Celebrity foreclosures show extent of housing woes

Celebrity foreclosures show extent of housing woes

LOS ANGELES - Tabloid magazines like to reassure us that celebrities are just like us - they go grocery shopping, take their dogs for a stroll around the neighborhood, even pump their own gas.

These days, that can also hold true when it comes to the plummeting real estate market. Several celebrities have dealt with foreclosure issues on their luxurious estates and many more have had to drop their asking prices, putting some high-profile faces on a growing problem: the real-estate meltdown is now hitting every socio-economic class.

The case of Ed McMahon has shown that you can make millions over a lengthy show business career and still find yourself in foreclosure. Johnny Carson's former "Tonight Show" sidekick owes more than $644,000 in mortgage payments on his Mediterranean estate in Beverly Hills, a house he and his wife have been trying to sell for the past two years. The six-bedroom, five-bathroom home - in the same exclusive, gated community where Britney Spears lives - is now on the market for $6.5 million, down from an original price of $7.6 million.
The 85-year-old television personality, who has been unable to work since breaking his neck in a fall 18 months ago, described his economic problems as "a perfect storm."

"If you spend more money than you make, you know what happens. And it can happen. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen," McMahon said on "Larry King Live" recently. "You want everything to be perfect, but that combination of the economy, I have a little injury, I have a situation. And it all came together."

McMahon certainly is not the only celebrity to find himself in such financial trouble. Former NBA player Vin Baker saw his home in Durham, Conn., go up for auction last weekend. The seven-bed, six-and-a-half-bath mansion, on about 11 acres with a basketball court and a bowling alley, had been on the market for $2,950,000. Earlier this year, former baseball star and "Juiced" author Jose Canseco stopped making payments on his $2.5 million home in the upscale Encino section of LA's San Fernando Valley.

Rick Sharga, vice president of marketing for RealtyTrac, which monitors foreclosures, says that people of any income level can get in trouble by buying overvalued homes at the peak of the market that they ultimately can't afford.

"Ed McMahon's a sympathetic character in this scenario in that he got into a house that possibly he could have afforded if he had been able to keep working, then he had an injury that upset his financial apple cart pretty badly," Sharga said. "What you don't know is, in a normal real estate market, if the same lender would have taken a look at an 82-year-old man at the tail end of his career and written him a $4.6 million mortgage he had to keeping working to be able to afford."

It's not all doom and gloom, of course. Avril Lavigne listed her nearly 6,900-square-foot Mulholland Estates mansion for $5.8 million and, after just 36 days on the market, recently accepted a cash offer of $5.2 million.

But as celebrity real estate columns like "Hot Property" in the Los Angeles Times and "Gimme Shelter" in the New York Post show, other stars can't command the same prices for their homes that they might have been able to a few years ago.

The price of Angela Bassett and Courtney B. Vance's house has dropped more than $2 million in the past year. The French Colonial in a gated section of Los Angeles' old-money Hancock Park neighborhood has five bedrooms, seven and a half bathrooms, a gym, a hair salon and a two-story guest house. An agent listed it last year for $5,999,000, then a month later took it off the market for seven months. Then June Ahn of Coldwell Banker got the house and listed it for $4,999,000; she reduced it soon afterward to $4.6 million, and now has reduced it again to $3.9 million.

"It was overpriced," Ahn said. "The price difference from $5,999,000 to $3.9 (million), obviously we'll have a bigger number of buyers that can afford to get into it and even take a look at it."

It helps that the husband and wife, who bought the house 17 years ago for about $1.8 million, own it outright. "They're very flexible, they just go with the flow of the market," Ahn said. "Unfortunately, this happens. Last year was better than this year. Now they realize they didn't reduce in time. They were hoping to get the best (price) last year but it didn't happen so they learned the lesson."

Then again, property values can be a matter of perspective, says Ed Kaminsky, a Manhattan Beach, Calif.-based real estate agent who helps professional athletes relocate.

"You've got the new guys with the big contracts that are excited about the $8 million check they just got and they want to spend some, and I'd say rightfully so. Sometimes it's not a smart investment and sometimes it is," he said. "But if you make $8 million a year and you blow $5 million on a house and you sell it for $3 million a few years later, is it really wrong?

