Case-Schiller: Twin Cities Home Prices Down 13.8%

 
Standard & Poors has released the August 08 print of the Case-Schiller Home Price Index.  We pulled the graphic above to highlight what's happening in Minneapolis/St. Paul.

Click the graphic to make it bigger, or take our word that the average home price in the Twin Cities for August 2008 was 13.8% lower than August 2007. 

Though prices continue to slip, Teresa Boardman points out that (unlike last year) the market is slowly  moving in the right direction - toward price stability:

Teresa elaborates on the chart above:

"As the lines get closer to each other the supply of homes and the demand will be more balanced and theoretically home prices will stabilize. Last year the number of homes on the market went way up.  Supply and demand were out of balance because while listings were going up, sales were going down.  This year the inventory has been slowly decreasing all year."

10/28/08 at 09:44 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Banking Bailout, Blind Item, Case-Schiller Home Price Index, Market Stats, Minneapolis, Reports & Research, St. Paul

Breaking News: Lender with 9 Local Branches Can't Fund Loans, Ordered to Cease and Desist

We've only got a single source on this for now (working on more) so we'll leave the name of this outfit blind until we can get some confirmation.  Name now confirmed as Centennial Mortgage and Funding, out of Bloomington, see update below.
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The word is a south-metro headquarted Mortgage lender Centennial Mortgage and Funding, a local correspondent/broker with 9 Minnesota branches, and two in Wisconsin, has had their warehouse lines pulled, and cannot fund loans.  Allegedly the company CFO was using one warehouse line to fund another (this is bad, see below.)

40 some odd loans scheduled to close today cannot fund, leaving the borrowers, some of whom were set to close on purchase transactions, in the lurch.

UPDATE 3:54P Friday 28 March

We just received the following confirmation via email from Bill Walsh, Director of Communications for the Minnesota Department of Commerce:

The Minnesota Department of Commerce issued a Consent Cease and Desist Order today against Centennial Mortgage and Funding of Bloomington because of their substantial financial problems. The company agreed to cease and desist from engaging in any and all new mortgage loan origination or servicing activities in the State of Minnesota.

The order should be on our website soon.

Though the name has now been confirmed, the exact nature of the financial problems remain a bit of a mystery, but since our original sources information has now largely been substantiated, we can only assume it was warehouse line shenanigans that did them in.

UPDATE 2, 4:43P Friday 28 March
Here is a copy of the consent order: Download CentennialMortgage.pdf

For the civilians and non-mortgage people:
A warehouse line, or warehouse line-of-credit is the mechanism that most larger brokers (or correspondent lenders) use to fund loans before they are sold off to the investor (such as a Countrywide, Chase, Wells Fargo, etc.) who will ultimately own and/or service the loan.

Warehouse lines are used because the typical broker does not have the cash to fund each loan themselves, so they need short term borrowing capacity to fund production.  A warehouse line is essentially a giant revolving line of credit, and their use is the standard business model for non-bank lenders.

Normally, and by design, closed loans are "on" a warehouse line for very short periods of time - a matter of days or weeks - until the loan is shipped off to the investor.  For this reason, there is not normally a lot of risk for the providers of these types of facilities. 

But occasionally, the investor the loan was destined for will reject the loan and push it back to the originator/broker.  There are many reasons this can happen.  Maybe the loan was underwritten incorrectly, maybe it was flagged for fraud, maybe it was an early payment default, or some other violation of the representations and warranties the lender and originator agree to. 

So if nobody will buy the loan, it sits on the warehouse line.  Once enough loans (or just one of the wrong kind- warehouse lenders are VERY conservative these days) get put back on the warehouse line, the warehouse lender says something like: "Hey, this is supposed to be a short term deal here, we didn't sign up to take the long term credit risk for you on a loan, so you need to pay this loan off yourself if you can't sell it on the secondary market." This is known as a margin call.

And if the broker/originator does not have the cash to pay up, they might just look to other sources to raise cash.  If desperate, they might just use one warehouse line to meet the margin call of another.

