7-31-09

 
7-31-09
Merced Sun-Star
Valley coalition wants med school sooner
Group on a 'listening tour' will give report to regents...DANIELLE GAINES
http://www.mercedsunstar.com/167/v-print/story/978969.html
The push for a UC Merced School of Medicine continued Thursday at a "community listening tour" meeting, billed by the Valley Coalition for a Medical School as an outlet to educate and inform the public about the medical school planning process and to provide residents an opportunity to express their views, interests and recommendations.
In a break from previous timelines for establishing the medical school, coalition leaders announced at the meeting that they hoped for an independent medical school at the 4-year-old campus by 2015, a full five years ahead of the campus' original plan.
The need is urgent, said DeeDee D'Adamo, of the Partnership for the San Joaquin Valley.
Residents in the Valley have the least access to physicians per capita of any region in California, with 31 percent fewer primary care physicians and 51 percent fewer specialists than the rest of the state.
According to several sources, the problem could get worse. The state of California faces a shortage of 17,000 physicians by 2015, years before the school could turn out any graduates.
"We can't just sit back and wait for that problem to solve itself," Carpenter said. "As residents we must get involved. We need to make sure the medical school becomes a reality for UC and for the Valley."
More than 50 local residents attended the meeting, ready to assist.
Dr. Tony Tam, a private practitioner and chief of trauma at Memorial Medical Center in Modesto, suggested planners concentrate on a way to reduce the financial burden on medical school graduates by considering a fast-track model. Doing so would encourage young doctors to continue in less-lucrative family practice fields.
Joan Voris, associate dean of the UCSF Fresno Medical Education Program and one of the planners for a UC Merced program, said that model was unlikely given the amount of information medical students must learn, but she didn't completely discredit the suggestion.
"We are really just beginning to talk about the nuts and bolts of what the curriculum will look like," Voris said.
One of the primary goals of the medical school is to train physicians who are culturally competent and who represent the diversity of the state and region.
"Beyond attracting individuals that look like the community, we need to maintain and further develop their language skills," suggested Marilyn Mochel, clinical director of Healthy House, an organization that provides medical interpreters among other services.
Everyone at the meeting voiced strong support for the school.
Mike Sullivan, CEO of Golden Valley Health Centers, said a medical school here would "simply lift" the quality of health care.
But "it's also about us building up the strength so we can compete for our fair share of dollars," for the program from Washington and Sacramento, he said.
After similar listening tours are completed in all San Joaquin Valley counties, organizers will compile a written report to the University of California Board of Regents.
Modesto Bee
Vacancies in Modesto among highest in state...J.N. Sbranti
http://www.modbee.com/business/v-print/story/800576.html
Apartment rental prices are down, vacancies are up and tenant credit-worthiness is declining, analysts report.
Rental prices across California fell 4.5 percent this spring compared with the same period last year, according to research firm RealFacts.
While Stanislaus County rents have remained fairly flat, vacancy rates in Modesto and Merced apartment complexes are among the highest in the state.
Fewer than 90 percent of Modesto apartments had tenants this spring, compared with about 94 percent a year ago and nearly 96 percent two years ago.
"It's definitely not going in a good direction," said Georgina Bockel, a West Coast consultant with RentGrow, which provides tenant screening services.
Bockel said occupancy rates of 93 percent to 97 percent are considered healthy for apartments, and anything below 90 percent is not good.
Merced occupancy rates also dipped below 90 percent this spring. Compare that with 2001, when more than 99 percent of apartments were full. Occupancy levels have been dropping since, according to RealFacts records.
It's not that rents in the region are high. The average California apartment dweller paid $1,382 per month this spring. Those in Modesto paid just $817, Turlock tenants paid $813 and Merced $732.
Northern San Joaquin Valley rents barely moved during this decade's real estate boom and subsequent housing bust.
More than 43,000 homeowners lost their houses to foreclosure in Stanislaus, San Joaquin and Merced counties the past three years. But relatively few of them appear to be renting apartments in the region.
Many of those foreclosed houses, in fact, have been purchased by investors and turned into rental homes. Those rentals now compete with apartments for tenants.
Apartment tenant applications nationwide have declined, according to a recent RentGrow report.
