Commentary By Peter Schiff

As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit's depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn't have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy.

The argument that energizes the pro-Detroit camp is that the government should extend the same courtesy to the rank and file auto workers that it lavished upon the fat cats of Wall Street. While two wrongs certainly do not make a right, the fact remains that the Wall Street firms are still floundering despite the bailouts. What's worse, the money spent was either printed or borrowed from abroad. Both options are destructive to America.

When it comes to bailouts, the real discussions are not centered in Washington but rather in Beijing, Tokyo, and Riyadh. With no money of our own, our ability to bailout our own citizens is completely dependent on the world's willingness to foot the bill. While I am sure that Bush and Paulson are doing their best to convince the world that open ended financing of the United States is in the global interest, my guess is that, unlike Congress, our foreign creditors will see through the self-serving nature of our plea.

Like any bailout, our foreign creditors should consider the moral hazard of rewarding bad behavior, and the old investment adage of not throwing good money after bad. By continuing to "lend" us money, the world is merely delaying the necessary rebalancing of our upside down economy. By continuing to subsidize our reckless and outsized consumption, the world merely delays the inevitable re-balancing and exacerbates the underlying problem at the root of the current global financial crisis.

If Washington bails out General Motors, the funds will never be recovered. GM will simply burn through the bailout money and then be back for more. Talk of designing a new fleet of "green" cars that will pave the way to profitability by spurring a new buying spree is simply delusional. Given the staggering "legacy" costs of health care and pensions for millions of current and former workers, Detroit cannot produce cars profitably. Unless these costs are seriously brought down, and there is very little chance that they will be, Detroit will remain a bottomless money pit.

Similarly any money that the world lends to America to finance more consumption will never be repaid. We will simply blow through it, and be back, hat in hand, begging for more. As we painfully learned in the housing bust, lending people money that they cannot pay back makes no sense. This applies equally to foreign central banks lending to America as it does to commercial banks lending to homeowners.

So for the same reasons that Washington should not bail out General Motors, the world should not bailout America. Like GM, our economy is in desperate need of a restructuring. Spending must be replaced with savings, and consumption with production. The service sector must shrink and manufacturing must expand to fill the void. The dollar must fall, wages in America must be brought down to a competitive level, and hopefully government spending and burdensome regulation can be reduced.

This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

Visit my online real estate resource at www.PhilDeCarolis.com

By Ilyce R. Glink

Q: We are a California limited liability company (LLC) and would like to know if we can purchase a residential property under the name of the company. We plan to use it as our primary residence and also conduct our business from there. Please tell us the pros and cons of making this purchase.

A: There are probably too many issues to discuss in this answer, but I'll give you a few to start mulling over.

If the home is your primary residence, you may lose tax benefits by placing the home in a limited liability company. For one, under current tax law, if an individual owns a property, that individual can sell the property and exclude up to $250,000 from federal income taxes if that individual used the property as his primary residence for two out of the last five years ($500,000 can be excluded from gain for married couples).

If the LLC owns the property, the LLC is usually not considered a person for purposes of the primary-residence exclusion. In your case, if the LLC is disregarded for purposes of your owning the home in a similar manner as living trusts are disregarded, you would be entitled to federal income tax benefits as if you owned the home in your name. But for local property tax purposes and state income tax purposes, you may find that those taxing authorities might not allow you to benefit from reductions in state income taxes and local property taxes for homes owned by individuals (also known as the homestead exemption).

Many local governments won't give those real estate tax benefits to corporations and companies. These real estate tax benefits can be substantial and you might not want to miss out on them.

If you run your business out of this home, you may run afoul of zoning laws in your municipality. In some cities, you may not use more than 10 percent or 15 percent of a home for a home office if the property is located in a residential neighborhood.

For federal income tax purposes, if the home is owned by the LLC, you might create unusual circumstances in your ability to deduct all of the real estate taxes, amortize the entire value of the home, or to deduct the entire amount of the interest payments for the loan on the property on your federal income tax form, particularly if you use all or part of the home for your business.

Since you have indicated that the home will be your primary residence, it's unclear why you would want to hold the property in the name of the LLC.

If your intent is to protect your personal assets from liens and creditors' claims against your business, you might be making a mistake by having the home owned by the LLC. If your business is sued and loses in litigation, the assets of your business will be at risk. If you don't have adequate homeowners insurance and someone slips and falls on your property, the home will still be at risk and you could lose it.

