Over 520,000 homes repossessed in H1 as banks step up effort to clear backlog

(LOS ANGELES) More than one million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released yesterday by RealtyTrac Inc, a foreclosure listing service.

‘That would be unprecedented,’ said Rick Sharga, a senior vice-president at RealtyTrac.

By comparison, lenders have historically taken over about 100,000 homes a year, Mr Sharga said.

The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of levelling off in recent months, but remains a crippling drag on the housing market.

The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market.

At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.

The number of households facing foreclosure in the first half of the year climbed 8 per cent versus the same period last year, but dropped 5 per cent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.

In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 US homes.

Foreclosure notices posted monthly declines in April, May and June, but Mr Sharga said one shouldn’t read too much into that.

‘The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market,’ he said.

On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc, which tracks mortgages.

Assuming the US economy doesn’t worsen, aggravating the foreclosure crisis, Mr Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.

And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programmes fail, and the economy doesn’t improve fast enough to lift home sales.

The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

‘The downward pressure from foreclosures will persist and prices will be very weak well into 2012,’ said Celia Chen, senior director of Moody’s Economy.com.

She projects home prices will fall as much as 6 per cent over the next 12 months from where they were in the first-quarter.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.

Lenders are offering to help some homeowners modify their loans. But many borrowers can’t qualify or they are falling back into default.

The Obama administration’s US$75 billion foreclosure prevention effort has made only a small dent in the problem.

More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification programme have dropped out. That compares with about 27 per cent who have received permanent loan modifications and are making payments on time. — AP

Source: Business Times, 16 Jul 2010

(LOS ANGELES) The Spanish colonial-style Hollywood home where iconic sex siren Marilyn Monroe died in 1962 is going up for sale for US$3.6 million, the real estate agency said on Tuesday.

The one-storey property, built in 1929, which spreads lavishly over 23,000 square feet of land, is ‘the crown jewel’ of the luxurious neighbourhood of Brentwood, according to the agency’s website.

Cinematic diva Monroe lived in the house for only six months before her sleeping pill overdose death, having bought the house for US$90,000.

The current owner did not permit press access to the property but allowed AFP access to take photos from behind tall gates on the secluded cul de sac.

Monroe memorabilia is highly coveted, with even a burial spot near the star’s last resting place being sold on the online auction website eBay in 2009 for US$4.6 million. — AFP

Source: Business Times, 15 Jul 2010

Lack of available supply sparking demand for the few deals being offered

(NEW YORK) US commercial real estate sales in the first half totalled about a quarter of the average of the previous six years as owners kept properties off the market, impeding investors with record funds for purchases.

Buyers and sellers completed US$34.2 billion of deals through June, or 26 per cent of the average first-half dollar volume since 2004, according to preliminary figures from Real Capital Analytics. The total was about 12 per cent of the 2007 peak, when US$277.7 billion of properties changed hands in the same period, data from the New York-based real estate research firm show.

Sales climbed 58 per cent from last year’s first half, when purchases dried up after the US credit crisis and recession sent values tumbling. A dearth of available properties has sparked demand for the few deals being offered, according to Alan Kava, co-head of Goldman Sachs Group Inc’s Real Estate Principal Investment Area in New York.

‘People are frustrated that not a lot has been trading,’ Mr Kava said. ‘When something does come to market, that lack of supply is causing almost a feeding frenzy. People have real estate funds that are not on an infinite time line – they need to put capital to work.’

Private equity real estate funds have a record US$104 billion of equity available for US deals, research firm Preqin Ltd reported last month. Blackstone Real Estate Advisors has the most to invest, with Goldman Sachs second, according to Preqin.

More than half of the US$8.4 billion available for Goldman Sachs’s property funds is reserved for overseas investments, Mr Kava said. Blackstone has about US$12 billion for real estate purchases, said Peter Rose, a spokesman for the New York-based private-equity firm.

In top markets such as New York and Washington, owners who owe more than their properties are worth are finding new sources of equity and lenders are willing to restructure their loans, said Sam Chandan, Real Capital’s chief economist.

In less attractive markets, banks have been extending loans, waiting for higher prices so they don’t record losses, according to Mr Chandan. That has kept troubled assets off the market, he said.

