Cori Bradley and Cecil Baird are among many Valley homeowners who are finding it tough to qualify for mortgage modifications as they face declining home values, diminished income and the looming shadow of foreclosure.
Homeowners, real estate agents and mortgage experts say President Barack Obama’s mortgage modification plan is not working in housing markets such as Phoenix, because in many instances home values have dropped too much for the owners to qualify.
To qualify for a principal modification under the plan, a borrower’s mortgage balance cannot be more than 105 percent of the current value of the home. For example, a suburban
“The real killer here is the 105 percent stipulation,” said Joseph Maggiore, a Realtor with
Adjustable-rate mortgage holders in trouble may qualify for temporary rate reductions for five years, but then will see their rates go back up. That could reintroduce the same problem of suddenly rising payments now faced by subprime borrowers, said Dean Wegner, a mortgage banker and principal with
Wegner said conventional mortgage holders who are current on their loans, but have seen values dive often do not qualify for either aspect of the rescue plan.
Baird is in that nonqualifying group. He has seen his income drop and his Queen Creek home’s value plummet, and he’s behind in his mortgage payments — but he’s not qualifying for mortgage adjustments from his lender,
Baird’s wife decided to stay home after the birth of their daughter because she didn’t make enough money to offset child care costs. They have not been able to keep up with their $1,850 mortgage payments. He’s in the last month of a forbearance period and faces higher payments next month.
“I have tried several times to remodify the loan. However, since I am in the red … Chase (representatives) say they are unable to assist me until I at least break even,” said Baird, who received a conventional mortgage in 2006. “I paid $211,000, owe $206,000 and have seen comparable houses posted for $76,000.”
In the
“We are terribly underwater. We owe $291,000-ish and the property is now worth $190,000, maybe,” she said.
The Bradleys also are suffering in the economic downturn. Both were laid off from their jobs in the mortgage and commercial real estate industries and had to deal with unexpected medical and tax bills. They have found new jobs and are current on their mortgage, but it is an adjustable-rate loan, which puts the couple in peril.
“I know that everyone is going through tough times and that my story is just another story, but I am hopeful my lenders will reach out and help us in this time of crisis,” Bradley said.
NO REAL OPTIONS
Stacy Pingree, president of
Mortgage and real estate professionals also said the federal modification plans are not working well in other hard-hit housing markets, such as
“It seems like there is no real option that addresses the most common scenarios out there: people who are significantly upside down on their value and either have adjusting loans or fixed rates that are just too high to be manageable,” said Maggiore, who would like to see the underwater rule lifted from modifications.
MORE HELP NEEDED
Chase spokeswoman Mary Jane Rogers said it has been difficult for the bank to qualify borrowers under the refinance plan because loans often total more than 105 percent of a home’s current appraised value.
Late last month, Chase opened a loan service center in north
“We’re seeing an increase in people talking to our bankers about their options,”
There also are mortgage brokers, modification firms, attorneys and rescue companies offering their services to struggling homeowners.
Dan Mercer, senior partner with
Mortgage and real estate experts expect the Obama administration to revisit the modification rules because they aren’t helping markets such as
“They’re probably just going to have to wait it out,” said Brandon Hinson, an agent with
Staff reporter Chris Casacchia contributed to this story.
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Radiant Financial Group: www.radiantfg.com
Title Management Agency of
Federal Deposit Insurance Corp.: www.fdic.gov/consumers/loans
The term LEED is so prevalent in construction and design jargon that it has gone mainstream, even making it into the dialogue of a popular television drama.
So what is it? Leadership in Energy and Environmental Design is a designation created by the U.S. Green Building Council to measure how well a structure stacks up in terms of energy efficiency and environmental sensitivity. It began with specific criteria for new commercial construction, but has expanded in recent years to include many other categories.
Now there are LEED standards for existing buildings, commercial interiors, core and shell construction, homes, neighborhood development and schools. Each category includes several levels of performance. Meeting the minimum standards results simply in LEED certification. Buildings that go above and beyond may be certified as LEED silver, gold or platinum — the highest level of achievement.
On April 27, the council will roll out an updated version of the program, called LEED v3, to address new energy-use priorities and carbon dioxide emissions. Specifics about new credits and standards are outlined on the council’s Web site.
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U.S.
Has LEED become the standard for new commercial construction?
“Absolutely. LEED buildings outperform standard construction in energy reduction, water reduction, indoor environmental quality and productivity gains, as well as in the real estate markets.”
Tom Hootman, Director of sustainability
“LEED has become standard across the
Will Bruder, President
“I don’t believe LEED is the standard just yet, but it is quickly becoming one, along with Energy Star.”
