TALLAHASSEE, Fla. – June 3, 2009 – Citizens Property Insurance officials Tuesday proposed rate increases that would raise most South Florida home and condominium owners’ premiums up to 10 percent a year for as many as five years, beginning Jan. 1.
State-backed Citizens estimates it needs to boost property insurance rates for homes, condos and businesses by a statewide average of 6 percent a year starting next year until the rates are about 44 percent higher.
Some Broward homeowners could see their rates rise as much as 74 percent over the next five years, according to the Citizens proposal.
A final rate filing will be submitted to the Office of Insurance Regulation after Citizens board members approve it later this month.
The Legislature froze Citizens rates the past few years to help drive insurance prices down after the 2004 and 2005 hurricanes.
This year, legislators passed a bill to increase annual premiums by up to 10 percent. Gov. Charlie Crist signed the bill into law last week.
State officials say the rate increases are needed to pay projected claims and other expenses. All automobile and property insurance policyholders in Florida are subject to fees to offset Citizens’ deficits if a major hurricane hits. More than half of Citizens’ 1 million policyholders live in South Florida.
Some homeowners questioned the timing of the proposed increases – during a recession and after three relatively quiet hurricane seasons.
“We are losing jobs ... and our government is raising our insurance rate, which will no doubt increase the number of foreclosures,” said Jeff Kahn, a real estate agent and homeowner in Wilton Manors. “We haven’t had a storm for a while that affected us down here. ... So what justifies these abominable rates?”
Citizens’ rate estimates are broken out by region and policy type; individual policyholders’ premiums will vary based on factors such as the age, location and strength of their homes.
Over time, the projected increases will be greater on average for policyholders in single-family homes than for condo owners.
Most rates for Broward County homeowners will increase 10 percent a year for three to five years.
Most rates for Palm Beach County homeowners will increase 10 percent a year for two or three years, except for some inland neighborhoods, which will decrease slightly.
Condo unit owners in some parts of Broward and Palm Beach counties would see average rate decreases of 2 percent to 12 percent.
But some Citizens board members, including Plastridge Insurance Agency President Tom Lynch, are pushing for a 10 percent increase for all policyholders or for the projected decreases to be “zeroed out” to help the insurer become financially sound quicker.
Susanne Murphy, Citizens’ executive vice president of corporate operations, said it’s probably not fair – or legal – to charge people more than they need to pay to cover the risk of their homes and condos. But she said Citizens would consult with the insurance regulation office before the board makes a final decision.
The legislation approved this year also allows private insurers to increase premiums up to 10 percent, pending state review.
Citizens Property Insurance can be reached at 888-685-1555 and the state’s insurance consumer help line is 800-342-2762.
Copyright © 2009 Sun Sentinel, Fort Lauderdale, Fla.
Thursday, June 4, 2009
Wednesday, June 3, 2009
FAR study looks at Florida’s present and future
TALLAHASSEE, Fla. – June 3, 2009 – Migration – the movement of people into and out of a geographic area – impacts a state’s economy and real estate market. Because birth and death rates are usually low and stable, migration often accounts for the largest changes in population growth, decline and redistribution.
Migration patterns have a big impact on real estate professionals, and Florida has one of the greatest levels of domestic migration. Florida’s total population was 18.3 million in 2008, and, according to the Census Bureau estimates, will reach 19.3 million by July 2010, and approximately 23.4 million by 2020. The Census Bureau estimates a 79 percent increase in total population between 2000 and 2030, ranking Florida third highest in projected population growth.
Twenty-two percent of the state’s population in 2007 was under 18 years old, and 17 percent was 65 years and older. By 2015, 21 percent of the state’s population is projected to be under 18 years of age, and 19.5 percent will be 65 years and older. Furthermore, Florida is a favorite state for many second home buyers, both from other areas in the U.S. as well as from abroad. While the state still attracts retirees, it also appeals to many young college graduates.
A Florida Association of Realtors®’ study conducted by the National Association of Realtors® analyzes mobility and migration trends for Florida, and includes information on recent second home purchase activity. It includes projections for future migration patterns, including expected housing demand by different demographic segments, states with high volumes of in-migration to Florida, and expected changes in the existing home sales.
The report also compares Florida second home purchases to other states; mortgage data on second home purchases compared with primary residences; and recent changes in purchases by income and race.
The complete study is available on floridarealtors.org at:
http://www.floridarealtors.org/LegislativeCenter/Research/index.cfm
© 2009 FLORIDA ASSOCIATION OF REALTORS®
Migration patterns have a big impact on real estate professionals, and Florida has one of the greatest levels of domestic migration. Florida’s total population was 18.3 million in 2008, and, according to the Census Bureau estimates, will reach 19.3 million by July 2010, and approximately 23.4 million by 2020. The Census Bureau estimates a 79 percent increase in total population between 2000 and 2030, ranking Florida third highest in projected population growth.
