What Does the 'Foreclosure Crisis' Mean for You?

The Wall Street Journal

For the vast majority of homeowners, new questions about the state of foreclosures appear to be irrelevant. Few people seem to have been wrongly thrown out of their homes, and those who have been are generally months or years behind on their mortgage payments.

But the fallout from the crisis is beginning to be felt in real-estate markets across the country, particularly in places dominated by vacation homes and investment properties. Some of the worst-hit areas could be Western ski towns, because fall is the busiest time of the year for sales.
Real-estate salespeople in some of those places are worried. "September and October are usually the height of the selling-season for us," says Rich Armstrong, who owns the brokerage Rare Properties in Jackson Hole, Wyo. "Now we are seeing a number of what we call 'fence sitters,' people who would have leapt in even a month ago, but now are waiting on the sidelines."

The "foreclosure crisis" is a result of the frenzied real-estate boom and bust of the past decade. Banks made foolish loans, and borrowers signed up for them—only to default later, as the economy slumped. Banks rushed to reclaim properties, launching a record number of foreclosure proceedings.

In the past several weeks flaws have emerged in that complex process. Because of the high volume of foreclosures, the documentation supporting legal actions was prepared hastily, and some homes were seized improperly.

Yet the far bigger worry is what happens next. A frenzy of lawsuits and banks' examinations of their own practices could throw more of the millions of foreclosures of the past few years into legal jeopardy. Attorneys general in all 50 states are investigating, and plaintiffs' lawyers are working hard to perfect their legal strategies for suits on behalf of people who have been foreclosed on.

The suits might well fail. But just the threat that past foreclosure rulings might be overturned could result in collateral damage. In some places, banks are rushing foreclosed properties to market. In others, buyers are stepping back, refusing to buy foreclosed properties or "short sales"—homes sold by owners for less than the mortgage balance. In markets already beset with large inventories of foreclosed properties, the result could be a slower recovery.

Coastal markets and ski areas are feeling the most anxiety. Some already are littered with foreclosures—in part because they're dominated by second-home and investment properties. Those owners are more willing to walk away from a house that isn't their primary residence.

Foreclosure tracker RealtyTrac estimates that, nationwide, 30% to 35% of properties in foreclosure are owned by investors or were second homes. In Aspen, Colo., the figure is about 60%, says Kim McKinley, owner of McKinley Sales Real Estate in Basalt and Aspen, Colo. If foreclosure proceedings slow from here, inventory could jump, leading to price weakness later.

"We're concerned that the phantom inventory buildup will cause a more rapid and drastic drop in prices in Aspen, which is just getting started in terms of foreclosures coming to the market," says Ms. McKinley.

The timing of the foreclosure mess is especially inconvenient for ski towns, given the fall selling season.

Property owners are growing nervous. In Park City, Utah, lenders are quickly unloading foreclosed homes ahead of what could be a long, stalled foreclosure process, says Joe Trabaccone, a real-estate agent there.

On Oct. 11, for example, J.P. Morgan Chase put up for sale an 8,000-square-foot home adjacent to a private gated golf course. Mr. Trabaccone initially recommended the property be listed for $1.6 million, but Chase opted for $1.26 million. "They are offering these homes far too low just to hurry up and sell them," Mr. Trabaccone says.

Even so, it hasn't worked. A buyer made an offer and signed a contract, but then backed out.

In South Lake Tahoe, Calif., on Thursday, Freddie Mac, the big government-sponsored guarantor of mortgages, put a foreclosed home that had just been listed for sale on hold, freezing the property until paperwork could be straightened out. The foreclosure mess "seems to be filtering down and it could be an impact," says Doug Rosner, the broker who had listed the home. Three other properties in town were also frozen, another real-estate agent says.

The "sand states" of Arizona, California, Florida and Nevada are being hit as well. These areas, too, have a lot of vacation and investment properties—and a lot of foreclosures.

Robin Speronis, a real-estate broker in Cape Coral, Fla., says business had been picking up recently, with several inquiries a day—until the latest foreclosure scandal broke. Since then, she says, inquiries have shriveled to just one in the past week.

Susan Weeks, 55 years old, and her husband, Eddie, aren't optimistic. The couple had expected to retire and downsize when they bought a condo in Clermont, Fla., near Orlando, in 2007 for $192,000. Their plan was to sell their primary residence 10 minutes away and live in the condo. The trouble: They can't sell their first home.

The Weeks paid $269,000 for their three-bedroom home in 2004. The house next door, a bit larger, is listed at $185,000, Ms. Weeks says.

The couple has decided to move back to their primary home and take a renter for the condo. But while that brings in $850 a month, the Weeks take a $450-a-month hit on the condo —on top of the $2,400 a month they pay every month on their primary home.

"We're just going to wait it out," she says.

The possible foreclosure wars to come loom so largely over Florida markets that Ms. Speronis is urging condo sellers to consider any offer they get, even if it is far below asking price or what is owed on the mortgage.

Dianne Cloutier, a records supervisor in Chelmsford, Mass., had been looking for a retirement property in Cape Coral, but decided to wait because of the foreclosure mess. "It's left us on hold until we are sure the banks have legitimately foreclosed on people and that nobody can come back on us to get their property back," she says.

Foreclosures aren't the only problem. Short sales are getting more difficult to pull off, too.

In Bend, Ore., agents say buyers are avoiding short sales or even backing out of contracts because they don't want to deal with paperwork hassles or the chance of a court challenge later.

"I have some people saying 'I don't want to mess with bank-owned properties or short sales,'" says Dianne Willis, principal broker with RE/MAX Sunset Realty in Sunriver, Ore. "They're reluctant because it can be a frustrating process, especially for those who are looking to make a big move."

The short sales "can be very frustrating," adds Becky Ozrelic, of with Steve Scott Realtors in Bend. "You just have buyers waiting and waiting."

For sellers, lining up a short sale was tough even before the latest foreclosure crisis. Banks and mortgage "servicers," the outfits that process payments, already had been scrambling to handle surging workloads.

Mike and Kim Schwarz of San Jose, Calif., are coming up on the one-year mark on their short-sale saga.

The couple had acquired several investment properties over the past few years, including one in Thousand Oaks, Calif., for $751,000. After the tenants stopped paying rent, the Schwarzes couldn't cover the payments and decided to sell, Mr. Schwarz says.

They lined up a buyer in November 2009, and started working with their loan servicer on the short sale. For lenders, short sales are ugly because they guarantee a loss, but they often are preferable to a foreclosure, in which the lender is saddled with a tough-to-sell house.

The servicer, Residential Credit Solutions, took six months to process the paperwork, the Schwarzes say. Faxes and emails were sent, but nothing happened, Mr. Schwarz says.

"We typically don't hear from borrowers about long delays," says Dennis Stowe, president of Residential Credit.

The buyer walked away from the deal in June. The couple found another buyer in August, and resubmitted the short-sale paperwork. Mr. Schwarz says he has sent paperwork to Residential Credit four times since.

On Friday, Mr. Schwarz says, Residential called to tell him the short-sale paperwork looked good and the sale should close in mid-November.

Says Mr. Schwarz: "They didn't make it easy."

Other Ways the 'Foreclosure Crisis' Could Sting Homeowners

The foreclosure mess could hurt homeowners in another way: The costs of buying a home and paying off the mortgage are likely to go up, say housing experts.

The rising costs will come both during the closing and throughout the life of the loan.

At the closing, the cost of title insurance, which protects a property buyer from claims of ownership made by other people, is likely to rise, industry officials say. Title insurance is one of those annoying costs that can sneak up on a buyer during a close; premiums average around $2,000 across states, says Tim Dwyer, CEO of insurer Entitle Direct Group.

The foreclosure mess has sent insurers scrambling. One of the largest, Old Republic Title Insurance, told its agents on Oct. 1 not to issue policies on homes that have been foreclosed by GMAC Mortgage or J.P. Morgan Chase. And on Wednesday, the nation's largest title insurer, Fidelity National Financial, said lenders must vouch for the accuracy of their paperwork before it will insure properties.

Just like homeowners-insurance rates rise after a hurricane, the rates for title insurance are expected to rise, to compensate for the added risk.