Luis Huertas, Project architect
“LEED is not the standard. However, we are finding that more owners are at least requesting sustainable design, if not formally certified by LEED. It’s not standard because there is a perception of increased costs for construction of a LEED building.”
Neal Jones, Principal
“Sustainable design is the new standard for commercial design and construction. The decision to seek LEED certification is a complicated one and may not make sense for every project.”
Mike Davis, Principal
What are the most challenging aspects of designing to LEED standards?
“Some owners are on top of the LEED requirements and initiatives, and others are not. In a lot of cases, the process is not as collaborative as it could be, and we end up guiding and directing the ship.”
Jeff Stanton, Vice president and sustainable design leader SmithGroup
“Developers often want ‘LEED-like’ or ‘LEED lite’ at a lower price.”
Will Bruder
“The costs associated with LEED certification are considerable and don’t always fit with the budgetary constraints of a project.”
Mike
“We find that having an experienced team helps you navigate some of the ambiguities and areas of interpretation in LEED.”
Tom Hootman
“Helping the client understand the long-term benefits of sustainable design of LEED can be a challenge. However, a life-cycle cost analysis does effectively illustrate the benefits of LEED.”
Neal Jones
What changes or new categories would you like to see in LEED?
“A new category that would address criminal justice projects, like border stations, law enforcement and correctional facilities, and courthouses.”
Neal Jones
“New LEED standards should seek to improve on the applicability of certain credits to varying climatic regions. LEED also needs to integrate infrastructure projects and site/landscape design better.”
Luis Huertas
“We’d like to see more credit for social and economic sustainability, including beauty, adaptability, productivity, health and well-being.”
Tom Hootman
“LEED should not be a choice, but a given, as it becomes part of every community’s requirements for a building permit — just like structural integrity and (Americans with Disabilities Act requirements) are now.”
Will Bruder
The venerable Wigwam Golf Resort & Spa in
Also included in the foreclosure action are the two golf courses at the
But that is not all of the bad news for the historic west side resort.
“It’s a surprise. I knew there were financial problems, but when I heard that Starwood had a meeting yesterday with their employees, I knew it was something big,” said Darryl Crossman,
He in turn called Starwood, which he said confirmed that the international hospitality firm no longer will maintain the Wigwam as part of its Luxury Collection of hotels.
The decision was made in the last two days, according to K.C. Kavanagh, Starwood’s vice president of public relations. “This is separate and totally unrelated to the foreclosure,” Kavanagh said.
Starwood and Kabuto, she said, “have spent many months negotiating and there were several material points of difference. Given that, we decided to terminate our relationship.” Kavanagh would not elaborate what the differences entailed.
According to a letter sent Monday to Crossman by Ronnie Collins, acting general manager of the Wigwam: “Starwood and the owner of the hotel had been working toward trying to resolve a dispute concerning their management agreement and Starwood’s ability to continue to operate the hotel. Unfortunately, it is now clear to Starwood that this dispute cannot be resolved in a way that would enable Starwood to continue to manage the hotel.”
Crossman said closure of the Wigwam would cause serious distress to
“It not only is an historic property for the whole Valley and it’s not only the heart of this community, it’s also our financial lifeline,” Crossman said.
The Phoenix Business Journal was unable to contact Kabuto Arizona Properties President George Lee, a resident of
Crossman said Lee’s wife is giving birth to a child. Though Crossman said he talked with Lee recently, they haven’t been in touch for several days.
“I’ll probably call him by the end of the week. Right now we’re trying to find out what the city can do, how we might be able to facilitate some other arrangements,” Crossman said.
Even so, Kabuto Arizona Properties is facing the foreclosure sale of the Wigwam resort and golf course and the Biltmore’s Adobe and Links golf courses.
According to documents filed with the Maricopa County Recorder’s office, Kabuto failed to make monthly payments on the $65 million loan beginning in November.
It is unclear what impact the foreclosure will have on Biltmore Golf Club, a popular spot with local golfers. A spokesperson for the adjacent Arizona Biltmore Resort and Spa, which is owned by a different company, referred questions about the foreclosure to the golf club’s General Manager Dick Bates. He did not respond prior to press time.
A soft real estate market continues to drive
In the first quarter, 46 companies filed for Chapter 11 reorganization or Chapter 7 or 13 bankruptcy, up 44 percent from the same period last year, according to the latest data compiled by investment bank Greene Holcomb & Fisher LLC.
A Chapter 11 filing allows a business to reorganize while receiving protection from creditors.
The Phoenix office of
“That’s a huge increase compared to 2008,” said Jack Hebert, who heads the firm’s bankruptcy department.