There also is little incentive for owners who bought as the market climbed to sell now. Values in April were down 41 per cent from their October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index.

‘The problem is more on the supply side than the demand side,’ said Dan Fasulo, a Real Capital managing director. ‘Our investors are regularly complaining there’s not enough quality listings available for purchase.’

Demand for properties is strongest in New York, Boston, Washington and San Francisco, ‘where domestic and foreign investors alike have sought to acquire high-quality assets’, said Mr Chandan.

Those four markets accounted for 20 per cent of first-half sales, compared with about 15 per cent last year, according to Real Capital. For office buildings, the largest category, the cities made up almost 35 per cent of the volume, up from almost 32 per cent last year.

Manhattan totalled US$2.92 billion of completed sales in the first half, up 70 per cent from a year earlier. About US$1.42 billion were office deals, up 62 per cent.

SL Green Realty Corp, New York’s largest office landlord, was both a buyer and seller. The company agreed in May to sell a 45 per cent stake in Manhattan’s McGraw-Hill Building at 1221 Avenue of the Americas to Canada Pension Plan Investment Board for US$576 million, a deal that values the building at about US$500 a square foot, according to Real Capital.

It also purchased 600 Lexington Ave for US$636 a square foot, and agreed to buy 125 Park Ave, a tower across 42nd Street from Grand Central Terminal. That deal was valued at about US$507 a square foot, based on data in a company statement.

Those prices reflect a rebound off market lows reached last year, when similar midtown Manhattan properties sold for about US$350 a square foot, said Mr Chandan. In 2006 and 2007, readily available loans that were packaged and sold as commercial mortgage-backed securities helped drive prices for top Midtown skyscrapers beyond US$1,000 a square foot.

‘We basically went around the world talking to capital sources, in Asia, Europe, Middle East, Canada, and domestically, and hearing the same thing,’ said Andrew Mathias, SL Green’s president and chief investment officer. ‘People’s confidence in Manhattan was not at all shaken, because of the extraordinary supply/demand metric that exists here, where you have very, very limited new supply, and the interest rate environment.’

The company paid US$523 million for its two acquisitions, combining both closed and contracted deals. Its sales of partial property interest totalled US$663 million.

The biggest completed deal of the year so far was Monsanto Co’s purchase of Chesterfield Village Research Center, a research and development complex in Chesterfield, Missouri, from Pfizer Inc, according to Real Capital. Monsanto paid US$435 million, said Kelli Powers, a spokeswoman for the St Louis-based company.

Distressed building sales probably will remain scarce, Mr Chandan said. There are US$184.6 billion of troubled properties facing foreclosure or bankruptcy, out of a total US$239 billion since the credit crisis started in 2008, according to a June 1 Real Capital report. – Bloomberg

Source: Business Times, 8 Jul 2010

(NEW YORK) Retailers shuttered more stores in US shopping centres during the second quarter, further delaying a rebound in the struggling retail real estate market, according to research firm Reis Inc.

Shopping centres and strip malls have been pounded harder than other types of real estate, hurt by weak consumer spending, anaemic job growth and an oversupply built to serve new housing that never materialised.

‘Until we see stabilisation and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest,’ said Victor Calanog, Reis director of research.

For US strip centres, the vacancy rate in Q2 rose 0.1 percentage point from Q1 to 10.9 per cent, slightly below the 11 per cent in 1991 during the prior real estate bust, according to the Reis quarterly report, released yesterday.

Retailers gave up 1.85 million square feet of occupied space in Q2 at neighbourhood shopping centres, while developers opened less than 400,000 square feet of new strip mall space.

That compares with an average of about seven million to eight million square feet of shopping centres built each year from about 2001, according to Reis.

Unlike the office or apartment real estate sectors, a meaningful recovery in retail real estate is expected to be very sluggish, Mr Calanog said.

Rents are not expected to return to 2008 levels before 2016, he said.

‘It’s really the one sector where because of persistent overbuilding across time, things will really get way down and even a recovery defined by a bottoming out will be pretty tepid,’ he said.

A recovery also will depend on type of real estate, tenants and location, he added.

