The Housing Bubble

Reuters reports on California. “Andrew Thompson fears his mortgage lender is poised to foreclose on his Folsom. California, home because he will not be able to make his monthly loan payment when it jumps to $3,200 from $2,100. ‘As of May 1, I’m dead in the water,’ said Thompson, already behind on payments as the deadline nears for a higher interest rate on his mortgage. ‘I don’t think I’m going to be able to keep it.’”

“Thompson met his mortgage payments until an accident at work in September. Expecting he would fall behind on payments, Thompson listed his house for sale late last year. It’s still on the market.”

“Thompson bought it in 2004 for $289,000 and won praise from neighbors for at least $60,000 worth of renovations. Thompson is resigned to losing money on the house. He has cut its price from $360,000 to $307,000, which would provide enough for him pay off his mortgage and other debt he took on for the house and prevent a default. ‘I would have $1,000 left over to move,’ he said.”

“But a sale before foreclosure is uncertain. Seven similar homes within a two-block radius have ‘for sale’ signs on lawns and Folsom has an abundance of new homes for sale.”

“Deutsche Bank analyst Nishu Sood painted a bleak picture of Sacramento’s homes market: ‘New home inventories remain elevated, while resale inventories are even more worrisome, with significant investor overhang and mounting distressed listings.’”

“‘And all of this is before the effects of the subprime situation have begun to be realized in the market. Significant further price declines are likely,’ Sood wrote.”

The LA Times. “Steve Nguyen bought his first home, a three-bedroom ranch house in Lakewood, three years ago with a no-interest sub-prime mortgage. Since then, the sub-prime market has virtually collapsed.”

“But Nguyen is feeling confident. Though he figures his home’s value fell at least $40,000 during the last year, he gained $200,000 in equity during the five-year boom. He’s qualified for a conventional 30-year fixed-rate mortgage on a $750,000 house he hopes to move to in Orange County after he sells his current home.”

“‘It’s at a good state right now,’ Nguyen said of the housing market. ‘It didn’t completely crash on me.’”

“Many homeowners like Nguyen also became wealthier with the run-up of the housing market, borrowing against their homes and refinancing their mortgages to fuel spending. Homeowners cashed out $640 billion in home equity last year, according to David Wyss, chief economist at Standard & Poor’s.”

“Failed sub-prime mortgages and the resulting supply of homes on the market could even have a silver lining, some analysts say. They would slow the rise in rents, a major contributor to recent inflation.”

“Jon Emery hopes that happens. Emery has been driving around Los Angeles for the last few weeks, hunting for a two- or three-bedroom apartment for his wife and two sons waiting in Cincinnati. ‘I’m kind of hoping that prices will go down some, especially now with so many people having to default on their mortgages and whatnot,’ Emery said last week.”

“Back in Cincinnati, Emery’s wife, Katie, was reminded of 1992, when the housing market bottomed out and her brother-in-law sold his Pasadena home at a deep discount.”

“‘I don’t want my friends’ houses to lose value,’ she said. ‘But I kind of wish that does happen, for our sake. All these foreclosures kind of make me hopeful.’”

The Desert Sun. “Home sales across the Coachella Valley dropped 25 percent last month compared with February 2006, fueled in part by a nearly 43 percent decline in new-home sales, a new report shows.”

“‘The fact is: Fewer homes will be sold; it will take longer to sell them; and in most areas and price ranges in the valley, asking and selling prices will decline. Having said that, it is still much too early in 2007 to speculate how the year will finish,’ said Greg Berkemer, executive vice president of California Desert Association of Realtors.”

“Both sellers and buyers are cognizant of mounting home inventories, which climbed to 8,852 homes on the market by mid-February compared with 7,046 at the same time a year earlier, according to the California Desert Association of Realtors and the Multiple Listing Service.”

“That compares with an inventory of 1,400 resale homes in the spring of 2004 and about 3,200 homes in spring 2005.”

