Sunday, December 23, 2007

King County's new flood philosophy: Stop fighting nature

It's a sight only a biologist — or a fisherman — might love: a very big, and very ripe, spawned-out king salmon, tucked under a log in a side channel of the Green River.

This fish, this log and this meander wouldn't have been here even a year ago. A levee used to fence the river and the fish out. Then King County did what until recently was unthinkable: It ripped the levee out and gave this bit of land north of Highway 18 in Auburn back to the river.

The project, completed last year, reconnected the Green River with a side channel to provide refuge for salmon and water to recharge the aquifer. The county planted native vegetation on the banks, and hauled in woody debris to slow the current and create hidey holes for fish.

It's just one of many projects planned to eventually return stretches of land totaling more than 33 miles along the county's major rivers back to nature — rather than fighting it.

The difficulty of trying to hold a swollen river to its banks was on frightening display earlier this month in southwestern Washington, where flooding damaged or destroyed hundreds of homes and dozens of businesses in the Chehalis River watershed, and closed Interstate 5 for four days.

Levees expected to protect roads and buildings were overtopped by the floodwaters.

The work along the Green River is a new approach for King County, which already has allowed more than $7 billion in development in its floodplains, and has suffered eight federal flood-disaster declarations since 1990, most recently in November 2006.

"Rivers don't negotiate with you. So you have got to figure out what the river's behavior is going to be, and accommodate that," said Ron Sims, King County executive. "Nature has the last vote and the longest memory."

Increasing flood risk

And flood risk is only going to get worse, scientists say. That's because of two converging trends: climate change and development, in a place uniquely sensitive to both due to our topography and weather pattern.

The Cascades are low mountains. And our weather pattern sees most of its precipitation in winter. That means that if average temperatures rise just three degrees, about a third of the precipitation switches from snow to rain, said Philip Mote, research scientist with the Climate Impacts Group at the University of Washington.

"It's very likely that flood risk will increase in the future," Mote said.

Cliff Mass, an atmospheric scientist at the University of Washington, predicts a 30 to 50 percent loss of snowpack by 2050, and a 75 percent loss by 2100. If people pump less greenhouse gas into the air, the impact could be reduced, but some losses are already certain, Mass said.

And changes in land use will make flood risks — already heightened by more rain and runoff — worse. That's because as more land in the Puget Sound area is developed, forests that used to soak up rain and hold it for slow release are replaced by roofs and pavement. That sends more water into rivers more quickly.

No place in the country has undergone a bigger change in land use between 1973 and 2000 than what's called the Puget lowlands ecoregion. During that time, 29 percent of the land, or 1,943 square miles, converted from one type of use to another, according to preliminary findings of a study by the U.S. Geological Survey.

The study, which is still under review, analyzes changes in the landscape in 11 categories — such as forestland, water and development — in sample grids all over the country.

The Puget lowlands ecoregion stretches from the Canadian border to Longview in the south, the Cascade Crest in the East to the Olympics in the West.

The high rate of change is driven primarily by the turnover of forestlands. In all, about 337 square miles of forest have been converted to development between 1973 and 2000, according to the study. That does not include land that's been clear-cut but is still in forestry.

"Adaptation strategy"

In King County, there is already so much development built in the floodplain — home to some 65,000 jobs, including one-third of the county's aerospace employment — the county has to deploy a combination of tactics to reduce flood risk.

Where it has billions of dollars of development to protect, the county is spending millions on a containment strategy, repairing levees that in some cases were cracked and vulnerable to failure.

The County Council last month increased property taxes by 10 cents per $1,000 of assessed value to raise money for levee repairs and other flood-control projects.

Where it's still possible, the county is giving the river some space to flood. In those places, instead of disaster, floodplains can actually deliver benefits: aquifer recharge, open space, recreation, wildlife habitat and farmland preservation.

The county also has severely restricted new development in the floodplain. Some new construction is banned, and new fill in the floodplain must be offset by excavation at the same elevation. The policy is intended to help prevent an increase in flooding due to new development.

