Watch Out For Fraudulent Bonding Companies During These Tough Times
When the economy gets tough and construction company profits wane, surety companies tighten up their requirements. Contractors may find their bonding line of credit is reduced or gone entirely. As more contractors seek bonding credit, there can be an increase in the number of fraudulent bonding companies. This seems to happen in every economic downturn.
According to the New Orleans Times-Picayune, a Baton Rouge judge has ordered Infinity Surety of Louisiana Inc of Metairie, LA. and company principal George D. Black to stop doing business. The Louisiana Department of Insurance accused it of selling bogus construction bonds for public works projects worth hundreds of millions of dollars. Insurance Commissioner Jim Donelon said that Infinity Surety wasn't licensed to operate as an insurance company when it sold bonds to contractors bidding on government projects. Donelon said damage from Infinity Surety's actions is widespread. "They have been peddling their wares all over the state”, he said.
Infinity Surety provided the bond on a $51.4 million project by the Louisiana Department of Education for L.B. Landry High School in New Orleans on a bid submitted by Home Solutions Restoration of Louisiana Inc. and JRDKS Construction. The company also provided bonds on Home Solutions bids on a $5.4 million public works project for Davant Consolidated Building and a $6.9 million project for the Port Sulphur Consolidated Community Center, both in Plaquemines Parish.
Several construction companies also charge that Infinity's actions caused them to lose out on jobs when the bond insurance proved to be worthless. A joint bid by Benetech LLC and JRDKS Construction to rebuild the cabins at Bayou Segnette State Park in Westwego was rejected, the companies said, because Infinity didn't meet bond requirements. A lawsuit filed by the bidders says that at least 15 other public works projects are affected.
If you have doubts about the viability of a bonding company, give us a call and we will check it out for you. Also if you are offered a bonding line of credit that seems too good to be true, you might be right! Watch out and be careful!
Wednesday, January 13, 2010
Tuesday, January 5, 2010
Housing Overhang/Shadow Inventory Is An Enormous Problem To The Recovery Of The US Housing Market
The Good News Is That Dallas Is In Pretty Good Shape With Regard To “Shadow Inventory”
According to “Amherst Mortgage Insight” from Amherst Securities Group, investors may be premature in believing the housing market has bottomed and is beginning to recover. Amherst estimates there is a housing overhang in the US of 7 million units. They are talking about loans that are destined to ultimately default and liquidate, creating a huge “shadow inventory.” This is 7 times what the estimate was in 2005.
The Mortgage Bankers Association quarterly delinquency survey showed that at the end of the 2nd quarter of 2009, 13.54% of mortgages in the U.S. were in some stage of delinquency: 4.3% were in foreclosure, another 3.88% were 90+ days delinquent, 1.68% were 60 days delinquent, and 3.68% were 30 days delinquent. Only a small percent of the loans that are delinquent will actually recover; most will foreclose. The MBA estimates that of the 13.54% total distressed inventory 12.42% will actually liquidate. That’s 6.94 million units. With existing home sales totaling around 5.2 million units, the 6.94 million units of overhang is about 1.35 times 1 year of existing home sales! This number does not include those loans that will become delinquent next month and the month after.
The effect of the huge “shadow inventory” varies dramatically from city to city. The report has a chart showing the 20 cities it reports on with dramatically different results. It compares actually listings of houses for sale in the city to the total inventory of houses potentially for sale including the “shadow inventory.” The “shadow inventory” is made up of real estate owned by banks not yet listed for sale, loans posted for foreclosure sales not yet owned by banks, and all of the loans that have received notice of default.
The total inventory in a city is equal to the listings plus the total “shadow inventory.” The worst situation is in Las Vegas, Nevada . . . it had 16,765 listings with a total inventory of 69,614. The total inventory is over 4 times the houses listed for sale!
The 5 cities that had inventories that were 2 times or greater than the actual listings were Las Vegas, San Diego, Los Angeles, San Francisco, and Phoenix. Dallas was the 3rd best on the list with a total inventory equal to 1.17 times the actual listings. Dallas had an actual listing of 30,530 houses and the total inventory was 35,757. I think that means that we are likely to see a much quicker housing recovery in our area than in the more distressed parts of the U.S.
It appears that housing prices have stabilized because there is a seasonality aspect to housing prices. The favorable seasonal factors will disappear over the coming months and the reality of this 7 million housing overhang is likely to set in. This could further exacerbate the problem if it causes a further home price depreciation which could lead to an even higher volume of defaults.
(Go to http://www.scribd.com/doc/20351562/Shadow-Inventory-Report-Amherst-9-23-09 to read the entire report).
According to “Amherst Mortgage Insight” from Amherst Securities Group, investors may be premature in believing the housing market has bottomed and is beginning to recover. Amherst estimates there is a housing overhang in the US of 7 million units. They are talking about loans that are destined to ultimately default and liquidate, creating a huge “shadow inventory.” This is 7 times what the estimate was in 2005.
The Mortgage Bankers Association quarterly delinquency survey showed that at the end of the 2nd quarter of 2009, 13.54% of mortgages in the U.S. were in some stage of delinquency: 4.3% were in foreclosure, another 3.88% were 90+ days delinquent, 1.68% were 60 days delinquent, and 3.68% were 30 days delinquent. Only a small percent of the loans that are delinquent will actually recover; most will foreclose. The MBA estimates that of the 13.54% total distressed inventory 12.42% will actually liquidate. That’s 6.94 million units. With existing home sales totaling around 5.2 million units, the 6.94 million units of overhang is about 1.35 times 1 year of existing home sales! This number does not include those loans that will become delinquent next month and the month after.
The effect of the huge “shadow inventory” varies dramatically from city to city. The report has a chart showing the 20 cities it reports on with dramatically different results. It compares actually listings of houses for sale in the city to the total inventory of houses potentially for sale including the “shadow inventory.” The “shadow inventory” is made up of real estate owned by banks not yet listed for sale, loans posted for foreclosure sales not yet owned by banks, and all of the loans that have received notice of default.
The total inventory in a city is equal to the listings plus the total “shadow inventory.” The worst situation is in Las Vegas, Nevada . . . it had 16,765 listings with a total inventory of 69,614. The total inventory is over 4 times the houses listed for sale!
The 5 cities that had inventories that were 2 times or greater than the actual listings were Las Vegas, San Diego, Los Angeles, San Francisco, and Phoenix. Dallas was the 3rd best on the list with a total inventory equal to 1.17 times the actual listings. Dallas had an actual listing of 30,530 houses and the total inventory was 35,757. I think that means that we are likely to see a much quicker housing recovery in our area than in the more distressed parts of the U.S.
It appears that housing prices have stabilized because there is a seasonality aspect to housing prices. The favorable seasonal factors will disappear over the coming months and the reality of this 7 million housing overhang is likely to set in. This could further exacerbate the problem if it causes a further home price depreciation which could lead to an even higher volume of defaults.
(Go to http://www.scribd.com/doc/20351562/Shadow-Inventory-Report-Amherst-9-23-09 to read the entire report).
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