Today's Local Real Estate News: "We're nowhere close to the end of the collapse."

The Sun-Sentinel printed one of its most forthright articles on the mortgage crisis:

“When Domenico Colombo saw that his monthly mortgage payment was about to balloon by 30 percent, he had a clear picture of how bad it could get.”

“His payment was scheduled to surge by an extra $1,500 in December. With his daughter headed to college next fall and tuition to be paid, he feared ending up like so many neighbors in Broward County who defaulted on their mortgages and whose homes are now in foreclosure and sporting ‘For Sale’ signs.”

“Colombo did manage to renegotiate a new fixed interest rate loan with his bank, and now believes he'll be OK — but the future is less certain for the rest of us.”

“In the months ahead, millions of other adjustable-rate mortgages like Colombo's will reset, giving them a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Soaring mortgage default rates this year already have shaken major financial institutions and the fallout from more of them, some experts say, could spread from those already battered banks into the general economy.”

“When home prices kept rising, these were lucrative assets to own. But the ongoing collapse in housing prices has set off a chain reaction: Lenders are tightening their standards, borrowers are having a harder time refinancing loans and the securities that underpin them are in jeopardy.”

“This has resulted in more than $500 billion of potentially worthless paper on the balance sheets of the biggest global banks — losses that could spill into the huge pension and mutual funds that also invest in these securities and that the average worker or investor expects to depend on.”

“There's more pain left for Wall Street: ‘We're nowhere close to the end of the collapse,’ said Mark Patterson, chairman and co-founder of MatlinPatterson Global Advisors, a hedge fund that specializes in distressed funds.”

The Palm Beach Post ran an editorial discussing the housing bubble (of course they included the myth of the rich foreign investors coming to the rescue):

“There's little doubt that, outside of the high-end market, this area is in a real-estate recession. There's also little doubt that few in the industry raised warnings as the housing bubble got bigger and bigger. Too many people were making lots of money. Those Realtors who blame The Post and other news organizations for reporting the current bad news didn't object when The Post ran its ‘Mapping the Boom’ series.”

“If rising prices fueled the boom, however, falling prices will fuel the recovery. And a look back shows that prices aren't collapsing; they're settling back to traditional levels.”

“From its peak of $400,000 in 2005, the median home price in Palm Beach County is down to about $355,000. In the Treasure Coast, the median price is at $214,200 from a high of $269,400 two years ago. But for Palm Beach County, that still is 40 percent higher than the median home price in 2003. If home prices had risen by a steady 10 percent over those four years, most people would have been happy. Between August 2000 and August 2001, home prices went up just 3 percent. In the Treasure Coast, prices remain about 35 percent higher than in 2003.”

“Lower prices in South Florida will make more homes affordable. Lower prices might help bring down the cost of insurance and taxes. A tax system that doesn't penalize first-time home buyers also would help. The lower dollar will continue to attract foreign buyers. Florida will recover. But the going up won't have been worth the coming down.”

RisMedia discusses mortgage fraud in South Florida:

“In his article ‘Miami condo at ground zero in mortgage fraud,’ Tom Brown highlights the fact that foreclosures follow fast on the heals of mortgage and real estate fraud. As he points out, “fraud accounts for a sizable share of the bad bets on mortgages,” which often result in foreclosures. Lenders get stuck holding the bag, but as we have seen recently, problems in the mortgage industry affect the entire national economy and can even destabilize the global economy.”

“Brown focuses his article on a 643-unit condo known as the Club at Brickell in Miami’s international banking district. Con artists and other opportunists used this building as a vehicle to commit rampant fraud in what are commonly known as cash-back-at-closing deals. With cash back at closing, buyers, sellers, appraisers, real estate agents, and other real estate professionals often conspire to inflate the value of a property to fool a lender into approving a loan that grossly exceeds the true market value of the property.”

“The buyer receives the excess proceeds, the sellers are able to sell their property for close to their asking price, the real estate agent receives a higher commission based on the inflated price tag, and the appraiser is rewarded with another satisfied customer.”

“These cash back at closing schemes have become very popular during the latest housing boom, because they seem like “everybody wins” deals. On the surface, even the lender seems to win-loaning more money and earning more interest over the life of the loan. Unfortunately, however, when the housing bubble bursts, someone gets stuck holding the bag-the lender. And when enough lenders get stuck holding the bag, they simply pass the costs on to investors, homeowners, and taxpayers. The only winners are the con artists who rake in the cash at the closing table.”

The St. Petersburg Time questions how the housing downturn will affect the holiday season’s retail sales:

“Whether Friday's discount-induced buying binge will last remains the big question as merchants fret a weakening economy will slow down their tepid forecast for a 3 percent retail sales gain in Florida.”

“‘We've all got our fingers crossed,’ said Rick McAllister, president of the Florida Retail Federation. His worry? That the housing slump, deteriorating dollar and subprime mortgage crisis will keep the Sunshine State from doing even as well as the national forecast of a modest 4 percent gain in general merchandise sales to $474.5-billion. That would be the worst holiday season nationally in five years.”

“There was little sign shoppers were holding back Friday. In fact, Black Friday - so named for the first day retailers typically become profitable for whole year - is rarely the biggest shopping day of the year. But some experts predict it may be this year, because Hanukkah comes early and Christmas lands on a Tuesday. That means the big finish will be spread over four days.”