Looks like things are looking up...

First-time home buyers and investors chasing foreclosures continued to fuel the housing market in Riverside and San Bernardino counties last month, pushing prices down and sales up despite worsening economic conditions, according to figures released Tuesday by a real estate information service.

In Riverside County, where foreclosures represented more than 70 percent of the market, there were almost 49 percent more sales last month than in November, 2007, although the median price of the homes that sold fell more than 38 percent to $220,000. In San Bernardino, where repossessed homes accounted for almost 68 percent of sales, the median price dropped to $185,250, down almost 44 percent from a year earlier, while sales increased almost 39 percent.

Throughout Southern California home sales outpaced last year for the fifth consecutive month in November, with 55 percent of buyers of resale homes choosing repossessed properties, said San Diego-based MDA DataQuick in its monthly report on the housing market.

"Bargains and bargain hunters have kept this market alive through some of the bleakest financial news in memory. There's this renewed sense that you can score a 'deal' - something that had been missing for many years," DataQuick President John Walsh said in a prepared statement.

But last month's home sales in Southern California were still the second lowest for any November in 16 years, Walsh added.

Robert Kleinhenz, deputy chief economist for the California Association of Realtors said November sales held up remarkably considering the blows to the nation's financial market that occurred in September and October, including the federal government's takeover of lenders Fannie Mae and Freddie Mac.

Sales are being buoyed by mortgage money that the federal lenders are pumping into the housing market and by low mortgage rates and dramatically more affordable home prices, Kleinhenz said. However, the lending industry's fear of risk is making it difficult for people to qualify for mortgages, he added..

Foreclosures will continue because of high-risk loans made during the housing boom, now combined with rising unemployment, Kleinhenz said. He said he expects foreclosures, which are depressing home prices, will peak in the second or third quarter of next year. "We have not seen a bottoming out of home prices," he said, predicting that the summer of 2009 is the earliest that home prices may stop falling.

Improved affordability is providing opportunity for first-time home buyers. "A lot of people were left out in the first part of the decade," Kleinhkenz observed.

INCOME PROPERTY

Also investors are taking advantage of an attractive market for buying income properties. At today's low home prices it is easy for an investor to charge enough rent to cover the monthly mortgage, said Bruce Norris, who operates a real estate investment firm in Riverside.

However, foreclosures in the resale market are depressing sales of new homes, with home builders struggling to compete on price, said Mark Knorringa, chief executive of the Building Industry Association of Riverside County. In some cases, he said, builders are not able to sell new houses for enough to cover the cost of construction and development fees.

Changes to FHA as of the 1st of the year...

As we come to the end of a wild and crazy year full of change in real estate, we wanted to remind you of Changes to FHA Loans that will be taking place soon.

Required Down Payment Increases to 3.5%
Effective 1/1/09. *Remember- the down payment may come from borrower’s own funds or from family member’s gift and the seller may pay buyer’s closing costs, not to exceed 6% of the purchase price.

Minimum Required Credit Score 580
This was recently announced and now matches Fannie Mae and Freddie Mac’s minimum credit score requirement. The effective date will vary from lender to lender as HUD is requiring that all loans delivered to them by March 2009 meet this criterion- lenders will likely mandate the 580 minimum in advance of that date so that the loan funds and is shipped to HUD prior to the cut off. *Remember- manually underwritten loans with nontraditional credit will be exempt from this policy.

Fannie, Freddie execs turned aside warnings...

Top executives at mortgage finance companies Fannie Mae and Freddie Mac ignored warnings that they were taking on too many risky loans long before the housing market plunged, according to documents released Tuesday by a House committee.

E-mails and other internal documents released by the House Oversight and Government Reform Committee show that former Fannie CEO Daniel Mudd and former Freddie Mac CEO Richard Syron disregarded recommendations that they stay away from riskier types of loans.

"Their own risk managers raised warning after warning about the dangers of investing heavily in the subprime and alternative mortgage market. But these warnings were ignored" by the two chief executives, said Rep. Henry Waxman, D-Calif., the committee's chairman. "Their irresponsible decisions are now costing the taxpayers billions of dollars."

The two companies were seized by government regulators in September. A month later, Freddie Mac asked for an injection of $13.8 billion in government aid after posting a massive quarterly loss. Fannie Mae has yet to request any government aid but has warned it may need to do so soon.

Lawmakers questioned Mudd about an internal Fannie Mae presentation from June 2005 that showed the company at a "strategic crossroads," at which it could either delve into riskier loans or focus on more secure ones.

Questioned about the presentation, Mudd defended his company's effort to compete against Wall Street banks that were pouring money into subprime and other exotic loans.

"We couldn't afford to make the bet that the changes were not going to be permanent," Mudd said.

Mudd and three other former executives of the two companies defended their stewardship in a hearing held by the House committee.

"It's important to remember that Freddie and its sister institution, Fannie Mae, did not create the subprime market," said Richard Syron, Freddie Mac's former CEO.

But Rep. Darrell Issa, R. Calif., blasted Syron and Mudd, along with former Fannie Mae CEO Franklin Raines, and former Freddie Mac CEO Leland Brendsel.

"All four of you seem to be in complete denial that Freddie and Fannie are in any way responsible for this. Your whole excuse for going to risky and unreasonable loans that are defaulting at an incredibly high rate is that everyone is doing it. If we don't do it, we'll be left out."

Fannie and Freddie own or guarantee around half the $11.5 trillion in U.S. outstanding home loan debt. The two companies are the engines behind a complex process of buying, bundling and selling mortgages as investments.

They traditionally backed the safest loans, 30-year fixed rate mortgages that required a down payment of at least 20 percent. But in recent years, they lowered their standards, matching a decline fueled by Wall Street banks that backed the now-defunct subprime lending industry.

Republicans blame Fannie and Freddie, and homeownership policies of the Clinton administration for sowing the seeds of the financial meltdown. Democrats defend the companies' role in encouraging homeownership and stress that Wall Street banks - not Fannie and Freddie - led the dramatic decline in lending standards.

For years the two companies flexed their lobbying muscle in Washington to thwart efforts to impose tighter regulation.

Internal Freddie Mac budget records obtained by The Associated Press show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich and former Sen. Alfonse D'Amato of New York were recruited with six-figure contracts.

The more difficult questions, however, will come next year, when lawmakers weigh what role, if any, the two companies play should play in the mortgage market.

Options include taking the companies private, morphing them into a public utility or a federal agency, or leaving them as government-sponsored entities that have private shareholders and profits, with tougher regulations.

Fannie gives Holiday Hope to Troubled Homeowners...

Fannie Mae announced today that they will be suspending foreclosures. This comes just in time for the holidays, to the relief of many troubled homeowners. 

Fannie Mae will suspend foreclosure sales and the completion of evictions from occupied SFR properties scheduled to occur from November 26, 2008 through January 9, 2009.

The temporary suspension of foreclosures is designed to allow affected borrowers facing foreclosure to retain their homes while Fannie Mae works with mortgage servicers to implement a streamlined modification program scheduled to launch December 15. The initiative applies to loans owned or securitized by Fannie Mae. 

How does your client know if this announcement applies to them?

A homeowner can contact their current lender/loan servicer to find out if their loan is owned or securitized by Fannie Mae and if this foreclosure suspension will benefit them. Also, borrowers who have Fannie Mae loans that are scheduled for foreclosure between November 26, 2008 and January 9, 2009, will be contacted directly by the attorney handling the foreclosure.

Should a Homeowner with a Fannie Mae loan work with their existing lender even if they’ve been turned down previously for a modification?

Yes. As part of Fannie Mae’s "Second Look" program, Fannie loan servicers are prepared to work with borrowers during this period, even if previous workout efforts have been unsuccessful. 

