By RICK TOBIN Special to the Palisadian-Post There is really no true precedence for what is happening in the world’s financial markets and the impact of the ongoing credit crisis. Today’s financial markets are far more complex than in the past, thanks to the fact that Main Street has essentially merged with Wall Street over the years. The flaws in the efficiency of the ‘globalization’ of our world’s financial markets began to show last year. A high percentage of subprime mortgage loans started to default, partly because of the Federal Reserve’s 17 separate rate hikes in recent years. Many property owners saw their adjustable payments increase, and late payments began to skyrocket. The ‘domino effect’ of credit losses then followed the subprime credit meltdown around the world. Let me try to explain some of the key issues involved in this complicated mess, and how our credit crisis has evolved since 2007. Let’s begin with a brief explanation of Collaterized Debt Obligations (CDOs), which are derivatives–a synthetic financial instrument derived from another asset. CDOs may be a combination of bridge and mezzanine money, notes, equity and debt. CDOs are converted into bonds and later sold off to Wall Street, hedge funds, or foreign investors. Before the CDOs were sold off to investors, they were assigned a specific bond rating by a major credit rating agency. These rating agencies would rate the potential risk of these various forms of investment pools. AAA is considered the highest and safest investment rating, and is the same rating these agencies give to a U.S. Treasury bond. Traditionally, financial ratings are based upon true market value and actual market prices. However, these artificially created securities rarely had firm values, and were difficult to liquidate quickly. Sadly, many of the largest pools of Mortgage Backed Securities (MBS) were rated as AAA. As a result, investors from around the world purchased them in bulk. The rates offered were higher than a U.S. bond, and yet they were rated as the ‘safest’ investment in the world. What could go wrong? Structured Investment Vehicles (SIVs) use short-term funding such as asset-backed commercial paper to purchase longer-term assets like Mortgage Backed Securities. Many banks and investment firms took their lower yielding money-market funds and invested them in higher yielding mortgage pools. The banks then profited from the difference. Many banks used SIVs as ‘off balance sheet’ investments, meaning that most banks did not report these gains or losses. Once the credit crisis began, this market ‘froze’ because it was difficult to determine the true value of these ‘off balance sheet’ investments. Some experts believe the greatest risk to the world’s financial markets is tied to the status of the estimated $45 to $62 trillion worth of Credit Default Swaps (CDS). The unregulated CDS market dwarfs the entire U.S. stock market (estimated current value $21.9 trillion), the U.S. mortgage security market ($7.1 trillion), the entire U.S. treasuries market ($ 4.4 trillion), and is significantly larger than the combined value of all bank accounts in the world. A CDS is essentially a counter-party agreement that allows the transfer of third-party credit risk from one party to another. One party in the swap is a lender who has credit risk from a third party. The counter-party in the swap agrees to insure the risk in exchange for insurance premium payments. If the third party defaults, the party who provides insurance will have to buy the defaulted asset from the insured party. The insurer, in turn, will then pay the remaining interest on the debt as well as the principal. Many of America’s largest bond insurance companies that supposedly will ‘guarantee’ any losses incurred through a defaulted CDS contract may already be technically insolvent right now. These same bond insurance companies may have assigned their insurance risk to off-shore bond reinsurance companies that may not have the proper cash reserves either to cover any losses. The unwinding of assets in the world’s ‘shadow banking system’ is truly the root cause of the credit crisis. The record number of Southern California foreclosures is forcing most banks to tighten their underwriting guidelines tremendously. Lenders have also been ‘freezing’ existing credit lines due to the high default rates. Many banks are facing insolvency issues themselves. They may not have the funds or the secondary market investors available for the larger jumbo loan amounts. Many of the mortgage loan products used by Pacific Palisades residents have disappeared recently. Non-conventional financing methods should now be considered as a way to beat the credit crisis. Please visit my Web site at www.realloans.com for more information. My other Web site (www.thecreditcrisis.net) has updated videos, daily blogs, foreclosure investments, and information on my new book, ‘The Credit Crisis Deals (Finding America’s Best Real Estate Bargains).’ Optimistically, we may just be experiencing the ‘growing pains’ of the globalization of all types of credit markets (home, business, credit card, auto and student loans). You still should learn as much as you can about this historic economic time period so your family may prosper. In terms of the Westside housing market, what do I foresee this summer? Pacific Palisades and other coastal areas may soon experience drops in median home prices due to a variety of factors. Even though Fannie Mae and Freddie Mac recently raised their conforming /jumbo guidelines from $417,000 up to $729,750 in Los Angeles County, the vast majority of all jumbo loans these days require full documentation, excellent credit and lower loan to values. A high percentage of homebuyers in the pricier coastal regions the past decade were ‘stated income’ borrowers who chose more affordable adjustable rate loans. Most of these loan products are not now available. Always remember: the availability of financing will always be the number No. 1 reason affecting real estate because the vast majority of home buyers need loans. (Rick Tobin is a real estate investor, lender and writer. His business, First Financial Bancorp, is located at 12424 Wilshire Blvd. in West L.A.)