On the other hand, if the LLC runs its business separately from what you and your wife do in the business and if the LLC is sued, the litigation will risk only the assets held by the LLC. You could lose the LLC, but you shouldn't lose the home. (Still, it seems as though you'd be taking a fairly big risk by mixing your personal assets with the assets of your business.)

Finally, if you're planning to own the home and obtain loans on the home, you may find it difficult to get a lender to give you a loan on the basis that the home is a primary residence. Because the home is owned by the LLC, most lenders may treat the home as an investment property and you may end up having to pay greater costs to close the loan on the property and probably pay a higher interest rate on the loan.

Talk to an estate planner to help you solve some of your issues. You'll probably find that he or she feels the home should be owned separately from the business but that you and your wife can lease a part of the home to the LLC. The rent would be income to you on the personal side, but you would be able to deduct some of the home expenses as business expenses due to the rental of that portion of the home to the LLC business.

http://www.inman.com/buyers-sellers/columnists/ilyceglink/drawbacks-mount-when-owning-home-in-llc

By Ilyce R. Glink

Q: My husband and I are building a house with a big, new construction company. We put down $10,000 in earnest money when we signed the contract back in June.

The contingency clause in the contract said the earnest money was refundable if we failed to qualify for a mortgage within 30 days of signing the contract. We went with the builder's in-house lender (to get all the incentives) and were approved.

At the same time, we were in the process of selling our house. But our buyer is having trouble getting his mortgage in order. When we qualified in June, it was for a low-down-payment mortgage. We hadn't yet sold our house, so we couldn't show that we had enough proceeds for a larger down payment.

We're supposed to close on our house in the next couple of weeks. The builder's lender called a few weeks ago to say the mortgage we qualified for originally is no longer available. Apparently, we won't qualify for a mortgage unless we put a lot more money down.

We won't have any additional cash available until our house closes, which may not happen in time for our new construction closing. I'm wondering if we can get our earnest money back if we can't sell our house.

The builder's lender qualified us; nothing has changed in our circumstances; and now they are unqualifying us through no fault of ours. Any advice you can give would be very much appreciated.

A: When you say nothing has changed, you probably mean nothing has changed in your life. Unfortunately, a lot has changed in the national and international credit markets. One result of the credit crisis is that a lot of mortgage lenders have stopped financing loans. Another result is that today mortgage lenders are requiring higher credit scores and bigger down payments for loans.

What can you do now? You should immediately contact your attorney who can read through your contract and see if these events would entitle you to back out of the deal.

If not, you should have a frank discussion with the builder so that he understands you will not be able to close on the deal without having a loan in place. In some parts of the country, bigger builders are stepping up to provide financing to buyers so that they can close on their new home. The builder may also be able to work with the lender to arrange alternative financing.

If your builder isn't willing to help you out, and your contract permits the builder to keep your down payment, then it's entirely possible you'll lose your cash. On the other hand, it's also possible that the home is worth less than what you originally agreed to pay. If that's the case, it might be a wash down the line when you finally sell your home and buy another one.

One last item to note: In some parts of the country, home builders have gotten into trouble by assisting buyers with the names of specific lenders to use in the purchase of their new construction homes. Some of the builders may have a financial incentive to use these particular lenders, and in some cases, attorneys for these buyers have claimed that the buyer should not be held responsible for the changes in the marketplace when the buyer used the lender recommended by the builder and that financing falls through, as in your case.

You might want to do a little searching in your area to see if there are any attorneys that are arguing that issue and work with them to get your money back.

Q: In a recent column regarding a female homeowner who died without a valid will, you stated that if she had a spouse the house would be divided between her spouse and any children.

Why wouldn't it go completely to the spouse? Does this differ by state law?

A: State laws differ on the distribution of an estate when there isn't a will. In some states, the entire estate may go to the spouse, but more commonly it is divided between the spouse and children.

For information on what will happen to your estate if you die without a will, please see www.mystatewill.com. But the easy way to get around this is to write and execute a valid will, or do some serious estate planning. I recommend you do both.

http://www.inman.com/buyers-sellers/columnists/ilyceglink/builder-buyer-you-no-longer-qualify

By Ilyce R. Glink

My mailbox has been filled with letters from readers who wonder if the real estate market will reset itself now that the presidential election is over.

"Can we expect the next four years to bring us a better real estate market? Will my house go back up in value," one reader wrote.

Eventually, the real estate market will hit bottom and turn around. Perhaps it has already hit bottom (one can only hope), and now we are waiting for the "bumpy bottom," as Alex Perriello, president and CEO of the Realogy Franchise Group, put it at the launch of its newest franchise, Better Homes & Garden Real Estate.

