The Boston Globe reports from Massachusetts. “The number of Boston residents who lost their homes in foreclosure was four times greater last year than in 2005, according to a new report, and the rate is accelerating this year. This year the city is on pace to exceed 2006 numbers. Of the Boston residents who faced foreclosure last year, just under half had purchased their homes with mortgages from five major lenders that specialize in subprime loans, the city said.”
“Last year, the median price for a single-family house in Roxbury, Mattapan, and Dorchester declined between 7 percent and 8 percent. When lenders seize properties, they auction them for sale, often at bargain prices, which can drive down the sale prices of other properties on the market. ‘It’s going to add to the problems,’ said William Apgar, senior fellow at Harvard University’s Joint Center for Housing Studies.”
The Banner from Massachusetts. “The slump in real estate prices has spilled over into the Outer Cape construction industry, causing jobs to dry up and a jump in competition from up-Cape builders for local projects.”
“‘In the last five or six years, it was a contractor’s market. We could pick and choose projects and set our own prices,’ said Frank Deschaine, owner of Deschaine Construction out of Wellfleet and North Eastham. ‘Now it’s just the opposite. It’s a buyer’s market and contractors are dropping their prices.’”
“Many builders…are still worried that the downturn in their industry, which began last fall, is not over. Peter Page operates out of Provincetown. One of his regular clients, a real estate investor who purchased homes in Provincetown told Page he is no longer looking for properties to buy.”
“‘I’ve been hearing for close to a year that things had been slowing down [in the Cape Cod construction industry]. But I didn’t see it in my business until this winter. I had work for the winter but the inquiries are down, which is future work,’ Page said.”
“Leif Johnson, a custom home builder based in Wellfleet who has worked on projects stretching from Orleans to Provincetown for the past 48 years, said his business ‘is not as good as it was, that’s for sure.’ Johnson has seen an increase in competition from up-Cape builders, who are traveling hundreds of miles round-trip in search of work.”
“‘We’ve got a lot of competition. For me as a builder, for all these years in business and doing all the estimates, I’m not very successful lately in winning the jobs,’ he said.”
“Individual tradesmen have been inundating Deschaine and Provincetown contractor John Lisbon with telephone calls asking for work because their regular employers have laid them off. Lisbon said he has received calls from masons, shingle installers and painters looking to join his crew.”
“Painters in particular are hurting, he said, because clients are looking to do some of the construction work themselves. ‘People are constantly asking me, ‘Is that your best price?’ Lisbon said.”
“‘I get three or four calls a week from shinglers, masons and painters. They’re all scared. I’ve had few of them say they’ve never seen it like this,’ Deschaine added.”
“All the contractors interviewed cited the high cost of real estate as a primary reason for the downturn in their local industry.”
“Page said he is optimistic about a turnaround in the market because he has begun to see an increase in the number of bank foreclosures on homes. ‘If foreclosures start and [homes] go up for auction and sell for less, investors might be willing to get back into the market,’ he said.”
The Times Ledger from New York. “More homes were sold at foreclosure auctions in Queens than in the other four boroughs combined during the first three months of the year, and they were concentrated in the southeast part of the borough, according to a report.”
“The report shows 319 foreclosure auctions in Queens during the first quarter, more than 57 percent of the 554 citywide. The figure is almost double the number of foreclosures for the last quarter of 2006.”
“Of the 20 zip codes with the most foreclosures in New York City for January through March, 16 of them were in Queens and 12 were in the 114, an area that includes Jamaica, Hollis, St. Albans, Laurelton, Cambria Heights and Queens Village.”
“The Neighborhood Economic Development Advocacy Project report mirrors the growth of foreclosures in Queens. Through the middle of March, more than 1,200 foreclosure notices were filed in the borough, compared to 3,600 in all of 2007, Ludwig said.”
The Star Ledger from New Jersey. “In an echo of the savings-and-loan industry collapse of the 1980s, a growing number of lawmakers and consumer groups are calling for measures to bail out homeowners who are at risk of losing their homes in foreclosure. Yesterday, it was New Jersey Assemblyman Neil Cohen’s turn to take a whack at what is fast becoming an increasingly controversial topic.”
“‘What’s going on in the subprime market affects nearly every segment of the economy,’ said Cohen. ‘The subprime market was wonderful when it was good, and now there are problems with it and there is an enormous rippling effect that could cause a meltdown in the state.’”
“Earlier this month, Cohen called upon the state’s attorney general to impose a 180-day moratorium on subprime mortgage loan foreclosures, to give the state time to investigate and address the problems.”
“‘Blaming the borrower for the foreclosures and calling the current crisis a mere market correction as lenders have done is unconscionable,’ said Phyllis Salowe-Kaye, the executive director of Citizen Action.”
“She said that while 7.6 percent of the subprime loans originated in New Jersey between 1998 and 2001 ended in foreclosure, a recent study predicts that 19.6 percent of the state’s subprime loans originated in 2006 will end in foreclosure.”
“‘For most subprime borrowers, the nightmare is only just beginning,’ she said.”
“E. Bob Levy, the executive director of both the state’s Mortgage Bankers Association and the Association of Mortgage Brokers, said the market has already started correcting the problem. Lenders have dramatically cut the availability of risky products.”
“Terry McEwen, the director of the New Jersey Department of Banking and Insurance, raised a possible snag to many of the solutions being offered. State regulators, he noted, have limited authority when it comes to regulating national banks. Just this week, the U.S. Supreme Court ruled that state financial regulators have no authority over subsidiaries of national banks.”
“Although the ruling did not directly involve subprime lending, it raised a big question as to how states can enforce their own consumer protection laws when dealing with national banks.”
“‘As a consequence, federal institutions can engage in aggressive lending activities through their subsidiaries that would otherwise violate state law and yet remain insulated from liability for those activities,’ McEwen said.”
The Record from New Jersey. “Rose Mortgage CEO Ralph Vitiello and two colleagues were the only ones left last week at the 7-year-old subprime mortgage banking firm in Parsippany, which in January employed 60 people. ‘We’re taking care of loose ends,’ Vitiello said in a telephone interview in which he described the credit crunch that caused the company to unravel.”
“Wall Street investors could not seem to get enough of these high-risk, high-yield loans just a couple of years ago. But with houses on the market longer and default and foreclosure rates climbing, many such loans are being sold on the secondary market at bargain-basement prices, often below the borrowers’ cost.”
“Investors started to become leery of a softening housing market two years ago, and over time they were paying less and less for the loans that Rose Mortgage made to high-risk borrowers, CEO Vitiello said. The company also had to tighten its lending standards to satisfy investors, which resulted in a reduction in volume.”
“By 2006, it could not maintain a strong enough capital base to qualify for the wholesale funding it needed to make new loans. In January, Deutsche Bank withdrew the company’s last lifeline, a $50 million line of credit, and Vitiello sent a letter to employees urging them to ’start looking for other employment.’ In February, all but a few were let go.”
“‘Once they cut the line, the oxygen was gone,’ Vitiello said.”
“Vitiello said he was fortunate that partner bought out Rose Mortgage’s last bundles of loans at a price that allowed him to give employees their last paychecks, including commissions. Rose Mortgage could not afford severance pay, and ‘guys that worked for me are still looking for jobs,’ Vitiello said.”
“The boom in high-risk mortgage lending was bound to bust, said Joel Naroff, economist for Commerce Bank in Cherry Hill. ‘The people working in an industry that was artificially pumping up the housing market were working in an industry that had very little job security,’ he said. ‘It was like working in a dot-com in the 1990s.’”
