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stoic little town faces tomorrow

By Scott Gold
Los Angeles Times Staff Writer

February 29, 2008

Sigfried Carrle angled his farmer's hat into a forceful wind roaring across the Antelope Valley. He did not blink, even when a fly bounced off his craggy cheek.

Dust curdled the air and shrouded the sun, and stalks of wheat trembled like the strings of a harp. The sign at Carrle's farm stand on the gravel shoulder of California 138, in the town of Neenach, read: "Last Chance Peaches." The landscape was so bleak it seemed prudent to ask: Before what?

But the produce was fresh and plump and grown in Carrle's backyard. So you picked through his crates -- a half-pound of green tomatoes at 50 cents a pound, a pound and a half of Fairtime peaches at $1.25 a pound, and on and on -- until your arms were full of a high school algebra question with no calculator in sight.

"What about five dollars?" Carrle shrugged.

Oh, it should be more than that. . . .

"Yes," Carrle said, then leaned in for effect. "It should, shouldn't it?"

What he meant, on the surface, was that there isn't a place for backyard farmers in modern commerce, that it costs him more to irrigate his tiny orchard than he could ever get for his fruit.

But it was a reminder, too, that the truly rural outposts of Los Angeles County -- the nation's top agricultural county not so long ago -- are withering away. And this one happens to abut the proposed site of the largest planned community in county history.

Neenach -- and a smattering of other forlorn towns hidden between Lancaster and the Grapevine -- will be the subject of a fierce dispute in the coming year over when enough is enough in Southern California.

On one side, advocates will wave studies showing that there are 6 million more people headed this way in the next 20 years, people who will need roofs over their heads. On the other side, activists will point out that once construction starts here -- above the historical northern boundary of the region's development -- there will be nothing to keep "Los Angeles" from turning into a vast, broken metropolis stretching from Tijuana to Bakersfield.

It would all be very apocalyptic-sounding, if only it was the kind of thing that got Neenach bent out of shape.

Life, by design, is gentle and dull here.

Eight hundred people, give or take, live in Neenach. Recreation consists largely of trying to grow a bigger squash than your neighbor or trying to buy his truck. One man races pigeons. The school closed a few years back when they ran out of kids, and its rose-painted walls are still the brightest thing on the prairie.

When the abutting development is built -- if it is built -- it will be called Centennial. It would be the end, for all intents and purposes, of Neenach.

Billed as a "new town," Centennial would be constructed on a chunk of the 165-year-old Tejon Ranch. There would be 23,000 homes, eight elementary schools, three fire stations.

Well aware of the lifestyle they are preparing to upend, managers of the project have launched a spirited marketing campaign to sell Centennial -- not to sell the houses, though that would come soon enough, but to sell the very idea.

They plan to pepper the development with open space and "gathering places" -- civic squares, parks -- intended to foster a small-town feel. Children would be encouraged to walk to school, which would indeed be revolutionary by Southern California standards.

In an effort to make Centennial "self-reliant" -- that's code for cutting down on commuter traffic -- they have pledged to create 30,000 local jobs. More than 1,000 would be required for construction alone: a new house every eight hours, on average, seven days a week, for 20 years.

Environmental advocates, suffice to say, are not impressed.

Ileene Anderson, a biologist with the Center for Biological Diversity, a leading advocacy group opposing the development, said Centennial would be built on rare ecosystems, including the largest swath of native grassland left in California.

Those ecosystems are home to animals that deserve protection, she said: condors that fly overhead, a species of mouse that lives only on the interface between the Antelope Valley and the Tehachapi mountains.

That battle will play out in the next two years or so, first in front of county regulators and then, chances are, in court.

Neenach is divided into two camps too, just not in the usual big-developer-meets-small-town way.

There are those who wish they'd just get on with it.

And those who figure they'll be dead before it happens.

Joe Stamback, 71, represents the first camp.

He grew up in Compton but moved here in 1975 to get away "from the hustle and bustle and drugs," Stamback said on a recent afternoon, relaxing on his back porch as his dogs -- Lily, Jacko, Humphrey, Gracie and Sarah -- vied for his attention.

He soon discovered that you can grow just about anything in Neenach's soil; a year after he arrived, he celebrated the nation's bicentennial by growing red, white and blue grapes: red Candace, white Thompsons, blue Concords.

