Wednesday, November 26, 2008
The lender, a unit of Taylor Capital Group Inc., agreed to reduce its $14.4 million claim in exchange for part of the 600- acre Clublands property in Antioch, according to papers filed Nov. 22 in U.S. Bankruptcy Court in Chicago.
U.S. Bankruptcy Judge Eugene Wedoff agreed to hold an emergency hearing to consider the sale. Cole Taylor, based in Rosemont, was Neumann's lender for the development, and the only interested buyer, the builder said.
Neumann, a 24-year-old company that built 12,000 homes in Illinois, Wisconsin, Colorado and Michigan, filed for bankruptcy in October 2007, citing inadequate funding and weakening of the U.S. housing market.
The Clublands assets include proceeds from a $13.8 million tax bond issued by Antioch for streets, sidewalks and other improvements, as well as three bonds totaling $15.6 million issued by Fidelity & Deposit Co. of Maryland, court records show. Antioch said in July that Neumann had defaulted on its obligations to finish public improvements.
Neumann has secured claims of $151.1 million, unsecured claims of $134.1 million and assets of $291.8 million, court papers show.
George Panagakis, Neumann's lawyer with the law firm Skadden, Arps, Slate, Meagher & Flom, didn't immediately return a call seeking comment.
Tuesday, November 25, 2008
Florida home builders are upset with the way lending institutions are handling the cash from the $700 billion federal bailout.
Home builders are accusing banks of misusing their federal assistance. They say lenders are hoarding the bailout money while demanding repayment of good loans from customers with top credit scores.
Builders also contend banks are eliminating lines of credit and doing away with construction financing.
The Florida Home Builders Association says the situation is driving builders to ruin.
Valrico builder Chuck Fowke says he and other builders have been meeting with members of Congress to seek a “time out” until they can reach a solution with lenders.
Home Builders President Jay Carlson says the business practices are forcing solvent, creditworthy home builders to the brink of financial disaster.
One example cited by builders involves a development in Pensacola where many owners of pre-sold lots are ready to close on their homes, but the deals are falling apart because banks are requiring down payments of up to 50 percent.
Florida Chief Financial Officer Alex Sink met with builders on Monday and promised to work on a solution, but her authority is limited to smaller, state-chartered lending institutions.
The chief economist for the American Bankers Association responds to the builders’ charges, saying banks have not received all the bailout cash yet from the federal government.
James Chessen says one of the most important factors in securing credit is to have a longstanding relationship with a bank.Chessen says the credit situation in Florida may be among the worst in the country because of the overbuilding in the state.
Friday, November 21, 2008
"The banks stopped making loans to our customers," Ward said in an e-mail. "It just doesn't seem fair that the banks can put us into bankruptcy because of their failure to lend and then get a federal bailout, but then chase me personally and ruin a very good company and put 250 people out of work and affect thousands of property owners and leave them with uncompleted lots."
Ward, who is 60, said he will start over.
The company's assets include 128 unsold lots in Cumberland Harbour in St. Marys, where the largest marina complex on the Georgia coast has been proposed. According to Land Resource, 936 lots have been sold. They asked from $150,000 to $750,000 for lots.
In July, Land Resources Companies of Orlando, Fla., parent company of Roaring River, a proposed 4,300-acre, master-planned community in Fayette County next to the New River Gorge National River, closed its Fayetteville office and laid off all of that office’s employees.Friday, the company announced it and 34 of its affiliates and subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code.“I am presuming this does affect the Roaring River project and its lot owners,” Fayette County Commissioner Matt Wender said.
Land Resources officials cited a combination of the declining economy, the credit freeze that is currently gripping the U.S. and a challenging real estate market.“We deeply regret the impact the Chapter 11 filing will have on property owners, vendors and employees,” Land Resource Chairman and CEO J. Robert Ward said. “We remain mindful of our customers whose home sites and communities have not yet been completed.”Ward said that through the Chapter 11 process the company will identify the best means of maximizing recoveries for all creditor constituencies.“Including our customers and employees,” he said.
“As part of this process, we will explore the sale of all the company’s assets to a well capitalized and well positioned purchaser.”Wender says he has always had mixed feeling about the proposed housing development.“I have always been concerned with the encroachment to the rim of the gorge, but the part of the housing development not visible I always thought of as being beneficial to the county,” he said.Approximately 80 lots have been sold as part of the housing development.“I’m very concerned about the lot owners who purchased lots, but can’t build on them,” Wender said.In July, a groundbreaking ceremony for water and sewer services was scheduled, then canceled.“Without that infrastructure, the lot owners can’t obtain building permits to build on their lots,” he explained.
