The Housing Bubble

The San Francisco Chronicle reports from California. “The median price for an existing single-family dwelling in the Bay Area hit a record $720,000 in April, up 6.6 percent from last April, according to DataQuick. That happened even though the number of existing homes sold in April fell 19.9 percent. The month was the 27th in a row in which sales volume declined, and April’s sales count was the lowest in 12 years.”

“The Bay Area numbers come with some caveats, however. The median price is skewed by strong activity at the upper end. ‘The volume (of sales) being low tells you that we’ve lost the bottom 20 to 30 percent of the market that can’t qualify for mortgages,’ said economist Ken Rosen, at UC Berkeley.”

“‘In starter neighborhoods, you’re more likely to see big sales drop-offs from last year and more significant price declines,’ DataQuick analyst Andrew LePage said.”

“Bearing out that thesis, Realtor Leif Jenssen recently cut $20,000 off the price of a 2-bedroom, 1-bathroom home he’s selling in Oakland’s Maxwell Park, which he considers a starter neighborhood, with home prices from $400,000 to $550,000.”

“‘If you search six blocks in either direction from the house, there are 80 houses for sale,’ he said. ‘The one right next door, which is a bit smaller, came on the market at $449,000. We were at $495,000 so (we reduced the price) to $475,000.’”

“Maxwell Park exemplifies the kind of area likely to suffer from the subprime problems. ‘It will probably have a fair amount of foreclosures because a lot of people buying in that neighborhood were low-income and didn’t have money to put down,’ Jenssen said. ‘I see properties out there that say they’re bank-owned (which means they have been foreclosed).’”

The Santa Cruz Sentinel. “There is a flip side to the April median home sales price that is near the record set in the red hot market of 2005. ‘The homes that are selling are the more expensive ones,’ said Herbie Lee, a statistician at UC Santa Cruz. ‘The low end of the market is what they’re selling less of.’”

“‘Cheaper places aren’t selling, so I think what is happening is only more expensive places are moving, thus making the median look so large,’ said renter Scott Oliver.”

“His theory is that people with better credit can get large loans to buy pricey homes whereas people with lower incomes who were buying less expensive places are no longer getting the no-verification loans that used to be granted.”

The Contra Costa Times. “While East Bay home sales slid to their lowest-selling April in 12 years, the median home price rose 4.3 percent in Contra Costa County, DataQuick reported.”

“‘The sharp drop-offs in entry-level neighborhoods have been dragging down sales,’ said DataQuick analyst LePage. ‘Contra Costa’s median price is up 4.3 percent, but that’s because there are fewer starter-homes sold.’”

“LePage said that tougher lending practices, foreclosures and higher rates have led to fewer first-time homebuyers being able to afford a home. And with less of those lower-end homes selling, the price of higher-end homes sold rises, skewing the statistics.”

“In areas where the typical price is less than $550,000, there could be 30 to 60 percent declines in sales. ‘Buyers are being very cautious,’ said Paul Ward, a broker associate in Danville. ‘There has been a big drop in transactions and cautious buyers and speculators are out of the market.’”

The Mercury News. “In the more expensive counties, median prices continue to defy the slowdown because the mix of homes that are selling has changed. Some local realty agents attest to the slowdown in ‘entry-level’ homes in Santa Clara County.”

“In the under-$700,000 price range, especially on San Jose’s East Side, ‘There’s a lot of homes out there right now and they’re not moving because there’s no one out there to buy them,’ said (broker) Robert Aldana.”

“He works with many clients on the East Side, which is suffering higher default rates than other parts of the county.”

“Creekside Realty owner Richard Calhoun said that in March and April, sales of houses in the high-priced cities of Mountain View, Palo Alto and Los Altos, for example, went from forming about 10 percent of sales in Santa Clara County to being 25 percent of sales.”

“‘Right now we’re seeing the reality of the financial well drying up,’ Aldana said. ‘I don’t think this is going to be a thing that lasts forever, but we’re going through some tough times.’”

The Manteca Bulletin. “The courthouse steps in Stockton are about to become the busiest sales location for South County homes. In a 17-day period starting Monday, 69 homes in Tracy, Manteca, Lathrop, and Mountain House are going on the auction block.”

“Long-time Manteca real estate broker Bev Marlow said she wasn’t surprised but was ‘dismayed’ at the foreclosures. ‘A lot of people put their heads into the sand,’ she said.”

