Horizon, Host: Ted Simons

February 9, 2009


Host: Ted Simons

Foreclosures and Bankruptcy

  |   Video
  • In the current real estate market, more people are facing foreclosure and bankruptcy. Attorney Diane Drain, a real estate and bankruptcy specialist, explains how homeowners can avoid foreclosure and, if necessary, file for bankruptcy.
Guests:
  • Diane Drain - Attorney
Category: Business/Economy

View Transcript
Ted Simons:
Here now to talk about real estate, foreclosures and bankruptcy is attorney Diane Drain who focuses on both real estate and bankruptcy. She's a member of the board of directors of the state bar of Arizona. Good to have you here, welcome to “Horizon.”

Diane Drain:
Thank you for inviting me.

Ted Simons: Concerns when working out a foreclosure and bankruptcy. What should folks be aware of?

Diane Drain:
Well certainly from the foreclosure side, you need to know the consequences of a lender not receiving the full amount they're owed. Once a foreclosure is completed, there's a credit hit because there's foreclosure on their credit there could be an opportunity for the lender to sue the borrower for losses that the lender suffered. If not that, that's called a deficiency. If not that, there could be tax consequences called forgiveness of debt that roll out of a foreclosure or a short sale.

Ted Simons:
There also has to be concerned with the lender as well, because lenders promise things but sometimes either the promises don't happen or happen in a far distant future that a lot of things happen in between.

Diane Drain:
Well unfortunately, the lenders have been taken by surprise the number of files that are in default. They're under trained and overwhelmed as far as the number of loans -- what's called the loss mitigation department is being asked to review. So they’ve really done, they've taken a position they're dealing only with the hottest flames that are out there meaning those that are closest to losing in foreclosure. They're ignoring the ones that they could save if only they'd work on them earlier. So it's taken between six weeks and six months to get a response out of a lender whether or not they'll work with the borrower.

Ted Simons:
And people have to be aware of that because a lot could happen six months to a year regarding your loan.

Diane Drain:
Exactly.

Ted Simons:
Short sales. Talk to us about the ramifications there.

Diane Drain:
A short sale is where a lender doesn't receive what he's owed. So again, the consequences could be taxes, forgiveness of debt. The lender may ask the borrower to sign a promissory note for the difference between what the lender is receiving for a short sale. The borrower needs to be aware he’s legally obligated to pay that back or he could be sued. The problem there is that he may have not -- the promissory note is a legal obligation outside of our Arizona statutes, what's called the antideficiency statute. Had he not signed the promissory note, he might have been protected. Once he signed it he's now exposed.

Ted Simons:
So in terms of taxes, see if I got this right now --

Diane Drain:
Ok.

Ted Simons:
You sign for the loan. You sign the promissory note. You can't pay the loan. That's considered income until you sign the note. When you sign the note, that's not considered income. But if you can't pay it, then all of a sudden it comes back to you as income you're liable for?

Diane Drain:
Right, it's called phantom income, because you never really got a dollar bill in your pocket. But it is deemed income. The internal revenue code requires the -- that the lender file a 1099 showing you did have income. There has been some relief. The mortgage forgiveness act of 07 says if it was your principle residence for two of the last five years and you borrowed the money to buy the house or borrow money to improve the house, that there’s a particular form, a 982 form you file with the IRS showing this should not be deemed income.

Ted Simons:
Debt forgiveness act of '07, that's been extended, has at any time?

Diane Drain:
It has been. I believe going to 12 now.

Ted Simons:
And as far as that is concerned, um, what are the ramifications there? What -- how -- not ramifications -- what are the requirements there for someone to be helped?

Diane Drain:
You can't have a secondary residence. This has to be your only residence. You had to have borrowed the money prior to January 1, 2008. Your income has to be such you're 31% of -- I don't have my cheat sheet with me unfortunately -- but basically you can't afford the loan is what it comes down to. The result will be if at first place it's an FHA program so your lender has the discretion whether or not to agree to the -- to modifying the loan. If they modify the loan, then they are to make it a 30-year fixed, standard, you know, current interest rate. And there are some programs for first-time home buyers. There's $7,500 up front down payment kind of a grace period -- grace loan but it will be a loan. You'll have to pay it back.