“Now, it appears that they can’t get their money back, either. Those are the people I feel bad for in all of this.”Wender added he was surprised to learn that Land Resources had no escrow or bond funds to guarantee the water and sewer infrastructure being completed.“I’m concerned the lot owners may be in a difficult situation,” he said.Land Resources develops upscale residential resort communities throughout the Southeast and West Virginia.“The sudden and steep economic downturn has significantly impacted Land Resources in each of the markets where the company operates,” Ward said.“Home site sales have also declined dramatically due in large part to the extremely limited availability of credit.
Many well qualified buyers are finding it difficult to secure financing for a second home.” In order to facilitate an orderly negotiation process with its creditors and facilitate a structured sale of the enterprise or its assets, the company filed its Chapter 11 case in U.S. Bankruptcy Court for the Middle District of Florida in Orlando, according to Ward. “Purchasers of Land Resources’ assets may elect to fulfill the developer’s obligations, including those related to funding homeowner associations,” he explained.
“All transactions will be subject to bankruptcy court approval.”Ward said as news regarding the bankruptcy filing becomes available, the company will inform property owners and other stakeholders by posting information on its Web site, www.landresource.com.”The company has also established a “Frequently Asked Questions” section on its Web site as well, Ward added.
Monday, November 17, 2008
The housing market is beginning to resemble one of those super bugs that are resistant to modern medicine: Despite injections of help from the government and lenders, it's still sick. Foreclosures continue at an alarming pace, sales are few, and mortgages are hard to come by.
Just this week Treasury Secretary Henry Paulson said he would not use taxpayer funds to buy up troubled mortgage-related securities, as was originally intended by the passage of the $700 billion federal bailout bill. Congress is expected to develop a new economic stimulus package in the coming weeks, and many housing industry officials and activists hope lawmakers will use the opportunity to devote more attention to fixing the nation's real estate problem.
Here are six of the top ideas being mulled in Washington, and among industry specialists.
1. Cut the rates
How does a 2.99 percent mortgage sound? Silly? Maybe 5.25 percent? Discount loan rates could draw home shoppers off the sidelines and into the market, boosting sales and helping to check falling housing prices. One proposal, plugged by Columbia Business School dean R. Glenn Hubbard and Columbia Business School professor Chris Mayer, includes refinancing primary residences into 30-year fixed-rate mortgages at 5.25 percent placed under mortgage giants Fannie Mae and Freddie Mac.
The National Association of Homebuilders, with 235,000 members, wants Congress to include in the upcoming economic stimulus package a subsidy on conforming 30-year loans that would lower the interest rate to a bargain 2.99 percent. The rate would be for all mortgages on homes purchased through June 30, 2009. For homes bought in the second half of 2009 the subsidized interest rate would be 3.99 percent.
2. Make like Sheila
Sheila is Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., who's become something of a cult hero among housing activists because of what she's doing for customers of failed IndyMac Bank who are facing foreclosure. Her agency is systematically modifying these mortgages to more affordable levels, so borrowers' monthly payments are as low as 31 percent of their income. Already around 5,000 customers have had loans adjusted by an average of $380 a month or about 23 percent. Methods include lowering a loan's interest rate, forgiving some of the principal debt, or extending the repayment period. Importantly, Bair would pay loan servicers $1,000 for every mortgage they modified, giving them an incentive to work out, instead of foreclose on the loan.
Bair wants to expand the IndyMac model across the industry. One problem: Too many of the borrowers who receive help still have trouble affording their homes and end up being foreclosed on again. The FDIC proposes that the US government would absorb up to half of the losses of those homeowners who default a second time, with the lenders or mortgage holders eating the other half. The estimated cost is $25 billion. The rub? Paulson has frowned on spending that kind of money because taxpayers are unlikely to recoup these losses.
3. Own the loanSenator John McCain, US Representative Barney Frank, a Newton Democrat, and various academics have come up with a simple idea: Have the government buy up troubled loans instead of waiting for lenders to figure out how to fix them. This, they argue, would speed the pace of loan modifications, more quickly helping distressed homeowners avoid foreclosure. One novel approach involves using the government's power of eminent domain to take, not the property, but the loan notes from investors who may be reluctant to part with them.
During the presidential campaign, McCain suggested using around $300 billion of the bailout fund to buy hundreds of thousands of loans. The government would then issue those homeowners new loans at more affordable levels. Other supporters have suggested the original lenders would have to forgive a portion of the old loan, if the home has since lost value, as part of the buyout agreement. But now that Paulson has nixed the idea of spending bailout funds on mortgages, it's unclear where funds for a loan buy-up would come from.
