Saturday, June 19, 2010
Q. I bought a condo in Corona in December 2005. I owe $290,000 on the first – 10-year interest-only – and $32,000 on the second – which is due in 15 years with a big balloon due at that time.
We have made all payments on time and we have excellent FICO scores. We can afford our payments right now but will struggle when payments go up. Since recent comps in our condo community are about $150,000, I am looking at alternatives because we are so upside-down. I ran across an Internet site that proposes a short sale-refi, in which they would negotiate with the servicers to do a short sale on my condo. Then I would buy it right back, hence short sale-refi. Plus no upfront fees! All fees and costs would be rolled into new loan! After doing some Internet searches, this “short sale-refi” is only offered by one company. My question is, is this a real opportunity or a scam? The fees are $2,500 for loan modification and $3,500 for short sale-refi.
A. I share your suspicions of this program. One feature of legitimate transactions is that they are transparent. This scheme would seem to fail that test in that the ultimate buyer is not an independent third party. I think it unlikely that the lender would approve the short sale if they knew the full details of the transaction. More specifically, I also cannot see them approving a simultaneous loan modification.
There is a question about whether you could get a loan from someone else with the damage that a short sale would do to your credit rating. Normally the effect of any kind of action where the previous lender got less than the full amount they were owed shuts you out of the housing market for a few years. For a greater discussion of that topic, click here.
I think your suspicions are well-founded. The good news is that you have five years until the first loan resets and a lot can happen in five years, as we have found out in the last five.
Q. I am a retiree with six rental properties and trying to hold on. I need some refinance advice on what to do next on the refinances. I have been handling this on my own for years but now need guidance during this unique market. (The property I bought in 2008 is now appraising at under half of what I paid for it).
A. That’s not quite enough information for a comprehensive answer because all your properties are involved, not just the one property that’s under water. Although that property may be under water, it still may be providing a positive cash flow. Your interest is whether in total all of your properties will provide sufficient cash flow to support your retirement. Correct?
Current rates are well less than 5% so if you have properties with enough equity that are currently financed with loans with interest rates above 6%, you should consider refinancing them today for long-term savings. Note that you need to qualify for the loan, but that is based upon your total income including rental income and whether you qualify for the housing expense on your own residence.
If it makes sense to refinance, then you ought to do whatever you can now because rates are so low.
That’s it. If you want Johnson to answer a question, email it to Maurine Pool at email@example.com. Include your name or nickname and the city you live in .
Friday, June 18, 2010
Scott Salyer stepped into the federal courtroom in Sacramento, his trim frame swimming in an orange prisoner jumpsuit, his legs shackled, his wrists restrained.It was a humiliating moment in February for the 54-year-old agribusiness mogul, the last prince of one of California's cotton farming dynasties. The tomato processing outfit he started with his father, Fred Salyer, was in bankruptcy. Scott was being blamed for running SK Foods into the ground -- and far worse.
Salyer clenched his jaw as the prosecutor reeled off the allegations: that he and SK Foods tricked supermarkets and big food companies into buying substandard tomato products to put into brands found in almost every American cupboard. Read the rest of the story.
Photo: Frederick Scott Salyer, 54, is being blamed for running SK Foods into the ground. Credit: KSBW-TV
It is an overlooked danger in the oil spill crisis: The crude gushing from the well contains vast amounts of natural gas that could pose a serious threat to the Gulf of Mexico's fragile ecosystem.
The oil emanating from the seafloor contains about 40 percent methane, compared with about 5 percent found in typical oil deposits, said John Kessler, a Texas A&M University oceanographer who is studying the impact of methane from the spill.
That means huge quantities of methane have entered the Gulf, scientists say, potentially suffocating marine life and creating "dead zones" where oxygen is so depleted that nothing lives.
"This is the most vigorous methane eruption in modern human history," Kessler said.
