Today's Local Real Estate News: "There's no shortage of culprits."

In a cent article, The Palm Beach Post tried to answer the blame game question:

“‘The thing we have the most difficulty doing nowadays is figuring out who has legitimately been taken advantage of, as opposed to who went into the transaction with their eyes open,’ says Mr. Sichenzia, now lead investigator for the Deerfield Beach law firm of Glinn Somera & Silva, which handles foreclosure cases.”

“That's because so many had something to gain from the mortgage bubble, says Bill Davis, president of Private Funding Specialists and past president of the Florida Association of Mortgage Brokers' Palm Beach County region — and many of those people went about their business winking and nodding. ‘It's everybody,’ he says. ‘The Federal Reserve participated, the big lenders played a part, the credit ratings agencies had a part, so did hedge funds and borrowers, appraisers.’”

“The local results: In the six months ending July 1 of this year alone, more than $1 billion in mortgages defaulted in Palm Beach County and along the Treasure Coast. Not every borrower, though, was seeking shelter. And not everyone was duped into an onerous deal.”

“‘I had a guy who called me who owns 70 homes,’ says Stuart broker Michael Morgan. ‘I know a lady who owns 16. It's the room of 1,000 doughnuts. How many can you eat? Two? Three? Well, how many houses can you live in?’”

“‘We were going through my mother's financials and found out she had refinanced through the same broker eight times,’ says Lance Cassal, a Maryland man who once handled mortgage loans — and who has since cofounded a Web site offering licensing and general background information on brokers.”

“There's no shortage of culprits, says Mr. Sichenzia: ‘Everyone who had their little finger on the loan paper.’ Collecting from them could be harder, he says. ‘Most of them are running to the hills and seeking cover under deep rocks.’”

Meanwhile, the mainstream media continues to run stories where mortgage-industry officials try to talk troubled homeowners out of allowing their home to fall into foreclosure. The Miami Herald ran an article written by George Joseph, the president and CEO of the Dade County Federal Credit Union, where he encourages trouble homeowners to keep paying those mortgages:

“South Floridians who are facing foreclosure in the wake of the mortgage boom meltdown are not without hope.”

“They can expect to encounter significant difficulties, but many will find that they will not lose their home or ruin their credit if they take a proactive and determined approach in negotiating a ''workout'' with their loan servicing company and their lender.”

“Foreclosure filings nationwide in August soared to nearly 244,000, up 36 percent from the previous month and more than double the number in August 2006, according to home loan database RealtyTrac. The company reports that the filings in Miami-Dade and Broward counties totaled 12,441 in August, which is up from 8,625 in August 2006, an increase of more than 44 percent. Experts predict that the foreclosures will continue to rise, as many adjustable rate mortgages will reset to higher rates in the near future.”

“Foreclosures also take a significant toll on the individual borrowers as well as the region's economy and property values. Foreclosures damage borrowers' credit scores, making it more costly, if not impossible, for them to secure other loans. Ultimately, these borrowers reduce their purchases of goods and services, which has a negative impact on local businesses. The foreclosed homes that become owned by lenders are usually sold below market value, which impacts property values for all surrounding homes. In addition, local governments lose property taxes as the foreclosed properties sit idle.”

Many bloggers, including yours truly, have been talking about affordability for years. Now, a few mainstream media folks are finally seeing the light (even thoug it was a blazing spotlight shining right in their faces). Linda Rawls, a reporter with The Palm Beach Post explains the painfully obvious:

“Our take: Home sales have fallen because people can't afford to buy them anymore. Home prices have far outpaced income.”

“The ratio of home prices to income should be about 3-to-1, federal guidelines say.” [Actually, the federal guidelines say that 3-to-1 should be the MAXIMUM]

“In Palm Beach County, the ratio was 7-to-1 in last year's study by Housing Leadership of Palm Beach County. This year's report, we are told, should be out soon.”

“The new-home market is faring even worse than the resale.”

“‘For all practical purposes,’ Moody's Economy.com declared this month, the new-home market is ‘dead.’”

“Home builder sentiment has fallen to its lowest rating in the history of the National Association of Home Builders' index. The oft-quoted index was launched in 1985.”

“‘The seasonally adjusted numbers are the lowest on record in October for every subcategory, as they have been every month since spring began,’ economist Patrick McPherron noted in his eulogy. ‘The bottom of this market will not be reached until there is another significant decline in the cost to prospective buyers, both in house prices and mortgage rates.’”

The Palm Beach Post reports on the mortgage industry’s return to basics:

“An abrupt shift back to the basics of mortgage lending has many house hunters nervous because several once-popular types of loans are disappearing.”

“With urging from regulators, lenders faced with growing piles of bad loans have clamped down on the kinds of mortgages they are willing to offer. That is most strongly affecting people who lack proof of income, cash reserves or good credit. But others should still be able to find a home loan.”

“Most house hunters must once again bring money to the table because the no-down-payment loans that four out of 10 first-time home buyers used during the boom years are hard to come by. Many lenders now want at least 5 percent down, and the more, the better.”

“Many lenders have stopped making piggyback loans because the second loan poses more risk than they are willing to take. If a homeowner loses a house, proceeds from its sale would go toward paying off the first mortgage. Usually, there would be little, if any, money left to cover the second.”

“Also out of favor, and nearly impossible to find, are low- or no-documentation loans, which had been devised for people who were unwilling or unable to verify their incomes.”

The Miami Herald discussed the falling stock price of a local bank:

“As housing market losses pile up, Florida's largest locally headquartered home lender finds itself in the center of the storm.”

“Amid South Florida's housing meltdown, share prices at even highly capitalized BankUnited have taken it on the chin.”

“BankUnited Financial, the holding company for the bank, has seen its stock price drop from around $27 a share in January -- just before it announced record earnings but a spike in problem loans -- to below $11 this past week, after it forecast lower fourth-quarter earnings. Final results for the quarter that ended Sept. 30 will be announced on Tuesday.”

“This drop has frustrated management at BankUnited, the largest bank headquartered in Florida with $15 billion in assets. The institution says it has none of the problematic subprime loans that triggered the current mess, no piggyback loans, and even halted condo construction lending two years before the bottom fell out of the frothy housing market.”

“Ortiz and BankUnited Chairman and Chief Executive Alfred R. Camner are not denying that the current downturn is rough and that the lion's share of the bank's loans are home mortgages. Or even that more than half of its mortgages are option-ARM, adjustable rate mortgages, which allow the borrower to make full payment, pay only interest or even less than the full interest each month.”