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May 2011
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HUD projects waste millions
Filed under: General, Real Estate
Posted by: Lillian Wong @ 11:20 am

WASHINGTON - The federal government’s largest housing construction program for the poor has squandered hundreds of millions of dollars on stalled or abandoned projects and routinely failed to crack down on derelict developers or the local housing agencies that funded them.

Nationwide, nearly 700 projects awarded $400 million have been idling for years, a Washington Post investigation found. Some have languished for a decade or longer even as much of the country struggles with record-high foreclosures and a dramatic loss of affordable housing.

The U.S. Department of Housing and Urban Development, which oversees the nation’s housing fund, has largely looked the other way: It does not track the pace of construction and often fails to spot defunct deals, instead trusting local agencies to police projects.

The result is a trail of failed developments in every corner of the country. Fields where apartment complexes were promised are empty and neglected. Houses that were supposed to be renovated are boarded up and crumbling, eyesores in decaying neighborhoods.

In Inglewood, Calif., a sprawling, overgrown lot two blocks from city hall frustrates senior citizens who were promised a state-of-the-art housing complex more than four years ago. Although the city invested $2 million in HUD funds, the developer doesn’t have the financing to move forward.

In Newark, N.J., two partially completed duplexes sit empty in a neighborhood blighted by boarded-up homes lost to foreclosure. The city paid nearly $400,000 to build the houses, but after a decade of delays, the developer folded and never finished. The money has not been repaid.

In Orange, Tex., 35-year-old laborer Jay Breed lives next to a dumping ground littered with tires and other trash, where a non-profit developer was supposed to build 50 houses for the poor. Five years later, with $140,000 in HUD money gone, no homes have gone up.

“It’s a wasteland,” Breed said.

The Post examined every major project currently funded under the HUD program, analyzing a database of 5,100 projects worth $3.2 billion, studying more than 600 satellite images and collecting information from 165 housing agencies nationwide.

The yearlong investigation uncovered a dysfunctional system that delivers billions of dollars to local housing agencies with few rules, safeguards or even a reliable way to track projects. The lapses have led to widespread misspending and delays in a two-decade-old program meant to deliver decent housing to the working poor.

The Post found breakdowns at every level:

•  Local housing agencies have doled out millions to troubled developers, including novice builders, fledgling nonprofits and groups accused of fraud or delivering shoddy work.

• Checks were cut even when projects were still on the drawing boards, without land, financing or permits to move forward. In at least 55 cases, developers drew HUD money but left behind only barren lots.

• Overall, nearly one in seven projects shows signs of significant delay. Time and again, housing agencies failed to cancel bad deals or alert HUD when projects foundered.

• HUD has known about the problems for years but still imposes few requirements on local housing agencies and relies on a data system that makes it difficult to determine which developments are stalled.

• Even when HUD learns of a botched deal, federal law does not give the agency the authority to demand repayment. HUD can ask local authorities to voluntarily repay, but the agency was unable to say how much money has been returned.

The national capital region has a particularly troubled track record. In suburban Prince George’s County, Md., the non-profit Kairos Development Corp. received $750,000 in 2005 to build dozens of homes. Six years later, Kairos has not built a single house.

Dozens of housing agencies nationwide acknowledge botched deals and often blame the economy for leaving developers without financing to finish the work.

But hundreds of stalled projects predate the troubled financial markets, with developers tapping HUD’s program for easy money and then escaping even rudimentary oversight from local and federal authorities. The agency’s inspector general for years has chronicled scores of delayed projects and millions in waste.

“We need to reduce the risk for HUD funding in development deals,” said Annemarie Maiorano, who manages HUD money for Wake County, N.C. “There needs to be basic standards.”

HUD officials said they have recently tried to determine why developments are delayed and have begun to cancel projects. In response to inquiries from the Post, the agency last month launched investigations into a series of defunct deals, finding questionable payments and excessive delays, and in recent weeks has sought the return of more than $4 million from housing agencies in the District of Columbia and Prince George’s County.