"What I try to do is identify what is it that they want, and let them know that it is possible that they could buy a home for a lot of money and sell it for less than they paid for it, and are you OK with it?" he added. "If I handed you $25 million right now, would you think differently about the $2 million house that's down the street? You may not really care that it's 50 grand overpriced cause you like the swing set in the backyard for your kids."

The primary element driving where a celebrity chooses to live is privacy, said Jordan Cohen of Re/Max, who has represented more than 50 stars and athletes in real estate transactions, including Shaquille O'Neal and Marilyn Manson. He's now selling actress Joely Fisher's house - a four-bed, seven-bath, mid-century craftsman at the end of a secluded drive with a pool and a screening room - for $3,295,000, about $1 million less than the asking price when another agent first listed it last summer.

He believes a star's property can bring in more money than a regular house.

"I know it adds value," said Cohen, sitting on a limestone countertop in the kitchen of the suburban Encino home. "A good analogy would be, shoe companies pay athletes millions of dollars to wear a specific shoe so you'll have young America buy that shoe because a celebrity endorses it. It's the same thing with a house."

"Why does anyone read Hot Tracks in People magazine or any other publication?" he continued. "I've never understood that, because they're just, like, people - just like you and me. From the celebrities I've gotten to know, they're just normal people. . .. I don't know why America is fascinated by that, but they are."

But Mark David, who follows celebrity real estate on his cheeky blog "The Real Estalker," doesn't think prospective buyers are willing to pay top dollar for houses simply because someone famous has lived in them.

"It's not common. Property values are property values," said David, a 38-year-old graphic designer who writes under the pseudonym "Your Mama." "You've really got to be somebody for it to add cachet. Maybe if it's a major A-list celebrity who's going to go down in Hollywood history, like Jack Nicholson. But does anybody really care about most of these people's houses? Would you pay more for Danny Bonaduce's house? And I'm not trying to bag on him. I can't imagine that people would do it - then again, there's a lid for every pot."

Bonaduce's house, by the way, is still on the market. It was listed last July for $4.5 million - now it's down only slightly to $4.2 million. The ornate Spanish-style mansion, with four bedrooms, five and a half bathrooms and a theater on just over 7,000 square feet, sits in the hills of LA's Los Feliz section.

So why not drop the price further and finally sell the property?

"He can afford to wait it out for 20 years," said Alfonso Milanese of Show4you Realty, who co-listed the home with another agent when Bonaduce and his wife, Gretchen, filed for divorce. "It's such a minuscule mortgage on there. He's one of the few the people who are not in dire straits in selling their house."

As for McMahon's home, "we've actually gotten a bunch of offers," his real estate agent, Alex Davis of Hilton & Hyland, said recently. "I think we're going to sell it very soon and that it's going to be onward and upward for the McMahons."

AZ Home Buyers Turning to Non-profits For Cash

Down-payment aid debated
Home buyers turning to non-profits for cash

Arizonans treading in the housing market's choppy waters have found an unusual lifeline - a group of non-profit organizations that siphon down payments from home sellers to buyers.

Use of the decade-old practice known as down-payment assistance has dramatically increased since the demise of subprime lending because it offers another opportunity for buyers without substantial savings to obtain mortgage loans.

Advocates of down-payment assistance contend it has kept Arizona's failing real-estate market on life support by opening doors for responsible borrowers who simply lack the cash for a down payment.
Critics of the practice say it allows home sellers to kick back a percentage of bank-loaned money to buyers, which would be illegal if not done through a non-profit intermediary.

Housing statistics also indicate that charity-assisted loans default at higher rates compared with loans where the down payment comes from the buyer.

The Federal Housing Administration, which insures all loans involving down-payment assistance, has argued that such loans carry a higher default rate and could ultimately bankrupt the FHA.

A housing-reform bill up for vote in the U.S. Senate this week calls for eliminating the practice, while a competing resolution in the House would allow it to continue with some restrictions.