Ted Simons:
But in general from what we're talking about here, I guess the lesson learned is if you can, don't walk away?

Diane Drain:
Right, don't walk away without knowing what it is that could happen. What consequences will be if you walk away? It may be ultimately you decide to walk away any way because you can't afford to keep taking whatever money in savings and pay it into a black hole. So understand the deficiency issues. Understand the tax issues. You've got to see a certified tax specialist. Don't use the standard CPA who doesn't understand taxes. I'm sorry, forgiveness of debt. So have the big picture in mind before you decide to walk away.

Ted Simons:
Great information there, Diane. Thank you so much for joining us. We appreciate it.

Diane Drain:
Thank you.

Housing

  |   Video
  • Arizona Republic real estate reporter Catherine Reagor talks about the housing market and the state’s poor home sales statistics.
Guests:
  • Catherine Reagor, Real Estate reporter, Arizona Republic
Category: Business/Economy   |   Keywords: Real Estate,

View Transcript
Ted Simons:
Hello and welcome to horizon, I’m Ted Simons. Home sales nationwide were down 45 percent from December of ‘07 to December of ‘08. Here in Arizona, it’s worse. For the same period, new home sales were down 60 percent, resale home sales were down 72 percent. I spoke with Arizona republic real estate reporter Catherine Reagor---to look at these numbers.

Ted Simons:
Good to have you on the program. Thanks for joining us.

Catherine Reagor:
Thank you. It’s good to be here.

Ted Simons:
Let's start with an overview. The state of housing in the Valley right now.

Catherine Reagor:
It’s tough. It's tough. Home building is also down. Home building is down 60% from last year. Home building is one of our top industries. The real problem are foreclosures. And through January it looks like foreclosures are going to climb again. We had some dips in November and December, which were great. But those were because of lender moratoriums on foreclosures. Those are pretty much off. And foreclosures are hurting the entire market. New home sales are off because they’re competing against foreclosure homes that are reselling. Regular home prices down because foreclosure homes are reselling for very low prices. There are great deals out there.

Ted Simons:
You mentioned lender moratoriums are over. Are lenders in other ways working with folks, struggling homeowners right now?

Catherine Reagor:
Actually some numbers just came out today from Hope Now, an alliance of lenders and housing advocate groups and they say in December, they helped more than 200,000 people nationally stay in their home. The problem is, it can't just be a quick fix. It has to be a long-term fix, because also more than 50% of the loans that were fixed and adjusted to keep out of foreclosure in the first half of last year are now back into closure. So there has to be a long-term solution.

Ted Simons:
I know foreclosures are a major problem, but inventory is kind of overriding that as well. We still have way too many homes out there, don't we?

Catherine Reagor:
Yeah. There are a lot of homes for sale. There are a lot of spec new homes that are still for sale. Elliot Pollack, the economist, just said the other day we have to absorb 20,000 to 40,000. That's from the boom in 2005 when we built 68,000 new homes, compared to 12,000 last year, but, of course, we’ve already started to absorb some of those and that has to happen. But these foreclosures are just blowing up the inventory. Of all the resales in December, I believe 60% were these foreclosure resales. The good thing is, they're selling, because if they weren't it would be terrible. But if you’re just a regular homeowner and you need to sell your house, or are trying to sell your house it’s really a tough time.

Ted Simons:
Well, not only that -- if you’re a regular home owner and your neighborhood has been stable and there are homes for sale and all of a sudden there’s a bank-owned sign out front that means your value, your neighborhood, is going to get hit one way or the other.

Catherine Reagor:
It happened to me. Home right across the street sold for about one-third that it had sold for during the peak. But very happy to have a homeowner in there. They are doing work on it. It had been gutted. This is another problem -- we kind of have to change our mind-set a little bit about it and maybe not look at our comps for a couple years. Like our 401(k) s and just think: okay, great, if someone’s buying those homes and it's not an investor, and someone’s living in it, and that’s a good neighbor, and they are having work done that brings money into the economy and makes the neighborhood better.

Ted Simons:
Like Zillow. Just stay away at all costs. As far as significant increases in prices, are we looking at 2011? Are we looking at 2012?

