ‘That’s the problem with lenders right now: They don’t have an exit strategy.’”
“Kandel expects to lose his remaining properties to foreclosure later this year but said he is losing little sleep over it. ‘Why? My credit’s shot already,’ he said.”
“Despite the damage, he still plans to get back into investing in real estate.”
“Subprime lenders targeted Manatee County blacks, Hispanics and minority neighborhoods during the housing boom. Mario Garcia, a Mexican national…was making $12.50 an hour at a Bradenton lumber company when he bought a Ruskin mobile home for $279,000 in 2005.”
“Washington Mutual’s subprime arm, Long Beach Mortgage, gave him two loans, one for 80 percent of the purchase price and the other for 20 percent. To qualify Garcia for the loans, the mortgage broker listed his annual income at $60,000.”
“Garcia said when he asked about the figures at closing, he was told not to worry. ‘I said, ‘I can’t read it,’ he said through an interpreter. ‘And they said everything was fine.’”
“It was a costly mistake. With the loans’ high interest rates – 10.269 and 11.538 percent, respectively – he would have paid more than $1 million through the 30-year life of the loans.”
“He lasted just five months. With his income nowhere near the $2,350 monthly mortgage, he exhausted his savings before moving out.”
“Mike Rahn, production manager with CNL Bank in Sarasota, blames Wall Street and the way rating agencies.”
“‘If Wall Street and the bond-rating companies had not rated this subprime paper as triple A-type bonds, no one would have bought it, so there would have never been a market for it,’ Rahn says. ‘I lay a lot of this blame at the foot of Standard & Poor’s, Fitch and Moody’s. These ratings agencies should have never been allowed to rate this kind of paper. But again, they’re in bed with the investment banks.’”
“More than 4,000 foreclosure suits have been filed in Manatee County since January 2007, according to court records. That has left the county saddled with thousands of vacant homes – many neglected in the absence of their former owners.”
“Soaring foreclosures, coupled with the real estate downturn, means even ordinary homeowners trying to sell their properties are taking a hit.”
“‘Even though it’s not a foreclosure sale, it’s a distressed market,’ said said Bill Kersey, director of appraisal services for Manatee County. ‘If you want to sell it, you’re going to get a lot less for it than you did two years ago. And what this does is drive all the values in the neighborhood down. I have neighborhoods that are down as much as 30 percent, 32 percent.’”
“Gemma Henderson owns two homes in Covered Bridge Estates in Ellenton – one she lives in, the other she rents out. Her community ranks No. 4 in terms of foreclosure suits in Manatee County, with 31 actions filed during 2007. Nearly half of those – 13 homes – have already been foreclosed on.”
“Some investors looking to avoid foreclosure have turned to leasing their properties, and many of the same maintenance issues plague the rental homes. ‘People are desperate to have people come in and rent the houses they are trying to sell,’ Henderson said. ‘It’s put a big damper on where we are.’”
“‘Even the contractors have crashed so they can’t even finish what they started,’ Henderson said. ‘I think everybody is fighting to sell their home and it’s driving down everyone’s property values. They knew this day would come, but they were living in the moment like any other business would have.’”
The Herald Tribune. “Jeffrey J. Lauro was another of those energetic builder-developer deal makers who appeared to have the knack for making millions during Southwest Florida’s real estate boom. But when the real estate market soured, Lauro not only defaulted on millions of dollars in loans to banks and investors, but he has been charged by the Charlotte County Sheriff’s Office with stealing nearly $200,000 through a construction loan scheme.”
“‘He came to me to buy building lots,’ said Tom Welchman, a Port Charlotte real estate agent. ‘I loaned him $280,000. He bought and sold the lots within 40 days and never paid me back.’”
“‘He owes me about $3 million from putting together projects for him in Deep Creek and Burnt Store Lakes,’ said John Kingston, a Charlotte county mortgage broker and landowner. ‘He never paid and now the land is tied up in bankruptcy.’”
