Is it better to stay in a rented space or buy a home with slightly more money? This is a choice confronting Americans and many are opting for the latter. With foreclosures becoming a common feature of the American real estate scenario and home values plunging, many are opting to buy their own home rather than choosing to stay in a rented flat.

Take for instance, musician Aaron Carter. He was paying a rent of $615 for an apartment, when he came across a home in Phoenix that was double the space and the mortgage amount for this was $760. What was more interesting the mortgage was tax-deductible. Naturally the couple opted for the latter.

Twenty year oldCarter says that with home values plunging and the government offering tax incentives, it is definitely lucrative to buy a home than before. And Cartier is not alone. For many Americans this is the perfect time to buy a home than earlier. Home values have dipped and interest rates are at a never before low. According to an analysis by the Associated Press, the divide between the mortgage payment of a home and the rent has come down from $777 in a month to $221 in the last three years.

This can put an end to the turmoil in the housing market as renters picks up foreclosed decadent homes. In regions like Atlanta, Cleveland, St. Louis and Indianapolis the gap has come down to $100 in a month. Home rates are expected to spiral down even faster which means the gap will become narrower in no time.

In metros like Las Vegas, Phoenix, Florida and California, where home prices have gone down by 40 per cent, sales have picked up because first-time buyers are picking up the low –priced properties.

Foreclosed homes in some of these cities are attracting the attention of the buyers. Some are even drawing more than one bid. Buyers, it seems, have multiple options to choose from. Jere Ross an Air Force personnel has bought a four-bedroom apartment at $86,500 instead of staying in a rented space. The monthly mortgage that he is paying is $110 less than what he had paid as rent. Ross said that there was a time when he was throwing away all the money on rent. Now instead he owns an apartment with something less than that. That should come as good news for many of America’s harassed homeowners.

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In its strident fight against foreclosures, ACORN continues to defend borrowers. One of the victims was Tosha Alberty. She returned from work to her home in West Oakland to find that it had been taken away by foreclosure. She had been living here since 2005. Many like her have been slapped by foreclosure because of having inked sub-prime mortgages. Alberty had struggled for two years with a heavy monthly amount of $2,800. But when that reset by another $1,000 it became impossible for her to continue.

Alberty’s lender was First Franklin Home Loan of San Jose. She contacted them for modification of the loan but a representative said that she did not qualify for the same because she was being able to remain current. She then stopped making payments but even then assistance was denied. Her house was then foreclosed upon.There are many other borrowers of First Franklin Home Loan complaining of similar high handed behaviour The Company had specialized in sub-prime mortgages.

A survey was conducted in 2008 by California Reinvestment Coalition (CRC) on assistance programmes being given to troubled borrowers. Specific questions were asked about which of the mortgage service companies were the most non-cooperative. The name of First Franklin Home Loan came up many times according to Kevin Stein of CRC.

Numerous complaints have been received by The Better Business Bureau against First Franklin during the previous two years. Federal court docket searching also revealed that First Franklin and its associated company Home Loan Services are the defendants in as many 40 legal suits that have been filed against them. The latest one was filed on 17th July in the federal district court of Fresno.

First Franklin is bound to help the struggling homeowners as it is listed as one of the ten loan servicers that had signed an agreement in the autumn of 2007 with Governor Arnold Schwarzeneger – California Subprime Loan Agreement. According to the terms those borrowers who were at risk of default if rates were increased, would get assistance; they could even be permitted to continue with the old rate if they remained current. But in reality many like Alberty were denied help. When contacted, First Franklin refused to make any comments.

Alberty took up the matter with ACORN and joined its group named Home Defenders. Its vice president Martha Daniel said, “We fight for people to stay families, and to stay in their homes.” ACORN has warded off foreclosures in many instances and has been holding aggressive rallies to press their points.

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Nearly 60% of the builders are complaining that erroneous appraisals are creating grave problems. The evaluation is done by comparing the new properties with the foreclosed ones without taking into account the money required for massive repairs. According to the National Association of Home Builders the appraisal calculated is sometimes less than the cost of constructing the unit.

However New York Attorney General Andrew Cuomo contends that the rules are essential. Those criticizing it are making use of the rules as an excuse for the fall in the housing sector that has been further mired by the recession. Emily Browne speaking on behalf of Cuomo said, “With homes prices falling and foreclosures rising, this complaint is simply wrong and risks returning us to a corrupt system filled with conflicts of interest that promoted artificially inflated values.” She further commented that there are no evidences of an increase in delay in appraisals since the rules took off two months ago. She added, “Even if there are some delays, there is no reason to think the (rules are) the cause, as opposed to the unrelated, nationwide drop in home values which has made the appraisal process more complicated.”

