5-25-09

 
5-25-09
Modesto Bee
Possible routes for transmission lines criticized by landowners...John Holland
http://www.modbee.com/local/v-print/story/716797.html
Lou and Judy Lombardi's walnut orchard stretches half a mile from their house to the Tuolumne River.
On a clear day, they can gaze upon Sierra peaks far from this spot west of Waterford.
The Lombardis see something else looming, and they don't like it. Their farm lies along one of the possible routes for a transmission line project across much of Northern California.
"It's going to devalue the land," said Lou Lombardi, who has farmed there for 31 years. "No one is going to want to buy here because they will be looking at the lines."
The 600-mile project, involving towers probably 100 to 150 feet tall, has sparked opposition along potential corridors near Del Rio, Escalon, Riverbank, Oakdale and other communities.
It is being planned by a partnership that includes the Modesto and Turlock irrigation districts. They aim to meet increasing demand, guard against outages and tap potential sources of renewable energy in the northeast part of the state.
"It fits our long-term goal of providing reliable electricity for the district," said Casey Hashimoto, the TID's assistant general manager for engineering and operations.
"It's more interconnected pieces to be able to move power," said Allen Short, the MID's general manager.
Short is chairman this year of the partnership, the Transmission Agency of Northern California. Along with the MID and TID, the lines would serve the Sacramento Municipal Utility District, the federal hydropower system at New Melones Reservoir, and city-owned utilities in Santa Clara and Redding.
The project, expected to cost about $1.3 billion, could be built as early as 2014.
The MID likely would bear about a quarter of the cost. The TID's share has not been determined. Neither has committed to construction.
The planners have roughed out 1,000-foot-wide corridors for study, although only a fifth of that would be needed for the lines.
Critics worry about degraded scenery and hissing noises near their homes. Farmers have raised concerns that the lines would interfere with aerial pesticide spraying and that tall trees would have to be trimmed. Some people fear that electromagnetic fields from the wires could cause cancer.
"The point is it's blight," said Lia McKeon, whose century-old ranch house east of Riverbank is in one of the corridors. "It's ugly. It's noisy. It's dangerous."
Option has some near Del Rio
The upscale Del Rio community would have transmission lines just to the south under one of the options. They would reduce property values, interfere with satellite television and threaten geese that winter along the nearby Stanislaus River, resident Will Iffland said.
"It's an imposition that's never going away, ever," he said.
The Lombardis said the project could affect as many as 12 of their 104 acres of walnuts, including tower footings and limits on spraying. They would prefer that the route go through less valuable land to the east.
"I see the point in having to put the grid together," Judy Lombardi said. "I question their position that it has to go through prime ag land."
Iffland suggests that the partnership upgrade lines in established corridors instead. He said lines also could be buried, which would increase the construction costs but reduce maintenance needs.
Bill Jackson, a cattle rancher and nut grower between Oakdale and Waterford, said he already has Pacific Gas & Electric Co. transmission lines on his land and does not see why it was included in the new project. He, too, prefers upgrading existing lines.
"I just don't think they are looking at all the alternatives for making this cost-effective," Jackson said.
Some upgrades are part of the project, but most of it is new lines.
Short said this stage of the planning process is intended to get the public's concerns into the open. The planners will take the submitted comments, due May 31, and refine the routes and other design features over the next two years.
"Obviously, they'll pick the route with the least impact to the environment and farming operations," the TID's Hashimoto said.
Owners would be compensated for use of their land, at amounts to be negotiated. Hashimoto said acquiring the rights of way through condemnation would be "a last resort."
The tower design also has to be decided, MID spokeswoman Kate Hora said. The options include the lattice style, often called an "erector" set, and single shafts. Towers typically are 700 to 1,400 feet apart and have 400- to 2,000-square-foot bases.
Federal standards cited
Short and Hashimoto said the project is driven in part by new federal standards for assuring reliable electricity.
The districts also are under a state mandate to get at least 20 percent of their power from solar, wind and other renewable sources. The target could increase soon to 33 percent.
Short said solar arrays that could be installed within TID boundaries would not be enough to meet the need. Lassen County is seen as a prime source for solar, wind and geothermal systems, and new transmission lines are needed to move the power to customers, he said.
