A report from the Orange County Register. “Skipped mortgage payments across California are jumping to levels not seen since the mortgage mess surrounding the Great Recession. Let’s start with a few numbers from mortgage tracker CoreLogic and its measure of ‘seriously delinquent’ home loans in August — those with 90 days or more of late payments. Statewide, 3.8% of home loans were in deep trouble compared with 0.6% a year earlier. Yes, that’s a six-fold-plus jump.”
“It’s largely the same story in this sample of key markets. Riverside and San Bernardino counties: 4.6% ‘seriously’ tardy vs. 1% a year earlier. Los Angeles-Orange County: 4.2% vs. 0.6% a year earlier. San Francisco metro: 2.8% vs. 0.3% a year earlier. San Jose metro: 2.2% vs. 0.2% a year earlier. This isn’t just California craziness. The nation’s rate was 4.3% — up from 1.3% in August 2019 and the highest rate of ‘serious’ trouble since February 2014.”
The Times of San Diego. “Authorities indicted nine people this week allegedly involved in a $6 million scheme that preyed on Southern California victims facing foreclosure. The indictment, announced by California Attorney General Xavier Becerra, outlines crimes that occurred in San Diego, Los Angeles, Orange and Riverside counties from 2011 to 2018. Prosecutors accuse them of targeting distressed homeowners by claiming they could stop the foreclosure of homes if the victims made monthly payments.”
“They then delayed foreclosures and eviction actions by allegedly filing fraudulent bankruptcy documents, court documents and fractional interest grant deeds, according to the state. Many homeowners wound up losing their homes to foreclosure, despite paying the defendants hundreds of dollars a month over the course of many years. The alleged scheme impacted multiple victims, resulted in a loss of about $6 million and affected more than 200 properties.”
“The list includes properties with loans insured by the Federal Housing Administration (FHA), and loan servicers Freddie Mac and Fannie Mae, officials said. ‘This type of fraud not only affects individual families, it also affects the housing market,’ said Michael Gibson, the Special Agent in Charge of the U.S. Department of Housing and Urban Development Office of Inspector General.”
From Variety on California. “More than three years after it first hit the market, one of the Los Angeles market’s most notorious spec-mansions — the real estate white elephant formerly known as Opus — has finally found a buyer. The 20,000-square-foot contemporary made global headlines in summer 2017, when it debuted with a $100 million asking price. It took a change of realtors, multiple price reductions — to a final $60 million ask — and a second, far more subdued marketing campaign to sell Opus.”
“By the time Opus was finished, in 2017, the market had shifted. Billionaires were no longer interested in the latest modern white box. So the bloated house became an emblem of L.A.’s real estate excess. Seeing Niami’s early success, other local developers had built too greedily, churning out dozens of big white boxy mansions for buyers who didn’t even exist, only to watch them languish on the market. Opus, the biggest and baddest of them all — excepting Niami’s still-unfinished ‘The One’ compound — sat alone and unloved on its Trousdale Estates hill.”
“Undeterred, Niami continued trying to sell the house until earlier this year, when one of his lenders — local doctor-turned-real estate investor Joseph Englanoff — finally took control of the property. Englanoff gave the place a quick renovation, righting many of the previous design wrongs.”
The New York Post. “With many saying the COVID-19 real-estate turndown is like no other, heed these observations from CBRE superstar dealmaker and tri-state CEO Mary Ann Tighe. ‘Why does every downturn feel like the first time?’ she asks. Pointing out that New York has had a ‘deeply cyclical economy going back to the first Dutch settlement four centuries ago,’ Tighe reminds us, ‘Downturns have laid the foundation for change and ultimately regenerated our city.’”
From Texas Public Media. “The entire oil industry has been in trouble for the past eight months. And if oil is in trouble, that means Texas is, too. Right now the price of oil is a third less than it was in January. Every dollar the price drops, experts say, represents a decline of about $85 million in economic impact in the state. By many estimates, the speed and severity of this bust make it the worst on record.”
“Drew McManigle’s family used to be in the oil business, but not anymore. ‘This downturn is going to make the downturn of the ‘80s look like a cakewalk. When it’s all over and done,’ he said.”
“The boom caused a lot of demand for housing. That was starting to change. After decades of having no real investment, the area has new housing coming in. The city partnered on a new hotel and meeting center downtown. But now the demand that made this one of the most expensive places to rent a room or an apartment is largely gone. There are several projects being built right now in the area.”
“‘There are going to be a lot of empty apartments,’ said Kirk Edwards, president of Latigo Petroleum and a business leader in Odessa.”
“‘The shale revolution was not financed by debt, it was financed by equity, for the most part,’ said Gary Sernovitz, an author and energy finance veteran of 25 years. Equity investors were chasing big returns, but were met with what one analyst called a capital destroying machine.”
From D Magazine in Texas. “‘Will trade oil for toilet paper.’ So read a marquee outside an office building in downtown Midland on April 20, 2020, as the perfect storm of oversupply and pandemic-induced reduced demand took hold of the oil and gas industry. On that day, producers watched in disbelief as the oil futures price fell to -$37.63 on the New York Mercantile Exchange. For West Texas Intermediate, the posted price dropped as low as -$41.25. The sign usually displayed the price of oil, but it wasn’t programmed to go negative. The gallows humor messaging seemed appropriate, as oil prices were, indeed, in the shitter.”
“Layoffs occurred. Bankruptcy filings rolled in. Rigs shut down. ‘It’s not been fun–I’ll start with that. When activity levels cratered, the industry was in a lot of turmoil. If people were over-leveraged, they were in a lot of trouble,’ says Doug Dormer, CEO of Cardinal Midstream.”
“For some up-and-coming oil industry leaders, this bust has been defining. Although prices have recovered, in the moment, there were numerous unknowns. ‘It’s easy to look back now and see that we had hit bottom, but at the time, we really no idea where the bottom was,’ says Bradley Williams, CEO of Elephant Oil & Gas. ‘No one could have imagined oil was going to go to negative $40.’”
The Las Vegas Sun. “Rebecca Steele is the CEO of the National Foundation for Credit Counseling, the largest nonprofit financial counseling organization in the U.S. NFCC aims to help Americans lead financially healthy lives. It offers services such as debt management planning, foreclosure prevention and home ownership counseling through its network of 600 offices nationwide.”
“Q: How many people does NFCC serve? A: We expect to see anywhere from 1.2 million to 1.5 million this year through our network. We expect next year to be much larger than that; our forecast is over 2.5 million, maybe upward of 5 million.”
“Q: Has there been a change in demand because of the pandemic? A: At the beginning of the crisis, we saw a spike in concerns and fear. We’re talking about hundreds of thousands of people calling to find out, ‘Hey, what do I do if I can’t make my payments?’”
“Very quickly, the government turned around with the CARES Act and provided really needed stimulus, especially for this lower income band. That helped them get through their rent payments. Their mortgages were able to go on a forbearance and there was a deferment on eviction. So, all of that served to really help, as well as the additional payments from the federal government and some of the supplemental state payments.”
“Now what we see is that has leveled off and some of that (pressure) has begun to climb back up. We’re really, really concerned, especially with the fact that there’s just not a safety net.”