Refinance rates low; few qualify

Interest rates may have reached their lowest level in nearly 40 years, but that doesn't necessarily spell relief for South Florida's struggling homeowners.

BY MONICA HATCHER

mhatcher@MiamiHerald.com

Recent drops in interest rates have homeowners rushing to call local banks and mortgage lenders about refinancing. Loan applications are pouring in.

Yet, South Florida homeowners are mostly getting a big fat ''No!'' from the bank when they ask to refinance. The chief reason: Falling home values mean they owe more than their homes are worth.

''We got 53 calls to my branch on Friday,'' said Todd LaPenta, a private mortgage banker at Wells Fargo on Lincoln Road in South Beach. ``We could only help about five.''

Average rates for a 30-year, fixed-rate mortgage fell to 5.14 percent on Wednesday, the lowest level since 1971, reported Freddie Mac, the government-controlled mortgage giant. The number of people applying for mortgages rose by 50 percent last week, the Mortgage Bankers Association also reported.

It's another painful irony of living in one of the nation's worst hit housing markets -- borrowers who owe more than their homes are worth cannot refinance without ponying up thousands of dollars in cash to cover the difference between the old and new loan amounts.

And they're the ones in most dire need.

In South Florida, four in 10 homeowners who bought or refinanced over the past five years owe more on their home than it is worth, according to sales and mortgage data analyzed by Zillow.com, a web-based real estate services firm. Many of them chose adjustable-rate loans and other expensive mortgages because that was the only way they could afford the payments.

Justin Miller, a broker with Resource Mortgage Group in Plantation, said the current rates, which essentially amount to ''free money,'' are, in a sense, unavailable to those most in need.

''This is only putting people who are in a good position in a better position,'' Miller said.

Even when borrowers have the home equity they need to avoid a big cash payment, they must still meet rigorous underwriting demands that have become the bane of consumers. Equity refers to a borrower's ownership stake in a property, usually the home's market value minus any loans owed against it.

Before LaPenta begins processing an application, he said he makes sure customers are aware of the essential criteria needed to refinance: 20 percent equity in the property, a homestead exemption, a credit score of 700 or higher, a mortgage debt-to-income ratio of no more than 45 percent and the ability to fully document income and assets.

''If not, we're just wasting our time,'' LaPenta said. Still, it's hard to turn down desperate borrowers, whose harangues invariably end in accusations of hoarding federal bailout money, LaPenta said.

'They say, `We provided all the billions and you guys aren't helping us. Why aren't you lending it?' '' said LaPenta. He tells them he works on the front lines and has no say in the bank's underwriting policies.

Still, if you can qualify, the low interest rates offer a welcome financial boon.

Joshua Estrin, a dance and drama teacher in Broward County, on Monday locked in a 4.87 percent fixed rate for a 30-year loan on the Plantation home he refinanced in 2006, reducing his monthly payments by about $300.

''It's wonderful, and I feel very lucky, and every little bit helps. But I'm not the one losing my house,'' Estrin said.

Despite his stellar credit score, his lender showed no leniency in his application, he said. He also had 20 percent equity, though he had to have his home reappraised because the bank's automated valuation found him short by $7,000.

''The bank was putting me through the wringer, so I can only imagine someone who has been responsible, then being hit with hard times and now has a 600 or 650 credit score,'' Estrin said.

When it comes to cheap financing, home buyers -- not refinancers -- may be the biggest winners if they can brave the prospects of further price declines.

Though it still may be too soon to tell whether low rates will spur new sales, Madeleine Romanello, a real estate agent for Douglas Elliman Florida, said there are lots of fence-sitters still too worried about the market to take the plunge. People have learned from the boom years the perils of buying an overpriced property just because interest rates are low, Romanello said.

Florida, however, is basically ''on sale'' right now, Miller said, and buyers would be foolish not to take advantage of low home prices and low interest rates. Even if home price fall another 7 percent in six months, he said, buyers would still have a lower monthly payment if they financed their purchase at today's rates.

''The hardest thing about my job right now is seeing the great deals everybody else is getting,'' Miller said.

source:

http://www.miamiherald.com/business/story/825962.html

Drywall complaints go up

Reports prompt search for answers

By Tim Engstrom • tengstrom@news-press.com • December 23, 2008

Complaints about damaged air conditioning equipment, refrigerators and even home wiring spread Monday as homeowners attempt to pinpoint whether sulfur-emitting drywall from China is to blame.