For more information and a direct link to the Fannie Mae announcement, go to: www.fanniemae.com

As we’ve come to expect, loan underwriting guidelines continue to change. Here is an update on the status of some of our local first time buyer programs:

CalHFA (State of California’s First Time Buyer Program)

Funds are still available for CalHFA 30 year fixed rate 1st mortgages and CHDAP & ECTP silent 2nd mortgages. As of yesterday CalHFA has changed their underwriting guidelines (again). Credit score requirements are higher and the debt ratio allowances are lower on a tiered basis. Also, CalHFA is now requiring that a borrower come in with 3% down payment from their own funds. Even if a silent 2nd mortgage is used for down payment assistance, the borrower needs to come in with 3% down either from their savings or by gift from a family member.

The County of San Bernardino HAP

As of mid September HAP ran out of money but was able to get interim funds. We were notified today that there are only funds available for 2 more families. HAP funds are first come first served and can be reserved with an accepted and fully executed purchase contract. They will NOT be taking a waiting list when funds are depleted. Their funds will be replenished July 2009.

The County of Riverside down payment assistance program

Out of money since mid September and will have funds replenished July 2009. 

The City of San Bernardino

The City of San Bernardino ran out of one of their funding sources but still has down payment funds available for 20% down payment assistance. The borrower must meet the City’s Affordable Housing Payment calculation. 

The City of Redlands

Redlands ran out of funds within a week or two of getting their money in July. Their funds will be replenished in July 2009.

We have more information available on all of the above programs. Our toll free number is 1-877-367-8844

As always, in this very dynamic market, if you have been pre-qualified already, please call to get it updated!

For Immediate Release

November 20, 2008

Statement of FHFA Director James B. Lockhart

“The foreclosure suspension announced today by Fannie Mae and Freddie Mac will help homeowners and servicers utilize the new streamlined loan modification program (SMP) announced by FHFA, Fannie Mae, Freddie Mac and HOPE Now. With this suspension, seriously delinquent borrowers may have an opportunity to avoid foreclosure and work out terms to stay in their homes.”

S.B. County to use funds to target foreclosed homes.

San Bernardino County plans to use $22.8 million in federal funds to help the local housing market get through the foreclosure crisis.

A portion of the funds would be used to help homebuyers purchase foreclosed homes. The county also plans to fix up and sell blighted homes, and to fix up apartment complexes and make them available to low- and moderate-income residents.

The money was made available through a program approved by Congress in July. Department of Housing and Urban Development officials have notified San Bernardino County that it's eligible for $22.8 million and must apply by Dec. 1.

The Board of Supervisors signed off on its application and approved an action plan for the funds at its Tuesday meeting.

County officials expecPublish Postt to begin implementing the plan by February or March.

"Our region was one of the hardest hit by the foreclosure crisis," said 1st District Supervisor Brad Mitzelfelt.

"It's incumbent upon us as local elected officials to do all we can to preserve our county's quality of life for our residents."

About 42,000 homes in the county are now in foreclosure, said Mitch Slagerman, director of community development and housing for the county.

Eight cities, including Fontana, Rialto and San Bernardino, also expect to receive funds through the federal program, with the amount they receive based on their foreclosure rates.

The county's share will be used in the unincorporated parts of the county plus 13 cities that did not get separate grants. They include Colton, Grand Terrace, Highland, Loma Linda, Redlands and Yucaipa.

US home construction sinks to new record low.

Construction of new homes plunged last month to the lowest level on records going back nearly 50 years as U.S. builders slashed production while Wall Street nosedived.

Embattled homebuilders, who enjoyed a five-year boom, are now building new homes and apartments at a record-low pace, according to government data released Wednesday. New building permits, a barometer of future activity, also plummeted to the lowest pace on record.

With construction dropping, the number of unsold homes should fall quickly in the coming months, wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. "But right now housing is a disaster area," he said.

The Commerce Department reported that construction of new homes and apartments fell 4.5 percent in October, the fourth straight monthly decline. Construction sank to an annual rate of 791,000 units from an upwardly revised September rate of 828,000 units.

The results were the lowest on government records dating back to January 1959. Previously, the slowest pace had been in January 1991, when the country was in recession and going through a similar housing correction. Analysts surveyed by Thomson Reuters had expected construction to fall even further to a rate of 780,000 units

Wachovia Corp. economist Adam York forecasts that construction will fall to around 650,000 units by next summer. While that's going to be painful for the nation's homebuilders, it will help stabilize the overall U.S. housing market, he said.

"The broader housing market needs fewer homes," York said in an interview. "We built too many homes in the United States and building less is one way to work off the excess inventory."

The declines in construction last month were led by a 31 percent drop in the Northeast, where construction of single family homes fell to a new record low. They also dropped 13.7 percent in the Midwest. Construction rose 7.5 percent in the West and 1.5 percent in the South.

Applications for building permits, considered a good sign of future activity, fell by 12 percent in October to an annual rate of 708,000 units, the weakest on records dating to early 1960. New permits for single-family houses fell 14.5 percent to 460,000, the lowest level since February 1982.

That decline was surprisingly large, wrote Global Insight economist Patrick Newport, adding that builders "will take a big hit from the financial problems that erupted in September," when the government seized control of mortgage finance companies Fannie Mae and Freddie Mac, and extended a financial lifeline to insurance company American International Group Inc.

The U.S. housing recession has triggered severe economic problems and calls for further action in Washington. Builders' sentiment about market conditions dropped to a record low in November, according to the latest survey from the National Association of Home Builders.

The trade group's housing market index, which started in January 1985, tumbled five points to nine in November, reflecting growing worries over the U.S. financial crisis, rising unemployment and weakening consumer confidence. Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.

Tighter lending standards, rising defaults and fear about the housing market's future have sidelined buyers, an absence felt acutely by homebuilders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp.

In recent weeks, homebuilders have ratcheted up pressure on Congress to take steps that go beyond trying to reduce foreclosures. The industry wants lawmakers to enact new incentives aimed at getting reluctant homebuyers back into the market.

Specifically, the group is asking for a 10 percent tax credit of up to $22,000 for homebuyers that purchase a home over the next year, and a temporary interest-rate reduction on 30-year mortgages.

Would-be homebuyers find themselves in ownership limbo...

When Ryan Zimmermann last month arrived for a walk-through of the four-bedroom Corona house he had just bought at a bank auction, he got a big surprise. Someone else had moved in.

Unable to close escrow on his $483,000 purchase, Zimmermann is living in a camper near his job in Anaheim. His wife and two young sons are staying with relatives in Montana while he waits for Deutsche Bank, from whom he bought the house, to prevail as the legal owner.

David Dobbs, 27, refuses to leave. Neighbors said he showed up late one night a few weeks ago and unloaded his belongings from a small trailer. He filled the once empty swimming pool and spa and had cable hooked up to his wide-screen television.


Ryan Zimmermann cannot close escrow on the Corona home he “won” at auction because a “renter” has moved into it.


Police allowed him to stay after he showed them a rental agreement and what he said was the deed proving this landlord is the owner.

"I have the legal documents to be here. That's why I'm not gone," Dobbs said in an interview.

Squatting in vacant homes typically is the lifestyle of derelicts and the homeless, who stay a few nights and leave quickly when they are discovered.

However, the legal standoff keeping the Zimmermann family out of the home, say real estate agents, is the work of an organization that is seizing foreclosed houses in Riverside County by producing deeds that, at first glance, look legitimate because they have been notarized and filed with the county recorder.

The organization, which claims to be a religious corporation and to have "sovereign" immunity from federal and local laws, is under investigation by the Riverside County district attorney, said Jim Larsh, the district attorney's senior investigator.