“The biggest impact of the foreclosures won’t hit until the lenders repossess the homes officially on the courthouse steps. That means in the coming weeks the lenders will be putting those homes back on the market.”

“Unlike the buyers being foreclosed on, the lenders will price the homes to move to reduce their losses. That explains why one lender who foreclosed on property in Lathrop’s Mossdale Landing listed the home built in 2005 that sold over a year ago for $620,000 for $377,950 even though it passes inspections with flying colors and is in excellent shape.”

“The list of foreclosures moving forward to bid shows at least two other homes within two blocks where the lenders are owed in excess of $500,000. Tom Wilson, who has 31 years of experience in the Manteca-Tracy market, expects lenders to price those homes fairly aggressively which would put a damper on the sellers of other previously owned homes.”

“Compounding the market is the fact there are almost 570 resale homes for sale within Manteca’s city limits as of Monday. That doesn’t count new homes or homes being sold by the owner without an agent.”

“‘That kind of market conditions with an existing 10-month inventory means price is what is going to sell a home,’ said Wilson.”

“There were 586 notices of default sent to homeowners in the first three months of 2006 throughout San Joaquin County. That amount jumped by 193.7% in the first quarter of this year to 1,721 such notices. With the glut of homes on the resale market home sales are sluggish even for short sales where the owner sells for less than is owed of the home.”

“Wilson said it is also unfair to use subprime loans as the whipping boy for the rash of foreclosures.”

“‘The idea that subprime loans are entirely behind all of this is a fallacy,’ Wilson said. ‘People let themselves get lulled into the idea they could afford more house than they could. They bit a lot more off than they could chew with escalating interest payments.’”

The Daily Press. “With sales of new and existing homes plummeting to nadirs not seen for over a decade, some developers in San Bernardino County are putting homes on the auction block.”

“‘We are in for some unpleasant market adjustments, including lower prices,’ said John Karevoll, a DataQuick analyst. ‘Over the next six to nine months, there will most likely be a drop of about 8 percent from San Bernardino County’s peak price last November,’ Karevoll said.”

“Kennedy Wilson Auction Group usually handles between 100 and 250 auctions per year. But the auctioneer has seen a ‘dramatic increase’ in business since the fall of 2006, according to VP Marty Clouser.”

“One local developer putting properties under the gavel is National Security Construction, which is offering seven luxury homes in Rancho Cucamonga. The auction is scheduled for June 16, with opening bids of up to 40 percent off the pre-auction price.”

“‘We want to let the buyers decide a realistic price by putting them in the driver’s seat and letting them go after the kind of bargain they want,’ said Shone Wang, president of National Security Construction.”

Inside Bay Area. “Mortgage fraud rose significantly last year in California, which ranked No. 2 in the nation among other states for fraud incidents, a new study revealed Wednesday.”

“Stagnant and declining property values were blamed for California’s rise in frauds, according to Nick Larson, for the Mortgage Asset Research Institute. ‘Declining property values make it harder for fraudsters to cover their tracks and sell a house quickly,’ Larson said.”

“‘We’ve been talking to anybody who would listen for years about the negative impact (of mortgage fraud) on consumers and neighborhoods and trying to upgrade the industry,’ said Ted Grose, past president of the California Association of Mortgage Brokers. Grose said fraud would be reduced if the state’s laws against ‘fraud and lying’ were enforced.”

A report from the Colorodoan. “As subprime lenders close their doors, foreclosure rates increase and home prices dip, the American dream has turned rapidly frightening. ‘The end result is that fewer people will get into homes,’ said Cynthia Torp, founder of The Angel Investment Network in Fort Collins, which helps people qualify for new home loans.”

“‘We have an excess supply of housing,’ regional economist Martin Shields said. ‘Any time there is a tightening of credit and foreclosures, it reduces the demand and foreclosures increase the supply. It has to put more pressure on prices.’”

“Longtime Loveland Realtor Eric Holsapple said the subprime meltdown will affect a certain sector of the population, but overall it will not be a bad thing for Larimer County.”

“‘So many of the loans were adjustable rate mortgages (ARMS) or interest-only loans; they got people in who couldn’t afford it,’ he said. ‘The only way it could work is if the home kept appreciating in value. That’s not the American dream to have a home that’s a risky investment for people and 100 percent financed.’”

“With Colorado leading the nation in foreclosures much of last year, many lenders are taking 5 percent off every appraisal and borrowers have to put up bigger down payments. ‘There will be a whole lot less people who can afford that,’ Torp said.”