Twenty-two percent of the state’s population in 2007 was under 18 years old, and 17 percent was 65 years and older. By 2015, 21 percent of the state’s population is projected to be under 18 years of age, and 19.5 percent will be 65 years and older. Furthermore, Florida is a favorite state for many second home buyers, both from other areas in the U.S. as well as from abroad. While the state still attracts retirees, it also appeals to many young college graduates.
A Florida Association of Realtors®’ study conducted by the National Association of Realtors® analyzes mobility and migration trends for Florida, and includes information on recent second home purchase activity. It includes projections for future migration patterns, including expected housing demand by different demographic segments, states with high volumes of in-migration to Florida, and expected changes in the existing home sales.
The report also compares Florida second home purchases to other states; mortgage data on second home purchases compared with primary residences; and recent changes in purchases by income and race.
The complete study is available on floridarealtors.org at:
http://www.floridarealtors.org/LegislativeCenter/Research/index.cfm
© 2009 FLORIDA ASSOCIATION OF REALTORS®
Tuesday, June 2, 2009
NAR: Pending home sales up for third month
WASHINGTON – June 2, 2009 – Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7 percent to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5.
“Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” says Lawrence Yun, NAR chief economist. “Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
The Pending Home Sales Index in the Northeast shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago. In the Midwest the index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008. The index in the South slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago. In the West, the index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.
NAR President Charles McMillan says there are numerous buyer assistance programs around the country. “Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location.
“Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans to buy down the interest rate or make a larger downpayment.”
NAR’s Housing Affordability Index (HAI) is in record territory. The index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income. Tracking began in 1970.
A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. The affordable price was well above the median existing single-family home price in April, which was $169,800.
Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability.
“In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,” Yun says. “Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.”
The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. “The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline,” Yun says.
© 2009 FLORIDA ASSOCIATION OF REALTORS®
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7 percent to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5.
“Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” says Lawrence Yun, NAR chief economist. “Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
The Pending Home Sales Index in the Northeast shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago. In the Midwest the index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008. The index in the South slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago. In the West, the index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.
NAR President Charles McMillan says there are numerous buyer assistance programs around the country. “Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location.
“Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans to buy down the interest rate or make a larger downpayment.”
NAR’s Housing Affordability Index (HAI) is in record territory. The index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income. Tracking began in 1970.
A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. The affordable price was well above the median existing single-family home price in April, which was $169,800.
Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability.
“In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,” Yun says. “Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.”
The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. “The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline,” Yun says.
© 2009 FLORIDA ASSOCIATION OF REALTORS®
Gov. Crist signs Fla. growth management bill
TALLAHASSEE, Fla. (AP) – June 2, 2009 – A growth management bill supported by business and development interests but opposed by environmentalists and local governments became law with Gov. Charlie Crist’s signature Monday.
Crist said he hopes the bill (SB 360) will boost Florida’s sagging construction industry and create new jobs by making it easier to build in urban areas and extending the life of existing development permits for two years. Other provisions are designed to promote affordable housing development.
“I know that it’s probably one of those bills where nobody’s going to be overly happy on either side,” Crist said. “So, hopefully it’s right down the middle and will be able to stimulate our economy and not do harm to our beautiful state.”
Environmentalists, the growth management advocacy group 1000 Friends of Florida and the Florida Association of Counties had urged a veto. They argued the legislation will encourage sprawl and make Florida’s roadways even more crowded than they are now.
“This is going to be a disappointment to the citizens of Florida who are already frustrated by traffic congestion,” said Florida Association of Counties spokeswoman Cragin Mosteller. “This is a big setback.”
Most of the argument has been over a provision designed to correct an unintended consequence of an existing growth management law that requires ample roads and other transportation facilities to be in place before development can occur. That’s a concept known as “transportation concurrency.”
It was aimed at containing sprawl but has had the opposite result. Instead of focusing growth in urban areas, concurrency has shifted it to outlying and rural areas because roads there are less congested and cheaper to build.
The new law is intended to channel that growth back into cities by lifting transportation concurrency requirements in what are termed dense urban areas. State review of large regional developments also will no longer be required in those areas.
The problem is the measure’s 1,000 people-per-square-mile definition of an urban area is too broad and will include suburban and rural sectors, said 1000 Friends president Charles Pattison.
“The areas being exempted are not the ones that are urban and dense,” Pattison said. “This is clearly meant to benefit development interests.”
Those interests certainly are happy with the new law.
“Our economy needs the shot in the arm that this legislation will provide,” said John Sebree, the Florida Association of Realtors vice president for public policy.
Associated Industries of Florida president and CEO Barney Bishop said the state’s prosperity hinges on its ability to grow and the new law will provide a spark by “easing the regulatory burdens that have been stifling economic growth.”
Florida Chamber of Commerce president and CEO Mark Wilson also praised the legislation while criticizing “special interests and others” for making “a last-minute push to politicize” the issue.
Crist also cited a provision calling for a study of mobility fees that would replace transportation concurrency and spread costs for new roads and other facilities more broadly across communities.
