The military takes the lead in renewable energy

The federal government, via the Department of Defense, is finally taking the lead in renewable energy. This will speed the “mainstreaming” of renewable energy technology. Action is taking the place of words and minor financial incentives at long last. More private-sector jobs are an important added bonus. The military obviously sees the immediate need to break its long dependence on oil(mostly imported from not-always-friendly countries). Hopefully this will help Congress and the Senate see the light and speed the country as a whole in this direction.

Sunpower Corp.(SPWRA) has signed contracts with the General Services Administration, the National Renewable Energy Laboratory, the U.S. Air Force and the U.S. Navy. New solar power installations for these government agencies will comprise a minimum of 20MW. Sunpower estimates creation of 1,000 new local construction jobs. Locations are in the west and mid-west, in Colorado, Indiana and Arizona and are expected to start producing power next summer. The U.S. Marines are also getting into solar power with suitcase-sized installations for field use.

Wind power is also in the picture. The U.S. Coast Guard installed a 2.4MW wind turbine at its Southwest Harbor Base in Maine. The Coast Guard is shooting for a zero-carbon footprint for housing at this base and also installed solar panels and solar hot water heaters. This closely follows the U.S. Army’s first wind project at the Toole Army Depot in Utah.

The Army has so far been focusing on geothermal energy production. The Air Force is moving forward on renewable biofuels for its aircraft.

Another part of the wave of the future is here

One of the oldest public swimming pools in the country has been transformed into one of the greenest and healthiest places to swim indoors on the planet. “The Plunge”, also known as the Richmond Municipal Natatorium, has been brought back from the dead after being closed for nearly a decade because of lack of public funds for maintenance and necessary upgrades. The historic 1925 pool reopened on August 14, 2010 in Point Richmond, California.

The refurbished 324,000 gallon pool now features chlorine-free saline water sanitized with ultraviolet light, solar heating, solar electric power, highly efficient pumps and 300 operable windows for natural ventilation. The $7.5-million makeover was paid for with a combination of voter-approved funds and private donations. A portion of the grounds are now dedicated to a community food garden.

This type of project is the wave of the future. Governments and other public-service entities need to take the lead on the issues of energy efficiency, alternative energy use and public health. If government sets the example, these types of projects will seep into the mainstream and become the norm much more quickly.

Up to this point, most projects of this sort have been undertaken by private-sector companies. The companies are not spending this money just as a public service or for good PR. They are doing it because they can see the writing on the wall and know it makes good long-term financial sense. Government on all levels needs to adopt such a long-term outlook and jump on the bandwagon sooner rather than later.

For photos and more information, click these links: http://solar.calfinder.com/blog/news/richmond-plunge-green-pool/ and http://www.metaefficient.com/architecture-and-building/efficient-public-swimming-pool.html.

Federal mortgage help not working

In its latest report, the Congressional Oversight Panel notes that the programs initiated by the Treasury Department to help homeowners facing foreclosure have not been effective. Fewer than 200,000 people have been permanently helped by the programs so far. I do not think this should be a surprise to anyone.

What incentive do the banks have to help homeowners facing foreclosure? The government bailed them out and continues to offer help as more foreclosures pile up. Participation in all of Treasury’s programs so far has been voluntary for the banks. A new requirement that loan servicers explain to homeowners why their loan modification has been declined is not going to increase the number of modifications. New efforts to get banks to write down principal loan amounts to bring loans in line with actual house values has gained no traction, even with one out of four mortgages currently being upside down.

What incentive does a homeowner have to apply for help through these Treasury Department programs? With second mortgages, credit cards, car loans and other debt, most homeowners would still pay nearly 60% of their income towards debt service even with reduced first mortgage payments. If they do attain a “best case” 5-year payment reduction, the homeowner will probably still be upside down and looking at higher payments once again.

Lenders and borrowers both seem slightly confused by the trickle of modifications to existing programs and new programs that keeps coming from Treasury. No-one seems to know whether to try to modify a mortgage now or wait a few months to see if something better comes along. Homeowners have seemingly been stuck in a non-stop cycle of applying to lenders for help, being denied after multiple delays and then being encouraged to apply for help again under a new or changed program, only to be denied yet again.

Meanwhile, more and more homes are foreclosed upon. Housing prices seem to be stabilizing in parts of the country but are still plummeting in some major cities. And the banks are once again profitable thanks to the federal government bail-outs.