“Messages left for Lauro at a family residence in California and with his criminal attorney, Jason Goldman, were not returned.”
“‘I’m sure there are hundreds of real estate investors, as well as other local professionals dependent on the real estate market, that have had their livelihoods and personal finances turned upside down by the horrible turn of events due to volatile local real estate values,’ Goldman said.”
The St Petersburg Times. “Millions of dollars in debt and sued by dozens of disgruntled customers, the developers of the Clearwater Cay Club are liquidating some of their property to try to stay afloat.”
“During the real estate boom, Cay Club partners Dave Clark and Dave Schwarz made millions selling condo-hotel units. In Clearwater, the pair promised to convert apartment buildings into luxury condominiums on Old Tampa Bay. Investors from across the country sued, saying Cay Club violated securities laws by luring them into contracts with promises of quick appreciation and easy rental income.”
“Instead, many units are worth only half of what buyers paid for them. Cay Club also reneged on promises to rebate part of the purchase price through a ‘lease back’ program that put units in a rental pool.”
“At the auction, 10 of the condos and 10 of the boat slips will go to the highest bidder without a reserve price.”
The Orlando Sentinel. “Mitchell Harlee recently became a first-time homeowner in Orange County, fulfilling a lifelong dream despite some past bill-payment problems. ‘I had credit issues,’ he said.”
“A single father raising two daughters, Harlee improved his credit score by working closely with an east Orlando real-estate agent, Michele Guzman, who specializes in first-time buyers. Harlee attended Guzman’s free seminars and followed her advice for about a year — and finally was able to buy a spacious, four-bedroom, two-bath home in Pine Hills for $150,000.”
“He got a 30-year, fixed-rate mortgage with an interest rate of 5.9 percent. Better still, ‘I didn’t have to put a penny down,” he said, because he qualified for an Orange County down-payment-assistance program that Guzman told him about. ‘I couldn’t have done it without the help,’ Harlee said.”
“Single-family home construction in the Orlando area has stopped its downward spiral, according to a first-quarter survey by Charles Wayne Consulting Inc. of Maitland.”
“But the reason for that, said Jim Lewis, president of the real-estate research and consulting company, is because ‘they can’t go much lower.’”
“Only 916 new homes were started in subdivisions in the Orange, Seminole, Osceola, Lake and northeast Polk area during the three months that ended March 31.”
“Lewis found that only about 20 subdivisions out of the 376 ‘active’ subdivisions in the region accounted for more than 200 of the housing starts. That means, he said, that most of the subdivisions in Central Florida ‘weren’t [active] at all,’ with builders sitting on a combined 24,500 vacant lots.”
“And those are only the lots that are ‘fully developed and immediately buildable,’ Lewis said — his inventory count doesn’t include the thousands of other, unimproved lots in future development plans.”
The Palm Beach Post. “With no signs of a real-estate rebound in sight, a slew of buyers are trying to get out of their luxury condo contracts at Boca Raton-based Altman Development Corp.’s waterfront project in Stuart.”
“They’re taking the approach du jour when it comes to backing out of condo contracts around Florida: claiming Altman subsidiary Harborage Cottages-Stuart LLLP violated the Interstate Land Sales Full Disclosure Act.”
“The act, a 40-year-old law designed to protect land buyers or renters against fraud, requires, among other things, that developers of subdivisions of 100 or more nonexempt lots provide each buyer with a detailed property report.”
“The Harborage buyers say their contracts are null because they never received such a report.”
“In one of the lawsuits, filed May 15, Palm City residents R. Scott and Patricia Stone also claim the quality of construction on their $430,000 Harborage condo was not as good as the developer promised.”
“But Altman denies construction was sub-par and claims it is exempt from providing the property reports. The buyers are just trying to wriggle out of the contracts because real estate values have dropped, said Tony DiTocco, financial and legal consultant to Altman.”
“‘It’s all economic,’ he said. ‘It’s all a function of the marketplace.’”