It's a mixed approach to living with Mother Nature, in a place where a lot of choices have already been made. "This is an adaptation strategy," Sims said.

"There comes a time when nature speaks to remind us of our insignificance. I accept that," he said. "You are never going to constrain a river system in a way that says there is not going to be flooding. Sometimes you can let nature do what nature does best."

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source: seattletimes.nwsource.com

$58 million sought for flood victims, affordable housing

Joined by state Democrats and housing activists, Gov. Christine Gregoire on Monday proposed spending nearly $58 million to increase the state's inventory of affordable housing and help victims of the recent floods rebuild.

The proposed package, which will be considered when the state Legislature convenes next month, also would provide financial-counseling services and programs aimed at curtailing mortgage fraud and helping homeowners avoid foreclosure.

The floods that devastated communities across Southwest Washington earlier this month served as "a rude reminder" of how precarious a family's housing situation can be — and how important a home is to a family's sense of security, Gregoire said.

At a news conference Monday in White Center — King County's poorest neighborhood — Gregoire; Senate Majority Leader Lisa Brown, D-Spokane; House Speaker Frank Chopp, D-Seattle; and Sen. Claudia Kauffman, D-Kent, unveiled what they called a housing-security plan.

It would add $7.5 million to the state operating budget. Of that, $1.5 million would pay for mortgage-crisis counseling and homeownership-education programs, with the rest going to the Washington Families Fund.

The fund uses public money to leverage philanthropic donations to create affordable housing and provide such services as drug treatment, domestic-violence counseling and child care to help people move out of homelessness.

Since 2004, Boeing, the Windermere Foundation and other private foundations have given money that's been matched by the state, totaling more than $11.5 million.

The Washington Families Fund is a national model of collaboration between the public and private sectors, said Bill Gates Sr., representing the Bill & Melinda Gates Foundation, which has given $4 million to the fund since 2004.

An additional $50 million would be added to the state Housing Trust Fund, bringing the fund's total to approximately $180 million.

Of that, $10 million would go to help families who were hit hardest by the recent floods to repair and rebuild. An additional $3 million would be available so nonprofit organizations and housing authorities could buy property.

The property-acquisition program is "still under design," said Kari Burrell, the governor's executive-policy director. But the goal, she said, is to help nonprofits quickly buy property when it comes on the market to preserve affordable housing and mobile-home parks.

Gregoire also said the proposal seeks to ban deferred-interest options for subprime loans and eliminate prepayment penalties that kick in when a loan is paid off within a certain time period, typically three years after it's sold.

Under the proposal, mortgage fraud would be a felony, and anyone involved in mortgage-lending scams also would be subject to greater civil penalties, the governor said.

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source: seattletimes.nwsource.com

More mortgage relief is urged

Support is growing on several fronts in Washington, D.C., for mortgage-industry reforms and homeowner-assistance programs with broader potential impact than the Bush administration's plan to freeze interest rates on a small percentage of home loans.

So far, the government has pursued modest responses to this year's surge in mortgage defaults and home foreclosures. But mounting foreclosures, fears of a recession and an upcoming election are prompting a range of more aggressive proposals from Congress, the Federal Reserve and consumer groups.

The Bush administration favors restraint, with President Bush saying Monday that the "the government should never bail out lenders." Still, the president noted that Treasury Secretary Henry Paulson is working with Rep. Barney Frank, D.-Mass., on a plan to allow Fannie Mae and Freddie Mac to finance larger loans, in conjunction with tighter regulation of the government sponsored companies.

Several housing-related bills had been stalled in Congress for much of the year. On Friday, though, the Senate overwhelmingly approved bills that would allow more government-backed loans to borrowers with weak credit and permit homeowners to receive tax-free mortgage forgiveness from their lenders. The IRS now taxes any loan forgiveness as income.

These two measures have bipartisan support and appear likely to be signed by the president next year. Other proposals are more divisive and likely to be the subject of heated debate in Congress.