The fee concept has drawn support from all sides in the growth management debate, but Pattison noted the state already is conducting the study, so there was no need to put it in the law. The results are expected to be ready for next year’s legislative session.
Copyright © 2009 The Associated Press
Crist said he hopes the bill (SB 360) will boost Florida’s sagging construction industry and create new jobs by making it easier to build in urban areas and extending the life of existing development permits for two years. Other provisions are designed to promote affordable housing development.
“I know that it’s probably one of those bills where nobody’s going to be overly happy on either side,” Crist said. “So, hopefully it’s right down the middle and will be able to stimulate our economy and not do harm to our beautiful state.”
Environmentalists, the growth management advocacy group 1000 Friends of Florida and the Florida Association of Counties had urged a veto. They argued the legislation will encourage sprawl and make Florida’s roadways even more crowded than they are now.
“This is going to be a disappointment to the citizens of Florida who are already frustrated by traffic congestion,” said Florida Association of Counties spokeswoman Cragin Mosteller. “This is a big setback.”
Most of the argument has been over a provision designed to correct an unintended consequence of an existing growth management law that requires ample roads and other transportation facilities to be in place before development can occur. That’s a concept known as “transportation concurrency.”
It was aimed at containing sprawl but has had the opposite result. Instead of focusing growth in urban areas, concurrency has shifted it to outlying and rural areas because roads there are less congested and cheaper to build.
The new law is intended to channel that growth back into cities by lifting transportation concurrency requirements in what are termed dense urban areas. State review of large regional developments also will no longer be required in those areas.
The problem is the measure’s 1,000 people-per-square-mile definition of an urban area is too broad and will include suburban and rural sectors, said 1000 Friends president Charles Pattison.
“The areas being exempted are not the ones that are urban and dense,” Pattison said. “This is clearly meant to benefit development interests.”
Those interests certainly are happy with the new law.
“Our economy needs the shot in the arm that this legislation will provide,” said John Sebree, the Florida Association of Realtors vice president for public policy.
Associated Industries of Florida president and CEO Barney Bishop said the state’s prosperity hinges on its ability to grow and the new law will provide a spark by “easing the regulatory burdens that have been stifling economic growth.”
Florida Chamber of Commerce president and CEO Mark Wilson also praised the legislation while criticizing “special interests and others” for making “a last-minute push to politicize” the issue.
Crist also cited a provision calling for a study of mobility fees that would replace transportation concurrency and spread costs for new roads and other facilities more broadly across communities.
The fee concept has drawn support from all sides in the growth management debate, but Pattison noted the state already is conducting the study, so there was no need to put it in the law. The results are expected to be ready for next year’s legislative session.
Copyright © 2009 The Associated Press
Monday, June 1, 2009
Hedge funds take aim at Florida real estate
TAMPA – June 1, 2009 – Some consider them good capitalists. Others see them as opportunists. Still others call them vultures.
Whatever the name, hedge fund investors likely will be major players in Florida real estate in the next few years, buying up mortgage notes – troubled or not – for a fraction of their original value.
Often, the funds are passive investors. But here in Sun City Center, Jim Biggins is fighting to protect his family business, Cypress Creek Assisted Living Residence, from a Greenwich, Conn.-based hedge fund called Silver Point Capital.
Shortly after buying Cypress Creek’s mortgage note from M&I Bank, the hedge fund moved to foreclose. Biggins filed for Chapter 11 bankruptcy protection to fend off the investors and he said he’s confident a judge will give him time to find new financing.
Now 44, Biggins grew up helping out at his family’s assisted living facility in Manatee County, delivering dinner to seniors and cleaning floors before running home to finish his homework.
“I’m a little disappointed that they didn’t give us terms, because we could get them paid off if they would just give us time,” Biggins said. “They could get their money without destroying a family business.”
Silver Point declined to comment.
In Florida, the next wave of loan defaults and foreclosures is expected to hit the state’s battered commercial real estate market. Investment funds are forming to capitalize. While some investors also target distressed home mortgages, many hedge funds – private investment funds that aren’t regulated by the government – prefer the multimillion-dollar mortgages common in commercial real estate.
Local bankers and commercial real estate brokers report getting cold calls from hedge funds inquiring about distressed mortgages for sale.
At the moment, funds holding as much as $300 billion are looking to buy distressed real estate debt, said Pat Blount, an Oklahoma-based consultant who has advised banks on asset sales. Florida is high on their list of targets.
True impact may be felt later
It isn’t clear how many funds are taking aim at Florida. But one investment banker who advises banks, Russ Hunt of the Kendrick Pierce firm in Tampa, said he’s aware of at least 200. Blount said the real impact of hedge funds may be felt in coming months and years as some banks grow more desperate to sell troubled assets.
At the moment, there is a gap between how much banks want for their troubled loans and how much hedge funds are willing to pay, Blount said.
