Friday, March 16, 2012

Whistleblower wins $18 million

Whistleblower wins $18 million

Attorney Lynn Szymoniak had spent a career investigating
insurance fraud when a bank moved to foreclose on her Florida
home in 2008. Almost four years later, the fraud she said she
uncovered by combing through mortgage documents earned her $18
million.  Szymoniak, 63, is among six whistle-blowers who will
pocket $46.5 million as part of a $25 billion national
foreclosure settlement that state and federal officials reached
in February with five banks, including Bank of America Corp. and
JPMorgan Chase & Co. (JPM), according to the US Justice
Department.  Szymoniak’s examination, in which she relied on
her experience as an insurance-fraud investigator, led to her
claims against banks for submitting fraudulent documents to the
federal government asserting that they owned loans insured by the
Federal Housing Administration, she said.  The national
foreclosure settlement with the five banks, which resolves claims
of abusive foreclosure practices, provides mortgage relief to
borrowers, pays $1.5 billion to those who lost their homes to
foreclosure, and sets standards for how the banks service
mortgage loans.

As part of the agreement, whistle-blower claims are being settled
for about $228 million, according to court papers filed in
federal court in Washington. A group of six whistle-blowers will
receive $46.5 million out of that amount, said Alisa Finelli, a
Justice Department spokeswoman.  Szymoniak’s foreclosure case
began in July 2008 when Deutsche Bank AG (DBK), as trustee for a
mortgage securitization trust, sued to seize her Palm Beach
Gardens, Florida, home, which was once worth $1.3 million. The
bank couldn’t prove it owned her loan and claimed it had lost
the mortgage note, she said.  Szymoniak said she was first
alerted to problems in the paperwork on her foreclosure when
Deutsche Bank said it acquired her mortgage note in October 2008,
three months after the bank sued her over the loan.  “So I
began doing what I’ve done for years -- go out and
investigate,” she said. “It was pretty obvious to me that the
paperwork was fraudulent.”  Her work quickly uncovered
widespread document fraud in the mortgage industry, she said, and
eventually led to the filing of her whistle-blower cases in 2010.
 The whistle-blower claims resolved in the national settlement
include a case filed in Atlanta in 2006 in which banks are
accused of defrauding military veterans and the US government.
The banks violated rules under a Department of Veterans Affairs
program for refinancing mortgage loans by charging improper fees
to veterans, according to the complaint. The banks hid those fees
and obtained government guarantees on the loans, according to the
complaint.

Inflation leaps, gas leads

The Labor Department said its Consumer Price Index increased 0.4%
after advancing 0.2% in January. That was in line with
economists' expectations. Gasoline accounted for more than 80% of
the rise in consumer prices last month, the department said.
Outside the volatile food and energy category, inflation
pressures were generally contained. Core CPI edged up 0.1% after
gaining 0.2% in January. The February increase was below
economists' expectations in a Reuters poll for a 0.2% rise.  The
Federal Reserve said on Tuesday that the recent spike in energy
costs would likely push up inflation temporarily. Over the
long-term, inflation was likely to run at or below the its 2%
target, it said.

While the US central bank reiterated its expectation that
overnight interest rates would remain near zero until at least
through late 2014, it offered no clues on whether it would launch
a third round of bond buying or quantitative easing, to keep
borrowing costs low to stimulate the recovery.  Last month,
overall inflation was pushed up by gasoline prices, which soared
6%, the largest increase since December 2010, after rising 0.9%
in January.  Although surging gasoline prices are a strain on
consumers, they have so far not caused a sharp pull back in
spending, thanks to a strengthening jobs market.  Food prices
were flat last month after rising 0.2% in January. Food prices
were the weakest since July 2010.  Overall consumer prices rose
2.9% year-on-year after increasing by the same margin in January.
 Core consumer prices were last month restrained by apparel
prices, which fell 0.9% — the most since July 2006 — after
rising 0.9% in January. There were also declines in the prices of
tobacco, airline tickets and used cars and trucks.  But new motor
vehicle prices rose 0.6% after being flat in January. While
housing costs held up, owners' equivalent rent rose only 0.1%
last month after increasing 0.2% the prior month.  In the 12
months to February, core CPI increased 2.2% after rising 2.3% in
January. This measure has rebounded from a record low of 0.6% in
October and the Fed would like to see that closer to 2%.