But as president-elect Barack Obama said in his acceptance speech earlier this month, there is a lot of work to be done, and not just by policy bureaucrats in Washington, D.C. Fixing the U.S. economy will require a shared responsibility between corporate America, federal and state governments, and U.S. residents.

While there's no magic bullet, there are some suggestions floating around that might help the real estate market get moving again. The dialogue is just beginning and I encourage you to e-mail me with your own comments and suggestions, which I'll include in a future column.

For what it's worth, here are some suggestions worthy of consideration:

Keep people employed. If you don't have a job, you can't pay your bills. If you want to hold down the level of mortgage defaults, you have to keep people employed.

One way to do that is for the federal government to provide the funding for some major infrastructure programs all over the country, but particularly in places where the economy is suffering and foreclosures are the highest.

The country has plenty of infrastructure needs. Many infrastructure projects have completed planning and are just waiting for funding to be approved. Providing a big check for infrastructure construction will help fund necessary jobs and hold down unemployment. It should pay longer-term benefits than another one-time stimulus check.

Allow people with poorer credit to refinance their mortgages. FHA loans are available to fund loans for those with credit scores in the upper 500s. That's low enough to give most borrowers the chance to refinance out of their adjustable-rate mortgages (ARMs).

Still, there are those who have missed a payment or two, and whose credit scores are now in the low 500s, who would like to get out from under their now-unaffordable pay-option adjustable-rate mortgages resetting at 10 percent or higher.

While I do believe there are some folks who used pay-option ARMs and other exotic loans to purchase homes they could never afford, a separate fund could be set up to refinance these mortgages, provided that the homeowners now have enough income to afford a regular 30-year fixed-rate mortgage at some low interest rate. In return, the government could institute an equity-sharing arrangement should the houses be sold within the first five years of granting the loan. This should help promote affordability and stability in neighborhoods that need it most.

Change the rules regarding refinancing of newly converted investment properties. When people are out of work or can't sell their homes, they will try to rent them out, thus turning their primary residences into investment properties. But make no mistake: Most of these folks would sell these properties if they could.

As the owners of newly converted investment properties, they're no longer able to take advantage of low rates and refinancing programs. In fact, the market for investment properties remains rather frozen: If you can get a loan, you'd better have plenty of equity (north of 30 percent in many cases) and a wad of cash to pay fees and a much higher interest rate.

By changing the residential mortgage lending rules to include properties that were primary residences within the past 60 to 180 days would provide some financial relief to homeowners who have moved to take new jobs -- and hopefully hold down the number of foreclosures.

And as part of the shared responsibility:

Don't walk away from your mortgage. I've received many letters from homeowners who are wondering whether they should just walk away from their properties now that they are worth so much less than the mortgage. What local real estate markets don't need is to add to the number of homes going into foreclosure.

If you can refinance your mortgage to make it more affordable, you should do that. If you have to temporarily take a second job to keep enough cash coming in, then you should do that. There are long-term repercussions of going into foreclosure that should make this a final-resort option.

If you can't sell your property, but you can afford your payments, consider staying in it for the next couple of years until the market stabilizes. Let other homes for sale in your neighborhood get absorbed by bottom-feeders and real estate investors while you shore up your financial house.

Again, these aren't the only solutions worth considering. There is an interesting proposal floating around to have the federal government renegotiate mortgages on a grand scale using the model that the FDIC has used with the IndyMac Bank loans. Another proposal making the rounds would turn the $7,500 first-time buyer tax credit (which must be paid back at a rate of $500 per year or in full when the house sells) into a much larger tax credit that would not need to be repaid.

http://www.inman.com/buyers-sellers/columnists/ilyceglink/key-proposals-revive-real-estate

By Ilyce R. Glink

Q: During the course of our marriage, my husband and I purchased a home and later took out a second mortgage on the house. In the divorce agreement, I was awarded the house and have subsequently been making the regular monthly payments on the primary mortgage.

As the second mortgage was used to pay off items that were mostly in his name, he agreed to pay the second mortgage upon separation. You should know that neither the second mortgage account nor responsible party was specifically named in the divorce agreement.

For almost four years, he has been making the monthly payments. However, a few months ago, he decided to stop making payments and defaulted on the loan.

I have been informed by reliable sources that I do not have adequate legal recourse to force him into continuing to paying this loan. Yet, I do not feel that after all this time I should be forced into a position of making these payments (nor do I feel that I can afford them as a single mother).