Back then, Neenach was a little livelier. There were community-wide potluck dinners, and on occasion old-timey bands would play into the wee hours. There were almost 80 members in the local 4-H Club. Since then, many of the kids move away as soon as they are able.

Stamback spends much of his time making his tri-tip, a local legend, which he sells to raise money for sports teams at a high school 25 miles away. Gardening has taken an even more central role. He grows his own walnuts and throws them in a cement mixer with rocks to get rid of the husks.

Construction, he notes, could have started by now if there hadn't been such a stink about "condors and minnows and all that crap." It would be nice, he said, to have a few more restaurants to choose from, something other than the Sizzler up the road in Gorman, though he noted the Sizzler does offer a fine buffet. In fact, he said, the whole deal has started to sound pretty good.

"Schools?" he said. "Parks? Shops? I could go for some of that."

The headquarters of the second camp is down the road, at the home of William R. Barnes.

By the front door, there is a hand-painted copy of the Pledge of Allegiance. Over the fireplace, there is an old rifle. Outside, past the family's graveyard of rusted-out hay rakes and grain threshers, is the land Barnes men have farmed since the 1800s, when Barnes' grandfather homesteaded in Neenach.

Standing in the fields, there's not much to look at it. But you can, he points out, see the big picture. Barnes sees a queasy and turbulent real estate market, which could help buffer Neenach from substantive change for years to come.

In other far-flung suburbs, block after block is dotted with for-sale signs and mortgage default notices. Many of those spots are -- as Centennial would be -- marketed to families of teachers and firefighters. Barnes knows, too, that there are other big developments in the north end of the county that could break ground before Centennial.

"It all depends on the economy," Barnes said. "And it's been rough."

He's right, said Centennial spokeswoman Barbara Sayre Casey. The construction plan, she said, "could be elongated if the market stays down."

Farming the same land for more than half a century gives you some perspective, Barnes said. He's a "dry" farmer, which means he relies on the rain; he's learned not to get too excited about the wet years or too depressed about the dry ones. Sixty years of marriage, 23 grandchildren, four great-grandchildren -- that's the important stuff, he said.

"All the rest, it don't bother me," he said. "I don't look for much to change."

scott.gold@latimes.com

Starved credit wrecked housing, not vice versa Commentary: Mortgage rates fall while public policy still frozen Friday, February 29, 2008 By Lou Barnes Inman News

Mortgage rates have begun a decline from the irrational levels of the last month, now approaching 6 percent and says here likely to cross back into the fives. Part of the decline is due to deteriorating economic news. The toughest was a surge in new claims for unemployment insurance, up to 373,000, consistent with recession and suggesting that next week's payroll report will show February contraction. Orders for durable goods tanked 5.3 percent in January, as have February measures of consumer confidence. Inflation is worrisome, but a soon-to-blow commodity bubble will fix that. A two-part story today, housing as scapegoat for the failures of others. The real causes of this credit crunch -- still called "subprime" -- and the recession it has spawned are the grotesque failure of structured-finance products on Wall Street, and failure of oversight by their regulators. The strange story of mortgage-rate spike and reversal began with the January fable that mortgage-backed securities (MBS) issued by Fannie, Freddie and Ginnie (the "GSEs") had become too toxic for investors to hold. That notion made no sense here: These GSE/MBS are as good as Treasurys, no matter what the ultimate default rate of mortgages within (Ginnies are guaranteed by the Treasury, Fannie and Freddie clearly "too big to fail"). The GSE/MBS market is $4.5 trillion, the deepest and most liquid market for anything on the planet except U.S. Treasurys. Yet, traders said throughout February: "too many MBS sellers." The excess on the market was certainly not new loan production. Now we know who those sellers were: big banks and Wall Street dealers, capital impaired, dumping the only liquid assets they have to make room for trash flooding back onto their balance sheets. The backwash: the remains of deals they sold but agreed to support if "something went wrong." The February went-wrong: almost $1 trillion in "auction-rate" securities -- actually good-quality muni-bonds, but held in short-term rollover structures (note: nothing whatever to do with housing or "subprime"). When rollover failed in renewed crunch, an avalanche of illiquid paper hit banks, triggering MBS sales and higher mortgage rates. The financial press is having a wonderful time ginning-up a housing depression, this week shrieking about new-home-price data: "Decline in Home Prices Accelerates" (WSJ), emphasizing the Case-Shiller index, down 8.9 percent in '07. Case-Shiller is designed to magnify home-price declines. Robert J. Shiller correctly called the stock market bubble (his book "Irrational Exuberance" appeared on the day of '00 collapse), and has spent the last several years misapplying financial-market principles to real estate, gleefully predicting a 30-40 percent national crash in home prices. The design flaw: It captures only sales of homes, obviously heavy with distressed transactions. For the authentic story and great methodology, visit OFHEO.gov and its "all-transactions" House Price Index, which includes repeat appraisals in refinances, by definition free of distress. By that measure, national home prices in the fourth quarter rose by 0.8 percent. Prices fell in only 11 states, and in only five of those were declines in excess of 1 percent. See page 21 of the report for its critique of Case-Shiller. At the micro level, some spots are in horrible trouble: Of OFHEO's 291 metropolitan statistical areas, 15 had price declines last year in the 10-19 percent range (all in California and Florida). And the national market is decelerating: Of 39 states with positive appreciation in the fourth quarter, 32 had gains of less than 1 percent. The key to this unpleasant situation: Housing is sinking because of credit starvation, not the other way around, housing wrecking credit markets. No matter what it takes, the supply of credit must be restored to housing and the rest of the economy. The public policy response is still frozen, Democrats trying to help families who cannot afford their homes to stay in them, and Treasury Secretary Henry Paulson refusing assistance to the financial system: "I'm not interested in bailing out investors, lenders and speculators." Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com. *** What's your opinion? Send your Letter to the Editor to opinion@inman.com.