Gwendolyn Johnson, the woman whose signature is on a number of the documents purporting to deed houses to Sovereign Solomon Brothers Archbishop Sole, denies that anything that organization is doing is illegal or that the people living in the houses can be legally evicted.

Johnson said in a telephone interview that the organization is based in Nevada and headed by an archbishop who is her uncle, King Solomon II. She described herself and her uncle as sovereign, which she said means among other things they are not required to pay taxes, mortgages or homeowner association fees.

Johnson, 34, said she is a Corona resident and previously worked for 11 years in the mortgage industry as an underwriter. She said since July she has deeded into sovereign ownership 23 houses in Riverside and San Bernardino counties.

A search of public records in San Bernardino county failed to find any such deeds.

Recording Deeds

However, 10 deeds were recorded in Riverside County between July 24 and Oct. 8 that purport to transfer ownership of houses to "Sovereign Solomon Brothers Archbishop Corp. Sole." The houses were in the cities of Corona, Murrieta and Palm Springs and in the unincorporated communities of Romoland and Victoria Grove.

As of Nov. 3, RealtyTrac, an online foreclosure research firm, found that six of those houses had been repossessed by banks and the legal owner of a seventh house was an individual in default.

King Solomon II did not answer a letter asking for an interview that was sent to the mailing address of Sovereign Solomon Brothers at 160 W. Foothill Parkway, a mail box center in Corona. He also could not be reached at a house in Fallbrook that is described in court records as the home of Terry Lee Herron, also known as King Solomon II, a 42-year-old with a previous felony conviction for auto theft who was charged earlier this year for illegal possession of a firearm.

The Fallbrook house was posted with the same kind of signs saying "spiritual sanctuary" and "no trespass" that can be found on other houses deeded over to Sovereign Solomon Brothers.

By filing deeds that cloud title to a house, someone can get free shelter and "hold a house ransom" by demanding cash from banks that want to avoid the delay and expense of an eviction process, which can take 60 days or longer, said Pete Nyiri, owner of Top Producers Realty & REO, which specializes in selling bank repossessed houses.

"This is going to be the next big wave of rip-offs because it is so easy," Nyiri said.


The vacant houses claimed by Sovereign Solomon routinely display a paper entitled “notice of forfeit.”

Oversight

Obtaining a blank deed is easy. Such forms can be purchased at stationary stores or downloaded from the Riverside County assessor's Web site.

Larry Ward, Riverside County's assessor-county clerk-recorder, said it is the role of his office to record documents in order to make them public, not to determine whether the chain of title was broken illegally with a phony deed.

Ward said the recorder's job is very narrow: to make sure the document contains all the information required for recording, such as the signatures of the grantor and grantee and legal description of the property, and that it is notarized.

Bobbi Schutte, Riverside County's chief deputy recorder, said that at the request of the district attorney, the office has been watching for Johnson and on Oct. 30 the police were called and stopped Johnson from recording deeds on four more houses in Riverside and another in Corona.

Once squatters take over a house, the problem of getting them out can be challenging. When police are confronted with dueling ownership claims, each supported by paperwork, they typically refuse to oust the occupants and defer a decision about who is the rightful owner to the civil court system.

"The police are not set up to be a judge and jury. They don't know who's telling the truth," said Barry Lee O'Connor, a Riverside attorney who specializes in evictions and landlord tenant law.

A bank that ousts a squatter from a foreclosed house typically declines to sue for damages or to seek criminal prosecution, said Ken Kellermann, president of Corona-based Sales Advantage Group, another firm that sells bank-owned homes.

But Larry Roberts, lead deputy district attorney in charge of San Bernardino County's real estate fraud unit, said such schemes could involve multiple crimes. He said the corrupting of public records with a phony deed is a felony.

Also, someone who collects rent from tenants put into a house he does not own commits a crime called rent skimming, also a felony, Roberts said.

Biblical Authority

Riverside County records show that on Sept. 25, Johnson deeded the house at 3240 Star Canyon Circle to Sovereign Solomon Brothers Archbishop Sole.

A representative of First American Title said in tracking the ownership of the house from person to person he could easily see that the last legitimate owner in the chain of title was Deutsche Bank, from whom Zimmerman said he had expected to take title.

No one ever deeded the property to Johnson, which raises the question why she believes it was hers to give away.

Inside the front windows of vacant houses claimed by Sovereign Solomon is routinely displayed a paper entitled "notice of forfeit" that in murky language claims the legal owner has 24 days, excluding the Sabbath, to accept an amount of silver as payment for the property. References cited as authority for the notice are biblical verses from Leviticus, Exodus, Psalms and Ecclesiastes.

Johnson said if no one responds to a notice of forfeit on a house, she is free to deed that house to the sovereign nonprofit religious organization. The people she puts in such houses, she said, do not have the credit or income necessary to buy such a home. They are happy to become "caretakers" of the houses for which they pay no rent but pay a "pledge" of $500 a month, she said.

"I am making somebody happy. That's a blessing," she said.

'Legally Ridiculous'

Johnson's argument for claiming vacant properties has no basis in law, say legal experts.

"Finders keepers doesn't work with houses," said Detective Steve Sears of the Corona Police Department, who had started a preliminary investigation before turning it over to the district attorney's office.

Edward Treder, managing partner for Barrett, Daffin, Frappier, Treder & Weiss, a law firm representing mortgage firms in eviction and other litigation, said he is familiar with the practice of groups claiming to be sovereign and beyond the government's authority.

"It is legally ridiculous, but there are a growing number of people out there that believe this," he said.

"People like this have always been around, but in times of rising defaults and foreclosures it really presents an opportunity for them to spread their message and expand their following."

Heidi Beirich, spokeswoman for the Alabama-based Southern Poverty Law Center, a nonprofit civil rights group that has been tracking sovereign citizen groups for decades, said she knew nothing about Sovereign Solomon Brothers.

But she said organizations that similarly proclaim themselves sovereign from the U.S. government and exempt from taxation thrived in the 1970s through the early 2000s and attracted members who were largely, poor, white and rural.

She said what started as a white, anti-government movement in the last year "has shockingly become part of the black nationalist scene."

The new black sovereign groups, she said, are concentrated in cities and suburbs and are notorious for their involvement in financial schemes.


   Terry Lee Herron, left, and Gwendolyn Johnson


IRS Alerts

Besides taking possession of vacant foreclosed homes, Sovereign Solomon Brothers and an affiliate, King Solomon II Archbishop Sole, have been granted title to houses by former owners who expect they can thereby avoid paying mortgages and property taxes, Johnson said.

The Internal Revenue Service in the past has issued alerts for taxpayers to be wary of promoters offering a scheme that misuses "corporation sole laws" to enable people to escape paying federal income taxes and other personal debts.

The IRS says such laws were intended to allow religious leaders to incorporate for the purpose of protecting from creditors property dedicated to the benefit of a legitimate religious organization.

At least one household is displeased with the help it received from Johnson and Solomon.

Shawna Clark, 30, said in July her fiancé, Anthony Fuller, deeded his house in Murrieta to King Solomon II Archbishop Sole as a last-ditch effort to avoid foreclosure after he lost his job and fell behind on mortgage payments.

Clark said Johnson was a friend she had known since they were teenagers in Santa Ana. She said Johnson assured her that the sovereign organization had the power to get her fiancé a modification of his mortgage to make it affordable. She said Fuller paid $500 for the assistance.

But Clark said instead of saving the house from foreclosure, Johnson's uncle, Solomon, told Fuller he would have to start paying rent or get out.

She said Solomon tried to change the locks on the house and later threatened that if Fuller and Clark did not leave in 72 hours he would put them out with "Homeland Security."