Lehigh Acres resident Billy Rybak said he was "stunned" to read reports in The News-Press about homeowners who have regularly replaced A/C coils and refrigerators and are blaming sulfur from their imported drywall as the cause.

"This sounds exactly like what we have been dealing with for years, but we have been blaming it on the water," Rybak said. "We've been changing water systems like crazy."

Also Monday, Lennar Homes, which has heard similar complaints from residents in the Bella Terra condominium, responded with a written statement from Darin McMurray, Southwest Florida division president for Lennar.

"So far, our investigation in Southwest Florida shows that independent subcontractors installed Chinese drywall in a very small percentage of Lennar homes built between November 2005 and November 2006," McMurray said in the statement. "Lennar has taken extensive measures to ensure the safety of our homeowners and their families. Scientific testing shows no indication of any health risks to our homeowners."

He said the company is taking action.

"Lennar has been working with our homeowners on long-term solutions based on the specific testing of their homes," he said.

Dan Reid of Intuitive Environmental Solutions in Fort Myers, said he has been getting complaints about sulfur dioxide from drywall for three months. He said he has investigated four complaints and has found measurable levels of the substance.

"There are no residential safety standards, but the levels have been well within workplace standards," Reid said. "There has been nothing extreme."

Reid said his research indicates at least some drywall imported from China during the homebuilding boom years of 2004 and 2005 was made with waste materials from scrubbers on coal-fired power plants.

Those materials can leak into the air as gases combine with the moisture on an air conditioning coil to create sulfuric acid, which appears to be dissolving solder joints and copper tubing - creating leaks, blackening the coils and even causing the system to fail, Reid said.

Rybak moved into his home in 2003 and said he has had to replace air conditioning coils four times and his refrigerator once.

Meadowbrook Estates was built by Lehigh Acres-based I&E Homes. Calls to the company offices were not answered Monday and President Johann Pfuner's home number is unlisted.

"I'm going to notify everybody on the street about this and have it tested to find out exactly what the problem is," Rybak said.

Cape Coral resident Frank DeBenedictis said he already checked into getting an air quality test on the advice of his air-conditioner installer, who has replaced his coils four times.

"They said it was going to cost me $800 for the testing," said DeBenedictis, who moved into his home two years ago this month. "I think the builder should have to spend the $800 to tell me if it is safe."

DeBenedictis said his home has copper electrical wiring and it shows signs of corrosion as well.

His home was built by Cape Coral-based Aranda Homes. The woman who answered the phone there on Monday said executives were out of the office on holiday vacation.

Cape Coral resident Lou Appelman, who lives in a home built by Aranda Homes in 2006, said he has replaced his air conditioning coils annually.

"They come out of the unit looking like they are 20 years old," he said, adding that at first, he was willing to blame the air conditioning unit.

"But copper is copper," he said. "Whatever is in the air is going to turn copper no matter who made it."

Michael Reitmann, executive vice president of the Lee Building Industry Association, said homeowners with concerns should first contact their builder.

"You have to contact the builder because, ultimately, the builder is responsible," Reitmann said.

Reitmann said the building industry association is aware that builders such as Aubuchon Homes, Engle Home and Lennar are investigating claims of drywall related problems in homes, but the association hasn't taken a position on the reports.

"Until the research is done, we don't know exactly what the situation is," he said.

source:

http://www.news-press.com/article/20081223/RE/812230384/1075

Jumbo Mortgage Shoppers Get Little Relief From Rates

By Kathleen M. Howley

Dec. 24 (Bloomberg) -- Jumbo mortgage shoppers in the most expensive U.S. housing markets such as New York and San Francisco aren’t getting much relief from lower borrowing costs.

The average 30-year fixed rate for home loans of more than $729,750 remains almost 2 percentage points above conforming rates and the spread between them may set a record this month, according to financial data firm BanxQuote.

Banks remain reluctant to lend after recording $678 billion in mortgage-related losses and writedowns in the past year and as house prices plunge. The collapse of the private mortgage securities market means lenders find there’s little demand for jumbo loans they want to sell. If low conventional rates entice enough homeowners to refinance, jumbo home loans may become more affordable as loan payoffs add liquidity to the banking system, said Keith Gumbinger, vice president of mortgage-research firm HSH Associates Inc. in Pompton Plains, New Jersey.

“A guy in a low-cost market like Des Moines probably doesn’t care much about helping someone in New York buy a million-dollar apartment, but if he refinances his conventional loan, that’s exactly what he’ll be doing,” Gumbinger said. “He’ll be giving lenders the liquidity they need to rebalance their loan portfolios and compete for jumbo borrowers who typically are the best in terms of credit quality.”