"The theme for the last 12 months has been lower year-over-year traffic by 10 to 20 percent, with some (apartment complexes) reporting traffic declines of 25 percent or more," RentGrow reported.
And prospective tenants are not as creditworthy as they used to be.
"On average, the applicants visiting leasing offices this year have weaker credit profiles than last year, continuing a trend that began in 2007," RentGrow found. "The U.S. economy has shed 5 million jobs in the past 18 months, and the foreclosure and banking crises have weakened the financial profiles of many individuals."
Bockel said apartment managers face the challenge of finding good tenants when applications are down and those who do apply aren't as financially qualified.
"They must look at their criteria (for screening tenants)," Bockel suggested. "Their scoring systems can be tweaked to increase occupancy rates."
Among the changes that RentGrow suggests landlords consider:
• Adjusting deposit levels for marginal credit profiles
• Adjusting the number of years that credit items are scored
• Removing foreclosure items from scoring
• Removing medical debts from scoring
• Adjusting rent/income ratio criteria
• Bolstering the tenant decision process with supplemental or alternative applicant data, such as civil court records and rental payment history records.
Fresno Bee
Tsunami coming?...Sandy Nax...News Blog
http://fresnobeehive.com/news/2009/07/tsunami_coming.html
When real estate broker Terance Frazier is asked about the projected next wave of foreclosures, he points to a chart compiled by his intern, Trent Souza.
Souza matched up scheduled auction dates at the Fresno County courthouse with government-imposed moratoriums and found, not surprisingly, that banks didn't repossess as many homes during those periods.
Then, he tallied up the number of new default notices and discovered that, barring more government intervention, the number of foreclosures could more than double between September, when the last moratorium expires, and year's end.
Frazier, who buys and resells foreclosures, said bank-owned properties have been piling up as lenders, adhering to moratoriums, postponed the auctions. Those could start hitting the marketplace in early 2010, increasing supply and possibly keeping prices down.
Frazier says the moratoriums delayed the recovery of the housing market and also fuzzy predictions. "We don't know what the government will do," he said. "Until that inventory hits the market, we won't recover."
It remains to be seen if real estate agents will be able to sell the foreclosures as quickly as they are now. Lower-priced foreclosures get multiple offers and many realty agents want more to sell.
But, experts predict more moderate and higher-end families to lose their houses during this recession, which is the worst in decades. At least 1 of every 10 home loans in Fresno County was at least 90 days delinquent in June, according to market tracker First American CoreLogic.
Banks say they are modifying more loans and doing more short sales, where they negotiate negotiate a sale with the owner before it goes to foreclosure.
But Frazier thinks lenders should reappraise properties, issue a new loan at a reduced interest rate for the true value and then either issue a no-interest mortgage for the remainder of the old loan, or arrange to be paid a cut of any profit from the sale of the house.
That would cut payments enough to keep the homeowner from defaulting and put money into their pockets - money that could be used to buy cars, appliances, eat in restaurants and otherwise stimulate the economy.
Stockton Record
City ranks 5th in foreclosures
Stockton ranked No. 1 from July 2007 to July 2008...Keith Reid
http://www.recordnet.com/apps/pbcs.dll/article?AID=/20090731/A_NEWS/907310311
STOCKTON - The city has shed its title as the nation's epicenter of foreclosures, and a steady decline in filings over the past 12 months could indicate the county is nearing the bottom of the housing market, experts said.
Statistics released Thursday by the Irvine-based RealtyTrac U.S. Foreclosure Report shows Stockton at fifth in the national foreclosure rankings for the first half of 2009 with 5.64 percent. The city ranked No. 1 in foreclosures from July 2007 to July 2008 but began to give way to other metropolitan areas in the second half of 2008, according to RealtyTrac.
Las Vegas, another city that experienced rapid growth over the past decade, now ranks No. 1 in the nation.
"The good news for Stockton is that this doesn't appear to be a one-time blip in the data, but a steady decline in foreclosure filings tracked over a good period of time," RealtyTrac spokesman Daren Blomquist said. "The interesting thing is, it's not just areas like Stockton and Modesto that are declining, but other hard-hit areas like Detroit and Cleveland are on the decline, too."