“If foreclosures continue on their current pace, Larimer County’s foreclosure rate is expected to increase by about 20 percent by the end of the year.”

“Seventy-five percent of those foreclosures are the result of refinancing, said Kathi Williams, director of the Colorado Division of Housing in Denver.”

The Greeley Tribune. “Colorado came in at No. 2 in the nation for foreclosure rates, recording 16,435 foreclosures from January through March. That represents a 6 percent jump from the same time last year.”

“In Weld County, the first quarter recorded 647 foreclosures through the Public Trustee’s office, a 31.5 percent jump from the same time last year. For the year, there have been 865 foreclosures in Weld.”

The East Valley Tribune from Arizona. “Reports of Arizona mortgage fraud spiked last year, mirroring a nationwide trend, as lenders scrutinized deals more closely and falling home prices unmasked shams.”

“‘The Southwest United States has been an increasing hotbed for mortgage fraud activity,’ said Nick Larson, assistant VP for the Mortgage Asset Research Institute.”

“‘When you have a lot of bidding on properties, it really does strain a lender’s ability to differentiate between a legitimate loan’ and schemes, Larson said.”

“The number of fraud cases reported in Arizona in the first three months of 2006 was 213 percent higher than the same period the year prior, according to the study. The state also saw an increase in the number of fraud cases involving subprime loans, jumping to No. 6 in the nation from No. 19 in 2005.”

“Eric Bowlby, president of Amerifirst Financial in Mesa, said he interviewed more than 150 job applicants in the past three months, hired 11 and fired five. ‘We have too many people in the industry,’ he said. ‘When you have an uneducated sales force, fraud is going to run rampant.’”

“The Valley has seen lenders pushing for false appraisals, misusing stated-income loans, conducting cash-back schemes and more, Mesa loan officer Shailesh Ghimire said. Everybody saw prices going up and tried to make it work, Ghimire said.”

“Now his business is feeling the pinch of tightening lending guidelines resulting from the subprime market crisis. Last year, it would have been possible to qualify someone with a 580 credit score, but now we need a 620 score, he said.”

“‘The last two months, I’ve seen guidelines change completely,’ Ghimire said.”

The Review Journal from Nevada. “Home Builders Research reported another dismal month for housing in Las Vegas in April, home building analyst Dennis Smith said Wednesday.”

“He counted 1,568 recorded new home sales in April, a 40.7 percent decline from the same month a year ago. Existing home sales fell 36.6 percent to 2,353, the second-lowest monthly total in the past six years.”‘

“This correction or slump or slide or dip or whatever you want to call it is deeper and longer than most expected,’ Smith said. ‘It will get better, but until sales and permits improve, it will continue to be very painful for a lot of folks and businesses.’”

“‘We all agree we have limited land supply and we continue to have strong economic growth in Las Vegas, regardless of residential construction. The key for us is residential listings must drop before this market improves. Part of that is owners are not pricing their houses properly and that’s why they’re not selling,’ Pardee Homes Division President Klif Andrews said.”

“Robin Camacho of Direct Access Lending said she can see that the median price isn’t accurately reflecting house values right now, but she can really only make an educated guess as to why.”

“‘Our research does show that the number of homes listed on the MLS for less than $270,000 has increased substantially in the past year,’ she said. ‘This indicates that prices are falling, though people are actually still paying the same but getting more for their money.’”

“Camacho said she can spot when prices are rising or falling earlier than most analysts with her up-to-the-minute data, but she hesitates to give exact figures as she uses a different indicator.”

“‘It is very accurate in terms of direction, sort of like a compass in that I can see the general direction we are traveling,’ she said. ‘And what I definitely see is that houses are dropping in value at a steeper decline than the median price indicates.’”

The Deseret News from Utah. “While states and regions around the country are reporting bursting housing bubbles and slowing job growth, Utah’s economy remains strong, according to a report released Tuesday by the state’s Department of Workforce Services.”

“‘It’s not like we sprinted past Nevada and Arizona. It’s like we stood still and watched them slip past us, going downward,’ said the department’s senior economist, Mark Knold. ‘They’re more vulnerable to the national problem that’s going on right now, which is the housing bust.’”

“Utah didn’t add much air to the current bubble, Knold said. Not much Utah money went into the speculative housing market.”

“All but one of the 11 job categories measured by the department reported year-over growth. Construction led the way, adding 14,000 jobs, followed by the trade, transportation and utilities sector.”