After speaking with some co-workers, I was informed that should he or I neglect to pay this loan, the company would place a lien against the house that would have to be paid at the time of sale. Is there any other recourse that I have in this situation? Due to other issues with my ex-husband, my credit is already very poor, thus the damage of default could not possibly make it any worse.

Also, I intend to sell the house in the next two years. By that time, there should be enough value in the home to cover both the primary and secondary mortgages. How hard is it to settle a lien on a home? What happens if I go to sell the house and the company has not yet placed a lien on the home? Can I still sell the house without paying off the loan? Can I still be sued for the amount of the loan at a later time?

A: I don't know where you live, but your co-workers are misinformed about at least one thing: The second lender could force you into foreclosure if it wanted. More likely, the second lender already has a lien against your home. When you took out the second mortgage, it became a lien on the home. When this house sells, you will not get any proceeds until both of your lenders have been paid off.

You and your divorce lawyer appear to have made a serious mistake by not having the loans specifically named in your divorce agreement. But beyond that, if you are a co-signer of the second mortgage, you are responsible for that loan even if the proceeds were used by your husband to settle his own debts.

Had you named the loan and responsible party in your divorce agreement, you might still be in the same place, but you might have additional legal standing to go back to court to force the issue.

Is your ex-husband still listed on the property as an owner? Is he listed on both mortgages as an owner? If so, then he has killed your credit as he has killed his own -- probably a small comfort. Hopefully, your ex-husband has given up any legal interest he had in the house.

If you feel you can't afford to pay the second mortgage bill, you have a few choices: You can ask the lender to renegotiate the terms of the payment; you can engage in free budgeting services from a reputable credit counseling agency, such as CCCS of Greater Atlanta, to figure out how to make your income go farther; or you can get a second job.

For more information on any legal options you might have, as well as what liabilities and responsibilities you have based on the documents you've signed, please talk to a qualified real estate attorney.

You can also go back to the divorce attorney who assisted you and determine whether you can reopen the divorce proceeding to add a provision to the divorce decree that would make your former husband responsible for the second mortgage. While reopening the divorce judgment might not prevent the lender from foreclosing on the home, it might buy you some time until you decide to sell the home or to entice the second lender into making the loan payments manageable for you.

Q: My siblings and I received property from our mother through a quitclaim deed. She has since died. The property is in West Virginia, but we live in Ohio. We didn't sign the deed nor was it ever recorded through the local clerk of courts.

Is this quitclaim deed valid? If it is, which state law has precedence: West Virginia, where the property is and where my mother lived, or Ohio? Our brother passed away two years ago; his wife claims that she inherited his one-seventh ownership of the property. She does not want to relinquish rights and we are looking for a loophole.

A: From your question, you seem to imply that your sister-in-law has a claim to the property if the quitclaim deed is valid, but if the quitclaim deed is not valid, she might be out of luck.

It's unfortunate that you feel the need to find a "loophole" to deprive your sister-in-law of her share of the property.

I guess you need to see what your mother's intent was when she gave all of you the property and signed the quitclaim deed. If her intent was to have each of her kids receive a piece of her property and now due to terrible circumstances once of your brothers has died, his wife would probably be entitled to his share of the home.

You might be right that there may be a loophole for you to use. But you'll need to consult with a real estate attorney in West Virginia to determine if the quitclaim deed that was unrecorded during the lifetime of the grantor is still valid.

In some states, if a deed is not recorded promptly after delivery to the recipient, that deed could be presumed to be invalid or other people that might claim an interest in the home might have a claim against the home, which could trump the ownership interest of the people named on the deed.

What some people don't realize is that a properly prepared and delivered quitclaim deed will transfer the ownership of a home even if the deed isn't recorded. The key, however, is that some jurisdictions penalize the party that fails to record the deed. Furthermore, if the deed was prepared and signed but never delivered to the intended recipients, you might be able to claim that the deed was invalid, particularly if the proper documentation that might have been necessary for the quitclaim deed was never signed by your mother.

Some states have laws in place that will protect other purchasers of the property if they record a deed for the property prior to a deed that floats around without ever being recorded.

Some states also want to collect taxes and other fees on the recording of the deed. And in some other jurisdictions, when the deed is recorded, property taxes can increase substantially for the new owner.

Due to all of these issues and state laws, you need to determine if anything happened to the title to the home from the time your mother executed the quitclaim deed to the time of her death. You'll also need to determine if the executor of her will in West Virginia has taken any action in court to dispose of the property.

When your mom died, her will, if she had one, would have dictated who received what share of her assets. If she left all of her assets in her will to her children equally, then your late brother would have received a share and it's likely that his wife, or, at the very least, their children, would have inherited his share of the property after his death.