We Are Not Alone! Pacific Palisades Sites Are Around the World

‘FIRE THREATENS HOMES IN PACIFIC PALISADES!’ ‘When flames shot up from the steep valley below Eric Beal’s house and surrounded his back yard yesterday, his Pacific Palisades neighbors came running with their garden hoses. Five fire companies responded, and 20 firefighters dragged hoses through Beal’s and his neighbors’ back yards” Okay, stop! Before you wonder why you never heard about this fire, be aware that the above breaking news is an excerpt from a 2003 article in the Star Bulletin, which does not cover Pacific Palisades, California, but Pacific Palisades, Hawaii. That’s right: Hawaii! We we are not alone in the universe. There are other Pacific Palisades out there (you might call them ‘Pacific Parallel-sades’), and several are them are not even located in the United States. For example, Pacific Palisades is also the name of a 17-section apartment block found in one of the finest parts of Hong Kong. The complex contains 809 units, and the 1,000- to 3,829-sq. ft. flats range in monthly rent between $TK and $TK. This Pacific Palisades, a Sino Group luxury property located at the mid-levels of Hong Kong Island east, is home to senior executives longing for panoramic sea views and tranquility. It’s close to the vast Choo Sai Woo Park and, just like our Pacific Palisades, is near the ocean, dead center between North Point and Quarry Bay. The buildings are sandwiched between Tin Hau Temple Road and Braemar Hill Road. Incidentally, the 18th-century Tin Hau Temple, standing west of the Palisades complex in Causeway Bay, is named after Tin Hua, goddess of the sea (a loose analogy might be if we erected a shrine to ‘Splash’ star Darryl Hannah, which, this being Southern California, might happen one day if she has another hit movie). According to Sino Group, about 60 percent of Pacific Palisades’ tenants are expatriates, most of whom are Japanese. To help the Japanese feel right at home and to promote their culture to their neighbors, the Palisades complex celebrates the traditional Sakura Festival, from mid-March to mid-April, by staging various cultural performances, including a drum show, flower arranging, a karate demonstration, and a sword performance. The Palisades property also has a clubhouse that serves Japanese cuisine. ‘Pacific Palisades is a big international family’home to people from South Korea, the U.S.A., United Kingdom, and other destinations,’ said Victor Tin, Sino Group’s assistant general manager of leasing, in a press release. ‘We plan to introduce more overseas cultural events in the near future to further enhance the multiculturalism of Pacific Palisades.’ [DROPCAP] Located on the northern part of Pearl City, north of the 1 Freeway (a.k.a. Queen Liliuokalani Freeway) and Pearl Harbor, you’ll find the aforementioned Pacific Palisades, Hawaii. Komo Mai Drive is the main drag bisecting this island town, and it spans several residential streets with exotic names such as Aamomi Street, Akaikai Loop, Aaniu Loop, and Aamanu Street. According to Coldwell Banker Pacific Properties, a single-family home in Pacific Palisades, Hawaii, currently falls in the low to high $600,000 range (considerably more affordable than our Pacific Palisades). ‘It is a nice middle-class area,’ Chris Cuyno, a Coldwell agent from the Leeward office, told the Palisadian-Post. ‘One of the reasons it’s not as sought after as it could be is because it’s located on a ridge and getting to it means going up a windy road. It’s a little isolated.’ Cuyno noted that the neighborhood is ‘completely residential,’ and even the main drag does not offer much in terms of commercial activity. ‘It’s not a main thoroughfare,’ he said of Komo Mai. ‘It goes from houses to houses. It’s important though because it’s the only road that goes to the Palisades.’ Pacific Palisades is one of the larger communities in this region, and its proximity to the various army and naval bases has helped shape its populace. ‘It’s become so diverse that it’s hard to put a cultural stamp on it,’ Cuyno said of the mix of military and local families. Unlike our Palisades, Hawaii’s Palisades does not border the ocean, but ‘you get beautiful nighttime views of the Leeward coast,’ Cuyno said. ‘You can see all the way down, depending on the weather.’ [DROPCAP] For a scenic destination of the non-tropical variety, travel up to Canada, where you’ll find the Pacific Palisades Hotel, a swanky five-star pair of towers in downtown Vancouver. A participant in the Kimpton Hotels and Restaurants Group’s EarthCare program, the Palisades Hotel has won numerous awards for its environmental leadership (e.g., using nontoxic cleaning products, installing energy-efficient light bulbs and low-flow toilets, and printing on recycled paper with soy ink). Hotel guests who drive a hybrid car get overnight parking for half-price. According to a Pure Canada magazine article, Pacific Palisades Hotel saved 521,000 kilowatts of electricity in 2007 by retrofitting its lighting system. ‘Fun and fabulous’ is the motto, according to Lydia Miller, the hotel’s director of sales and marketing. ‘We’re not big, stuffy and corporate.’ Built by the Mel Zajac family, the hotel originally opened as four towers in 1968 and 1969. Top-floor suites offer glorious views of Stanley Park and the Northshore Mountains, and later this year the guest rooms will have flat-screen TVs and clock radios equipped with iPod docking stations. Like our Palisades, this Palisades knows something about catering to movie stars, dating back to when members of the Rat Pack stayed in the hotel in the its earliest days. ‘We have been a long-established upscale property that has hosted many celebrities,’ Miller told the Post. ‘We keep it low key, and they keep coming back.’ Of course, if a trip to Vancouver is not likely this summer, travel about 90 minutes south of here to Carlsbad, where you’ll find the Grand Pacific Palisades Resort & Hotel, located close to the beach and to Legoland. Of course, prepare to spend a few bucks: summer rates begin at $TK for a double. [DROPCAP] It’s only fitting that Hawaii’s Pacific Palisades is located on the main island of Oahu, a name that literally translates to ‘sheltered bay’ or ‘safe haven.’ The common thread running through all versions of Pacific Palisades appears to be that each one is located in a spectacular locale. Could it be that the very moniker ‘Pacific Palisades’ has become synonymous with ‘paradise’? When a Post reporter pressed Arnie Wishnick, executive director of our Pacific Palisades Chamber of Commerce, for comment on those other Palisades locations, he admitted that he had not heard about the Hawaiian Pacific Palisades, but he did visit British Columbia’s. ‘It’s a very beautiful hotel and it does our name proud,’ Wishnick said. ‘And I have a bar of soap from the hotel sitting in our office that I didn’t steal.’ (For information on Vancouver’s Pacific Palisades Hotel, visit www.PacificPalisadesHotel.com. To learn more about the Grand Pacific Palisades Resort in Carlsbad, visit www.GrandPacificPalisades.com.)

By THERESA HEIM-KILKOWSKI Palisadian-Post Contributor For the first time in 17 years, the Palisades Highlands Presidents Council has elected a new chairman. When I asked Steve Nuccio how he came upon such an honor, his response was, ‘When Paul Glasgall wanted to step down, some other people stepped up to take other roles, but no one wanted to chair. So in a moment of weakness I said yes. Somebody had to take a turn.’ Aside from being comical and colorful, Nuccio is serious regarding the concerns of the Highlands, a place he has called home for the last 13 years. He and his wife of 38 years, Beverly, live in a beautiful home in the Country Estates, one of 21 homeowner associations represented by the Presidents Council. Nuccio grew up in the Pasadena area, and majored in business at USC, which was where he met his wife. He eventually entered into the family business, managing Little Joe’s Restaurant in Chinatown with his brother until 1999, when he retired and the restaurant closed. The Nuccios lived for 20 years in Arcadia, where they raised their two daughters, Leslie and Kimberly. After the girls moved away and the maintenance of a large property became arduous, the couple decided to make a change. Beverly had grown up in Palos Verdes and wanted to live near the ocean once again. When she found their Highlands house in 1995, her husband pulled out a map of the trails in the Santa Monica Mountains and said, ‘Yep, I can live here.’ Nuccio is an avid mountain biker and takes full advantage of the vast terrain available to him from the moment he steps outside his house. ‘There are hundreds of miles of trails accessible from any of the trailheads [in the Highlands],’ Nuccio says. ‘I can get lost up there for hours and do from time to time.’ Now that he is retired, he devotes much of his time to the surrounding mountains, but he has other pastimes as well. ‘I like to build and fix things,’ Nuccio says. ‘I do all my own bike maintenance as well as for my friends. I am always building or fixing something, be it a bird feeder, a model boat, a playhouse for my grandchildren, Liesel and Avery, or something in the house. Sometimes Bev thinks I live in the garage.’ Nuccio first got involved with his homeowners board in 2001. ‘I went to a meeting to complain about a barking dog,’ he says. ‘Somehow I ended up on the board after that.’ Shortly after, he became president of the Country Estates, a gated community that begins where Vereda de la Montura dead ends. At first, Nuccio wasn’t sure what he was getting himself into. ‘I didn’t duck fast enough,’ was his explanation as to how he ended up being president. But it has been an enjoyable experience for him, as well as his neighbors. ‘Our annual meetings are a big party,’ he says. ‘We rent bouncers for the kids, we have it catered and invite the fire department. We make it fun so the members will show up. So far, it seems to work.’ Nuccio does not foresee a long-term appointment in the chairman’s position. ‘I’m a believer in officer term limits,’ he says. ‘It’s good for the character to change on a regular basis. I had everyone on my board in the Country Estates be chairman for a month. This way we get a slightly different vision on the issues each time.’ Under Paul Glasgall’s leadership, the chairman of the Presidents Council assumed most of the responsibilities, but the current officers have agreed to divide up the workload. Nuccio, who reluctantly accepts that he must be ‘the public face’ of the council, chairs the meetings and is the lead person dealing with security co-op. Jon Girard, president of the Santa Ynez Homeowners Association, is treasurer and in charge of the landscaping co-op. Vice chair Laura Chung (The Peninsula Homeowners Association) is liaison for community affairs, and Elaine Bauer (Palisades Recreation Association) is secretary and is responsible for communications with the other board members. Drawing on his experience as a board member of the California Restaurant Association, Nuccio is introducing what he likes to call ‘shop talk’ to the council’s agenda. This is when other council members are encouraged to share problems and solutions with each other. ‘Our associations differ dramatically,’ Nuccio says. ‘But a lot of our problems are the same. Shop talk gives us a common forum to deal with issues and it’s also a way to unite the residents.’ If Nuccio has his way, every association will also have its own annual party to build neighborhood rapport and communication. Nuccio’s main goal while he is in office is to clean up Palisades Drive, while also continuing the board’s focus on diminishing the problem with speeders. ‘Palisades Drive is the entrance to our community. It is our driveway,’ he says. ‘When we come home, it should be a scenic drive. We should be able to enjoy the beauty of the mountains. It shouldn’t look like some abandoned stretch of back road.’ Nuccio believes the sidewalks in the lower canyon should be repaved every seven years and that the weeds should be pulled, making it not only scenic, but also safe for those residents who like to walk the canyon for exercise. The problem is that the sidewalks are owned by the L.A. Department of Recreation and Parks, not the city’s Department of Transportation. ‘There’s no money, no manpower and no expertise to take care of the problem,’ Nuccio says. ‘I go mountain biking with my buddy, Barry Kurtz, a traffic engineer. We discuss this problem regularly.’ Regarding the ongoing problem posed by speeding on Palisades Drive, Nuccio says, ‘There are no traffic mitigation measures to stop people from driving stupid. I don’t know the answer, but I won’t stop looking for the answer. The best thing we can do for now is to police ourselves.’ Asked about preparations for the upcoming brushfire season, Nuccio says he is already frustrated, noting that it’s difficult for him to take measures because of bureaucratic red tape. ‘It would be nice to have a fire break around the Highlands,’ he says, ‘but we’re surrounded by state land. So what we have to do is be real nice to Fire Station 23,’ which is located just west of Palisades Drive on Sunset Boulevard. These various issues certainly don’t dampen Nuccio’s enthusiasm for living in the Country Estates. ‘In the Highlands,’ he says, ‘we can live in the mountains without having to live on a narrow mountain road. It’s an absolutely perfect climate up here and we’re close to both the beach and the town. There’s a certain solitude that makes you feel like you’ve really left the city and all the problems behind. It’s our own serene little world.’ Of course, all is not ideal in upper Santa Ynez Canyon. ‘The deer keep eating my roses,’ Nuccio says. ‘But if this is the biggest problem I have up here, I live a pretty good life.’