The real estate lobby is however not willing to buy this argument and are coming out strongly against the new appraisal regulations. The National Association of Mortgage Brokers has gone to court last February to stay the rules which are limiting competition. Following this other important   groups in the industry, inclusive of Appraisal Institute, have spoken out loudly against it.

Earlier this month (July) the National Association of Realtors put pressure on Congressional members to give its support to a bill that would bring into effect a moratorium of 18 months on the new appraisal rules. The step is still moving through the Congress.

The Realtors hold that the new regulations are hurting the industry as a whole. It argued that the appraisers that have been hired by the appraisal management firms have been done because of their expertise and experience “but for their turnaround time and price.”

Freddie Mac responded to the rising criticism by issuing fresh appraisal guidelines or “best practices” for the lenders. One was that the appraisers have to hold a certificate issued by the state in which the unit is located and they have to be conversant with the home market. Fannie Mae too has echoed these sentiments.

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Life has to push on and the post-foreclosure period needs will power to look forward without looking back. People are cutting down on space utilization and learning to live together amicably with friends and relations.

Chris Henning has crossed 66 and at this age adjusting to a new life in a smaller condo, trying to sell her old one and even mentally prepared that if the going is too tough she would have to move in with her son’s family. Meanwhile she has rented out her unit and is planning to sell some of her belongings to rake in some extra dollars. Finally she got $355 from two vanloads of stuff collected through 40 years. What hurt her most was parting with an antique cane rocking chair. But shifting to smaller quarters meant giving up big possessions. She knew that things were sold for a song but emotionally drained she just did not have the will power to haggle.

Henning is not alone – in California many like her are surrendering their belongings. Realtors advise their clients to look around for another accommodation even before the foreclosure process starts so that at least they have money to afford rented quarters. Valerie Torelli of Torelli Realty, Orange County said, “Clients are doing the right thing [trying] to move out as quickly as they can.” Torelli has experienced many unsavory scenes in the course of her work. She has seen furniture littering yards and sometimes pets have been kept locked inside. The belongings are left behind often because the owners do not have the cash to take them or nowhere to place them.

California is ground zero of the foreclosure crisis. In 2008 there were about 500,000 foreclosure postings. In Florida there were 115, 00 foreclosures making Florida rank second.

A couple in Virginia, Dennis and Charlotte Jensen sought bankruptcy in May 2008 – a year after borrowing money to repay debts by mortgaging their house. This led to them paying extra $900 on their monthly payments. They could not manage but shifted to a smaller house. Now they realize that they should never have been given the refinancing option. It broke their hearts to sell off their grill and riding mower – these two items being sort of representatives of their house ownership and now their failure. Their son aged 8 had to be enrolled in a new school. Charlotte’s father has now asked them to move in with him and reluctantly they are not too happily weighing the option.

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The continuation of the foreclosure crisis will dangerously hit the state and local government activities. Many services will have to be withdrawn and this will tell adversely on society. As per the law the state administration has to balance its budget. Many will have to raise taxes and cut services to do so. An entire generation of Americans will be affected by this. The government has never had experience of handling a crisis of such astronomical gravity. As such the new government has not acted either swiftly or aggressively to contain the menace.

The Senate cancelled a suggested remedy by allowing writing down of the principal in cases of bankruptcy thanks to the furious opposition of the financial sector. In Washington the banks are continuing to call the shots from back stage even though by it they are likely to lose more business and contribute to the prolonging of the recession.

A good suggestion would be to allow those under threat from foreclosure to rent their units and thus build back some equity. The modification programme is not working because the incentive is not strong enough. For the lenders it makes no sense to keep the borrowers in their houses while the real market is falling nearly each day. Potential new buyers and the secondary market that deals in buying and investing in mortgages would benefit from short-term secure guarantees on the mortgages of those who have made required down payments.

The crisis in the housing sector has given the country a rare chance to do a re-thinking about house ownership. If the American Dream has to be rescued incentives will have to be given by the government for building more affordable units. This move has to be accompanied by lower medical expenses and introducing universal coverage. The changes need to debut immediately but ironically it cannot be done until the foreclosures stop marching and the real market becomes stabilized.

The programme for construction decent as well as pocket-friendly green houses can be realized by providing grants to the private sector to go ahead with plans for making homes that are energy savers in communities that produce their own power. Those who build on vacant plots or demolish derelict buildings should get tax credits. Generous financial breaks should be given to those who take up work in distressed areas of towns and cities and make the most energy saving houses.

All this calls for a new American dream that will be affordable, eco friendly and socially helpful.

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It is the tiny drops that make the ocean. The foreclosure of a single borrower followed by another and then another running into millions has opened up the floodgates – so much so that the crisis has led to the questioning of the validity of the dollar as international reserve currency.