“We can do better and we will,” said Mercedes Marquez, HUD’s assistant secretary for community planning and development, who was nominated by President Barack Obama in 2009. “HUD, the Congress and every taxpayer I know expects these funds to be put to work. … I won’t hesitate to do what’s necessary.”

The Post’s investigation is the first systemic look at the progress of construction in HUD’s affordable-housing fund, known as the HOME Investment Partnerships Program.

The program launched with great promise two decades ago, when Congress vowed to fund the construction or renovation of thousands of apartments and houses for working-poor families.

HUD’s money typically doesn’t cover all construction costs. The program is meant to provide partial funding for developers who are expected to draw additional financing from banks and other sources.

But hundreds of current projects have faced years-long delays, with a similar pattern playing out in city after city.

Behind many of the deals are developers who didn’t have land, permits, financial capacity or commitments for private financing. HUD has few underwriting standards: Housing agencies are required to ensure that developers have a proposed budget and construction schedule - but not proof that they have the money to start building.

Other developers have had little housing experience or were dogged by foreclosures, cost overruns, liens and allegations of defective work.

by Debbie Cenziper and Jonathan Mummolo Washington Post May. 15, 2011 12:00 AM

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Real-estate professionals embrace new digital tools to better serve clients
Filed under: General, Business, Real Estate
Posted by: Lillian Wong @ 11:14 am

Historically, the real-estate industry has lagged behind the rest of the business world by a few years in the adoption of new digital tools.

But the housing-market downturn appears to have spurred agents, brokers and others to develop and embrace new technology at an unprecedented rate.

From Facebook to QR codes, to Twitter and multiple custom websites, many agents have come a long way from the days when they jumped in the car carrying printouts of home listings and the latest local street map.

5 key technologies for real-estate agents

Bob Bemis, chief executive of the Arizona Regional Multiple Listing Service, said Arizona real-estate agents have adjusted quickly in terms of their attitudes toward adopting new technology.

“The explosive nature of technical development has been phenomenal,” said Bemis, who has helped promote that change by offering a variety of technology products to listing-service members.

To some extent, it’s unclear where the changes will lead. The worst housing slump in generations came along just as smartphones, social media and other devices were starting to transform the way real-estate business was conducted.

The flood of short sales and foreclosures, not to mention many recent changes in rules and procedure, have required agents to learn new processes and techniques with all the latest tools at their disposal.

Even after the housing market returns to normal, those in the real-estate industry said technology was likely to continue changing their profession in unpredictable ways.

The agent’s role in a home sale - that of buyer or seller representative - is no different, according to real-estate agents in the Phoenix area. But there has been a significant uptick in the knowledge and tools required to do the job effectively.

Rampant change is partly a product of the economic downturn and financial distress many homeowners have endured and partly the result of new information technologies that, depending on how they are used, can be regarded as either a boon or a threat to the real-estate industry.

Most agents and brokers seem to agree their industry is likely to undergo as many changes in the next four years as it has during the previous four.

They said the impact of high-tech tools such as broadband wireless service, Internet data exchange, digital social networking, global-positioning systems and quick-response codes for smartphones had been overwhelmingly positive.

Still, industry representatives said information technology also has the potential to diminish real-estate agents’ role in the housing economy via a process known as “disintermediation,” which is a fancy way to say “cutting out the middleman.”

It’s the same process that has wreaked havoc on travel agents, discount stockbrokers and other professional intermediaries.

“At this point, the threats are not huge,” said Ron LaMee, senior vice president of information services for the Arizona Association of Realtors. “It may carve out pieces of the traditional services that agents provide.”

Agents of change

Today’s real-estate agents operate in an environment in which sales transactions have gotten more complicated, mortgage-lending standards are tighter, the home-appraisal process stricter, and the federal government is constantly changing incentives and restrictions that can save or kill a deal.