“‘Probably a big unknown out there are the fairly significant changes in the sub-prime (lending) market and what the overall implications will be on long-term housing in the Coachella Valley,’ said Fred Bell, executive director of the Desert Chapter of the Building Industry Association.”

“Coachella Valley’s home sales figures are in line with cities across Southern California and the rest of the state. Home sales last month in the six-county area, Riverside, San Bernardino, Los Angeles, Orange, San Diego and Ventura, dropped 19.8 percent to 17,680 new and resale homes sold, DataQuick reported.”

From Bloomberg. “New Century Financial Corp., struggling to stay in business after a wave of defaults by subprime mortgage customers, said yesterday its home state of California ordered a lending halt, and Fannie Mae stopped buying its loans.”

“The state accounted for 37 percent of New Century’s loans in 2005, the most recent year for which data is available.”

“The California order ’spells doom for the company,’ said analyst Matt Howlett. ‘That is the crux of their operations. What little hope was left is gone now, in terms of ever coming back and operating as New Century.’”

The Orange County Register. “The subprime meltdown continued Tuesday as one local lender filed for bankruptcy and another laid off workers. Irvine-based People’s Choice Home Loan, a unit of People’s Choice Financial Corp., became at least the second subprime lender to file for bankruptcy protection in the county in the past two months.”

“Separately, subprime lender ResMae MortgageCorp. of Brea, which filed for bankruptcy Feb. 12, cut more than 100 jobs Tuesday, though workers will be paid through May 19, said Debra Batista, one of the workers sent home.”

“Batista, whose job at ResMae was to handle closing documents on loans, said she may give up on the mortgage industry after 20 years.”

The Lookout News. “Risky mortgage practices rocking the nation are coming home to roost for one Santa Monica-based lending institution. Fremont General confirmed Tuesday that nearly 2,400 employees nationwide could lose their jobs by May after the company reported it was withdrawing from the sub-prime lending market.”

“Spokesman Daniel Hillary said he did not know how many of those 2,400 branch employees may be based in at its Santa Monica headquarters.”

The Bakersfield Californian. “McMillin Realty’s Bakersfield office will close at the end of the week, another sign that the real estate industry is tightening its belt as the housing market stalls. More than two dozen jobs will be lost as a result of the closure.”

“McMillin officials said that while the local office’s performance played a role in the closure, there was also a decision to consolidate company resources amid a stagnating market.”

“‘We were approaching break even. It certainly wasn’t highly profitable. If it was, we would still be in business,’ said Don Cohen, the general manager of McMillin Realty in Bakersfield. ‘We couldn’t count on the other offices to carry us because they are at break even.’”

“McMillin’s eight other realty offices are located in the San Diego area.”

The Union Tribune. “Apartment complex vacancies in San Diego County rose to their highest level in 12 years, spurred by new construction, condo converters caught with empty units and a growing number of individuals renting condos to upwardly mobile tenants, MarketPointe Realty Advisors reported yesterday.”

“MarketPointe President Russ Valone said the vacancy rate is rising because more rentals are on the market. ‘A couple of new projects came out, and there were some conversions that went back to the marketplace,’ Valone said.”

“His research director, Robert D. Martinez, added that the low vacancy rate set last September may have been an aberration because so many tenants had vacated apartments being converted to for-sale condo status.”

“‘(Converters) kick everyone out, rehab to get ready to sell and realize they’re not in a good position to sell,’ Martinez said. ‘All the people in the units are gone, and they’ve got to start from scratch again (to re-rent the property).’”

“A third element affecting vacancies is the rise in investor-owned condos and houses that are rented to tenants who would otherwise be living in commercial apartment complexes.”

“‘They have not been able to flip these for profit and (have) put them in the rental pool,’ Martinez said.”

A housing report from the Idaho Statesman. “If you are in the market for a high-end house, you’re in luck. Following more than a decade of boom, the Treasure Valley housing market this year will continue to undergo a market correction that started last year. ‘We’ve been through a heckuva transition period,’ from decades of stagnant growth to an unprecedented valleywide boom to a minor bust in the form of a housing market slowdown, John Starr told an audience in Boise.”