Why “green” is important to real estate investors

There are a lot of reason why green is in the news so much. Many of those reasons are going to become very important to everyone involved in real estate or real estate investing. Green is not just about trees and polar bears but about making homes more affordable and salable. Home buyers are interested in green and investors should remember this when doing rehabs.

Homeowners in all areas of the country benefit from living in energy-efficient houses. Well insulated walls and ceilings, thermal-barrier windows and no air leaks reduce heating and cooling bills for everyone. Installation of modern, efficient furnaces, air conditioners and electrical appliances also leads to reduced emissions, reduced raw materials extraction, reduced transportation costs and less waste in general. There are many programs at all levels of government to help homeowners pay for these types of improvements on older homes. More incentives also need to be made available for purchasing energy-efficient new homes.

Water contributes to the monthly cost of home ownership. Making a home more water-efficient can both lower operating costs and benefit the environment. Reduced water use can even delay or prevent sinkhole formation in areas prone to sinkhole activity. Low-volume toilets, shower heads and faucets all help reduce water usage. Native-plant landscaping watered with captured roof run-off can greatly reduce irrigation needs. Where available, recycled water can be used for irrigation. Tankless, or on-demand, hot water heaters save both energy and water.

Solar water heaters are an ancient and proven technology that is easily and cheaply installed and can also be adapted to heating the house. Passive solar home designs can reduce demand for air conditioning by limiting indoor direct-sun exposure during summer days and allowing cool night air into the home. Solar electric has become much more efficient and affordable than ever before and can supply much of a home’s needs during the day but storage is still a problem. Wind electric generation is just starting to trickle down to the individual home level and should become much more affordable and available during the next few years.

All of these “green” upgrades will lower monthly bills and increase salability of a home. These are not “fringe” ideas limited to the granola & chai crowd at the co-op. Mainstream home buyers are now looking for “green” features because they benefit everyone.

Effective government Mortgage help for homeowners?

Can the federal government really have much impact on the number of consumer mortgages that go into default? So far the answer would appear to be no, but the programs offered have been quite limited and not many homeowners have even qualified. The answer for the next round remains to be seen.

First there was the Making Homes Affordable program launched in 2008. Though the intentions were good the program showed the governments lack of grasp of the reasons home mortgages were going into default. The program targeted people with equity in their homes and who were current in their monthly payments. It encouraged lenders to refinance at lower interest rates and/or lesser principal amounts to lower payments to a more affordable level. With the drastic drops of property values and the rapid rise of the unemployed, most folks in mortgage trouble were left out in the cold. There was also very little incentive for the banks to take part in this program.

New provisions have now been added that try to make up for some of the original shortfalls. Eligibility now extends to properties valued at least 15% less than the amount of the mortgage. The unemployed are also targeted. Lenders are encouraged to refinance with FHA guarantees at a new principal of 97.75% of the actual property value, getting people above water on their mortgages again. Another goal is have maximum monthly payments of 31% or less of the borrowers income. Banks are also encouraged to offer up to six months on reduced or furloughed payments to help those who are out of work. Participation by lenders is still voluntary but some of the larger banks are showing signs of they think keeping people in their homes is better than foreclosing and trying to sell in today’s real estate market.

The problem of second mortgages, a large part of many lenders’ portfolios, remains unaddressed. Also not tackled is the problem of unaffordable mortgages on properties that have not drastically dropped in value. All of these loans will still go into default if the borrowers not find a job quickly or lose the job they currently have. The impact of the many commercial real estate loans about to come due is also ignored and could have a major impact on the whole economy. There are still interesting times ahead for all of us.

Real estate and the federal government

Timothy Geithner, the current Secretary of the Treasury, pledged at a recent congressional hearing to reform the way Fannie Mae and Freddie Mac operate. Geithner thought Fannie and Freddie had been more prudent than the private market mortgage lenders but acknowledged mistakes. He said the failure of Fannie and Freddie in 2008 was part of a broader crisis and revealed structural flaws in the entire housing finance system. The main flaws were seen to be insufficient regulation and enforcement of existing rules and regulations.

The Vice President and Liaison to Government Affairs of the National Association of Realtors, Vince Malta, mostly agreed with Geithner. Malta thought the basic structure of Fannie Mae and Freddie Mac were flawed. He saw them having a private profit structure but a public loss structure, putting money in the pockets of those in charge but taxpayers on the hook for losses. Instead, the entities should be self-sufficient and price risk effectively to cover potential losses. Any profit should be used first to establish capital reserves.

