Categories
Crisis

The Current Housing Crisis in Maryland

Abstract The current housing crisis in Maryland has devastated much of the inner city of Baltimore and surrounding counties. The economic collapse of 2008 has left many Maryland residences unemployed or underemployed. The direct impact of the economic collapse has left homeowners wondering how they will pay their mortgages and keep food on the table. Maryland homeowners have been struggling to make ends meet. Some of the issues that are being faced have to do with the predatory lending practices of some mortgage lenders. President Obama signed an agreement to bailout some banks in hope to spare families from losing their homes.
Those hopes did not pan out well. There was another bailout of $25 billion dollars allotted in Feb 2012 to help homeowners and reduce mortgages to the principal home values. Thus far the mortgage industry has done as little as possible to hold up their end of that bargain. We need to get educated and hold these predatory lenders accountable. The Current Housing Crisis in Maryland By a show of hands, how many people are in a financially challenging situation with paying their mortgage? Do you know that you may very well be a victim of predatory lending practices?
You may be asking yourself what is predatory lending. Some of us are familiar with the term. For those who are not, I will explain what a predatory lender is and the effect they have had on our communities. Predatory lenders and the tactics they use to originate loans with unsophisticated buyers are unfair. We now have predatory legal and rescue services popping up everywhere with the defense that they are here to help us. I intend to provide you with information to free legal services and information to assist in the fight to hold the mortgage lenders accountable for what they are doing.

I am a Baltimore City resident who is upside down in my mortgage. I owe more on my home than it is worth in today’s market. I am currently in the fight to have my mortgage lender do what is right by lowering my principle home value to a fair market price. I currently owe double what my home is worth. Many of us are upside down, have high interest rates or are currently in foreclosure. We are looking for relief from the banks that don’t seem to care much about where our families will sleep once we lose our homes. We need to embarrass them for the way they are treating minorities and low-moderate income families.
Predatory lending practices are a huge contributing factor in the current economic crisis. Many families lost income and the home values have been declining drastically. Saving our homes from foreclosure is the main focus of many families in Maryland. I intend on exposing predatory lending practices that homeowners may not be aware of. The lack of strong regulations in Maryland has allowed unscrupulous mortgage lenders to take advantage of unsophisticated homeowners. Predatory lending has had a devastating effect on individuals and families.
The term “predatory lending” has been used to describe a broad range of loans that are not common in the prime market. These loans do not offer any benefit to the borrower. Some of the most common predatory practices are: •Excessive fees and points •Ignoring borrower’s ability to repay •Balloon payments •Interest only loans •Excessive interest rates •Concealing the true cost of the loan Federal regulators have warned banks that non-traditional mortgages such as interest-only loans may lead to a rash of defaults when the principal must be paid or interest rates increase.
With such loans, the homeowners are not paying towards the principal on the loan, only the interest. Interest rate increases could have a devastating effect on the mortgage payment monthly. Adjustable rates have the same devastating effect on homeowners. The interest rate is not guaranteed and could fluctuate greatly on a per month basis. With adjustable mortgage loan terms homeowners have no clue on what the loan would eventually cost them. This lending practice is a “set up to fail” proposition. Underemployment and lack of employment has been the peripheral nail in the coffin for many Maryland families.
Many families have lost at least one household income and a few have lost both incomes. Income loss combined with the volatile housing market has crushed the American Dream for many homeowners. People who were able to find work after economic crisis, had to take drastic pay cuts which were not adequate to support their current needs. With the economic downturn families are left to pay for homes they cannot afford. This crisis occurred when the mortgage bubble burst. Many homes were being sold for much more than their fair market value.
Once the bubble burst the home value depreciation was steep and sharp. People lost 20-40% of the equity in their homes. Although there are many programs available to help homeowners, the majority of them are unable to help homeowners who are under water on the mortgage due to the lost equity in their homes. Some foreclosures are voluntary. When the bubble burst, homeowners found themselves owing 100,000s more than the homes were worth. Those homeowners decided that paying off the mortgage was indeed a bad deal. So they just walked away from the properties.