In contrast, new markets such as Provo, Utah; Portland, Ore.; and Boise, Idaho; are becoming new foreclosure hot spots. Foreclosures in those areas have likely been fueled by unemployment rather than subprime and adjustable rate loan practices that led to California's housing collapse, Blomquist said.
Las Vegas led the nation with a 7.45 percent foreclosure rate, which means out of every 100 homes, 7.45 have at least one foreclosure filing. Following Las Vegas are Cape Coral, Fla. (7.20 percent), Merced (6.89 percent) and Riverside (5.73 percent). Modesto ranks sixth and Sacramento 15th in a top 20 dominated by 11 California metro areas.
In Stockton, there were 12,700 foreclosure filings in the first half of 2009, a dip of nearly 4 percentage points from the previous six months and 13 percentage points form the first half of 2008, according to RealtyTrac.
"It's certainly a good sign for the city of Stockton, but foreclosure troubles are not over by any means," Stockton's Deputy Director of Housing Bob Bressani said. "On the positive side, this is in part a result of Stockton's portion of the subprime mortgage mess coming to an end and other cities are catching up."
In other words, Bressani said, Stockton was among the first areas to be hit hard by foreclosures, thus it should be one of the first in line to rebound.
Fueling optimism of a real estate turnaround in San Joaquin County, Tracy has been listed the eighth-hottest investment market by an online real estate analyst www.smartzip.com, a statistics-based company that measures an area's real estate affordability, crime, school rankings, lifestyle rankings and employment potential.
"It boils down to fundamentals. When you look at Tracy and even Stockton, those markets have strong affordability ratios and the ability to outperform other investment markets in the long run," said the Web site's market research director, Avi Gupta.
Investment possibilities in a county where the median home price has dropped to $155,000, and the slight decrease in foreclosures brings hope to community leaders.
"Foreclosures and unemployment rates are still way too high in the Central Valley, but I'm hopeful that we could start to see the market stabilize," said Rep. Dennis Cardoza D-Atwater. "This is a great place to live, and I think the housing prices in the Central Valley are underpriced. I think when the market starts to firm up, it is going to move pretty fast in the positive direction."
Los Angeles Times
California's default rate soars to 9.5%
Delinquencies in June are up sharply from a year ago, when 6% of borrowers were behind on their loans...Peter Y. Hong
http://www.latimes.com/business/la-fi-default31-2009jul31,0,7489665,print.story
About 1 in 10 Californians with a home loan is now in default, and there's growing evidence that the mortgage meltdown is spreading to commercial real estate.
The home mortgage delinquency rate -- the percentage of borrowers who have missed several payments and are in the first stage of foreclosure -- climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.
The staggering number of home mortgage defaults probably will lead to large numbers of foreclosures through at least this year, housing experts say.
"It's probably a given we'll see a high number of foreclosures in the next couple of quarters due to the level of defaults plus the recession and jobs lost. There's plenty more pain to come," said Andrew LePage, an analyst for real estate research firm MDA DataQuick of San Diego.
Mortgage defaults are more likely to result in foreclosure when borrowers owe more on their homes than they are currently worth -- commonly called being "upside down" or "underwater" in industry lingo.
That's the case for many in California who bought homes during the real estate bubble, often with little or even no money down.
When distressed borrowers have equity, they often can sell the property to cover the outstanding mortgage. For upside-down borrowers, that's usually not an option.
In recent months, about 60% of California mortgages in default ended up foreclosed, LePage said.
Foreclosures should pick up even more now that various government moratoriums and voluntary foreclosure freezes by lenders have expired.
But LePage said the rate of foreclosures may not reach the record level set last year if lenders increase loan modifications or approve more "short sales," in which homes are sold for less than their mortgage amounts.
The mortgage delinquency rate in June was up sharply from a year ago, when 6% of California mortgages were delinquent and 5.2% in Los Angeles County were in default.
In May 2009, the state default rate was 9.2% and the Los Angeles County rate was 9.5%, according to First American CoreLogic.
At the same time, the California Mortgage Bankers Assn. reported a surge in the number of commercial real estate loans in default. The total number of delinquent commercial loans remains small -- only 14 of 6,497 loans in the statewide survey -- but industry analysts say more defaults are on the way.