Methane is a colorless, odorless and flammable substance that is a major component in the natural gas used to heat people's homes. Petroleum engineers typically burn off excess gas attached to crude before the oil is shipped off to the refinery. That's exactly what BP has done as it has captured more than 7.5 million gallons of crude from the breached well.
A BP spokesman said the company was burning about 30 million cubic feet of natural gas daily from the source of the leak, adding up to about 450 million cubic feet since the containment effort started 15 days ago. That's enough gas to heat about 450,000 homes for four days.
But that figure does not account for gas that eluded containment efforts and wound up in the water, leaving behind huge amounts of methane. Scientists are still trying to measure how much has escaped into the water and how it may damage the Gulf and it creatures.
The dangerous gas has played an important role throughout the disaster and response. A bubble of methane is believed to have burst up from the seafloor and ignited the rig explosion. Methane crystals also clogged a four-story containment box that engineers earlier tried to place on top of the breached well.
Now it is being looked at as an environmental concern.
The small microbes that live in the sea have been feeding on the oil and natural gas in the water and are consuming larger quantities of oxygen, which they need to digest food. As they draw more oxygen from the water, it creates two problems. When oxygen levels drop low enough, the breakdown of oil grinds to a halt; and as it is depleted in the water, most life can't be sustained.
The National Science Foundation funded research on methane in the Gulf amid concerns about the depths of the oil plume and questions what role natural gas was playing in keeping the oil below the surface, said David Garrison, a program director in the federal agency who specializes in biological oceanography.
"This has the potential to harm the ecosystem in ways that we don't know," Garrison said. "It's a complex problem."
BP CEO Tony Hayward on Thursday told Congress members that he was "so devastated with this accident," "deeply sorry" and "so distraught."
But he also testified that he was out of the loop on decisions at the well and disclaimed knowledge of any of the myriad problems on and under the Deepwater Horizon rig before the deadly explosion. BP was leasing the rig the Deepwater Horizon that exploded April 20, killing 11 workers and triggering the environmental disaster.
"BP blew it," said Rep. Bart Stupak, D-Mich., chairman of the House investigations panel that held the hearing. "You cut corners to save money and time."
In early June, a research team led by Samantha Joye of the Institute of Undersea Research and Technology at the University of Georgia investigated a 15-mile-long plume drifting southwest from the leak site. They said they found methane concentrations up to 10,000 times higher than normal, and oxygen levels depleted by 40 percent or more.
The scientists found that some parts of the plume had oxygen concentrations just shy of the level that tips ocean waters into the category of "dead zone" — a region uninhabitable to fish, crabs, shrimp and other marine creatures.
Kessler has encountered similar findings. Since he began his on-site research on Saturday, he said he has already found oxygen depletions of between 2 percent and 30 percent in waters 1,000 feet deep.
Shallow waters are normally more susceptible to oxygen depletion. Because it is being found in such deep waters, both Kessler and Joye do not know what is causing the depletion and what the impact could be in the long- or short-term.
In an e-mail, Joye called her findings "the most bizarre looking oxygen profiles I have ever seen anywhere."
Representatives of the National Oceanic and Atmospheric Administration acknowledged that so much methane in the water could draw down oxygen levels and slow the breakdown of oil in the Gulf, but cautioned that research was still under way to understand the ramifications.
"We haven't seen any long-term changes or trends at this point," said Robert Haddad, chief of the agency's assessment and restoration division.
Haddad said early efforts to monitor the spill had focused largely on the more toxic components of oil. However, as new data comes in, he said NOAA and other federal agencies will get a more accurate read on methane concentrations and the effects.
"The question is what's going on in the deeper, colder parts of the ocean," he said. "Are the (methane) concentrations going to overcome the amount of available oxygen? We want to make sure we're not overloading the system."
BP spokesman Mark Proegler disputed Joye's suggestion that the Gulf's deep waters contain large amounts of methane, noting that water samples taken by BP and federal agencies have shown minimal underwater oil outside the spill's vicinity.
"The gas that escapes, what we don't flare, goes up to the surface and is gone," he said.