The turmoil will likely lead to pricey premiums for new homeowners, says McLean, Va.-based housing economist Tom Lawler. Adds Cameron Finlay, chief economist at mortgage lender Lending-Tree.com: "Any time there is uncertainty in the market or risk implied, it follows that costs go up."

Other costs could be felt during the life of the loan. Until the current mess, servicing loans was a low-margin, high-volume business. Servicers collect mortgage payments from borrowers and send them off to mortgage holders, and if the loan gets into trouble, they manage the foreclosure. Few doubt this process will get costlier now that it is under scrutiny from regulators and the courts. That higher cost likely will show up in higher interest rates for borrowers.

Both of these higher costs also would hit homeowners who refinance their loans.

How much the costs of buying a home will rise is unknown. Mortgage industry officials say it is too soon to tell. And no one believes the costs will significantly change the price of a home. But with the housing market still weak, the uncertainty is making the prospect of buying—or selling—a home that much dicier.

Raleigh, NC Refinance Mortgage Rates Around 4.25% for 30 Year Fixed Interest Loans

Examiner

 

While Raleigh, NC has held up well when it comes to the mortgage market collapse there are still areas that have seen home prices drop in the last several months.  With three major universities in the area and many government jobs available there are many reasons to believe the housing market will improve in Raleigh, NC.  

 

For those looking to stay in the area and invest in their homes it is good to know that Raleigh, NC refinance mortgage rates are around 4.25% for a 30 year fixed interest loan at the end of September 2010.  Be aware that it takes a great financial history to lock in to these low loan rates in October 2010.

Many analysts continue to make mortgage rate predictions that state that 30 year fixed home loans will stay very low as long as Ben Bernanke and the Federal Reserve Bank feel that the economy is still struggling.  Just last week Bernanke came out and stated that interest rates were going to be held quite low for an extended period of time.  This is very good news to those who have made very good financial decisions in the past.

For those who did not make good financial decisions there are many options when it comes to lower a home loan monthly payment.  The Making Home Affordable government program has helped many to reduce payments as millions of Americans continue to search for Wells Fargo home loan modification.  With Wells Fargo gobbling up Wachovia during the credit crisis it is the case that this major financial institution has many loans that mean the modification requirements.

In a time when mortgage interest rates are very close to all time lows it might be smart to consider refinancing.  Residents of Raleigh, NC can be rest assured that jobs will remain in this area as the capital will not move and the major universities of NC State, UNC and Duke will always be within 25 miles of the state capital. 

Local-Food Entrepreneurs bring Produce directly to Eaters

Lexington Herald-Leader

RALEIGH, N.C. - "From farm to fork" has long been the rallying cry of the eat-local movement.

But getting the food from the farm has been a barrier for some consumers who don't have time to shop at farmers markets or who find community-supported agriculture programs, better known as CSAs, inconvenient.

Enter a new breed of business - a middleman between consumers and farmers - that tweaks the old model.

Traditionally, a consumer who joins a farmer's CSA pays up to $600 in the winter for a weekly share of produce from spring to fall. Though the programs are popular - there are more than 100 in North Carolina, up from 35 in 2002 - many people cannot pay for a whole season of produce in advance, volunteer on a farm or pick up the food at designated times as many programs require. Other people simply don't know what to do with an abundance of beets or kale.

That has created an opportunity for businesses such as Papa Spuds and The Produce Box, which allow customers to pay for their produce as they go - generally $20 to $30 per box. They offer customers more choice and generally stock products from several farms rather than just one. In addition, the boxes are delivered to customers' homes.

These new businesses are bringing hundreds of new customers to the table, helping to make farming financially viable for more small farmers.

In two years, The Produce Box has grown from 25 customers to nearly 3,000. At the end of last season, the Raleigh company was filling 900 boxes a week, and owner Courtney Tellefsen said demand is growing steadily this year. Some areas have a waiting list to become a Produce Box customer.

This type of system has been feasible only for a few years, said Rob Meyer, co-founder of Papa Spuds, a similar operation in Cary, N.C. He credits his partnership with Eastern Carolina Organics, a Pittsboro, N.C., group that acts as a distributor for local organic products.

Meyer's company, which offers meat and produce, also contracts directly with dozens of farms throughout the state to get the volume and variety customers demand.

"If you were going to do local organic in our size in this area, there aren't enough farms," he said.

Sandi Kronick, CEO of Eastern Carolina Organics, said the new businesses complement farmers' other efforts to reach consumers. Eastern Carolina Organics is farmer-owned and distributes organic products from farmers to restaurants, retailers and companies such as Papa Spuds.

"CSAs are overbooked by February, and there's always going to be customers who choose to go pick up off the farm," Kronick said. "The point is that the money is flowing throughout the local community, and hopefully it's resulting in more acres turning into organic in the state."

The Produce Box partners with Lee Farms in Dunn, N.C., where the sorting and packing is done on site, often within hours of the items' being picked. The company then relies on a network of women who do not work outside the home to distribute the boxes throughout the Triangle.

Papa Spuds gets bulk shipments from Eastern Carolina Organics at its Cary warehouse, where everything is packed and then distributed.

"It took us a year to turn a profit," Meyer said. "We bootstrapped the hell out of it at first. We got our feet and hands really dirty."

For customers like Jessica McRackan the new businesses make eating local feasible.

McRackan, 29, of Cary gave birth to a daughter at the end of March, an event that put an end to her regular trips to the farmers market.

"I like it better," she said of the deliveries. "I love the environment of the farmers market; it's a lot of fun. But it's often hot and it's crowded."

McRackan has become such a fan of The Produce Box service that she writes a blog dedicated to sharing what she does with the contents of each box she receives. She posts meal plans and recipes to help others figure out what to do with less familiar produce.

Government Starts Talks about New Mortgage System

Associated Press

Talk of shrinking the government's involvement in the mortgage market is growing. Just don't expect action any time soon.

A conference Tuesday at the Treasury Department is the first of many steps toward restructuring the nearly $11 trillion mortgage market. So far, rescuing mortgage giants Fannie Mae and Freddie Mac has cost the government more than $148 billion. That number is expected to grow.

Treasury Secretary Timothy Geithner pledged "fundamental change" to the structure of Fannie and Freddie, which profited tremendously during good times but burdened taxpayers with losses when the housing market went bust. He said the two companies weren't the only cause of the financial crisis, but made it worse.

Geithner, however, did not offer a specific exit strategy for Fannie and Freddie. He said only that, "it is our responsibility to make sure that we create a system that is not vulnerable to these same failures happening again."

With Republicans likely to pick up seats in Congress in November, however, the Obama administration will need support from both political parties for the changes it proposes.

Reflecting this reality, Geithner said that "the failures that produced the system we have today were bipartisan. The solution must be as well."

Executives and mortgage experts are prepared to tell Obama officials that the government must stay in the business of backing U.S. mortgages even if Fannie and Freddie disappear someday.

"At the end of the day, the government will still have a very large role to play," said Mark Zandi, chief economist at Moody's Analytics and a panelist at the event. Others include mortgage executives from Bank of America Corp. and Wells Fargo & Co, plus Bill Gross, managing director of bond giant Pimco and Lewis Ranieri, one of the creators of mortgage bonds.

The Obama administration's management of Fannie and Freddie has been under fire for months from Republicans on Capitol Hill. In December, the Treasury Department eliminated a $400 billion cap on how much money it would give the mortgage giants to keep them from failing. Sen. John McCain, R.-Ariz., has called that a "taxpayer-backed slush fund" and called for the support to be wound down.

Many in the mortgage industry say that's not realistic.

"There has to be a game plan," said Paul Leonard, vice president of government affairs at the Housing Policy Council, a mortgage industry group. "You can't just pull the plug on them."

Fannie and Freddie buy mortgages and package them into securities with a guarantee against default. They have ensured that millions of Americans can get home loans - even after the housing market collapsed.

The two mortgage giants, the Federal Housing Administration and the Veterans Administration together backed about 90 percent of loans made in the first half of the year, according to trade publication Inside Mortgage Finance.

At some point the government will have to scale back the level of support it provided the housing and mortgage markets during the recession and financial crisis.

"The government's footprint in the housing market needs to be smaller than it is today," said Shaun Donovan, President Barack Obama's housing secretary.

Most of the plans being circulated to reshape the mortgage market call for the government to guarantee that investors who buy mortgage-backed securities receive their money even if borrowers default.