Phoenix loan originator Dean Wegner said nearly half of the home loans being issued involve seller contributions to special non-profit organizations that gift the money - usually 3 to 6 percent of the home's sale price - to buyers after charging a transaction fee of $400 to $600. Unlike other charitable contributions, the seller's donations are not tax-deductible.

"It's a loophole in the FHA guidelines that says the down payment can come from a 501(c)(3) charity," Wegner said.

Now that subprime loans and their creative financing schemes are gone from the market, lenders have returned in droves to FHA loans and the primary reason is down-payment assistance, he said.

"This is what everyone is talking about now," Wegner said, adding that sellers are generally willing to put up the money because it greatly increases their chances of finding a buyer.

The two leading providers of down-payment assistance are AmeriDream, based in Gaithersburg, Md., and Sacramento-based Nehemiah Corp.

Nehemiah was involved in 676 Arizona home-sales transactions in 2007 and is on pace to quintuple that amount this year, passing down payments from buyer to seller on 1,692 sales as of early July.

AmeriDream President Ann Ashburn said the two non-profits provide a vital service to low-income, minority and first-time home buyers while giving the economy a needed boost.

Ashburn opposes eliminating down-payment assistance programs that benefit "good, qualified people."

"The real tragedy will be that 100,000 to 200,000 home buyers annually will be locked out of homeownership," she said.

AmeriDream data indicates that roughly a million U.S. residents have used down-payment assistance in the past 10 years, including nearly 43,000 Arizonans.

Nationwide, $130 billion in loans have been generated by the practice, the non-profit says, with about $5.5 billion in Arizona.

Since its advent, down-payment assistance has faced several attempts by the federal government to ban its practice, but so far the courts have protected it.

In recent months, FHA Commissioner Brian Montgomery has launched a full-scale verbal attack on down-payment assistance, calling it a "shell game" that threatens to bankrupt his administration.

"We had to book an additional $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio," Montgomery said in June.

"Unless we take action to mitigate these losses, FHA will soon either have to shut down or rely on appropriations to operate."

Montgomery also said the federally insured value of those loans is often inflated, because many sellers simply tack on the amount of their charitable contribution to the home's sale price.

About 30 percent of all FHA loans now involve down-payment assistance, according to the U.S. Department of Housing and Urban Development, FHA's parent agency.

HUD data indicates that charity-assisted loans were more than twice as likely to go into default or foreclosure in recent years than loans with the down payment coming from buyers' pockets.

However, Wegner said all FHA loans have credit-score and income requirements, which make them far less risky than subprime loans.

"These people are still getting scrutinized heavily," he said.

One such buyer is Lawrence Smith, who recently purchased a vacant Phoenix home from an out-of-state investor. Although he had never heard of down-payment assistance, his real-estate agent recommended he look into it.

"I had gone through a divorce, so most of my assets were gone," Smith said.

He got an FHA loan with down-payment assistance through AmeriDream. Smith said the entire process was transparent and spared him the six to 12 months it would have taken to save up a down payment.

"I think if you have people that have decent credit and decent incomes, but for whatever reason can't come up with the down payment, it makes a difference," he said.

Source:AZ Republic

Phoenix Area Million Dollar Home Sales

Phoenix AZ Area Million Dollar Home Sales

Scottsdale home sells for $5.7M

A Scottsdale land developer, a founder and CEO of an information technology group and two local Realtors, are among the buyers and sellers in this week's done deals.

$5,791,500.

Richard and Kimberly Cabral bought a new 10,645 square-foot home with five bedrooms, seven bathrooms plus two powder rooms, bonus room, kids retreat, game room, library with fireplace, office theatre, gourmet kitchen with two islands, six-car garage, plus detached casita has two bedrooms and living room with fireplace. This Calvis Wyant luxury home on four and a half acres is northeast of the Pinnacle Peak Country Club in Scottsdale.

$4,995,000.

