Thursday, August 6, 2009

Park City bankers explain credit crunch

Jumbo loans were popular with speculators, now investors won't buy them
by Andrew Kirk, OF THE RECORD STAFF
Posted: 07/31/2009 04:21:38 PM MDT

Ask any Realtor or home builder how they're doing and they often say the same thing: clients can't get "jumbo loans." Those are home loans that exceed a $729,750 limit set by Congress as the maximum amount for loans guaranteed or purchased by the federally-chartered Fannie Mae and Freddie Mac.
That's a relatively small sum when shopping for a stand-alone house in Park City. Before last September, home-financing companies used to brag about their ability to find loans for nearly any amount.
That is because mortgages are usually sold to investors. Before the credit crisis, there were many types of investors. Now, there are few to speak of unless the loans are guaranteed by Fannie Mae and Freddie Mac which still buy the majority of mortgages in America.
But unfortunately for Park City home shoppers, the Federal Housing Finance Agency (FHFA) sets limits on the size of loans they can buy, hence the distinction "jumbo," explained Brad German, spokesperson for Freddie Mac.
The irony is it's a great time to get a smaller loan.
"Wells Fargo has made more loans in the first six months of this year than they have in years. Money is available, plentiful and inexpensive. And it's absolutely true," said Rick Klein, sales manager for Mountain Summit Mortgage, an affiliate of Wells Fargo.
"Frontier remains a very active lender," said Marc Estabrook, president of Frontier Community Bank. "Year to date, we've funded nearly $32 million in loans."
Riley Risto, vice president and branch manager at Mountain West Bank, explained the problem this way: Commercial mortgages; jumbo mortgages; construction loans; and home equity loans or lines are much harder and more expensive to obtain; loans for residential developments; and loans for timeshares, fractional ownerships and condominiums to be used for nightly rentals, are all but impossible to get.
"Unfortunately, these segments make up a significant portion of Park City's real estate market," he said.
Klein said borrowers for the types of loans listed above are "under much more of a magnifying glass today."
It wasn't hard to qualify for a loan in the past, Estabrook said, and those days are gone.
Because the FHFA is backing smaller loans, investor banks are still buying them and local banks are still supplying them. But because there is no security in buying loans not approved by the FHFA, global investors aren't interested, Klein said.
Risto said he believes a correction in the market is necessary and warranted. He said there was a false boom created by a policy of artificially-low interest rates set by the Federal Reserve. The market was alright with "toxic assets" because they moved quickly through the system to companies like Countrywide, then on to the general investing public. Now banks and secondary-market investors "are being highly scrutinized by auditors and analysts for their concentration levels and risk management."
It may seem odd that large loans going for large houses would be trusted less than average homes going to regular Americans in the midst of a recession. Common sense might suggest that someone who can afford a $1 million house is more trustworthy than a blue-collar working trying to buy a $200,000 condominium. After all, job losses are still predicted.
But Risto explained that jumbo loans were popular among real estate investors.
In the old system, a plumber could just declare his income at $1 million a year and qualify for a $1-million loan so he could flip a house. Inexperienced contractors and novice investors suddenly became residential developers during the boom and got loans to create subdivisions. After the credit crisis last September, lenders were left holding loans for over-priced homes and half-completed neighborhoods.
Klein said the result of this national trend is that if banks lend jumbo loans, they've got to keep them. Even if a bank can afford to do that, they're going to price those loans at a higher rate.
Estabrook said his bank has been making those loans and has been keeping them. But a bank that size can only make so many of them.

Huntsman's Deer Valley compound: yours for $55 million


Now on the market, it is 'truly the crown jewel of Deer Valley,' agent says
by Jay Hamburger OF THE RECORD STAFF
Posted: 07/31/2009 04:21:59 PM MDT

Deedee Corradini, the real estate agent listing the Huntsman family compound in Deer Valley, says...