Catherine Reagor:
For significant increase in prices they are saying 2012. The word is that this year is going to be as bad as last year. Now, we have already felt the pain. We will not see another huge drop in prices or huge drop in sales. We will hold steady, so if we can just get through this and we will start to see it pick up in 2010. But again, as soon as foreclosures slow and more people have their loans modified and work that out -- and we’ll see what the economic stimulus plan has for that -- it will help expedite...well, that may be too strong of a term...it will help speed up the recovery.

Ted Simons:
It would seem, though, that it stands to reason if you’ve got folks who have three and five-year mortgages, these ARMs things, and three years ago, things were gangbusters, five years ago things weren't all that bad. Some of these folks, they're coming due and I’ve got a funny feeling they’re not going to be able to handle this.

Catherine Reagor:
Yeah, and be able to refinance. A lot of the wave of the first foreclosures were subprime loans. It's people losing jobs now and that’s a problem but there is this wave of Alt-A, which are slightly better than subprime, but they’re bigger loans, the more expensive homes. That is set to readjust late this year. I’ve talked to lenders, and they are expecting foreclosures to jump again in 2010 because of that. We have a lot of Alt-A loans. Not as many as California, but we’re third or fourth in the nation for those types of loans.

Ted Simons:
I don't think there’s any hot spot out there, but how about a warm spot? And what are the ones that are just dead cold?

Catherine Reagor:
The fringes. It's a tough time for the edge communities, partly because so many new homes went up, so many during the boom, so many of the buyers, so many people bought at the peak and unfortunately some of the amenities that they needed out there, didn’t come because things slowed. Gas prices, you know, a year ago made it very tough. Areas closer in seem to be faring better, and the thing is, this is a huge valley and we are a neighborhood by neighborhood area. We have had, you know, 40% overall drop in home prices in the past year. But some neighborhoods have done better. Some neighborhoods of central Phoenix, some neighborhoods in Tempe, some neighborhoods of Scottsdale, Ahwatukee, are doing better because of schools and pockets and they didn't have at lot of speculators or investors during the boom to lose the homes to foreclosure.

Ted Simons:
Last question. We have home builders now filing for protection. Is that something that affects the housing industry? Or is the housing industry just basically affecting them?

Catherine Reagor:
I think it goes both ways. I think it goes both ways. We are going to see more consolidation definitely. And more bankruptcies. Fulton Homes was a surprise because that's a builder that's been around since the '70s. They have done very well. Ira’s a huge contributor to the community. But private builders are in a tough spot. It's their names on the bank note. Unlike the public builders who get their money from shareholders and the public. Banks are calling loans. Right and left. And they call your loan, and you don’t have the cash and you can’t sell the homes --

Ted Simons:
Again, we depend so much on housing and construction and finance and those three things are so involved in everything that's going south right now. We're just going to have to tough it out for a while.

Catherine Reagor:
Yeah. But the outlook is good a few years out. If we can get the job market coming back that will help.

Ted Simons:
Catherine, thank you so much for joining us on “Horizon.”

Catherine Reagor:
Thank you.

Phoenix Police Reserve Program

  |   Video
  • Many of the people that you see protecting us on the street are volunteer reserve officers, who are fully sworn police officers. They come from all walks of life and they share a common goal — to make Phoenix streets safer. We speak with Assistant Police Chief Scott Finical about the program.
Guests:
  • Scott Finical - Assistant Chief, Phoenix Police Reserve Division
Category: Law

View Transcript
Ted Simons:
For more than half a century, men and women have been working alongside the sworn officers of the phoenix police department. they are members of the police reserve, volunteering to serve and protect our community. Merry Lucero has their story.

Merry Lucero:
Police officers have demanding and rewarding careers. They train hard and risk their lives every day they work. These officers are no different, except they don't get paid. They are reserve officers, volunteers with the phoenix police department.

Scott Finical:
Reserve officer have established careers that they like and they enjoy, and they don't want to give up those careers because of lifelong education or training. This is just a little something extra that they want to do, in addition to their career job. People are very committed to do that. You really come away with an incredible sense of accomplishment, and it's a great experience.

Robert Vied:
It’s been great, very enjoyable. You learn a lot of things that you never even would think of.