U.S. Economy: Existing Home Sales Decline to Nine-Year Low

By Courtney Schlisserman

Feb. 25 (Bloomberg) -- Sales of existing homes in the U.S. fell in January to the lowest level since records began nine years ago and prices slid for the sixth time in seven months, posing a threat to consumer spending, the largest part of the economy.

Resales declined 0.4 percent, less than forecast, to an annual rate of 4.89 million from a revised 4.91 million in December that was higher than previously reported, the National Association of Realtors said today in Washington.

The figures indicate declines in home prices so far aren't sufficient to entice more buyers. Former Federal Reserve Chairman Alan Greenspan said today that the deepening rout in housing is having a ``broader effect'' on spending, and that a recession this year may be deeper than previous downturns.

``The Federal Reserve's efforts to restore the mortgage market so credit is available so people can buy houses has largely failed,'' Peter Morici, an economics professor at the University of Maryland, said in a Bloomberg Radio interview. ``There really isn't a lot of hope that things are going to turn around soon.''

Economists had forecast home resales would fall 1.8 percent to an annual rate of 4.8 million, according to the median of 63 estimates in a Bloomberg News survey. Estimates ranged from 4.65 million to 5 million.

The Standard & Poor's Supercomposite Homebuilding Index, which had fallen earlier in the day, rose following the report. The measure was up 0.4 percent at 11:37 a.m. in New York, at 341.21. Treasuries fell, with 10-year note yields rising to 3.86 percent, from 3.81 percent on Feb. 22.

Unsold Properties

Mounting foreclosures are adding to a glut of unsold homes that is driving down property values. The number of homes for sale at the end of January rose 5.5 percent to 4.2 million. At the reported sales pace, that represents 10.3 months' supply, compared with 9.7 months in December.

``The past five months' sales activity has been very soft, but stable,'' said Lawrence Yun, the real-estate agents group's chief economist. A fiscal stimulus that included tax cuts and relaxed restrictions on so-called jumbo mortgage loans may lead to better sales late this year, he said.

Elevated inventories are driving down prices and causing some potential buyers to stay on the sideline to see if prices will go down further.

The median sales price fell 4.6 percent to $201,100 from January 2007. The median cost of a single-family home decreased 5.1 percent to $198,700, while that of condominiums and co-ops fell 1 percent to $220,400.

``The general trend is down, especially in home sales,'' Anirvan Banerji, director of research for the Economic Cycle Research Institute in New York, said in a Bloomberg Television interview. ``There is quite a bit of overhang in inventory.''

Greenspan Remarks

``There is more adjustment that is required'' in housing, Greenspan told a conference in Abu Dhabi, United Arab Emirates, today. ``There is a broader effect on consumer expenditures.''