The new dagger in homeowners back is the rise in property taxes. The city government needs money so they have raised the taxed values of homes to bring in more money regardless if the home values are decreasing. Homeowners are losing their homes because their mortgage payments did not include an escrow for homeowners insurance and taxes. Once a homeowner becomes delinquent on their property taxes, they have to pay the past due amount in addition to the current amount due. For the Maryland residence that find themselves in foreclosure, please seek assistance sooner than later.
Maryland laws do not demand that you are notified of the Intent to foreclose. Within your originating loan documents you signed either a “power of sale” or “assent to decree” which essentially is an ex parte order to sell your property if you are in default. In addition, the predatory lenders make it impossible to become current again once the mortgage is in default. They can add servicing fees such as late fees, force placed insurance, inspection fees, etc. to make it difficult to bring the account current. We as homeowners have the right to stay in our homes.
Homes we have cared for over the years. The banks should not have the right to evict us without improving the foreclosure process so we have better and earlier notice and the opportunity to redeem prior to significant costs being incurred. They should reduce the loan principle to the fair market value, adjust interest rates and reevaluate the financial situation of the homeowners. The mortgage industry did a disservice to many of the homeowners in the room. Many of us were uninformed about the repercussions and pitfalls involved with interest only, variable rates and balloon payment loans.
Predatory lending practices contributed directly to the economic crisis of the mortgage industry in Maryland. I would like to provide information to several pro bono legal services and housing resources: Pro Bono Resources Center of Maryland. (410)837-9379 or toll free (800)396-1274 www. probonomd. org 1. Civil Justice, Inc. www. civiljusticenetwork. org 2. Public Justice Center (410) 625-9409 for tenants who landlords are in foreclosure 3. Community Law Center (410) 366-7777 www. communitylaw. org 4. Maryland Hope (877) 462-7555 www. mdhope. dhcd. maryland. gov 5.
Foreclosure Proceedings in Maryland (Brochure): http://www. msba. org/departments/commpubl/publications/brochures/foreclosure. htm There has been an ongoing investigation into the banking fraud and predatory lending scandal. President Obama signed another bailout of $25 billion dollars in Feb 2012 to help homeowners and reduce principle mortgage values. The bailout involved Bank of America, Citigroup, Wells Fargo, Ally Financial and JPMorgan Chase. Freddie Mac and Fannie Mae have yet to come on board however they do offer some homeowner assistance with modification of term and underwater loans.
Many look at the bailout as another opportunity to reward the banks for the wrong doing they have done to the citizens and many communities. I was able to look at the bigger picture. This is a way to monitor how many loans are modified and how many principle values are reduced. By providing the bailout this time around there were defined stipulations as to what the funds are to be used for. North Carolina’s Banking Commissioner Joseph Smith will serve as the “independent monitor” to enforce the deals and their terms. The bailout does very little for the people who have already lost their homes. They are eligible to receive up to $2000.

Categories
Crisis

An Investigation of the Impact of the Financial Crisis on the UAE Real Estate Market

Background
One of the marked indications of economic growth and performance is the degree of investments and activities taking place in the construction and real estate market (Global Economic Research, 2012). This statement is indeed true for the United Arab Emirates which over the last decade has recorded strong growth in its real estate market on one hand. And on the other hand has seen marked decline as a result of the global financial crisis which began in 2007. The crisis has caused significant decline to the real estate development and activities of the UAE economy prior to which the Emirates enjoyed an unprecedented real estate growth which was above any other in the Gulf Corporation Council (GCC region) (Kamco Research, 2010). In nominal term, research shows that the industry recorded a CAGR of 20% from the early 2000s to 2007 and as of 2007 the market showed a strong growth rate of over 21% with real estate constituting about 8% of the country’s total GDP estimated at over (15 billion USD) (Whatley, 2011).
