Hacked By GeNErAL
The legal tensions are escalating between Zillow and News Corp.-owned Move Inc.
And with good reason. There’s a lot of money at stake.
In its fourth quarter earnings report this week, Zillow’s profits fell short of expectations, after the Seattle online real estate company spent $8.1 million on an ongoing lawsuit with Rupert Murdoch’s News Corp., which in 2014 acquired Move Inc.
In a SEC filing on Friday, Zillow said that legal costs related to the Move Inc. litigation mounted to $27.1 million last year. And those expenses are expected to go up in 2016, reaching an eye-popping $36 million.
That’s a lot of coin for a suit that largely centers around one employee.
The dispute is tied to former Move executive, Errol Samuelson, who was hired by Zillow in March 2014.
Samuelson and Zillow were promptly sued by Move for allegedly hijacking trade secrets, with Sameulson sidelined in July 2014 from working at Zillow by a Washington State Superior Court Judge, a ban that was lifted last year.
If the rivalry wasn’t nasty enough in the courts, some verbal barbs flew this week.
In a Friday appearance on CNBC, Rascoff was asked how long the legal bills would hang over Zillow.
“You’d have to ask Rupert Murdoch that question,” said Rascoff, referring to the News Corp. chairman.
“We are focused on innovating, News Corp. is focused on litigating. Unfortunately, you see this all too often in business where companies who lose on the business battlefield resort to the court room out of desperation. We have been sued by News Corp. We are forced to defend ourselves. It is vindictive, it is baseless. But I try to put it out of my mind, and focus on turning Zillow into a $5 billion or $10 billion revenue company and I leave it to the lawyers to handle it.”
In response to the CNBC appearance, Move issued this statement:
“Today on CNBC, Zillow CEO Spencer Rascoff accused Rupert Murdoch and News Corp of acting out of ‘desperation’ in filing a ‘vindictive’ lawsuit. But that litigation was filed by Move long before News Corp even owned the company, and it is based squarely on the merits of the case, not emotions. In Zillow’s own filings with the SEC, it has concluded there is a ‘reasonable possibility’ it will suffer a loss in this lawsuit.
It’s understandable why Mr. Rascoff said today of the litigation, he’s ‘tried to put it out of my mind.’ Just last week, the judge ordered defendants to appear for a two-day evidentiary hearing on April 13 and 14 into Move’s claims that important evidence has been destroyed by some or all of the defendants in this case.”
Rascoff has taken shots at Move Inc. in the past, calling it a “crappy company.” Meanwhile, at a real estate conference last year Murdoch exclaimed: “What the hell does Zillow mean?”
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BEGINNING Saturday, applicants for most home mortgages will receive new forms from their lender that are intended to make it easier to review and compare loan offers.
Along with the updated forms, new rules aimed at simplifying the borrowing process for consumers will take effect.
Mortgage applications submitted through Friday are governed by the old rules, while applications submitted on or after Saturday will fall under the new rules.
At least initially, consumers may encounter lengthier waits to close on the purchase of their home. Thirty-day waits are now common in some markets. But 45- or 60-day waits may become more common as lenders familiarize themselves with the new rules, according to Bob Davis, executive vice president of the American Bankers Association.
“I’m sure there are going to be growing pains,” Mr. Davis said.
“This is a new process for everybody,” said Diane Evans, president of the American Land Title Association, an industry group for title insurers and settlement agents. “No one’s had practice at it.”The switch to the new forms has been in the works for more than a year and was originally scheduled to take effect on Aug. 1, but the changes were delayed until Oct. 3. The two-month breather has given mortgage software vendors additional time to make necessary changes, but there still may be problems.
The new forms are supposed to make it easier for borrowers to compare loan offers and to see if the final loan terms differ significantly from the initial estimate. The change was required by the Dodd-Frank financial reform law, which directed the Consumer Financial Protection Bureau to combine and simplify older disclosure documents required by two federal laws.