Under this system, Fannie and Freddie could either be returned to private ownership or phased out completely. Fannie and Freddie, or their replacements, would pay the government to insure the loans. That money could be tapped if the housing market collapses.

"A government guarantee is both a desirable and necessary component of the country's housing finance system," wrote John Gibbons, a Wells Fargo & Co. executive vice president, in a letter last month to the Treasury Department.

Geithner said that there is a "strong case to be made" for such a government guarantee, but said the government needs to charge enough money to make sure the taxpayer does not get hit with losses in the future.

Caterpillar Picks NC for Second Plant in Two Weeks

WRAL

SANFORD, N.C. — Heavy equipment manufacturer Caterpillar Inc. announced an expansion at its Sanford plant on Thursday afternoon, bringing more than 300 jobs back to a facility that has seen cutbacks in recent years.

Gov. Beverly Perdue and other state and local officials were at the plant to herald the $28.3 million expansion, which is expected to add 325 jobs over the next four years. An unidentified Caterpillar supplier is also expected to bring 160 jobs to North Carolina to work with the plant, officials said.

“For the second time in less than a week, Caterpillar is making a major investment in North Carolina and strengthening its ties as a corporate citizen of our state,” Perdue said in a statement. “By expanding its stake in North Carolina, Caterpillar has demonstrated that our own investments in education, worker training, transportation and infrastructure have paid off.”

Last Friday, the company said it would build a $426 million factory in Winston-Salem to produce axle units for large mining equipment. It could employ about 500 full-time and contract workers in five years.

Caterpillar will build a 270,000-square-foot addition to the Sanford plant that will house logistics and robotic welding lines to produce skid steer loaders and other equipment, officials said. About half of the new production is slated for export, they said.

Construction is expected to start in September, with production beginning by next July, officials said. The average annual wage for the new jobs will be $35,602, plus benefits, they said.

The Sanford plant and another Caterpillar facility in Clayton have experienced several rounds of layoffs since late 2008, as the company adjusted to the global economic slowdown.

Lee County's unemployment rate is more than 12 percent, and Sanford Mayor Cornelia Olive said it was difficult for her to stop smiling on Thursday with hundreds of new jobs on the horizon.

"This has been a hard couple years for Lee County," Olive said.

Charles Childress, who lost his job as a machinist five months ago, already lined up an interview for Monday for a job at Caterpillar.

"It's hard to find a job. It really is," Childress said. "I know a lot of people out there need work, and there's a lot of people out there qualified (for the Caterpillar jobs)."

Caterpillar employs 1,026 full-time workers in seven North Carolina counties, and with the economy stabilizing, the Peoria, Ill.-based company appears to be gearing up for growth again.

Lee County commissioners in June offered Caterpillar up to $900,000 in incentives to land the plant expansion.

Caterpillar also was awarded a $600,000 grant from the One North Carolina Fund, which provides cash grants to attract business projects to the state. No money is paid up front, and companies must meet job creation and investment targets to obtain the funding.

Also, the state Economic Investment Committee voted Thursday to award a Job Development Investment Grant to Caterpillar. Under the terms of the JDIG, the company is eligible to receive a grant equal to 75 percent of the state withholding taxes on the new jobs for each year in which it meets annual performance targets.

If Caterpillar meets the all of the targets during an 11-year period, it could garner $3.46 million from the JDIG.

40% of Participants Depart Federal Mortgage Aid Program

USA Today

The number of homeowners dropped from the Obama administration's signature program to modify mortgages for cash-strapped homeowners is larger than the number of those receiving permanently lower monthly payments under the program.

The program puts homeowners into five-year programs with lower monthly payments on their mortgages, but first they must provide proof of income and get through a three-month trial period making all payments on time. About 530,000 homeowners, or about 40% of 1.3 million borrowers enrolled, have had their lower mortgage payments canceled, the Treasury Department reported Tuesday.

An additional 398,000 homeowners, or 30% of borrowers, have received the longer-term lower payments on their mortgages.

To qualify, homeowners must be paying about a third or more of their monthly gross income toward their mortgage. They must have a property value less than about $729,000, and they must have incurred some sort of hardship.

For qualifying homeowners, banks will extend repayment periods, drop interest rates to as low as 2% and, in some cases, reduce the outstanding loan value. Homeowners in the longer-term modifications are guaranteed lower payments for five years, then fixed terms at today's low rates for the life of the loan. The typical homeowner is receiving a reduction in the monthly payment of 36%, or more than $500 a month.

Some economists say few are benefiting from the program. "(It) is not helping a lot of people, but for those that have gotten it, it seems to be working reasonably well," says Mark Zandi at Moody's Analytics. "The problem is not a lot of people are getting it."

Others see progress. The total number of homeowners getting longer-term mortgage modifications increased nearly 15% in June. "The housing market and economy are starting to resolve the issues, thought it's going to take years," says Joel Naroff at Naroff Economic Advisors.

For the first time, the government also detailed how many borrowers with modifications are defaulting for a second time. For homeowners with permanent loan modifications for six months, fewer than 6% are 60 or more days delinquent. Fewer than 3% of such homeowners have defaulted at the nine-month mark.

FeatureTel Named Among Top 100 NC Small Businesses

TMCnet

The Business Leader magazine has recognized FeatureTel, a hosted business VoIP telephone system solutions company in North Carolina as a Top 100 North Carolina Small Business for 2010.

Business Leader provides information, tools, and resources for business executives/owners. The magazine is found on newsstands worldwide with local editions available in certain markets.FeatureTel ( News - Alert) is a fully managed and Hosted VoIP, voice and data communications service company. The company provides businesses across the Carolinas with a cost-effective, feature-rich alternative to traditional voice communication solutions.

FeatureTel earned this recognition mainly because of its implementation of a new telephone service with upgraded functionality for the City of Durham, the establishment of its Channel Partner (News - Alert) program, and its community service. Apart from sponsoring events to benefit Hospice of Wake County, Habitat for Humanity and breast cancer research, FeatureTel provides free phone service to the Triangle Autism Society.

“We are pleased to have been recognized with this award for our business achievements,” said FeatureTel Founder and CEO Paul Levering (News - Alert), “but we are especially proud of our community involvement and what we do to give back.” Levering, a supporter of educational concerns, personally participated as a panelist at the North Carolina School of Science and Math Alumni Forum & Lecture Series last year.

The list of Top 100 North Carolina Small Businesses from Business Leader includes companies with 100 employees or less that do the majority of their business in North Carolina. During the selection process, Business Leader evaluated each company's one-year and five-year revenue growth, business achievements and community involvement. FeatureTel was honored June 24 at an awards dinner in Raleigh real estate, N.C.

In October 2009, the company announced that it recently completed the installation of phones and related services for 1,815 users across the City of Durham’s operations, including police and fire rescue. This is deployment is part of a $1.63 million contract that also includes network equipment upgrades and a three-year service agreement. The previous telephone system of the city required 67 different key systems.

Many Cities Across U.S. Issuing More Housing Permits than during Boom

Reed Construction Data

Des Moines, Charleston, Austin, Columbia and Houston are the strongest large metro housing markets. These are the only cities with a population over 500,000 that issued permits/1000 population at more than three times the national pace over the last year.

Twenty-four smaller cities also had intense housing development at a rate per 1000 population more than three times the national average. This set includes two cities rebuilding from hurricane destruction of homes, several college towns and military base cities, resort and retirement cities in North Carolina and the Rocky Mountains and three market center cities in the Plains states. Several of the resort/retirement cities were part of the 2004-06 housing boom but the rest of the twenty-four cities sat out the boom so they have relatively minor foreclosure and underwater mortgage problems now.

The four large Texas metro areas continue to dominate the list of the largest single family housing markets. Together, they account for nearly 37% of the permits over the last year among the twenty cities issuing the most permits. Las Vegas, Phoenix, Riverside, Tampa, Austin, San Antonio and Orlando are the only housing boom cities still left on the top twenty list. Washington has moved up to third place on the strength of tens of thousands of new federal jobs. Atlanta, the largest housing market for several years has dropped to 7th place due to a weak Georgia economy and a large surplus of unsold homes. Fifteen metro areas, all manufacturing centers without any of today’s high growth industries, have issued less than two permits a month over the last year. Sandusky Ohio has issued no permits and Wheeling West Virginia has issued only one permit.