Many agents have incorporated technologies into their businesses that allow clients to perform some of the more enjoyable work themselves, such as searching through online home listings, while their agent focuses on the heavy lifting.

Every geographic area in the country has a listing service that maintains a Web-based database of homes available for purchase, along with various details about each property. Some of the information is suitable for public consumption, such as a home’s square footage, while other information is not, such as the lockbox combination to house keys for agents to use when showing a home to clients.

One of the listing service’s major accomplishments in recent years has been developing a Web-based system that lets consumers access and search the public-approved portion of the database.

Bemis has gone on to transform the Phoenix-area listing service into what he calls “a tester and recommender of new technology” for agents.

Bemis said most agents felt pressure to keep up with new technology, but that there could be as many as 50 to 100 applications with the same basic function available on the market.

Generally, real-estate agents are looking for tools that enhance their self-promotion efforts, improve relationships with clients, gauge buyer interest in their listed properties and the track the progress of pending home purchases. Agents have adopted other technologies out of sheer necessity, such as electronic systems lenders have implemented to track the progress of short-sale transactions.

Bemis said competition among agents is more intense than ever, and that any tool which provides a slight edge over the competition is too important to ignore.

“Those that want to survive have to evolve much, much more quickly,” he said.

Apps for agents

High-tech entrepreneurs John Perkins and Grant Gould have spent the past several years developing applications designed to perform certain tasks specifically for real-estate agents.

Co-founders Gould and Perkins’ latest venture, Home Junction Inc., based in La Jolla, Calif., offers a proprietary software product called SpatialMatch that allows users to choose a neighborhood and then view an interactive map showing anything they want to see: schools, public parks, parking garages, bus stops, bagel shops, haberdashers, Whataburgers - anything.

Agents subscribe to a service that lets them embed the SpatialMatch interface on their own websites using a technology known as Internet data exchange, or IDX.

IDX lets visitors to the website use the embedded application without having to link to another site. Many real-estate agents use the same technology to let clients access the listing service’s database.

Gould and Perkins give their agent clients the option of putting the SpatialMatch app behind a lead-generation barrier, which forces visitors to enter their name and contact information.

However, they said few agents use it. Agents have learned by experience that the hard sell and the Internet don’t mix.

“It’s not about lead-generation,” Gould said. “It’s about managing the flow of information to the consumer.”

Unfettered access to apps such as SpatialMatch keep visitors on the website and position the agent as a hyper-local expert, they said.

A previous business Gould and Perkins developed, Real Estate Village, helped agents create custom websites and was sold in 2005 to, which provides a variety of Internet-based services to real-estate agents.

Perkins explained that tech tools in the real-estate business usually have one of two opposing goals: automation or disintermediation.

Automation products aim to make the job easier for agents. Disintermediation products aim to make agents obsolete.

Because they offer the application only to real-estate professionals, Perkins and Gould said they are in the automation space.

In fact, their goal is to help agents and brokers compete against the leaders in disintermediation, do-it-yourself home listings Web portals such as, Zillow and Trulia.

“We made a conscious decision to develop products that empower the Realtor,” Gould said.

Too much tech?

In today’s real-estate market, the use of certain high-tech products and services is mandatory, said Laurie Duffy, a real-estate agent with John Hall & Associates Inc., based in Phoenix.

The most critical among them is a quality website devoted specifically to that particular agent.

All real-estate agents are independent contractors, she said, and they succeed or fail based on the strength of their personal branding effort.

“You really have to set yourself apart from other agents by putting your name out there,” she said.

Other must-have technologies include text messaging, a Facebook page, a GPS device, and a laptop computer with wireless Internet service.

One of the most promising technologies to hit the real-estate profession in recent months is the use of quick-response codes, or QR codes, said Realty Executives agent Libby Cohen, of the Scottsdale-based Walt Danley Group.

