Citizens for Balanced Growth

Year: 2010 (Page 2 of 2)

E-mail exchanges between PWCBG, Chairman Stewart, Chairman Stewart’s Chief of Staff, and Planning Commission Chairman

Ralph Stephenson of Prince William Citizens for Balanced Growth

Corey Stewart, BOCS Chairman

Laurie Cronin, Chief of Staff to Chairman Stewart

Gary Friedman, Planning Commission Chairman

29 Jan-2 Feb 2010

(E-mails read from top to bottom in reverse chronological order)
Subject: Re: CPA Land Use & Transportation Updates
Date: Tue, 02 Feb 2010 00:18:34 -0500
From: Ralph Stephenson <stephenrk1@comcast.net>
To: Cronin, Laurie A. <lcronin@pwcgov.org>, Friedman, Gary <garycf1@netzero.net>, Stewart, Corey <cstewart@pwcgov.org>, Pugh, Bob <bob@insightwealth.com>

Tks, Laurie, for the statements below from county Planning Staff.  Appreciate you taking the time to ask them to respond and sharing their response with me.

It’s interesting to see Planning Staff repeating almost verbatim the same mantras that I’ve heard over and over again from developers.  That only helps confirm my worst fears.  It’s also interesting how transparent many of the Planning Staff rebuttals below are; very obviously leaving out important information and in some cases making blatant distortions — either unintentionally out of ignorance or intentionally to obfuscate.  (Neither possibility is very comforting.)   For example: “The [Planning Staff’s plan] does not increase the number of new homes planned for Prince William County.”  OR  “The BOCS is considering the staff version of the Land Use chapter that proposes 2 Centers of Commerce, 2 Centers of Community, and 2 study areas for future centers.  The 4 centers reflect planning already approved by the Board and would result in no additional residential development in these areas.”  Say what?   If this is true, if there will indeed be no additional residential development in Planning Staff’s overall plan, then why is it proposing centers of community (the old LUAC euphemism for high-density housing)?  If there will be no new residential development in the centers of community, then why are they being proposed as development areas?  Development of what?  And NO ADDITIONAL residential development means what exactly:  in addition to what?

But it’s most interesting of all to see the Planning Staff directly rebutting Chairman Stewart’s own Planning Commission Chairman Gary Friedman.  (All four points below are his, not mine.)   Do you remember the following e-mail you sent me below in Dec 2008 [see passage between line of asterisks immediately below] in which you said Chairman Stewart strongly supported Chairman Friedman’s plan (which is represented in the four points rebutted by Planning Staff below)?  Your e-mail from today has a very different tone and apparent direction than that one from 14 months ago.  I’m getting the eerie feeling that Chairman Stewart has changed his mind and decided to no longer support his own Planning Commission Chairman, and instead support (or at least move much, much closer to) Planning Staff parotting the developer party line?  Is that true?  If so, why?   Please say it ain’t so.  Ralph Stephenson


Mr. Stephenson [summary of message from Stewart Chief of Staff Laurie Cronin to Ralph Stephenson 20 Dec 2008]:

Thank you for your e-mail I wanted to send you an article that recaps what Chairman Stewart’s Planning Commissioner, Gary Friedman has implemented, Chairman Stewart is supportive of the changes.

Prince William land use changes in the works

By Cheryl Chumley
Published: December 10, 2008 http://www.insidenova.com/isn/news/local/article/prince_william_land_use_changes_in_the_works/26050/


Cronin, Laurie A. wrote:

Ralph,

Thank you for including me in your e-mail, I did want you to be aware of a response that I got from PWC Planning:

 

County’s future:

1.     Provides no incentives for focused, major development in the two areas of the county identified by the Planning Commission as most in need of redevelopment and revitalization, which already have the basic public infrastructure in place and are the most likely locations for future metro rail expansion from Fairfax into Prince William County:  North Woodbridge and Yorkshire.

Staff has proposed designating North Woodbridge a “Center of Commerce,” giving that area the highest level of focus and attention for redevelopment and revitalization.  This is on top of the fact that North Woodbridge has already been the focus of planning as part of the Potomac Communities effort.  Yorkshire has also been recommended by staff to be studied for consideration as a “Center of Community,” recognizing that it is in need of redevelopment and revitalization and has existing infrastructure.

2.     The “centers”, as proposed by staff, have been best described by a fellow planning commissioner as allowing “anything, anywhere, anytime”.   There is no limit on the number of these centers that could be advanced and the Land Use Advisory Committee (LUAC) located a large portion of them in the Brentsville District.  Planning staff proposes these “centers” comp plan amendment initiations be allowed without form, format, or defined content, other than a vague “mixed use” requirement, and without any major investment in the county or the process by the applicant, whenever a proposal is submitted.  It would then be left to staff to work out the details along the way, thus allowing unprecedented “flexibility”.  In this scenario I am sure staff would do the best job possible to “work out the details”.  But any such effort will, of necessity, be constrained by resources and staff availability.  Due to budget restraints and numerous department vacancies, planning staff is already stretched to its limits.  Does it make any sense to add what would surely become dramatic new burdens on an already overburdened department?  And if so, what would be the likely result?

The BOCS is considering the staff version of the Land Use chapter that proposes 2 Centers of Commerce, 2 Centers of Community, and 2 study areas for future centers.  The 4 centers reflect planning already approved by the Board and would result in no additional residential development in these areas.  Any request for an additional center would, if initiated by the BOCS, have to go through a planning process that engages the community in development of a “Centers Plan” that would define the unique characteristics of the area and would prescribe the limits on the appropriate amount of development in the Center.  You are correct that such a Centers Plan would require significant resources.

3.     Provides no phasing structure on mixed use projects.  We’ve been down this road before.  How many times have mixed use projects been approved in the past, the residential component installed, then the commercial component left waiting for “the market to catch up”?  This scenario always results in more rooftops, more congested roads, more overcrowded schools, and less revenue for the county to meet its obligations because the commercial component either never happens or happens to such a minimal level as to fail to offset the budget burdens the new homes create.

The proposal includes a requirement to phase the infrastructure of a project rather than the timing of the various uses.