New York City remains by far the largest multi family permit metro. The recent credit based recession caused much less damage to the New York City economy than expected. Construction activity remains relatively strong partly due to the mild recession and partly because the permitting process is so long and so expensive that developers are always in a catch up mode. Permits are up from a year ago in many college and oil patch towns that escaped both the 2005-06 housing boom and the worst of the ongoing economic recession. San Francisco has returned to the list of top multi family markets due to hiring by its growing technology industries. Other markets that have recently become significant are Salt Lake City (low cost attracts new jobs and residents) and Virginia Beach (a lower cost alternative to South Florida).

Forty-five cities issued more housing permits in the three months ending in March than they did at the peak of the housing boom in late 2005/early 2006. All of these cities are very small markets except for El Paso, Buffalo and Rochester. This should not be interpreted as a list of cities leading the housing market or the economy out of recession. These cities simply missed most of the recession as they did the previous housing boom. Many of them have a locally unique housing demand driver. In El Paso, it is immigration. In Bismarck and Grand Forks, it is a strong farm economy.

Atlanta and Phoenix continue to have the largest declines in homebuilding relative to the peak of the housing boom. The twenty cities on the list are all suffering from the surplus supply created during several years of overbuilding, as with Houston apartments. Excepting, New York City, each of them has an unusually large inventory of homes for sale and a high incidence of foreclosures and underwater mortgages that will keep inventory excessive well into next year and possibly beyond in Florida and the Rocky Mountains.

IBM To Hire 600 Workers In RTP For Service Center

Raleigh Telegram

North Carolina Governor Beverly Perdue announced this week that a subsidiary of IBM (International Business Machines) will hire around 600 workers during the next two years in Research Triangle Park.

The governor’s office says that the company will invest $3.7 million to open a managed business process service center in Research Triangle Park.  The jobs are being located here thanks in part to tax incentives being offered by state and local governments that could total as high as $7.79 million if IBM hires all of the 600 workers.

“IBM has been a major employer in North Carolina providing thousands of skilled jobs for more than 30 years. We value this company’s ongoing commitment to North Carolina and Research Triangle Park,” said Perdue.

With thousands of workers, IBM is one of the largest employers in Research Triangle Park and one of its first tenants in the facility that was created by the government decades ago to draw high-tech firms to the area.

According to the governor’s office, the salaries for the 600 new jobs will be around $50,000 a year, while the Durham County real estate average is $57,772.

“The new services operation furthers our commitment to the state of North Carolina and our ongoing presence in Research Triangle Park,” said Bob Greenberg, senior state executive, IBM North Carolina in a released statement.

“These are exactly the sort of highly skilled jobs that North Carolina needs to be recruiting in the 21st century economy, and we’re especially pleased that IBM is expanding its presence in Research Triangle Park,” said Rep. Mickey Michaux, (D-Durham) in a released statement.

High Risk Insurance in NC More Affordable Under Health Care Reform

Public News Service

RALEIGH, N.C. - Quality, affordable health care is easy to take for granted if you have access to it, but it's an enviable commodity for North Carolinians with pre-existing conditions. In the past, medical issues such as cancer or multiple sclerosis prevented people suffering from these diseases from having access to affordable insurance, or even to coverage at all.

That changed 18 months ago in North Carolina with the creation of Inclusive Health, the North Carolina Health Insurance Risk Pool. The organization offers insurance policies to high-risk individuals at only a slightly higher rate than to people without health issues.

Executive Director Michael Keough says the savings for the participants are significant.

"Our rates are capped, by law, at 150 percent of the market average for people who typically would run into rates two to five times higher."

Prior to enrollment, some people were paying premiums as high as $3000 a month for health insurance coverage, Keough says. Enrolling in the state program reduces premiums by 50 percent, on average.

The addition of the federal program, part of this spring's health care reform legislation, will reduce rates even further for people who have had no access to insurance. Out of the 3,900 people currently enrolled in Inclusive Health, roughly 20 percent will benefit from the federal program.

Their savings for Raleigh assisted living will be significant. Currently, a 50-year-old woman in the high-risk pool pays $561 a month. The federal program would reduce her rate to $347 each month, Keough explains.

"The rates for the federal pool are 100 percent - in other words the same - as they would be for a person in the individual market who has no pre-existing condition. So it's a real break and a significant improvement."

The government is banking on the fact that more people will enroll in the more affordable insurance program, making it easier to fund such a costly endeavor.

What Should Home Seller Expect to Pay at Closing?

The Wall Street Journal

Don't hire any real estate agent that doesn't give you a clear idea of what you should expect to pay at closing, and what you should net from the sale.

Since these costs vary depending on both the location and what other sellers are offering to buyers in your neighborhood, I can't tell you exactly what that number will be. But here's a general rundown on costs:

As a seller, you're responsible for paying certain set costs, such as a grantor's tax (which in Virginia is $1 for every $1,000 of fair market value, based on the higher of assessed or sales value). You will also have to pay any homeowners' association fees and real estate taxes due, prorated to the closing date, as well as any outstanding utility, water and sewer bills.

You'll also have costs that can be negotiated, at least somewhat. These include settlement company charges, any fees your lender may charge for paying off the loan, and of course, the broker's commission.

For all of the above, as a rule of thumb, you can expect closing costs will be about 1.5% of the purchase price, and broker fees to run between 3% (if you use a flat-fee broker) and 6% (if you use a full-service broker). All of these costs are spelled out in the HUD-1 form

But since it's still a buyer's market, it's not unusual for purchasers to ask for help with their own closing costs, or to buy down the interest rate on their loans (their lender must approve this). If the buyers are unhappy with some aspect of the house, such as stained carpeting or old appliances, they may also ask for a decorator's allowance. For this reason, I don't think it's shocking to be asked for $7,500 in concessions.

The buyers' requests will be spelled out in the offer, and you don't have to accept them. However, if other buyers are doing so, you should consider doing it too. Your agent can find out the dollar amount of seller concessions for recently sold homes comparable to yours.

Regardless of what sort of deal you and the buyer work out when you accept their offer, you should also put a few thousand dollars aside for problems that may be revealed after the buyer has the home inspected—even if you have had your own home inspection done before you put your home on the market. You don't want your sale scuttled because of some loose flashing or a sagging porch. It's also wise to offer a one-year home warranty, which costs around $300. That way, the buyer will be calling the warranty company, and not you, should the washer break a month after closing.

And remember that many concessions may be worth making if the buyer offers you a good enough price. It's the bottom line that counts.

U.S. Homebuyers still in the Driver's Seat

CNBC

Prices were cut on nearly one quarter of U.S. homes on the market in May, the same as April, with a growing supply of unsold homes keeping buyers in the driver's seat, real estate web site Trulia.com said Wednesday.

Sellers lowered asking prices at least once on 22 percent of homes listed as of June 1, unchanged in the month and up from 20 percent two months ago, San Francisco-based Trulia said in a report provided to Reuters before official release.

A year ago, prices had been cut on 23.6 percent of listed properties. Sellers may face a setback after a brief spring sales spree driven by a rush for federal tax credits of up to $8,000.

To qualify, borrowers who may have purchased in the summer and fall raced to meet the April 30 deadline to sign contracts.

Spring sales could be "providing sellers with a false state of optimism," said Trulia Chief Executive Pete Flint.

"For the unforeseen future, buyers will continue to have the negotiating power and I expect we will see sellers get aggressive via price cuts throughout the summer," he said in a statement.

In the weeks since the tax incentive expired, applications to buy homes toppled to a 13-year low and home builder sentiment worsened.

Inventory levels are growing as sellers gain comfort that the spring season will pave the way for healthier summer sales, Trulia said.

Banks coping with record numbers of repossessed properties will add to the supply as they place the homes on the market, though most economists expect that pace will be measured.

Sellers slashed a total of $26.7 billion in May from asking prices, more than the $25 billion in April and $22.8 billion in March, according to Trulia.

The average discount on the reduced homes held at 10 percent from the original listing. More than a year of tax incentives put the U.S. housing market on a more solid footing.

However, a significant recovery is unattainable without a meaningful improvement in employment, economists agree.

Government data earlier this month showed private-sector hiring rose by 41,000 in May, far overshadowed by the 411,000 temporary census jobs.