Asking rents fell 0.3 per cent from Q1 to US$19.07 per square foot, the lowest since the end of 2006, according to the report.

Factoring in months of free rent and other perks landlords offered to attract and retain tenants, effective rent fell 0.5 per cent to US$16.58 per square foot, the lowest in nearly five years.

Reis said that roughly half of its clients plan to take advantage of the cheap rents in their expansion plans.

‘Only about 20 per cent expressed such sentiments in the first quarter, and none were in a position to plan for expansion in 2009 for obvious reasons,’ Mr Calanog said.

‘If rents are so cheap now and they can lock it in, maybe it is time to expand,’ he said. ‘Some people will benefit from this. But it’s not going to be the retail landlord.’

At large US malls, the vacancy rate rose 0.1 percentage point from Q1 to 9 per cent, the highest since Q1 2000, when Reis began tracking regional malls.

Asking rent fell 0.2 per cent to US$38.72 per square foot, marking the seventh straight quarter of decline. Asking rent was the lowest in more than four years. Reis does not track effective rent at regional malls.

Some publicly traded retail real estate landlords are expected to fare better than the overall market.

Many of them, including Simon Property Group, Kimco Realty Corp, Developers Diversified Realty Corp and Equity One Inc, are scheduled to issue Q2 reports starting the end of July. — Reuters

Source: Business Times, 8 Jul 2010

Last month, 155,000 borrowers left, bringing the drop-out total to 436,000

THE Obama administration’s flagship effort to help people in danger of losing their homes is falling flat.

More than a third of the 1.24 million borrowers who have enrolled in the US$75 billion mortgage modification programme have dropped out.

That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes.

Last month alone, 155,000 borrowers left the programme – bringing the total to 436,000 who have dropped out since it began in March 2009.

About 340,000 homeowners have received permanent loan modifications and are making payments on time.

Administration officials say that the housing market is significantly better than when President Barack Obama entered office. They say that those who were rejected from the programme will get help in other ways.

But analysts expect that the majority will still wind up in foreclosure, and that could slow the broader economic recovery.

A major reason so many have fallen out of the programme is that the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Many borrowers complained that the banks lost their documents. The industry said that borrowers weren’t sending back the necessary paperwork.

Carlos Woods, a 48-year-old power plant worker from New York made nine payments during a trial phase, but was kicked out of the programme after Bank of America said that he missed a US$1,600 payment afterward. His lawyer said that they can prove that he made the payment.

Such mistakes happen ‘more frequently than not, unfortunately’, said his lawyer, Sumani Lanka. ‘I think a lot of it is incompetence.’ A spokesman for Bank of America declined to comment on Mr Woods’ case.

Treasury officials now require banks to collect two recent pay stubs at the start of the process. Borrowers have to give the Internal Revenue Service permission to provide their most recent tax returns to lenders.

Requiring homeowners to provide documentation of income has turned people away from enrolling in the programme. Around 30,000 homeowners started the programme in May. That’s a sharp turnaround from last summer when more than 100,000 borrowers signed up each month.

As more people leave the programme, a new wave of foreclosures could occur. If that happens, it could weaken the housing market and hold back the broader economic recovery.

Even after their loans are modified, many borrowers are simply stuck with too much debt – from car loans to home equity loans to credit cards.

‘The majority of these modifications aren’t going to be successful,’ said Wayne Yamano, vice-president of John Burns Real Estate Consulting, a research firm in Irvine, California. ‘Even after the permanent modification, you’re still looking at a very high debt burden.’ So far nearly 6,400 borrowers have dropped out after the loan modification was made permanent. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes.

Credit ratings agency Fitch Ratings projected that about two-thirds of borrowers with permanent modifications under the Obama plan will default again within a year after getting their loans modified.

Obama administration officials contended that borrowers are still getting help – even if they fail to qualify. The administration published statistics showing that nearly half of borrowers who fell out of the programme as at April received an alternative loan modification from their lender. About 7 per cent fell into foreclosure.

Another option is a short sale – one in which banks agree to let borrowers sell their homes for less than they owe on their mortgage.