Clark said she and her fiancé reported the threat to the police. The Murrieta Police Department verified that a report by Clark was made. Clark said she and her fiancé also told Solomon and Johnson that they did not owe them rent because the house has been repossessed by Bank of America.

Johnson could not be reached to comment on Clark's complaints.

Lookout for Squatters

The homeowner association of Victoria Grove, an 1100-home gated community in southwestern Riverside County, in its Oct. 23 newsletter, told residents to "beware" of squatters who have been pulling for-sale signs out of the front yards of bank-owned homes and moving in.

"It is like something out of the 'Twilight Zone,' " said Scott Elliot, a retired lawyer and president of the association. Elliot said it looks like the squatters have obtained the combinations to locks boxes and so have not had to break into the homes.

Elliot said the association has reported the problem to the Riverside County district attorney's office in hopes of stamping it out.

"Why should someone have the benefit of a $400,000 house if they don't pay for it?" Elliot said.

Robert Hesslink Jr. owns a house on Brianwood Drive in Victoria Grovenot far from one on which Sovereign Solomon Brothers has recorded a deed. He said he became suspicious when he saw two adults and several children arrive in the upper-middle income neighborhood with a small trailer and a beat-up Suburban loaded with clothes.

Hesslink said since the squatters have moved into the neighborhood, he has worried about his family's security and bought a dog he hopes will bark to warn him of trespassers.

Kellermann said Sovereign Solomon Brothers' "notice of forfeit" one day appeared on his Brianwood Drive listing next to where alleged squatters live. He said he tore it down and replaced it with signs that say "This is bank property, not for rent or lease."

Determined to keep the squatters at bay, Kellermann said he has screwed shut the windows and has someone drive by the house every 24 hours to make sure no one tries to get inside. He said he may also pull out the toilets.

He said he can't cancel the utilities because he needs lights to show the house and water to keep the lawn green.

Prudential California Realty agent Tom Tennant said Monday, with the help of the Riverside County Sheriff's Department and an alert neighbor, he was able to take back control of the Brianwood Drive house that Deutsche Bank owns but which squatters had occupied for seven weeks.

Tennant said Sunday a neighbor called to tell him that one group of squatters on which Deutsche Bank had begun an eviction process had moved out but within 15 minutes another group had arrived to take their place.

Tennant said was able to convince sheriff's deputies Monday that the new squatters were there illegally and had them locked out.

'Crazy Nightmare'

Tennant, also the agent trying to sell the house on Star Canyon Circle that Sovereign Solomon Brothers has claimed, said when one of his agents asked Dobbs what it would take for him to leave, he said $10,000 but that Deutsche Bank refused his demand. When asked about the $10,000, Dobbs said he had been joking.

At Prudential's request, the city of Corona has turned off the water to the house.

On Wednesday, police responded to neighbors' complaints about water flowing off the property, apparently the result of Dobbs trying to gain access to water after the city meter was removed. He was arrested and charged with vandalism and theft of public utilities.

Tennant said he hopes that lack of water will put the residence in violation of the city's health and safety codes and force Dobbs out. He said Southern California Edison Co. and The Southern California Gas Co. as a matter of policy will not refuse service.

Tennant said the Corona Police Department also as a matter of policy refuses to evict Dobbs, leaving that responsibility to the courts.

"Unfortunately I am at a standstill," Tennant said.

Zimmermann, a 34-year-old plumbing equipment salesman, said he will try to get back most of the $25,000 down payment he made on the house in Corona but he still wants to keep the escrow open in case the bank can sell the house to him before he finds another.

He said when he told his wife about the squatters, "She cried a while. ... But then you have to laugh. It is like a crazy nightmare."

Eviction takes time

Steps required for eviction in California after a house is repossessed:

The former owner gets a three-day notice to vacate and a tenant gets a 60-day notice.

The bank then files an unlawful detainer lawsuit in Superior Court after which the occupant of the house has five days to answer.

If the bank is unable to serve the occupant in person with the lawsuit after three attempts over two days, the bank applies for a judicial order to have a copy of the lawsuit posted on the outside of the house and sent to the occupant by certified mail.

If the lawsuit is sent by mail, the occupant of the house has 10 days to file an answer in Superior Court.

If the occupant fails to file an answer to the unlawful detainer, the bank can get a judgment and have a writ issued by the court clerk to retake possession of the property. The bank submits the writ and instructions to the sheriff to lock out the occupant. The process can take two weeks.

If the occupant of the house files an answer to the bank's lawsuit, the bank then must file a request for a court hearing, which is scheduled in two weeks. However legal motions can further delay the start of the hearing and if the persons being evicted requests a jury trial, the wait will be longer.

If the court judgment is in favor of the bank, the sheriff will perform a lock out.

After an eviction, the bank gets restitution papers to ensure that anyone who later moves into the house without the bank's permission will be presumed to be a trespasser and subject to a sheriff lock out.

Bailout Efforts Shift To Consumer Debt.

A guest post from Frank Shump. Frank is a veteran from the financial services industry, and currently authors a blog called Thefinancecastle.com, which documents his thoughts on money matters and his adventures in self employment.

From its inception, the primary focus of the $700 billion bailout package was on businesses or, more importantly, banks and financial institutions. The plan was aimed at providing financial support to a system that had ceased to function properly, with credit markets freezing up and firms gasping for the additional capital they needed with no one willing to give it to them. Of course once the government gave them that capital it’s been having a hard time persuading them to lend it out again. Still, it appears that the Treasury is ready to broaden the bailout’s goals and provide assistance to an entirely new demographic: Consumer debt.

Treasury Secretary Henry Paulson came out today to let us know that Uncle Sam would not only be bailing out banks and other troubled lenders, but is going to (attempt) some rescuing of consumer debt firms as well. This “second stage” of the bailout, as it’s being called, officials are hoping to bring in some private money as well, which would give the bailout efforts more weight. In a surprising change in focus, Paulson said that the government will no longer be planning to buy troubled mortgage assets, which was its original intention, but will continue to examine ways to help homeowners so that they can somehow stem the tsunami of foreclosures that’s appeared in recent months to be gaining momentum.

Paulson noted that “Although the financial system has stabilized, both banks and non-banks may well need more capital given their troubled asset holdings, projections for continued high rates of foreclosures and stagnant U.S. and world economic conditions, “Second, the important markets for securitizing credit outside of the banking system also need support,” he said. “Approximately 40 percent of U.S. consumer credit is provided through securitization of credit card receivables, auto loans and student loans and similar products. This market, which is vital for lending and growth, has for all practical purposes ground to a halt.”

What this means is that the Treasury will not be aiming efforts at loosening up another important aspect of our economy: consumer spending. These consumer finance companies that he mentioned are the ones who provide us with car loans, student loans, and credit cards. Much like investors don’t want securities that are backed by mortgages anymore, they’ve lumped investments backed by other loans into that pack as well, and so firms like American Express are having some trouble getting the funding they desperately need.

The thinking is that by providing them with capital, they’ll once again begin lending out to consumers, which should get us to spend more and help support the economy. Then again that was the idea when they bailed out the banks, too, and getting them to start lending again has been much akin to pulling teeth. As a result there’s been a good amount of criticism that these banks are using the money for their own purposes rather than helping struggling homeowners and the overall economy. What’s stopping consumer lending firms from doing the same?

Sellers out of touch with realty reality...

The housing market may have bust, but many homeowners are still living in a bubble.

Despite dismal housing headlines and reports showing falling prices nationwide, owners in some once-hot areas still believe their home is gaining value or at least holding its own. And by hanging onto too-high expectations, sellers are unwittingly keeping the market from finding a bottom.

Real estate professionals across the country are reporting difficulty convincing sellers the true market value of their homes.