Short said underground lines would be much more expensive than overhead wires. And he said customers ultimately will benefit from having public utilities build the lines at a lower cost than if private utilities did it.
Over near Waterford, along the river that provided the MID and TID with their first power in the 1920s, the Lombardis keep watch on their walnut crop and on the transmission line project.
"We just want to be here and keep farming, and they're making it difficult," Judy Lombardi said.
Sacramento Bee
Rising inventory of troubled homes could spur fresh wave of foreclosures...Jim Wasserman
http://www.sacbee.com/topstories/v-print/story/1889277.html
By the usual historical markers, the Sacramento-area real estate market is stabilizing, a model for recovery nationally.
But a particular wild card hangs over this fledgling recovery in Sacramento, making it anything but certain or predictable. More than 20,000 troubled homes are growing into a massive "phantom" inventory that could potentially be unloaded onto an already fragile housing market.
According to distressed property tracker ForeclosureRadar.com, most of the 4,449 homes foreclosed the past four months in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties are not yet listed for sale. And now the Contra Costa County firm says an additional 17,792 homes in the six-county area – all in some stage of the foreclosure process – represent a potential new supply of bank repos for roughly the next six months.
• As of mid-May about 12,000 of these capital region properties had received notices of default, the first foreclosure warnings issued after several missed payments.
• About 5,800 are within a month of auctions on courthouse steps, a move that can be postponed. Most are likely to attract no bids at the courthouse, then revert back to lenders who typically list them in the real estate market as repos.
As the 2009 summer sales season begins with repos accounting for two-thirds of sales in Sacramento County, no one is certain whether nearly 18,000 new troubled homes will actually come onto the market. The numbers could be blunted by more-aggressive loan modifications or short sales in which lenders accept less than owed to avoid the higher costs of foreclosing. California also is launching a new 90-day foreclosure moratorium in June for lenders that don't work hard enough to help borrowers stay in their homes.
But if thousands of these properties do become repos the question is: Will they be released in a big wave that destabilizes supply and demand or a trickle that helps sustain it?
Ultimately, this critical factor in the region's housing and economic recovery is up to distant banks tangled in the worst financial crisis since the Great Depression. Banks largely call the shots now in the Sacramento real estate market, and few outside the giant institutions have a good grasp on their strategy.
"Everybody is holding their breath to some extent to see which way the wind blows," said Stuart Feldstein, president of New Jersey-based SMR Research, which tracks the U.S. mortgage industry. "This is a very mixed-up period."
The ForeclosureRadar estimates clearly reveal a growing backlog of distressed properties in recent months, even as banks have curbed foreclosures. Many have turned to foreclosure moratoriums and other delays while awaiting federal government policies.
"There's no lack of properties to turn into repo inventory, and it's not happening," said Sean O'Toole, chief executive of the foreclosure tracker.
Recent foreclosure slowdowns have sharply cut the supply of bank repos in the Sacramento market since the beginning of the year. The competitive bidding and upward prices that resulted have prompted some real estate agents to start calling bottom. It's a call that Lyon Real Estate head Mike Lyon has dubbed "fool's gold."
Lyon is watching for a large new wave of repos in the market within 90 days. Bob Bronswick, head of Coldwell Banker's Sacramento-Tahoe division, says it may start in June.
Speculation abounds about why bankers have let so much distressed inventory build up without foreclosing. A major theory is government pressure to work harder with borrowers and to modify more loans.
But O'Toole believes that banks also kept foreclosure losses off their books while preparing for recent "stress tests," and are still awaiting a federal plan to unload their "troubled assets."
Bankers and their associations deny that's the case.
"The view that they've been holding them before the stress tests are completed is flawed," said Rod Brown, chief executive officer of the California Bankers Association. Brown said the drop in foreclosures and rise in distressed properties is "a function of the foreclosure moratorium."
Bank of America spokeswoman Jumana Bauwens said it, too: "The biggest factor is the moratorium."
And banks say they're back to ramping up foreclosures.