If your mom died "intestate," or without a will, the laws of the state in which she died would determine who received what assets.

I'm sorry, but there is no simple answer to your question. You'll need to do some additional research on the title to your mom's home to see if anything changed on the status of the probate of your mom's will, and on the status of the quitclaim deed.

http://www.inman.com/buyers-sellers/columnists/ilyceglink/neglecting-second-mortgage-incites-f-word

By LOU HIRSH
The Press-Enterprise

A climate still dominated by foreclosures sparked a near doubling of Inland home sales in October compared to a year ago, but median prices dropped more than 35 percent, according to figures released Tuesday by research firm DataQuick Information Systems.

Also Tuesday, a building industry group reported that housing affordability in California continued to improve in the third quarter, but the state still has five of the 10 least-affordable markets in the nation.

DataQuick shows Inland prices continuing their downward trend, and sales were still at an unseasonably high level across the six-county Southern California area as the market attracted bargain-hunters.

The median home price in Riverside County fell to $230,000 in October, a drop of $7,500 from September and a decline of 35.4 percent in the past 12 months. In San Bernardino County, the median price declined to $200,000 from $205,000 the previous month, but fell 39.4 percent from October 2007.

The Southern California median sale price, the level at which half sold lower and half sold higher, fell to $300,000, compared with $445,000 a year ago. The price marked a 67-month low, as foreclosures once again accounted for half of all resales, DataQuick reported.

DataQuick analyst Andrew LePage said about 68 percent of Riverside County sales and 65 percent of San Bernardino County sales in October were foreclosure-related. Both counties were well above the 51 percent figure for Southern California as a whole.

There is evidence throughout Southern California, including the Inland region, that in neighborhoods where more than half the sales were foreclosure-related, even those sellers who weren't in foreclosure paid a price by taking a lower offer.

"We've seen that (non-foreclosure) sellers probably pay a 10 to 15 percent penalty on the final sale price," LePage said, compared with comparable sellers in areas not as impacted by foreclosures.

A total of 21,532 new and resale houses and condos closed escrow in Southern California in October, the highest for any month this year. Last month's sales rose 5.0 percent from 20,497 in September and jumped a record 66.7 percent from 12,913 in October 2007.

Also on Tuesday, the Sacramento-based California Building Industry Association pointed to national data showing increasing home affordability in most areas of the state. But it reiterated its past calls to government leaders to increase the base of affordable housing by streamlining the home-building process and lowering development impact fees.

The builders group referred to a quarterly affordability index compiled by the National Home Builders Association and Wells Fargo, which measures about 200 U.S. metro areas based on the share of homes that are affordable for median-income buyers.

The Inland region was the nation's 64th least-affordable region in the third quarter, with just 48.4 percent of homes considered affordable. However, that was a big improvement from the second quarter, when the region ranked 35th least affordable.

Five California communities ranked among the 10 least affordable: San Luis Obispo (2nd, 13.4 percent), San Francisco (3rd, 16.6), Los Angeles (5th, 20.7), Santa Cruz (7th, 22.8) and Napa (9th, 23.2).

The California Department of Housing and Community Development has estimated the state needs to be building around 230,000 units per year to keep up with population growth. The builders group estimates less than a third of that number will be built this year.

Steve Johnson, a director in the Riverside office of real estate consulting firm MetroStudy, said there likely will not be an uptick in new Inland homes being built until early 2010. Local builders are still working to sell off their unsold inventory of about 3.6 months of supply, which at more than 3,600 homes is about double what it was at the same point of 2005.

Johnson said bargain hunters and investors are currently drawn primarily to resale homes in older neighborhoods, sometimes being sold in the foreclosure process at up to 50 percent off their original list prices.

Home Sales
County	Home sales Oct. 2007	Home sales Oct. 2008	Percent change	Median price Oct. 2007	Median price Oct. 2008	Percent change
Los Angeles	4,368	6,824	56.2	$500,000	$355,000	-29.0
Orange	1,700	2,833	66.6	$573,750	$420,000	-26.8
Riverside	2,377	4,619	94.3	$356,300	$230,000	-35.4
San Bernardino	1,603	2,856	78.2	$330,000	$200,000	-39.4
San Diego	2,327	3,598	54.6	$460,000	$323,500	-29.7
Ventura	538	802	49.1	$535,000	$375,000	-29.9
All SoCal	12,913	21,532	66.7	$445,000	$300,000	-32.6
Source: MDA DataQuick

http://www.pe.com/business/realestate/stories/PE_Biz_S_housing19.3a1535c.html

By LESLIE BERKMAN
The Press-Enterprise

Linking financially troubled homeowners with legitimate counselors so they don't get scammed is the first step that should be taken to stop the flood of foreclosures weighing down the Inland economy, a western Riverside County group of business and government leaders decided Monday.