Olick - Miami condos - bust or boom?

"South Florida real estate developer Martin Margulies has been
sitting on prime ocean-front property for five years, waiting for
the condo market to rise from the grave. When the market here
crashed in 2007, amid overzealous speculators and an abundance of
cheap and easy credit, condo construction ground to a halt. The
joke had been that the unofficial bird of Miami was the crane,
but that bird flew the coop. Apparently it is now swooping back
in.  'This is the moment because we're going to be delivering
this property next year, and so by that time there will be good
demand, there is good demand now,' says Margulies, who began
construction on a brand new high-end condo tower in December.
And he is right. Foreign buyers, largely from South America, but
also from Europe, Russia and China, are flooding into the Miami
area, and that has developers rushing to keep up with demand.
'The music started again in South Florida,' says Peter Zalewski
of CondoVultures, a Florida real estate data and investment firm.
'We have an arms race of developers moving into the marketplace
trying to put up condos or planned condos in anticipation of a
recovery in the next two years or so.'

And they are doing it fast. Twenty five new towers with 5200
units are proposed while there are still 4200 unsold units left
from the crash. Sounds crazy, but the foreign demand developers
and real estate agents are seeing now is just that hot.  'The
foreign buyer is coming in looking for wealth preservation or
taking advantage of the weak US dollar, or coming in because of
problems back home, whether it's Venezuela or Mexico with the
drug war,' says Zalewski, who has been watching and working this
market for the past decade.  Foreign buyers are investing as well
as foreign developers, like the Melo group, a family business
from Argentina. They began construction last August on the first
new tower in Miami in at least four years. A lot of people
thought they were crazy, but now the tide has decidedly turned.
The Melo's say they have pre-sold the entire building, and they
required buyers to put 50% down. Most of their buyers, again, are
foreigners with cash.

This new condo boom, while reminiscent of the recent one, is not
built on easy credit. In fact, credit is still very tight here,
especially for developers. Martin Margulies tried to get a
construction loan for his Hollywood project, the Bellini, but
could only get 50% financing along with putting up collateral. He
called that 'onerous,' and instead took out a personal loan,
using his massive art collection as collateral. He says he's not
concerned, as his buyers will be putting down 30% on one to four
million dollar units.  'The kind of buyers we get they don't need
financing, they're all cash buyers,' says Margulies. 'It's a
lifestyle they have, so they're not reliant on a bank to give the
money.'  Most of the foreign buyers in Miami are renting the
properties to locals who have either lost their homes to
foreclosure or whose credit is not good enough to get a home loan
in today's tough US mortgage market. The question now is, what
happens to all these renters when Florida's single family housing
market recovers and credit opens up again?

Will all these foreign investors want to unload their units at
the same time?  'You wonder if we're not kicking the can, where
we dealt with the problem at hand by dumping it off to foreign
buyers, and now as the domestic buyer starts to move back into
the marketplace, is that domestic buyer going to pay the same
price that the foreign buyer is willing to pay or take the same
chances that the foreign buyer is willing to pay?' asks Zalewski.
 It all sounds frighteningly familiar."

Industrial output down

The Federal Reserve said Friday that the output of the nation's
factories rose 0.3% last month. That followed even stronger
increases in January and December, which combined for the best
two month stretch since 1998.  Overall industrial production,
which includes output by mines and utilities, was unchanged.
Mining activity declined sharply and utilities were flat.
Factory output has risen 17.4% since the depths of the recession
in June 2009. It remains 6.7% below its pre-recession peak,
reached in December 2007.  Growth at US factories was a little
slower in February because auto production edged lower after big
gains in December and January. Manufacturers made more
electronics, energy products and electrical equipment.  Still,
manufacturing has strengthened substantially since last summer,
when it faltered because of global supply disruptions caused by
the Japan earthquake and tsunami. Factories are benefiting from
strong auto sales and growing business investment in machinery
and other equipment.