Instead of the dollar it is suggested that the reserve currency should be the SDRs or Special Drawing Rights of the IMF. In reality it would mean that the unipolar world that was functioning since the fall of the Soviet Union in 1991 would now be replaced by a multi-polar global economic era with toned down globalization.

Till 1914 the currencies of the world were expressed in gold terms. Since gold was always limited, the countries could not issue currency over and above their gold holding. The first main power to go off the gold standard was Britain in 1914 so as to be free to fund its military spending during World War I.  But in 1925 Churchill returned to the gold standard.

After the close of World War I the dominant power in the world was USA. From 1946 to 1971 the rates of exchange were fixed relating to the USA dollar. Gold prices were pegged down at $35 per ounce. France made use of this to exchange dollars for gold and this depleted the gold holdings of USA. This apart USA found itself embroiled in heavy expenditures like Great Society programme of Johnson and the Vietnam War.  This made Nixon remove the fixed price facet causing massive numbers of dollars to start circulating.

Since then most of global trade and monetary transactions have been expressed through dollars. The size, power and increasing productive power of USA gave the rest of the world confidence to rely on the dollar. They began parking extra funds in American treasury bonds and various other kinds of investments. This ceaseless inflow of funds allowed Bush to merrily go on spending far in excess of the country’s revenues. This led to massive increase in liquidity.

The Federal Reserve stuck to its policy of low interest rates and allowed the economy of USA to grow and grow. There was employment all round and frenetic construction activity. It was the great bubble. There were huge purchases through credit cards and banks as well as other financial institutions dizzily indulged in speculation. Not to be left behind the mortgage firms began to play around with new types of financial tools.

Then everything went bust!

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The default of owner of Sheraton Bay Resort and Spa is facing foreclosure after the owner defaulted on loan. It is another symptom of the sick condition of the tourism industry in Hawaii since the recession.

Kenneth Marcus has been appointed commissioner by Ronald Ibarra, the Circuit Court Judge. He confirmed that the hotel will be put up for auction on 31st July 2009.

The owners of Koa Hotel have failed on a loan with dues running into nearly $60 million. Marcus said that right now, at least for some time, the hotel will continue to function as before. Marcus said, “As far as the operations of the hotel, nothing is likely to change, for all outward appearances. In terms of the short term, it should be business as usual.”

It remains unsure what will happen to the running of the hotel after the auction. It is however unlikely that anybody buying the hotel will shut it down. Koa hotel is owned by an equity firm – Brickman Associates based in New York. The major creditor of the property is Lehman Brothers. The latter had collapsed last year and filed bankruptcy.

The business of the resort started to decline when visitors in general began to stop coming since spring of 2008. This year the tourist number so far has declined by 15% compared to the same period during 2008.

The premises comprises of 521 rooms as well as a spa standing on 20 acres. The land is owned by Kamehameha Schools. There are three eateries and bars, shopping centre, exquisite pool as well as a spa. It also has a wedding chapel, a centre for fitness, business hub, and a couple of tennis courts.

The notice for the foreclosure for sale has not been put up as yet but will soon be done. No minimum bidding price has been said. Those who are interested are expected to register with Marcus – but not later than five days prior to the auction date. The bidders would have to ink an agreement of confidentiality before being allowed to browse through some financial documents. The winning bid would be taken by Marcus to court of Ibarra where more bids would be permitted. The winning bidder will get the approval of Ibarra.

Koa Hotel is current in payment of property taxes; neither were they defaulting in lease payments. Koa Hotel was bought from the previous Kona Surf Hotel in 2001. The owners took a loan of $82 million from Lehman Brothers.

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Despite monumental measures taken by the government, there is no end in sight for Cleveland foreclosure woes.

Tony Brancatelli is councilman of the city he is desperately looking for signs of normalcy in his ward. When on his rounds he came upon an octogenarian woman pulling up weeds from the foreclosed garden next to her house. She and her son had boarded up the house that had become a frequent haunt of raucous teenagers disturbing the peace and safety of her life. Like Brancatelli she too wants to know when this house that had been foreclosed more than a year ago would be demolished.

Cleveland is reeling under the throes of a foreclosure crisis of jumbo proportions. In two years there have been about 10,000 foreclosures. It ranked 24th among the states in March 2009. With the shutting down of the steel mills Cleveland has been in decline for quite some time. There are hardly any manufacturing jobs to attract newcomers. Since 1960 the population count has gone down by half. Poverty count in Cleveland is the highest in the nation. But the recent spurt since the outbreak of the housing crisis has surpassed the misfortune tempo of the past.
Cleveland is included in Cuyahoga County. In December 2008 the number of foreclosures touched record numbers. No one has an exact count of the number of vacant foreclosed houses blighting the neighbourhoods. Approximately 10,000 houses or one out of 13 units are lying deserted and forlorn. The treasury office of the county estimates that it could be about 15,000 houses. Today wholesalers are sweeping down to make bulk purchases as if these houses are nothing but baseball cards.