“The local housing market in 2006 ended with a more than 40 percent drop in permit activity and a glut of high-priced homes and lots. ‘The market is going to punish you if you are building above $380,000 homes,’ said Michael diVittorio, director of business development for Group One in Boise.”

“Thirteen planned communities covering 18,000 acres with 72,000 homes are in the works for Ada County; about 2,000 condominiums are in the pipeline for Downtown Boise alone.”

“Since few condominiums are for sale in Downtown Boise, but hundreds are under construction, experts cannot determine how much the market will embrace condominiums.”

The Associated Press reports on Oregon. “Portland-area house buyers are finding more inventory to choose from as the market starts to cool. The overall number of houses for sale jumped by 80 percent, to 9,901 on March 1, from 5,503 a year ago, according to figures from the Regional MLS.”

“The increase reflects the backlog of houses for sale for several months as well as a 44 percent rise in new listings — 4,155 houses in February, compared with 3,397 a year ago.”

“The number of closed sales fell 6.8 percent in February, compared with a year ago, consistent with falling demand since last fall.”

“Economists don’t expect Portland to experience a sharp drop in house prices in the months to come. Local growth constraints keep supply from overwhelming demand, said Jerry Johnson, of the Johnson Gardner economic consulting firm.”

“‘It stops developers from doing what they do best, which is overbuilding a market and inadvertently providing affordable housing,’ Johnson said.”

The Register Guard from Oregon. “Looking for your dream home in a beach town? You might find more elbow room at open houses these days. After five years in which median sale prices for homes in the Florence area surged more than 100 percent, buyers have backed off.”

“There were 320 homes sold in and around Florence in 2006, a steep drop from the 449 houses sold in 2005 and the 561 the year before that, said Tawfik Adhab, a Eugene appraiser. ‘What we had is a huge withdrawal of buyers.’”

“Until recently, retirees from states such as California arrived on the Oregon Coast with fat wallets. But when the national housing boom slowed last year, it showed just how tied to the rest of the nation Florence is.”

“Meanwhile, there are plenty of options for buyers, especially those willing to fork over more than $300,000 and especially in the condominium market, where several projects approved during the boom haven’t been built yet and may have to wait awhile to find owners once they’re built.”

“What’s happening now is a return to equilibrium, Adhab said. ‘There’s no doubt we went through the darkest phase in 2006,’ he said. ‘Now we’re probably headed toward recovery, if we’re not already there.’”

From News Channel 8 in Oregon. “Less than credit-worthy mortgage loans are falling apart in record numbers and loan defaults are causing a downward spiral in the housing market.”

“Right now there are six months worth of homes on the market in the Portland area. And while sales have been brisk in the past, so now are delinquencies. They’re on the rise. realtor Mary Low said.”

“‘The fallout is we’re going to see more houses coming on the market,’ Low said. ‘It’s going to be tougher for a young couple who doesn’t have good credit. They’re going to have a harder time finding a loan.’”

“Low blames the sub-prime mortgage business and less than honest realtors and mortgage brokers taking advantage of peoples’ desire to own a home at any cost.”

“Brian Bushlach, a senior mortgage advisor with Alpine Mortgage, said that while the Portland market is still healthy overall compared to the rest of the country, there will still be fallout in the metro area.”

“‘That’s where it’s going to hit at the neighborhood level is people who are trying to sell homes. The entry level price point for a builder or a resale, they can’t now,’ he said.”

“And it goes beyond the ‘For Sale’ sign. ‘Quite a few local mortgage company’s could go out of business,’ said Bushlach.”

The Seattle PI from Washington. “The typical house in the Seattle metropolitan area was 31.7 percent overvalued in the last quarter of the year, up 6.4 percent from the prior quarter and 24.3 percent from the end of 2005, according to Monday’s joint report.”