If a borrower can’t pay off the mortgage, the investor might foreclose and hold the property until the real estate market improves, said Chris Moench, an executive at Directed Capital Resources, a small St. Petersburg-based private equity firm that buys performing and distressed mortgages. Unlike hedge funds, Direct Capital sticks to buying mortgage notes and doesn’t venture into other investments, he said.
In some cases, the investors don’t have to wait long for a big payoff.
Last year, the real estate market came crashing down on homebuilder Peter Bennett. Several of his multifamily development projects have gone into default, and his bank, M&I Bank, sold off the mortgages to hedge funds including Silver Point Capital and Chicago-based Lincolnshire Associates.
One of the projects, a proposed multifamily housing project along MacDill Avenue in Tampa, carries a $1.4 million mortgage note that Silver Point Capital bought from M&I in March 2008.
In three months, Bennett was able to sell the MacDill Avenue property to another builder and pay off the hedge fund. It isn’t clear how much Silver Point paid for the note, but banking consultants said it isn’t uncommon to pay 50 cents on the dollar for a defaulted mortgage.
If that’s the case, Silver Point might have made an $800,000 profit in three months.
Today, Bennett is concerned less with the behavior of Silver Point Capital than M&I Bank. He had hoped his bank would renegotiate his loan.
“To me, if they’ve come to the decision to sell this note at cents on the dollar, why not work with the developer?” Bennett said.
M&I does not comment on customer matters, a spokeswoman told The Tampa Tribune.
In Sun City Center, Biggins, too, wonders why M&I Bank sold his mortgage note. Unlike Bennett, Cypress Creek Assisted Living Residence wasn’t in financial distress.
His problems started in 2007 when his $4.9 million mortgage was set to mature and a balloon payment for the remaining balance was coming due.
M&I Bank originally acquired Cypress Creek’s mortgage when it acquired Gold Bank three years ago. At first, it seemed M&I was willing to renew the loan for a year until he could find new financing, Biggins said. But before he could sign the papers to renew the loan, a FedEx letter arrived revealing that the bank had sold his mortgage note to Silver Point Capital.
“To be candid, I didn’t really know what that meant,” Biggins said. “After I spoke to Silver Point it was clear that there were no terms and they were just looking for the lump sum payoff.”
Hoping to avoid foreclosure
Today, Biggins continues to operate Cypress Creek. He worries some residents will leave the center because of its bankruptcy case, but he’s hopeful a bankruptcy judge will extend the terms of its loan and keep Silver Point from foreclosing.
“We need more than just a couple of months,” Biggins said. “We need potentially years to get this accomplished with the way the current market is.”
On a recent weekday morning, the assisted living home appeared serene and friendly.
A handful of seniors sat in the home’s front drive area, enjoying the midmorning sun and waving to strangers. A group of seniors was readying for the 10:30 a.m. prayer session.
Biggins appears to know many of its 94 residents by name.
His family built Cypress Creek in 1998. Despite its challenge, Cypress Creek is profitable, he said. But a huge mortgage note looms and for now he can’t pay it off.
While Silver Point Capital wouldn’t comment, Moench of Directed Capital Resources said many such funds are not just looking to foreclose and take property. His own firm, he said, generally tries to work with borrowers so they can make payments on their outstanding balance.
However, he acknowledged he occasionally has to foreclose if the borrower can’t or won’t make payments.
Moench said he doesn’t take offense at the term “vulture fund.” But he insisted such funds perform a service. Banks are swelled with troubled loans and someone needs to take the loans off their hands, even if it means foreclosure, Moench said.
“We need to make money,” he said, “but we do it in a way that we can hold our head high.”
What are hedge funds?
Hedge funds are private investment funds that are exempt from Securities and Exchange Commission regulation, unlike mutual funds, which are regulated and report their holdings to the SEC. This gives hedge funds more freedom to invest in risky assets using different techniques. For example, a hedge fund may buy stocks it expects to fall in value, profiting through a technique called “short selling.” Hedge funds also often buy currencies, real estate and other assets.
“Vulture funds” are investment funds, including many hedge funds, which invest in distressed companies or distressed mortgages, hoping to buy low and sell high.
Sources: Hedge Fund Association; Investment Company Institute
Copyright © 2009 Tampa Tribune, Fla.
Whatever the name, hedge fund investors likely will be major players in Florida real estate in the next few years, buying up mortgage notes – troubled or not – for a fraction of their original value.
Often, the funds are passive investors. But here in Sun City Center, Jim Biggins is fighting to protect his family business, Cypress Creek Assisted Living Residence, from a Greenwich, Conn.-based hedge fund called Silver Point Capital.
Shortly after buying Cypress Creek’s mortgage note from M&I Bank, the hedge fund moved to foreclose. Biggins filed for Chapter 11 bankruptcy protection to fend off the investors and he said he’s confident a judge will give him time to find new financing.
Now 44, Biggins grew up helping out at his family’s assisted living facility in Manatee County, delivering dinner to seniors and cleaning floors before running home to finish his homework.