Resales fell in three of four regions, led by a 3.6 percent drop in the Northeast. They declined 2.1 percent in the West and 0.5 percent in the South. Sales were 3.4 percent higher in the Midwest.

Sales of single-family homes increased 0.5 percent to a 4.34 million pace from a 10-year low in December, according to today's report. Sales of condos and co-ops fell 6.5 percent to an annual rate of 550,000.

Housing ``is going to be subdued'' until inventories are reduced, Federal Reserve Bank of Minneapolis President Gary Stern told reporters Feb. 19 after a speech in Golden Valley, Minnesota.

The effects of the worst housing recession in 25 years have spread into other areas of the economy. The Fed Bank of Philadelphia's general economic index fell this month to minus 24, the weakest reading in seven years.

Recession Odds

Economists surveyed by Bloomberg News earlier this month put the chance of the U.S. entering a recession at 50-50, up from 40 percent odds a month earlier.

The Fed last week said it lowered its growth forecast and now expects the economy to expand 1.3 percent to 2 percent in the fourth quarter from the same period of 2007, compared with the 1.8 percent to 2.5 percent it projected in October.

The Commerce Department is scheduled to release the January report on new home sales on Feb. 27. While economists forecast a decline, some measures indicate demand for new homes may be near the bottom.

For example, confidence among U.S. homebuilders rose for a second straight month in February and companies said there were more prospective buyers touring properties, the National Association of Homebuilders said on Feb. 19. In addition, the Reuters/University of Michigan index of consumer sentiment showed a record number of Americans said lower home prices made home buying conditions favorable.

Back to 2002

``We're seeing prices now that are basically back to '02, '03 levels,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., said in a Bloomberg Television interview on Feb. 21. ``That begins to get compelling for customers.''

Even so, the housing market ``continues to be in a very difficult position right now,'' and weaker sales are cutting into builders' profits, Hovnanian said.

Lowe's Cos., the world's second-largest home-improvement retailer, forecast full-year earnings less than analysts' projections after reporting a drop in sales and profits in the fourth quarter.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

Last Updated: February 25, 2008 11:47 EST

Wall Street’s role in housing meltdown probed

BOSTON - Regulators are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players — but also may have duped borrowers and investors who supplied cash to fuel a housing boom that's turned bust.

A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles. Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.

Aside from the civil cases, the FBI is looking at possible criminal action, focusing on what Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and whether they hid risks from investors.

Observers don't expect the financial penalties that regulators extract in the civil cases to be massive. But the cases could turn up evidence that forces Wall Street to defend itself amid growing talk of government help to ease subprime-related financial strains on bond insurers. Revelations of bad behavior turned up by the government also could spur private investors to file even more lawsuits than the hundreds they've already brought to recover losses.

"This could get a lot nastier, for many reasons," said John Akula, a business law lecturer at the Massachusetts Institute of Technology's Sloan School of Management. "Prolonged close scrutiny often turns up all kinds of dubious practices that in normal times are under the radar.

"If the government sponsors any kind of bailout with public funds, this may be coupled with an aggressive prosecutorial agenda in support of efforts to get private parties to kick in."

Although the foreclosure-blighted cities of Cleveland and Baltimore have sued seeking to recover damages from mortgage lenders, most of the cases filed so far are from regulators alleging violations of state securities laws.

Attorneys general in New York and Ohio are targeting alleged systematic inflation of home appraisals by major lenders and appraisal firms. Litigation in Massachusetts and other states seeks to demonstrate that investment banks failed to disclose risks to investors who bought mortgage-related securities and weren't up front about conflicts of interest across their far-flung financial operations, including trading of subprime investments.

"Over the years, the relationship between lender and borrower and a particular piece of property has been severed," said Massachusetts Secretary of State William Galvin. "It's clear that it's become a runaway train."

Gone are the days when most borrowers simply got loans from the neighborhood bank, which used to hold the bulk of mortgage risk. Now that risk is spread further — mortgages are bundled together and sold to investors. Behind the scenes, credit-rating agencies offer advice on whether the investments are secure.

Until recently, cash from Wall Street banks and investors extended growing amounts of credit to low- and middle-income Americans enticed to enter a market when home prices appeared headed nowhere but up.