“Local experts question the idea that Seattle houses are overvalued at all. Randy Bannecker, a consultant housing specialist for the Seattle-King County Association of Realtors, said there just are not enough homes available to cause overvaluing.”

“‘The overwhelming supply shortage is really what’s keeping the prices where they are,’ he said. ‘It’s hard to see where just kind of a run-up for run-up’s sake is in play.’”

“Last year, there were 41 percent more foreclosures in King County and 42 percent more nationally than in 2005, and the number could get higher, according to RealtyTrac. The reason? Wall Street investors poured money into the booming housing market in recent years and lenders found increasingly creative ways to get it to borrowers.”

“About 20 percent of Seattle mortgages had adjustable rates in 2004, according to the most recent U.S. Census Bureau numbers. ‘There are huge numbers of people in foreclosure because of being in ARMs or being put into loans that are completely inappropriate for them,’ said lawyer Melissa Huelsman, who specializes in foreclosures.”

“Part of the problem, said Erin Rearden, a mortgage default counselor, is that many borrowers don’t understand their loans. ‘A surprising number of people don’t even know if they have an adjustable-rate mortgage or a fixed, or don’t even know what their interest rate is,’ she said.”

“Those in trouble seem to be in deeper, she said. ‘What we’re seeing now is people who have permanent reduction in their income or no income. They’re six, seven, eight months behind.’ Just about everyone has refinanced to take equity out of their homes, she said.”

“Adam Stein, president of the Washington Association of Mortgage Brokers, said he’s seeing the market’s impact on loans. Six months ago, he said, he could get 100 percent financing for someone with verified income and poor credit. Now, people with low credit scores need 10 percent or 20 percent down payments.”

The Olympian from Washington. “All those low-interest and no-interest mortgage loans that helped fuel South Sound’s hot housing market last year are coming back to haunt some homeowners.

“Thurston County led the state in foreclosures as a percentage of households last year, according to Realty Trac.”

“South Sound real estate agents and mortgage lenders blame some of the increases on programs that enticed buyers into the market with mortgages that required no money down or allowed buyers to pay interest only for several years. ‘If you could fog a mirror, you could get a loan,’ said Jeff Crandell, broker in Lacey.”

“The pace of South Sound home sales slowed during the second half of last year as the inventory rose. That trend also lengthened the time it took to sell homes and slowed the increase in their value.”

“Homeowners increasingly find themselves with homes that take longer to sell and sales prices that aren’t enough to pay off their loans, said real estate agent Dan Dillashaw.”

“For consumers who expected home values to keep rising as quickly as they did two years ago, ‘They find themselves lucky today to get back the amount they got loaned,’ Dillashaw said. In many cases, the only choice left is for the lender to foreclose on the loan, he said.”

The Denver Post reports from Colorado. “One out of three mortgages made during the past three years with ‘teaser’ interest rates below 4 percent are expected to go into foreclosure because of rising payments, according to a study Tuesday from FirstAmerican CoreLogic. Zachary Urban in Denver, estimates that about 40 percent of loans made in Colorado during the past three years were subprime, adjustable-rate or otherwise ‘exotic.’”

“Urban, who oversees the Colorado Foreclosure Prevention Hotline, said more calls are coming in from people desperate because their mortgage payments are rising beyond what they can afford. ‘We are seeing a lot more people in that position who are current but they are caught by the rate adjustment,’ Urban said. ‘They are slammed.’”

“Aurora resident Kevin Bell suffered payment shock just a month after refinancing into an option-ARM loan with a low teaser rate in March 2006. Like the majority of option-ARM borrowers, he is taking the minimum-payment option most months, adding principal back to his mortgage.”

“Bell said he is trying to get other debts paid off so he can refinance. But time is running out, either a refinancing or a day of reckoning will come next year.”

The East Valley Tribune from Arizona. “Gilbert homeowner Raul Harris is the unfortunate bearer of two mortgages. For months now, the local loan officer has been trying to sell his four-bedroom home in the massive Seville development, where builders are still active.”