“I’m a little disappointed that they didn’t give us terms, because we could get them paid off if they would just give us time,” Biggins said. “They could get their money without destroying a family business.”
Silver Point declined to comment.
In Florida, the next wave of loan defaults and foreclosures is expected to hit the state’s battered commercial real estate market. Investment funds are forming to capitalize. While some investors also target distressed home mortgages, many hedge funds – private investment funds that aren’t regulated by the government – prefer the multimillion-dollar mortgages common in commercial real estate.
Local bankers and commercial real estate brokers report getting cold calls from hedge funds inquiring about distressed mortgages for sale.
At the moment, funds holding as much as $300 billion are looking to buy distressed real estate debt, said Pat Blount, an Oklahoma-based consultant who has advised banks on asset sales. Florida is high on their list of targets.
True impact may be felt later
It isn’t clear how many funds are taking aim at Florida. But one investment banker who advises banks, Russ Hunt of the Kendrick Pierce firm in Tampa, said he’s aware of at least 200. Blount said the real impact of hedge funds may be felt in coming months and years as some banks grow more desperate to sell troubled assets.
At the moment, there is a gap between how much banks want for their troubled loans and how much hedge funds are willing to pay, Blount said.
If a borrower can’t pay off the mortgage, the investor might foreclose and hold the property until the real estate market improves, said Chris Moench, an executive at Directed Capital Resources, a small St. Petersburg-based private equity firm that buys performing and distressed mortgages. Unlike hedge funds, Direct Capital sticks to buying mortgage notes and doesn’t venture into other investments, he said.
In some cases, the investors don’t have to wait long for a big payoff.
Last year, the real estate market came crashing down on homebuilder Peter Bennett. Several of his multifamily development projects have gone into default, and his bank, M&I Bank, sold off the mortgages to hedge funds including Silver Point Capital and Chicago-based Lincolnshire Associates.
One of the projects, a proposed multifamily housing project along MacDill Avenue in Tampa, carries a $1.4 million mortgage note that Silver Point Capital bought from M&I in March 2008.
In three months, Bennett was able to sell the MacDill Avenue property to another builder and pay off the hedge fund. It isn’t clear how much Silver Point paid for the note, but banking consultants said it isn’t uncommon to pay 50 cents on the dollar for a defaulted mortgage.
If that’s the case, Silver Point might have made an $800,000 profit in three months.
Today, Bennett is concerned less with the behavior of Silver Point Capital than M&I Bank. He had hoped his bank would renegotiate his loan.
“To me, if they’ve come to the decision to sell this note at cents on the dollar, why not work with the developer?” Bennett said.
M&I does not comment on customer matters, a spokeswoman told The Tampa Tribune.
In Sun City Center, Biggins, too, wonders why M&I Bank sold his mortgage note. Unlike Bennett, Cypress Creek Assisted Living Residence wasn’t in financial distress.
His problems started in 2007 when his $4.9 million mortgage was set to mature and a balloon payment for the remaining balance was coming due.
M&I Bank originally acquired Cypress Creek’s mortgage when it acquired Gold Bank three years ago. At first, it seemed M&I was willing to renew the loan for a year until he could find new financing, Biggins said. But before he could sign the papers to renew the loan, a FedEx letter arrived revealing that the bank had sold his mortgage note to Silver Point Capital.
“To be candid, I didn’t really know what that meant,” Biggins said. “After I spoke to Silver Point it was clear that there were no terms and they were just looking for the lump sum payoff.”
Hoping to avoid foreclosure
Today, Biggins continues to operate Cypress Creek. He worries some residents will leave the center because of its bankruptcy case, but he’s hopeful a bankruptcy judge will extend the terms of its loan and keep Silver Point from foreclosing.
“We need more than just a couple of months,” Biggins said. “We need potentially years to get this accomplished with the way the current market is.”
On a recent weekday morning, the assisted living home appeared serene and friendly.
A handful of seniors sat in the home’s front drive area, enjoying the midmorning sun and waving to strangers. A group of seniors was readying for the 10:30 a.m. prayer session.
Biggins appears to know many of its 94 residents by name.
His family built Cypress Creek in 1998. Despite its challenge, Cypress Creek is profitable, he said. But a huge mortgage note looms and for now he can’t pay it off.
While Silver Point Capital wouldn’t comment, Moench of Directed Capital Resources said many such funds are not just looking to foreclose and take property. His own firm, he said, generally tries to work with borrowers so they can make payments on their outstanding balance.
However, he acknowledged he occasionally has to foreclose if the borrower can’t or won’t make payments.
Moench said he doesn’t take offense at the term “vulture fund.” But he insisted such funds perform a service. Banks are swelled with troubled loans and someone needs to take the loans off their hands, even if it means foreclosure, Moench said.
“We need to make money,” he said, “but we do it in a way that we can hold our head high.”
What are hedge funds?