But back to our story:

If this is what happened here, they are up a creek.  And the solution is not likely to be just about throwing the CFO under the bus, offering a mea-culpa to the warehouse lender, and re-instating the line.  It may not be that easy.

That's because, presumably, the broker faced a cash call it could not meet, and tried to use another warehouse line to come up with the dough.  Point being: The original obligation that caused this may remain unmet, and unless they've got another way to quickly raise capital, or a VERY cozy relationship with another warehouse lender, it could spell the end.

Again, this is speculation and theory to a large degree at this point, and we will work on confirming the brokers identity.  Anyone with any personal knowledge, especially borrowers caught in this, feel free to jump in the comments. 

More as things develop.

03/28/08 at 11:49 AM Permalink | Comments (8) | TrackBack (0)
Filed Under: Blind Item, Breaking News, Credit Crunch, Twin Cities

Blind Item Recap: Connecting the Dots, Meet Adam Lafavre

Regular readers will remember this little blind item we published a few months ago:

What prominent, high rolling (love those rims baby!) Lake Minnetonka dwelling (whose domicile is/was actually owned by another prominent Minnesota business-person) real estate agent was recently visited by the FBI Federal Regulators.

Though there were some errors of fact in this original (hence the blind part - like we have staff to research facts, of all things) posting of what was at that time little more than rumor, we can confirm that our blind item referred to the same guy who happened to grace the front page of the Strib on Sunday. 

Meet one Adam Lafavre.  [Disclaimer: He may or may not have made the paper due to some nudging on our part of a particular reporter over at the Strib]:

For years, Adam LaFavre cultivated an image as a successful real estate dealmaker and a man of faith. He drove luxury cars, wore a Rolex watch and owned a $7.5 million mansion on Lake Minnetonka in Wayzata...The IRS' criminal investigation division alleges that he helped raise money for an illegal investment scheme that promised high monthly returns in offshore banking programs at no risk.

Great work by Reporter Chris Serres, who mentions that his phone has been literally ringing off the hook since publication, and has been taking calls from dozens of people who were allegedly defruaded by Mr. Lafavre, or, have been caught in some other type of real estate fraud and are looking for answers and help.
Cloud of Fraud Hangs Over Investor [Strib]

09/04/07 at 03:26 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Blind Item, Consumer Protection, Fraud, Industry News, Real Estate Law, Rip-Offs, Twin Cities

Rumor Mill: More Trouble at Sexton?

As if there weren't enough trouble at the Sexton Condo's, what with the developers suing one another and all.

We received a tip yesterday from a well placed source, that a drug bust went down, several units (four?) were raided, and that this bust involved the manufacture of illegal goodies.  We haven't seen anything official yet, so we'll file this in the mostly unsubstantiated rumor file for now.

The kicker?  Our tipster says that while the raid was in process, the Hennepin County Sherrif's office showed up to serve foreclosure notice on one of the units.  Talk about a bad day.

Know anything?  Drop us a tip right here...

07/27/07 at 09:08 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Blind Item, Breaking News, Condos & New Developments, Downtown, Minneapolis

Friday Blind Item: Real Estate Agent Cuffed and Stuffed by FBI?

Friday Blind Item is our new feature, which we will run at least once, (or maybe a lot, depending on how bad the real estate fraud problem gets) wherein we air-out some *semi-substantiated (though well-sourced) real estate rumor-mill fodder for our readers to digest, without naming names.  We won't name names because: 1. We don't want to be sued 2. Our sources aren't always THAT great (but sometimes they are.) 3.  This isn't Gawker. 

*If and/or when a blind item hits the actual press, we will post an update and claim all credit. Oh, and also, no naming names in the comments, or we will delete you.  Mmmkay?  Now, behold the underbelly of the Twin Cities Real Estate Market. Blind Item Tips to: behindthemortgage /at/ gmail.com
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BLIND ITEM:  What prominent, high rolling (love those rims baby!) Lake Minnetonka dwelling (whose domicile is actually owned by another prominent Minnesota business-person) real estate agent was recently visited by the FBI and involuntarily separated from his or her office (in handcuffs,) along with spouse, last week?

Or so we've heard...

04/13/07 at 11:07 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Blind Item