Given the country’s attractive position as a global tourist and investment destination, infrastructural growth and development of tourist sites and hotels as well as other entertainment and hospitability sectors has buoyed the real estate growth of the country. Indeed prior to the financial crisis, demands for properties were said to have significantly outweighed supply in both private and commercial real estate markets (Kuwait Finance House, 2011). Indeed, according to the Kuwait Finance House (2011), “there is still a shortage of units in the residential and commercial segments due to the unprecedented economic boom, high employment growth, foreign companies setting up base in the country, and huge inflow of expatriates”. The Kuwait Finance House further notes that the main factors underpinning the Emirates rapid real estate market growth are: Solid macroeconomic foundation, Public expenditure and huge fiscal surplus, Dollar-dirham peg and the record high inflation rates given that stubbornly high rates of inflation in the country rationalises investment decisions into the real estate market since property is used as a hedge against inflation. It has been noted indeed that inflation has overtaken official lending rates in the Emirates thus it is cheaper for people to borrow than to keep money in deposit accounts, therefore real estate investment is considered as a realistic way of hedging against inflation (Albayan, 2009).

In addition to the above stated factors, the Kuwait Finance House also suggests that part of the drivers of the Emirates real estate market are population growth, abundant liquidity and finally the availability of Islamic banking. The irony of the real estate market growth of the economy is that while most of the factors which gave rise its emergence has helped to hedge against the global financial crisis at the very start of the crisis, many of the factors also contributed to its decline. The financial crisis of 2007 did not start to unfold on the Emirates economy until the third quarter of 2008 but when its impacts downed on the economy, it put to test a growth that has been unprecedented in any region in the Middle East for the past 10 years (Albayan, 2009). According to Kamco Research (2011) at the heat of the financial crisis in 2009, the government asked the Dubai World which is its official real estate investment agency to stop all investment activities until March 2010 as a result of what it described as ‘terrible impact of the crises until when its impact might have subsided. Since 2009, the Dubai World has laid off over 10,500 construction staff with Dubai World’s debt standing at over $59 billion. As of 2009, the emirates debt was put at $80 billion. While at first quarter of 2009, the Abu Dhabi investment agency offered to help Dubai amidst its real estate market collapse, Abu Dhabi also felt the impact of the crisis as a result of the global crisis.
As of the first quarter of 2009, the real estate market plunged by almost 70% of the pre-crisis value and of the 980 ongoing real estate projects in Dubai, only 47 were completed in 2009 with about 500 registered with the Real Estate Regulatory Agency (Rera) cancelled. Since most investment into the emirate’s real estate market were from investors abroad with over 70% investment being FDI, the crisis which started from the United States and Europe unleashed its impact on the emirates as investors could not get funds from their western financiers and the rate of financial liquidity which initially increased the crisis reduced in the economy. Albayan (2009) also notes that most of the factors which led to the demands of real estate in the emirates were stunted. For instance he notes that the demand for tourism declined significantly thus affecting hotels rate of occupancy. This also led to the impact of the crisis felt in ongoing developments. While several accounts have been put forward to rationalise the real estate market decline in relation to the financial crisis, knowledge about the country’s real market decline amidst the crisis is still skewed. Besides, as the market is still struggling to come back to the pre-crisis period, there are concerns that if the real causes to the decline are not identified, there will be difficulty in moving forward and achieving the needed growth. In view of this background, the proposed dissertation will critically explore the impact of the financial crisis on the real estate market. The dissertation is concerned with identifying and examining the main causal factors responsible for transmitting the impact of the crisis on the real estate market and the varying strategies that have been employed to mitigate future impacts. The following are the specific aims and objectives of the dissertation.
Research Objectives:
Investigate the similarities or differences between UAE real estate markets, and those in the UK.
Ascertain the reasons why the global financial crisis could have had an impact on the UAE real estate, especially given differences in banking principles.
Ascertain the role of Islamic banking in mitigating the impact of the financial crises.
Investigate the direct and indirect impacts that the financial crisis had on the UAE real estate market, and its subsequent impact on the UAE economy.
1.3 Research Question
How has the financial crisis impacted upon the UAE real estate market
2.0 Literature Review
The 2007 global economic and financial Crisis which started from the US subprime mortgage crisis has affected virtually all the countries around the world given the interconnectedness of the global economy. The crisis which led to the collapse of several well known institutions such as Lehman Brothers also led to the bailout of financial institutions, and the near collapse of many governments as well as downturns in stocks markets around the world (Bob, 2012).