Price cutting over the past year was the greatest in cities based in the Midwest and South.

Kansas City, Missouri led by list, with 31 percent of homes for sale cutting prices at least once, up from 20 percent a year earlier.

Other cities with the largest increase in share of homes that lowered prices were Arlington, Texas; Cleveland, Ohio; Louisville, Kentucky, Houston, Texas and Minneapolis, Minnesota.

Western cities had the most improvement in the share of sellers slicing prices over the year.

These were among the cities that had gained the most during the housing boom and have already suffered the most in the crash.

Sellers dropped prices on just 10 percent of properties listed in Las Vegas in May, for example, compared with 30 percent a year earlier.

Six California cities were among the 10 cities showing the most improvement.

Price-cutting on luxury homes listed at $2 million or more was unchanged in May, with an average discount of 14 percent, Trulia said.

Homes in this category account for less than 2 percent of total inventory, but almost one-quarter of total dollars slashed from all homes for sale.

Mortgage Rates Drop Again

Market Watch

15-year fixed-rate mortgage sets record low for fourth week in a row

Bond yields fell and mortgage rates followed after a relatively weak employment report, allowing the 30-year fixed-rate mortgage to hover near its record low set late last year, Freddie Mac's chief economist said on Thursday.

The 30-year fixed-rate mortgage averaged 4.72% for the week ending June 10, down from 4.79% last week and 5.59% a year ago, according to Freddie Mac's weekly survey of conforming mortgage rates.

The 15-year fixed-rate mortgage set a record low for the fourth week in a row, averaging 4.17% this week, down from 4.20% last week and 5.06% a year ago. Freddie Mac started tracking the mortgage in August 1991.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.92%, down from 3.94% last week and 5.17% a year ago. And 1-year Treasury-indexed ARMs averaged 3.91%, down from 3.95% last week and 5.04% a year ago; the ARM hasn't been lower since the week ending May 27, 2004, when it averaged 3.87%.

To obtain the rates, the fixed-rate mortgages and the 5-year ARM required payment of an average 0.7 point, and the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

"Following a relatively weak employment report, bond yields fell this week and mortgage rates followed," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release. "Private payrolls rose by 41,000 jobs in May, less than a quarter of the market forecast consensus of an 180,000 gain."

The economy is showing signs of improvement, Nothaft added.

"The Federal Reserve reported in its June 9 regional economic review that the economy strengthened in all 12 of its Districts over April and May. It also noted that loan quality was stable or improving in most Districts, but remained an issue for banks with large exposure to real estate," he said.

Microsoft eyes 60M Homes for Energy Hogs

USA Today

More than 60 million U.S. homeowners, by simply typing in their address, can now see how their energy efficiency compares with others in their neighborhood or state.

Microsoft Hohm, a free online service that gives tips on how to boost home efficiency, announced Wednesday a new feature that scores homes nationwide. Its estimates are based on public information about a home's size, age and location and other data on an area's typical weather and utility bills.

"The big deal here is that we built the Hohm Score to answer a simple question: Am I an energy hog or an energy miser?" Troy Batterberry, Hohm Score's general manager, says in the announcement.

This new tool comes as companies increasingly compete in the home energy market, either by offering smart meters that connect a home's appliances or -- like Hohm and Google's PowerMeter -- online services.

Which states have the most and least efficient homes?

The average Hohm Score is 61, based on a 1-100 scale. Homes in Hawaii top the list, with an 81, followed by those in Delaware and Maryland (each 70), District of Columbia (68) and New Jersey (67.)

The lowest score went to homes in Texas, Tennessee and Nevada, each with a score of 51, followed by those in Oklahoma (52) and Arkansas (53.)

The scores are estimates unless a homeowner inputs more detailed information, which allows Hohm to provide customized tips for conserving energy such as caulking windows or adding insulation.

Consumers can automatically link their energy bills to a private Hohm page if they're served by these utilities: Seattle City Light, Sacramento (Calif.) Municipal Utility District, and Xcel Energy (eight states in the Midwest and West.)

"Someone could easily save $200, $300, $400 a year just by taking advantage of some of the more basic recommendations we offer you with Hohm," Batterberry says in the announcement.

Hohm charges nothing for its reports, but it may at some point start charging contractors for consumer referrals and utilities for its software, Marja Koopmans told Green House in a March interview. Koopmans is general manager of marketing for Microsoft's start-up business group, which includes Hohm.

Cashing in on a Real Estate Boom

The Wall Street Journal

Most Commercial Properties Are Slumping, But 'Triple Net Lease' Deals Are Hot

Are you overlooking a commercial real-estate boom?

If your definition of the category is limited to splashy office parks and shopping malls, both of which took a pounding during the financial crisis and haven't fully recovered, then you probably are.

But think a little smaller—like fast food-restaurants, convenience stores and gas stations—and the returns get bigger. Such ventures, known as triple-net-lease properties, are "the best-performing sector of the commercial real estate marketplace," says David Bailin, head of global managed investments for Citi Private Bank, which serves ultra-high-net-worth clients. "It is the sector that lost the least value [during the recession] and rallied the quickest."

Triple-net-lease properties are usually freestanding buildings in which a tenant agrees to take responsibility for maintenance, taxes and insurance during a long lease—leaving the investor with little to do but collect checks. Investors typically buy individual properties through commercial real-estate brokers like Marcus & Millichap, CB Richard Ellis Group or others, either alone or in limited partnerships with a few other investors, and then lease them out to occupants such as drug store chains, quick-serve restaurants, convenience and dollar stores, medical outfits, and in some cases big-box retailers like Costco.

Triple-net-lease properties are generating annual returns of as much as 12% these days, estimates Bernard J. Haddigan, managing director of Marcus & Millichap Real Estate Investment Services' National Retail Group. Individual investors and small groups of partners generally invest $300,000 to $5 million per building.

Some publicly traded real-estate investment trusts concentrate on triple-net-lease properties, too. They returned 16.9% during the first quarter—compared with 11.1% for Dow Jones Equity All REIT Index, which includes all types of commercial and residential property.

Triple-net properties suffered during the recession, but less than other types of real estate. Whereas overall commercial prices fell by about 40% during 2007-09, prices for triple-net properties fell by about 15%, according to Mr. Haddigan.

Like all kinds of investing, triple-net-lease plays are based on risk: the more you're willing to take, the greater the potential returns. There are several important factors that determine a triple net deal's riskiness: the creditworthiness of the tenant, the location, physical condition and functionality of the property, and the remaining term on a lease (shorter is riskier). Also important: the "occupancy cost" or "health ratio," defined as the percentage that the tenant pays in rent relative to store sales. (The lower the ratio, the better.)

Besides overall economic risk, there's the risk of picking a tenant whose product or service might fall out of favor. Changing consumer trends can wipe out cash cows, as happened with some video-rental stores during the last decade.

"You need a good tenant," says Jeffrey Rogers, president and chief operating officer of Integra Realty Resources, a commercial real-estate appraisal and consulting firm that doesn't own or broker real estate. "Then you need an optimal location and to know what the market rent is. That is absolutely key."

Investors who lack the time or inclination to invest in triple-net-lease properties directly can get into the category via REITs such as the publicly traded Realty Income Corp. and Lexington Realty Trust in New York, as well as American Realty Capital Trust in Jenkintown, Pa., which is not traded on a stock exchange. These REITs invest mainly in triple-net properties, and they're generally sold through broker-dealers. They sometimes have minimum-net-worth and other requirements.

As with most income properties, investors can come out ahead—or behind—on triple-net properties in two ways: through price appreciation and income. The best measure of income potential is the so-called capitalization rate, or the net operating income divided by the purchase price of a property.

In recent months, cap rates have been falling because property prices nationally are rebounding. More investors are going after fewer high-quality properties, driving prices up. This is considered a positive sign for the broader commercial real estate market—but it means the easy money in triple-net-lease properties might be coming to an end.

But there is still opportunity for savvy investors. Michael K. Federman, 38 years old, is an attorney in New York who began investing in triple-net properties in 2004, during the previous recession. His first acquisitions were fried-chicken restaurants in upstate New York, followed by a Circle K convenience store in Arizona. He later sold the Circle K and purchased more buildings, and currently owns a portfolio of 15 properties.