"There's been a reduction of properties going on the market because of foreclosure moratoriums, but some of that backlog will hit the market in months ahead," said California-based JPMorgan Chase spokesman Gary Kishner.
This week, Mark Hanson, managing director of Field Check Group, a Menlo Park-based financial industry consultant, confirmed that Chase is "cranking out the foreclosures" in California, exceeding its entire April tally in the first two weeks of May. He said 70 percent of the foreclosures involve mortgages written by Washington Mutual, a leading Sacramento-area lender during the riskiest part of the housing boom. Chase purchased the failed thrift in September 2008.
Hanson called Chase "the leader others tend to follow."
O'Toole, for one, believes big banks may continue to foreclose more slowly, and will "dribble out" their accumulated repo properties in hopes of a market change.
"I talk to them," he said. "It's like, 'If we don't foreclose, we see the market heat up again. You get a certain number of people who believe it's a bottom and the prices come back. Then we don't need to foreclose. These people can sell and get out from under them and we end up OK.' "
Dribbling them out slowly would keep prices stable, he said. But it also would prolong the housing correction.
Field Check's Hanson doesn't buy O'Toole's theory, even as they work off the same data. He predicts a flood of cheap repo inventory on the market this summer.
"The government and bank-specific moratoriums and modification initiatives have held back the massive wave of foreclosures," he said, "kicking the can down the road. But there is only so high the floodwaters can build before breaking the dam."
Yet even a torrent of repo inventory on the market won't pull median prices – now at $160,000 for existing Sacramento County homes – any lower, he said. That's because more higher-priced homes are in the foreclosure process and will tug the median upward in coming months.
"It does not mean the market is getting better," he said.
In the end, SMR's Feldstein thinks there are major factors working against mass foreclosures, a sentiment that plays in Sacramento's favor.
"Most of the forces in play are still suggesting more loan modifications and less foreclosures," he said. "There's Freddie (Mac) and Fannie (Mae) pressure and mortgage insurance company pressure and government pressure. Then there's the most obvious thing of all. If prices stay low and are falling, you're better off modifying than foreclosing."
Capital Press
'New' Clean Water Act worse than the first...Editorial...5-21-09
http://www.capitalpress.info/main.asp?SectionID=75&SubSectionID=767&ArticleID=51447
Inside the Beltway in Washington, D.C., they're choosing sides on an issue that could ultimately impact your property and almost any surface water on it.
Congress is out to "fix" critical language in the 1972 Clean Water Act. In the process, it would undo a couple of U.S. Supreme Court rulings that reined in the U.S. Environmental Protection Agency and Army Corps of Engineers. Those agencies administer the act and its permit system.
It also touches on the long-standing state-federal partnership in regulating water supply - a state task - and water quality, which has been a federal task since 1972.
The bill before Congress is S787, introduced in early April by Sen. Russell Feingold, D-Wis., and 24 co-sponsors.
Already, opposing sides of the issue are beginning to weigh in.
On one side is the environmental community. A coalition that includes the Natural Resources Defense Fund, the Sierra Club and five other environmental organizations has issued a slick report titled "Courting Disaster," which declares that the high court "misinterpreted the law" in 2001 and 2006 decisions.
On the other side, conservative bloggers call S787 "a blank check for future liberal courts." Though the big ag trade associations have yet to speak out on the issue, you can be sure that federal control of much of the surface water in the country will not be widely embraced.
At the heart of this simple bill is removal of the words "navigable waters" every place it appears in the original law and substituting "waters of the United States."
Waters are then defined as all seas, tidal basins including mudflats, streams and their tributaries, plus - and this is brand new - prairie potholes, wet meadows, playa lakes and natural ponds.
All of that is because the Supreme Court in 2006 found that the original law related to navigable waters and adjoining wetlands with a continuous surface connection to a navigable waterway. In other words, courtesy of the 2001 and 2006 decisions, no more Corps fill-and-removal permits for wetlands some distance from a stream.
Feingold and his co-sponsors, to their credit, do relist eight existing exemptions from CWA regulation, including irrigation return flows and stormwater runoff.
But overall, the reach of the new bill is beyond reason.
If S787 becomes law, even those ephemeral pools that show up after a rainstorm in the northern Sacramento Valley and out in the Black Rock Desert of Nevada will be waters of the United States.