Today, the Federal Reserve is expected to propose a new set of reforms for the home-loan market, including requiring lenders to borrowers with spotty credit to set aside money for property taxes and insurance, and restricting loans that do not require proof of a borrower's income.

However, the Fed's actions are unlikely to diminish Democrats' desire for stricter protections for borrowers. Analysts say House and Senate Democrats are likely to push for more stringent restrictions next year.

"The drumbeat of bad news about mortgage delinquencies and foreclosures will keep the issue at the front of the policy debate," said Douglas Elmendorf, a senior fellow at the Brookings Institution.

Several proposals are already being floated:

• Alan Greenspan, former chairman of the Federal Reserve, suggested in a TV interview over the weekend that more government intervention was needed to help borrowers.

"Cash is available and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this," Greenspan said Sunday during an appearance on ABC's "This Week," offering few specifics.

Asked Monday about Greenspan's suggestion on Fox Business News, Paulson said, "I don't think what we need is a big government bailout right now," he said. "I think what we need is to help the markets work the way they're intended to work and avoid those foreclosures that are preventable."

The Center for American Progress, a liberal public-policy think tank, last week proposed the creation of a new government agency, the Family Foreclosure Rescue Corp., that would help borrowers whose home value has declined to less than that of their mortgage by providing fixed-rate loans and issuing government-insured bonds to pay for the efforts.

• Democrats and consumer groups are advancing legislation to bar abusive lending practices and to allow bankruptcy judges to reduce the size of a borrowers' home loans in court. Advocates say this change could help 500,000 borrowers or more, compared with around 250,000 likely to be helped by the Bush administration's plan to freeze introductory interest rates for some borrowers.

Some Republicans and lending-industry lobbyists warn that an overreaction will limit access to mortgage loans just when they are needed most.

Republicans have backed limited responses, such as the bill passed by the Senate last week to raise the maximum mortgage the Federal Housing Administration (FHA) can insure in high-cost areas from $362,790 to $417,000.

The government estimates that 200,000 more borrowers would be aided next year through the legislation — including new buyers and existing borrowers trying to refinance into new loans. The FHA now insures 3.7 million loans.

The real-estate industry has long pushed for this change, saying that the size of mortgages the government agency can back is often too small to attract borrowers in expensive areas such as California and the Northeast.

Experts say the effort is especially important right now because lenders focusing on borrowers with poor credit have disappeared and investors facing huge losses on mortgages securities are avoiding riskier loans.

But many borrowers are still likely to be without help, analysts say, because the FHA has stricter requirements for loans than lenders to borrowers with spotty credit whose business has crashed this year.

For example, the agency requires borrowers to make a 3 percent down payment and document their incomes.

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source: seattletimes.nwsource.com

Critics say Fed's plan won't fix mortgage mess

The Federal Reserve on Tuesday proposed new mortgage-lending rules to protect consumers against fraud and deception, but consumer advocates said lenders could still make the kinds of bad loans that triggered the subprime-lending crisis.

The proposal includes measures specifically aimed at higher-cost subprime loans for people with weak credit, as well as broader rules that would apply to all home loans.

It would require lenders who make subprime loans to consider borrowers' abilities to make payments and to verify that they have the income and assets they claim.

Consumer activists said the plan moves in the right direction but not enough. For example, borrowers who suspect their lender broke the rules would have to prove "a pattern or practice" of abusive lending, noted Kurt Eggert, a law professor at Chapman University and member of the Fed's Consumer Advisory Council.

"To prove what the lender's real policy is, a borrower would have to examine potentially hundreds of loan files, while the lender would be screaming about privacy for other borrowers," Eggert said. "This could be an insurmountable burden."

As of late November, more than 7.2 million families held subprime loans, with an outstanding value of $1.3 trillion. About 14 percent of holders of subprime loans are in default or behind on payments. That number is expected to surge next year when many adjustable-rate loans issued in 2006, when lending standards were weakest, reset to higher prices.