“‘We’re in a growth spurt. We’re riding a high wave right now in the state of Utah,’ he said. ‘It’s very difficult to see anything to be worried about on the horizon, at least the short-term, immediate horizon.’”

“New housing permits issued across Utah in this year’s first quarter continued to tumble, indicating a housing slowdown could be around the corner. For the three months ended March 31, permits issued for new houses, condominiums and apartments in the state fell to 5,267, a 13 percent drop from the same quarter in 2006, according to a report.”

“Many of the state’s strongest housing areas showed double-digit declines. In Draper, housing permits in the first quarter were down 36 percent. Herriman issued 38 percent fewer permits than it did a year ago. South Jordan also showed a 38 percent drop. Lehi saw permits fall by 33 percent. Housing permits in Spanish Fork were down 23 percent, and in St. George, permits decreased 14 percent.”

“Mark Knold, senior economist at the Utah Department of Workforce Services, said housing permits overall this year will be down compared to 2006, marking the second consecutive year of declining housing permits.”

“‘And I anticipate that ‘08 will be lower than ‘07,’ Knold said. ‘But I don’t see the (first quarter) 13 percent drop as being alarming. We knew that was coming. The run-up that started in ‘03, ‘04 and ‘05, we knew that it was going to be high, and we also knew it was going to turn around and come off that peak and go back down.’”

“‘From 1990 to 2000, construction employment grew by 200 percent,’ Knold said. ‘We went from 23,000 people employed (in construction) in January 1990 to 67,500 in January 2000. In January 2007, we project that number at 96,600.’”

“Clint Carter, a building official with Lehi, predicts the city will issue roughly 1,500 housing permits this year, about a 9 percent drop from 1,649 issued in 2006. Yet if the first quarter numbers are any indication, the decline could be more severe.”

“‘We’ve noticed a little bit of dropoff,’ Carter said.”

Some housing bubble news from Wall Street and Washington. “Facing criticism from members of Congress about lax regulation, ederal Reserve Chairman Ben Bernanke promised that the Fed would do everything possible to crack down on abuses that have put millions of homeowners in jeopardy of defaulting on their mortgages.”

“‘We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers,’ Bernanke said in remarks prepared for a financial conference.”

From MarketWatch. “‘Combating bad lending practices, including deliberate fraud or abuse, may require additional measures,’ said Bernanke. ‘Markets can overshoot, but, ultimately, market forces also work to rein in excesses,’ the top central banker said. ‘In the long run, markets are better than regulators at allocating credit.’”

“Banks and other lenders are tightening their standards for subprime, near-prime and even prime borrowers, a Fed survey of banks’ loan officers showed earlier this week.”

“‘Curbs on this lending are expected to be a source of some restraint on home purchases and residential investment in coming quarters,’ Bernanke said.”

“About 14% of the outstanding first-lien loans, some 7.5 million, are subprime loans. Near-prime, also known as Alt-A or nontraditional loans, account for 8% to 10%.”

From Bloomberg. “‘We are likely to see further increases in delinquencies and foreclosures this year and next as many adjustable-rate loans face interest-rate resets,’ Bernanke said.”

“Bernanke said demand for high-yielding bonds in capital markets played a role in the fall in loan standards as subprime mortgage lending expanded. ‘The practice of selling mortgages to investors may have contributed to the weakening of underwriting standards,’ Bernanke said.”

“Lawmakers and consumer advocates have blamed the Fed and other regulators for lax enforcement during the record $2.8 trillion mortgage boom between 2004 and 2006.”

“At the urging of Congress, the Fed and other regulators issued a proposed guidance on prudent lending standards on subprime loans. Officials published the proposed guidance March 8. The Fed didn’t publicly rebuke any bank for failing to follow up on guidance on lending practices in the period.”

“Regulators could have ‘done more sooner,’ Roger Cole, the Fed’s chief bank supervisor told legislators in March. ‘Given what we know now, yes, we could have done more sooner,’ Cole told the Senate Banking Committee.”

From Forbes. “Each month, Daniel Oppenheim and Banc of America colleagues survey 4,000 real estate agents across the U.S. The topics. The numbers give Oppenheim a sense of pricing.”

“‘There’s still a lot of uncertainty among us as to when the recovery will come,’ says Oppenheim. Broadly, the data these days tell Oppenheim that home prices have further to drop. ‘We still have excess inventory relative to demand,’ he says.”