The average 30-year fixed jumbo loan rate was 7.32 percent on Dec. 22, compared with 5.38 percent for a conforming loan, according to BanxQuote of White Plains, New York.

Wide Spread

The difference between the two averaged 2.13 percentage points in December, 10 times the spread from 2000 to 2006 and above last month’s 1.95 percentage points that was the highest on record. If current rates reflected the historical difference of 0.2 percentage points, jumbo borrowers with an $800,000 mortgage would save $913 a month.

Buyers in markets that rely on jumbo loans, such as New York, San Francisco, and Boston, may see rates fall in 2009 because of Federal Reserve Chairman Ben Bernanke’s plan to buy at least $500 billion of securities issued by Fannie Mae and Freddie Mac, said Gumbinger. Fannie Mae and Freddie Mac are the largest buyers of mortgage debt in the U.S.

The Fed’s mortgage-bond buying program, announced Nov. 25, also provides for the purchase of $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Bernanke’s plan adds to previous government actions aimed at lower home-financing costs, including the September seizure of Fannie Mae and Freddie Mac. As part of that takeover, the Treasury announced its own program to buy mortgage-backed securities to bolster the worst housing market in at least 70 years.

Loan Applications Rise

Mortgage applications in the U.S. jumped 48 percent last week as dropping rates promoted a surge in refinancing. The average U.S. conforming rate for a 30-year fixed mortgage this week is 5.14 percent, the lowest in data that go back to 1971, Freddie Mac, the world’s second largest mortgage buyer after rival Fannie Mae, reported today. A year ago the rate was 6.17 percent, the McLean, Virginia-based company said.

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan rose to 1,245.4, the highest since 2003, from 841.4 a week earlier. The group’s refinancing gauge rose 63 percent and purchases gained 11 percent.

While many homeowners are trying to lower their mortgage payments, buyers remain on the sidelines as prices fall.

The median U.S. home price plunged 13 percent in November from a year earlier, the largest drop on record and likely the biggest decline since the Great Depression of the 1930s, the National Association of Realtors said yesterday in a report.

Home Prices Tumble

Home prices are tumbling as foreclosure-related sales accounted for 45 percent of the month’s transactions, according to the Chicago-based trade group.

“The real elephant in the room is falling house prices,” Glenn Hubbard, former chairman of the Council of Economic Advisers under President George W. Bush who is now dean of the Columbia University Graduate Business School, said in an interview Dec. 22. “We can fix this by lowering mortgage interest rates.”

Declining prices won’t be helped by the Federal Housing Finance Agency’s announcement last month that it will lower the size of so-called expanded conforming mortgages that can be purchased by Fannie Mae and Freddie Mac. Congress authorized raising the conforming limit of $417,000 to as high as $729,750 in about 90 of the nation’s most expensive housing markets in 2008 as a temporary measure to support housing.

Average Rates

The average rate for loans that are above the national cap of $417,000 but within the limit set by Congress is 5.51 percent, compared with 5.20 percent for a standard conforming loan, according to a survey by HSH Associates.

On Jan. 1 that expanded cap drops to $625,500 following the formula set out by July’s Housing and Economic Recovery Act. The law, known as HERA, specified a loan limit of 115 percent of an area’s median home price, rather than the 125 percent limit approved for this year by Congress, said Andrew Leventis, an FHFA economist. The change means more buyers in high-priced areas will have to use jumbo mortgages, he said.

The Fed on Dec. 16 cut its benchmark interest rate target to a range of zero to 0.25 percent and said it will add to the announced $500 billion in mortgage bond purchases as needed.

“Over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities,” the policy makers said in a statement.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: December 24, 2008 15:22 EST

source:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRAdEz_u_fR4&refer=home

A European-style tax?

Like it or not, there's only one way we're going to be able to pay for our ballooning deficit: a value-added tax.

By Shawn Tully, editor at large

Last Updated: December 2, 2008: 9:27 AM ET

NEW YORK (Fortune) -- It's highly possible, if not inevitable, that Americans will soon live under a radically different tax system - one that the pundits and politicians aren't talking about.

It's called a value-added tax, or VAT, and it's been used for decades to pay the bills and sustain the immense growth of governments around the world, from France to Mexico to Australia. Created in 1954 by a French economist, the VAT is the most potent, efficient machine for revenue generation yet invented.