Lenders wrote $625 billion in subprime mortgages in 2005, nearly four times the total in 2001. The boom brought in big fees to mortgage brokers, lenders, banks and ratings agencies.

But now that prices are dropping, those players are hurting. Global banks have ousted executives and have written off nearly $150 billion since mortgage securities began collapsing last summer.

Given the losses, "It's doubtful some of these entities will repeat their performance," Galvin said. "But I think there needs to be an understanding of how we got where we are, whether that is through regulatory action, or through Congress."

States have responded by tightening rules governing how lenders and brokers arrange mortgages and are compensated. But lawsuits and administrative complaints are the main tools regulators use to seek fines against companies accused of wrongdoing, or to set examples to deter bad behavior.

"What they can't enforce through regulation, they will try to accomplish through suing," said David Bizar, a Hartford, Conn.-based attorney with the firm McCarter & English who defends against subprime mortgage lawsuits brought by consumers and regulators.

Already, the number of subprime-related cases filed in federal courts is outpacing the rate of litigation that emerged from the savings and loan meltdown in the late 1980s and early '90s, according to a study released Thursday.

The 278 subprime cases filed in federal courts in 2007 already equals half of the total 559 S&L cases handled over multiple years, according to the findings from Navigant Consulting Inc.

Criminal action also could be looming. The FBI said last month it was investigating 14 companies for possible accounting fraud, insider trading or other violations that could result in criminal charges. The FBI didn't identify companies but said the probe involves firms across the financial services industry.

The FBI is working with the Securities and Exchange Commission, which has civil enforcement powers. The SEC said in January that it had about three dozen active investigations under way.

In the rush to sue big business, there's plenty of blame to go around in the subprime meltdown, said Bizar, the lawyer who has represented lenders in subprime cases. Those include everyone from investors buying mortgage-related investments without understanding the risks, to credit-rating agencies that failed to alert investors to lenders' precarious positions as mortgage delinquencies spiked.

But the mess can be blamed more on unrealistic expectations than fraud, he said.

"You had a lot of people reaching to get into homes they couldn't afford, on the theory that it would go up in value," Bizar said.

 

Report: State Heading For Recession By HOWARD FINE - 2/11/2008 Los Angeles Business Journal Staff California is headed for recession as a steep drop in construction spending continues to take its toll, according to an economic report released Monday. The Chapman University index of California leading employment indicators fell for the seventh straight quarter to 102.3 for the first quarter of 2008. That was down from 114 in the fourth quarter and 132 in the first quarter of 2007. An index reading below 100 indicates the economy is losing jobs. The last time the index reading was as low as 102 was in the first quarter of 2003, after the end of the last recession. The chief culprit behind the drop in the indicator index was a 14 percent drop in construction spending -- which offset a 7.7 percent rise in the value of exports. Los Angeles Business Journal, Copyright © 2008, All Rights Reserved.

Think before buying home in today's market

Problems can creep up in foreclosures, HOAs, sales contracts

Thursday, February 07, 2008

By Benny L. Kass
Inman News

 Another phrase has been added to the real estate lexicon: "mortgage meltdown."

Many of us used to call some of the practices that led to the meltdown "predatory lending." But because most of the people who were preyed upon were poor, uneducated and often minorities, our national leaders largely ignored the problem. We kept hearing that no one really could define the concept of "predatory."

But now that millions of Americans are facing foreclosure, governments at all levels are trying to find solutions. Recently, President Bush announced that his administration has brokered a deal with the mortgage industry whereby certain loans would be frozen for up to five years. Certain adjustable-rate mortgages that were originated between Jan. 1, 2005, and July 30, 2007 -- and were scheduled to be increased between Jan. 1, 2008, and July 31, 2010 -- would remain at the original rate. According to Bush, the government "should not bail out lenders, real estate speculators or those who made the reckless decision to buy a home they knew they could never afford. Yet there are some responsible homeowners who could avoid foreclosure with some assistance. …"

Accordingly, a private-sector group of lenders, loan servicers and mortgage counselors have created the "HOPE NOW Alliance," whose function is to help "struggling homeowners find a way to refinance" their existing subprime or adjustable-rate mortgage. (For more information call 1-888-995 HOPE, or visit www.hopenow.com.)

The tax code has been a major problem facing homeowners who arrange with their mortgage lender to forgive a portion of their debt. To add insult to injury, our tax laws required those taxpayers to pay income tax (called "phantom income") on the money they did not have to pay their lender.