“These days, Budd Bugatch, furnishings analyst at brokerage house Raymond James, doesn’t mince words when it comes to conditions for companies in his coverage area. ‘Awful,’ he says, ‘It’s as bad as when it was when I was in the business in the mid-’70s.’”

From Business Week. “The news from the U.S. Census Bureau that housing starts actually increased in April was surprising, to say the least. But don’t let April’s report fool you, there is nothing encouraging in these new figures.”

“As in the past, the percent increase still fell well within the census’ margin of error of plus or minus 9.3%, so we can’t say for certain whether they even rose at all. Comparisons to last year were not pretty either: starts were down 16% from a year ago.”

“The biggest indication of a still struggling housing market came in the form of poor building permit numbers. In the month of April, permits fell 8.9%, the sharpest drop since February, 1990, to 1.429 million units, the lowest level in nearly 10 years. Compared to last year, permits were off 28.1%.”

“‘My overall take is that the downward adjustment in the housing sector is still ongoing,’ says National Association of Home Builders chief economist Dave Seiders. ‘I don’t view this little bounce as a sign the fundamentals have improved.’”

“Back in January many economists were sure the housing market was evening out. In the second half of the year, real estate would rebound, or so went the common prediction. Now, it’s obvious that a turnaround may not take place until the fourth quarter of the year.”

“‘The downtrends are still in place–probably not looking for a fundamental bottom until late in the year,’ Seiders says. ‘The signals coming out of ‘06 were that the demand side had stabilized, but everything was changed by the subprime mortgage market meltdown and subsequent tightening in lending standards. The uncertainties right now are tremendous.’”

The Associated Press. “A survey by the National Association of Home Builders released Tuesday indicated that there are more troubles to come as builder sentiment fell to an index reading of 30, matching the low point in the current downturn set in September.”

“NAHB economist David Seiders said he changed his forecast to show a bigger 22 percent drop in construction starts this year, with 2008 showing a small 4 percent improvement, and the current slump ranking as the most severe since the 1990 housing downturn.”

“‘The housing sector got grossly overheated during the boom period, and there is a lot of payback going on now,’ he said.”

From Reuters. “OceanFirst Financial Corp. said it decided to close down its mortgage banking subsidiary as the unit incurred significant operating losses in the last two quarters from subprime mortgage loan originations.”

The Orange County Register. “Option One Mortgage Corp. of Irvine is laying off 20 percent of its staff, or 600 workers, including 133 in Orange County. It also is closing 12 loan processing offices nationwide, the company said Wednesday.”

“The lender, which funds loans brought by brokers, will stop buying loans in bulk, said Christine Sullivan, a spokeswoman for the lender.”

The Daily Southtown. “ACC Capital Holdings Corp., parent company of sub-prime mortgage lender Ameriquest Mortgage Co., will cut hundreds of jobs in the Chicago area later this month as part of an earlier announced nationwide consolidation.”

“The move is part of a final resolution arrived at last year with attorneys general in 30 states who investigated the company for possible predatory lending practices.”

“ACC spokesman Chris Orlando stressed that not all the local layoffs are from Ameriquest, but also include ACC’s other subsidiaries, Argent Mortgage Company, a wholesale mortgage loan operator, and AMC Mortgage Services, which handles loan servicing.”

A report from the Washington Post. “Two years ago, during the giddy real estate frenzy, some investors bought 300-plus garden-style apartment units in Fairfax County to convert to condominiums. Yesterday, a California bank foreclosed on the group’s loan and bought the property, minus about 45 units that had been sold. The bank, Fremont Investment and Loan, said it hoped to resell the property.”

“‘It’s part of the slowing housing market,’ said Scott MacIntosh, senior economist for the National Association of Realtors. ‘Fewer first-time buyers are willing to take that risk and go out and buy.’”

“In the first quarter of the year, 3,472 condo units that were either in the planning stage or about to come on line in the Washington area were changed to apartments and another 790 were simply canceled, according to a report by Delta Associates.”

“In 2005, there were about 13,000 condos sold in the Washington area, compared with 6,600 last year, according to Delta. The market has a bloated, 3.4-year supply of condos.”

“William Rich, a VP of Delta, said some condo projects are moving forward. ‘Some developers are just going to plug ahead and wait it out because they think their project is better than what’s out there,’ he said.”