The real estate market declined even further in fourth-quarter 2008. Because the
On the M&A front,
GHF Managing Director Paul Javnick said financing M&A deals is tough right now. It’s difficult to get credit for deals of $500 million or more, which rarely occur in midsize markets such as
Small deals also are getting squeezed.
To exacerbate matters, consumer services, high-end restaurants and some other sectors are struggling to survive as consumers watch their spending.
“Those kinds of deals are really struggling,” said Javnick, who splits his time between
“There’s life in the market,” he said, but “it’s sector by sector.”
Scottsdale-based
“We’re actually seeing a pretty strong market right now,” said Guy Downing, co-founder and managing director.
Strategic buys typically are carried out by well-capitalized companies in the same or a complementary industry. Many of these players have been chased out of deals or priced out of the market during the past three to four years, but conditions have shifted in their favor.
“We think ’09 is going to be relatively strong,” Downing said.
Get Connected
Greene Holcomb & Fisher LLC: www.ghf.net
Marc Lotenberg believes traditional media is dead.
“Any content you can get, you can get for free,” says the founder and CEO of 944 Media LLC, which publishes lifestyle magazines in nine metro markets, including
Not that Lotenberg hasn’t tried it. The former club promoter launched his company in
Lotenberg says it was costing 944 a lot of money accounting for actual sales.
“It was almost cheaper to not sell the product,” he says from the company’s office in
So, the company’s publications went to free distribution with controlled circulation. 944 eventually transformed into a quasi-marketing firm, using the magazines to get its message across. Its signature events, including the 944 Village during last year’s Super Bowl and lavish parties at
“The events were the glue,” says Lotenberg. “It’s like a social network, but we bring it to life.”
That business model has been successful in an era when newspapers and magazines are bleeding red, losing advertisers and subscribers by the day.
Despite Lotenberg’s quips of a dying media industry, 944 still relies heavily on print advertising. About 70 percent of its revenue is generated through print ads, with events and online sales evenly accounting for the rest.
Although the events bring in only 15 percent of revenue, Lotenberg says they’re responsible for driving the print products. Monthly ad buy packages range from $3,000 to $5,000, depending on the publication.
Unlike other magazines in that space, published content is 30 days old at the latest — sometimes just days after the coverage. When the publications go to press on Fridays, the issue might contain content from a Thursday party or an ad placed the day before.
“Most of the companies in the game can’t act that fast and put something together in a week,” Lotenberg says.
Looking to attract a younger demographic, 944 last month acquired Michigan-based
Lotenberg says the 944 demographic has grown with the publication, beyond the club scene.
“We were looking at a way to get back to our roots,” he says.
With the Six Degrees deal, 944 now circulates more than 330,000 audited magazines a month. April 30 will mark the debut issue of Six Degrees under the 944 umbrella.
Six Degrees will continue to operate in its current markets and plans to expand into
944 Media LLC
Description: Specializes in print and online lifestyle content, special events and custom publishing
Founded: 2001
Founder and CEO: Marc Lotenberg
Address:
Employees: 90
2007 revenue: $12.6 million
2008 revenue: $13.3 million
Web: www.944.com
SunCor Development Co. is moving quickly to dispose of its home building and golf course operations, as well as its master-planned communities.
The Tempe-based company, a wholly owned subsidiary of
An 8-K document must be filed by publicly traded companies to report any major changes affecting shareholders.
“Boiled down to its essence, SunCor has decided to double down on its commercial Phoenix assets and sell its master-planned communities and homebuilding and golf course operations in four states,” said Steve Betts, president and CEO of SunCor. “We’re moving all of SunCor’s resources into commercial and mixed-use infill projects here in
Betts characterized the move as “a strategic decision, not a reactionary plan.”
But Dale Belt, managing director of Phoenix-based Sierra Consulting Group, which handles corporate reorganizations, bankruptcies, mergers and acquisitions, said he reads the 8-K differently.
“What’s really telling is that SunCor got a one-year extension on its revolving loan by its senior lender. They are the ones who are calling the shots,” Belt said. “I doubt whether this is SunCor’s idea.”
Belt said the 8-K also said Pinnacle West is not bailing out SunCor, which has $175 million in debt — $108 million to the unidentified “principal loan facility,” and the remainder to “other SunCor credit facilities.”
“Pinnacle West has money to pump into (SunCor), but they obviously don’t want to do that,” Belt said.
Pinnacle West also is the holding company for
Pinnacle West spokesman Alan Bunnell confirmed the holding company will not be bailing SunCor out, but said it won’t be selling the company, either. The assets that will be retained “will provide potential future upside with minimal ongoing capital requirements and costs,” he said.
Those assets include 2,000 acres in the
Bunnell added, “We expect (SunCor) to meet its obligations as a stand-alone company.”