Congress finally got its act together and on Dec. 20, President Bush signed into law a temporary change to the tax code. For the period Jan. 1, 2007, through Dec. 31, 2009, homeowners will not have to pay tax on any debt that is cancelled.

The law does not protect speculators or investors. It applies only to principal residences -- that is situations where the taxpayer has owned and lived in the house for two or more years. And only the original loan can be cancelled debt free; if you have a second deed of trust (mortgage) the "phantom income" tax will still apply.

The law also extended the right to deduct private mortgage insurance for three more years.

All of these actions will help solve the current "mortgage meltdown" crisis. But as we enter into a new year, there are other real estate issues confronting consumers. Here are some New Year's resolutions I am recommending for legislators, lenders, appraisers, title companies, and -- most important -- consumers.

Are you are in the market to buy a house (whether it is a single-family, condominium or cooperative)? Shop around for your mortgage. Many new-home builders will offer you a cash discount if you use the lender's "preferred lender" and its "preferred title company." Sometimes these discounts are worthwhile, but sometimes the extra charges imposed by that lender and the title company exceed the amount of the discount. You may be able to save more money by using your independent lender and title company -- even without the discount.

Are you thinking about buying into a community association -- whether it is newly developed or an existing property? Read the legal documents carefully. In many jurisdictions, a seller of a condominium unit or homeowner-association house must provide you with a package of documents, including the operating rules and regulations, the budget, and an updated financial accounting. This is important information. Especially today, when delinquencies and foreclosures are on the rise, you want to assure yourself that the association is in good financial shape. The last thing you want is to learn -- shortly after you become a member of the association -- that there will be a large special assessment to cover any shortfall.

Are you planning to capitalize on the financial problems of others? There are a lot of people who are looking to buy homes either from a bank that has taken title by way of foreclosure or directly from homeowners who are desperate to sell so as to avoid foreclosure. Indeed, many speculators and investors are starting to show up at foreclosure sales hoping to get a good deal.

If this is something you are considering, you must do your homework very carefully. Make sure that you carefully inspect the house. If the current owner is reluctant to give you this opportunity, move on to another property. I have recently been contacted by several investors who bought a house sight unseen, only to learn that the occupants are refusing to move or that when they left the property, they took a lot of the major appliances with them. There is nothing that I can do to help these new homeowners.

You also have to have a complete title search done before you go to closing -- even if you plan to pay all cash. Distressed properties can carry a lot of problems -- such as tax liens, unpaid assessments, or judgments against the current owners.

Are you planning to buy a new-built home from a developer? Is the home ready for occupancy or will the builder complete the house only after you sign a sales contract? If the home has not been finished, your contract must contain an absolute, firm settlement date. Many new-home sales contracts contain what is known as a "force majeure" clause, which basically is a catch-all phrase for developers to say, "Sorry, your house won't be ready for several more months, because of matters outside of my control." I recommend deleting that concept from all new-home (or condominium) sales contracts.

Additionally, most new-home contracts are, in my opinion, completely one-sided in favor of the developer. For example, although the house may not be ready for settlement for several months, you are obligated to get firm financing immediately. Should interest rates increase -- as they may very well in the coming year -- you may be stuck with a monthly mortgage payment that you did not anticipate or cannot afford. You should be required to get a mortgage loan commitment only when the builder is ready to sell it to you. You can, however, get a preliminary letter from your lender (I call it a "comfort letter"), which will satisfy the seller that you are a serious buyer; but this is not a firm loan commitment.

Are you on the board of directors of your community association? If so, is your money secure? This past year, there have been several cases throughout the country where the property manager embezzled millions of dollars of association funds. There are a number of steps that must be taken to protect those funds, such as:

• all checks over a certain amount must be co-signed by a board member;

• all reserve accounts can be accessed only by two board members, and not the property manager, and

• proper insurance coverage must be in place. You should consult your insurance agent for more details.

Finally, I have to repeat my longstanding plea to mortgage lenders. Please simplify your legal documents so that every consumer can understand the terms and conditions that are imposed by the promissory note and the deed of trust. And why not go back to the good old days when potential homeowners had to sign only four documents: the note, the mortgage, the settlement sheet (called a HUD-1) and the Truth-in-Lending statement?

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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