"I believe the only way we can make a dent in keeping people in their homes is to get regionwide awareness," Tony Mize, president of Workforce Homebuilders LLC and first vice chairman of the Inland Empire Economic Partnership, said at a meeting of the regional task force in Riverside.

The group formed in July to find strategies that local businesses and governments could use to stem the tide of foreclosures, prevent associated blight and restart housing construction.

Mize and other task force participants said they have seen an increase in fraud against homeowners who pay entrepreneurs thousands of dollars to avoid foreclosure but receive nothing for their money.

They said a concerted marketing effort is needed to let people know about free counseling provided by nonprofit agencies such as the Fair Housing Council of Riverside County, Neighborhood Housing Services and Springboard.

Al Arguello, Inland Empire market president for Bank of America, said a San Diego organization called the Housing Opportunities Collaborative coordinates counseling services to modify mortgages and counsel first-time home buyers in San Diego. He said it could set up a similar model in Riverside County.

At Monday's meeting, the task force concurred with a proposed list of strategies that included creating and maintaining a database of houses in the foreclosure process; identifying the best kind of ordinances and code enforcement techniques to prevent neighborhood blight; and incorporate foreclosed homes into existing local first-time buyer programs.

The task force also agreed that local governments should consider buying foreclosed homes from banks at less than market value. They could hire contractors to repair the properties and then sell them to owner-occupants, rather than let them fall into the hands of investors who would convert them to rentals.

Arguello said Bank of America, which has acquired Countrywide, is willing to make repossessed houses available for sale to municipalities and nonprofit organizations up to 10 days before they are advertised in the multiple listing service. He also said the bank would consider selling properties in bulk to municipalities that expect to receive federal funds for such purchases.

FEE CUTS PROPOSED

The most controversial proposal before the task force, and which was recommended in a report by Inland economist John Husing, calls for temporarily reducing development fees so that local home builders can produce houses affordable to buyers in today's price-restricted market.

Task force members agreed to go forward with a study of the fiscal and legal consequences of reducing government and special fees by 80 percent and school fees by 40 percent.

Ted Weggeland, a director of the Historic Mission Inn Corp, which owns the Mission Inn, argued that the fee reduction should have high priority because home building and construction-related employment are vital to the region's economic health.

However, Belinda Graham, Riverside's interim assistant city manager, said any fee cuts should be done carefully so as not to create a long-term deficit for roads and other infrastructure. The task force also agreed there is a need to study alternative ways to fund capital improvements. One possibility, they said, would be to adopt conveyance fees that would be collected when any home, new or existing, is sold.

The proposals that the task force approved will be reviewed Thursday by a technical advisory committee of the Western Riverside Council of Governments, which includes representatives of 16 cities, the county, two water districts and the March Joint Powers Authority.

That panel's recommendations would be forwarded Dec. 1 to the council's executive committee for consideration.

Gary M. Christmas, Riverside County chief deputy executive officer, said some of the task force recommendations could be implemented by the regional council and others by individual cities and the county.

http://www.pe.com/business/realestate/stories/PE_Biz_S_housingplan18.3bcc27a.html

By JIM MILLER
Sacramento Bureau

Legislation proposed last week by Assembly Democrats to pressure lenders to help struggling borrowers stay in their homes will not happen this month, and possibly not until the new year.

The bill was prompted by concern about the high number of foreclosures in the Inland area and around the state. Democratic leaders had pledged a floor vote as soon as this week.

But the measure stalled at its first committee hearing Monday after technical questions about the bill and strong opposition from the mortgage and banking industry, which said its requirements were too onerous.

Riverside and San Bernardino counties have some of the highest foreclosure rates in the state. Statewide, hundreds of notices of default are filed daily, on average.

The bill would impose a 120-day moratorium on starting the foreclosure process on higher-cost mortgages. It would exempt those loans in which the lender is working with the borrower to restructure the loan to achieve a debt-to-income ratio of no more than 38 percent.

"The goal of this bill is not to put in a moratorium. It's to increase loan modifications," the bill's author, Assemblyman Ted Lieu, D-Torrance, said during a nearly three-hour hearing of the Assembly Banking and Finance Committee. No vote was taken.