Fannie and Freddie were allowed to earn private gains for many years while at the same time being subsidized by taxpayers. Federally regulated banks are required to hold 4% capital against mortgages on the balance sheets. Fannie Mae and Freddie Mac were only required to hold 2.5 percent capital against held mortgages and only 0.45% against guaranteed mortgage derivatives. They made unwise risk decisions during the boom years by investing heavily in mortgage derivatives.

The Federal Home Loan Bank system also made unwise decisions. Heavy investment in sub-prime mortgage securities was part of their game plan as well. These risk decisions and lack of capital reserves to cover loans and securities gone bad are a large part of the present problem.

Everyone involved thinks the government needs to stay involved in the home lending industry. Federal government loan guarantees are seen as the only way out of the housing mess. Without some sort of government guarantees the private mortgage industry would shrink to the point of uselessness. The question is: how will things be restructured and will that really solve the problems that were exposed during the past few years?

Florida mimics the feds in useless foreclosure help

In December of 2009, Florida’s Supreme Court required the 20 state judicial circuits to sponsor mediation between lenders and homeowners. This was supposed to ease the mortgage crisis. But it was a totally new program and each circuit had to design it from scratch. Pasco and Pinellas will start offering the foreclosure mediation in June and Hillsborough does not know yet when it will be able to start. There are now more than 50,000 mortgage default cases clogging the judicial system in those three counties alone.

First the borrower is contacted. The borrower then meets with a foreclosure counselor. Then mediation is scheduled. The best case scenario is that it would take at least a month after a program begins before the first case would get to mediation. Those with other mediation experience in Florida estimate only half of the eligible homeowners would sign up. Real estate investors without homestead exemptions would not even be eligible for the program.

The entire program of foreclosure counseling for the borrower and then mediation costs $750. This fee is paid by the lender. Sessions are set for no more than three hours.

This just does not sound like a useful or practical program. Three hours to work out an alternate solution to foreclosure with a bank? Really? Has any of these Supreme Court justices tried to convince a bank to do a short sale recently? Have they timed the process?

Another requirement: mediation sessions must be scheduled between 60 and 120 days after the foreclosure filing. How is this going to help any of the cases currently in the system? Does the Supreme Court think there are that many more foreclosures yet to come? Why not find a way to help some of the people that are being foreclosed on right now? Many of the foreclosures now in the system have been dragging on for much longer than 120 days.

A further requirement of the court: bank representatives at the mediation sessions must have full authority to modify the mortgage. The problem is that many of the banks filing the foreclosures are only servicing the loans. The mortgages are often owned by investing companies across the state or across the country. How is that ever going to work? The justices are again showing a severe lack of knowledge of how the modern mortgage system works.

So here is the way I see it. In the face of a poor economy and strangled budgets, the state Supreme Court has forced every judicial circuit in Florida to start a large new program from scratch that is not going to help any homeowners. There is no incentive for the banks to cooperate and it is another colossal waste of taxpayer money.

How the bank bail-out could have worked

We are now well over a year into the bank/financial institution bail-out. Trillions of dollars of taxpayer money have gone to huge companies that knowingly took very foolish risks with other people's money in order to enrich themselves. The people whose money was lost have gotten nothing and by government decree have been forced to give even more. Meanwhile the foreclosures roll on and more and more lives are ruined.

The entire mess started with home owners unable to afford the increased monthly payments on the adjustable rate mortgages(ARM's) their broker or bank talked them into(probably many could barely afford the low introductory payments). Facing the possibility of that many mortgage defaults the banks got nervous. Then the mortgage insurers(AIG, etc...) got nervous. Then the companies backing and depending on the insurers(Lehman, Goldman Sachs, etc...) got nervous and the whole house of cards started to come down.

Since the problem started with individual home owner's inability to meet an increased monthly mortgage payment, shouldn't the solution start there also? How many people would have remained in their homes and current on their mortgages if the government had offered them a few hundred dollars per month until a refinance solution could be worked out by congress and the banks? Would everyone have been so panicked if all those mortgages were getting paid by the government? Would simply keeping peoples' mortgages current have been any more expensive than the actual bail-out? How differently would our government be seen if all those trillions of dollars had been used to keep people in their homes instead of keeping huge, greedy companies afloat?

It is too late this time but this or a similar problem will happen again in the future. Next time I hope our government has the backbone and the common sense to look for solutions that address the real cause of the problem. The current financial crisis was not caused by huge banking and investment companies facing bankruptcy. The current crisis was caused by home owner’s inability to pay escalating monthly mortgage payments and this cause was never adequately addressed by any part of the bail-out.