That's a long way beyond protecting navigable waters and their tributaries.
Is this regulation necessary?
Is this a federal issue?
Does constitutional authority to regulate interstate commerce on navigable waters really extend to intermittent streams and prairie potholes?
We think not.
San Francisco Chronicle
R.I.P. Altamont Raceway...David White
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/25/SPK317QG7N.DTL&type=printable
Altamont Speedway has died its thousandth death, and no one bothered to show up for the funeral.
It was too sun-baked by day for auto racers in their fireproofed suits, too wind-blasted by night for fans in their layered hoodies, and too noisy on weekends for a few lawyered-up neighbors.
With no proper sendoff, the half-mile track, perched on the back side of Altamont pass, shut down some time after the 2008 season ended in October. The last oval, asphalt track in the Bay Area is closed for the sixth time in its 43 years, and many think this could be the once and for all of it.
"It's the curse of Altamont," said former track promoter Kenny Shepherd. "I wouldn't call it a surprise. It's more a shame."
A shame, Shepherd said, because Altamont Speedway sits in the dark and cold on Memorial Day weekend. This is the most celebrated holiday of the racing calendar, from the Indy 500 to the little big shows at small tracks across America.
Aside from the wandering horses and wild squirrels, all that raced within Altamont's property lines Saturday was loose foxtails and tumbleweed in the 30-mile per hour gusts.
Its current owners hope to get a new use permit and restart the track, possibly by next season. Anyone who knows anything about its long history of false starts and colossal failures share the same plea: Let the dead be.
"I don't think anyone can make this place work," said Ken Clapp, a NASCAR senior consultant who oversaw its western operations for 25 years. "It has always been a nightmare."
Alternate tracks
Doff Cooksey Jr. has a goatee hanging off his chin, tobacco chew sticking in his teeth and a mean streak flying out of his 21-year-old mouth.
He towed his late-model Chevy from Brentwood to Stockton 99 Speedway on Saturday fixing to break even with a $1,500 winner's check. Fifteen hours later, all he had to show for an eighth-place finish was a $350 payday and $500 in damages after 150 laps of paint-exchange racing.
The sides are scraped. The front end is busted. And now, he's got to load up the bent mobile for a midnight run back to Brentwood, almost an hour away if his trailer catches the green lights on crooked Highway 4.
"I'm glad to have a good place to race, but I'd rather be at Altamont," Cooksey said. "I love racing to death but I can't be traveling every weekend, not in this economy."
Altamont Speedway was his hometrack, just 20 minutes from his house. Cooksey started racing there as a 13-year-old. At age 20, he finished second out of 25 regular drivers in last year's late-model standings. Every race is a haul now. Altamont It was the last Bay Area track left on the oval asphalt circuit. San Jose Speedway died in 1977. Oakland Speedway went away in 1954.
All that's left locally are dirt tracks in Antioch, Calistoga and Petaluma. Infineon Raceway has a drag-race program and brings in the NASCAR Sprint Cup series for a road race once a year.
But, for those interested in NASCAR's signature style of racing - left turns on asphalt - the closest options are in Stockton, Roseville and Madera.
Only five of Altamont's 25 late-model drivers are known to still be racing on a regular basis. If Altamont is dead indeed, it's taking a crop of Bay Area race teams with it.
"There's just nothing left for us in the Bay," said Doff Cooksey Sr., who runs a helicopter spraying business. "I can't be doing this all the time like I used to. We work seasonally seven days a week. I gotta get up for work at 4:30 Sunday morning."
The Cooksey family thinks re-opening Altamont would save NASCAR racing in Northern California. Those who tried to run the track wonder why.
'Trying to figure it out'
Kenny Shepherd thought he would make things different when he was named track president and general manager in 2006. They all do when they buy into Altamont Speedway.
"When I got up there, some of the older guys told me to stay away, it's cursed," Shepherd said. "I knew going in it was a nightmare. and the odds were so big against us. I spent a lot of time trying to figure it out."
The track itself is considered fantastic. The surface is as fast as the straightaways are long. Smaller tracks are like bullrings, where the winners are those who best avoid the pileups. Altamont runs more like a sprint to the finish with elbow room.