"It's like pulling teeth in this market," said Twyla Rist of Reece & Nichols Realtors in Kansas City, where prices are off between 7 percent and 15 percent. "Even with everything being said, you still have people that think my house is better than everybody else's."

A recent Coldwell Banker report showed that more than three-quarters of its real estate agents surveyed said most sellers have unrealistic initial listing prices for their homes.

Likewise, an unscientific study released last week by real estate Web site Zillow.com found that half of homeowners polled think their home's price has increased or stayed the same in the past year.

"We expected people to get a little more in touch with reality especially over the summer, because you couldn't turn on the TV or read the newspapers without seeing that home prices are falling," said Amy Bohutinsky, a spokeswoman for Zillow.com. "It was very surprising to see this kind of disconnect."

In fact, the median sales price of an existing home dropped 9 percent to $191,600 in September from a year ago, according to the National Association of Realtors.

It took John Cicero and his wife an appraisal, some convincing by their real estate agent and some hard-to-swallow facts to get them to lower the $525,000 listing price on their five-bedroom home in Valrico, Fla. They closed two weeks ago for about $380,000.

"We didn't really understand the severity of the market," Cicero said. "We lost close to $100,000 in equity so we were walking away from real money."

They built the stucco home four years ago for $380,000 and poured more than $80,000 into it, putting in hardwood floors, granite countertops, ceiling fans, blinds, drapes and a built-in surround-sound stereo system. They also expanded the deck by the pool, turning it into what Cicero called an "executive entertainment area."

"You think you have this wonderful home and people will want to buy it," he said, "but you're wrong."

Dan Ariely, a behavioral economics professor at Duke University's Fuqua School of Business and author of "Predictably Irrational," said the "better-than-average" effect is at play. And knowing your next-door neighbors sold their house for $500,000 makes it even more imperative for a homeowner to top that price.

"We feel that we're better than other people. We're unique. We're special," he said. "It stands to reason that our houses are also special."

The attachment to a house only intensifies the more a homeowner personalizes it, creating an extension of themselves.

"The moment we invest in something, we fall in love with it," Ariely said, which applies to something as sentimental as children or as trivial as origami.

That puts real estate agents in a precarious position of pricing a house to sell, but not insulting the homeowner by recommending a lower asking price. To a homeowner, a low, but realistic, listing price is "like someone calling your kids ugly," Ariely said with a laugh.

Nancy Batchelor, a real estate agent at Esslinger Woooten & Maxwell Realtors in Miami, says she usually agrees to list the owner's asking price as long as they can reevaluate the price in 30 days if the house doesn't sell.

"I would like to believe their house is different, but I also don't want to do them a disservice," Batchelor said.

Joni Herndon, an appraiser in Tampa, said real estate agents are calling her in to help homeowners grasp the reality of their home's value. Herndon frequently fields questions from disappointed homeowners after an appraisal, and has to explain how broadly the market is declining and why what a neighbor got two months before for his house doesn't apply anymore.

"But sometimes you just can't get through to people," she said.

She said homeowners who bought newly built homes at the height of the boom are the most stubborn because they're trying to get back every penny they spent on customized changes.

One homeowner Herndon did an appraisal for refused to lower her listing price for the third time, insisting that such features like a raised roof and more space between two windows in an upstairs bonus room set her house apart from others just like it.

"It's the mine is better than yours mentality," Herndon said.

The homeowner originally asked the builder to move the windows another foot apart and raise the roof by 12 inches so the wall could fit her big-screen television. She also spent $15,000 in extra landscaping and exterior lighting, and $2,900 on designer fans, Herndon said.

"You could have put $1,000 worth of fans in the house and blown just as much air," Herndon said.

"Owners are very concerned about how much they paid for particular changes, but buyers out there don't value them," she said.

Herndon appraised the house, also in Valrico, Fla., at $430,000. The seller put it on the market in April at $500,000, and cut the asking price to $469,5000 in July. The home is still on the market, and the seller declined to be interviewed.

The market would bottom out sooner if sellers weren't so stubborn and didn't keep prices artificially high, Arielly said.

Homeowners can't stand taking a loss on their properties, yet keeping their home on the market at an inflated price could wind up costing them more.

Homeowners need to look at the larger financial picture, Ariely said, and determine how much there is to gain or lose by keeping a home on the sales block longer.

Real estate agents press this point on their clients, saying no one wants to buy the most expensive house on the block.

After the first reduction in listing price, a psychological barrier, subsequent cuts come easier, most agents say.

Meltdown 101: Mortgage help from banks, government.

With more than 4 million homeowners behind on their mortgage payments, the government and major banks are scrambling to help at-risk borrowers avoid foreclosure.

What exactly have they done — and can they do more?

For one thing, the government and the mortgage industry said Tuesday a new plan will allow lenders to alter delinquent loans more quickly. That follows Citigroup's announcement late Monday that it would expand its efforts to help its beleaguered borrowers. Other national banks have initiated similar programs.

But what else is on the table?

Here are some questions and answers about mortgage assistance:

Q: What is a foreclosure moratorium?

A: A foreclosure moratorium is when a lender holds off on starting a foreclosure or completing a foreclosure sale on a delinquent borrower, to give both parties time to rework the loan or set up a repayment plan.

Oftentimes, the lender sets conditions for a moratorium. They might require, for example, that the home be the borrower's primary residence and that the borrower have enough income to make affordable mortgage payments.

Q: What is a repayment plan?

A: When a lender works out a plan for a borrower to pay back missed payments, it's called a repayment plan, or forbearance. A lender can increase the monthly payment until the missed payments are paid off or add the missed payments to the total principal the borrower owes.

Q: Can a restructured mortgage include an interest rate reduction?

A: Yes — to lower monthly payments, a lender might decrease the mortgage interest rate either permanently or temporarily.

Q: What is a principal reduction?

A: A principal reduction, or forgiveness, lowers the total principal amount the borrower owes on the mortgage. That, in turn, decreases the monthly payment.

Q: How can changing the length of the loan help a struggling borrower?

A: To lower payments without changing the interest rate, a lender can extend the time required to pay off the loan. For example, a lender might restructure a 30-year mortgage as a 40-year loan, shrinking the payments by stretching them over an extra 10 years.

Q: What is a short sale?

A: A short sale is when a lender allows a borrower to sell the home for less than what's owed on the mortgage, and accepts that amount as enough to satisfy the debt. For a borrower, a short sale is less detrimental on a credit report than a foreclosure, but it's still a hefty stain.

Q: What other methods could lenders be using to help at-risk borrowers?

A: Lenders and the government are using all the tools available to them to help struggling borrowers. However, many of the most far-reaching remedies weren't made available until it was too late for many homeowners. And the continued rapid decline in housing prices, the stalled credit markets and the weakening economy have only made matters worse for troubled borrowers.

Q: Why is it hard to rework a loan?

A: In the late 1980s, Wall Street started to slice up mortgages and repackage them into securities that were sold to investors. As a result, many different investors could end up owning pieces of the same mortgage.

Now many of these investors are reluctant to allow significant modifications of the loans they partly own — like reducing the principal balance — because they don't want to take a huge investment loss.

Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged into these sorts of investments.

Q: Who else can help borrowers?

A: Borrowers are encouraged to contact their lenders or mortgage servicers as soon as they think they may fall behind on a payment. The sooner contact is made, the easier it is to head off larger problems.

Homeowners can also contact a nonprofit housing or credit counseling service to help with lender negotiations. Reputable services can be found, state-by-state, on the Department of Housing and Urban Development's Web site, and the Homeownership Preservation Foundation has a 24/7 toll-free hot line: 888-995-HOPE (4673).

Mortgage Rescue Program Coming...

