A report from the Washington Post. "As home prices peaked in the first half of this decade, roughly 40 percent of buyers took out two loans, often from two lenders, to cover the purchase. These loans, known as piggyback mortgages, enabled home buyers to put little or no money down and avoid paying private mortgage insurance, which is why their popularity surged in high-cost areas such as Washington. The fallout could hobble the ability of the area's housing market to rebound by adding to the glut of homes, further dragging down property values."

"Theresa Trainer's Gainesville townhouse may soon add to the troubles. Trainer bought the home in mid-2006 for nearly $357,000. It has since plunged in value, and her second mortgage has made it tough for her to sell it."

"Like many who used piggybacks, Trainer put no money down. She also did not pay mortgage insurance, which lenders require only if a loan exceeds 80 percent of the price of the house. Her first loan covered exactly 80 percent and the second covered the balance."

"Trainer discovered that late last year when she got hit with thousands of dollars in back taxes from when she was self-employed. She also realized that the property tax on her home was not included in her monthly mortgage payments. She fell behind on both her loans."

"A housing counselor suggested that Trainer try to sell the home for less than she owed. In October, a buyer offered $242,000. At the time, Trainer said, she owed $313,000 to the first lender and $76,000 to the second. The first lender accepted the buyer's offer and agreed to pay $1,000 to the second lender. That lender rejected it."

"'I feel stuck,' said Trainer."

"Troy Scott, who represented Trainer in the sale, said he was flummoxed by the rejection. 'They told us they wanted full payment on the second loan," said Scott, chief negotiator for a Re/Max office in McLean. 'They stopped negotiating, and the conversation was over.'"

"Trainer's home is still on the market. Under the circumstances, it's unlikely that it will fetch a price that satisfies both lenders. Foreclosure proceedings are under way, Scott said."

The Free Lance Star from Virginia. "Real rays of hope do exist for the local residential construction industry, but one analyst who tracks these trends in Northern Virginia says the market’s recovery is at least a year away."

"Dan Fulton of Fulton Research and Consulting in Fairfax County told a gathering of local government officials and building leaders Wednesday that the industry found itself in an economic utopia in the years leading to 2006."

"'You had a perfect storm of demographics, economics and loose lending standards,' said Fulton."

"That led to the region’s rampant growth. Now the region is suffering through the hangover. He estimates that the Fredericksburg area has an 18-month inventory of existing homes for sale, including foreclosures."

"Faced with competition from national builders, land that's scarce and expensive, and a devastating economic downturn, Fredericksburg area builders are ready for some good news in 2008."

"'We're all saying the same thing: Please tell me something, anything, positive,' said Jeff Hall of J. Hall Homes in Spotsylvania County. 'Builders can't go much lower [in price] and still stay afloat.'"

"The situation Hall and other builders find themselves in is reflected in plummeting building-permit figures. Spotsylvania issued only 596 residential permits last year, down from 973 in 2006 and a peak of 1,921 in 2001."

"George Snead of Snead Custom Homes in Fredericksburg, Snead said it's hard to attract buyers to new homes when sellers of existing homes are cutting their prices, and foreclosures are being sold for a song."

"'Then you have the nationals coming in and buying land and lots,' added Snead, referring to companies such as Beazer, Ryan, Ryland and Richmond American. 'If they have a lot valued at $200,000, they'll cut the price in half and write off a $100,000 loss. They can afford to do that,' said Snead. 'Then they can sell the house for less. We can't compete with that.'"

"Pennsylvania-based Toll Brothers, for example, which is building Chancellor Hunt on State Route 3 in Spotsylvania, is expected to take $150 million to $300 million in first-quarter pretax write-downs of land and land options, according to a published report this week. Because it stockpiled land when prices were lower, however, it is better positioned than many of its peers, the report added."

"Hall added that given the choice, a developer will jump at the opportunity to sell a large block of lots at one time to a national builder rather than sell them piecemeal over time to smaller builders. That was precisely the scenario in 2006 at Stafford Lakes Village off U.S. 17, where local builders had been active until Beazer bought up all the remaining lots."

"Under the current conditions, Snead said buyers know they are in the driver's seat. 'They don't want a deal, they want a steal,' he said. 'We are willing to work with people as much as we can.'"

"Knowing it was a gamble, Snead just completed a speculative house in Spotsylvania to stay busy and keep his subs working. Now he can only hope to find a buyer. 'My goal is to just hang on,' he said."

"Dan Spear of Spotsylvania-based Spear Homes of Virginia faces a similar quandary. Spear, who has been building a broad price range of homes in the area since 1987, peaked at 158 houses sold in 2003. That number has dropped every year since, to a low of 14 closings in 2007."

"'Everything's relative,' Spear said, 'so even if you go from zero to five it's a good thing.'"

"In addition to waiting for foreclosures to drop back, the builders agree that existing inventory, both new and pre-existing homes, needs to be sold off before new home sales can pick up. Hall also finds himself carrying empty lots from month to month that he'd expected to build on."

"The downturn's ripple effect has taken a toll on the builders' office employees and subcontractors. Builders need to provide steady work to keep the contractors they like and have worked with for many years."