4.     Fails to include the Planning Commission safeguards designed to protect the rural areas from encroachment.  Anyone who cares about advancing smarter growth principles knows encouraging and concentrating growth in the development area, and protecting rural areas from sprawl development, are key features.  While the planning staff text mentions smart growth principles, and makes plentiful use of smart growth language, the proposed details tell a very different story.

The proposal does not propose any changes to the protections currently afforded the rural area.  The rural area continues to be a critical element in the county’s efforts to concentrate growth and development in the development areas of the county, and to preserve the rural character of the rural area.

We do not need 50,000 new homes in our community.  We do not need supervisors who are allied with builders running the county government.  We already have a glut of homes, overcrowded schools and overcrowded roads.  Do not add to this by ignoring the residents who vote for you and lining your pockets with big builders bribes.  Please do the right thing for us, our children and all the people of Prince William County.

The proposal does not increase the number of new homes planned for Prince William County.  Rather, the plan would focus on improving the quality of development by focusing development in high quality mixed-use, walkable centers with access to transit and trails.

I hope this is helpful.

Laurie

 

Laurie A. Cronin

Chief of Staff

Chairman Corey A. Stewart

Prince William County Board of Supervisors

(703) 792-5626 / (703) 792-4640

lcronin@pwcgov.org

From: Ralph Stephenson [mailto:stephenrk1@comcast.net] Sent: Sunday, January 31, 2010 6:47 PM
To: Stewart, Corey A.
Cc: Cronin, Laurie A.; Friedman, Gary
Subject: Re: CPA Land Use & Transportation Updates

 

Corey:

Thanks for getting back to me.  Appreciate all that you do to serve the county.  Per your request below for ideas for the comp plan, numbered below are the things that we would most like to see in it.

Ralph & Kathy Stephenson

  1. No more residential development at all until the county has worked off its current surplus/glut of residential housing.  Why would we build something that we not only don’t need, but that is economically harmful?  A possible rule of thumb might be that until the county’s total of empty/foreclosed houses and approved-but-not-yet-built houses drops below 7,000  or 10,000 at most, no more new houses can be approved.As has been said and proven so many times before, more residential housing over the next few years will further crowd schools and roads, subsidize residential developers yet again with our taxpayer dollars to create unneeded housing in a still-extremely-glutted housing market, and thus further damage the property values and long-term viability of older neighborhoods.  (At last count, there were still 25-30,000 approved, but not-yet-built homes in the county.)  More residential housing will also damage the county tax base, which is currently about 85% residential (higher taxes for all of us) and only 15% commercial.  And It will further harm the environment of beautiful (?? or soon-to-be-formerly-beautiful) western Prince William County.It’s ironic that the county is considering making it even easier to build residential housing at the very time that the U.S. is trying to recover from its worst financial crisis since the Great Depression, a crisis brought on by, among other things: massive housing industry overcapacity and oversupply (probably the single biggest cause); political shenanigans by local and federal government officials allied to the housing industry, trying to keep demand artificially high to match the artificially high housing supply; dishonest and predatory lending practices by many mortgage lenders to people who couldn’t afford the homes they were being sold; and the financially toxic effect of these millions of now-non-performing (or bad) loans on the books of banks and other investors.
  2. Please stress commercial development, not residential development — especially focused commercial development:  i.e., the Centers of Commerce concept, EXCEPT totally or mostly without residential housing.  The 85: 15 residential-to-commercial tax ratio is untenable, shows very poor and/or improper past planning by the county, and needs to be greatly improved.  Other than extreme cases like the Vulcan Quarry in Nokesville and the asphalt plants right next to housing, schools, GMU, and the county’s new arts center, when have citizens strongly protested commercial development?  Commercial is far, far more likely to receive a receptive audience — especially if it doesn’t severely impact traffic congestion or the environment — than residential development, which always has all the negative impacts discussed above and should only be built when it is actually needed.  Building housing only when we need it:  Isn’t that simply a matter of the most basic economic common sense?  Otherwise, the immutable laws of supply and demand will have their revenge on the county’s economy.  (I’m forwarding separately to you an economic analysis of the housing market, in line with other analyses I’ve seen and heard recently, that argues convincingly that housing demand is about to drop further in the coming months — upon expiration of a number of temporary federal government economic stimulae that have artificially propped it up for awhile.)
  3. I urge you to reject the Planning Staff and Land Use Advisory Committee, or LUAC, recommendations on the Land Use Chapter of the Comprehensive Plan. As you may recall, the LUAC recommendations are outrageous, proposing 19 Centers of Community — 11 in the Haymarket, Gainesville, Bristow, Manassas area. If each of these 19 centers builds 3,000 homes, which is about the same density level as the infamous 2005-06 Brentswood Project, and assuming the county’s average of three people per house, that would total 171,000 more people, a 50% increase in the population of the entire county.Since the Planning Staff recommendations on residential housing, on closer examination, apparently set no real limits on housing and instead seem to allow “anything, anywhere, anytime” — and thus are not really a plan at all — I see no reason to believe that they will not ultimately move strongly in the direction of, even converge with the outrageous LUAC recommendations. On the other hand, the Planning Commission recommendations actually would noticeably plan and channel residential growth in more reasonable ways — and primarily in two areas.
  4. The following, on schools, we quote from Michelle Trenum because we agree completely:Please put some teeth in the school policy.  Although it is lovely to see the BOCS discuss the issue of school overcrowding, the proposed school policy with the way it currently is written doesn’t really do anything to address the real issues.  It is an empty box that is just wrapped in pretty paper with a nice bow.  That doesn’t change the fact that inside the box is NOTHING.   When I spoke before the board I showed a colored map of which schools would be overcrowded IF Avendale was approved….this policy, even if approved, does not change that colored map one bit.  All the same schools would still be overcrowded.

My concerns with the policy is that nothing is different from now but it gives the public the false illusion that the board is addressing the problem.  I also have issues that it only affects Linton Hall when there are other parts of the county with overcrowding as well.