Payments that do not exceed 38 percent of a borrower's income will be considered affordable.

The regulator for mortgage finance companies Fannie Mae and Freddie Mac said it would unveil on Tuesday a new loan modification program that is meant to make mortgage payments more affordable and prevent foreclosures.

Sources had told Reuters on Monday that under the plan, mortgage servicers will lower a homeowner's monthly payments to affordable levels if such a move will keep those borrowers in their homes.

Payments that do not exceed 38 percent of a borrower's income will be considered affordable, the sources said.

Officials from the Federal Housing Finance Agency and the Treasury and representatives from the mortgage lending industry will hold a news conference on the plan at 2 p.m. EDT.

Since Fannie Mae and Freddie Mac are the nation's two largest mortgage finance companies, their business practices often become the industry standard. Policy-makers hope the new plan will encourage other mortgage finance companies to show forbearance on troubled loans.

LOAN MODIFICATION MODEL:

The plan is similar to one conceived by the Federal Deposit Insurance Corporation to better match a troubled borrower's income with his monthly payments.

The FDIC turned IndyMac Bancorp Inc into a petri dish for such loan modifications when it seized the failed company in July.

FDIC Chairman Sheila Bair is not scheduled to take part in the event on Tuesday, which will take place at the offices of the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac.

Separately, the Department of Housing and Urban Development is considering an expansion of its own aid program -- Hope for Homeowners -- under which HUD's Federal Housing Administration can tap a $300 billion kitty to underwrite failing loans, the sources said.

That program, which Congress approved in July, went into effect in October. However, it got off to a slow start and officials are eager to loosen the terms and cut some red tape to make it more appealing to mortgage companies.

Under the program in its current form, a mortgage finance company must have a home reappraised and then erase ten percent of its value before the loan can win a government guarantee. Policy-makers are considering lowering that required write-off, sources said.

The HUD does not plan to announce a change to the Hope for Homeowners program on Tuesday, an agency spokesman said .

The mortgage industry will be represented on Tuesday by HOPE NOW -- a coalition of lenders, mortgages services and investors brought together under the auspices of the Treasury Department to expand aid to homeowners.

While the group has helped conceive plans to ease loan terms, many consumer groups have said such an industry-led effort to staunch foreclosures is not enough.

Promises, promises: Vision to collide with reality.

Over a two-year campaign, Barack Obama laid out a vision for the nation's future in soaring speeches that enthralled his audiences. With his victory in the presidential election on Tuesday, those goals will collide with daunting realities.

President Obama will inherit a budget deficit that many analysts say could hit a trillion dollars for the first time in history, severely crimping any promises for tax cuts or spending on new programs. He faces a diving economy that has traumatized Americans trying to buy a home, pay for college or plan for retirement. And he'll confront the complexities of trying to extricate U.S. forces from Iraq, and a resurgent conflict in Afghanistan. A look at Obama's campaign promises and the challenges that stand in their way:

THE ECONOMY, TAXES AND DEFICITS

The promise: Retain President Bush's tax cuts for families making less than $250,000 a year and provide more relief to the squeezed middle class by creating new tax breaks for lower-income families; protect middle-class taxpayers from the Alternative Minimum Tax; exempt seniors making less than $50,000 a year from paying income taxes, expand the tax credit for college and provide incentives to encourage savings, and help pay for child care and mortgage expenses.

For the shorter term, Obama supported the $700 billion financial bailout plan passed in October and backs a second stimulus plan that would provide up to about $150 billion on top of the $168 billion package of tax rebates passed earlier in the year. It could provide tax rebates or credits, extend jobless benefits and spending on infrastructure projects like roads and bridges, as well as sending food aid to the poor and money to states to pay their Medicaid bills. Separately, Obama also proposed a $1,000 emergency energy rebate to families and penalty-free withdrawals of up to $10,000 from 401(k)s and IRA's. He also proposes a $3,000-per-employee tax credit to companies for each new job they create.

The problem: Obama's spending plans and middle-class tax relief will confront exploding budget deficits - $438 billion this year, and growing as the down economy reduces tax revenues and increases spending on bailouts and anti-recessionary programs. The nonpartisan Tax Policy Center estimates Obama's proposals would reduce projected tax revenue by $2.95 trillion over the next decade, compared to what would happen if Bush's tax cuts were to expire as scheduled at the end of 2010.

ENERGY

The promise: A crash program to begin to wean the country off of its dependence on oil. The goal is to reduce U.S. petroleum demand by an amount equal to the 3.5 million barrels a day now imported from unfriendly Venezuela and the volatile Persian Gulf. Obama also would invest $15 billion a year over the next 10 years to spur commercial development of alternative energy - wind, biomass and solar - and more energy-efficient buildings and automobiles. And he wants a short-term rebate of $1,000 per couple to help with rising energy costs.

The problem: Here, too, the economic crisis throws new spending into doubt - including Obama's alternative energy plans. The $150 billion program also is tied to Congess tackling global warming by putting a price on greenhouse gases, a prospect that faces many obstacles. The call for an energy rebate also may lose its urgency as gasoline prices have dropped by more than a third and heating oil by almost half from their peaks last summer.

HEALTH CARE

The promise: Increase the number of people with health insurance by having the government subsidize the cost of coverage for low- and middle-income families. To help pay for that expense, increase taxes for those families earning more than $250,000. Obama also would require employers not offering health coverage to pay a percentage of their payroll toward a national health plan. Small businesses would be exempt. He would also mandate that children have health insurance, and he would expand who can participate in Medicaid and the State Children's Health Insurance Program.

Obama's plan would let people choose a public, Medicare-like plan or browse a shopping center of sorts for private insurance plans. The National Health Insurance Exchange would create rules and standards for participating private plans, and insurers would have to issue every applicant a policy regardless of pre-existing health conditions.

The problem: While the plan would help millions of people obtain health insurance, health analysts say it falls short of universal coverage. The Tax Policy Center says the Obama plan would reduce the number of uninsured by 18 million in the first full year of operation, from the current figure of 45 million. That still would leave millions of uninsured adults. Meanwhile, the penalty on employers that don't offer health insurance could increase the cost of operating a business. Also, the plan will cost an estimated $1.6 trillion over 10 years, according to the Tax Policy Center.

FOREIGN POLICY

The promise: Obama says he would engage both allies and adversaries to repair the U.S. image abroad and regain leverage and leadership that he says Bush squandered with the Iraq war. He says he will marshal international pressure against Iran, boost U.S. efforts against extremists along the Afghanistan-Pakistan border and get a faster and firmer start on Middle East peacemaking. He vowed to "renew the tough, direct diplomacy that can prevent Iran from obtaining nuclear weapons and curb Russian aggression."

The problem: The Bush administration has already reversed many of its policies that other nations saw as isolationist or bullying - for example, by joining international diplomatic efforts with "axis of evil" nations Iran and North Korea. But even those haven't produced great results and neither has yet to achieve its desired goal. Obama has suggested he would continue such efforts, but there is no guarantee they will yield greater success. The Bush administration has also in recent weeks engaged in unilateral strikes against extremists inside both Pakistan and Syria, prompting furious responses from those countries. Obama says he, too, will go after terrorists this way but any president wanting to step up such activities will face strong resistance from local authorities and probably pay the price for violating other nations' sovereignty by seeing cooperation cut back.

DEFENSE

The promise: Pull all U.S. combat forces out of Iraq within 16 months, send more combat troops to Afghanistan and provide better care for wounded troops and veterans.

The problem: A troop pullout by mid-2010 is feasible, although some argue that it risks shifting full responsibility to Iraq's security forces before they are ready. The Bush administration, which originally opposed setting any pullout date, has targeted departure by the end of 2011, although the Iraqis have yet to agree.