As a result of the crisis, there have been credit default problems, negative interest rate movements, inflation rate fluctuation and several distortions in the financial agreement of many financial obligations and agreements. As the credit crisis led to the collapse of financial institutions, it became problematic for investors to expend more on their business commitments and financial obligations as borrowing became squeezed as the liquidity ratios of many banks almost diminished (TIME Magazine Friday, April 10, 2009). While the crisis has unleashed its impact on every economy and the Emirate’s economy in particular on one hand through its heavy financial implication, it has on the other hand had huge impact on other Emirate’s industries. As noted by Kamco Research (2011), the financial crisis started to affect the UAE through the decline of tourists and tourism activities which further led to decreased demand for housing and real estate as well as hospitality and hotels in particular. Kamco Research notes that since investors income started to nosedive as a result of low hotel occupancy and diminishing tourism activities which once fuelled the real estate market, this led to falling profits and investors started to abort new projects. As noted by Wam (2010), when the crisis started in UAE in late 2008, over 150 real estate investment projects were called off by investors who had started to fall into trouble with their financial institutions regarding their financial agreements. The Citibank notes that: “real estate projects worth 170 billion USD have been cancelled since the financial crisis explosion with rents seeing a decline of over four fifths since 2008. Also, Al Futtaim – a Real Estate group in Dubai during the financial crisis stopped work on the Dubai Festival City which was billed to cost almost 3 billion USD. Similarly, major projects were stalled such as hotel and other developments were stalled. For instance, Four Seasons Hotel and the Al Badia Business Centre which are major real estate development projects were stopped. According to the Executive Magazine, the company has taken this step in order to benefit from a further fall in construction costs due to the financial crisis, which would enable it to reduce its expenses.
At the same time, the UAE government which has enjoyed almost a decade of surplus fiscal regime had started to feel the impact of the crisis as the government debt has quickly risen to over $30 billion as of early 2008. The government’s bad fiscal position led it to order the Dubai Corporation to stop all real estate market activities while the heat of the crisis subsides. While the Kuwait Finance House had in 2008 earlier predicted that the UAE will not feel the global credit squeeze due to private consumption growth that is likely to remain strong as well as the population growth of expatriates in the country who boosted consumer confidence. The financial crisis at its peak contrarily affected the growth of private consumption in a lot of ways. According to Mintel Research (2010), “since private institutions were unable to obtain credits from banks to sustain different projects and demands for almost entirely all services declined, private consumption growth was affected to much that it took the UAE back to a pre-20 year period when it could the country could not be found on the face of the earth”. Following the crisis, the government has taken several steps to mitigate the impact of the crisis (Global Property Guide, 2011). The central bank has for instance begun to overhaul the banking system by raising bank’s liquidity ratio in order to encourage banks to give credit while the capital base has also increased (Hatoum, 2012). As a result of the steps taken by the central bank and other government agencies, the UAE reality market has began to emerge out of the crisis. Dubai’s residential real estate market is finally recovering after hitting bottom, while neighbouring Abu Dhabi continues to struggle. A property index published by Zawya Dow Jones (2012) shows that the home prices in Dubai saw a rise of almost 7.6 percent for the year at the start of 2012, but prices in Abu Dhabi dropped 4.1% in the same time period.
3.0 Methodology
The methodology is an important element of the research process which shows the design elements of the research particularly with regard to data collection and the adopted techniques as well as their justification. Accordingly, this section of the proposal sets out the proposed methodology of the dissertation. The current literature shows the existence of two approaches to research: namely the deductive and inductive methods (Saunders et al, 2003). While the deductive approach is leaned towards a scientific evaluation or understanding of data as well as the relationship between variables, the inductive approach owes much to gaining an understanding of the meanings humans attach to events as well as the research context (Saunders et al, 2003). The merits of both approaches have been considered useful for the proposed dissertation; hence both the deductive and inductive research will be employed. The inductive approach will employed in specific in order to be able to understand the broad experiences, causes, problems and important factors which underlined the global financial crisis and how it affected the real estate market of the Emirates. As the approach which helps to understand events and how they occurred, it is expected the deductive approach will offer insight into other broad issues regarding the financial crisis and its broad effects on the UAE reality and other markets. The inductive approach on the other hand will be employed based on the need to critically analyse the major effects of the crisis, the approach will also help to gain knowledge into numbers and figures which are key to understanding the real nature and effects of the crisis. The approach is also highly favoured due to what Hussey and Hussey (1997) describe as some of the characteristics of the deductive research approach which fits well into the objectives of the proposed dissertation. This includes:
The use of statistical methods in testing samples
The uses a highly structured methodology in order to enhance reproducibility of the results
An exploration of relationships between complex variables
Concerning the strategy suitable for the dissertation, the exploratory research methods have been considered useful given that it is the one used explore phenomena that are yet to be studied or to further explore areas that have received few investigations as is the proposed dissertation. As noted by Silverman (1993), exploratory research seeks to understand a particular phenomenon as well as to gain new insights and perspectives on the phenomenon under investigation. Saunders et al (2003) note an advantage of exploratory research as being its flexibility and adaptability permitting the researcher to easily take on any direction that the data may dictate in the course of gathering the data.