Merry Lucero:
These reserve officers are in the last week was training before they graduate. They are on a six-mile run near the phoenix police academy in south phoenix. Physical training is a huge part of becoming an officer.

Scott Finical:
The training for a reserve officer is identical to that for career officers because they do the same job. But a significant component of the training on police curriculum is physical fitness, physical training, endurance training such as the long-distance run that you talked about, as well as defensive tactics. The work of a police officer is a physically demanding job.

Reserve Officer:
You’ve got to plan before you get there what you're going to do and how you're going react.

Merry Lucero:
The run pauses at a memorial for a DPS. Officer shot and killed on a call.

Scott Finical:
That kind of a story helps to impress upon our recruits the seriousness of the work they do, and why our training is so important. We train officers to protect them, as well as to protect the public. Unfortunately, officers are killed in the line of duty. And that's a very serious and sobering experience. It’s important for our recruits to understand that part of the job, as well.

Merry Lucero:
Like career officers, reserve recruits complete more than 180 hours of hands-on firearms training and must pass the firearms qualification course. In total, reserves must fulfill 620 hours of training at the academy.

Scott Finical:
It covers all areas from history of law enforcement to criminal law, all aspects of the job, including constitutional law, search and seizure, victims' rights, all of those important areas that we deal with every day as police officers.

Merry Lucero:
After they graduate the academy, the reserve officer goes into a field training program.

Scott Finical:
Which is, they will be in uniform with a firearm as fully certified officer and they will be paired with one of or seasoned career training officers. That program takes another 480 hours on the street, dealing with the public, responding to traffic accidents, handling the duties that a police officer does. But the recruit does it with a training officer along with them.

Merry Lucero:
Once reserve officers are on duty, they must commit to 60 hours of service every three months.

Scott Finical:
But in reality this is such an interesting job that most of our reserve officers work at least one night, sometimes even two nights a week on a volunteer basis.

Merry Lucero:
The men and women who serve as reserve officer versus diverse day jobs. Businesspeople, lawyers, engineers, even an emergency room doctor, all working to keep the public safe. Phoenix Mayor Phil Gordon recounts a reserve officer's heroism on the job.

Phil Gordon:
Somebody went into a food court with an automatic weapon and one of the reserve officer, I believe it was a sergeant, put himself in front of the automatic weapon as it was being fired and was able to raise it upward as it was let go when another officer then shot the bad guy and saved a lot of the patrons' lives.

Merry Lucero:
Since Gordon took officer the reserves program has gone from 25 officers to about 125. The goal, to have 200 fully trained and certified officers in the program.

Ted Simons:
Joining me is assistant chief Scott Finical who oversees the phoenix police reserve division. Thanks for joining us here on “Horizon.”

Scott Finical:
Thank you, it's a pleasure to be here.

Ted Simons:
Let’s talk about this program, how the program started and where you see it going.

Scott Finical:
The program initially started in 1951, as a civil defense auxiliary from World War II. And so it started in 1951 and has continued to grow and strengthen as time went on.

Ted Simons:
It sounds as those these folks work a lot and save a lot of money for the city, give us some numbers here, how that works.

Scott Finical:
Last year our reserve officers donated approximately 33,000 hours, which have a value of probably $2 million to the city. It’s a very substantial contribution to the city and savings for the city, as well.

Ted Simons:
One of the reasons Mayor Phil Gordon is happy with the program?

Scott Finical:
Mayor Gordon is very pleased with the program and he's been a very strong advocate of growing the program as has Chief Harris. That’s why we've seen this success over the’s few years.

Ted Simons:
Are you ever surprised when you get a stockbroker or a preacher coming in saying, I want to be a reserve officer?

Scott Finical:
I’m not surprised anymore. Because they are committed individuals with demanding career jobs. They want to do something more for the community, to make our community a better place to live, work and, and actually visit, they are very interesting and motivated but very diverse in terms of professionals we do have.

Tim Simons:
Let’s say I’m interested but I am worried about the physical nature of the job and the physical requirement to be on the job, what are the requirements?

Scott Finical:
The requirements are the same as to be a career officer. There is no difference; reserve officers do the same job with the same authority and responsibility. There’s a comprehensive background investigation that has to be performed, physical examination, physical agility testing. You do have to be in good physical shape because the job of a police officer is physically demanding.