Low interest rates are enabling many commercial borrowers to stay current on loans, but that's certain to change if rates rise, and a high percentage of office, retail and apartment buildings are already underwater.
"There's no question we're going to see more commercial properties end up in restructuring; the question is how much," said Dan Fasulo, managing director of Real Capital Analytics, a New York research firm.
Fasulo said lenders are trying to avoid foreclosures on commercial properties partly because they don't want to take on properties they would have trouble selling.
"They're saying, 'If we foreclose now, what are we going to do with it?' This is the worst market to sell property in modern times."
Lenders have been making allowances to upside-down borrowers, hoping to keep from foreclosing long enough for commercial real estate values to recover, Fasulo said. There's now a popular street term for the practice, he said: "extend and pretend."
California's higher education system could face decline
The state's budget cuts to the three-tiered system -- UC, Cal State and community colleges -- may threaten the system's world-class reputation and the future of a generation of students...Larry Gordon, Gale Holland and Mitchell Landsberg
http://www.latimes.com/news/local/la-me-college-cuts31-2009jul31,0,4228979,print.story
California's master plan for higher education, the product of an era of seemingly limitless opportunity, was nearly 30 years old when Nicolette Lafranchi was born in 1988. By the time she turned 20 last year, the plan was working well for her, just as it had for tens of millions of students before her.
That's less true now.
In the wake of massive cuts in California's three-tiered system of public colleges and universities, Lafranchi discovered that she can no longer transfer from Santa Rosa Junior College to San Francisco State University in December, as she had planned, because midyear admissions were eliminated.
Nor is that necessarily her biggest problem. A fall statistics class she needs is full. Without it, she faces the possibility of forfeiting her health insurance, which requires her to carry at least 12 college credits. A scholarship she had been receiving was eliminated.
"It's a lot at one time," she said. "You know, it's kind of sad. You think it's the state of California and we're the next generation, we have to take over from the baby boomers, but we're going to be a group of uneducated people.
"It's not kind of -- it is sad."
California's higher education system, created to offer the opportunity for advancement to any resident, rich or poor, has seen hard times before. But the deep cuts imposed by the Legislature and Gov. Arnold Schwarzenegger this year are raising the question of whether the University of California, the California State University system and the nation's largest community college network can maintain their reputations for quality, or whether a public higher educational system that has been lauded as the world's finest may be in serious decline.
"This notion of the California dream, the idea that every adult could go to college, we've been hacking away at that during every recession for the past 25 years, and this year may well be it," said Patrick M. Callan, president of the San Jose-based National Center for Public Policy and Education. "We're coming out of this really tarnished."
The governor and legislative leaders acknowledge that the cuts will be devastating, but say they have no choice.
Already, campuses from Humboldt to San Diego are raising fees, shedding courses, slashing enrollment, and compelling faculty and staff to take unpaid furlough days. Class sizes are up, library hours are down, and long-held dreams for new programs and schools are on hold.
It's a far cry from the master plan's sweeping ambitions.
The state's college and university systems, which educate 2.3 million students annually, have roots in California's early days, but their modern history begins in 1960, when the educational plan was approved. It called for all state residents to have access to a tuition-free, public higher education, and outlined the mission of the three levels of colleges.
The higher education system has been credited with helping to shape and nurture California's economy and draw striving migrants from around the world.
"It had a magnet effect here for people who had ambitions for their children, that they could come to a place with good and virtually free public education all the way through college," said Richard White, an American history professor at Stanford University.
But White, who earned his bachelor's degree at UC Santa Cruz, said he is worried that the budget cuts and higher student fees could jeopardize that tradition. The state's public universities will remain "perfectly good universities but not what they were before." And that, he said, "is a real tragedy."
So how bad is it?
According to the Department of Finance, the state is expected to spend about $8.7 billion in general revenue funds on UC, Cal State and the community colleges in the coming fiscal year. That would be a 17% drop from two years ago, the department reported.
Federal stimulus money will offset some of that, but there remains much uncertainty about the level of funding from Washington, and how long it will last.
UC's state general revenue fund budget of $2.6 billion will be 20% less than it was two years ago. Cal State is seeing a similar percentage drop to about $2.3 billion.