It is the policy of the Prince William Board of County Supervisors that, before any new residential rezoning in the Linton Hall Geographic District is approved, the developer shall commit that no new building or occupancy permits shall be issued unless and until

(i) two new elementary schools IN THE LINTON HALL AREA are fully constructed and opened to new students;

Those schools were already on the schedule and will be completed, one by 2011 and the other by 2012 or it could be moved up to 2011 as well.  So nothing is different because any rezoning approved now would not have people moving in until 2011 or 2012 anyway. 

(ii) a new high school IN THE LINTON HALL AREA (at Kettle Run) is fully constructed and opened to new students;

Also, it is on the schedule to be opened in 2011 so nothing would change there

(iii) the sites for an additional elementary school and new middle school be acquired and located IN THE LINTON HALL AREA.

In an amazing coincidence, Avendale offered a middle school and elementary school site (although both are badly located) so golly gee, if Avendale was approved, then all the pieces would fall in place and anything could now be approved.

For the sake of argument, let’s say that the school policy was actually put into effect last December 2009.  Then Avendale came up for a vote in January.

Could Avendale be approved with this policy in effect?  YES

Would the homes be built and occupied on the same timeline as without this policy?  YES

Could 10 more developments be approved with this policy as long as the homes weren’t occupied until 2012 which would have happened anyway due to the length of time it takes to go from approval to people moving in?  YES

Would our schools be equally as overcrowded with this policy as without this policy ?  YES, THERE WILL BE NO CHANGE.

So the policy does NOTHING until it deals with the capacity issue and school locations.
Stewart, Corey A. wrote:

Ralph, It really depends on how many people show up. If it is lighter than we expect, then I can allow for 5.  In any case, please feel free to send me any specific changes you would like us to consider. I, for one, am not hard set on any portion of the comp plan an am open to suggestions.

Corey
————————–
Sent from my BlackBerry Wireless Handheld

—– Original Message —–
From: Ralph Stephenson <stephenrk1@comcast.net>
To: Stewart, Corey A.; Cronin, Laurie A.
Sent: Sat Jan 30 07:11:20 2010
Subject: Re: CPA Land Use & Transportation Updates

Thanks for letting me know.  Ralph

Stewart, Corey A. wrote:

Mr. Stephenson, I spoke to Chairman Stewart and due to the sheer volume of citizens expected at the meeting Chairman Stewart requested I advise you that you will have 3 minutes to speak.

Thank you,

Laurie

 

Laurie Anne Cronin

Senior Aide

Chairman Corey A. Stewart

Prince William County Board of Supervisors

(703) 792- 5626 / (703) 792 – 4640

lcronin@pwcgov.org / cstewart@pwcgov.org

—–Original Message—–

From: Ralph Stephenson [mailto:stephenrk1@comcast.net]

Sent: Friday, January 29, 2010 1:33 AM

To: Stewart, Corey A.

Cc: Pugh, Bob

Subject: Re: CPA Land Use & Transportation Updates

Chairman Stewart:  Please advise whether I’ll have five minutes to speak Tuesday 2 Feb during citizens time at 7:30 pm (as a representative of Prince William Citizens for Balanced Growth), or just three minutes.  Thanks for all you do to serve the county.  Ralph Stephenson

 


 

For Chairman Stewart’s original positions on land use, see: E-mail exchanges between Ralph Stephenson, BOCS, and Stewart’s Chief of Staff Laurie Cronin 12/20/2008

Speech to Board of County Supervisors on 2 Feb 2010

by Ralph Stephenson of Prince William Citizens for Balanced Growth

1.  Members of the Board:  Thank you for all your service to the county.  Tonight, I urge you to reject the Planning Staff and Land Use Advisory Committee, or LUAC, recommendations on the Land Use Chapter of the Comprehensive Plan. As you may recall, the LUAC recommendations are outrageous, proposing 19 Centers of Community — 11 in the Haymarket, Gainesville, Bristow, Manassas area.  If each of these 19 centers builds 3,000 homes, which is about the same density level as the infamous 2005-06 Brentswood Project, and assuming the county’s average of three people per house, that would total 171,000 more people, a 50% increase in the population of the entire county.

Since the Planning Staff recommendations on residential housing, on closer examination, apparently set no real limits on housing and instead seem to allow “anything, anywhere, anytime” — and thus are not really a plan at all — I see no reason to believe that they will not ultimately move strongly in the direction of, even converge with the outrageous LUAC recommendations.

On the other hand, the Planning Commission recommendations actually would noticeably plan and channel residential growth in reasonable ways — in two areas of the county.

2.  As has been said and as subsequent events have proven so many times before, more residential housing will further crowd schools and roads, subsidize residential developers yet again with our taxpayer dollars to create unneeded housing in a still-extremely-glutted housing market, and thus further damage the property values and long-term viability of older neighborhood (At last count, there were still at least 25-30,000 approved, but not-yet-built homes in the county.)  More residential housing will also damage the county tax base, which is currently about 85% residential (higher taxes for you) and only 15% commercial.  And It will further harm the environment of beautiful (?? or soon-to-be-formerly-beautiful) western Prince William County.

It’s ironic that the county is considering making it even easier to build residential housing at the very time that the U.S. is trying to recover from its worst financial crisis since the Great Depression, a crisis brought on by, among other things:

1) massive housing industry overcapacity and oversupply (probably the single biggest cause);

2) political shenanigans by local and federal government officials allied to the housing industry, trying to keep demand artificially high to match the artificially high housing supply;

3) dishonest and predatory lending practices by many mortgage lenders to people who couldn’t afford the homes they were being sold; and

4) the financially toxic effect of these millions of now-non-performing (or bad) loans on the books of banks and other investors.

3.  Supervisor Covington, you represent my district, Brentsville District.  For many years you have supported every residential development I can think of — from Brentswood to Avendale to bringing sewer lines to the Rural Crescent, which is supposed to be off-limits to residential developers, so you can develop it, too.  You appointed a developer to the  Land Use Advisory Committee to make sure that residential developer interests were given preferential treatment.  You do not represent the interests of the vast majority of your constituents, though most are not yet aware of that.  Are you prepared to tell your constituents now that you really don’t care what they think because you’re a big landowner with lots of big landowner friends looking to make a killing off of taxpayer-subsidized real estate and county government bailouts of residential developers?  Are you willing to tell your ordinary constituents that the 10s of thousands of dollars of  campaign contributions you’ve received mostly from developers are far more important to you than their interests?  If so, then vote for the LUAC or Planning Staff Land Use plan.  Otherwise, if you respect the wishes of your ordinary constituents at least to some degree, I strongly urge you to vote for the Planning Commission Land Use recommendations.