Under the new rules, borrowers will receive a loan estimate, including information like the interest rate and monthly payment, within three business days of applying for a loan. If they apply to several lenders, the offers will be displayed in a similar format so the borrowers can compare terms like fees and interest rates.
Holden Lewis, a mortgage analyst at Bankrate.com, said borrowers can easily see how much each loan will cost over the first five years by comparing forms. The form was tested with consumer focus groups and went through several revisions to make it as easily comprehensible as possible. “This is very much a net positive for consumers,” he said.
Lenders must also give borrowers a disclosure, which details the final loan terms and summarizes the transaction, three business days before the closing. Borrowers can compare the disclosure with their initial loan estimate to see any changes.
The bureau says that only major changes in a loan — like a switch to an adjustable-rate loan from a fixed-rate loan, a significantly higher interest rate or the addition of prepayment penalties — should require a revised disclosure, which brings another three-day waiting period.
“Some have been spreading misinformation about this point, claiming that last-minute changes based on walk-throughs or similar circumstances will cause frequent three-day delays in the closing process,” Richard Cordray, the bureau’s director, said last month in prepared remarks to the National Association of Realtors. “That is simply wrong.”
But it most likely will not be clear until late October or early November, when closings under the new rules start occurring, if the new approach is causing serious confusion.
Here are some questions and answers about the new mortgage rules:
■ How can I minimize possible delays?
You can get up to speed on the new forms and rules by reading about themon the bureau’s website.
Ms. Evans said borrowers should ask questions, listen carefully to instructions from their lender and be prepared to supply extra information promptly if asked. The quicker borrowers provide what is needed, she said, the faster the process can move.
■ What if I have already submitted a mortgage application?
If you applied before Oct. 3 and your loan is in process, the new rules and forms do not apply, Ms. Evans said.
■ Will the rules affect the availability of any loans?
While standard loan options should be “readily” available, some lenders may temporarily curtail certain specialty loans, Mr. Davis said. For instance, he said, some lenders may limit “construction to permanent” loans, which allow borrowers to finance a construction loan and a long-term mortgage with a single closing, because of confusion over how to disclose the information.
Faced with a growing housing problem, Seattle leaders have unveiled an ambitious plan to create 6,000 affordable housing units in the next 10 years.
In September, Mayor Ed Murray and Councilmember Mike O’Brien introduced what is being dubbed the “Grand Bargain,” a plan that tries to find common ground for both housing advocates and real estate developers while increasing the production of affordable homes.
It’s a groundbreaking proposal at a time when many cities are looking for new ways to expand affordable housing production.
There are two major components to the Grand Bargain. The first establishes the Affordable Housing Impact Mitigation Program (AHIMP), also known as a commercial linkage fee, that will help fund the construction of new affordable housing by requiring developers to pay a fee on every square foot of new commercial development. The fee will range from $5 to $17 per square foot, based on the size and the location of the development.
The second part calls for Mandatory Inclusionary Housing (MIH) for new multifamily developments, requiring 5% to 8% of units to be affordable for residents earning up to 60% of the area median income (AMI) for 50 years. In 2015, 60% of the AMI is $37,680 for an individual and $53,760 for a family of four. As an alternative to on-site units, developers can pay a fee to construct new affordable housing off site.
The proposals alone would be a tough sell, but there’s another important piece to the plan.
“The Grand Bargain says what if we implement a mandatory inclusionary housing program but we do it in conjunction with a modest ‘up zone’ citywide,” says O’Brien.
In other words, the city will look at increasing development capacity by allowing developers extra space or height in their buildings. This would give landowners some additional value in exchange for providing affordable housing.
“Instead of the affordable housing advocates or the nonprofit housing providers on one side and the private development community on the other side ready to sue each other over the linkage fee, this agreement we believe will give us more affordable housing with the up zone, and the development community is supportive of it,” O’Brien says.