California's community colleges are not taking quite as big a hit as the two university systems -- down 7% from the past two years, according to the state Legislative Analyst's Office. But they are feeling the pain too. And the reductions come just as the recession is driving newly laid-off workers to their doors.
Students at UC and Cal State say they worry that the cutbacks will lengthen the time it takes to graduate.
UCLA civil engineering major Jesse Diaz, 20, had hoped to finish his bachelor's degree in four years, with one extra quarter, but now expects it will take him five years.
"It's a trickle-down effect and now I have to wait to get those classes," said Diaz, who grew up in Covina.
Critics of the UC administration contend that UC is purposefully aiming the cuts at undergraduates to increase political pressure, and should instead tap other income sources, including endowments and research grants.
"I think it's a really dangerous game and the students are already going to suffer," said Bob Samuels, a UCLA lecturer who is president of UC's American Federation of Teachers union. This week, Samuels was among 67 UCLA lecturers who received warnings that they might face layoffs next year.
Several analysts said they expect raids on UC's blue-chip faculty, many of whom face up to 10% salary cuts.
"Don't be surprised if they leave," warned Barmak Nassirian, associate executive director of the American Assn. of Collegiate Registrars and Admissions Officers. "There's a big difference between having 10 Nobel Laureates on campus and having none." (Actually, UC Berkeley now has seven, the most among the UC system's 10 campuses.)
UC's enormous reservoir of federal and private research grants, hospital revenues and its formidable fundraising operations shield it more than Cal State from the pain of the state's deficits. State funding accounts for less than one-sixth of the UC system's overall operating budget.
California State University has been complaining about funding shortfalls and rising student fees for most of the decade, but the main issue until this year was lack of support for growth.
Now, Cal State Chancellor Charles B. Reed frets about plans to reduce the system's enrollment by 40,000 over the next few years, from a current population of 450,000.
Cal State also has raised student fees by a total of 32% for the coming school year and is imposing 24 furlough days for all employees, including college presidents.
The University of California system has taken a series of belt-tightening steps, including reducing freshman enrollment by 6% and hiking undergraduate fees by 9.3%.
"Everything's being looked at. Everything's on the table," said UCLA Chancellor Gene Block. "It will be a different place in a few years. We will be offering a smaller program."
He said he hoped that could be accomplished without diminishing the overall strength of the education, but said course offerings will be reduced about 10% this fall. Average class sizes will be about 60, up 20% from three years ago.
Throughout the UC system, which enrolls about 225,000 students and employs 180,000 faculty and staff, other austerities are underway. UC Davis is ending a program that trained veterinarians to become professors. UC San Diego has frozen faculty hiring. UC Berkeley has reduced library hours. And UC Riverside is considering delaying its plans for a new medical school.
UC President Mark G. Yudof said such painful steps do not mean the system has collapsed. "I don't think the sky has fallen yet," he said, "but I look at these trends and ask myself how long can you reduce course offerings and still hold your head up and say you are still offering students a high-quality education?"
Yudof and others say this is a time to consider fundamental changes in how UC works. Russell Gould, the Board of Regents chairman, is launching a commission to examine the university's future, including such ideas as: Should its campuses grow or shrink? Should they specialize in certain academic areas? Should majors or departments be reduced, merged or eliminated?
For now, UCLA chemistry professor Robin Garrell said, the campuses will live through this year's cuts.
"But," she said, "it's going to be hard to emerge whole or able to maintain that sense of optimism, the aggressive pursuit of discovery and innovation, and offer the innovative and wonderful experience for our students."
CNN Money
Big Texas bank on verge of failure
Guaranty Bank, which counts Carl Icahn as one if its backers, is teetering on the edge of insolvency. But it may not be easy for regulators to find a buyer...Colin Barr
http://money.cnn.com/2009/07/31/news/companies/guaranty.
headache.fortune/index.htm?postversion=2009073113
NEW YORK (Fortune) -- Guaranty Bank is hardly a household name. But the Austin, Texas-based thrift's looming failure is shaping up as a big headache for bank supervisors -- not to mention a black eye for Carl Icahn and others in the smart money set.
