Today's Local Real Estate News: "The ultimate beneficiary will be the lenders who get a bad loan paid off."

The Sun-Sentinel reports that Congress is looking to expand the proposed Federal bailout of irresponsible and reckless lenders:

“A House panel was expected to examine the potential impact on consumers during a hearing Wednesday, five days after President Bush put forward a plan to help struggling borrowers keep their homes amid rising foreclosures. Regulators who oversee the markets, from the Treasury Department, the Securities and Exchange Commission, and the Federal Deposit Insurance Corp., were scheduled to appear.”

“An estimated 2 million adjustable-rate mortgages are scheduled to "reset" this year and next, jumping from low ‘teaser’ rates for the first two or three years to much steeper rates that could cost borrowers their homes. The wave of resets could crest during the presidential and congressional election campaigns next year, and the issue already has brought politically tinged debate over possible responses by the government.”

“Observers say it is likely that the modest proposals Bush outlined last Friday will be expanded in coming weeks by a Democratic-controlled Congress seeking to respond to growing voter anxiety.”

“‘I welcome the administration's recognition that a greater public response is required and I look forward to working with them because I agree with a number of specific things that they propose,’ said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. Changes being proposed by Frank and other Democrats in Congress go further, however.”

Meanwhile, the Sun-Sentinel reports that the Fed is pleading with the reckless lenders to go easy on the troubled borrowers:

“The Federal Reserve and other banking regulators issued special guidance today urging loan service companies to work with borrowers in danger of defaulting on their home mortgages.”

“The new guidelines are not mandatory, but the regulators expressed hope companies that collect payments on mortgages would heed the advice.”

“Sheila Bair, chairman of the Federal Deposit Insurance Corp., said that mortgage collectors have the authority under existing accounting and tax rules to help deserving borrowers.”

“‘More and more consumers with subprime and hybrid mortgage products are facing the very real prospect of losing their homes through foreclosure as their payments reset and become unaffordable,’ she said in a statement. ‘It is vital that mortgage servicers work proactively with borrowers facing much higher payments as their interest rates reset.’”

The Palm Beach Post printed a column that encourages the Federal government to use billions of taxpayers’ dollars for the bailout:

“From the way President Bush's comments on the mortgage meltdown were pitched in advance, you would have thought his compassion had finally caught up with his conservatism. But it wasn't to be, not any more than the other times during the last seven years when the White House pulled the same feint.”

“Bush did not after all come to the rescue of the literally millions who may be within months of seeing their homes snatched away by jacked-up payments.”

“Instead, the administration would make maybe 80,000 additional people eligible for FHA-backed loans and will ask Congress for legislation to make it easier for some shaky homeowners to renegotiate with their mortgage holders.”

“Overnight the Fed can flood billions into the system to keep credit from seizing up altogether. It is difficult for this dolt to see why we can't devise relatively speedy administrative means to protect reasonably able families from foreclosures that would further depress housing by dumping thousands upon thousands of homes on what is already a buyer's market.”

“Sometimes a little humanity can be good business.”

While this columnist does not seem to understand the real purpose behind the bailout, at least Leon Mandell gets it. The Palm Beach Post recently published his letter to the editor:

“Any way you look at it, here goes the government again bailing out the lending industry, this time for its greed in making bad sub-prime loans ("Locals give Bush plan qualified thumbs-up," Sept. 1) - just like when the government bailed out the savings and loans.”

“While President Bush is suggesting that the Federal Housing Administration refinance loans for people with good credit who are not in a position to repay, the ultimate beneficiary will be the lenders who get a bad loan paid off. Their investors and other investors who invested in packages of sub-prime loans will come out whole. Again, big business is saved without any change in its lending habits or any change in the borrowing habits of the poor person who took out the loan.”

“I am a retired person on a fixed income. Can the government fix it so that my property taxes and homeowners insurance do not take a large share of my meager income? Who will bail me out when I no longer can afford to live in my home? Maybe someone like the tooth fairy will increase my Social Security payment in an amount sufficient to cover my needs.”

The Palm Beach Post reports on plunging construction spending:

“Construction activity plunged in July by the biggest amount in six months as spending on homes fell for a record 17th straight month.”

“The Commerce Department reported Tuesday that construction spending dropped 0.4 percent in July, compared with June, the weakest showing since a 0.6 percent fall in January.”

“It was a bigger drop than economists had been expecting and underscored the continued drag the severe slump in housing is having on building activity.”

“Housing activity fell by 1.4 percent, more than double the 0.6 percent decline in June, and has now declined for a record 17 straight months as home building suffers through its worst slump in 16 years.”