A short sale results in a less severe hit to a borrower’s credit score, and is better for communities because homes are less likely to be vandalised or fall into disrepair. To encourage more of those sales, the Obama administration is giving US$3,000 for moving expenses to homeowners who complete such a sale or agree to turn over the deed of the property to the lender.

Administration officials said that their work on several fronts has helped stabilise the housing market. Besides the foreclosure- prevention plan, they cited government efforts to provide money for home loans, push down mortgage rates and provide a federal tax credit for buyers.

‘There’s no question that today’s housing market is in significantly better shape than anyone predicted 18 months ago,’ said Shaun Donovan, President Barack Obama’s housing secretary.

The mortgage modification plan was announced with great fanfare a month after Mr Obama took office. It is designed to lower borrowers’ monthly payments – reducing their mortgage rates to as low as 2 per cent for five years, and extending loan terms to as long as 40 years. Borrowers who complete the programme are saving a median of US$514 a month. Mortgage companies get taxpayer incentives to reduce borrowers’ monthly payments.

Consumer advocates had high hopes for Mr Obama’s programme when it began. But they have since grown disenchanted. ‘The foreclosure-prevention programme has had minimal impact,’ said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group. ‘It’s sad that they didn’t put the same amount of resources into helping families avoid foreclosure as they did helping banks.’ – AP

Source: Business Times, 24 Jun 2010

Both sufficiently strong to see through existing contracts, as conditions have stabilised

(NEW YORK) US mall operators are holding retail tenants to their leases as the industry remains in waiting mode for growth to return, possibly not until 2011, a retail real estate insider said recently.

During the height of recession last year, mall landlords got a ‘reality check’ about the state of the economy and modified leases for retail tenants to help prevent them from falling into bankruptcy.

But now conditions have stabilised. Mall owners and tenants alike are sufficiently strong to see their existing agreements through, even if the economy recovers in fits and starts.

‘It is business as usual,’ Nina Kampler, executive vice-president at Hilco Real Estate, told the Reuters Consumer and Retail Summit.

At the same time, it has not translated into a real pickup in the commercial business.

‘There’s very little retail closures right now,’ she said.’There’s very little retail expansion. There’s very little retail activity.’

The economic crisis forced a number of US retailers to fail last year, including electronics chain Circuit City and department store Mervyn’s, squeezing in turn the malls that had housed them.

General Growth Properties went bankrupt, setting off a bidding war between Brookfield Asset Management and Simon Property Group, as declining demand spurred consolidation.

But the 2009 holiday shopping season saw a slight uptick in consumer spending, and contrary to expectations, the wave of retailer bankruptcies seems to have subsided.

These days, mall owners know their surviving tenants are not likely to file for bankruptcy. For their part, the retailers know that they are going to need healthy relationships with their landlords when they want to grow again in 2011 and 2012, Ms Kampler said.

Until growth picks up significantly, most retailers will likely cut their store counts and sizes when current leases expire, Ms Kampler said.

‘You trim the deadweight off your otherwise healthy growing tree,’ she said.

The United States’ overall store count is still a bit too high, especially in secondary and tertiary markets. In prime markets such as the New York City area and Southern California, there are malls with no vacancies, Ms Kampler said.

But even there, landlords have a price.

‘Someone who wants to get into a top centre can get into a top centre, if they are prepared to pay those dollars,’ she said. — Reuters

Source: Business Times, 24 Jun 2010

WASHINGTON: Sales of new US homes dropped a record 32.7 per cent last month to the lowest level in at least four decades as the boost from a popular tax credit faded, adding to worries of a slowing economic recovery.

The Commerce Department said yesterday that single-family home sales tumbled to a 300,000-unit annual rate, the lowest level since the series started in 1963.

In addition, the April and March sales figures were revised down to 446,000 units and 389,000 units, respectively. The drop in sales last month unwound two months of gains, which had been inspired by a government tax credit for home buyers.

Prospective home owners had to sign contracts by April 30 to qualify for the tax credit. Analysts polled by Reuters had forecast new home sales sliding to a 410,000-unit pace. New home sales are measured at contract signing.

‘The previous two months were revised down, so the lift from the tax credit was less than we previously realised. We are getting a little nervous,’ said Mr David Sloan, an economist at 4Cast in New York.