4. Share the pain, gain
A growing number of proposals resurrect an idea known as "shared appreciation mortgages," in which struggling homeowners would be forgiven a portion of their mortgage debt. In exchange, if the home appreciates in value or the borrower later sells at a profit, the lender would get a share of that profit.
The arrangement is a component of the federal Hope for Homeowners program, a new loan program at the Federal Housing Administration that refinances mortgages for homeowners who owe more than what their house is currently worth.
Academics such as Andrew Caplin and Thomas Cooley of New York University argue that the agreement gives taxpayers an "ownership stake in the future." The shared appreciation model was used years ago in limited measure, but has largely stalled because of an arcane tax ruling by the Internal Revenue Service.
Meanwhile, Hope for Homeowners got off to a slow start, partly because lenders are required to write down loans to participate. It now has 180 lenders enrolled, although some will only finance loans in certain areas of the country.
5. Buy cooperation
Harvard Law School professor Elizabeth Warren is circulating a proposal to buy cooperation from mortgage servicers, who perversely are in the position of making money doing a foreclosure. Many loan servicers, who are the liaisons between homeowners and investors, are limited in what they can change in loans by contract terms with the loan holders.
Warren said even if legal issues are eliminated, servicers need financial incentives to help homeowners. She proposes the US government pay servicers for each loan modification that results in a family receiving a fixed-rate mortgage with an affordable payment. Secondly, she said owners of second mortgages, who often block modifications because they stand to lose money, should receive a 10 percent bounty on the face value of the loan for writing it off and getting out of the way. Finally, she recommends a fee for specialists who assist homeowners through the negotiations and paperwork. The mortgage problems are too complex to be solved without the help of some highly incentivized middlemen, she argues.
6. Reform bankruptcy laws
This is another idea that has been around the track before and remains popular. Some Democratic lawmakers and housing officials want to amend bankruptcy laws so judges would be allowed to modify a debtor's mortgage as part of a bankruptcy proceeding. The plan was excluded from the original bailout plan but proponents want to re-insert it in the new stimulus. Nobody wants to go into bankruptcy, but when losing your home is the other option, advocates of the law change say this could make a world of a difference. Some hope the law change would push lenders to work harder to modify loans before going to court. Opponents, however, counter that this authority would violate the sanctity of contracts and be a remarkable intrusion into private business matters.
Thursday, November 13, 2008
Buena Vista Homes hasn’t gone bankrupt like some other custom home builders in the housing slump, but according to The Oregonian, the company faces a growing list of unpaid bills.
The newspaper reports that Sterling Savings Bank sued Buena Vista because the company allegedly stopped paying its loans.
Sterling seeks to recover $11 million in loans and foreclose on some 50 lots Buena Vista owns in a Happy Valley subdivision, according to the newspaper.
Happy Valley is among the areas hardest hit by the metro area’s housing downturn.
Buena Vista owner Roger Pollock says he will attempt to renegotiate his loans with the bank but that can’t happen until he’s defaulted.
Pollock joins a growing list of area homebuilders who have gone under since the housing bubble burst, which economists say occurred in late 2006.
Pacific Lifestyle Homes Inc. announced last month it was filing for Chapter 11 bankruptcy.
In September, Renaissance Homes, a Portland-area luxury home builder, announced it was entering bankruptcy as well.
Legend Homes, one of Oregon’s largest home builders, filed for bankruptcy in June after its parent company made some bad land investments.
Homebuilder Roger Pollock can claim some success simply because his company, Buena Vista Custom Homes, hasn't been forced into bankruptcy like three of his competitors in the housing downturn.
But public records show that Pollock, 47, and his affiliated companies face a growing list of mortgage defaults, past-due construction bills and unpaid homeowners dues.
Buena Vista's new stone-fronted headquarters in downtown Lake Oswego sits unfinished with plywood covering parts of the building. Banner Bank of Walla Walla says Pollock's company, Pollock Commercial Holdings LLC, has defaulted on its $5 million construction loan, and his general contractor has gone to court to collect $1.3 million in unpaid bills.
But Pollock's bigger problems are with his housing projects.
Sterling Savings Bank sued Buena Vista because it said the company stopped paying its loans. The bank is seeking to recover about $11 million in loans and foreclose on about 50 lots Buena Vista owns in a Happy Valley subdivision, areas hardest hit by the Portland area's housing slowdown.
Pollock blamed the commercial project problems on the lender that he said backed out of commitments to provide more funding.
On his housing work, Pollock said he stopped paying loans on his rentals because the rents didn't cover his mortgage. He hopes to renegotiate those loans and possibly resell his subdivision lots. But that plan, he said, was stalled when Sterling Savings Bank stopped the talks after months of negotiations.