The city officials together with the judiciary and policy are struggling to manage the wreckage that has been left behind. It is too early to talk of this as the aftermath because the war is still going on. Despite the various measures introduced by Obama Cleveland is gearing up for more foreclosures. The trouble has escalated with job losses. The city has an unemployment rate of 8.8%

Another problem is that the residents of areas with high rates of foreclosure are unwilling to stay on. Brancatelli said, “It just happens so fast, the sad part is you really have little control. It just happens so fast, the sad part is you really have little control”

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• Foreclosure Crisis Imposes on the Dreams and Nightmares of Americans
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The foreclosure crisis in USA ultimately led to global instability. Miguel D’Escoto the president of U.N. General Assembly said that the approval has been given to a proposal that can be considered to be the first step of many that will try to put the world along a new course leading to solidarity and stability that could be sustained.

A central forum has been set up for discussions on international financial and economic subjects. He was speaking after the UN Conference on World Financial and Economic Crisis and its Impact on Development came to a close in New York. He said that this itself was an important achievement.

The assembly has been told to follow up the matter with the help of a working group to deal with mitigation of crisis, reframing the financial and economic system, external debts and world trade. It has been admitted that the present crisis should not delay the world response to changes in climate and degradation of the environment. Initiatives on ‘green economy’ have to be taken.

D’Escoto reiterated, “We are happy but not content, or rather, not completely satisfied. We must all join forces to confront these crises. The proposals we have adopted today point in this direction. But much remains to be done.” He pointed out that there were heavy clouds looming in the horizon relating to food, water and fuel.

The conference lasted for three days and there were many rounds of discussions covering various issues regarding the part to be played by U.N. in responding to these problems and how to solve these. It was noted that although the developed countries have not been spared they have the means at hand to tackle it. But this is not so the case with other parts of the world. Helen Clark the administrator said, “Some expect a slow recovery towards the end of this year or in the first half of next year. The turn-around for developing countries, however, may well take longer. Many impacts of the crisis in developing countries, such as slowing growth rates, rising unemployment, and declining budgets are only now beginning to unfold.” The main concern is that progress rate will be slowed and anti-poverty targets would not be reached. She added, “We must do all in our power to stop this happening.”

Representatives from 150 countries attended this high level conference focusing on the international economic gloom and its impact on the developing nations.

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It is the financial oligarchs ruling in Washington that are being held responsible for the foreclosure crisis. Economist Simon Johnson of MIT contends that it is not only political corruption that has given this group immense clout in the corridors of power. The guiding force is the tremendous belief in the free-market theory. So long as Wall Street thrived, nobody questioned the veracity of this.

The health of Wall Street came to be linked with that of the rest of the world. But the foreclosure crisis has exploded that myth. There is plenty of mud slinging going on and the principal villains of the piece are three – continuous low interest rates maintained by the Feds, deregulations and lack of supervision and the pampering of Fannie Mae and Freddie Mac. It is to be noted however that there is one common string running through all these three – they all acted to boost the interests of the financial system and not the welfare of the public. Johnson said, “The power of the financial sector goes far beyond a single set of people, a single administration, or a single political party.” Nobel Laureate Joseph Stiglitz opined that the financial sector had become obese and unhealthy – taking in much more than what it gives to society. They have become so powerful that it will not be an easy task to deregulate them. The system becomes complex when small financial entities become linked with the rest.

This is what happened with AIG. Thus even the small firms need to be watched so that they do not become too big for their shoes. There are many who echo the sentiments of Stiglitz and Johnson but it is not the majority line of thinking. The new government has plans to set up a regulatory structure to deal with the financial bodies that are over bloated. The idea is to systematically check them and then shut them down in a phased manner.

The Obama team has not suggested however that these companies who are “to big to fail” to be cut down to size. This is not surprising since President Obama relies for advice on economic matters on people who may be termed the head priests of the financial cult. There are however few exceptions. Congress is far less inclined than the administration to crack down the banks. Barney Frank and Chris Dodd have not suggested anything near to implementing radical reforms. As such the banking lobby continues to dominate Washington.

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• Home Appraisal Codes Being Revamped so as to Avoid Rerun of Foreclosure Crisis
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• The Impact of the Foreclosure Crisis will be Felt for Many Years to Come
• Foreclosure Crisis Imposes on the Dreams and Nightmares of Americans
• The regulators as well as the executives are equally to blame for bank failures linked to the foreclosure crisis