US stocks fell after the report, with the Dow Jones Industrial Average down nearly 36 points, or 0.35 per cent, at 10,257.55 an hour into trading.

The report was the latest in a series to suggest that the economy’s recovery from the worst downturn since the 1930s might be losing strength.

It also came as Federal Reserve policymakers gathered for a two-day meeting at which they were expected to extend their pledge to hold overnight interest rates ultra low for ‘an extended period’ to aid the still fragile economic recovery.

The United States central bank is not seen lifting rates, currently near zero, until next year. A report on Tuesday showed sales of previously owned homes, which are recorded at contract closing, fell unexpectedly last month.

‘We see no chance of a quick, sustained recovery, though we are hopeful there is little further downside’ Mr Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York, said in a note to clients. Mr Shepherdson had correctly forecast the drop in sales.

The expiry of the tax incentive also resulted in a decline in new home construction, and applications for loans to buy homes fell last week, staying near 13-year lows.

Last month’s weak sales pace saw the supply of homes available for sale jumping a record 46.6 per cent to 8.5 months’ worth, the highest in nearly a year, from 5.8 months’ worth in April.

However, the number of new homes on the market dipped 0.5 per cent to 213,000 units, the lowest since November 1970.

REUTERS, BLOOMBERG

Source: Straits Times, 24 Jun 2010

WASHINGTON: Sales of existing homes in the US fell 2.2 per cent in May after two consecutive rises, an industry group said yesterday, despite support from a government tax incentive programme.

The National Association of Realtors (NAR) said that existing home sales dropped to an annual rate of 5.66 million units, from an upwardly revised surge of 5.79 million units in April.

Most analysts had expected sales to rise to 6.10 million units as homebuyers raced to close contracts under a federal tax incentive programme.

‘Although the data can be volatile, the homebuyer tax credit seems to have run out of steam early,’ said Ms Celia Chen at Moody’s Economy.com. The report ’suggests that there may be greater fundamental weakness in housing demand than anticipated’, she added.

The Dow Jones Industrial Average lost ground after the news but rose again. It was 30.15 points higher at 10,472.56 after two hours of trade.

Existing home sales last month were 19.2 per cent above their level in May last year as the housing sector slowly stabilises after the collapse of a real estate bubble caused a mortgage meltdown that sparked a global financial crisis in mid-2007.

‘We are witnessing the ongoing effects of the homebuyer tax credit,’ said Mr Lawrence Yun, NAR’s chief economist.

The government reported last week that new housing construction in the United States slumped 10 per cent in May to its lowest level since October 2009.

NAR said it was supporting Senate amendments to extend the homebuyer tax credit closing deadline through Sept 30 and to renew a national flood insurance programme.

‘Sales and related local economic activity would have been higher without delays in the closing process or flood insurance issues,’ Mr Yun noted.

‘The tax credit undoubtedly pulled into the spring transactions which would have taken place in the summer, so the next few months will be tough,’ said Mr Ian Shepherdson, chief US economist at High Frequency Economics.

AGENCE FRANCE-PRESSE

Source: Straits Times, 23 Jun 2010

A new breed is standing out from the masses with designer details and special perks

(NEW YORK) A new breed of hotels is trying to stand out from the masses with designer details and memorable perks and prices around US$250 a night.

Finding a decent place to sleep in New York City has never been easy. Traditionally, you either had to spend a tonne of money (the Ty Warner Penthouse at the Four Seasons for US$35,000 a night, anyone?) or scrimp and hope for the best (warning: a recent search for ‘bed bugs’ on TripAdvisor found 877 mentions for city hotels).

What is a budget and style-conscious traveller to do? Go for the new middle. In a city that still boasts one of the nation’s highest room rates (US$238 on average in Manhattan, according to Smith Travel, which tracks the industry), hotels aiming for the midrange are reaching new heights.

The trend began about three years ago, with a trickle of boutiquey places like the Pod, the Ace and the Jane – which offered a patina of style without the premium prices. It has accelerated in recent months, with a raft of new hotels promising cool design, nods to local flavour and wallet-friendly rates of about US$200 to US$250.

Call them budget boutiques. But instead of coming from daring young hoteliers, many are being rolled out by chains like InterContinental and Wyndham in a bid to attract a hipper clientele.