A self-professed "conservative" investor, Mr. Federman now concentrates primarily on single-tenant properties, he says. Most recently, he and a business partner in March purchased a long-term lease property for about $4 million housing a Chipotle Mexican Grill in Lower Manhattan with a cap rate of 8.5%. That return was in line with the national average for casual dining restaurants in 2009, according to Marcus & Millichap.

"For me it was a perfect deal," he says, "because it combined prime real estate, stellar credit and minimal management responsibilities."

Median Home Prices Up in 60% of U.S. Cities

USA Today

Home prices rose in nearly 60% of U.S. cities in the first quarter of this year, the National Association of Realtors says.

The median sales price for previously occupied homes rose in 91 out of 152 metropolitan areas tracked in the January-March quarter versus a year ago. There were double-digit price increases in 29 cities.

That's a sharp improvement from the fourth quarter of last year, when prices rose in about 40% of cities. The national median price was $166,100, or 0.7% below the first quarter of last year.

Sales of foreclosures and other distressed properties made up 36% of all sales in the first quarter.

The largest percentage price increase was in Saginaw, Mich., where the median price doubled to nearly $61,000. Prices in Akron, Ohio were up 95% to about $95,000. Prices in Cleveland were up 54% to $106,400.

The largest price decline was in Orlando, where they dropped 15% to nearly $132,000. Prices in Ocala, Fla., fell 14.5% to a median of nearly $93,000. Prices in Cumberland, Md., fell 14.4% to $98,300.

Fed Planning to Sell MBS

The Wall Street Journal

Fed Officials Develop Plan to Shrink Central Bank's Mortgage Portfolio

Federal Reserve officials have agreed to sell some of the central bank's $1.1 trillion of mortgage-backed securities at some point, but have been unable to reach a firm consensus on how soon or how aggressively to do that, according to several people familiar with the matter.

Many Fed officials want to wait until after the central bank has started to raise short-term interest rates and tighten financial conditions, which could be many months away, but a minority is eager to move sooner.

The internal debate about the Fed's mortgage portfolio is important to households and investors because sales of mortgage securities could push down prices of the securities and push up mortgage borrowing costs.

Fed officials have been debating asset sales for months. Minutes of the Fed's late April meeting, due out in two weeks, are likely to show the debate has intensified but hasn't been completely resolved. The Fed started buying the securities in early 2009 as part of an effort to drive down long-term interest rates to speed an economic recovery. But now, most officials are uncomfortable holding them.

One issue underlying the debate is inflation expectations. Some Fed officials worry that holding such a large portfolio—which entails pumping money into the financial system to fund the purchases—fuels fears that the Fed will allow inflation to take hold in the future.

Sale proponents also are averse to holding instruments that seem to favor housing over other parts of the economy. But many officials worry that markets would interpret even a program of modest sales as a sign that the Fed wants to tighten credit, before it is actually prepared to do so or before the economy could bear it.

The Fed's conventional way of tightening credit is to raise a short-term interest rate called the federal-funds rate, which is what banks charge each other on overnight loans. Many officials are inclined to maintain that as their main mechanism for tightening policy when the time comes, and to put mortgage sales on a slow track at first.

One approach attracting a following within the Fed: After the economy improves enough, the Fed would change the way it communicates to the market, no longer saying rates would stay low for an "extended period." Then, it would pull some cash out of the financial system with operations called reverse repos and term deposits. Next, it would raise short-term rates by increasing the rate the Fed pays banks to keep money on reserve at the central bank. Then it would announce a modest asset-sales program that it might ratchet up after six to nine months as recovery gains steam.

"The best argument for this sequence is that the Fed and markets have lots of experience analyzing the effects of rate hikes and should be able to gauge their effects with reasonable accuracy," economists at Goldman Sachs said in a commentary on the Fed's debate earlier this week.

The goal would be to substantially reduce the Fed's mortgage holdings within four or five years after tightening starts. Fed officials believe they will need to sell substantially less than their overall holdings of $1.1 trillion because many of the securities will retire on their own as borrowers refinance mortgages and the securities mature.

The idea of ratcheting up sales later is one that is gaining support at the Fed and could be a compromise to allay the worries of the officials most eager to dispose of the securities. The Fed would also have the option of tapering down the sales if the economy responded poorly.

"I would start slow and then move based on the economy," James Bullard, President of the St. Louis Fed, said in an interview with the Wall Street Journal last week. "I would want to ensure markets that you would do it slowly over a longer period of time."

The process of just getting started could take as much as a year or more to unfold, depending on how the economy performs. Though the Fed's anti-inflation hawks want to get going soon, many officials are still comfortable with their assurance to the public that rates will stay low for an extended period because inflation might still be slowing and unemployment is high.

"With inflation expectations stable, core inflation rates declining, and significant excess capacity in the economy, accommodative monetary policy remains appropriate," Federal Reserve Bank of Boston President Eric Rosengren told a gathering in New York Wednesday night.

An added reason for caution: Rising concern about financial risks in Europe related to Greece's debt woes. Though Greece is small relative to the U.S., Fed officials are concerned that turmoil in European markets could spill into U.S. markets and hurt the recovery here.

More N.C. Residents Being Counted in Census

WRAL

Raleigh, N.C. — North Carolina residents are doing a better job at being counted in the 2010 census than they did 10 years ago, census officials said Tuesday.

Each of the state's 100 counties has met or topped the rate at which of residents mailed in their 2000 census forms, making it one of the few states nationwide with a boost in early participation in the current population count.

The average increase in 2010 census participation is 12.9 percent, officials said, with 66 counties increasing their participation by at least 10 percent.

Seven counties had a 79 percent mail-in rate, including Chatham and Person counties, while Avery County had the lowest participation statewide at 63 percent.
 

The mail-in rate for Wake County real estate was 76 percent, while Orange County's was 78 percent, Johnston County's was 75 percent, Durham County's was 72 percent and Cumberland County's was 70 percent.

The door-to-door segment of the census, in which workers try to contact households that didn't mail in their census forms, begins Saturday. The Census Bureau estimates that 48 million households nationwide will be visited by a census taker during this segment, which runs through July 10.

Contest to Determine North Carolina's Top 10 Natural Wonders

Ashville Citizen-Times

RALEIGH — Land for Tomorrow, a coalition dedicated to supporting the preservation of North Carolina’s land, water and historic places, will begin taking online nominations for their "North Carolina's 10 Natural Wonders" contest

North Carolinians are encouraged to nominate any landscape, natural feature, wildlife or plant life that is unique to North Carolina and should be considered among the state’s greatest natural wonders.

The general public will have until May 6 to nominate their favorite North Carolina natural wonders for consideration in the contest. Then, an expert panel, which includes Asheville Citizen-Times editor Karen Chávez, will narrow down the nominations to a group of finalists. Popular vote online will determine “North Carolina’s 10 Natural Wonders.”

As an added bonus, prizes from vendors across North Carolina, including fine art, outdoors equipment and music, will be awarded to participants each weekday of the contest. The grand prize will be awarded on May 18th when the winners are announced.

The contest is part of Land for Tomorrow’s effort to highlight past generations’ conservation successes and urge North Carolina lawmakers to continue supporting conservation in the state.

Triangle Company Tapped to Grow Dickey's Barbecue in NC

Triangle Business Journal

GMW Carolina Inc., which owns Dickey’s Barbecue Pit restaurants in Cary and Durham, has signed an exclusive deal to grow the Dallas, Texas-based chain in North Carolina.

Gregory Woloszczuk, head of GMW Carolina, says this is the first time Dickey’s Barbecue Restaurants Inc. has entered into a statewide development deal with a franchisee. Dickey’s usually deals with franchisees directly. In this case, however, Dickey’s will rely on GMW to sign and support franchisees in the Tar Heel State.

By leveraging local expertise, Dickey’s believes it will be able to open locations faster and reduce expenses, Woloszczuk says.

GMW Carolina has signed up three franchisees to develop restaurants in the Triad, the Sandhills and the New Bern area. GMW also is looking for Raleigh real estate to add its third Dickey’s location, Woloszczuk says.

Woloszczuk expects each of his three franchisees to open at least one restaurant before the end of the year, saying that all three currently are in lease negotiations. He hopes to have his third Triangle location locked up before 2011.

In the meantime, Woloszczuk will be looking to sign up franchisees in the Charlotte, Fayetteville and Asheville areas over the next six months.