Guaranty (GFG) could be soon seized by the government in what would be the biggest bank failure in a year that has already had 64 of them. Last week, the bank warned investors to expect a federal takeover after regulators forced a writedown of its risky mortgage investments and a bid to raise new capital failed.
Guaranty has $13.4 billion in assets and operates 160 branches in Texas and California -- two of the three best banking markets in the nation, thanks to their size and population growth.
But the bank's capital problems and its smallish, scattered network of branches could detract from Guaranty's appeal, making it tough for regulators to find a buyer quickly -- or without substantial federal subsidies.
"This may not be closed as quickly as you think, since it will require bids and rebids," said Miami banking consultant Ken Thomas.
That means resolving Guaranty's failure is likely to be costly to the FDIC's deposit insurance fund, whose balance is at its lowest point in almost two decades.
The Federal Deposit Insurance Corp. isn't the only one taking its lumps. So have some big investors.
Shares of the bank's parent, Guaranty Financial, have dropped 97% since a group led by billionaire Texas hotel mogul Robert Rowling and Icahn, the renowned New York corporate raider, poured $600 million into the company in June 2008.
Other big Guaranty holders whose stakes stand to be wiped out include hedge fund managers David Einhorn, who was among the most persistent skeptics of Lehman Brothers before its collapse, and Dan Loeb.
"Relatively low franchise value and the fact that two big money investors already got burned on this bank may suggest less interest than with BankUnited," said Thomas, referring to the Florida thrift that failed in May and was bought by a group of private equity investors.
BankUnited had half as many branches and operated in only one state, but had a strong competitive position in the most lucrative counties -- something Guaranty lacks.
Despite BankUnited's relative attractiveness, its sale to investors led by vulture investor Wilbur Ross was hardly a walkover for the FDIC. The deal cost the FDIC insurance fund $4.9 billion.
A big tab on Guaranty would be costly to the deposit fund, whose balance was $13 billion at the end of the first quarter. The FDIC has estimated failure costs on cases since then at $11.2 billion.
A spokesman for the FDIC stresses that it has already set aside an additional $22 billion for failure-related costs in 2009, and adds that congressional action this spring gave the agency access to $500 billion in Treasury credit.
Though Guaranty has been around since 1988, it came public less than two years ago. Guaranty was part of the Temple-Inland (TIN) cardboard-box conglomerate until Icahn pressured the company to split up at the end of 2007. Guaranty shares were then distributed to Temple-Inland holders.
Guaranty's chief executive at the time, Ken Dubuque, assured investors that despite the gale force winds sweeping the financial world, the bank would be safe.
"We're keenly aware of the importance of good credit, disciplines and effective risk management, in good times and in difficult times," he said on the bank's first earnings conference call in February 2008.
But Guaranty's risk management soon was found wanting. The bank aimed to expand beyond lending to the builders of office buildings, shopping centers and houses to new areas such as small business and corporate energy lending.
Because its thrift charter obliges Guaranty to keep 70% of its assets in housing-related investments, the bank matched growth in other areas with expanded investments in housing. That, Dubuque said, is how the bank ended up taking on a giant portfolio of mortgage-backed securities, backed largely by option adjustable-rate mortgages in California and Texas.
"We needed to increase the size of the balance sheet, so that was a relatively risk-free way of doing it," Dubuque told investors in 2008. "We also have liked the returns in that business as well."
But securities backed by option ARMs are anything but risk-free, as investors have learned. Among institutions that dealt most heavily in those were Washington Mutual, the Seattle thrift that collapsed in September with $307 billion in assets, and Wachovia, which was sold to Wells Fargo (WFC, Fortune 500) later in 2008. Other big option ARM users included failed California savings banks Downey Financial and PFF.
Losses built at Guaranty over the past year, and Dubuque quit without explanation in November. In April regulators told Guaranty to raise more capital. When that effort failed, they told Guaranty to write down the value of the mortgage-backed securities by more than $1 billion. That move, announced this month, left the bank with negative capital of $748 million, according to filings.
Despite its many problems, Guaranty is -- for now -- operating as usual.
"We are open for business. We continue to work with our regulators," Guaranty said Friday in an emailed statement. "We are focused on providing the best customer service possible and believe we can avoid any disruptions to our customers."