And if there's one thing the U.S. government needs as the federal budget balloons, it's a ton of new revenue. "The bottom line is that the income tax cannot support the level of spending that's projected, something other countries faced years ago," said Roberton Williams of the Tax Policy Center, a non-partisan research institute. Today the VAT raises almost half of the total government revenue in France, and a similar share in most of the developed world.

The VAT is essentially a sales tax, except that it's charged at each stage in the development of a product instead of at the moment when the product is sold.

Take, for instance, a car with a sticker price of $30,000 and a value-added rate of 10%. Ford might buy its steel and other materials for $8,000 plus $800 in a VAT tax. A dealer then pays $25,000 plus a $2,500 tax for the finished vehicle. Ford takes an $800 credit for the tax it already paid and sends $1,700 to the government. A buyer then pays $30,000 for the SUV and $3,000 in taxes. The dealer collects the $3,000, takes a credit for the $2,500 worth of taxes already paid, and sends $500 to tax authorities. Ultimately, the government pockets $3,000, or 10% of the retail price of the car, in taxes.

The genius of the VAT is that, while the consumer pays it, the actual cash is mostly collected from producers before it reaches the retailer. Since the VAT is essentially a hidden charge embedded in the price of goods and services, raising the VAT doesn't arouse nearly the uproar caused by increasing income taxes.

The ease with which a VAT can be increased points to one of its big drawbacks: Governments see it as an easy way to pay for increased spending, which is a potential drag on economic growth.

Even so, the VAT would be better than the other likely alternative: A higher retail sales tax. If the national sales tax were raised to, say, 20%, consumers would cheat by paying cash to avoid it, and retailers would submit because they'd sell more goods by cutting the price 20%. With the VAT, every step of the manufacturing (and tax collection) process is documented.

Make no mistake: A VAT may be unavoidable in the United States. The reason is that spending is rising far faster than the revenue that can conceivably be generated by the current tax regime.

Keeping the budget afloat

Let's examine the numbers. Under our current tax system, receipts are projected to remain pretty flat, at about 18% to 20% of GDP, far into the future. But spending is slated to rise to 24% of GDP in 2030 and 28% in 2050, excluding interest on the federal debt. If taxes aren't increased enormously, future deficits, and the enormous borrowing they require, will swamp the budget with ruinous interest costs.

Today, the income tax raises around $1.1 trillion, or around 9% of GDP, with payroll and corporate taxes contributing the balance. The deficit now stands at around $580 billion, including the Social Security surplus that's helping to pay the bills. But that surplus is also rapidly disappearing. So to balance the budget, America would need to raise income taxes by 53%, assuming the other taxes remained at current rates.

The gap gets far larger in the future, chiefly due to rapidly rising costs of Medicare and Medicaid. To pay for those costs, we'd need to raise taxes by an extra 2% of GDP. That would require an additional $270 billion in income taxes.

All told, that's a total tax increase of $870 billion, or almost 80%. That's not including the estimated $240 billion cost of President-elect Barack Obama's healthcare plan through 2018.

The rub is that the fiscal pillar America has relied on since 1913 - the federal income tax - can't possibly support the looming new era of spending. All economists agree that when top income tax rates get too high, Americans will work, save and invest less. Tax collections would increase far more slowly than rates, and eventually level off completely.

The VAT may be the only answer. "We're moving towards European levels of spending," said Andrew Biggs, an economist at the American Enterprise Institute "If you go there, you need a more efficient way to raise revenue."

But the VAT, on top of encouraging bigger government budgets, has another problem: Middle class taxpayers would be hit harder by a VAT because they spend more of their income on goods like clothing and cars than high-earners. That's especially distressing to Obama and Democrats, who have pledged to make the tax system far more progressive by raising rates for the wealthiest Americans.

One partial solution would be to exempt staples such as food, gasoline or fuel oil from the VAT and impose extra-high charges on yachts and jewelry. To help middle-class taxpayers, the federal government could also send subsidies to tens of millions of taxpayers based on their incomes. The French, for example, mail checks to families depending on how many children they have.

But given the nature of politics, said Biggs, "the problem is that those rebates might be tied to some social agenda, not to making the system fair."

European governments have typically seen VAT hikes as an easy way to raise revenues during a recession. In some countries, government spending is more than 50% of national income. The results have been fiscal stability, but lackluster growth and a dearth of dynamism and entrepreneurship.