“Yesterday, at 1 p.m., the foreclosure was announced, and one of two substitute trustees, read a dry description of the property in front of the steps of the Fairfax County Judicial Center. The first bid, $50 million, came from Eron Sodie, the lending bank’s vice president and regional manager in Bethesda.”

“Portfolio manager Chris Beaulieu of Ritchie Capital. He bid $51 million. The bank went to $55 million. The Illinois man bid $55.5 million. The bank came back with $60 million. The Illinois man backed off. The bidding ended.”

“Afterward, Beaulieu was asked whether his firm would have stuck with the condo plan. Citing the uncertain market, he said: ‘We were going to take a fresh look. We were looking at different options given the deteriorating market.’”

The Baltimore Messenger from Maryland. “Lagging condominium sales and uncertain prospects for public financing have stalled The Olmsted, a planned condo and retail building on the west side of St. Paul Street in Charles Village.”

“Struever Bros. Eccles & Rouse has sold only about 25 percent of the 68 condos that it built in the Village Lofts building. Now, the developer is seeking the city’s approval to redesign The Olmsted, by increasing the number of stores and condos and making the condos smaller than originally planned.”

“Right now, the project doesn’t look like anything. It’s a bulldozed lot where University Minimart used to be.” “Another problem is that investors so far are unwilling to buy Tax Increment Financing bonds that the city agreed to sell to finance 400 public parking spaces and streetscape improvements, such as crosswalks that are half built.”

“Investors are reluctant to buy TIF bonds because the condo market is soft and Struever Bros. is having difficulty selling Village Lofts condos, said Councilwoman Mary Pat Clarke.”

“‘We’re not getting the speed of sales we’re looking for,’ said Joshua Neiman, senior development director for Struever Bros.”

“Original plans for The Olmsted called for 119 condos up to 1,200 square feet and starting at more than $400,000. The need for smaller, less-expensive condos became evident because of slow sales in the Lofts, Neiman said.”

“Rough plans now call for The Olmsted to have as many as 252 condos that could be as small as 700 feet and would be priced as low as $250,000, Neiman said.”

“No one blames Struever for the downturn in the housing market. ‘They missed the bubble,’ Clarke said. ‘We’re all in the same boat. We didn’t create the economy.’”

From Your4State.com in Maryland. “Washington County has more than 1,300 homes with for sale signs, but with a buyer’s market how difficult is it to sell a home and get the price you want?”

“A year ago, homes in Washington County stayed on the market for an average of 86 days. Today, that number’s changed. Realtors say a home can take up to 176 days to sell. ”

“‘If you’re a buyer it’s a big advantage right now because you can be kind of picky. There’s a lot to look at and the prices have come down since last year,’ says Dan Plombon of MackIntosh Realtors.”

“Plombon says that sellers need to be realistic in setting the price for their home, be flexible, consider all offers and be sure to make all the necessary upgrades.”

The News & Advance from Virginia. “Changes in the mortgage market are starting to affect the Lynchburg real estate market. Financing homes recently became more difficult for people with less than perfect credit, said Wayne Ramsey, Lynchburg Association of Realtors president. Especially since lenders stopped approving subprime loans. Ramsey said lenders were approving these loans one day, and stopped the next.”

“Local mortgage brokers in Lynchburg say the lenders they work with are becoming pickier everyday. Jay Brown, a mortgage officer for American National Bank and Trust Company, said one lender the bank deals with accepted a 600 credit score for a 100 percent mortgage just a few months ago. Now, the company will only accept a score of 660.”

“‘Four months ago, it was hard not to get a loan,’ Brown said. ‘You could have bad credit and no documental income.’”

“Brown said now he gets a rate sheet from lenders, who purchase the mortgages from the bank, detailing what the acceptable credit scores are for that day. ‘The people we work with have changed their lending practices,’ he said.”

“Both Brian Cash, VP of the Bank of the James mortgage division, and Brown said the market started to slump because people weren’t paying back their loans. ‘It is all driven by the foreclosure rate,’ Brown said. ‘There is nothing we can do about it. It is what it is.’”

“Brown said the decline of the subprime market hasn’t hit Lynchburg the same way it will Northern Virginia. ‘Over the past couple of years when you put people in a house they couldn’t afford, chances are they aren’t going to pay it back,’ he said. ‘The companies have been forced to cut back.’”

“Lenders are now requiring high down payments from people with low credit scores, Brown said. ‘People are less likely to walk away from something they’ve put their own money into,’ he said.”

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