Let there be no doubt:  It is in no way ethical or humanitarian or fiscally responsible or pro-free-market to support county taxpayer bailouts of residential developers and big landowners so they can build more unneeded and economically harmful housing.  Let’s call it by its real name:  political corruption and an abuse of supervisors’ sacred public trust.  Please support the Planning Commission  Land Use recommendations.  Thank you.

“Housing Red Flags Ignored”

by Elizabeth MacDonald, Fox Business

2 Feb 2010

“One of the nation’s biggest mortgage industry players repeatedly warned the Federal Reserve, the Federal Deposit Insurance Corp. and other bank regulators during the housing bubble that the U.S. faced an imminent housing crash.

“The trade group also mapped out the 15 states which faced ‘sudden increases in foreclosures’ and ‘a downward spiral,’ including California, Florida and Nevada.

“But bank regulators not only ignored the group’s warnings, top Fed officials also went on the airwaves to say the economy was ‘building on a sturdy foundation’ and a housing crash was ‘unlikely.’

“The letters, obtained by Fox Business, were sent in 2005 and 2006 before the housing bubble burst.

“As it pleaded with bank regulators to stop subprime lending abuses, the Mortgage Insurance Companies of America [MICA] pointed out the red flags in analysis from the bank regulators’ own staffers as well as the likes of Bear Stearns and Lehman Brothers.

“But the fact that these lengthy warnings did not compel bank regulators to act raises serious policy questions for Congress and the White House, as they move to make the Federal Reserve the systemic risk regulator, when the Fed didn’t act to stop the biggest systemic risk of all.

“The new revelations also may make it harder for Federal Reserve chairman Ben Bernanke to battle Congressional curbs on the Fed’s authority over the banking system, and moves by members of Congress to have the Fed’s monetary policies audited.

“Disturbing Concerns Raised

“Mortgage insurance companies cover lenders’ loan losses when they go bad; borrowers pay for the insurance. MICA counts as its members AIG United Guaranty, Genworth Mortgage Insurance Corp., PMI Mortgage Insurance Co., United Guaranty, and Mortgage Guaranty Insurance.

“Mortgage insurers are ‘deeply concerned about increased mortgage market fragility, which, combined with growing bank portfolios in high-risk products, pose serious potential problems that could occur with dramatic suddenness,’ warned Suzanne Hutchinson, top executive at the Mortgage Insurance Companies of America, in 2005.

“Failure to adjust bank underwriting, reserves and capital to account for this growing risk ‘means that downturns from credit and/or interest rate events – let alone shocks – will be far more severe than’ if precautions are taken, Hutchinson noted, adding that what is ‘disturbing to us is the fact that recent trends could lead to sudden increases in foreclosures.’

“MICA based its warnings on detailed analyses that came from the regulators’ own officials at the Federal Reserve, the OCC, FDIC and OTS. ‘The OCC and FRB work reinforces, we think, the urgent need for quick action on high-risk’ subprime loans, Hutchinson wrote.

“And MICA also backed up its red flags with hefty amounts of data from the Basel Committee on Banking Supervision, the world’s top central bank body comprising central bank governors from the Group of Ten nations.

“MICA also bolstered its case with data from Bear Stearns and Lehman, three years before these two Wall Street giants collapsed under the weight of bad mortgage bets.

“It also backed up its predictions with Fannie Mae disclosures in filings with the Securities and Exchange Commission, as well as analysis from Standard & Poors, Fitch Ratings, Deloitte & Touche, the Mortgage Bankers Association and the National Association of Realtors.

“The Federal Reserve Board, the Administrator of National Banks, the FDIC and the Office of Thrift Supervision declined repeated calls for comment. MICA said the letter only jump-started informal conversations about the problems.

“Bank regulators began warning lenders in 2004 about the dangers of subprime loans, and issued guidance in 2005 advising tighter lending standards, including higher down payments and income verification.

“But MICA said this didn’t go far enough. It noted that there are ‘questions about the degree to which this guidance has in fact been reflected in industry practice,’ and the government’s ‘industry outreach statements do not address the prudential implications’ of subprime loans, which demand stiffer ‘internal controls, regulatory capital and reserves.’

Bernanke Says Crash ‘Unlikely’
“Despite mounting evidence, Bernanke went on TV in 2005 to say of a housing collapse, ‘it’s a pretty unlikely possibility,’ adding that ‘fundamentals are strong.’ Right before the crash in 2007 the Fed chairman said ‘the subprime markets seem likely to be contained.’

“Bernanke also noted in February 2008: ‘By later this year, housing will stop being such a big drag directly on GDP’ and that ‘among the largest banks, the capital ratios remain good and I don’t expect any serious problems.’

“Former Fed chairman Alan Greenspan also testified to Congress that the Fed could do nothing to stop lending abuses. ‘The loan officers of those institutions knew far more about the risks involved and the people to whom they lent money than I saw even our best regulators at the Fed capable of doing.’

“Despite the fact that a chorus of economists around the world began raising the alarms in the mid-’90s that U.S. housing leverage on both the business and borrower level would lead to economic collapse, no moves stateside were made to enact common sense measures such as tougher loan to value ratios.

“For example, Germany’s legal limit on loan to value ratios is 60%; France is 75% and Denmark pegs it at 80%. In the U.S., no-money-down loans were rampant.

“Subprime loans were historically given only to rich borrowers who could afford them. In 2000, just 1% of borrowers got subprime loans.

“But by May 2006, about a third of all borrowers had one, according to First American LoanPerformance, which tracks mortgage lending statistics.

MICA’s Warnings
“In September, 2005, MICA executive vice president Hutchinson wrote to the Federal Reserve, John Dugan, Comptroller of the Currency, Donald Powell, then chairman of the FDIC and John Reich, then director of the Office of Thrift Supervision.