Cohen demonstrated recently how she uses QR codes, which look like squares partially filled in with black dots, on the front of her listed homes’ for-sale signs.

Any passer-by with a compatible smartphone can scan the code with the phone’s camera, which instantly sends the phone’s Web browser to a page featuring information about the home and even a video tour.

Cohen receives a notice whenever one of her QR codes is scanned, allowing her to track the number of visitors to each property.

She said the system helps her maintain a good relationship with sellers.

Duffy said there were some things she prefers to do the old-fashioned way, and that too much technology can be a bad thing.

Whenever possible, Duffy said she chooses face-to-face conversation over a phone call, and a phone call over an e-mail message.

While Duffy agreed that the role of real-estate agents was bound to continue evolving with new technology, she scoffed at the notion that a website ultimately could displace agents altogether.

“I don’t see how the Internet could ever take the place of an agent,” she said. “People need guidance, and they need it from an actual person.”

Agents of the future

LaMee agreed that real-estate agents always would have a place in the housing market.

A home purchase is far more complicated than buying plane tickets or shares of Motorola, he said, adding that real-estate agents are unusual in that they broker transactions between two consumers.

Still, LaMee said it was likely that real-estate agents of the future would be fewer, more specialized, more productive and able to provide a no-frills version of their services for a reduced fee.

Limited-service real-estate agencies, often charging a flat fee in place of the traditional 3 percent commission, already had begun to emerge toward the end of the housing boom, LaMee said, but the downturn seemed to have put the brakes on that trend.

As much as real-estate agents hate them, complicated and potentially frustrating short-sale transactions now prevalent in the Phoenix-area housing market have made full-service agents vital again, especially to sellers.

Many agents believe the reprieve from their devaluation is only temporary, however.

A survey of agents and brokers conducted recently by Web-based real-estate news service Inman News revealed that many believe flat-fee services are most likely on the rise again.

The online survey, whose respondents included more than 700 self-identified agents and brokers, and about 300 other real-estate professionals, was conducted between February 2009 and March 2011.

Only about 12 percent of respondents said they currently offer services for a flat fee, but 36 percent said they expected flat-fee services to become more popular in the next five years.

The devaluation problem appears more advanced when it comes to the services provided by sellers’ agents, who often do the lion’s share of work in a typical short sale.

The survey found that while the bulk of buyers’ agents still claim to be receiving the standard 3 percent commission, more often than not sellers’ agents are getting less than that, about 2.5 percent.

Not surprisingly, the number of licensed agents and brokers statewide has declined almost 22 percent since 2007, just after the Valley’s housing market peaked.

Roughly 51,000 agents and brokers remain in the state, according to recent figures from the Arizona Department of Real Estate, down from more than 65,000 in 2007.

LaMee said that thinning of the ranks is bound to continue in the foreseeable future.

Therefore, the next generation of high-tech tools for agents will have to address productivity concerns in an industry whose participants do more work and get paid less.

by J. Craig Anderson The Arizona Republic May. 15, 2011 12:00 AM

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Arizona banks seeing a profit
Filed under: General, Business, Real Estate, Mortgages
Posted by: Lillian Wong @ 11:06 am

After considerable pain, downsizing and nearly $1 billion in cumulative losses, Arizona’s native banks finally might be turning the corner.

The 37 banks still based in the state just wrapped up their best quarter since the financial crisis and recession began, breaking a string of 12 straight quarters during which the majority of institutions here lost money.

On balance, the local industry is profitable again, albeit by a razor-thin margin that partly reflects the demise of some of the weakest players. Still, bankers are sensing a silver lining in the latest numbers, and they’re not complaining.

“It’s a good story, a change in the weather,” said Stephen Haggard, president and chief executive officer of Metro Phoenix Bank. “The local economy is doing better, with definite improvement from six months or a year ago.”