Sales up 14% in San Francisco

San Francisco Bay Area home sales grew 14.2% from last year in
February with the region recording 5,702 sales, up from 4,991 a
year ago, DataQuick said.  The San Diego-based real estate
research firm said sales are up over year-prior levels for the
eighth straight month, suggesting a tepid recovery could be under
way.  New and existing home prices continue drag, with the
February median of $325,500 down 0.3% from $326,000 in January
and 3.6% from $337,250 a year ago.  Prices in San Francisco hit
their peak of $665,000 in June 2007 before plummeting to $290,000
in March 2009 after the nation fell into a prolonged recession.
Much like the Southern California market, distressed home sales
accounted for half of the Bay Area's resale market in February.
Foreclosure sales alone made up 27.4% of all resales in the
market, while short sales represented 23.1%.  The average monthly
mortgage payment in the Bay Area hit $1,225 in February, down
from $1,233 in January and $1,440 a year earlier.

Obama to release emergency oil in front of election?

Britain is poised to cooperate with the United States on a
release of strategic oil stocks that is expected within months,
two British sources said, in a bid to prevent fuel prices choking
economic growth in a US election year.  A formal request from the
United States to the UK to join forces in a release of oil from
government-controlled reserves is expected "shortly" following a
meeting on Wednesday in Washington between President Barack Obama
and Prime MinisterDavid Cameron, who discussed the issue, one
source said.  Britain would respond positively, the two sources
said, and Cameron said a release was worth considering.  "We
didn't make any decision, this has to be discussed broadly. We've
got to look at this issue carefully, it's something worth looking
at. Short-term should we look at reserves? Yes, we should,"
Cameron said during a meeting with students in New York.  "We'd
both like to see global oil prices at a lower level than they
are."  Details of the timing, volume and duration of a new
emergency drawdown have yet to be settled but a detailed
agreement is expected by the summer, one of the sources said.
Other countries may also be approached by Washington to
contribute, a further source said, Japan among them.   Rising
world oil prices have pushed the cost of gasoline in the US up
sharply, threatening to stall economic recovery ahead of Obama's
bid for re-election in November.

Renting jeopardizing affordable housing

More Americans are renting houses instead of buying them, a trend
that could disrupt price affordability, analysts say.  With more
homeowners unable to secure mortgages and uncertain about future
finances, renting is the only sure-fire way to live in a
single-family property, according to Capital Economics.  But as
more Americans turn to home renting, the influx of demand is set
to squeeze the nation's rental supply, pushing monthly rents even
higher.  Paul Dales, senior economist with Capital Economics said
that rental vacancy rates will fall again in the future, pushing
prices up. The median rent is already up to $712 per month—well
above the average monthly mortgage cost of $647, Dales reported.
He estimates vacancies in the home-rental market will push
average rental rates up as much as 5% by early 2013, compared to
2.4% in January.  "We expect the annual rate at which rents are
rising will rise to 3% this year and remain at that level in
2013," Dales said. "Assuming that the economic recovery gains
firmer footing, in future years there is scope for rents to rise
by around 4% a year."

And as single-family renters head into the market, the supply of
rentals is unlikely to meet new demand.  This reality is playing
itself out in Denver, where the vacancy rate for home rentals
fell from 3.4% in the third quarter to 2.1% in the fourth
quarter. At the same time, the vacancy rate edged up slightly
from the 2% level reported in the fourth quarter of 2010.  "The
vacancy rate went up slightly year-over-year," said Ryan McMaken,
a spokesman for the Colorado Division of Housing. "That doesn’t
mean much, though, because when you’re looking at vacancy rates
below 3%, the bottom line is that the market is tight. For many
people, it’s not easy to buy a house right now, so they’re
renting. 

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