“Economists believe the downturn will get even more severe in coming months, reflecting the spreading problems in the mortgage markets. Rising delinquencies, especially by borrowers of subprime mortgages, are dumping more homes on an already glutted market. That is forcing builders to slash construction plans even further and offer a variety of incentives to move the homes they have already built.”

The Palm Beach Post reports that the subprime mess disproportionately affects minority borrowers:

“Minority borrowers in Palm Beach County were more than twice as likely to get high-cost subprime loans last year than whites were, a study scheduled to be released today shows.”

“Besides the racial disparity the study reveals, the findings suggest that minority borrowers have a higher risk of foreclosure because of their subprime mortgage rates.”

“Borrowers with subprime loans are already paying higher interest rates and don't have the resources to handle rising loan payments, the study says. More than $1 trillion in adjustable rate mortgages, or ARMs, are scheduled to reset to higher interest rates in the next few years.”

“Palm Beach County's African-American buyers were 2.4 times more likely than whites to be steered to subprime loans in 2006, according to the ACORN study. Nationwide, African-Americans were 2.7 times more likely than whites to get subprime loans.”

“Of 110 purchase loans made to African-Americans in Palm Beach County last year, 82 mortgages - nearly 75 percent - were subprime loans, according to the ACORN study.”

“‘We have seen a sharp increase in foreclosures in some of the urban and minority communities that most need to build wealth through home ownership,’ said ACORN National President Maude Hurd. ‘Too many of our neighbors were steered into unaffordable, exploding ARMs without being given an option for a fixed rate,’ she said. They face foreclosure, ‘which harms their families and our communities.’”

The Broward School Board announced that they support using taxpayers’ dollars to add to the massive inventory of homes in the County. The Sun-Sentinel reports:

“The Broward School Board on Tuesday overwhelmingly backed the unique concept of building affordable apartments reserved exclusively for district workers.”

“Public school employees just starting out in Broward County would be able to rent one-, two- or three-bedroom apartments at a price within financial reach, school district officials said.”

“By providing School Board-owned land to private developers, officials say they would be in a position to set affordable rents. No one would pay more than 30 percent of their salary for rent. A teacher with a starting pay of $38,500, for example, would pay no more than $962 a month.”

“‘They're making determination on where people should be living,’ Pat Santeramo, president of the Broward Teachers Union, told the South Florida Sun-Sentinel last week. ‘[Teachers] should be able to live wherever they want to live and afford it.’”

The Wall Street Journal reports on Fort-Lauderdale-based homebuilder, Levitt Corp.:

“Could Levitt Corp. be one of the first casualties among builders from the housing bust? The answer will partly depend on the success of the company's rights offering, which is under way.”

“Levitt, of Fort Lauderdale, Fla., played an important role in the history of the nation's home-building industry and was among the first companies to produce suburban tract developments. The company has been ailing for years because of management missteps.”

“Now Levitt's future seems uncertain as it rushes to raise cash. Last month, the company reported a loss of $58.1 million, or $2.93 a share, in the second quarter, and analysts don't expect a profit anytime soon. While stock prices of all home builders have fallen sharply in the past year, Levitt's stock has been hit harder than others and has plummeted more than 80%, the weakest performance among the 37 companies in the Dow Jones U.S. home-construction stocks index. Levitt's shares were down 11 cents to $2.23 yesterday in 4 p.m. composite trading on the New York Stock Exchange.”

But, don’t worry; the University of Florida has declared that the State’s real estate market is good shape. According to a survey released yesterday:

“Despite the bleak real estate outlook nationwide, Florida’s new home market appears for now to be stabilizing as a result of persistent demand for homes and lack of overbuilding, according to a University of Florida study released today.”

“‘There’s a growing feeling of apprehension or caution, but the results from our survey remind us that the underlying markets for real estate in Florida are still in good shape,’ said Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies. “Owner residential is the only area of real estate markets where there are problems at this time. Apartments, retail, office, industrial and hospitality all remain stable and healthy.’”

“The latest UF housing survey was conducted in July before the crisis had escalated. ‘If we could poll our respondents now, they might be quite a bit more apprehensive than they were two or three weeks ago,’ he said.”

“Whatever happens to the single-family housing market in the future, the chances of homeowners defaulting on their mortgages are small, he said.”

“Archer, who has spent most of his professional career studying mortgages, said people underestimate the tenacity of homeowners to remain in their homes. ‘Even if a homeowner gets in trouble, it takes a severe disruption in their household or their life before they will abandon their mortgage and their home,’ he said. ‘They will fight to keep that house. They’ll give up their car. They’ll take on four jobs. They’ll do whatever it takes.’”