Given the budget numbers, the United States has already chosen a path of far bigger government. The trap has been set. It's unlikely America can escape without a VAT.

source:

http://money.cnn.com/2008/12/01/news/economy/tully_vat.fortune/?postversion=2008120206

Sudden Upsurge in Demand for Mortgages May Not Be Met With Supply

Mortgage applications are up sharply as homeowners try to take advantage of low 30 year fixed rates. But tighter lending standards means that a fair number will be disappointed.

Moreover, the surge in mortgage applications is for refinances rather than new home purchases. And while refis will indirectly help the economy by increasing consumer discretionary income, the newly low mortgage rates do not yet appear to be stabilizing the housing market.

From the Financial Times:

Applications for home loans more than doubled in the two weeks after the Federal Reserve said it would buy mortgage bonds to help stabilise the market, prompting mortgage rates to fall by more than three-quarters of a percentage point.

With average rates for a 30-year, fixed-rate mortgage now at about 5.2 per cent, growing numbers of borrowers have an incentive to refinance to bring down their mortgage costs.

But tighter underwriting standards for prospective borrowers, combined with funding and staffing difficulties for mortgage originators, are likely to restrict the supply of new mortgages.

“The mortgage industry is collectively unprepared to deal with a cascade of business; staffs were pared to the bone as the market for mortgages shrank over the past year,” analysts at HSH Associates wrote in a note to clients.

Mahesh Swaminathan, mortgage analyst at Credit Suisse, said that as a result, lower rates would not necessarily create a wave of mortgage refinancing on the scale that was seen in 2003, when credit markets were healthy.

source:
http://www.nakedcapitalism.com/2008/12/sudden-upsurge-in-demand-for-mortgages.html

Unfinished subdivisions stuck with underfunded HOAs

When the San Tan Heights Homeowners Association switched from developer control to homeowner-elected leaders in August, its new board members and management company learned that the HOA was practically DOA.

Its problems included nearly $1.6 million in unpaid dues that the previous HOA board in the Queen Creek-area community had made no effort to collect.

The biggest individual delinquencies belong to bankrupt home builders.

Developer abandonment is likely to become a serious issue in the coming year for as many as 200 of the more than 10,000 Arizona communities under HOA control, both opponents and supporters of Arizona's HOA policies say.

Partially completed subdivisions and newer communities more prone to home foreclosures are the ones most likely to suffer, experts say, while well-established HOAs in older neighborhoods may not have any trouble at all.

Homeowners in neighborhoods with underfunded HOAs have seen their association fees increase at the same time amenities and services are being reduced or eliminated.

They fear the worsening conditions will further hurt their property values and quality of life.

San Tan Heights is one of several boom-era subdivisions Valley developers have abandoned before completion during the past year.

Homeowners in some other communities have been unable to wrest control of their association from developers, who usually are among the HOA's principal debtors.

Ricky Doxie, owner of a condominium at Village at Rio Paseo, said that developers Engle Homes and Sunbelt Holdings still control the Goodyear community's destitute HOA despite the demise of their joint development venture, which produced 27 of 144 planned units.

Meanwhile, homeowners in the community have been forced to fend off worsening blight, angry creditors and interruption of essential services, he said.

San Tan Heights HOA board members say the association will go bankrupt in 2009 unless homeowners each agree to pay an extra one-time $750 assessment, which many residents say they can't afford.

The board also accused developer Miller Holdings of tapping the association's reserve fund to pay operating expenses.

However, owner Larry Miller said he simply did whatever he could to pay the HOA's bills while member delinquencies mounted, adding that it would have been a waste of money to go after bankrupt HOA debtors who had no money to give.

Miller said the HOA is suffering because San Tan Heights, like scores of other communities in the Valley, provided homes to entry-level buyers, many working in the construction industry, at or near the housing-market peak.

"Every one of those subdivisions is having the same problems," he said.

Advocates for HOA reform say lawmakers could have prevented problems caused by the housing-market downturn by passing tougher restrictions on what critics describe as a developer-friendly system that often treats homeowner rights like an afterthought.

"Unfortunately, I think we've dug ourselves into a big hole here," said Clint Goodman, Mesa attorney and homeowner advocate.

The HOA age

Homeowners associations have become ubiquitous in recent decades, as local governments have sought to limit the impact of population growth on the demand for municipal services.

Development standards have evolved to the point where developers are required to include large parks and open spaces in each new community - recreational amenities once provided almost exclusively by the public sector.

"Cities like it because they don't have to maintain certain areas," said Goodman, president of the Homeowners Institute.