"Mortgage-market discipline has in some cases broken down, and the incentives to follow prudent lending procedures have, at times, eroded," Fed Chairman Ben Bernanke said. The proposed rules, he said, aimed to prevent improper lending without "unduly restricting mortgage credit availability."

The Fed proposal was released Tuesday for a three-month public-comment period, after which the Fed could adopt it with or without revisions.

For all loans, mortgage brokers would be required to disclose in writing if they receive bonuses for selling loans at interest rates that are higher than what a borrower qualifies for.

But critics — who deride such incentives as kickbacks — say the disclosures are easily overlooked or ignored in a mountain of other loan documents.

"Unsophisticated borrowers may be too easily convinced to take out a loan" with unreasonable charges and those bonuses, and the proposed rules wouldn't solve that problem, said John Taylor, president of the pro-consumer National Community Reinvestment Coalition.

He added: "A borrower shouldn't need to be a lawyer or financial expert to protect themselves from unfair and deceptive lending that leaves them vulnerable to foreclosure."

Experts Tuesday said some of the Fed proposals were helpful, such as the rule that lenders must verify income and assets for subprime loans. The proposal came in response to lenders offering "no-documentation" loans, and charging a premium for them.

Some borrowers used these loans to buy homes for speculative purposes, betting on rising prices. Others say they were lured into mortgages they did not fully understand. Now, with home values falling, many of these borrowers are facing foreclosure.

Criticism over the Fed initiative seemed certain to energize Democrat-led efforts in Congress to approve stricter requirements next year.

"We now have confirmation of two facts we have known for some time," said Rep. Barney Frank, D-Mass., chairman of the House Committee on Financial Services. "One, the Federal Reserve System is not a strong advocate for consumers, and two, there is no Santa Claus."

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source: seattletimes.nwsource.com

Buying a house on the courthouse steps can be cheaper, but also riskier

Over the rush of traffic, homes were being sold and big money was changing hands.

Jon Rosen couldn't believe his eyes.

The 27-year-old Belltown resident was viewing King County's weekly home auction for the first time in hopes of someday nabbing a good deal on a foreclosed home. He was shocked by the informal, old-fashioned proceeding.

Three auction criers rattled off lists of homes available, barely audible over the street noise. Bids were handwritten on a sheet of paper as bidders — many of whom are regulars — called out their price.

"I think it's crazy," Rosen said. "It's an odd process for this day and age."

It's also gaining more attention locally and nationally as the number of foreclosed properties swell.

The auctions are attracting novices like Rosen who want to learn more about it, as well as experienced real-estate investors who are looking for additional opportunities.

Houses sold at auctions in King County (in downtown Seattle and at a site in Bellevue) have increased about 29 percent this year compared with 2006, (from 529 to 680), according to Dean Street & Associates, a real-estate firm in Bellevue specializing in foreclosures.

Foreclosed-property sales jumped 90 percent through last month in Pierce County (from 396 to 753).

Similar figures were not available in Snohomish County, but the number of homes entering the foreclosure process rose 17 percent (from 1,316 to 1,534), according to Dean Street figures.

Those numbers also include properties that revert to the lender if no one buys them at auction.

The actual number of foreclosed properties in each county is much higher than the number that go to auction. About a third of them never make it to the auction block because they're held up in bankruptcy proceedings or sold beforehand, according to Dean Street & Associates.

Better deals

As more houses are sold at auction, investors have a wider selection and, lately, the deals are often better because banks and mortgage companies are willing to take a loss to offload the properties.

On average, buyers of foreclosed homes see a savings of about 18.5 percent in the Puget Sound area, according to ForeclosurePoint.com, a Web site launched earlier this year by DepotPoint in Bellevue.

Auctioned houses run the gamut, from new small condos in South King County to large old homes on Capitol Hill.

"You can find some very interesting properties at auction," said Chris Matty, chief marketing officer for DepotPoint.

Home auctions can be a minefield, though, especially for first-timers.