Until U.S. forces are pulled from Iraq, there are none to bolster the force in Afghanistan. Balancing needs in those two countries will be an immediate challenge for Obama. There is broad consensus on the need for more troops to combat an emboldened insurgency in Afghanistan and to train government troops there, but the trick is to accomplish that without giving up gains against the insurgency in Iraq and without robbing combat-weary soldiers and Marines of the rest periods they need.

Caring for veterans and the wounded entails enormous costs, and the scope of the health care requirements for returning troops is not yet fully known.

EDUCATION

The promise: An $18 billion plan that would encourage, but not mandate, universal pre-kindergarten; teacher pay raises tied to, although not based solely on, test scores; an overhaul of President Bush's No Child Left Behind law to better measure student progress, make room for subjects like music and art and be less punitive toward failing schools, and a tax credit to pay up to $4,000 of college costs for students who perform 100 hours of community service a year. Obama would pay for part of his plan by ending corporate tax deductions for CEO pay. He has backed away from his proposal to save money by delaying NASA's moon and Mars missions.

The problem: With the budget stretched thin, a huge infusion of cash for early childhood education or college costs seems unlikely. Federal spending on education has already been rising for more than a decade. Congress and the White House will be in no hurry to tackle No Child Left Behind, which was due for a rewrite in 2007; the economy, the war and health care are stickier and more pressing concerns.

Our housing outlook is promising.

It is a measure of the importance of housing to our region's, nation's and world's economies that today's turmoil in global finance markets can trace its beginnings to California's housing shortage beginning in the millennium.

More importantly, the fact we are poised on the cusp of recovery speaks volumes of the success we enjoy when government and private enterprise form partnerships to deal with important issues.

The latest news locally is uniformly positive. According to the latest data from the major industry tracking firms DataQuick and the Construction Industry Research Board (CIRB) home sales in San Bernardino County are up nearly 88 percent, San Bernardino County home builders have constructed nearly 2,400 new single- and multi-family homes in the first eight months of this year and median home prices are returning to roughly the same level they would have been had the market not begun overheating in the early 2000s.

In addition, San Bernardino County homebuilders are building a much healthier balance of single-family and multi-family new home communities than in previous years. The relative shortage of multi-family homes such as condominiums, townhomes and apartment homes, was one of the key factors in causing the market to overheat in the first place by reducing the most affordable housing options for those demographics that needed them the most.

We are fortunate here in our county to be part of a recovering economy thanks in large part to the willingness of local and county authorities to partner with the homebuilding industry to streamline community development processes to reduce or defray many of the costs of building new home communities - costs that otherwise result in increased consumer costs and reduced competition among homebuilders.

However, given the magnitude of the impact of the correcting housing market, we still have much to do to beyond our own borders to restore order and help revive confidence in global financial markets.

In the wake of the disruption of the housing market nationwide that followed the correction here in Southern California, the flow of credit has been seriously curtailed for home buyers, student loans, housing and other business sectors, Congress passed the $700 billion rescue package approved by lawmakers in early October that was absolutely essential to prevent a collapse in our financial system that would have inflicted devastating damage to our economy.

Policymakers continue to adjust to the rapidly changing landscape. The latest response by U.S. and global leaders was to inject cash into the world's banks and guarantee their debt. The administration announced it would purchase up to $250 billion in non-voting shares of banks to encourage them to begin lending again.

This marks an important turning point in the effort to restart the banking system. In the weeks and months ahead, this rescue plan should help stabilize financial markets, get bad mortgages off banks' balance sheets and pave the way for home values to stabilize and consumer confidence to start building back up again.

The rescue package builds off this summer's historic housing stimulus bill, which includes a first-time home buyer tax credit and much-needed FHA reform. Some have criticized the tax credit on the basis of its payback provisions. But a $7,500 no-interest loan is a step in the right direction. To help Americans understand how it works, the National Association of Home Builders (NAHB) has a Web site in English or Spanish at www.federalhousingtaxcredit.com.

It's important to keep your eye on the big picture. Over the long-term, both San Bernardino County and the nation definitely are on a growth path. Our population will rise by about 35 million over the next 10 years, and all of those people will need someplace to live.

Consider these facts:

America currently has about 105 million occupied housing units.

About 70 million of those are owner-occupied.

Total equity (value of homes minus mortgage debt) amounts to $9 trillion.

37 percent of all homeowners own their home outright, with no mortgage debt.

94 percent of those who have mortgages are making their payments on time every month.

It's going to take time to get credit markets and the banking system functioning again, to get the housing market moving, and to rebuild confidence. But once we turn the corner, the longer-term outlook is very promising.

Frank Williams is CEO of the Building Industry Association (BIA) Baldy View Chapter, which represents homebuilders and industry associates in San Bernardino County and the easternmost portion of Los Angeles County.

A new pot could help struggling homeowners.

The Inland region could soon have access to another multimillion-dollar pot of money to help stem the tide of foreclosures and keep struggling homeowners from losing their houses.

A less-publicized part of a federal housing rescue plan approved this summer increased the amount of tax-exempt bonds local and state housing agencies could issue to provide financial assistance to homeowners.

San Bernardino County could get as much as $24.7 million if the bonds are issued and would use the money to provide below market-rate financing to homeowners on the verge of foreclosure, county officials said. Riverside County still is evaluating how to proceed.

The legislation, known as the Housing and Economic Recovery Act of 2008 and signed by President Bush in July, increased the amount of tax-exempt bonds states and local agencies could issue by $11 billion nationwide. California's share is $1.2 billion.

But scant details on how the program would work are available, raising concerns among San Bernardino County supervisors, who held a public hearing on the issue last week.

Agency Manages Funds

The county would not issue the bonds directly. Instead, supervisors on Oct. 7 assigned the county's $24.7 million allocation to the Independent Cities Finance Authority. That agency, an obscure joint-powers authority, would issue the bonds as part of a larger effort to get a lower interest rate.

The agency, mainly made up of Los Angeles County cities, has been around for two decades and has helped fund $413 million in community projects.

"Our intentions are that (the funds) be used in our county, but there is nothing in the agenda item that says how you are going to do that," Board of Supervisors Chairman Paul Biane said Tuesday.

"There is nothing that gives me any sense of security that they have any ability to do this," he said. "I don't know why we are not doing this through our own housing authority."

Time Limits Addressed

The federal government put a short time frame on the bond allocation, and Michelle Blakemore, a county lawyer, said other counties around California are giving their bond allocation back to the state because of the time constraints.

"We wanted to at least take a shot," she told supervisors on Tuesday.

Debbie Smith, with the Independent Cities Finance Authority, said the agency does have experience overseeing down payment and closing-cost assistance programs for homeowners. The agency has experience dealing with lenders, she said.

Smith said the agency is committed to spending the money within San Bernardino County.

"All of the funds if you like, we can certify that those funds will only be issued within the county of San Bernardino," she said.

Before bonds are issued, supervisors asked that the matter come back to the board. The county should enter into a legal agreement with the Independent Cities Finance Authority outlining specifically how the agency will spend the money, supervisors said.

San Bernardino County officials say the foreclosure problem they are facing is massive. With an estimated 40,000 homes in some stage of foreclosure, even an additional $24 million will only go so far, said Paul Herrera, a spokesman for the county Economic Development Agency.

"You are not getting anywhere near the problem," Herrera said. "The market needs to come back."

Still, every bit helps, he said.

As part of the same legislation, Inland cities and counties will get $133.5 million -- $49 million for Riverside County and $23 million for San Bernardino County -- in actual cash to fight blight stemming from foreclosures.

Unlike the bond money, this pot of cash cannot be used for preventative measures such as refinancing of subprime loans, officials said.