Fast-growing Arizona cities and towns such as Gilbert require all new residential development to be under HOA control.

Another requirement, which Reed Porter, president of T2 Homes, said has become a challenge, is that the developer must finance and construct those amenities in each new community before selling a single home.

Porter knows firsthand how amenities can become cash-sucking monsters in a half-empty community where the developer has gone out of business.

"Now, there's 500 residents living in a community with amenities for 1,000 residents, and then they see the community start to deteriorate," he said.

Porter, also the former president of bankrupt builder Trend Homes, abandoned one Gilbert subdivision fitting that general description early this year.

Cooley Station North in east Gilbert is one of seven communities Trend Homes was building before filing for Chapter 11 bankruptcy protection in January.

Porter later joined Najafi Cos., a private-equity firm, to start a new company, incorporated as T2 Homes but operating under the Trend Homes name.

Still, T2 is not planning to build or sell any more homes in Cooley Station North and is not liable for the original Trend's unpaid HOA subsidies, Porter said.

Trend built about 280 homes inside the community, which contains 865 subdivided lots.

Nor is the community's principal landowner, Trend Homes' former - also bankrupt - land bank Taro Properties Arizona, responsible for cleaning up the acres of weed-infested vacant land inside Cooley Station, he said.

"The problem is, bankruptcy protects you from all that," Porter said.

His choice of the word "problem" seems less ironic when one learns that Porter served as the board president of the Cooley Station HOA until earlier this month.

That's when Taro agreed to release its nearly 500 mortgaged lots to Bank of America, the jilted lender. BofA will become the community's sole institutional landowner.

It has been an ordeal that required board members to make tough decisions such as closing two of the community's three swimming pools, he said.

Like it or not, Porter said, municipalities will have to change their standards to allow incremental development in the wake of so many failed subdivision projects.

"The developer gets these huge loans to build all these parks and amenities," he said. "I'm sure that the next go-round, banks won't lend on all that stuff up front."

Defeated purpose

Garin Groff, spokesman for the town of Gilbert, said that the reason town officials require developers to complete parks and other amenities in advance is to protect home buyers from the unfulfilled promises of developers.

However, he said Gilbert has been working to accommodate recent requests for more incremental development.

"The town is flexible and will work with developers to phase certain elements," Groff said.

He added that residents of Cooley Station can file complaints with the code-enforcement department in Gilbert about the weeds, which some residents believe are a fire hazard in addition to being unsightly.

The town's enforcement staff will contact the landowner, in most cases a bank, to pressure for a cleanup of the area, Groff said.

Porter said bank repossession of developer land is usually beneficial to struggling HOAs, because banks generally resume payment of fees and clean up vacant land to prepare it for resale.

In the meantime, some communities have formed homeowner cleanup crews to tackle vegetation, trash and construction debris on developer- or bank-owned vacant lots. Groff said, though, residents should obtain permission from landowners so they don't risk being accused of trespassing.

Doxie said he and his neighbors confronted a similar problem earlier this year, when tumbleweeds took over the vacant lots in Rio Paseo.

They had a lawyer send letters to the HOA demanding removal of the weeds, which were cleared out soon afterward.

In general, Rio Paseo residents have learned by experience to take an active approach to dealing with problems in the mostly empty community.

At one point, a landscaping contractor who claimed he was owed money by the developer-controlled HOA had his attorney get liens placed on every homeowner's property.

On another occasion, residents received notice that the community's water service, paid through their $165-a-month association fee, was scheduled to be shut off the next day for non-payment.

By getting involved, the homeowners were able to get the liens removed and keep the water running, Doxie said.

Still, he said that some HOA services have been eliminated without input from homeowners and that the association has not provided any update about its financial situation since a year ago.

"Nobody has contacted us to this day with any information about what is happening here," Doxie said.

Richard LaPorta is board treasurer of the San Tan Heights HOA. He said the community's previous HOA board had a policy of limiting homeowner access to financial information, forbidding residents to copy any documents or remove them from the management office.

Goodman said such policies are commonplace but illegal.

"I sue homeowners associations all the time because they don't disclose financial records," he said.

Lack of accountability and a widespread lack of interest in tougher HOA laws have turned associations that could benefit both home builder and homeowner into "a setup that's ripe for fraud" and financial shenanigans, Goodman said.

"It seems like the main purpose of HOAs has backfired," he said.

source:

http://www.azcentral.com/realestate/articles/2008/12/21/20081221biz-homeowners1221.html