‘There’s a huge wave of consumer demand, especially with the younger Gen Y or millennials, for properties that have some level of style to them,’ said Sean Hennessey, founder of Lodging Advisors, a hospitality consultant firm.

In May, I slept in some of these new hotels. Despite their novelty, some were already victims of their own cliches. Rooftop bars, rainfall showers and iPhone docks were everywhere. Still, rooms were large by the city’s pint-size standards, service was sharp, and for the moment, they offer some of the best values around.

Distrikt Hotel

Why book? On an exhaust-choked block next to the Port Authority bus station, three new cookie-cutter hotels are stacked together like cereal boxes in a configuration that hotel bloggers have started calling a ‘tri-pack’. Distrikt, next door, is different: It has a simulacrum of soul. This is impressive, not only because of its unseemly location – within shouting distance of a homeless shelter and a parole office – but also a kitschy design conceit: Every floor takes its cue from a New York City neighbourhood.

Room: My standard room was on the 28th floor: Central Park. Don’t expect a wax statue of Frederick Law Olmsted. The only nods to the famous park were photo collages that hung in the room and hallways.

Needless to say, the actual park wasn’t visible from the window, though tantalising glimpses of the Hudson River were. The room itself was a beige rectangle furnished with the type of inoffensive contemporary furniture one might find in a West Elm catalogue.

Vibe: Blame the sketchy neighbours, but parts of the hotel feel as though they’re under lockdown. Key cards are needed to operate the elevators, and the marble-and-steel lobby is a tad cold, despite a 12-foot vertical garden. An adjacent lounge, called Collage, looks like a modern airport bistro. It serves breakfast by day, and drinks and bar food by night. On a recent Friday evening, it was empty. ‘This is New York City,’ said the young bartender. ‘Who wants to stay inside their hotel?’

Mints: An organic fudge brownie awaits you in the room, along with a personalised welcome letter – nice touches for a hotel of this class. There’s no fitness centre, but free passes are available to the nearby Mid City Gym. You can check your e-mail on one of three large Mac screens in the lobby, but be prepared to wait.

342 West 40th Street, between Eighth and Ninth avenues; (888) 444-5610; distrikthotel.com; free Wi-Fi; breakfast for US$14.95; 155 rooms from US$209.

Eventi Hotel

Why book? Straddling the higher end is the Eventi, a 292-room hotel that opened last month in northern Chelsea. Operated by Kimpton – a San Francisco-based chain that helped pioneer the budget boutique niche – it offers doses of luxury that are unusual at this price range. There’s clever design, 24-hour room service, a large terrace, a sunny gym, a spa that offers something called spirulina body wraps, and even dog and cat massages.

Room: The standard queen was sleek and handsome, with custom-made furnishings (dark woods, cloud-gray upholstery, heavy drapes) that felt rich. It had a risque side: a huge mirror faced the bed, Frette robes were trimmed with zebra prints, the honour bar was stocked with an Intimacy Kit (US$6). Other high-end perks await in the marble-tiled bathroom. There was an elongated tub, a magnifying makeup mirror and bottles of musk-scented Italian hair products.

Vibe: It’s a work in progress. Planned for October are a Basque restaurant by Jeffery Chodorow, a plaza with a movie screen and whiskey bar. Meanwhile, the lobby – with cave-red marble and quirky seating nooks – fills up during the free wine hour that begins at 5pm. For breathing room, take your glass to the wraparound terrace on the fifth floor, furnished with terra-cotta planters and oversize wicker love seats.

Mints: No Pringles here. The minibar was stocked with goodies like blueberry acai Gummy Pandas (US$4), Late July organic crackers (US$3), and Alba Botanica shave cream (US$5). There’s even a 375-millilitre bottle of Absolut vodka, big enough for an impromptu party. Service was polished. A free toothbrush and hair straightener were delivered in less than five minutes.

851 Avenue of the Americas, between 29th and 30th streets; (212) 564-4567; eventihotel.com; Wi-Fi is US$10 per day (free for Kimpton rewards members); a breakfast buffet is US$22; 292 rooms starting at US$249 (at US$399 once introductory rates finish in fall)

Fashion 26

Why book? A quick step from the Fashion Institute of Technology, this shiny new hotel by Wyndham tries hard to live up to its name.