Stuart and Mary Rhea purchased a new 8,400 square-foot home with six bedrooms and seven bathrooms. The master suite has an exercise room with bar and two flat screens. There is a library and office with fireplace and private patios; formal living room, dining room with wine room and butlers pantry; huge gourmet kitchen opening to oversized family room, three en-suite bedrooms, media room, game room; and a separate guest house out by a party gazebo and diving pool, A/C garages and Crestron Smart house. This luxury home at Mummy Mountain is on the southwest side of the Camelback Golf Club in Paradise Valley. Stuart Rhea is the founder and CEO of Tolt Service Group, a nationwide provider of outsourced technology field services. He has spent over 30 years in the information technology field.

$3,170,000.

Kent Bowerbank and Leslie Bowerbank, as Trustees of the Bowerbank Trust, paid cash for a 6,991 square-foot home with 650 square-foot pool originally built in 1999. Kent Bowerbank is a Realtor with Embassy Properties in Phoenix.

$3,125,000.

Michael L. White, as Trustee of the Statice Revocable Trust, purchased new home west of the Camelback Golf Club in the Morton Mesa Subdivision of Paradise Valley.

$3,100,000.

Robert D. MacMillan and Mary Hazel MacMillan, as Trustees of the Robert D. MacMillan Family Trust, paid cash for a 4,565 square-foot home with 704 square-foot pool originally built in 1977 on over two acres on the west side of the Camelback Golf Club in Paradise Valley.

Feds Protect Homeowners From Scam Lending Practices

WASHINGTON - The Federal Reserve will issue new rules next week aimed at protecting future homebuyers from dubious lending practices, its most sweeping response to a housing crisis that has propelled foreclosures to record highs.

Fed Chairman Ben Bernanke spoke of the much-awaited rules in a broader speech Tuesday about the challenges confronting policymakers in trying to stabilize a shaky U.S. financial system. To that end, Bernanke said the Fed may give squeezed Wall Street firms more time to tap the central bank's emergency loan program.

To prevent a repeat of the current mortgage mess, Bernanke said the Fed will adopt rules cracking down on a range of shady lending practices that has burned many of the nation's riskiest "subprime" borrowers - those with spotty credit or low incomes - who were hardest hit by the housing and credit debacles.

The plan, which will be voted on at a Fed board meeting on Monday, would apply to new loans made by thousands of lenders of all types, including banks and brokers.

Under the proposal unveiled last December, the rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.

"These new rules ... will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Bernanke said.

Consumer groups have complained that the proposed rules aren't strong enough, while mortgage lenders worry that they are too tough and could crimp customers' choices.

In an extraordinary action aimed at averting a financial catastrophe, the Fed in March agreed to let investment houses go to the Fed - on a temporary basis - for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.

The Fed's decision to act - temporarily at least - as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.

Bear Stearns was eventually taken over by JPMorgan Chase & Co., with the Fed providing $28.82 billion in financial backing.

Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk.

Bernanke, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.

In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.

"Allowing Bear Stearns to fail so abruptly at a time when the financial markets were already under considerable stress would likely have had extremely adverse implications for the financial system and for the broader economy," Bernanke said to the mortgage forum, organized by the Federal Deposit Insurance Corp.

The Fed's consideration of giving Wall Street firms more time to tap the Fed's emergency loan program is part of an ongoing effort by the central bank to bring back stability to fragile financial markets and help to bolster shaky confidence on the part of investors.

Policymakers - in the White House, in Congress and other federal agencies - will need to work together to come up with ways to make the U.S. financial system more resilient and stable and to prevent a repeat of the types of problems that brought about the end of Bear Stearns, an 85-year-old institution, Bernanke said.

Although those efforts are already under way and will be the focus of a House Financial Services Committee hearing Thursday, it will fall to the next president and next Congress to settle them. Both Bernanke and Treasury Secretary Henry Paulson are scheduled to testify at Thursday's hearing.

The Bush administration has proposed revamping the nation's financial regulatory structure. That plan would make the Fed an ubercop in charge of financial market stability. But the Fed would lose daily supervision of big banks. Bernanke said the Fed must maintain this power if it is to be an effective overseer of financial stability.

The Fed, which regulates banks, and the Securities and Exchange Commission, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system.

Over the longer term, though, Congress may need to adopt legislation to bolster supervision of investment banks and other large securities dealers, Bernanke said.

Bernanke recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the SEC's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.

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