“Hutchinson acknowledged that regulators were dealing with the aftermath of Hurricane Katrina. But she pleaded with regulators to crack down on risky subprime loans because another storm was brewing, a nationwide crash due to a ‘growing risk in residential mortgage’ business.

“Mounting defaults warrant ‘considerable caution as lenders have rapidly increased their portfolios of high-risk subprime loans,’ she said, adding, ‘Federal Reserve data indicate that banks say they have not yet changed their underwriting standards even as’ the subprime loans ‘have dramatically increased.’

” ‘We know that dealing with Hurricane Katrina is rightly your agencies’ first priority,’ Hutchinson warned, but ‘market developments call for quick supervisory action on mortgage risk,’ as banks were overexposed.

Banks’ Wells Running Dry
“And Hutchinson foretold that the banks’ wells were running dry, putting the FDIC deposit insurance fund in jeopardy.

” ‘Combined with the fact that bank reserves are, according to the FDIC, at a 19-year low, it would appear that lenders with large’ subprime portfolios ‘are singularly ill-prepared for the risk clearly presented by high-risk, nontraditional mortgages,’ she said.

“Hutchinson warned that toxic subprime loans ‘would, in effect, ‘pollute the residential mortgage well’– a well of profound importance to the depository institutions you regulate and to the mortgage insurance industry.’

“Hutchinson also cited a ‘recent Federal Reserve study [that] has rightly demonstrated that many vulnerable borrowers of complex adjustable rate mortgage products do not understand their terms, may pay higher rates with complex products, and thus are more exposed to payment shock.’

“Even so, lenders were selling subprime loans at ‘very high’ loan to value ratios ‘to unsophisticated borrowers’ who were ‘ill prepared’ and could default, she said.

“The OCC, too, had cautioned that it has seen the ‘first drop in overall credit underwriting standards in the 11 years of its work,’ Hutchinson noted.

“OCC found rampant problems, including ‘higher credit limits and loan-to-value ratios, lower credit scores, lower minimum payments…less documentation and verification, and lengthening amortizations — have introduced more risk to retail portfolios,’ Hutchinson told regulators.

Huffing, Puffing, and Blowing Borrowers Out of Their Houses
“Citing data from SMR Research, a market data firm, Hutchinson pointed out that borrowers were increasingly doing an end-run around the rules in order to get little- to zero-money down loans — or loans at 100% or more of a home’s value.

“Specifically, MICA’s Hutchinson pointed out a soaring increase in what are called ‘piggy back loans,’ whereby borrowers first get a loan worth 80% of a house’s value, then get another loan to finance the remaining 20%.

” ‘They may be called piggyback loans, but some analysts worry they could behave more like the big bad wolf — huffing, puffing, and blowing borrowers right out of their houses via defaults,’ Hutchinson wrote, quoting Dow Jones.

“Hutchinson predicted no money down loan abuses would help tank the market.

” ‘Without equity, borrowers may have to bring money they do not have to the closing table, worsening market problems and potentially creating a downward spiral in home prices that leads to still more mortgage defaults and then still more foreclosures,’ she wrote.

Shows the States Under Threat
“California, Arizona, Nevada, Florida, Texas and ten other states were plagued by these loan abuses, Hutchinson said, citing an SMR survey covering 2004 and the first half of 2005, which looked at 3.1 million new loans for homes in over 334 counties.

“SMR found that out of the loans in these areas, ‘60% were piggy back loans with LTVs above 95% in 2005, up from 52% in 2004,’ Hutchinson warned. Hutchinson added that ’70 counties, or a fifth of the total, had piggybacks representing more than half of all loans in 2005,’ noting that ‘piggybacks comprise over 48% of the dollar value of all new home purchase loans.’

“And Hutchinson noted government data showing that loans at 95% or more of a home’s actual value actually ‘performed 200% worse’ in terms of defaults versus loans at 80%. Loans at 100% more performed three times as poorly as loans with 20% down.

“Hutchinson spotlighted another growing abuse. ‘One lender brought out a mortgage that combines an 80% first lien and a 23% second for a 103% LTV. Minimum credit score: 620,’ at the low end of the range, she told the bank regulators.

“Hutchinson also cited a Fannie Mae disclosure in its 2003 annual report, where Fannie reported ‘the likelihood of default and gross severity of a loss in event of default are typically lower as the LTV decreases.’

Cites Lehman Bros. Warning
“According to ‘a recent Lehman Bros. report,’ Hutchinson said that ‘several large banks have significantly higher exposures, including ‘Wells Fargo [and] Bank of America.’

“Reckless subprime lending caused ‘lenders to develop large concentrations of high-risk loans which, even if backed by additional capital or reserves, could pose significant credit, liquidity, operational and interest-rate risk,’ she wrote.

Cites Bear Stearns, S&P Warning
“And Hutchinson reported a Bear Stearns analysis whereby it’s saw delinquencies more than triple in just a year on option ARMs, which dangerously let borrowers set their own payment terms, even skipping interest payments. She urged federal bank regulators to move ‘quickly’ to curtail these loans.

” ‘Bear Stearns estimates the percentage of skipped payment borrowers at 65%, but both estimates are significantly higher than the 20% comparable figure estimated by Bear in spring 2004,’ she wrote.

“She added that meanwhile, ‘S&P data indicate that only 16% of option ARM borrowers provide full documentation’ to get their loans, and ‘that about 75% of these borrowers skip mortgage principal and interest payments in any given month..S&P has also noted that possible payment shock awaiting neg-am borrowers is a main concern for the ratings agency.’

“And only ‘approximately 60% to 70%’ of ‘borrowers make the minimum payment,’ Hutchinson said, adding that ‘recent trends show alarming signs of on-going undue risk-taking that puts both lenders and consumers at risk.’

Says Fannie and Freddie At Risk
“The piggy back loan abuses were an end run around Fannie and Freddie requirements that forced borrowers to get private mortgage insurance on any loan above an 80% LTV ratio, Hutchinson said.