Too bad everything else makes it such a miserable place.
No one seems to know why, but the original owner built the track in the howling center of the Altamont Pass wind corridor. The later it gets, the stiffer the breeze and colder the night.
"They put them windmills on those hills for a reason," current track president Jeff Macey said.
The restrooms were rank no matter how hard the cleaning crew scrubbed. The water in the local well had too much sulfur, giving it the aroma of rotten eggs.
"I've never seen anything like it," Ken Clapp said. He's run some 4,150 single-day shows at 18 race tracks. He was Altamont's promoter for a brief time in 1973.
"It was always something. Grass fires, traffic jams, power failures were imminent. The losses were huge. For every home run, there were 99 failures. I can easily count $12 million that's been lost there and I think it's probably a bigger number than that."
Yet, new owners keep diving in, convinced they can be the ones to turn the track around. The track has burned through nine ownership groups in all. The original owner sold it after three years.
The next in line rented the place out for the "Woodstock of the West" concert featuring the Rolling Stone in December 1969. A crowd of 300,000 trashed the place beyond use. A teenager was stabbed to death by a Hells Angels security guard. Racing did not return for three years.
"You talk to all the operators and it's the same thing," Shepherd said. "It's a piece of Bay Area property. How can I lose on it? Somehow, someway, they all end up losing."
Current co-owner Mel Andrews wonders why he never got the message.
Millions lost
Andrews is a Southern Californian who invests money for a living and races vintage cars as a hobby.
He wanted to get into track ownership. In 2006, he bought into Altamont as a lead investor in Lakeside Motorsports-Altamont, LLC. He's been losing money ever since, more than he cares to disclose.
"I probably was not aware of the history that it had," Andrews said. "The people that were the lead in running this either weren't aware of it or they weren't as forthright as I would wish they'd be." I kept putting more money into it, so I became a much bigger investor than I had ever dreamed.
"Given what I know now about its history, I would not have gotten involved."
Truth is, no one could have seen what was around the turn.
The group spent $1.8 million in upgrades to a track that was dormant from 2002-05. It operated under a conditional user permit from Alameda County, but it expired in 2006.
The renewal process took on a death of its own.
A new neighbor brought complaints and land-use lawsuits against the track because of the weekly noise. The state Department of Fish and Game held up the track's environmental impact report because the proposed project - adding a sign, awning and caretakers' house - could endanger the San Joaquin kit fox and California tiger salamander.
The county allowed the track to operate last year with restrictions. Races could only run during the day and had to end before nightfall. Current track president Jeff Macey said those rules "strangled" them.
"It's hard enough to get people out there to start with," Macey said. "Then to get them to come there in the heat of the day? That really hurt our fan base."
With the restrictions the county put on us, there was absolutely no way we could be functional as far as making a profit."
That's why the track is closed today. Big events always drew big crowds at Altamont, especially on Memorial Day weekend, but they were never enough to outweigh the weekly overhead of a full season.
"As much as it seems a shame to have it sit there empty," Andrews said, "it's better than having to write a check every month to cover the losses."
Racing teams impacted
Jeff Macey has been in auto racing for 35 years as a mechanic, driver, builder, owner and track manager. He remains president and general manager of Altamont Speedway, but he couldn't just sit and wait to see if racing comes back.
So, he took the job of competition director at All-American Speedway in Roseville, where he oversees large car fields and even larger crowds just outside Sacramento.
Macey is using the same formula he had at Altamont: take care of the drivers, bring in big events, and make it affordable for the fans. It turns out, the formula works just fine.
"It must be working because the grandstands are packed and we've got great car counts," Macey said. "Altamont always had its own set of problems. What has there been, how many owners? That tells you it's never been totally successful. If it had been, someone would have kept it for a long time."
Shepherd, too, is enjoying post-Altamont success. He took over a closed-down Madera Speedway in 2007 and brought it back to life. This year, he has Chowchilla Speedway back in operation.
"The same business model I'm using here just did not work at Altamont," Shepherd said. "No matter what you do, you can't get crowds out there."