There’s a Best Dressed Guest contest held occasionally (winners get room upgrades), the Mondrian-like mural above the front desk is made from thread spools, and the concierge keeps tabs on sample sales. No, you won’t see a gaggle of models during check-in, but the hotel does have fun playing dress-up.

Room: A standard room was maybe a size medium, with plenty of nods to fashion: buttons on the door numbers, a merino herringbone throw on the bed and mint-green polka dots on the walls. Housekeeping staff members wear custom dresses that hint, naughtily, at French maid. A big window offered postcard views of the Empire State Building, as well as peeks inside garment showrooms across the street.

Vibe: Despite all the sartorial trappings, guests dressed like any in your typical off-the-rack hotel. On a recent Monday, there were FIT parents in the slate-gray lobby, and suits trading airport stories in the elevator. There’s a chatty cocktail scene at the lobby bar, but Rare, the fiery orange dining room, was desolate. Maybe the ho-hum menu – part burger joint, part formal steakhouse – was to blame. A rooftop bar is expected to open this month.

Mints: Service was elegant and unobtrusive. Arriving two hours before check-in was no problem; the attendant had a room ready. Come back from dinner and the bed is turned down: the pillows stacked upright, the comforter removed, a note left on the sheets with tomorrow’s weather, and a mint. There’s also a decent gym in the basement and a single-cup Keurig coffee maker in the room.

152 West 26th Street, between Avenue of the Americas and Seventh avenues; (212) 858-5888; f26nyc.com; free Wi-Fi and a US$15 cold and US$19.70 hot breakfast buffet, along with à la carte; 280 rooms from US$229.

Hotel Indigo

Why book? Hotel Indigo may be the prototype of this new hotel class. Started by the InterContinental Hotels Group, which owns Holiday Inn and other chains, the Indigo brand aims to be affordable yet stylish, though its first property in New York City doesn’t quite hit the mark. It opened last October in the heart of the flower district, so it is hemmed on all sides with orchids and pussy willow.

There are flowers inside the hotel, too, though mostly of the printed variety. Hallway carpets with comically giant indigos and carrot-orange walls conspire to create a visual jungle. Too bad the floral theme didn’t extend to the scent. The lobby smelled more like cleaning fluid than roses.

Room: The oversaturated colour scheme continued inside the room, with a headboard stitched together from swatches of reds, oranges and yellows. Still, the room was bright and airy, with hardwood floors, a small desk and a floor-to-ceiling print of sewing needles. The view was quintessentially New York: fire escapes and the back of old factory buildings. As in many of these budget boutiques, the bathroom was sleekly appointed. In this case, however, the shower lacked water pressure, and a puddle from the previous night was still on the shower floor in the morning.

Vibe: An oddball mix. Foreign tourists in I (HEART) New York T-shirts sat in the lobby. Office workers crowded the smoky rooftop Glass Bar. And at Blu, its street-level Italian restaurant, there was, well, no one. The soupy risotto I was served one night may have something to do with it.

Mints: Service was unexpectedly attentive; the front desk called shortly after check-in to make sure everything was in order. In the basement, there’s a basic business centre (two desktop computers) and a well-equipped, if petite, fitness studio with free weights and treadmills.

127 West 28th Street, between Avenue of the Americas and Seventh Avenue; (212) 973-9000; indigochelsea.com; 122 rooms from US$269; US$15.99 breakfast buffet, and à la carte brunch served on weekends. — NYT

Source: Business Times, 22 Jun 2010

Bankers and agents disagree on responsibilities of foreclosed owners

(NEW YORK) As the housing market continues to sputter, the real estate industry is increasingly split on the responsibilities of overextended and foreclosed homeowners.

On one side are the bankers, who say borrowers should be liable for what they owe. On the other side are real estate agents, who say those who lost their houses should not be so burdened by debt that they cannot move on.

The differences have real financial consequences: Bankers want to collect on billions of dollars in outstanding loans; real estate agents want as many people as possible to return to the housing market.