Data Collection
Given the complexity of primary data collection such as access to the needed respondents, resources and time which the research lacks altogether, it would be impossible to use primary data collection as the main source of data gathering for the proposed dissertation. Hence, secondary data will be used in a way that would allow the researcher to analyse the UAE real estate market and the impact of the crisis. Secondary data will be mainly collected from the Newspapers and UAE authorities such as the Dubai World and the Abu Dhabi Investment authority. The option of data gathering would be employed because the country lacks an organised data gathering system with anyone unique database regarding the property market unidentifiable (See: Ameinfo.com November 24, 2009).
With regard to data, the real estate market would be examined in specific and about 20 real estate projects will be critically analysed. The analysis will be based upon how the financial crisis affected the various real estate development projects and the extent of the impact. The dissertation will be a longitudinal study and will focus on the crisis period between 2007 and 2010 when the heat of the crisis were most severe.
ActivitiesJulyAugSepOct NovDec
Start the thesis+++++
Complete Chapters 1 & 2+++++
Data collection begins +++++
Start with Methodology +++++
Begin to analyse data +++++
Check analysis for consistency +++++
Get supervisor’s approval +++++
Start with the final chapter +++++
Get the dissertation edited and checked+++++
Get supervisor’s final approval+++++
Correct mistakes+++++
TIMESCALE: GANTT CHART
References
Albayan, M. (2009). The Global Financial Crisis and the GCC region, Research Series
Ameinfo.com (November 24 – 2009). Lack of data hampers Dubai property market forecasts, Available at: http://www.ameinfo.com/217619.html
Bob, I. (September 24, 2008). “(quoting Joshua Rosner as stating “It’s not a liquidity problem, it’s a valuation problem”. Bloomberg, Retrieved June 6, 2012
Executive Magazine (Jun 11, 2012). UAE – Construction hits the wall, Available at: http://www.executive-magazine.com/getarticle.php?article=11520, Accessed: 13th June, 2012.
Global Economic Research (March, 2012). Global Real Estate Trends, available at: http://www.gbm.scotiabank.com/English/bns_econ/retrends.pdf
Hussey, J. and Hussey, R. (1997) Business Research: A Practical Guide for Undergraduate and Postgraduate Students, Basingstoke: Macmillan Business.
Silverman D (1993). Interpreting Qualitative Data: Methods for Analyzing Talks, Text and Interaction, London: Sage.
Saunders M, Lewis P and Thornhill A (2003). Research Methods for Business Studies, 4th edn, Harlow: Pearson Education
Kuwait Finance House (2011). UAE Real Estate Sector Research: KFH Research Ltd. Available at: http://www.liquidityhouse.com/upload/UAE_Real_Estate_-_12_Sep_08_1443.pdf
Kamco Research (2010). United Arab Emirates (UAE) Economic Brief and Outlook, http://www.menafn.com/updates/research_center/UAE/Economic/kamco130411.pdf.
TIME Magazine Friday, (April 10, 2009). The financial crisis and the Dubai reality.
Whatley, S. (2011). The Impact of the Financial Crisis on Dubai’s Property Market, available at:http://www.trcb.com/real-estate/real-estate/the-impact-of-the-financial-crisis-on-dubais-property-market-22671.htm
Wam, N. (Aug 2, 2011). Why a Weaker Dollar Could Help the U.S, Time. Retrieved , June 9th, 2012.