Steven DiMarco, an oceanographer at Texas A&M University who has studied a long-known "dead zone" in the Gulf, said one example of marine life that could be affected by low oxygen levels in deeper waters would be giant squid — the food of choice for the endangered sperm whale population. Squid live primarily in deep water, and would be disrupted by lower oxygen levels, DiMarco said.
Meanwhile, the Coast Guard signaled a shift in strategy Friday to fight the oil, saying it was ramping up efforts to capture the crude closer to shore.
Coast Guard Adm. Thad Allen said an estimated 2,000 private boats in the so-called "vessels of opportunity" program will be more closely linked through a tighter command and control structure to direct them to locations less than 50 miles offshore to skim the oil. Allen, the point man for the federal response to the spill, previously had said surface containment efforts would be concentrated much farther offshore.
Thursday, June 17, 2010
Imagine your surfboard defining your place in society.
In Ancient Hawaii, it did.
Under the kapu system of laws, the ali’i was above all others. The ruling class surfed on one type of board, and the commoners used another. Even the type of wood used determined social classification.
Commoner surfboards came in three lengths and were mostly constructed of wood from the koa tree. The introductory board to wave riding, or he'e nalu, was the paipo. 2’- 6’ in length, the finless paipos were much like today’s bellyboards and mostly ridden by children.
Splitting a Koa log.
Once accustomed to the rhythm of riding waves, surfers would move on to the alaia. Suitable for standup, an alaia ranged 6’ to 12’ in length and was the forerunner of today’s surfboard.
After mastering the art of surfing, commoners would advance to the kiko’o, a board 12’ to 14’ in length, and, as you can imagine, much more difficult to ride. To master one of these definitely demonstrated one’s proper place at the top of society.
Shaping the Koa blank with an Adz.
The ruling class had its own board made of its own wood, the olo. 14’ to 18’ in length, not only was the olo a bigger board, but it was constructed of the more buoyant wood of the wili wili tree and further defined the class separation of kapu.
The ali’i even has their own breaks, and under kapu, any attempt by a commoner to paddle out among the elite was punishable by, among other things, death.
Surfboards were sacred, their construction ritualistic. Kahuna would search for just the right tree, sacrifice fish as an offering to the gods and stand guard over the specimen overnight under prayer.
Only after successful completion of the ritual, could the tree be felled, and once it was cut down, more sacred behavior was practiced by the kahuna.
Finer shaping was done with blocks of coral and stone..
First the board was rough-shaped with an adz. Then, the wood was shaped and planed with blocks of coral or stone. Once shaped, it was applied with a finish, such as the root of the ti plant or the stain from banana buds. The board was then treated with kukui oil to give it a glossy finish.
When the surfboard had met the kahuna’s approval, it underwent a final ritual of dedication, and only then was it offered to the sea.
Special thanks to Ron Croci for his brilliant illustrations. Check out more of his art by visiting his website.
Wednesday, June 16, 2010
NEW YORK (CNNMoney.com) -- As the nation struggles to shrug off the worst housing crash since the Great Depression, it may be hard to believe a housing shortage could be on its way.
The nation is simply not building enough homes to keep up with potential demand. Just 672,000 new homes were started in April, an annualized rate and less than half the long-term run rate needed to meet the nation's natural population growth.
So far, the shortfall has been masked by a weak economy that has put a damper on home buying. Once the job market rebounds, however, people will look to have their own homes again. This pent-up demand could get unleashed on unprepared markets, causing shortages and rising local prices.
Household formation -- the technical term for people moving in together -- has been on hold during the past few years as young people, especially, have been unable to find jobs. In the past, an average of more than 1.3 million households were formed each year, causing demand for 1.5 million new homes. (More homes than households are needed to replace those destroyed by fires, floods, teardowns and neglect.)
In 2009, only 398,000 new households were formed, according to the Census Bureau. That is much lower than average and a quarter of the number formed just two years earlier.