“Piggy back loans ‘are often structured solely to evade this requirement, intended by Congress to ensure that [Fannie and Freddie] do not take undue risk,’ Hutchinson said.

“But they did get swamped with such risk. By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages and mortgage-backed securities (MBS)—risky loans with a total principal balance of $1.6 trillion, says Peter Wallison of the American Enterprise Institute. These are now defaulting at unprecedented rates, accounting for both their 2008 insolvency and their growing losses today, he added.

“Wallison also said: ‘New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.’

“And securitization, whereby banks pass the loans off as paper securities, wouldn’t totally inoculate lenders from harm, MICA’s Hutchinson said.

” ‘Some have suggested that banks are not at risk because nontraditional mortgages are largely securitized,’ Hutchinson said, but ‘as Fed data cited above, this is not the case for many banks.’

“She added: ‘Securitization does not ameliorate’ the ‘risk’ from subprime loans ‘because many lenders hold these’ loans in their portfolios. ‘Lenders who rely on securitization may also be subject to liquidity risk if markets dry up unexpectedly as risks become suddenly apparent,’ Hutchinson warned.

“Quoting bank analyst Richard Bove, Hutchinson wrote: ‘There is a reason why the three largest banks that make 40% of the [option ARMs] are selling 75% of the product [in securitizations] despite its high yield. They smell the risk.’

“Hutchinson added: ‘The question remains as to which lenders have not yet smelled the risk and which ones will still be carrying the exposure when it is too late.’

Behind the Scenes at Treasury
“During the bubble, Federal Reserve and Treasury staffers considered everything but a housing crash triggered by subprime loan abuses.

“In a report on what was happening behind the scenes, they considered ‘sudden crises such as terror attacks, natural disasters,’ says Phillip Swagel, former Assistant Secretary for Economic Policy in the Treasury Department, ‘or massive power blackouts..market-driven events such as the failure of a major financial institution..a large sovereign government default..huge losses at hedge funds, energy price shocks; ..corporate bankruptcies..or a large and disorderly movement in the exchange value of the dollar,’ Swagel notes.

“They also considered all sorts housing data, too, he notes.

” ‘What we missed was that the regressions did not use information on the quality of the underwriting of subprime mortgages in 2005, 2006, and 2007,’ Swagel says.

FDIC Warns First
” ‘This was something pointed out by staff from the Federal Deposit Insurance Corporation (FDIC), who had already (correctly) pointed out that the situation in housing was bad and getting worse and would have important implications for the banking system and the broader economy,’ Swagel adds.

Bernanke Ignores Growing Problem
July 1, 2005: Bernanke, then President George W. Bush’s Chairman of the Council of Economic Advisers, to CNBC: ‘…unquestionably, housing prices are up quite a bit; I think it’s important to note that fundamentals are also very strong…I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy.

“CNBC: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’
Bernanke: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.

February 15, 2006: Bernanke said: ‘Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise, but not at the pace that they had been rising. So we expect the housing market to cool, but not to change very sharply…The weakness in housing market activity and the slower appreciation of house prices do not seem to have spilled over to any significant extent to other sectors of the economy.’

January 2007: Bernanke speech before the American Economic Association in whereby he said ‘to make crises less likely over the years, the Federal Reserve has worked effectivelywith the Congress, other supervisors, and financial market participants to develop statutory regulatory and other measures.’

March 28, 2007: Chairman Bernanke said: ‘The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.’

May 17, 2007: Chairman Bernanke said: ‘We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.’

February 27, 2008: Chairman Bernanke said: ‘By later this year, housing will stop being such a big drag directly on GDP…I am satisfied with the general approach that we’re currently taking.’

February 28, 2008: Chairman Bernanke said: ‘Among the largest banks, the capital ratios remain good and I don’t expect any serious problems … among the large, internationally active banks that make up a very substantial part of our banking system.’

July 16, 2008: Chairman Bernanke said that Fannie Mae and Freddie Mac are ‘adequately capitalized’ and ‘in no danger of failing.’  Since then, Fannie Mae and Freddie Mac have received the largest taxpayer bailout and have been taken over by the federal government.

Greenspan Too
October 2008 Congressional Testimony:

Greenspan: I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms. And it’s been my experience, having worked both as a regulator for 18 years and similar quantities in the private sector especially, 10 years at a major international bank, that the loan officers of those institutions knew far more about the risks involved and the people to whom they lent money than I saw even our best regulators at the Fed capable of doing.

Greenspan: Well, let me give you a little history, Mr. Chairman. There’s been a considerable amount of discussion about my views on subprime markets in the year 2000. And indeed, one of our most distinguished governors at the time, Governor Gramlich, who frankly, is regrettably deceased but was unquestionably one of the best governors I ever had to deal with, came to my office and said that he was having difficulties with the problem of what really turned out to be fairly major problems in predatory lending.

Bank Crackdown Gets Lost in Fed Subcommittee
Testimony continues:

Rep. Henry Waxman (D-Calif.): Well, he urged you to move with the power that you had as the chairman of the Fed, as both the Treasury Department and HUD suggested, that you put in place regulations that would curb these emerging abuses in subprime lending. But you didn’t listen to the Treasury Department or Mr. Gramlich. Do you think that was a mistake on your part?

Greenspan: Well, I question the facts that — he and I had a conversation. I said to him I have my doubts as to whether it would be successful. But to understand the process by which decisions are made at the Fed, it’s important to recognize what our lines of responsibility and lines of authority are within the structure of the system.
The Fed has incredibly professional large division that covers consumer and community affairs. It’s got probably the best banking lawyers in the business in the legal department and outside counsel of expert professionals to advise on regulatory matters. And what the system actually did was to try to corral all of this ongoing information and to eventually filter it into a subcommittee of the Federal Reserve Board.

Greenspan: If I may have an extra minute. The reason basically is this that Governor Gramlich said to me that he had problems. Indeed, I agreed. I had heard very much the same thing. I, frankly, thought that when our meeting ended that the subcommittee of the board which supervises all of the various aspects of consumer and community affairs within the board of governors and the Federal Reserve system would move forward and present to the board as a whole recommendations to be made. That was not made, and I presumed at the time that essentially the subcommittee didn’t think it rose to the higher level.”