For one thing, a prospective buyer can't always see the inside of a foreclosed house before the auction, because it's considered private property; it's possible he'll get stuck with something that needs costly repairs.

Buyers who don't do their homework can also get strapped with a lien they're not aware of, obliterating their good deal.

The scene

The weekly home auction in downtown Seattle shows how the process can be particularly intimidating to novices.

In addition to the informal process, the auction is ruled by something of an old boys club, a group of competing real-estate agents who show up every week.

They're in it to make their investor clients a deal and they know all the ins and outs.

Dean Street, 67, has been attending the weekly auctions for more than 30 years. He's in his element at the sale, joking with his competitors — among them The Foreclosure Group of Seattle — and heckling the auction criers.

"Hurry it up, it's cold out here," he said to auction crier Tara Turpen, who was busy rifling through a list of properties. She merely smiled — after 7 ½ years on the job, she's used to the teasing.

"I like it," she said. "But weather can be a factor and we get people that don't understand."

Newcomer Adam Wilkes, 32, of Seattle, bid on a four-bedroom Seattle house but lost out to one of the regulars.

The 1,730-square-foot house on the north side of Lake Union had an estimated market value of $621,500 and went for $412,500, a 34 percent savings.

It didn't bother Wilkes, though, because he didn't expect to buy a house on the first try.

"This was the nicest house in the nicest neighborhood," he said. "But I have a lot of others in less-great neighborhoods that I'm looking at."

Even more challenging is the financing: Buyers have to show up with the full amount of their winning bid to be able to buy a house at auction. (Most use cashier's checks.) While there are loans available for that, they often come with a high interest rate.

"What I say is, 'Yes, you can find a good deal at an auction. But you have to be very patient and very logical,' " said Matt Steel, a real-estate agent who specializes in foreclosure sales for Real Estate Investment Firm, a Seattle company he owns.

Making bank

Lately, the deals have been getting better. Mortgage companies, eager to sell a growing number of foreclosed properties, are willing to take a hit to save their balance sheets.

They're dropping their opening bids on about 25 percent of all properties going to auction, reducing them from 19 to 47 percent in one extreme case, according to ForeclosurePoint.

About 9.5 percent of properties on the auction block in King, Pierce and Snohomish counties revert to the lender and become what are known as REO (real-estate owned) properties.

That's a much lower rate than in such markets as California, Nevada and Arizona, where the number of foreclosures have soared, and sometimes 75 percent or more of homes end up back with a lender.

"In a normal market, [mortgage companies] would have a few thousand homes on their balance sheets," Matty said. "Now there's a multifold increase nationwide. That's billions of dollars."

The risks

Scooping up a deal on a foreclosed home can seem attractive — especially in the current market — but the system is rife with risks for the average homebuyer.

Take, for example, Brian Truman, 31, who recently bought a three-bedroom house in Kent for $262,776, 26 percent below its estimated market value.

While Truman has bought several houses at auction before with partners, this is his first solo investment.

He knew from research that the home came with a $63,390 lien, decreasing the value of his investment.

What made him nervous was the unknown condition of the house.

"Out of 10 properties you purchase, there's one that's a home run, several that are break-even and a couple that are horrible," Truman said.

He said he was waiting to see the inside before he decides whether to hold onto it as a rental or sell it after some renovation. In this market, more auction buyers are looking at holding onto their homes for a while.

Renting out the home is something that Dean Street, whose real-estate company bears his name, is recommending to investors.

"Our rents [in the Seattle area] are going up about 15 percent," Street said. "That's a heck of a return on an investment."

Another tip for homebuyers who are thinking of purchasing a property through auction for the first time: don't go alone and don't be impulsive.

Foreclosure experts recommend attending an auction at least several times and bring a knowledgeable real-estate agent.

This is especially important because there's a lot of money on the line: the cost of the house.

"You really need an accurate picture of what's going on and you need to research," Steel, the real-estate agent, said.

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source: seattletimes.nwsource.com