"The only way to start negotiations with the bank is if you're in default," Pollock said. "I don't think they know what to do. Do you take the home? Do you wait to see if you get any of the (federal) bailout?"
Lawyers representing Pollock's lenders either didn't return calls seeking comment or declined to comment.
Like most homebuilders, Pollock and Buena Vista made a fortune during the 2004 to 2006 housing boom.
Trade journal Builder Magazine in 2005 named Buena Vista the nation's fastest-growing homebuilding business. Pollock made plans during the heat of the boom to build a more visible headquarters on Lake Oswego's main downtown street.
As the housing market slowed, Pollock later decided not to move into the building if he could find other tenants. He'd hardly need the space now, since he's now one of just three employees of a company that employed 50 at its peak.
"Buena Vista, we're just on hold until the market comes back," Pollock said.
Before he could finish the 20,000-square-foot building and find a tenant, the project ran into financial trouble.
In August, Carlson Testing Inc. of Tigard filed a small-claims case against Pollock Commercial Holdings LLC. Subcontractors Dallas Glass, Cascade Fire Protection Co., Sowles Co., Portland Electrical Construction Inc. and Western Partitions Inc. all filed liens for unpaid bills.
In September, the general contractor, Precision Construction Co. of Portland, filed a $1.3 million lawsuit for unpaid bills.
Last week, lender Banner Bank filed a lawsuit asking the Clackamas County Circuit Court to appoint a receiver to manage the project. The bank said Pollock had defaulted on a $5 million construction loan when he failed to pay his construction bills. It also said Pollock didn't make his monthly $31,600 payment starting in September.
Banner Bank's most dangerous allegation was that Pollock used some of the loan funds for "purposes unrelated to the construction."
Banner Bank's suit provided no further detail, and its lawyer, Kimberley Hanks McGair, declined to comment. In some cases, such charges can lead to a criminal investigation. Federal prosecutors are currently investigating possible bank fraud charges against at least two other Oregon developers, both in Deschutes County, who allegedly misappropriated construction loan proceeds.
Pollock denied the allegation. "That's completely false," he said. "We've provided them with complete documentation since August, and they haven't even looked at it."
He said Banner Bank agreed upfront to provide another $2 million loan to finish the building but later changed its mind. "The bank is stalling in funding the rest of their loan," Pollock said. "The truth about Banner Bank will come out in due time.
"We fully intend to countersue them if they won't honor their commitment."
Houses go to auction
Last year, Buena Vista became the first major local builder to auction off its excess inventory in the housing slowdown. It sold 177 homes and 11 lots for about $75 million in two auctions.
Even so, Pollock and his companies held onto dozens of rental homes and lots as Portland-area home prices declined for the first time in a generation.
Sterling Savings Bank filed two lawsuits against Pollock and his companies. The first seeks to foreclose on homes and lots, many of them in Happy Valley's Lincoln Heights subdivision.
The second says Pollock or his company had defaulted on loans for 20 rental properties, all but two in Happy Valley. A Clackamas County judge appointed Ted Durant & Associates Inc. as receiver and directed it to collect rents from Pollock's rental homes.
But in court filings, the receiver accused Pollock and his company of demanding that the tenants continue to pay rent to Pollock's company. One tenant said Pollock contacted him and was "very pushy, articulated very strongly that he was still the person in charge and had ownership/control of all the properties," according to an e-mail the receiver sent to Pollock's lawyer.
Pollock denied pressing the renter for the payment and said he has collected no rent from the properties since the receiver took over.
The homeowners' associations in Pollock's neighborhoods are also seeking money for unpaid bills.
Northwest Community Management Co., which manages the homeowners' association, filed six liens against Buena Vista seeking $4,900 in unpaid dues. Pollock said all the homes were rentals but he stopped making the payments while he negotiates with his lenders.
Despite his troubles, Pollock insists that he and Buena Vista will make it through. While his commercial project has unpaid bills, Pollock stresses that Buena Vista has paid all of its subcontractors.
"We're not going out of business," he said. "We're not going bankrupt. We're just watching the market."
Wednesday, November 5, 2008
Analysts had forecast a loss of 58 cents a share on revenue of about $1.6 billion when D.R. Horton reports its financial results on Nov. 25, according to a poll by Thomson Reuters. In the year-ago period, D.R. Horton lost $50.1 million, or 16 cents a share. The company projected that revenue for the quarter would fall by half to $1.5 billion.Shares of Fort Worth-based D.R. Horton rose 19 cents to $6.87 in regular trading. The stock was down 11 cents in after-hours trading.