E-mail communications between County Planning Commissioner, PWCBG and county citizens

Gary Friedman, County Planning Commissioner

Ralph Stephenson and Bob Pugh, Prince William Citizens for Balanced Growth

(e-mails read from top to bottom in reverse chronological order)

——– Original Message ——–

Subject: PW Supervisors 2 Feb Vote on Adding ~57,000 Homes, Most of them in Haymarket-Bristow
Date: Fri, 29 Jan 2010 13:33:33 -0500
From: Kathy Stephenson <stephenroe1@comcast.net>
To: Stephenson, Ralph <stephenrk1@comcast.net>

All:  Please spread the word and work to defeat the county government’s plan to further crowd schools and roads.  This plan will also subsidize residential developers yet again with your taxpayer dollars to create unneeded housing in a still-extremely-glutted housing market, and thus further damage the property values and long-term viability of older neighborhoods.  (At last count, the county still had a backlog of 25-30,000 approved, but not-yet-built homes.)   Furthermore, the plan will damage the county tax base, which is currently about 85% residential (higher taxes for you) and only 15% commercial.  And It will further harm the environment of beautiful (or soon-to-be formerly-beautiful) western Prince William County.

Below is a message I received 25 Jan 2010 from the Chairman of the County Planning Commission, the advisory body to the Board of County Supervisors.  See also recommendations and map below that.

My apologies if this message went to some of you twice.  : )  Ralph

____________________________________________________________

Ralph and Bob –

Anything you can do to help get the word out will be appreciated.  See below.  Thanks much.

Gary

On Tuesday, January 19th, after two years of collecting input from advisory bodies and planning staff, the Prince William Board of County Supervisors held what it indicated will be its only public hearing on what could possibly become the two most important Comprehensive Plan documents it considers during the current board’s tenure:  The Long Range Land Use and the Transportation chapters.

As the At-Large representative and current Chairman of the county’s Planning Commission, I have been closely involved in this process from the beginning.  Following the board hearing on the 19th, I received several comments from planning commissioners and numerous comments from citizens concerned about the direction the board seems to be headed with these two chapters.  I would like to share some of these concerns.

From all indications, the board seems to be headed for adoption of the planning staff text recommendations on these two chapters at its February 2nd meeting, with perhaps some minor “wordsmithing” modifications.  Citizens should know that the Planning Commission carefully considered the texts for both these chapters and found the staff recommendations problematic, particularly in the land use chapter.  None of these concerns have been addressed.  Space constraints here prevent a full discussion, so I will mention just a few of the major concerns with the land use chapter.  The planning staff text:

1.     Provides no incentives for focused, major development in the two areas of the county identified by the Planning Commission as most in need of redevelopment and revitalization, which already have the basic public infrastructure in place and are the most likely locations for future metro rail expansion from Fairfax into Prince William County:  North Woodbridge and Yorkshire.

2.    The “centers”, as proposed by staff, have been best described by a fellow planning commissioner as allowing “anything, anywhere, anytime”.   There is no limit on the number of these centers that could be advanced and the Land Use Advisory Committee (LUAC) located a large portion of them in the Brentsville District.  Planning staff proposes these “centers” comp plan amendment initiations be allowed without form, format, or defined content, other than a vague “mixed use” requirement, and without any major investment in the county or the process by the applicant, whenever a proposal is submitted.  It would then be left to staff to work out the details along the way, thus allowing unprecedented “flexibility”.  In this scenario I am sure staff would do the best job possible to “work out the details”.  But any such effort will, of necessity, be constrained by resources and staff availability.  Due to budget restraints and numerous department vacancies, planning staff is already stretched to its limits.  Does it make any sense to add what would surely become dramatic new burdens on an already overburdened department?  And if so, what would be the likely result?

3.    Provides no phasing structure on mixed use projects.  We’ve been down this road before.  How many times have mixed use projects been approved in the past, the residential component installed, then the commercial component left waiting for “the market to catch up”?  This scenario always results in more rooftops, more congested roads, more overcrowded schools, and less revenue for the county to meet it obligations because the commercial component either never happens or happens to such a minimal level as to fail to offset the budget burdens the new homes create.

4.    Fails to include the Planning Commission safeguards designed to protect the rural areas from encroachment.  Anyone who cares about advancing smarter growth principles knows encouraging and concentrating growth in the development area, and protecting rural areas from sprawl development, are key features.  While the planning staff text mentions smart growth principles, and makes plentiful use of smart growth language, the proposed details tell a very different story.
Citizens who care about what the future of Prince William County will look like should let their supervisors know of their concerns before the board’s February 2nd meeting, when it plans to act on these chapters.

Gary C. Friedman
Chairman of the Prince William County Planning Commission.

____________________________________________________________


Additional note from Ralph Stephenson:

RECOMMENDATION:  a) Contact all the BOCS Supervisors (the county’s land use decision makers) and let them know of your opposition to ~57,000 more unneeded homes,  ~33,000 of them in the Haymarket-Bristow-Manassas area. Here is their e-mail address:  BOCS@co.prince-william.va.us   It helps them to have your opposition as political cover to vote against unsavory plans that they’re under heavy pressure from powerful political interests to vote for.  b) Speak against the PW County Planning Staff’s Long-Range Land Use and Transportation Chapter updates to the county Comprehensive Plan at 7:30 pm on 2 Feb.  The meetings will be held at the McCoart Building at the county offices on Prince William Parkway.  (Note:  Since the Planning Staff recommendations on residential housing, on closer examination, apparently set no real limits on housing and instead seem to allow “anything, anywhere, anytime” — and thus are not really a plan at all — I see no reason to believe that they will not ultimately move strongly in the direction of, even converge with the county’s outrageous Land Use Advisory Committee (LUAC) recommendations described in this and the next paragraph.)

The [linked documents] at the bottom of this e-mail, which I took off the county website, summarize the current plan.  There are  19 planned Centers of Community — 11 in the Haymarket, Gainesville, Bristow, Manassas area, and 8 at the east end of the county.  If each of these 19 centers builds 3,000 homes, which is about the same density level as the infamous 2005-06 Brentswood Project, and assuming the county’s average of three people per house, that would total 171,000 more people, a 50% increase in the population of the entire county.