For the first time, the debate is spilling into the realm of law making, with state legislators in California considering a bill that would redefine the obligations of many defaulting homeowners. The efforts to shape the bill demonstrate how much is at stake – in California and the many other states with distressed real estate markets.

The legislation introduced in the spring by the real estate lobby would have largely shielded foreclosed homeowners from debt collectors. But by the time it passed the state Senate on June 4, the banking lobby had succeeded in scaling it back. Now the bill is headed to the state Assembly, where a committee will take it up next week and bankers intend to continue lobbying against it.

‘We’re concerned this could adversely accelerate strategic defaults,’ said Rodney K Brown, chief executive of the California Bankers Association, referring to instances in which borrowers leave their properties without settling with the lender.

For years, a house in California was a machine for building wealth, and few were the families that could resist temptation. They refinanced their loans to pay for vacations, operations, tuition or, frequently, investments in more houses. Many of these households ended up struggling after the crash.

The lenders were often aggressive in making loans and frequently were predatory. The extent to which this absolves the borrowers of responsibility is at the centre of the current debate.

In the style of King Solomon, the proposed law in its current form tries to divide defaulting borrowers into the sober and the feckless, and help only the first group.

The bill that passed the Senate by a lopsided vote of 30-4 would protect former homeowners up to the amount of their original loan. For instance, a family that took out a US$500,000 mortgage to buy a house and then refinanced and took cash out, swelling their loan to US$600,000, would be released from claims on the original sum but remain vulnerable on the US$100,000.

Ellen M Corbett, the Democratic state senator from San Leandro, California, east of San Francisco, who introduced the measure, said it is a matter of fairness.

During the Depression, she said, California legislators decided that losing your house was punishment enough. They did not want lenders endlessly hounding borrowers for the difference between what they owed and what their former house was worth, an amount called the deficiency.

Seventy-five years later, because of that law, anyone who has an original loan and wants to get rid of the house because it has fallen in value can simply walk away without further legal jeopardy. But a homeowner who refinanced, even for the straightforward reason of getting a lower interest rate, could in theory lose the house and be pursued for the deficiency.

‘I don’t believe the original intent was to have a two-tier system, where some were protected and some were not,’ Ms Corbett said.

The agents, too, say this is a fairness issue. But there is also self-interest involved.

‘Realtors are very worried about this because they think it will destroy the housing market if people end up with these huge deficiency judgements and are never able to buy a house again,’ Ms Corbett said.

To some extent, this is a fight over something that is not happening, at least not yet.

Lenders in California rarely chased foreclosed borrowers for deficiency judgments. Pursuing such cases in court can be an arduous process, and few of those in foreclosure have the assets or incomes to make it worthwhile.

But the threat of such action can come in handy for lenders, servicers and collection agencies. By raising the possibility of a court fight, they can negotiate favourable terms when agreeing to loan modifications and workouts, surrenders of deeds and sales for less than the full amount owed, also known as short sales.

‘Using the threat of a deficiency, full-recourse lenders often prevail upon distressed borrowers to sign new, unsecured obligations in exchange for their assent to a proposed short sale or surrender of a deed,’ said William A Markham, a lawyer with Maldonado & Markham in San Diego. ‘This practice will nearly vanish overnight if the new measure becomes law.’ About a third of the seven million California households with a mortgage have negative equity, a condition known as being underwater, according to the research firm CoreLogic. Many of these families might be content to wait years for a rebound in real estate but others, if at least partly freed from deficiency worries, might walk away.

‘This will lead to a surge in the supply of housing, a corresponding decrease in the price, and a welcome hastening of the end of the foreclosure crisis in California,’ Mr Markham said.

State Senator Mimi Walters, a first-term Republican representing Laguna Hills, north of San Diego, voted against the measure precisely because it could encourage more defaults.

‘I’m very sympathetic to what’s going on in the economy and to people that are losing their homes,’ said Ms Walters, a former executive with two Wall Street firms. ‘But we have to be careful not to overleverage ourselves and to take responsibility when making investments.’ The banking lobby says it could accept the bill as is, on one condition: that it apply only to new loans. In its current form, it applies to any existing loan. — AP

Source: Business Times, 22 Jun 2010