Woloszczuk and his wife, Maureen Woloszczuk, founded GMW Carolina in 2006. They opened the Cary Dickey’s location in September 2007 and the Durham restaurant in April 2008.

GMW has 25 employees. Each Dickey’s has about a dozen workers.

Dickey’s, which was founded in Dallas in 1941, features hickory-smoke barbecue in a variety of plates and sandwiches.

Take Two: Government Tries New Fix for Mortgage Crisis

WASHINGTON (AP) - The government's bold new plan to stem the foreclosure crisis aims to succeed where previous efforts have fallen flat. Yet just as before, the odds are long, and many struggling borrowers won't qualify.

In theory, the effort unveiled Friday would help millions of troubled homeowners who owe more on their mortgages than their homes are worth, or who are jobless and need a break on their payments.

But it depends on cooperation from investors and bankers, many of whom have been locked in disputes over whether to reduce the debt owed by homeowners.

And just like the bank bailouts, this rescue plan poses risks. If it doesn't slow the wave of foreclosures or if home prices nosedive, the tentative recovery in the housing market could fizzle.

The Obama administration says the plan will help stabilize the real estate market by keeping many borrowers out of foreclosure. If it succeeds, the plan would limit damage to the overall economy.

The new effort is designed to help two groups:

- Borrowers who owe more on their loans than their houses are worth. More than 15 million homeowners fall into this category, according to Moody's Analytics. About 10 million of them owe at least 20 percent more than their house's current value.

Their mortgage companies can cut the total amount they owe, or they can refinance into loans backed by the Federal Housing Administration. FHA will get $14 billion in incentive money from the federal bailout fund.

- Unemployed borrowers. People receiving unemployment benefits would have their mortgage payments cut to no more than 31 percent of their monthly income for three to six months.

That's intended to give homeowners more time to find a job. Once they do, they may qualify for a loan modification that would permanently reduce their payments under the administration's existing $75 billion loan modification program.

The plan aims to help 3 to 4 million borrowers avoid foreclosure - the same target the administration tried to reach with its original plan last year. Even with the changes, the effort will likely prevent no more than 1.5 million foreclosures, estimates Mark Zandi, chief economist at Moody's Analytics.

Disputes among banks and investors, who would have to approve any cuts in loan principal, could prevent the effort from stopping more foreclosures, as could another drop in home prices.

"Practically speaking, this is probably going to prevent foreclosures. But I don't think they're ever going to reach 3 to 4 million homeowners," said Chris Mayer, a real estate professor at New York's Columbia Business School. "These plans always turn out to be harder than we think."

The administration's existing program to prevent foreclosures hasn't made much of a dent in the foreclosure crisis. A lack of planning and shifting rules on who qualifies produced a huge backlog in the program, the special inspector general for the federal financial bailout fund told lawmakers this week.

Still, analysts said this effort has a better chance of success than past efforts because it would reduce principal for some struggling borrowers - a method more effective at helping homeowners than reducing interest payments or other forms of aid. Laurie Goodman, a widely followed mortgage securities analyst with Amherst Securities Group, called it "a huge step forward."

The plan comes after pressure from the administration's Democratic allies in Congress to intensify efforts to help Americans at risk of losing their homes.

The overhauled plan came together after several months of negotiations between the Treasury Department, major banks and investors in mortgage securities. A major sticking point so far has been getting everyone involved to agree on restructuring loans.

The problem is that most of the troubled mortgages aren't owned by the banks themselves. They were bundled into securities during the housing boom and sold to investors.

To reduce principal payments on those mortgages, banks often must get permission from the investors who hold the securities - and may not be willing to take less.

Banking industry officials were optimistic that investors would negotiate.

"You have two choices: Modify the mortgage and help a borrower stay in their home or possibly get nothing if they foreclose," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, an industry group.

The plan risks angering Americans like Jim Truschel, a homeowner in La Mirada, Calif., who said he was disappointed the government is spending taxpayer money on another homeowner bailout effort.

"I feel very sorry for the people that are in these situations, but they have to be somewhat to blame themselves," said Truschel, a retiree. "They should have realized that they were getting into things that they weren't going to be able to pay for."

The administration says irresponsible borrowers will not benefit. The plan will not help investors, speculators or "Americans living in million-dollar homes or defaulters on vacation homes," an administration fact sheet said.

Diana Farrell, a White House economic adviser, acknowledged the plan won't prevent many of the expected 10 to 12 million foreclosures expected over the next three years. Doing so, she said, "wouldn't be fair, it would be too expensive and we probably wouldn't succeed in any case, because many people got into homes that they simply cannot afford."

Rep. Barney Frank, chairman of the House Financial Services Committee, praised the new steps, particularly giving jobless borrowers a break on their payments for three to six months.

"The whole economy is hurt by these foreclosures," Frank said.

For taxpayers, the government's plan carries some risk. Lenders will probably sell their most troubled loans to the FHA so they can be insured against default, said Mayer of Columbia Business School. Experts have warned that the FHA faces rising losses from foreclosures and might need a bailout.

"There's more risk to taxpayers," Mayer said. "There's a big incentive for lenders to give the government the worst of their loans, the ones they fear they won't get paid back on."

One "underwater" homeowner, Joe Clarke, a police officer in Oxnard, Calif., welcomed word of the plan. He owes $390,000 on his home, which is only worth about $250,000, and he fears his adjustable-rate loan will reset to a higher rate in August.

"I've made my payments," he said. "I didn't walk away from my house. I'm just not being afforded the opportunity to refinance my home, even at the current value, without taking the principal off."

$40 Million Development Project Planned in Raleigh

News & Observer

A Charlotte developer that has spent the last three years assembling property at the edge of downtown is moving ahead with plans to transform an abandoned industrial area between N.C. State University and downtown Raleigh into a mix of apartments, townhouses and shops.

In a rezoning request filed with the city of Raleigh this month, FMW Real Estate outlines plans to redevelop a 6.67-acre site just west of the intersection of West Morgan and Hillsborough streets.

The $40 million first phase would include a 5-story, 240-unit apartment building, 32 townhouses along Ashe Street and 10,000 square feet of restaurant, retail and office along Morgan Street, Wakefield Avenue and Tryon Street.

 Jim Zanoni, who owns FMW along with Walker Wells, said the company hopes to break ground by next spring.

FMW paid about $14.5 million total for four different parcels of Raleigh real estate. The largest piece was once home to the Bolton Corp., a family heating and air condition company that ceased operations on the site several years ago.

FMW also owns the property where the IHOP on Hillsborough Street is located, but that site would be part of phase two of the redevelopment and exact plans for that portion have not been finalized, Zanoni said.

Siemens Moves Power Unit to North Carolina, Adds 825 Jobs

RALEIGH, N.C. (AP) — German industrial conglomerate Siemens AG is consolidating production of gas turbines for electric utilities in North Carolina to position itself for an expected boom in electricity demand in the Southeast and around the world.

A subsidiary of the Munich-based company, Siemens Energy Inc., said Thursday it plans to invest $135 million to build a new manufacturing plant for 60-Hertz gas turbines in Charlotte. The company was promised a package of tax breaks, grants and low-interest loans worth up to $154.75 million to make the move.

Siemens will close a similar plant in Hamilton, Ontario, that employs about 450, though it's not yet clear how many will lose their jobs and how many transfer to North Carolina over the next 18 months, spokeswoman Melanie Forbrick said.

The turbines will be shipped to utilities in the Americas, Japan, South Korea, the Philippines and Saudi Arabia.

"Over the next five years, we expect employment at the Charlotte site to grow to nearly 1,800 people, with more than 1,000 of those positions new to Charlotte. With this move we're pushing ahead with our growth strategy in the U.S., which is our most important single-country market," Siemens AG chief executive officer Peter Loescher said in a statement.

The move is expected to create 825 engineering and manufacturing jobs in Charlotte within five years, paying an average wage of almost $64,000 a year. Production in the expanded plant is scheduled to start in the fall of 2011, the company said.

State and local governments promised up to $35 million in tax breaks and grants. A county development entity is also prepared to lend Siemens up to $120 million in low-interest loans, with funding coming from bonds created by last year's federal stimulus package.

Siemens said the move to Charlotte was in part driven by a need to be closer to customers. Siemens-built power plants supply one-third of North America's electricity, the company said.