As local banks recover, that could make more lending dollars available to customers here, especially small businesses, while improving overall banking services and perhaps even reversing the three-year decline in employment at these firms. Healthy local banks also are in a better position to donate to non-profits and support the community in other ways.

Metro Phoenix Bank posted a $624,000 first-quarter profit after basically breaking even one year earlier.

The big news is that bad-loan difficulties are easing, at long last.

“Problem assets have been dramatically reduced,” said Scott Schaefer, president of Meridian Bank, which improved to a $2.9 million first-quarter profit from a loss of $11.1 million a year earlier.

“We took our lumps in 2009 and 2010,” he said, citing write-downs and other responses for dealing with problem loans.

The banks headquartered in Arizona earned nearly $20 million combined from January through March, with 19 of the 37 turning a profit, based on a preliminary tally of financial reports supplied to the Federal Deposit Insurance Corp.

The agency will release final statewide numbers later this month.

Many local banks were and remain highly exposed to real-estate lending, since that industry was the state’s main growth catalyst for so many years.

The Arizona totals exclude figures for banks that operate here but are based elsewhere, such as the three largest companies with an Arizona presence - Wells Fargo, Chase and Bank of America.

They also don’t include banks that have failed, merged or been acquired over the past few years.

The majority of local banks have been running in the red for the past three years, hammered by real-estate setbacks and hemorrhaging the capital that regulators require for them to stay in business.

At the nadir in late 2009, 84 percent of Arizona’s banks were unprofitable.

Combined, Arizona’s local banks lost $950 million across 2008, 2009 and 2010.

Since the end of 2007, the state has lost 20 banks through failure, merger or acquisition and shed more than 1,500 related jobs.

Also, market share has become more concentrated in the hands of the big out-of-state entities that, critics say, are less motivated to lend locally.

“Local banks will reinvest the money in small businesses,” said Ernest Garfield, president of Independent Bank Developers of Scottsdale and a former Arizona state treasurer and Corporation Commission member.

“The big banks will drain it out of the state.”

Bankers at large institutions contest that claim, but it’s clear that having more healthy entities increases the availability of local loan dollars.

The improved recent numbers for local banks don’t mean all is well. Some of the weakest banks in Arizona and nationally continue to struggle.

The FDIC’s list of “problem” banks is still rising, with one in nine institutions nationally and an untold number in Arizona under close scrutiny. The agency doesn’t name banks on its list out of concern for inciting runs by depositors.

The FDIC generally insures depositors up to $250,000 per bank.

Small community banks that represent the backbone of Arizona’s industry have been hit harder than larger national banks, which have more diversified operations.

The U.S. industry actually remained profitable throughout the slump and earned $87 billion in 2010 - almost back to pre-recession levels.

Arizona banks, as noted, have been heavily dependent on real estate.

Perhaps the main reason banks in Arizona and elsewhere are reporting better numbers is that loan problems and delinquencies are easing, so banks don’t have to increase their reserves to cover losses.

When banks must boost reserves, that eats into profits and capital.

Also, banks are earning higher spreads between what they generate on loans and pay on deposits, and they’re earning more in fee income, Haggard said.

Schaefer sees opportunities for well-positioned banks but cautions that metro Phoenix’s economic recovery remains “spotty.”

Haggard is more optimistic. While real estate remains depressed, prices aren’t dropping as fast as before, he said.

Also, borrowers in other industries generally are faring better.

“The financial reports we’re receiving from clients are showing stronger cash flow and top-line revenue numbers,” he said.

Garfield feels now is a great time to start a bank in Arizona, reflecting the decreased competition, gradual improvement in the economy and other factors.

“Also, bankers have finally learned what gets them in trouble,” he said.

Add it all up and there are reasons for optimism.

Local banks focus their lending within Arizona and thus are a key cog in the economic-development machine.

If they have finally turned the corner, that could be a good indicator for everyone in the state.

by Russ Wiles The Arizona Republic May. 15, 2011 12:00 AM

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