Hedge funds are private investment funds that are exempt from Securities and Exchange Commission regulation, unlike mutual funds, which are regulated and report their holdings to the SEC. This gives hedge funds more freedom to invest in risky assets using different techniques. For example, a hedge fund may buy stocks it expects to fall in value, profiting through a technique called “short selling.” Hedge funds also often buy currencies, real estate and other assets.
“Vulture funds” are investment funds, including many hedge funds, which invest in distressed companies or distressed mortgages, hoping to buy low and sell high.
Sources: Hedge Fund Association; Investment Company Institute
Copyright © 2009 Tampa Tribune, Fla.
Mortgage rate rise thwarts some refinancing plans
NEW YORK – June 1, 2009 – Roger Wald recently discovered he would save $25,000 a year if he refinanced his five-year mortgage at 4.75 percent. Wald, an auto body repairman in Sarasota, Fla., could have gotten that rate last month.
But like many homeowners, he waited for rates to fall further. Now, he’s worried he missed his chance.
Mortgage rates at some lenders spiked by as much as 1 percent last Wednesday and saw little relief on Thursday, according to mortgage brokers.
“The 4.75 percent my broker quoted two weeks ago? There’s no way I’m going to get that now,” said Wald, 49.
The fear dogging homeowners and investors alike is that April’s record lows in mortgage rates may have come and gone.
The stock market has rallied since early March on the assumption the economy will rebound later this year. Federal Reserve Chairman Ben Bernanke has been calling early signs of economic stabilization “green shoots” – and one of those shoots was a pickup in refinancing activity caused by tumbling mortgage rates.
But mortgage rates have rebounded sharply over the past few days as the nation’s growing debt raises concerns that government-backed assets could lose some of their value. It’s a trend that could slow both refinancing and home buying if it continues. Higher mortgage rates won’t necessarily derail the economy’s recovery, analysts say, but it certainly won’t help.
“If the Fed does not step in, you are going to see the ‘green shoots’ get frost bite,” said T.J. Marta, founder of financial research firm Marta on the Markets.
The average rate for a 30-year fixed mortgage is back at 4.91 percent this week, up from 4.82 percent last week, Freddie Mac said Thursday.
The 30-year fixed mortgage rate hit a record low of 4.78 percent in April thanks in large part to the Fed’s decision this year to buy as much as $1.25 trillion in mortgage securities and $300 billion in Treasury notes. So far, the Fed has bought $130.5 billion in government debt and more than $431 billion in mortgage securities.
Lower rates led to a surge in mortgage applications. Applications rose for five straight weeks between early March and early April, according to the Mortgage Bankers Association. And sales of both existing and new homes ticked higher from March to April, according to data released this week.
The Fed’s moves, however, have recently lost their effectiveness in the market. The yields on the 10-year and 30-year Treasury notes have surged to a six-month high, and are nearly where they were a year ago. That’s significant because Treasury yields, or their annual rates of return, help set mortgage rates.
Mortgage activity is already starting to decline. Mortgage applications tumbled 14 percent in the week ended May 22 from the previous week, the Mortgage Bankers Association said Wednesday. Applications to refinance a loan were down almost 19 percent.
The Fed has many tools to bring rates down again. It could increase how much it intends to spend on Treasury purchases or mortgage-backed securities. It could also decide to simply buy longer-dated Treasurys, said David Ader, government bond strategist at RBS Greenwich Capital. Recently, the Fed has been focusing on buying shorter-term government debt.
But if the Fed buys more Treasurys, some investors worry the central bank’s moves could have unintended consequences. That’s because when the Fed buys the debt that the government issues, it is essentially creating money. And that can cause inflation and weaken the value of the dollar against other major currencies.
A plunge in the dollar and high inflation might scare away foreign investors from buying U.S. debt, said Mike Larson, a real estate analyst with Weiss Research. And that would cause Treasury yields to rise eventually anyway, he said.
“The Fed is really backed into a corner,” Larson said.
It would be preferable if the 10-year Treasury yield fell back to 3 percent, from its current 3.75, said Mark Zandi, chief economist at Moody’s Economy.com. Such a pullback would help bring down mortgage rates and motivate people to refinance and buy homes.
When borrowers refinance to lower rates their monthly payments goes down so they have more free cash to spend on other things they need and want. And that’s good for businesses – consumer spending accounts for about two-thirds of economic activity.
Dan Lawrence, Wald’s mortgage broker in Florida, said clients of his who have refinanced to a lower rate averaged between $300 and $400 in savings on their monthly mortgage payments, and almost assuredly pump some of those savings back into the economy.
“They’re going to go out dinner more. They’re going to buy shoes,” he said.
But many analysts, including Larson at Weiss Research, expect mortgage rates to head back toward 6 percent. The question, they say, is how fast.
Copyright © 2009 The Associated Press
But like many homeowners, he waited for rates to fall further. Now, he’s worried he missed his chance.
Mortgage rates at some lenders spiked by as much as 1 percent last Wednesday and saw little relief on Thursday, according to mortgage brokers.
“The 4.75 percent my broker quoted two weeks ago? There’s no way I’m going to get that now,” said Wald, 49.