Gov. Arnold Schwarzenegger proposed a similar plan this month. Both the governor and Assembly Democrats linked their proposals to the state's massive budget problems during a special session that ends Nov. 30. A new Legislature takes office Dec. 1 and the governor could renew the special session.

Republican lawmakers, including those representing the Inland area, have generally opposed foreclosure-related legislation this year.

Assemblyman Ted Gaines, R-Roseville, the banking panel's vice chairman, called the proposal "socialistic." The bill would create an incentive for homeowners current on their payments to go into default, he said.

Industry groups contend that existing measures already are helping to reduce the number of default notices. Those include Senate Bill 1137, a bill passed this summer that requires lenders to try to communicate with borrowers facing foreclosure.

Jonathan Ross, a lobbyist for the state's mortgage bankers association, said the group opposes a moratorium on foreclosure proceedings. The proposed loan modifications could be too difficult to achieve, he said.

But consumer groups said the voluntary approach is failing to solve the problem. Millions of higher-cost loans are scheduled to reset to much higher rates in the coming months, likely leading to more defaults, they said.

"We've been at this for a year and the numbers continue to get worse," Kevin Stein, associate director of the California Reinvestment Coalition, said. "Time is of the essence here."

http://www.pe.com/business/realestate/stories/PE_News_Local_S_mortgage18.38f2204.html

Commentary By Peter Schiff

Before the current economic crisis became apparent to all, the most popular fable used to describe America’s uncanny economic resiliency was the story of Goldilocks. It was argued that our economy was skipping down a sunny path of moderate growth, low inflation and rising asset prices. However, a much better parable for our economy over the last decade would have been the story of Humpty Dumpty: a bloated, fragile shell perched on the top of a dangerously high stone wall. This week, all the government’s horses and all of its men scrambled to put Humpty Dumpty back together again. Here is a look at some of this week’s highlights:

The Mother of all Moral Hazards

No doubt prodded by the administration, Fannie Mae and Freddie Mac announced a new attempt to stop the fall in home prices and foreclosures through a loan modification program that would cap mortgage payments so that a homeowner’s total housing expenses would not exceed 38% of household income for home owners who are 90 days delinquent.

In a classic case of unintended consequences, the plan will encourage a massive new round of delinquencies and household income reduction as homeowners will jump through hoops to qualify for the program and maximize their benefit. Those who could conceivably economize to meet their existing obligations will now have a strong reason to forego such sacrifices. Those who are not 90 days past due will intentionally become so. In many cases, dual income families may decide to eliminate one job altogether as reduced mortgage payments combined with lower child care and other work related expenses will likely exceed the after-tax value of the lost paycheck.

Unfortunately, the last thing our economy needs is falling household incomes and even more bad debt. But that is precisely what this plan will give us.

To Bail or Not to Bail

With the Big Three auto makers now in a plainly visible death spiral, the automotive bailout debate is kicking into overdrive. The disagreement hinges on whether a bailout is necessary to support an important industry or whether the unprofitable dinosaurs of the past should be allowed to fail as America focuses on an information-age, service sector, and alternative energy future.

As usual, both sides have it wrong. The government should let the Big Three fail not because we no longer need an auto industry, but because we desperately do. What we do not need is the bloated, inefficient auto industry that we have today. By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages. The result will be a more efficient auto industry making cars that people around the world actually want to buy at prices they can afford. Such auto makers could conceivably be profitable and could become the cornerstone of a manufacturing renaissance in the United States. In contrast, Ford, Chrysler and GM are never ending money pits that threaten to swallow a good deal of our economy.

We Shopped and Dropped

This week, the bankruptcy filing by Circuit City and a profit warning from Best Buy, served as proof positive that America’s national shopping spree is over. As I have long said, the business model of importing cheap goods for Americans to buy with credit cards was unsustainable. We were told to “Shop till we dropped,” and we did.

Americans two primary sources of spending money, home equity extractions and unlimited credit card availability, have been shut down. With only dwindling paychecks to rely on, Americans are justifiably economizing. As a result, many more retailers will file for bankruptcy over the next few years, and those that remain solvent will only do so by drastically cutting their capacity.

In a desperate move to arrest this necessary process, Treasury Secretary Paulson announced his intention to use part of the $700 billion TARP (Troubled Asset Recovery Program) funds to re-liquefy consumer lending.

Paulson observed that “illiquidity is raising the cost and reducing the availability of car loans, student loans, and credit cards”, “creating a heavy burden on the American people” and reducing jobs. While all of this is true, this is precisely what needs to happen. Americans need to reduce their spending on all of these things, and market forces are in the process of bringing that change about. By encouraging even more borrowing, Paulson’s plan will aggravate the crisis.