Once the money is on hand, deciding how to use it will be a challenge in part because of the scale of the problem, officials said. Some homeowners on the verge of foreclosures owe more on their mortgage than what their home is worth on the current market.

Tom Freeman, a spokesman for the Riverside County Economic Development Agency, said county officials are awaiting a response from their financial advisers. Any money Riverside County would receive from the bond issue could be used to refinance loans.

"The challenge in many of these cases is that so many of subprime loans are now upside down, meaning they are worth less than is owed," Freeman said. "We have not made a recommendation to the Board of Supervisors and will not do so until we hear from our financial advisers in the next 10-15 days."

Home Prices Plummet; Sales Up for Southern California Homes.

According to a report released by MDA DataQuick, Southern California home sales volume, particularly in San Diego County, has rebounded while homes prices in almost all counties plunged at a six year-record low.

Based on the firm’s data, median home prices in San Diego County plummeted by $22,000 to $328,000 for the month of August. Comparing it to the $517,000 peak last November 2005, the present figure clearly shows a 34.6 percentage decline.

As for home sale activity, there was a 56.4 percent rise in the number of sales transactions closed for September. Compared to 2,152 transactions last year, record showed 3,366 for the said month. This jump in sales activity was observed in the entire Southern California and only emphasized the really low home sales activity last year, when the foreclosure crisis was holding the market.

One of the things quite noticeable in the report is the increase in foreclosure sales, which basically showed that home buyers are favoring these repossessed properties over other homes. Of course, this is not surprising considering that these foreclosed properties are much more affordable and offer greater return potential.

The report also showed that about 47.3 percent of the sales transaction last September involved homes that were repossessed in the past 12 months. This is a significant rise to August’s 43.2 percent and September 2007’s 45.3 percent.

In a couple more days, the firm is expected to release new reports regarding the number of foreclosures in the state. If the current trend continues, the number of homes entering foreclosure will surely outpace the sales of these repo homes. In addition, DataQuick also expects more foreclosures after the financial market meltdown.

Home prices in Riverside and San Bernardino counties dropped by 36.8 and 36.9 percent respectively. Orange County’s declined by just 25.4 percent while Los Angeles County home prices was down by 31.4 percent.

Foreclosures spur jump in SoCal home sales.

Home sales soared a record 65 percent across Southern California during September as foreclosures continue to drive an unprecedented price slide that's luring bargain hunters back into the market, an industry tracker said Monday.

Foreclosures accounted for 50 percent of last month's 20,497 sales, said San Diego-based MDA DataQuick. A year ago they accounted for 13 percent.

September's sales total is the most since December, 2006. And sales made a rare gain - 6 percent - from August, the company said.

However, September's big increase is from a record low 12,455 sales a year ago after a widespread credit freeze curtailed home financing.

That's still impacting the market and last month's sales number is the second lowest since DataQuick began keeping records in 1988.

"The pitifully low September 2007 sales numbers weren't tough to beat. More impressive was that this September's sales volume bucked the seasonal norm and rose above August," said DataQuick president John Walsh.

Credit still remains tight despite wide-ranging federal intervention and many economist believe the country has sank into a recession that will deepen into next year.

During September the median price of new and previously owned houses and condominiums plunged 33 percent to $308,500 from $462,000 in the six-county region. Prices are now back to levels last seen in May, 2003 and the median is 39 percent below the record $505,000 reached in spring and

summer of last year.
More price slashing is likely because foreclosures remain on a record pace, DataQuick said, and less expensive properties are making up the bulk of sales.

Prices are reaching fire sale levels in the Inland Empire. The median in San Bernardino County fell an annual 37 percent to $205,000. It also fell 37 percent in Riverside County to $237,500.

Walsh said September's sales reflect buying decisions made weeks ago before the dramatic worsening of the nation's financial markets.

DataQuick said that problems in the jumbo mortgage market continue impede high-end home sales. Before the credit crunch hit last August, 40 percent of sales were financed with jumbos, then defined as over $417,000. Last month just 13.2 percent of purchase loans were over $417,000.

Home sales jump, prices don't.

Home sales jumped sharply in September across Southern California from record lows of a year ago, as foreclosure sales continue to dominate the market.

More than 20,000 homes and condominiums closed escrow last month, including 7,382 in Riverside and San Bernardino counties, DataQuick Information Systems reported today. More than half the sales in the six-county region were the result of foreclosures.

Median prices fell to $237,500 in Riverside County and $205,000 in San Bernardino County. That's roughly a $10,000 decline in the median price in both counties since August. Prices are down about 40 percent since the peak of the housing price bubble about two years ago.

A DataQuick analyst said in a statement that declining prices in the Inland region has helped the affordability levels and spurred sales.

Local leaders explore buying up troubled mortgages.

Banks are sick of the Inland Empire's nonperforming mortgages, and Wall Street can't afford them on its books.
But those toxic loans are looking lucrative to investors willing to accept a huge risk.

Government and business leaders from San Bernardino and Riverside counties decided at a Wednesday meeting to keep pursuing a proposal that would open the door for Los Angeles-area investors and Inland Empire cities to buy up thousands of troubled mortgages behind the region's economic problems.

At stake: every aspect of the Inland Empire's economy.

The region's hammered real-estate market could spiral downward even further if the concept doesn't come together, which could slide the local economy into a deeper recession than expected, proponents say.

"It could devastate our economy for the next decade," said Steve PonTell, president of Upland-based La Jolla Institute, a nonprofit economic research organization.

But the proposal's advocates are also looking out for themselves. If their plan doesn't work, and if home prices fall even more, they might see millions of dollars in losses.

After the federal government takes collapsing mortgage-backed securities off the hands of Wall Street - just like it did during the 1980s savings-and-loan crisis - the Treasury Department is poised to repackage that debt and sell it to investment firms across the nation.

That worries local business owners and politicians who argue

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that nationwide investors with no stake in the Inland Empire's economy are bound to turn local properties into rentals, which would make real-estate values drop further.
They're proposing a public- private partnership between cities and investors, which would buy distressed Inland Empire mortgages and shut out investors from outside the Los Angeles region.

Real-estate developers, auto- dealership owners and some other entrepreneurs across the two-county region are tentatively on board with the concept.

But envisioning the dream and realizing it are two different things.

Right now, lobbyists and congressional representatives are imploring Treasury Secretary Henry Paulson to add specifics into recent bailout legislation that would let an Inland Empire public-private partnership purchase local mortgages.

"Wall Street wants to make this so complicated because they want control over this," said Lance Larson, legislative director for San Bernardino County. "They want to keep (local assets) on the securities side."

San Bernardino and Riverside counties ratified a resolution supporting the concept in early October. Nothing is set in stone, but proponents say they might call it the Inland Empire Asset Value Recovery Corporation.

Larson said the Inland Empire has 100,000 homes in default or foreclosure - a $30 billion problem that doesn't include thousands of previous and future foreclosures.

"We're also trying to increase demand," Larson said about drawing out buyers and propping up the region's devastated real-estate values.

Montclair Councilman Bill Ruh, a strong advocate for affordable housing, questions whether a public-private partnership is a good thing for the region.

He thinks it might usher in an artificial price floor on real-estate values, which would keep local blue-collar workers from finally being able to afford the American dream.

"When homes were running up in price, we never said, `They can only go this high' - so why stop prices from dropping?" Ruh said. "What's wrong if a home's price drops low enough for a janitor to own one? There's nothing wrong with that.

"If a janitor who makes $35,000 a year can finally afford a home at Sierra Lakes (in Fontana), so be it," Ruh added. "If a retail sales clerk who works at Banana Republic can finally afford a home, so be it. It seems that cities are more afraid of rentals than actually dealing with the problem."