"I think that they're seeing that the American market has been slow but will be rebounding," said William Schmalzer, an analyst for market research firm Forecast International Inc. The North Carolina move "also puts them closer to their markets in Brazil, especially, and Latin America, which are probably also going to increase in the near future."

Forecast International predicts that worldwide demand for gas turbines will be almost $140 billion by 2018, with Siemens holding about 18 percent of the market behind General Electric's 43 percent market share.

About 780 Siemens workers in Charlotte already manufacture and rebuild gas turbines. The company last spring announced an expansion of 200 jobs in Charlotte and construction of a 75,000-square-foot office next to its manufacturing plant.

Siemens employs about 64,000 workers in the U.S., including 10,000 in its energy sector.

Raleigh Named 3rd Best Market for Young Adults

Triangle Business Journal

A new study ranks Raleigh as the third best metropolitan area in the country for young adults seeking to establish themselves in a recessionary economy.

The Raleigh metro area ranked high in the categories of population growth, employment growth, share of total population and the jobless rate for people ages 18-34. Raleigh also boasts a large number of households led by people under the age of 45 with incomes of more than $100,000 and residents with bachelor’s degrees between the ages of 18 and 34, according to the new report from Portfolio.com/bizjournals.

Raleigh real estate was bested in the rankings only by No. 1 Austin, Texas, and No. 2 Washington, D.C.

Charlotte, the only other North Carolina municipality listed, ranked No. 28.

Portfolio.com/bizjournals analyzed the 67 U.S. metros with populations above 750,000, searching for qualities that would appeal to workers in their 20s and early 30s.

The study’s 10-part formula gave the highest marks to places with strong growth rates, moderate costs of living and substantial pools of young adults who are college-educated and employed.

The least desirable market for young adults, according to the Portfolio.com/bizjournals study, is Detroit, which is saddled with the nation’s worst unemployment rate for young adults, the slowest rate of income growth, and the biggest decline in overall employment.

Here’s a quick look at the top 10 metros for young people.

1. Austin: Its attractiveness to young adults is broadly based, and it ranks among the 10 leading markets in five of the categories that were analyzed. This isn’t the first time Austin takes top honors in a Portfolio.com/bizjournals analysis. Earlier this year, the city was named the best city in which to launch a small business.

2. Washington: Educated young adults flock to the nation’s capital, where 35.8 percent of all 18-to-34-year-olds hold bachelor’s degrees. The study group’s median is 23.2 percent. Per capita income ($56,510) is well above average.

3. Raleigh: This is the fastest-growing major metro in the nation. The population of the Raleigh area is increasing by 3.9 percent per year. That’s more than triple the pace for the typical market, 1.2 percent.

4. Boston: Elite universities such as Harvard and MIT give Boston its intellectual cachet. The local share of young adults with college degrees (37.6 percent) is the highest in the country.

5. Houston: Employment opportunities abound in Houston, where the job-growth rate (1.7 percent per year) ranks among the five best in the nation. And so does its annual upswing in per capita income (6.6 percent).

6. Oklahoma City: The unemployment rate for young adults is lower here than anywhere but Salt Lake City and Tulsa. Oklahoma City also enjoys the nation’s third-best pace for annual income growth, a rapid 7.2 percent.

7. Dallas-Fort Worth: The recession caused some backsliding in 2009, but Dallas-Fort Worth still has 206,000 more jobs than it did five years ago. Local population is zipping higher by 2.4 percent per year.

8. Tulsa: Here’s an area that’s a true bargain. Median rent is $508 per month in Tulsa, the third-lowest figure in the study group. Compare that to such budget-breakers as San Jose (median rent of $1,334) or Honolulu ($1,227).

9. Seattle: This high-tech metro offers a wide range of good-paying jobs. Seattle ranks among the 10 markets with the largest per capita incomes ($50,471) and smallest unemployment rates for young adults.

10. Baton Rouge: Louisiana is on its way back from the wrath of Hurricane Katrina, and this is one of its success stories. Baton Rouge boasts a high concentration of young adults (26.1 percent) and a strong rate of income growth.

Bank of America Apologizes for Taking Parrot

The Wall Street Journal

BofA Believed Woman's Home Was Vacant, Padlocked It and Kept Bird Over a Week

PITTSBURGH—Bank of America Corp. apologized after its local contractor entered the home of a mortgage borrower when she was away, cut off utilities, padlocked the door and confiscated her pet parrot, Luke.

Angela Iannelli, 46 years old, alleged in a lawsuit Monday that the October incident—which separated her from her 11-year-old parrot for more than a week—caused so much "emotional distress" that she needed a prescription medication for anxiety.

suicide threats from distressed borrowers are so common that one lender, OneWest Bank Group in Pasadena, Calif., had to establish procedures for alerting the police

A Bank of America spokesman said Wednesday a bank employee erroneously believed the house was vacant and sent the contractor there with instructions to install a new lock and otherwise "secure" the property. The bank spokesman said those instructions were inappropriate because Ms. Iannelli wasn't in default and the house wasn't vacant.

Mortgage lenders have struggled in the past three years to hire and train enough people to deal with the biggest wave of foreclosures since the 1930s. Nearly eight million households and Atlantic Beach vacation homes, or 15% of those with mortgages, are behind on their payments or in the foreclosure process.

Many borrowers complain they get the runaround when they call their lenders for help, receive contradictory information from different employees and are required to repeatedly fax the same documents.

At the same time, suicide threats from distressed borrowers are so common that one lender, OneWest Bank Group in Pasadena, Calif., had to establish procedures for alerting the police. Lenders' call-center employees are under heavy pressure. "These people make $14 or $15 an hour, and we ask them to move mountains," said a OneWest executive at an industry conference last month.

In her civil suit filed in the Allegheny County Court of Common Pleas, Ms. Iannelli said a contractor hired by Bank of America entered her house about 15 miles north of Pittsburgh in mid-October when she was away. According to the suit, in an "invasion" of the home, the contractor stopped utility services, cut water lines and electrical wiring, damaged flooring and finishings, poured antifreeze into sinks and toilets, and "stole" the parrot.

Ms. Iannelli, who owns a diner and works part-time as a bartender, said Bank of America representatives weren't helpful when she called in to protest. They first denied knowing where the parrot was, and later told her she could go to the offices of the contractor, about 80 miles away, to retrieve the bird herself. Ms. Iannelli said bank representatives also told her they were "tired" of hearing from her, hung up on her and advised her to seek help from the police.

Her lawyer, Michael Rosenzweig, a partner at Edgar Snyder & Associates in Pittsburgh, said Ms. Iannelli was seeking damages of more than $50,000. The amount of any damages would be decided by a jury if the case goes to trial.

A Bank of America spokesman said the bank would "quickly review the allegations in the lawsuit, the actual events that led to them and the causes of those events, and consider any hardship that resulted."

Mr. Rosenzweig said Ms. Iannelli had missed one payment around the time of the incident but quickly caught up and was now current on her loan.

After she drove two hours to reclaim her parrot in October, the bird initially seemed nervous, Ms. Iannelli said in an interview Wednesday. "He's doing very well now," she said.

North Carolina League Moving to Raleigh

Credit Union Times

Bolstering its advocacy role, the North Carolina Credit Union League announced Monday it is moving its headquarters from Greensboro, where it has been since its 1934 founding, to Raleigh, the state capital, by April 2011.

“The move is designed to enhance the trade association’s ability to serve members in legislative and regulatory advocacy,” said a statement by John Radebaugh, president/CEO.

The 21-employee league currently has four staffers in Raleigh and the relocation “will create greater synergy” on regulatory and legislative advocacy, said Radebaugh.

The staff will be offered relocation packages and no positions will be cut in the move, said Radebaugh.

“The board and management looked carefully at this decision over several months and with our Greensboro lease expiring next year the board decided that now was the right time to act,” said the statement.

From an historical perspective, Greensboro, located in the central part of the state and 80 miles west of Raleigh, served the league’s primary original function of chartering CUs but the times have altered the league’s job to high profile lobbying.

The league said it is evaluating office space and downtown Raleigh real estate for its headquarters “and expects to open the new space later this year.”

 "Headquartering downtown puts the entire organization in the heart of our state’s political system,” the statement concluded.