“A major part of the problem, Harris said, is that builders are dramatically slashing prices to off load homes that are finished but unsold. ‘You can’t really compete,’ he said.”

“Builders say homeowners aren’t asking realistic prices. But many owners can’t afford to drop prices because of the steep prices they paid for their homes a year or two ago, said John Fioramonti, who tracks the Valley’s new home market.”

“What some sellers are asking may be unrealistic in terms of current market prices, but it’s not unrealistic when it comes to their financial situations, Fioramonti said. ‘They’re just trying to get what they have in the place,’ he said.”

“Harris paid $569,000 for his 2,700-square-foot home about a year ago and put it on the market for $575,000. ‘I’m being realistic, especially when I owe the bank,’ said Harris, who purchased another home in December.”

“Builders in his neighborhood are selling similar homes in the high $400,000s.”

“Many of the speculative homes Montalbano Homes is trying to sell in its project in the Queen Creek area already have upgrades, Jon Baer, VP of sales said. That’s because many buyers couldn’t sell their own homes and walked away from contracts, he said.”

“‘The builder is stuck in a situation where now we have to find a new buyer,’ he said.”

“Despite difficulties selling his Seville home, Harris remains optimistic, expecting the market to pick back up in a couple of years. So for now, he’s renting the place out. Sellers need to be patient, Harris said. ‘If you couldn’t afford to buy a half million-dollar home, you shouldn’t have bought it,’ he said. ‘Or stay in it.’”

The Review Journal from Nevada. “An officer for a $600 million luxury Las Vegas condominium project that filed for bankruptcy protection said Tuesday he is confident developers will secure new financing and a new partner so the project can proceed.”

“‘We have not been able to refinance our project to get to the point where we can proceed with construction,’ said Ryan Langson, vice president of Langson Development.”

“Salestraq, a Southern Nevada real estate research firm, counts Las Vegas Central among Las Vegas 19 high-rise condo projects with 8,874 units in the sales stage. Another 26 projects with 12,714 units are under construction.”

The Las Vegas Business Press. “The Nevada Mortgage Lending Division finished its investigation into the collapse of locally-owned Silver State Mortgage. Silver State has not yet declared bankruptcy but faced similar liquidity problems, brought on by the large volumes of loans it was forced to repurchase from warehouse bank Washington Mutual. Silver State closed its doors Feb. 14.”

“Another obligation left to deal with is to continue making monthly payments for California builder Shapell Industries, which Scott Bice, Nevada’s Mortgage Lending commissioner said had more than $400,000 in an escrow trust account with Silver State.”

“The account was set up in order to cover the first six months of mortgage payments for customers who bought homes this year from the Beverly Hills developer. The $400,000, Bice’s auditors found, was comingled with Silver State’s operating funds. Bice said it’s a clear case of financial mismanagement.”

“‘They blame it on their accounting department. But that’s clearly sort of a theft thing,’ Bice said.”

In Business Las Vegas. “It’s a profession that attracted everyone from strippers and school teachers to waiters and blackjack dealers with the lure of easy money by simply listing a house, only to have a buyer later that day.”

“A doubling of real estate agents and brokers in Nevada between 2001 and 2006 is more than the industry can handle and there are indications a number of them are leaving the industry, according to a report by the Nevada Association of Realtors.”

“That’s changed with the slowdown in the housing industry that has seen some agents’ incomes go from more than $100,000 a year to $1,000 a month.”

“Mike Denley said friends of his in the real estate industry have had to turn to other jobs to support their income until the housing market rebounds. ‘There are opportunities for those who will do the business,’ Denley said. ‘Before, you could put a sign in a yard and could have made it. Now, you have to work.’”

“Those employed in real estate sales, leasing and related positions account for 3.8 percent of the state’s workforce. Real estate professionals and their employees account for 48,000 jobs in Nevada, the report said.”