The fear dogging homeowners and investors alike is that April’s record lows in mortgage rates may have come and gone.
The stock market has rallied since early March on the assumption the economy will rebound later this year. Federal Reserve Chairman Ben Bernanke has been calling early signs of economic stabilization “green shoots” – and one of those shoots was a pickup in refinancing activity caused by tumbling mortgage rates.
But mortgage rates have rebounded sharply over the past few days as the nation’s growing debt raises concerns that government-backed assets could lose some of their value. It’s a trend that could slow both refinancing and home buying if it continues. Higher mortgage rates won’t necessarily derail the economy’s recovery, analysts say, but it certainly won’t help.
“If the Fed does not step in, you are going to see the ‘green shoots’ get frost bite,” said T.J. Marta, founder of financial research firm Marta on the Markets.
The average rate for a 30-year fixed mortgage is back at 4.91 percent this week, up from 4.82 percent last week, Freddie Mac said Thursday.
The 30-year fixed mortgage rate hit a record low of 4.78 percent in April thanks in large part to the Fed’s decision this year to buy as much as $1.25 trillion in mortgage securities and $300 billion in Treasury notes. So far, the Fed has bought $130.5 billion in government debt and more than $431 billion in mortgage securities.
Lower rates led to a surge in mortgage applications. Applications rose for five straight weeks between early March and early April, according to the Mortgage Bankers Association. And sales of both existing and new homes ticked higher from March to April, according to data released this week.
The Fed’s moves, however, have recently lost their effectiveness in the market. The yields on the 10-year and 30-year Treasury notes have surged to a six-month high, and are nearly where they were a year ago. That’s significant because Treasury yields, or their annual rates of return, help set mortgage rates.
Mortgage activity is already starting to decline. Mortgage applications tumbled 14 percent in the week ended May 22 from the previous week, the Mortgage Bankers Association said Wednesday. Applications to refinance a loan were down almost 19 percent.
The Fed has many tools to bring rates down again. It could increase how much it intends to spend on Treasury purchases or mortgage-backed securities. It could also decide to simply buy longer-dated Treasurys, said David Ader, government bond strategist at RBS Greenwich Capital. Recently, the Fed has been focusing on buying shorter-term government debt.
But if the Fed buys more Treasurys, some investors worry the central bank’s moves could have unintended consequences. That’s because when the Fed buys the debt that the government issues, it is essentially creating money. And that can cause inflation and weaken the value of the dollar against other major currencies.
A plunge in the dollar and high inflation might scare away foreign investors from buying U.S. debt, said Mike Larson, a real estate analyst with Weiss Research. And that would cause Treasury yields to rise eventually anyway, he said.
“The Fed is really backed into a corner,” Larson said.
It would be preferable if the 10-year Treasury yield fell back to 3 percent, from its current 3.75, said Mark Zandi, chief economist at Moody’s Economy.com. Such a pullback would help bring down mortgage rates and motivate people to refinance and buy homes.
When borrowers refinance to lower rates their monthly payments goes down so they have more free cash to spend on other things they need and want. And that’s good for businesses – consumer spending accounts for about two-thirds of economic activity.
Dan Lawrence, Wald’s mortgage broker in Florida, said clients of his who have refinanced to a lower rate averaged between $300 and $400 in savings on their monthly mortgage payments, and almost assuredly pump some of those savings back into the economy.
“They’re going to go out dinner more. They’re going to buy shoes,” he said.
But many analysts, including Larson at Weiss Research, expect mortgage rates to head back toward 6 percent. The question, they say, is how fast.
Copyright © 2009 The Associated Press
The economy’s ‘less worse’
TAMPA, Fla. – June 1, 2009 – Florida’s economy may not be headed up yet, but at least things are “less worse” than they were, Regions Bank Chief Economist Bob Allsbrook quipped.
Bad grammar or not, the description sums up the views of four economists surveyed by the Tribune last week. A range of economic indicators is mostly negative, but in a few cases their pace of decline has slowed.
Meanwhile, as hard as the recession has hit the Bay area, a new Economic Stress Index developed by The Associated Press suggests this area isn’t suffering nearly as much as parts of California and Michigan, where unemployment tops 20 percent.
“I think there’s growing evidence at the national level that the blackness has begun to lighten in spots,” said Sean Snaith, an economist at the University of Central Florida’s Institute for Economic Competitiveness.
Still, in Florida, “I’m not seeing great signs that things are completely over.”
Nationally, economists and Treasury Department officials are hinting that the worst of the recession may be over. There are some encouraging signs in Florida, too, including:
• A glimmer of hope in employment. On Friday, the state reported the first drop in the unemployment rate in more than three years. It was a small drop – falling to 9.6 percent in April from 9.8 percent in March – but it could mean the rate is stabilizing, state economist Rebecca Rust told reporters Friday.
Take the good news with a grain of salt, though. It isn’t clear yet whether the drop in unemployment was caused by increased hiring or by more people giving up their job search and dropping out of the state’s labor force, Rust said.