Jon Huntsman Sr., the industrialist and father of Gov. Jon Huntsman Jr., has put his Deer Valley compound on the market, asking $55 million for what is among the prime pieces of real estate in Deer Valley.
The listing agent, Deedee Corradini, said it has been on the market for approximately two months, but there had been little publicity when it was offered for sale. The compound covers nearly 64 acres of land at 5000 Royal St. There is a mansion on the property and there is development potential on other parts of the land.
"It's one of a kind. Everybody says my property is one of a kind, but this truly is," Corradini said, calling the compound "truly the crown jewel of Deer Valley."
The compound covers three parcels, with there being development potential on each of them. They are:
a 40-acre piece of land with one house. The 20,000-square-foot house has 12 bedrooms, 16 bathrooms, a swimming pool, a fitness room, a game room, an artificial pond and an artificial waterfall. It was built in 1989. There is the potential to build another 14 houses on the 40 acres.
a 20-acre parcel where six or seven houses could be built.
a 3.61-acre parcel where one house could be located.
Huntsman wants to sell the three parcels to one buyer, Corradini said. She describes options for a buyer that include continuing to use the house and land as a family compound, keeping the house and selling the other land to developers or building on the other land themselves.
"There are people who want this kind of property. We just have to find them," Corradini said, adding that there are "many potential buyers."
She did not predict what the bids will be, though. She said Deer Valley and Park City have become sought-after places for businesspeople and celebrities.
Corradini said the Huntsman family has not used the compound regularly in recent years, prompting Huntsman to put it on the market. She said Huntsman has been spending more time in Driggs, Idaho, a small city close to Jackson, Wyo., that is becoming popular with people buying vacation properties. Huntsman is a key figure in the Huntsman Springs real estate development there.
Lincoln Calder, the president of the Park City Board of Realtors, said there has been at least one top-dollar sale in the area this summer, with a place in The Colony that had been listed at $23.8 million selling. He is unaware of the sale price, though.
Calder did not discuss the prospects of the Huntsman compound selling, but he said the property it is a rarity in Park City.
"It's a very unique piece of property and will take a very unique buyer with the ability to purchase it," Calder said.

Tuesday, August 4, 2009

County sets final deadline for Canyons golf course

Landowners who don't comply may lose development approvals
by Nan Chalat-Noaker, Record editor
Posted: 07/31/2009 04:22:10 PM MDT

Wolf Mountain Resorts LC has until Oct.1 to turn over the necessary easements and drop all legal impediments to construction of an 18-hole golf course at The Canyons or risk losing development approvals for a 35-lot subdivision that was part of the original development agreement for the resort. Wolf Mountain is the underlying leaseholder of much of the resort.
Once Wolf removes its roadblocks, other landowners in The Canyons Specially Planned Area have until this coming May 1 to begin construction on the long-awaited course, and until May 1, 2013, to open the course to the public, or all further development at The Canyons involving those entities will be suspended.
According to a 52-page report issued by interim Summit County Manager Brian Bellamy on Thursday, the county has exhausted its recourses for expediting the project, and is setting a new, hard deadline.
The American Skiing Company, Utah (ASCU)'s original development agreement with the county promised a completed public golf course by 2002 in exchange for specific development approvals for several landowners at the resort, but disagreements over the exact outline of the course put the project in legal limbo. As a result, the developers say, they were unable to obtain financing to move forward on the $11 million project.
Bellamy's report details the long, convoluted history of the proposed golf course, beginning with the original development agreement between Summit County and ASCU in 1997 and including the amended agreement in 1999, the soft default and suspension of plats and building permits in 2002, two "standstill" agreements allowing ASCU deadline extensions in 2003 and 2004, Wolf's refusal in 2006 to execute the deeds or sign the plats for the golf course, a redesign of the golf course to exclude Wolf's property, the county's lawsuit and subsequent settlement with Wolf, the sale of The Canyons to the Talisker Corporation, Wolf's lawsuit against Summit County and the county's counterclaim, Wolf's notice of intent to file a lawsuit contesting all of the golf course properties, and finally last June's public hearing that allowed each participating entity a chance to air its grievances and requirements.
The county's apparent willingness to take a tough stand and rescind the development agreement if the parties can't come to an agreement seems to have made a difference.
On Friday, after reading Bellamy's report, Kenny Griswold, principal partner of Wolf Mountain said, " Our negotiations with the county over the past month have been productive and Wolf looks forward to the start of construction on the course next summer." He added, "We look forward to doing our share I think it will be spectacular."
And on behalf of Talisker, attorney David Smith released this statement: "Talisker looks forward to the timely implementation of the County's findings on the Golf Course to be built at the Canyons. With the addition of the golf course and other planned improvements, Talisker will create a world-class all-season resort."
In addition to Wolf Mountain, the county's deadline applies to: ASCU; the Resort Village Merchants Association; Willow Draw, LC; the D.A. Osguthorpe Family Partnership and several other landholders.
On Friday Bellamy told The Record that he is "thrilled to see that people are willing to bury the hatchet to get this going." He added that he is "very optimistic" the landowners will meet the new deadlines.