California lost close to half of its construction jobs when the housing bubble burst.

The nation’s most populous state was an epicenter of the national housing bust. From June 2006 through last month, it lost 43% of its construction jobs, or 401,900 positions. That far outpaced a 28% decline in total U.S. building employment during the same period.

This didn’t take long to return.

Mortgage fraud takes many forms, but a well-organized scam frequently involves a limited liability company (LLC) or a “straw buyer.” In this scheme, fraudsters use a fake identity or that of someone else who allows them to use their credit status in return for a fee. The seller pockets the money the buyer borrows from a lender to pay for the home. The buyer never makes a mortgage payment and the property goes into foreclosure.

e property appraisal — compiled by an appraiser who Scott believes never visited the area — showed four nearby comparable properties of around the same age (100 plus years) sold recently for around $360,000. The trick to this kind of scheme is engineering the sale of the first few fraudulently overvalued properties to get “comps” — comparable values — to fool appraisers and underwriters alike.

“Miraculously, all of these properties were all within a very narrow price range,” Scott said with weary sarcasm. “This is a perfect appraisal for an underwriter. If you are an underwriter sitting in Kansas or California it all looks fairly straightforward so you can just hit the button and approve it.”

Certainly bad news for the city’s tax revenues, but this could lead to more development.

Several thousand are employed in HP’s Cupertino campus, these jobs will be relocated to Palo Alto.

Both facilities are only half occupied as the local tech sector stalls.

Commercial real estate loans are being extended as the financial industry refuses to accept reality.
When banks are allowed to mark to imaginary, this is what ensues in a repeat of Japan’s debacle.

A big push by banks in recent months to modify such loans—by stretching out maturities or allowing below-market interest rates—has slowed a spike in defaults. It also has helped preserve banks’ capital, by keeping some dicey loans classified as “performing” and thus minimizing the amount of cash banks must set aside in reserves for future losses.

Restructurings of nonresidential loans stood at $23.9 billion at the end of the first quarter, more than three times the level a year earlier and seven times the level two years earlier. While not all were for commercial real estate, the total makes clear that large numbers of commercial-property borrowers got some leeway.

The PACE “Green home” program is dealt a fatal blow. It’s interesting to note the Inland Empire municipalities in So Cal have been leading the nation in driving this program.

PACE lets homeowners use special property-tax assessments to pay off, over 15 to 20 years, the cost of new improvements. Local governments sell municipal bonds to fund it.

In May, Fannie and Freddie said the liens violated the terms of their contracts to purchase loans from lenders and said they would require borrowers to pay off the liens before refinancing or selling their properties. The announcements, which raised concerns that borrowers would have to pay off their mortgages early, led most municipalities to suspend their PACE programs.

Is this a turning point for the US budget deficits ?
Despite President Obama’s pitch at the summit meeting for developed nations here for continued stimulus measures to prevent another global economic downturn, the United States will go along with other leaders who are more concerned about rising debt and join in a commitment to cut their governments’ deficits in half by 2013, administration officials said on Saturday.
The group of developed and emerging nations said it would follow through on delivering existing stimulus plans, while highlighting the importance of properly phased plans to “deliver fiscal sustainability”.

Specifically, it said the group would aim to at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.

June 30 ends the TALF emergency program (Term Asset-Backed Securities Loan). The training wheels come off one by one.

[i] Federal Reserve: January 27, 2010
Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit will be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.
[/i]

In these tough times, one would have expected Congress to allow hardship withdrawals from IRA’s without penalty for living expenses but that’s not the case.

Hardship distributions are includible in gross income unless they consist of designated Roth contributions. In addition, they may be subject to an additional tax on early distributions of elective contributions. Unlike loans, hardship distributions are not repaid to the plan.
For a distribution from a 401(k) plan to be on account of hardship, it must be made on account of an immediate and heavy financial need of the employee and the amount must be necessary to satisfy the financial need. The need of the employee includes the need of the employee’s spouse or dependent. (Reg. §1.401(k)-1(d)(3)(i))
Under the provisions of the Pension Protection Act of 2006, the need of the employee also may include the need of the employee’s non-spouse, non-dependent beneficiary.

Of course, the penalty for early “hardship withdrawals” is waived if the “hardship” is buying a home or sending a child to college.

Though you may take money out of your 401(k) to use as a down payment, expect to pay a 10 percent penalty.
However, take the money from your IRA, and it’s penalty-free. The penalty-free withdrawal is not limited to first-timers either. Homebuyers must not have owned a home in the previous two years, though. Further you can take more than one penalty-free withdrawal to buy a home, but there is a $10,000 limit.
“Beginning January 1, 1998, a taxpayer may make withdrawals from an individual retirement account (IRA) to pay the qualified higher education expenses for the taxpayer, the taxpayer’s spouse, or the child or grandchild of the taxpayer or taxpayer’s spouse at an eligible educational institution. The taxpayer will owe federal income tax on the amount withdrawn, but will not be subject to the 10 percent early withdrawal tax that applies when amounts are withdrawn from an individual retirement account before the account holder reaches age 59 1/2.”

This will trigger more foreclosures from the direct effect on people paying their mortgages with unemployment checks and the decrease in consumer spending. About 1.3 million unemployed will be missing their $1200/month by the end of the month.

WASHINGTON—Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago.

The collapse of the wide-ranging legislation means that a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week. It will also leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid costs.
…
Under a program initially enacted last year—which expired June 2—jobless workers could receive up to 99 weeks of aid, including 26 weeks of basic assistance provided by states plus longer-term federal payments. The Labor Department estimates that the long-term unemployed, meaning those out of a job for at least six months, make up 46% of all jobless workers in the U.S.

Will this amount to nothing but an empty threat ?

Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.

Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.