You might be interested to know that making this plan part of the county’s Comprehensive Plan, as proposed, will apparently fast-track the approval process for all residential development in the Centers of Community.

It’s ironic that the county is bringing this up for discussion at the very time that the U.S. is trying to recover from its worst financial crisis since the Great Depression, a crisis brought on by, among other things: massive housing industry overcapacity and oversupply (probably the single biggest cause); political shenanigans by local and federal government officials allied to the housing industry, trying to keep demand artificially high to match the artificially high housing supply; dishonest and predatory lending practices by many mortgage lenders to people who couldn’t afford the homes they were being sold; and the financially toxic effect of these millions of now-non-performing (bad) loans on the books of banks and other investors.

Centers of Community Locator Map
Centers of Commerce Locator Map

“Housing Market: Even More Pain in Store?”

Fox News

25 January 2010

“Like a carnival free-fall ride that stops suddenly, teasing riders into a false sense of safety before plummeting the rest of the way to the ground, some economists say the housing market could once again be headed for a plunge after slowly clawing back some of its 2008 losses.  A trio of gathering government storm clouds will be responsible for the drop that some predict could mean another 10% to 15% slump in prices, they say.

” ‘Here it is three years after the peak and it’s still all about housing,’ said David Rosenberg, an economist at Gluskin Sheff & Associates in Toronto. ‘The outlook for the market is extremely clouded.’

“The first shoe to fall was last week’s Federal Housing Authority announcement that it would tighten its loan standards in light of defaults that had pushed the agency’s reserves well below its mandated level.

“In an effort to stem the tide of defaults, the agency increased the required down payment for borrowers with the weakest credit, hiked the premium for its loan insurance required of all customers and restricted the amount of closing costs that may be contributed by the seller.

“The FHA has backed more than 30% of loans in the past year as credit tightened and the market for borrowers with questionable credit dried up.

” ‘For a lot of people the FHA was their only resort,’ said economist Dean Baker, co-director of the Washington, D.C.-based Center for Economic Policy. ‘A lot of people who can’t get loans from the FHA will have nowhere else to turn.’

“Up next is the Federal Reserve’s plan to close up shop on its planned $1.25 trillion purchase of mortgage backed securities begun last year. In that time, the government has purchased roughly three quarters of all mortgages that Fannie Mae, Freddie Mac, and Ginnie Mae have turned into securities.

“The Fed’s planned March 31 pullout could send mortgage rates, which have been at historic lows in recent months helping to prop up home sales, up as much as a half to a full percentage point.

“Economists point to the virtual halt in refinancing that occurred earlier this month as rates jumped 0.10 percentage point, helping push demand for refis to a six-month low, as an indication of what could happen.

” ‘Barring a change of course frrm the Fed you will see interest rates start to rise,’ Baker said.  ‘That should lead to increases in rates of 0.5 to 1%. It’ll be a gradual increase but that’s enough to have an impact on the market.’

“The third and potentially most damaging blow poised to strike the housing market is the expiration of the federal tax credit for first time home buyers. The $8,000 credit for first time buyers – $6,500 for current homeowners in their houses longer than five years – has helped push sales up more than 15% from December 2008 but is set to expire on April 30.

“The credit was originally scheduled to expire on November 30, 2009, and the market gave a preview of the potential impact last month when existing home sales dropped 16.7% — or more than one million units — from November.

” ‘We’re likely to see a further falloff this spring because of the expiration of the credit,’ Baker said.

“Michael Lea, director of the new Corky McMillin Center for Real Estate at San Diego State University, said the actions by the government will likely mean a strong first quarter of real estate sales with the second half turning negative as rates rise and demand softens.

” ‘The net of it is transaction volume will be more concentrated in the first half and weaken in the second, and house prices are likely to have downward pressure again,’ Lea said, adding that the already-depressed markets of Nevada, Michigan and Indiana will continue to be harder hit than others where the economic recovery may be taking hold more firmly.

“There are other factors that will likely pressure the market as well, said Rosenberg. A glut of inventory – there are nearly nine million homes either on the market currently or vacant after foreclosure and being held off by the bank that owns it – means it will continue to be a buyer’s market.

” ‘The lingering problem in the housing market is still one of excess supply,’ he said. ‘The prospect we could have a 10-15% downfall in residential real estate values is significant.’

“The further drop in value would decimate consumer confidence and lead to more foreclosures as fully one half of all mortgage holders in the U.S. would owe more than the value of their homes.

” ‘That would put tremendous pressure on the government to deal with that environment,’ he said.

“High unemployment is yet another wild card that could pummel housing. As the jobless rate hovers near 10% and the rate of under-employment crests 17%, consumer confidence – and buying power – has been battered. With no clear end in sight to skyrocketing unemployment, the housing market and consumer spending in general are bound to suffer.

“But unlike most sciences, economics is one of speculation and conjecture, so much so that President Harry S. Truman, tired of his economists’ penchant for hedging their forecasts with information from ‘the other hand,’ once demanded a one handed economist.

“Nothing has changed.

“Celia Chen of Moody’s Economy.com said she expects the market to rebound in 2010, and she downplays the effect the government will have on the housing market. Indeed, while existing home sales were reported to have fallen by nearly 17% in December, median prices actually rose for the first time in more than two years.

“The FHA restrictions should have little to no effect, Chen said, because few borrowers have credit scores as low as 580, the threshold at which the agency requires 10% down instead of its traditional 3.5%. It’s uncertain if the Fed will actually make good on its intent to pull out of the mortgage backed market, Chen says, and if the economy does not pick up that decision could be reversed.

“The credit expiration may also have little effect, she said, because the bulk of the buyers eligible to take advantage of it have already done it.

” ‘I think that our outlook is that the housing market will continue improving through this year and the government support that will be fading away will be fading away at the same time the economy is strengthening,’ Chen said. ‘That will help drive demand for homes. If things work out well these policy measures will be in place long enough to get housing past the worst of it.’ “

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