The Salt Lake Tribune. “As expected, Utah’s red-hot housing market is cooling off, and builders are offering up goodies such as free appliances and luxury vehicles in a bid to reel in buyers.”

“The freebies represent an abrupt change from the past two years, when builders along the Wasatch Front have not had to offer much of anything to entice buyers.”

“The housing market is losing steam. Inventories are growing. Homes, both new and used, are staying on the market longer. And appreciation has slowed. As a result, ‘you’re going to see a lot more incentives now,’ said Gary Cannon, president of the Salt Lake Board of Realtors.”

“The incentives, worth in some cases tens of thousands of dollars, stem from a steep drop in demand for new homes. Home builders have taken out permits for the construction of 1,846 new single-family homes along the Wasatch Front since January, a surprising 37 percent drop compared with nearly 3,000 in the same period last year, according to Construction Monitor.”

“All builders are probably feeling the pain, although many, including Utah-based Ivory Homes, declined to be interviewed about the slowdown.”

“Sage Builders was offering $5,000 off closing costs to buyers who use a ‘preferred lender.’ Now the company is offering buyers who meet certain criteria ‘zero down’ and no mortgage payments for six months, said Juliette Beckstrand, marketing director for Sage Builders.”

“‘It’s our biggest promotion ever. We wanted to do something important that would really help people get into a home,’ Beckstrand said.”

“The biggest savings can be on speculative houses built without a contract. Builders in some cases are so eager to unload these properties they will offer an assortment of sweeteners.”

“Jim Wood, director of the Bureau of Economic and Business Research at the University of Utah, also does not see doom, but he thinks Utahns should brace themselves for a more sluggish real estate market.”

“He isn’t surprised that home building is slowing given that surrounding states such as Arizona and Nevada started to see that a year ago. ‘It was only a matter of time before it happened here,’ he said.”

“Also inevitable, he said, is a slowdown in the resale market. When a residential market that has been booming starts to slow, the home building industry is affected first.”

“‘Then you’ll see the resale market hit next. You’re going to see fewer sales, longer days on the market and lower price appreciation. It’s coming,’ he said.”

The Boston Globe reports from Massachusetts. “The Massachusetts housing market showed signs of bumping along the bottom of a year long slump as it heads into the crucial spring season. Prices for single-family homes sold in February declined between 4 percent and 5 percent from February 2006, according to two different reports released yesterday by real estate interests.”

“Conditions favored buyers. ‘People are looking for good deals,’ said Ken Maddeford, an agent in Chelsea. Maddeford, who has worked in Chelsea real estate for 28 years, including during the early-1990s real estate bust, said he believes the state’s housing market won’t bounce back quickly from the slump because too many sellers are refusing to drop their prices.”

“‘It’s going to take time to correct,’ he said, because ‘the numbers just don’t make sense right now.’”

“Currently, there are 45,193 single-family homes and condos on the market in Massachusetts, a year’s worth of inventory. Another wild card: Increasingly both borrowers and lenders in the subprime mortgage market are in financial trouble. Foreclosures in the state are increasing rapidly, while some lenders are also experiencing financial hardship or capital problems.”

“A record 15,000 Massachusetts homeowners received foreclosure notices from lenders last year. In the final quarter of 2006, 4 percent of Massachusetts borrowers with subprime loans had received foreclosure notices from their lenders, compared with less than 1.5 percent of borrowers of all other types of loans.”

“‘If a couple of these private lenders go down, it’s a damper on the whole economy,’ said Alan Pasnik, a real estate analyst for Warren Group. ‘People get nervous about the whole banking system,’ he said.”

The Boston Herald. “The market is readjusting and sellers are slowly starting to lower prices as buyers push for discounts, said Wellesley College economist and nationally respected housing expert Chip Case.”

“But Case believes the market still has more settling to do, enough so that it may be next spring before the market finally stabilizes. ‘The market is headed towards stabilization,’ Case noted. ‘I think it will take a year before we get a real sense of where it will end up.’”