A new model
The sweeping proposal stems from the work laid out by the Housing Affordability and Livability Agenda (HALA) Advisory Committee. Made up of 28 housing experts, activists, and community leaders, the committee recently met for 10 months to hash out specific recommendations.
The HALA plan, which features a total of 65 recommendations, comes at a time when low- and middle-income families are struggling to find affordable housing in Seattle. More than 45,000 households in the city—one in six households—are spending more than half of their incomes on housing.
In the very best of times, Seattle and its development partners have created about 800 affordable housing units in a year, says Faith Li Pettis, co-chair of HALA. A partner at the Pacifica Law Group, Pettis is a bond counsel familiar with affordable housing transactions.
HALA needed to find a way to more than double the prior high-water mark to meet Murray’s call for 20,000 affordable housing units in the next 10 years.
“There was no way we were going to get that out of the nonprofit community using their traditional type of financing,” Pettis says. “The capacity isn’t there.”
The Grand Bargain components—the commercial linkage fee and the mandatory inclusionary zoning— are estimated to add 6,000 affordable housing throughout the city over 10 years. Many jurisdictions that have mandatory inclusionary zoning have been able to produce units at 80% of the AMI, but the committee wanted to go deeper. As a result, the units that HALA expects to come out of the plan will be targeted at 60% of the AMI.
Seattle has a strong track record of supporting affordable housing, including a housing levy that has been repeatedly passed by voters. Even with that, the area needed a new model to capture the number of units needed by residents, Pettis says.
“This has the possibility of being a real game-changer,” Pettis says. “It’s a new way of doing business.”
Despite the strides made by the HALA committee and city leaders, there’s still a long road ahead, admits O’Brien.
In early September, he was hoping to pass a commercial linkage fee bill this fall. Officials will also work on the inclusionary zoning legislation, which is expected to take approximately six months. However, key zoning changes have to happen as part of the Grand Bargain, and to do that citywide would likely take about two years, estimates O’Brien.
All eyes will be on Seattle during this time.
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From the roof of their apartment building on Seattle’s First Hill, Dominick Pham and his fiance, Sarah Cheung, can see the Luma condos rising. The couple, who have rented for two years, recently made a down payment on a $465,000, one-bedroom unit there. (Dean Rutz / The Seattle Times)
Both homes and condominiums saw prices rise in August at the fastest 12-month pace seen this year, according to data released Thursday.
The path to homeownership for Dominick Pham and Sarah Cheung was short. Two blocks, actually.
The engaged couple, Maryland transplants in their late 20s, had forked out rent for two years at a new, luxury apartment tower on First Hill. This summer, they noticed the Luma condominiums being built nearby and jumped at the chance to buy a one-bedroom unit on the lower floors.
“Why pay rent when that could go toward a mortgage?” thought Pham, a software engineer. “This is the perfect opportunity.”
Across the region, home prices are zooming skyward, driven by new buyers like Pham and Cheung, a record-low inventory and expectations of higher interest rates.
In August, the median price of single-family homes in King County was $499,950, 14 percent higher than a year ago. Condos fetched a median $299,250, a 20 percent gain over last year, according to the Northwest Multiple Listing Service. In both, the gains were the biggest 12-month jump seen so far this year.
The biggest jump occurred in Seattle, where the median single-family-home price was $575,000, a 15 percent annual gain, and median condo price was $395,000, 32 percent more than a year ago. A big factor in the soaring Seattle condo prices is the handful of new downtown projects, where units can cost $600,000 or more.
In Snohomish County, August’s median single-family home price was $366,825, or 11 percent higher over the year; in Pierce, $255,000, up 6 percent; and in Kitsap, $259,975, or 6 percent higher.
In the four-county region, there were 7,792 pending sales — mutually agreed sales contracts that haven’t closed yet — the highest level for August since 2005, the MLS said.
VIA Seattle TImes.
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