"The decline in household formation is artificial," said Gaines. "The young are moving in with their parents. There's even doubling up among working class people. There's a pent-up demand coming if and when the economy recovers."
Those doubting a new bubble is near point to a large inventory overhang. As many as 7 million homes are vacant but not for sale, according to the Census Bureau, which should provide cushion to offset increased demand.
"The housing market hasn't been this way before," said Nicolas Retsinas, director of Harvard's Joint Center for Housing Studies. "The gravity of the problem is deeper and the challenges different. You have to get through that inventory."
The inventory number, however, can be deceiving for two reasons: People may not want to live in hard-hit areas where the houses are (think: California exurbs and Detroit neighborhoods) or the homes may be beyond repair.
"Many of these vacant homes may not be habitable or are in locations where nobody wants to live," Gaines said.
Ordinarily, the nation's homebuilders can react quickly to meet surges in demand. But several factors are preventing them from being nimble. The biggest is the difficulty getting loans, according to Jerry Howard, CEO of the National Association of Home Builders (NAHB).
"When we came out of past recessions, there wasn't the difficulty of obtaining financing that there is now," he said.
Many small builders have been unable to obtain construction loans or lost their financing in mid-project. That has prodded NAHB to support federal legislation that would make $15 billion in lending guarantees available for private builders.
Hard times also persuaded builders to postpone purchases of land they could prep for future development. It will take them that much longer to gear up production once the housing market improves.
Too, many builders went out of business in the bust, so there will be fewer companies out there to do the building. The survivors will confront a transformed regulatory environment, according to Howard, that will make new homes harder to build and more expensive.
"There is an increased focus on smart growth that will create regulatory barriers to the kind of sprawling development that has characterized a lot of recent building," said Retsinas.
The regulations come under two categories, according to Susan Asmus, NAHB's senior vice president for advocacy, covering where new homes are built and how they're built.
One category is storm water runoff. The Environmental Protection Agency tightened requirement governing how builders handle that. Builders will have to install controls such as catchments or retaining ponds that slow the flow of storm runoff into the local watersheds.
"It could add as much as $15,000 to $30,000 an acre in extra costs, depending on the soil," said Asmus.
Another proposed regulation mandates sprinkler systems in each new home. This is already state law, starting January 2011, in California, Maryland and New Jersey. That adds as much as $10,000 to the cost of construction.
Previous overbuilding one-time boom towns, such as Las Vegas and Miami, should provide enough inventory of like-new homes to counter any strong pent-up demand that breaks free.
It's the more constrained markets, where it's particularly hard to build -- such as New York, San Francisco and Seattle -- that will field the bulk of the new bubble problems, according to Retsinas. He, however, is less worried about the purchase market than about rentals, the usual entree for the young buyers expected to lead the new housing market charge.
Tuesday, June 15, 2010
Sunday, June 13, 2010
HP made news with its Manure powered data center.
NYTimes has an article on how the EPA is looking at the manure from Amish farmers and water pollution.
But farmers like Mr. Stoltzfus are facing growing scrutiny for agricultural practices that the federal government sees as environmentally destructive. Their cows generate heaps of manure that easily washes into streams and flows onward into the Chesapeake Bay.
And the Environmental Protection Agency, charged by President Obama with restoring the bay to health, is determined to crack down. The farmers have a choice: change the way they farm or face stiff penalties.
“There’s much, much work that needs to be done, and I don’t think the full community understands,” said David McGuigan, the E.P.A. official leading an effort by the agency to change farming practices here in Lancaster County.
There is an extremely low chance that HP could talk to the Amish to solve their manure problems with a data center.
Water supply is what has the EPA looking at the Amish.
Last September, Mr. McGuigan and his colleagues visited 24 farms in a pocket of Lancaster County known as Watson’s Run to assess their practices. Twenty-three of the farms were plain sect; 17 were found to be managing their manure inadequately. The abundance of manure was also affecting water quality. Six of the 19 wells sampled contained E. coli bacteria, and 16 had nitrate levels exceeding those allowed by the E.P.A.
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