• A spark of life in housing. Lately, the Florida Association of Realtors has been trumpeting increasing home sales in the state. For example, sales of existing homes rose 30 percent in March, rising to 13,085 sales from 10,080 sales in March 2008. However, a large number of those sales are foreclosure sales, said Scott Brown, chief economist with Raymond James Financial.
The AP’s Economic Stress Index puts the Bay area’s economic struggles in perspective, measuring unemployment, foreclosures and bankruptcies in every county in the United States.
For example, Hillsborough County got a “stress index” rating of 13.63; Pinellas County, 13.24; and Pasco County, 15.49. Higher scores indicate more stress, up to a level of 100.
By comparison, some counties in California and Michigan have stress index scores of 28 because their unemployment rates are above 20 percent. The least-affected counties in America tend to be in the Plains states, where unemployment is about 5 percent.
Economists are reluctant to say that Florida is in recovery. In fact, they say the state probably will take longer to break out of the recession than other states.
A sobering sign is in sales tax figures, which show Floridians have cut back their spending more sharply in recent months.
For example, in April, sales tax receipts were down 13.8 percent from the same month a year earlier. That’s a steeper decline than Florida saw in the fall, when year-over-year sales tax receipts were down about 11 percent, and over the summer, when the year-over-year decline was about 8 percent.
Meanwhile, Chris Lafakis, an economist with Moody’s Economy.com, sees a troubling trend in Florida’s labor market. Though April’s unemployment data was encouraging, the number of people in Florida’s labor force actually fell during the first three months of this year.
That was the first time the labor force had contracted for three consecutive months in at least 30 years, Lafakis said. So, more unemployed Floridians seem to be giving up looking for work and dropping out of the labor market, he said.
Lafakis estimates unemployment in Florida will top out at 11.4 percent in spring 2010 before starting to decline.
Copyright © 2009 Tampa Tribune,
Bad grammar or not, the description sums up the views of four economists surveyed by the Tribune last week. A range of economic indicators is mostly negative, but in a few cases their pace of decline has slowed.
Meanwhile, as hard as the recession has hit the Bay area, a new Economic Stress Index developed by The Associated Press suggests this area isn’t suffering nearly as much as parts of California and Michigan, where unemployment tops 20 percent.
“I think there’s growing evidence at the national level that the blackness has begun to lighten in spots,” said Sean Snaith, an economist at the University of Central Florida’s Institute for Economic Competitiveness.
Still, in Florida, “I’m not seeing great signs that things are completely over.”
Nationally, economists and Treasury Department officials are hinting that the worst of the recession may be over. There are some encouraging signs in Florida, too, including:
• A glimmer of hope in employment. On Friday, the state reported the first drop in the unemployment rate in more than three years. It was a small drop – falling to 9.6 percent in April from 9.8 percent in March – but it could mean the rate is stabilizing, state economist Rebecca Rust told reporters Friday.
Take the good news with a grain of salt, though. It isn’t clear yet whether the drop in unemployment was caused by increased hiring or by more people giving up their job search and dropping out of the state’s labor force, Rust said.
• A spark of life in housing. Lately, the Florida Association of Realtors has been trumpeting increasing home sales in the state. For example, sales of existing homes rose 30 percent in March, rising to 13,085 sales from 10,080 sales in March 2008. However, a large number of those sales are foreclosure sales, said Scott Brown, chief economist with Raymond James Financial.
The AP’s Economic Stress Index puts the Bay area’s economic struggles in perspective, measuring unemployment, foreclosures and bankruptcies in every county in the United States.
For example, Hillsborough County got a “stress index” rating of 13.63; Pinellas County, 13.24; and Pasco County, 15.49. Higher scores indicate more stress, up to a level of 100.
By comparison, some counties in California and Michigan have stress index scores of 28 because their unemployment rates are above 20 percent. The least-affected counties in America tend to be in the Plains states, where unemployment is about 5 percent.
Economists are reluctant to say that Florida is in recovery. In fact, they say the state probably will take longer to break out of the recession than other states.
A sobering sign is in sales tax figures, which show Floridians have cut back their spending more sharply in recent months.
For example, in April, sales tax receipts were down 13.8 percent from the same month a year earlier. That’s a steeper decline than Florida saw in the fall, when year-over-year sales tax receipts were down about 11 percent, and over the summer, when the year-over-year decline was about 8 percent.
Meanwhile, Chris Lafakis, an economist with Moody’s Economy.com, sees a troubling trend in Florida’s labor market. Though April’s unemployment data was encouraging, the number of people in Florida’s labor force actually fell during the first three months of this year.
That was the first time the labor force had contracted for three consecutive months in at least 30 years, Lafakis said. So, more unemployed Floridians seem to be giving up looking for work and dropping out of the labor market, he said.
Lafakis estimates unemployment in Florida will top out at 11.4 percent in spring 2010 before starting to decline.
Copyright © 2009 Tampa Tribune,
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