"'But they have to go where the work is,' said Hall. 'It's always, where's the next house?'"

"Snead noted that many conventional lenders are now requiring 20 percent down payments for new home purchases. 'People just don't have that kind of money,' he said."

The Times Dispatch from Virginia. "The housing industry has been in a recession for the past year and it's pulling down the rest of the economy. When will it turn? Not any time soon, said Christine Chmura of Chmura Economics & Analytics of Richmond."

"'The bottom line is it will be another slow year like last year,' Chmura said at the annual meeting yesterday of the Home Building Association of Richmond in Chesterfield County. The topic was 'Surviving Today's Market.' About 500 people attended."

"In the Richmond area, 'inventory is up by 30 percent and sales are off by 35 percent from February a year ago.' It would take 17 months to sell all the houses on the market at the current sales rate, Chmura said. A year ago, there was an 8.8-month supply of houses on the market."

"If people think this housing market is bad, perhaps they are too young or they have forgotten the early 1980s, said Richmond builder Lloyd Poe, who also spoke at the meeting. Mortgage interest rates were in the double digits and home prices in some areas of the country fell 20 percent, said Poe, owner of LifeStyle Builders & Developers and StyleCraft Homes Inc."

"'People were dropping their keys on lenders' desks,' he said."

"The housing market ground to a halt. 'Today it is working, just not nearly as well' as it did a few years ago."

"In the Richmond area, housing starts are down 46 percent from their peak 18 months ago. Nationwide, housing starts are down 54 percent. Builders might want to diversify and look into remodeling, Chmura said."

"Also, they may want to cut back on house sizes, like they did during the last recession, in 2001. 'People can't afford larger homes,"' she said. 'The economy has slowed significantly.'"

The Philadelphia Inquirer from Pennsylvania. "Frank Salamone blames himself, mostly, for his small role in the subprime-debt crisis that has helped hobble the global economy."

"With his household debt soaring from a $123,000 mortgage in 1990 to a $425,000 mortgage on the same house by 2006, Frank and his wife, Joan, are a striking example of how the housing bubble's easy credit allowed consumers to bury themselves in debt."

"Now, they are struggling to avoid the worst consequence of what Frank called 'crappy decisions.' That would be the loss of their house in Bucks County's Warwick Township. 'I'm not an Oprah victim. I don't blame anybody,' he said."

"Frank said a steady stream of credit-card offers and increased borrowing limits were 'ruining this country. Ignorant people like me are what's getting sucked into it.'"

"The Salamones have been two months behind on their $3,148 monthly mortgage payments since Frank - who comes across as a man who can eventually laugh at anything that does not kill him - took a 10 percent pay cut last summer. At that point, all the equity had been taken out of the house and the subprime-lending market had largely shut down."

"To catch up, they took a second job in December delivering newspapers from 2:30 to 5:30 a.m. Income from the paper route has made the monthly payments on their mortgages more manageable. Those payments had represented 55 percent of their gross income; now they consume 38 percent, Frank said. But the Salamones, who have two daughters, still owe more than $50,000 on credit cards, plus medical bills."

"Their house needed a long list of repairs when they moved there in 1990, Frank said. At first they tried to pay for repairs out of pocket, but then Frank got a real estate license in the mid-1990s. 'I discovered the wonderful world of refinancing,' he said."

"Cash from the first three refinancings - $160,000 in 1997, $230,000 in 2000 and $360,000 in 2003 - went mostly into home improvements. The size of the Salamones' refinancings outpaced the growth in average house prices in Warwick Township."

"'We were doing OK with the refis, but then medical problems hit,' Frank said."

"Frank refinanced into a $320,000 mortgage with an $80,000 piggyback loan to consolidate debt in 2005. That was his first experience with a so-called no-doc loan, which means that income was not documented. Otherwise, he said he would not have qualified."

"Frank took it because he was desperate without his wife's help. 'You figure out where my head was at that point,' he said. 'It was basically how do I keep things running.'"

"The idea was that he eventually could refinance out of the $80,000 loan, which had a fixed rate of 9 percent. He soon could not afford the $2,800 in payments on those loans. When he called the Arizona-based lender back, the broker who had promised him help was gone."

"Meanwhile, 'I was getting literally three dozen calls a week' from brokers and lenders offering new deals. The latest refinancing, for $425,000, occurred in August 2006 through Mortgage Lenders Network, which went bankrupt six months later."

"Despite all the refinancings, the Salamones still have $53,000 in credit-card debt. Help with the mortgage might be coming. A Philadelphia lawyer, Robert P. Cocco, said he found a violation of the federal Truth in Lending Act in the Salamones' loan documentation and sent a letter this month to the current servicer demanding that the loan be rescinded."

"The originator misstated the annual percentage rate as 10.3 percent rather than the actual 10.6 percent, according to Cocco."

"Adjustable-rate mortgages, Cocco said, 'are so complicated and they shoveled them out the door so quickly to investors that it was difficult even for the lenders themselves to accurately calculate and then disclose the costs of the loan.'"

"Meanwhile, the Salamones will keep plugging away - starting each day at 1:30 a.m."