“At the current sales pace this represents approximately 12.3 months of supply. On a month-to-month basis, the average months of supply went up from 10.7 months of supply in January 2007. Residential properties stayed on the market an average of 148 days in February 2007 compared to an average of 115 days in February 2006.”

“‘While February sales gains compared to the same time last year were more modest than those we reported for January, we continue to head in the right direction,’ said MAR President Doug Azarian.”

“Timothy Warren Jr., CEO of the Warren Group, offered his perspective of the housing market in a statement. ‘Although the number of sales fell in February, the relatively low decrease shows more of a leveling out in the Massachusetts home market,’ he said. ‘Sales decreased by double-digit percentages during much of 2006, so a decrease of only 1.4 percent could be an indication of some stabilization in the market.’”

“‘But recent difficulties in the subprime mortgage market could spell trouble down the road. Mortgage lenders may react by tightening qualifications for mortgages, making it more difficult for some to buy homes. That means the Massachusetts housing market is probably not yet out of the woods,’ he said.”

The Hartford Courant from Connecticut. “Bushnell Tower has struggled during the past year through a sort of identity crisis. It faced what it has really never faced before: competition.”

“During the past year, housing options have exploded in the city, from the upscale townhouse condominiums at Goodwin Estates near Elizabeth Park to the downtown Metropolitan condos.”

“Bushnell Tower has not been unscathed. Demand for its high-end rentals, with monthly rents of $2,000 or more, have plummeted. Almost 60 of the building’s 176 units are rentals; the individual owners have had to work harder to find tenants and, in some cases, have updated the units or reduced rents, local real estate agents said.”

“‘The rental market here is pretty much dead,’ said Becky Koladis, an agent who handles rentals and sales in the building. ‘Just recently, I lost a rental to Hartford 21. It’s very hard to compete with brand-new.’”

“A one-bedroom unit that was listed for $190,000 in January, for instance, sold in one day for $180,000. And last month, a two-bedroom, two-bathroom unit that was listed for $299,900 sold in four days for $264,000.”

Bloomberg reports from Rhode Island. “Rolando Ruiz and Stephanie Rodrigues telephoned their mortgage lender two weeks ago and offered to hand over the keys to their three-bedroom house in Providence, Rhode Island. They lost their jobs and haven’t made a loan payment since January.”

“‘I told the bank to come get the keys and just let me know when we need to be out, but they said why not put it up for sale and we might be able to work something out,’ said Rodrigues, the 22-year-old mother of two girls.”

“Homeowners such as the Rhode Island couple are finding their mortgage companies eager to accept a sale price that falls short of a property’s loan balance, a so-called mortgage short sale. The number of U.S. loans entering foreclosure reached an all-time high in the fourth quarter, according to the Washington-based Mortgage Bankers Association.”

“‘Banks don’t want to be real estate managers,’ said Doug Duncan, chief economist of the mortgage association. ‘The fact that delinquencies are rising means we’re going to see more pre- foreclosure sales.’”

“Almost 5 percent of U.S. mortgages had payments overdue by 30 days or more at the end of last year, the highest since 2003, Duncan said. No one tracks or estimates the number of borrowers who avoid foreclosure with a short sale, according to Duncan and David Berson, chief economist of Washington-based Fannie Mae, the largest buyer of mortgages. There’s ample evidence that the number is increasing, they said.”

“‘Clearly it’s happening and the numbers are rising,’ Berson said. ‘What we need to know to be concerned is how it compares to the last cycle, but no one tracks that.’”

“Ruiz and Rodrigues paid $195,000 a year ago for an eight-room house and spent about $12,000 renovating it. They found they couldn’t recoup the money they put into the property because real estate values in Providence had fallen. The city’s median selling price declined 1.1 percent in the fourth quarter to $291,300 from $294,400 a year earlier, according to the National Association of Realtors.”

“‘If the market had kept rising, we would have been fine because we could have easily sold for a profit when we lost our jobs,’ said Rodrigues. ‘Now, we’re in a jam.’”

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