Perhaps they can draw fans some of the time, and maybe that's how asphalt racing can return to the Bay Area.
One idea Andrews has is to re-open the track on a part-time basis with perhaps one big race per month. That, or sell the place to someone who wants a personal track to play in.
For now, he's focused on getting through the permit process with the county while pushing forward plans to build a road course and motorcycle park in Tracy.
Shepherd thinks he has the best idea of all, if only it were possible.
"If we could move Altamont race track, pick it up and slide it down the mountain in either direction, it would be an absolute home run," Shepherd said. "Even if you take away the political and neighbor pressure out of the equation, I still don't think it makes it financially because of where it sits.
"That's just a tough place to be."
New York Times
Job Losses Push Safer Mortgages to Foreclosure...PETER S. GOODMAN and JACK HEALY
http://www.nytimes.com/2009/05/25/business/economy/
25foreclose.html?_r=1&ref=business&pagewanted=print
As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.
In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.
With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.
“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”
Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.
“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’sEconomy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”
Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis.
Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.
Robert and Kay Richards live in the center of this trend. In 2006, they took a 30-year, fixed-rate mortgage — a prime loan — borrowing $172,000 to buy a prefabricated house. They erected the building on land they owned in the northern Minnesota town of Babbitt, clearing the terrain of pine trees with their own hands.
Mr. Richards worked as a truck driver, hauling timber from a nearby mill. His wife oversaw the books. Together, they brought in about $70,000 a year — enough to make their monthly mortgage payments of $1,300 while raising their two boys, now 11 and 16.
But their truck driving business collapsed last year when the mill closed. Mr. Richards has since worked occasional stints for local trucking companies. His wife has failed to find clerical work.
“Every month that goes by, you get a little further behind,” Mr. Richards said.
Last June, they missed their first payment, and they have since slipped $10,000 into arrears. They are trying to persuade their bank to cut their payments ahead of a foreclosure sale.
From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.
During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000.
Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.
Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. The Treasury Department says the program will spare as many as four million homeowners from foreclosure.
But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at “more than 10,000 but fewer than 55,000.”
In the first two months of the year alone, another 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.
“I don’t think there’s any chance of government measures making more than a small dent,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.
Last year, foreclosures expanded sharply as the economy shed an average of 256,000 jobs each month. Since then, the job market has deteriorated further, with an average of 665,000 jobs vanishing each month.
Each foreclosure costs lenders $50,000, according to data cited in a 2006 study by the Federal Reserve Bank of Chicago, so an additional two million foreclosures could mean $100 billion in lender losses.
The government’s recent stress tests of banks concluded that the nation’s 19 largest could be forced to write off as much as a fresh $600 billion by the end of 2010, bringing their total losses to $1 trillion. The Federal Reserve concluded that these banks needed to raise another $75 billion.
Many economists pronounce that assessment reasonable, while cautioning that it could become inadequate if foreclosures continue to accelerate.
“The margin for error is not that big,” said Brian Bethune, chief United States financial economist for HIS Global Insight. “It’s kind of like, ‘Let’s keep our fingers crossed that we’ve seen the worst.’ ”
Among prime borrowers, foreclosure rates have been growing fastest in states with particularly high unemployment. In California, for example, the unemployment rate rose to 11.2 percent from 6.4 percent for the year that ended in March, while the foreclosure rate for prime mortgages nearly tripled, reaching 1.81 percent.
Even states seemingly removed from the real estate bubble are seeing foreclosures accelerate as the recession grinds on.
In Minnesota, three of every five people seeking foreclosure counseling now have a prime loan, according to the nonprofit Minnesota Home Ownership Center.
In Woodbury, Minn., Rick and Christine Sellman are struggling to persuade their bank to reduce their $2,200 monthly mortgage on their five-bedroom home.
Mr. Sellman, a construction worker, found some work putting in asphalt driveways last summer, but he is now receiving unemployment. Ms. Sellman’s scrapbooking businesses shut down last summer. Since then, they have slipped $19,000 behind on their mortgage.
“We were always up on our house payments,” Ms. Sellman said. “You work so hard to keep what you have, and because of circumstances beyond our control now, there’s nothing we can do about it.”