One thing is certain: SunCor is motivated to dispose of about $400 million of its $470 million in stated assets. The company has hired some real estate brokers and is interviewing others to sell the unwanted properties, which have been written down in value “to really price them for attractive buyers, even in this down market,” according to Betts.
SunCor’s homebuilding and master-planned communities are in or near Goodyear;
“The master-planned communities are located in markets that have predominantly worked through their housing overhang,” Betts said.
Barclays Capital, an international investment banker, is SunCor’s financial adviser on the disposition of the homebuilding operations.
“We think most likely the buyer will be an investor looking to buy the entire division,” Betts said.
He hopes most of the transactions can be completed by the end of the year and that the sales largely will cover the company’s $175 million in outstanding debt.
The golf courses for sale are in
“We’ve had lots of interest in individual courses by different investors. We may pursue selling them individually or package some of them,” Betts said.
SunCor also plans to sell 62 luxury condos still for sale at its Bridgeview building, the most recent condos built at
Once the selected assets are sold, SunCor will be dramatically smaller.
The company has about 125 full-time employees, plus 325 at its golf courses, Betts said. He expects many of those employees to go with the buyers of the various assets, ultimately leaving about 20 with SunCor.
SunCor sold both of the office buildings it developed at Hayden Ferry. Tower I sold in 2005 for $53 million to CH Realty, an investment fund for Crow Holdings of Dallas. Tower II sold in 2008 for $93 million to New York-based Sumitomo Corp. of
SunCor retained ownership of the parking garage. It also obtained a building permit to begin a third office tower at the northeast corner of Rio Salado Parkway and Mill Avenue, but Betts said it likely will be a year to 18 months before that project breaks ground.
As for building the remaining condo towers that were to be constructed east of Bridgeview, “we may or may not build additional condo towers,” he said. “We may switch to office towers.”
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SunCor Development Co.: www.suncoraz.com
The mark-to-market accounting changes being championed on Wall Street are receiving less enthusiasm in
The
Investors heralded the move, and it helped push the Dow Jones Industrial Average past the 8,000 mark for the first time in more than two months.
In essence, the change eliminates the need for banks to write down assets they intend to hold to maturity, which theoretically should stabilize capital reserves.
Local bank leaders view the change as a positive step, but don’t think it will have a significant impact on their balance sheets, largely because impairments, or write-offs, already have been taken.
“We feel the FASB revisions are appropriate, albeit long overdue,” said Ed Zito, an executive vice president for
Zito was referring to illiquid assets that might have long-term value, but can’t be sold today because there are no buyers.
“It’s like a stock with a bad name,” said Doug Hile, president and CEO of
FASB’s new guidelines allow banks and their auditors to use “significant judgment” when valuing illiquid assets.
Alliance Bank parent Western Alliance Bancorp. charged off $75.3 million in the fourth quarter, writing off its collateralized debt obligations. That spurred a net loss of $148.3 million for the quarter and $236.5 million for the year.
“We can’t go back and write them back up,” Zito said.
Now most of the Nevada-based holding company’s CDOs are composed of trusts and preferred stock of other large financial institutions, which stand to benefit more by the FASB change because they hold these toxic assets.
A CDO is an investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt, but often are nonmortgage loans or bonds.
Dennis Jones,
“We have always taken a conservative approach to managing our investment portfolio and, consequently, carry a low level of the hard-to-value securities that are most impacted by this change,” he said.
Hile wonders how auditors will apply the “judgment” criteria.
“Then we’ll find out if this will be effectual or not,” he said. “We’re looking for some more clarification.”
Because most community banks do not buy or sell securities, they have little reason to cheer the rule change. Many community bank executives want bank regulators to take up their concerns — mainly readjusting real estate valuations.
If community banks could incorporate the same mark-to-market changes to loan portfolios and real estate loans, it would stabilize depressing capital levels, said
But community banks are viewed as individual entities. They rarely hold lawmakers’ ears and have little lobbying power in their own states, let alone in
“They just don’t have the voice,” Dunlap said.
Union Bank reported a $4 million loss in 2008, compared with a $1.5 million profit the year before. Last year’s struggles were tied largely to the bank’s high percentage of nonperforming loans.
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Meridian Bank: www.meridianbank.com
Alliance Bank of
Financial Accounting Standards Board: www.fasb.org
Mark-to-Market
The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
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A French entrepreneur is exploring Valley locations for a tethered balloon ride that would lift passengers to a height of 450 feet, nearly equivalent to the top of
In March, there were 200 more new-homes sales across the Valley than the month before. That may not sound like much, but it’s significant in the current slowdown. Last month, 912 new homes sold across metropolitan