Along those lines, our nation’s various bank regulators issued a joint press release this week that “encouraged” banks to make more loans and to reduce their lending standards if need be. Since lax lending standards are one of the primary reasons that those banks “needed” to be bailed out in the first place, it is lunacy to now encourage them throw good money after bad. More risky lending (and currently nearly all lending is risky) interferes with the market’s attempts to rebalance our economy along the lines that Paulson himself admits is necessary, and sows the seeds for even bigger bailouts in the future when this new crop of loans go bad.

Bait and switch

Reminiscent of his Bazooka maneuver, quick draw Paulson reversed course quickly with his decision to not use any TARP funds to buy the assets that the plan was specifically funded to procure. Instead, he will simply dole out the loot to his buddies on Wall Street and use it for whatever seemingly worthy initiative strikes his fancy.

Although Congress loves to grandstand about oversight, it has thus far shown no courage to interfere, or even question, the change in strategy. Paulson claims that he is simply rolling with the punches. The truth however, is that the original plan was flawed from inception, as I clearly pointed out in a string of commentaries following his proposal. How could the Treasury Department, with all its funding and PhD’s, not make similar predictions? Paulson is either a liar or completely incompetent. My guess is he is both.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

Visit my online real estate resource at www.PhilDeCarolis.com

By Ilyce R. Glink

Q: When my husband and I purchased our Georgia home in 2002, I wasn't working. The loan and title are in his name only. Is there any way to put my name on the title in case anything should ever happen to him? Is this something that could cause a problem for me if he should die?

A: In most states, you shouldn't have a problem having your husband transfer the title of the home from his name alone to him and to you as husband and wife with rights of survivorship.

If you and your husband have an agreement as to how the two of you should own the home, you should make sure to hold title in the manner you desire. This is particularly true if you decide to work with an estate planner or an estate attorney and create a living trust to hold the property. Then, you can put the title into the name of that trust.

If you decide to transfer title to both of you, you will need to have a document prepared to transfer title from your husband to the two of you or to an estate-planning trust. In some cases, most people will transfer title using a quitclaim deed, but in some cases a warranty deed may be a better option.

Both a quitclaim deed and a warranty deed can achieve the same result, but a warranty deed may carry forward the protections the owner of the property had under his or her title insurance policy that he or she obtained when purchasing the property and carry forward that protection, subject to the terms of the title insurance policy, to the new owners.

In some states, a quitclaim deed is not the right document to use. In some of those states where quitclaim deeds are not generally used, there are other documents under different names that can do the same job for you.

Your real estate attorney or estate attorney can advise you further.

Q: I have a quitclaim deed naming my mom, my two older brothers and me as the new owners of the house. The deed states that each of us owns the home with rights of survivorship. My mother and two older brothers have passed away. Am I the sole owner now?

A: If the person that signed the quitclaim deed was the rightful owner of the property, your mom, your brothers and you owned the property at the time the deed was transferred. If you held the property with rights of survivorship, as the sole survivor of all of the people named on the quitclaim deed, you should now be the sole owner of the property.

However, while it certainly seems as if you should be the sole owner of the property, there may be other circumstances out there that could change your situation. Some of these issues could include the loss of the property due to unpaid real estate taxes; the loss of the property due to a mortgage foreclosure action; or, if the property was abandoned for years, someone else might now have a claim on the property.

If your family has occupied and used the home continuously, you should be the owner. For clarity on this issue, you can go to a title insurance company in your area and request that they prepare a title insurance commitment for the property. That title insurance commitment should identify the owner of the property.

If you are applying for a loan on the property, your lender may order a title insurance commitment and that title insurance commitment should identify you as the sole owner of the property.

Q: I own two homes and share ownership with my brother of a third family house and property that is unoccupied. We inherited the third property from our mother this year. Can I deduct 50 percent of the property taxes on the inherited property from my federal income taxes?

A: In short, you probably can't deduct the real estate taxes on the inherited property.

That property is not an investment property so you can't deduct the taxes on that basis. You also won't be able to deduct the real estate taxes because the property is neither your primary home nor your second home. For now, you seem to be out of luck.

For more information, you might want to talk to an accountant or your tax preparer to see if there are other circumstances specific to your situation that might allow you to deduct those real estate taxes on your federal income tax form.

http://www.inman.com/buyers-sellers/columnists/ilyceglink/adding-wife-title-a-wise-move