Ted Simons:
Crazy good physical shape or just good physical shape?

Scott Finical:
Good physical shape and we'll make you in better shape as a result of the academy. A significant component of the academy is physical training, defensive tactics. You will come out of the academy in much better shape but do you have to meet the minimum requirements.

Ted Simons:
What do you say to those who say, these are not real officers?

Scott Finical:
The people whose lives were saved in the food court that the mayor referred to would disagree with that description. Our reserve officers are in the same uniform driving the same police cars, responding to the same calls. So they have saved people in numerous situations, not only the situation that the mayor recently described.

Ted Simons:
Are there assignments best suited for reserve officers?

Scott Finical:
All of our reserve officers start in patrol, which is really the backbone to the Phoenix police department. Because of the thousands and thousands of calls for service we get every year. If fact last year there were close to 800,000 calls for service. But they also work in specialty details, detective, motorcycle officers, helicopter pilots; they are throughout the department in specialty details, as well as patrol division.

Ted Simons:
If someone's watching right now and thinking, this may be something I’m at least interested in, we have a website and more information for them?

Scott Finical:
We do, our phone is 602-534-9000. Our website is phoenixpolicereserve.org, and they will see the information they need to learn more about the reserve division.

Ted Simons:
Last question: personally for you, is it rewarding?

Scott Finical:
It’s incredibly rewarding. It gives us an opportunity to really help people that sometimes don't have the resources to help themselves. At the end of the shift you feel incredibly fulfilled.

Ted Simons:
Thank you so much for joining us on “Horizon” and telling us about this valuable program. Thank you so much.

Ted Simons:
An exhibit in mesa showcases the low rider and a tattoo culture. Nadine Arroyo Rodriguez reports on how Latino artists are giving people the opportunity to see what people normally don't think of as art.

Nadine Arroyo Rodriguez:
Pin striping, car customizing, tattooing and graffiti is what the Mesa Art Center calls provocative art and they are all showcased at the mesa contemporary arts.

Patty Haberman:
Showing it in a very fine arts setting elevates the status of what has traditionally been a street art, really.

Nadine Arroyo Rodriguez:
The exhibit is divided into three exhibits -- low and slow, beneath the skin and the parlor. The lifestyle of the low-rider is interpreted by local and west coast find and traditional low-rider artists. All with a common goal to transcend a street culture into contemporary art.

Patty Haberman:
We always wanted to have a car in the gallery to see if we can do it. We brought in one full car and then decided to get car hoods and give them to prominent low-rider artists from the southwest and painters and drawers, mainly. And allow them to use it as a canvas and see what we got. So what we're doing is taking the low-rider canvas and art and putting it in a museum and showcasing it as exactly what it is. Fine art.

Nadine Arroyo Rodriguez:
Three of the car hood canvasses covering the walls are from Arizona artists. Mack has this car hood canvasses painted in acrylic depicting an Aztec Warrior. Buzz Gonzalez exhibits this hood with painting, hand pin striping and 23 carat gold leafing. And Ben Basha’s oil painting of an outer space chase of a ball of yarn. And what's a low-rider exhibit without a low-rider? A slick 1979 Monte Carlo sits in the center of the entire exhibit. The interior wall to wall pink velvet and the exterior is completely covered in paint art. From the inside of the hood, firewall, under the car and even the wheel wells, and it's the artistic of Mr. Cartoon, a nationally recognized low-rider artist and tattooist from Los Angeles. The exhibit features national artists inspired by the culture of tattooing. Among the artists is Sean Barber whose portraits depict the various styles of tattoos. The exhibit captures the ancient tribal traditions and individual expressions, such as the work in the parlor provides a backdrop.

Patty Haberman:
We’ve had a variety of reactions. There's people that are like, what are you guys doing? That sort of thing, to, wow, this is really great. To I was really skeptical and then I saw it and now I get it. Kind of reactions. So it's been all over the board. I think some people are coming in with not quite sold -- coming in with not quite sold and leaving with a really new understanding of what we're trying to do here. That's been very positive and exciting.

Ted Simons:
That’s it for now. Thank you so much for joining us. I'm Ted Simons. You have a great evening.

Content Partner: