The Housing Bubble

The Daily Bulletin reports from California. “New guidelines for federally regulated mortgage lenders announced Friday will make loans tougher to get, but those who follow the market disagree on how widespread their effect will be. ‘This is going to hurt the housing market dramatically,’ said Steve Johnson, director of the Southern California office of real-estate think tank MetroStudy. ‘It is probably going to add 12-14 months to the recovery from the current downturn.’”

“Regional economist John Husing of Redlands disagreed, calling it a classic example of ‘closing the barn door after the horse was stolen. ‘This does nothing for the problems that already exist; all it does is make sure that these mistakes will not occur again,’ he said.”

“‘A lot of those loans are loans that should not have been made,’ Husing said. ‘Anytime you have a speculatize boom with excesses, there are prices to pay. This time we have homeowners, we have people who were trying to flip properties and we have the enablers.’”

The Auburn Journal. “Some homeowners and DarkHorse officials are staying positive despite a planned foreclosure on the 1,046-acre luxury development in Nevada County.”

“Owens Mortgage Investment Fund, a lending company based in Walnut Creek, announced late last week that it would sell the land to the highest bidder on Aug. 17 if owners fail to make late payments on the loan of nearly $16.4 million.”

“DarkHorse developers, Chad and Ed Fralick, a father-and-son team from Lake of the Pines, are the principals in the defaulted loans.”

“‘I have no work out there,’ said said Michael Holland, owner of Masterpiece Construction of Auburn. ‘I basically wasted my time doing Street of Dreams and spent a lot of money on a home no one wants to buy.’”

“Terry Williams, DarkHorse sales director,…blames the development financial woes on the housing market. ‘The lots weren’t selling,’ Williams said. ‘The whole real estate market has dropped off tremendously over the past year and it is just now starting to recover.’”

“Williams said he is still receiving a lot of interest in the homes, but buyers in general are hesitating. ‘I think buyers are holding off to wait and see what happens,’ he said.”

The Sacramento Bee. “At its peak, just a couple of years ago, Rich Muma’s real estate and mortgage mini-empire employed 25 agents and other workers. Today the office in Elk Grove is closed and the business consists of one employee: Muma, who’s ‘doing an occasional deal’ while trying to land somewhere stable.”

“‘I’ve been trying to find other employment myself,’ said Muma.”

“California’s housing slump isn’t just bad news for homeowners looking to sell. It’s taking a worsening toll on those who depend on housing for their livelihoods, from Realtors to construction workers, and on the economy at large.”

“‘I don’t see a turnaround anytime soon,’ said Steve Benjamin, president of Production Framing Systems Inc. of Sacramento. The company, which constructs frames for new homes, has cut employment by half in two years, to about 500 workers, he said.”

“The white-collar end of the business seems to be suffering more. The mortgage industry is in deep trouble and has caused one Folsom company, Central Pacific Mortgage, to go out of business. Ameriquest Mortgage Co. laid off more than 300 workers in Rancho Cordova.”

“Times are tough for real estate agents, too. Mike Lyon, president of one of the most prominent firms in Sacramento, said he is deluged with calls from brokers attempting to sell their businesses to him. He’s passed on all the offers.”

“‘There’s no way for us to bail them out,’ Lyon said. ‘Their business is unrepairable.’ Most were started by novices ‘without a general history of the ups and downs of real estate,’ he added.”

“Things were going well, but by late 2005, Muma said, he could tell that business was slowing. As 2006 wound down, sales volume was down 40 percent, and Muma was having trouble justifying a monthly overhead of more than $25,000.”

“He closed the office last December; his agents and other employees scattered. Muma sold most of his office equipment. ‘I got about 10 cents on the dollar,’ he said. ‘There’s no real demand for that product right now; it’s like the market for foreclosed homes.’”

The San Francisco Chronicle. “The cream-colored rancher at 19131 Garrison Ave. in Castro Valley sold in about 11 minutes on a Friday afternoon in late July. But unlike the boom days, there was no staging, no standing-room only tours and the multiple offers were of a far different sort.”

“The owner, who struggled to sell the house for about six months, let it go to the highest bidder. That bid came in at $450,000 - well below the mid-$500,000 asking price earlier this year, but above the $350,000 or so owed on the house, according to the auction company.”

“Buyers, facing a fast-changing market that has been so unaffordable for so long, are taking the leap and praying for a discount. ‘Basically I drove up here … and 15 minutes later I owned a house,’ said Dane Andrew, winning bidder of the Castro Valley house. ‘I think I did pretty well.’”

“Centennial Homes, the developer of the Chanate Village townhome project in Santa Rosa, hopes the process works for new homes. The company is working with Beverly Hills’ Kennedy Wilson Auction group to sell off 22 new townhouses late this month.”

“Some of the properties have minimum bids of $200,000 below the seller’s original asking price. The builder is willing to take the price cut in order to get the homes off the books.”

“Owners of the 11 other homes in the development may not be happy with the lowered prices, but Kennedy Wilson President Rhett Winchell notes that empty townhomes lingering on the market for another year would be even more harmful to property values.”

“Andrew, the Castro Valley winner, hopes to translate any discount he received into quick cash. He plans on putting the Garrison Avenue house on the market almost as soon as escrow closes. But he doesn’t plan on using an auction. ‘I think we could do better on our own,’ Andrew said.”

The Times Delta. “In Tulare County, foreclosures are on the rise, dramatically, as homeowners who had mortgages with initially low payments are unable to meet the higher payments that kicked in after a few years. Notices of default, precursor to foreclosure, are running almost three times the rate of two years ago.”

“As homes are turned back to lenders and residents move out, many Visalia neighborhoods have been left with empty homes that no one cares about.”

“At 2008 E. La Vida Ave., there is an abandoned home in the South Pointe neighborhood, where most homes are less than 5 years old.”

“Neighbor Dena Brown wouldn’t mind buying the house next door. ‘It has just sat there empty for months,’ Brown said. If Brown doesn’t purchase it, she wishes someone else would because the dry grass is a safety hazard.”

“‘We stayed home on July Fourth because we weren’t sure if something would catch fire,’ Brown said.”

The Bakerfield Californian. “Gov. Arnold Schwarzenegger mentioned working with the real estate community to ensure standing water is emptied and pools are maintained in last week’s state-of-emergency proclamation.”

“‘It’s easy to say, ‘The Realtors can help us,’ said Ray Karpe, president of the Bakersfield Association of Realtors. ‘As concerned citizens, maybe we will, but is it our responsibility?’”

“‘We are in a state of emergency, and that means that folks need to make an extra effort,’ said Sen. Dean Florez, via e-mail. ‘It is fair to say that they are on the front lines of this epidemic for the mere fact that they probably have the most up-to-date information on homes that are for sale or in some cases in foreclosure.’”

“Karpe told The Californian his organization could send out an e-mail or letter to its members, urging them to be on the lookout for green, abandoned pools and to report them to the local mosquito abatement office.”

“‘I don’t know what else we can do,’ he said. ‘I can’t make anybody do anything.’”

“‘What we’re doing is urging everyone — homeowners, Realtors associations, brokers — to assist with efforts,’ said Suanne Buggy, spokeswoman for the state Department of Public Health. ‘(The stagnant pools) are just new this year because of the level of foreclosures.’”

“‘If you’re upset with somebody, maybe you should be upset with the deadbeat who didn’t make their payments,’ said broker Darrell Sparks.”

The Kane County Chronicle reports from Illinois. “Real-estate agent Rob Buhrow recently performed a market analysis on an Elgin property for a local bank, and every comparable home he turned up was a foreclosure property. ‘I’m like, ‘Oh my God,’ Buhrow said. ‘It makes you think – what’s really going on?’”

“Buhrow is not the only one asking that question. The numbers paint a jarring picture. In March 2007, for instance, the number of foreclosure filings in Kane County numbered 497. That is more than the total number of foreclosure lawsuits for the entire first three months of 2006 combined.”

“Karla Sitko, manager at Avenue Mortgage’s St. Charles branch, said that when the housing boom was hot, many lenders rushed to grab a piece of the market, writing loans to consumers who couldn’t really afford them, Sitko said.”

“‘If they were doing it to keep up with the Joneses, they should not have had those loans,’ Sitko said. ‘And there were a lot of lenders who were writing these bad loans, and knew they were writing the bad loans, and just didn’t care.’”

“And as the market has turned, there might be no way out for some saddled with those bad loans, said Keith Wolf of Winfield Realty, who now markets foreclosed properties after a career in banking and finance.”

“‘Because of the housing boom, with prices appreciating, a lot of people in trouble could just refinance,’ Wolf said. ‘But now a lot of those people are back in foreclosure.’”

From Chicago Business in Illinois. “The depressed housing market has pushed the supply of vacant lots for new homes in the Chicago area to its highest level in about 15 years, according to a new report.”

“Builders were sitting on 66,246 lots at the end of the second quarter, a 2.3% increase over the first quarter and a 14.0% jump from the year-ago period, according to Metrostudy, a Houston-based research firm that tracks the housing market. That represents a 34.3-month supply of lots, based on the current sales pace, the largest inventory since the early 1990s.”

From BlueridgeNow in Illinois. “Plenty of companies are absorbing the ill effects of the yearlong slump in housing construction and sales. But few have felt it as forcefully or as suddenly as the USG Corporation, the nation’s largest maker of drywall, the paper-wrapped plaster boards used to build walls in homes and offices.”

“USG, based here in Chicago, is in some ways a throwback to earlier times, when far larger swaths of the economy were unprotected against the brutal ups and downs of the business cycle.”

“‘Business is tough,’ said William C. Foote, CEO of USG. ‘The housing recession is entering the second year of what is likely to be a multiyear downturn.’”

The Lacross Tribune from Wisconsin. “Home foreclosures in La Crosse County this year are up by nearly a third over the pace in 2006, mirroring a statewide rise of nearly two-thirds.”

“‘It is an alarming trend, and banks have already admitted they’ve been too loosey-goosey with lending and they’ve pulled back considerably,’ said Sheridan Glen, manager of the Capitol Corridor office of First Weber Realtors in Madison.”

The Star Tribune from Minnesota. “The foreclosure problem in Minnesota last year was almost twice as bad as previously estimated. Based on sheriff’s sales of foreclosed properties, there were 11,207 foreclosures statewide last year, nearly double the 5,995 previously reported in Minnesota by RealtyTrac.”

“Warren Hanson, president of the Housing Fund, describes the situation as a ‘natural disaster’ akin to ‘10 Red River Valley floods hitting Minnesota all at one time.’”

CNN Money on Michigan. “Nouveau Riche offers real estate investment classes -and a host of related products and services - to would-be tycoons. The way the Michigan real estate market is headed, it might not be so easy.”

“According to Judy Brant, a broker in Fenton for more than 20 years with Coldwell Banker, the inventory of homes in Genesee County, which includes Fenton, averaged 2,000 units in 2005. Today it is 8,000, up 300%.”

“When Brant heard that Nouveau Riche students had bought 60 condo units in her town, sight unseen, she said, ‘I’m speechless…prices are falling faster than you can imagine: 10% last year and another 10% this year. Who knows when it will reach rock bottom? As far as rental properties, it’s hard to rent anything here now. Houses and apartments sit empty all over town.’”

The Springfield Business Journal from Missouri. “Upscale homes haven’t escaped a wave of foreclosures that’s flooding the Springfield housing market with a record amount of bank-owned real estate.” “Foreclosures in Greene County are up 43 percent over last year through July 31, according to the Recorder of Deeds office.” “Lenders are repossessing homes in some of the area’s most prestigious subdivisions. And in the exclusive gated community of Highland Springs, a recent streak of defaults prompted lenders to foreclose on some of the market’s priciest homes, two of which sold for more than $1 million in 2005, according to Greene County property records.” “‘We’re in a transition market, so it’s hard to judge foreclosures,’ said Scott Rose, president of the Greater Springfield Board of Realtors. ‘Unfortunately, it’s kind of that subprime story.’”

“Rose said the rising number of foreclosures in Greene County also may be a sign that area builders riding the real estate boom had too much new housing inventory when the market began cooling last year. ”

“Springfield Realtor Peggy Mitchell, who specializes in foreclosure properties, thinks there’s a simpler explanation. ‘When you’ve had a very strong economy where more people could get loans, you’re going to see more repos,’ said Mitchell. ‘It means you’ve had a great economy, and people that should have rented, bought. A certain number of people lose their homes.’”

“‘That’s just the American way,’ said Mitchell.”

Some housing bubble news from Wall Street and Washington. “As the market corrects itself Standard Pacific’s investors are scared, sending shares of the homebuilder down to levels unseen since the last bubble.”

The Orange County Register. “‘We’re hearing they’re about to violate bank covenants,’ said Joseph Saluzzi, co-head of equity trading at Themis Trading LLC.”

“‘Standard Pacific stock is down because of talk of liquidity concerns,’ said analyst Frederic Ruffy. ‘We had a similar rumor on Beazer Homes last week. There is a general fear that the problems are spreading beyond the subprime lenders.’”

The Miami Herald. “WCI Communities said 17 percent of its condominium buyers have walked away rather than close on new units this year, the latest indication of trouble in the condo market.”

“WCI also said the company is not in default of any credit agreements. Still, the builder said it’s renegotiating terms with lenders to ‘provide broader latitude to operate during the protracted downturn.’”

“‘Buildings yet to close from now through the middle of 2009 will see progressively higher walkaways because they were contracted later in the boom cycle when prices were at the highest point,’ said Deerfield Beach real estate analyst Jack McCabe, who has long argued that too many condos were built.”

The Associated Press. “HomeBanc Corp., a mortgage lender and servicer in the Southeast, said Tuesday it is exiting the mortgage origination business.”

“HomeBanc has been unable to tap its lines of credit in order to fund new originations, which has led it to cease its lending business. The company said it had to stop funding all mortgages Monday because of the loss of liquidity.”

From MarketWatch. “Shares of Luminent Mortgage Capital Inc. slumped on Tuesday after the home loan investment company warned that it’s been hit by lots of margin calls as the secondary mortgage market ’seized up.’”

“Luminent said last week it was not really subject to this risk. It does not issue loans, but rather purchases loans backed by good credit. The company confirmed it still planned to pay its dividend and had enough cash to keep operating.”

“A week later, Luminent issued a news release some analysts said spells the company’s demise. Luminent’s markets ‘have deteriorated significantly and in an unprecedented fashion.’ Its lenders want their money back.”

“Joseph R. Tomkinson, CEO of Impac Mortgage Holdings, Inc. announces the following response to current market conditions: In light of the continued and widely publicized volatility in the secondary and securitization markets, we have suspended funding on loans previously referred to as Alt-A loans.’”

“Mr. Tomkinson commented, ‘We would like to remind our stockholders that these rapid changes are widespread in our industry and while we are continuing to assess the market daily and can not make any assurances.’”

The Houston Chronicle. “One of the nation’s largest mortgage lenders, Houston-based Aegis Mortgage Corp., stopped taking new loans Monday, amid a day of news that signaled tougher days ahead for lenders and homebuyers.”

“‘It’s a bloodbath out there,’ said Mark Cady, senior vice president of Market Street Mortgage in Houston.”

The International News. “A senior Bank of China executive on Monday said the US mortgage crisis would cause it to lose several million dollars from mortgage-backed investments, but the fallout would be minimal.”

“Zhu Min, vice president China’s largest foreign exchange bank, said that the bank had invested several billion US dollars in mortgage-backed securities and losses would amount to several million dollars.”

“Asia as a region had until June 2006, invested $226 billion in US mortgage-backed equities. Worth trillions of dollars, US mortgage sector has been buffeted by a national housing slump.”

From Dow Jones. “Borrowers in California, Nevada, Hawaii and Florida face the harshest drought if banks cut off the flow of some popular but riskier mortgages. A broker at mortgage brokerage firm ACE Mortgage Funding LLC estimated Friday that 90% of mortgages that don’t conform to standards set by Fannie Mae and Freddie Mac have disappeared in the last three days.”

“As one visual sign of banks’ cooling to a variety of mortgages they had introduced over the years, the broker’s morning loan rate sheet dropped to one page, versus 10 pages usually. The broker asked not to be identified.”

“California led the nation in originations of payment-option ARMs, with about 24% of all its refinanced and first mortgages falling into this category last year, according to data firm First American LoanPerformance.”

“These home loans, also termed negative amortization loans because they tack any deferred interest on to the back of the loan, represented about 17% of Nevada’s total mortgages last year, followed by just under 15% for Hawaii and about 13% for Florida.”

“‘You’ve seen growth in the states with high home-price appreciation,’ said LoanPerformance spokesman Bob Visini.”

From Bloomberg. “Fannie Mae, the largest source of money for U.S. home loans, asked its regulator for permission to take on more mortgage assets and help ease a crunch in the credit markets, a person with knowledge of the request said.”

“Fannie Mae officials approached the Office of Federal Housing Enterprise Oversight in the past few days, seeking to have restrictions lifted so it can hold more home-loan assets in its portfolio, said the person, who declined to be named because the discussions were confidential.”

“‘At our conforming limit, the $417,000 mortgage will buy you a very nice piece of property in most of the country,’ Freddie Mac CEO Richard Syron said in an interview. ‘In Boston, New York, San Francisco, it won’t. So I think that is something that has to be taken into consideration.’”

“Participants in financial markets shouldn’t get their hopes up that the Federal Reserve will intervene to alleviate the current market turmoil, a former Fed governor says.”

“”I think it is too early right now to think about any kind of intervention by the Fed,’ said Susan Phillips, now the dean of the George Washington University business school in Washington.”

“Phillips said that the financial markets’ volatility is a painful but healthy ‘reality check’ and that this has led to an overdue repricing of risk. ‘We’re in the middle of that process,’ Phillips said. ‘The Fed wants the market to find its own right place,’ she said.”

The New York Times. “The end of cheap credit may be overdue. In the last few years, Wall Street has taken advantage of cheap money to make loans and finance takeovers that may not have made economic sense, said Robert DiClemente, chief United States economist for Citi — formerly called Citigroup.”

“‘At the core this is a healthy adjustment,’ Mr. DiClemente said.”

“Ed Yardeni, the president of Yardeni Research, said he had little doubt what choice Mr. Greenspan would make if he were still in charge.”

“‘Under Greenspan, my guess would be that the Fed would be already talking about priming the markets for a possible easing,’ Mr. Yardeni said — through lowering of interest rates. But Mr. Greenspan is not in charge anymore. Mr. Bernanke is, and he appears to be more inclined to allow the credit crunch to play out on its own, Mr. Yardeni said.”

“‘The definition of a crisis in the Greenspan era was any market environment preventing a trader from getting 100 percent of his bonus potential,’ said.”

“Bernanke is trying to wean the market from that form of life support. It’s a slow process, and during times of stress, old habits reassert themselves.”

“At times like these, it’s important to remember that ‘Greenspan is no longer Fed chairman,’ Bianco said. ‘It’s a dirty little secret that not too many people know.’”

From Reuters. “The U.S. housing downturn may be the first true test of Ben Bernanke’s leadership at the Federal Reserve, but many on Wall Street say the dilemma has its roots in the legacy of his predecessor, Alan Greenspan.”

“During his 18 years at the central bank, Greenspan unleashed the greatest credit boom in recent memory, bringing interest rates to their lowest levels in a generation. The result was an unprecedented lending bonanza.”

“‘Years and years of easy monetary policy under Greenspan created a tremendous amount of excess liquidity, which caused a total mispricing of risk,’ said Frank Hsu, director of global fixed-income at Fimat. ‘Now we’re getting payback.’”

“Indeed, rising default rates in the U.S. subprime mortgage industry, which targets borrowers with sketchy credit, have begun to jeopardize asset prices worldwide.”

“Analysts trace this debacle back to Greenspan, who not only cheered on the Internet boom but also battled its bust with yet another dollop of cheap credit.”

“‘He got carried away, caught in the ‘new economy’ hoopla,’ said Alan Ruskin, chief international strategist at RBS Greenwich. ‘That’s ultimately proved quite problematic.’”

“Throughout all of this, central bank officials have remained sanguine, insisting the housing downturn was contained and would not have a broader impact.”

“Many believe officials will have to acknowledge the seriousness of the situation in this week’s policy statement, although they must carefully balance any such remarks with positive comments on the economy, if only to prevent the markets from whirling into a tailspin.”

“But even this trap of perennial optimism can be traced to Greenspan’s legacy. By embracing ephemeral fads like the ‘new economy’ and ‘innovations in home lending,’ the former Chairman made it harder for Fed officials to face reality without unsettling markets.”

“‘The U.S. housing slump was totally predictable, but the Fed remained in denial about it for a very long time,’ said Bernard Connolly, global strategist at Banque AIG in London. ‘A lot of the problems we see today stem from Greenspan’s term in office.’”

A report from the Washington Post. “If 2006 was the year the boom market began to fade, 2007 is shaping up to be the year that beach communities along the Delaware, Maryland and Virginia shorelines see their economic engines, largely driven by tourism and real estate, downshift from overdrive, economic and tourism analysts say. That means job and income growth is slowing, vacations are being scaled back, and real estate opportunities have shifted in favor of buyers.”

“To lure buyers and ameliorate losses, developers have slowed their pace of construction, dropped prices, advertised upgrades as standard features and then offered discounts on land they haven’t built on yet.”

“In the Hampton Roads-Virginia Beach area, the value of single-family homes for which building permits have been issued declined about 16 percent, according to an analysis by Old Dominion University. In Ocean City, the pace of development has slowed considerably; the city has approved new construction worth $69.9 million for the first seven months of the year, down 32 percent from the comparable period last year.”

“The trends, at least in the real estate market, are working in the favor of Susan Gordon, a former Bethesda resident in the market for a condominium or townhouse in Rehoboth.”

“She’s considering a property along the canal, Blue Point Villas, where the developer is offering to pay her mortgage for six months, plus six years of condo association fees, $5,000 toward closing and a 15 percent ‘developer closeout’ discount on the sale price.”

“‘Builders are getting so low on prices, it’s getting down to materials,’ (realtor) Steve Conlon said. ‘They’re already dropping prices 20 percent, then people come in and think they’re going to get 25 percent off that.’”

“Fairfax County officials are predicting that the budget shortfall for the coming year could hit $120 million because the slumping real estate market has led to the lowest annual revenue rate increase in 15 years.”

“Throughout Northern Virginia, local governments are grappling with falling home sales and prices and more foreclosures, which are driving down real estate assessments. About 60 percent of Fairfax’s revenue comes from real estate taxes.”

“‘All of us are in the same boat in Northern Virginia,’ said Board of Supervisors Chairman Gerald E. Connolly.”

“Deputy Fairfax County Executive Edward L. Long Jr….said that the number of home sales had dropped, prices had leveled off and the number of home foreclosures had risen sharply, from 190 in the first six months of 2006 to 987 so far this year.”

“There are similar spikes in foreclosures elsewhere in the region. In Loudoun County, there were 66 foreclosures recorded in 2006. For roughly the first half of this year, there have been 188.”

“In Prince William County, there were 40 for all of 2006 and an estimated 300 in the first six months of 2007, according to each county’s commissioner of accounts. In Montgomery County, 1,238 homes were lost to the lender in 2006 and 1,824 in about the first half of the year.”

The Examiner from Virginia. “The sharp dip in property values that forced Prince William County into its first spending decrease in 15 years this spring is lasting longer than officials originally anticipated and is looming over preparations for next year’s budget.”

“Home sales have fallen off 40 percent from June 2006 to June 2007, and appraisal values could fall as much as 8 percent, officials said.”

“‘We’ve really seen the bursting of the bubble,’ Prince William County Chairman Corey Stewart said. ‘That’s going to affect our budgets for at least two years.’”

“‘We had hoped that come this spring, things would begin to improve. … They have not,’ said Chris Martino, Prince William County director of finance. ‘We’re basically where we were all last fall and continuing to trend down.’”

“While 732 property sales accounted for $316 million in June 2006, the 456 sales in June 2007 registered just $186 million. With more than a year’s supply of vacant homes for sale, the average house sits on the market for 106 days, he said.”

“Martino anticipated a 2 percent drop in property values this year, but new estimates based on soft figures show the decline could quadruple, he said. ‘We do not know where it will land,’ he said.”

The Baltimore Sun from Maryland. “A major mortgage lender filed for bankruptcy-law protection yesterday and other financial companies curtailed lending or laid off employees as the end to easy credit on Wall Street continues to trickle down, leaving consumers with fewer choices for home loans.”

“American Home Mortgage Investment Corp. filed for bankruptcy-law protection after laying off several hundred employees in Maryland and thousands across the country in recent days. Also, First NLC Financial Services closed an office in Greenbelt and subprime lender Fieldstone Investment Corp. of Columbia stopped accepting new loan applications last week.”

“Cleveland-based National City Corp.’s home equity unit suspended additional loans or lines of credit yesterday, and Houston-based subprime lender Aegis Mortgage Corp. said it would not accept any more applications.”

“Mortgage brokers who remain in business say they are no longer able to offer many of the loans that became the rage during the housing-market boom but led to a spike in defaults and foreclosures.”

“‘As the mortgage market shrinks because investors are drying up, you’re going to see more of this,’ said Joseph E. Rooney, deputy commissioner of Maryland Office of Financial Regulation. ‘It’s a huge problem from Wall Street to Main Street.’”

“Nationally, about one-seventh of subprime borrowers were more than two months late on payments in May, almost twice the rate from a year before, data from First American LoanPerformance show. Foreclosure rates for subprime borrowers also doubled to nearly 5 percent. In Maryland, one in 10 borrowers were delinquent.”

“‘It is unfortunate that American Home Mortgage, a company which we built into a highly successful business, experienced this sudden reversal of its fortunes due to the unanticipated and rather sudden deterioration in the secondary and national real estate markets,’ the company’s CEO, Michael Strauss, said in a statement yesterday.”

“Columbia-based Fieldstone stopped accepting new loan applications last week. Several Fieldstone employees, who did not want to comment publicly because of corporate policy, said yesterday that the company laid off some headquarters staff Friday.”

“First NLC Financial Services shuttered offices last week, including its Greenbelt branch, where it laid off about a dozen workers. The company, which specializes in subprime mortgages.”

“‘Unfortunately, we had to let some people go in order to compete in the marketplace as it is today,’ said Andrew Henschel, a vice president of corporate governance. ‘It’s a very, very difficult time.’”

“Christopher Ortiz of Neighborhood Housing Services of Baltimore Inc. said that problems arose with subprime loans because unscrupulous brokers and lenders extended loans that many buyers couldn’t afford over the long term.”

“‘Housing prices haven’t sunk significantly, and credit standards have tightened,’ Ortiz said. ‘How much money can you put down if you are low-income? Chances are you can’t save that much even though you have the dream of home ownership.’”

“Charles DiPino, president of the Maryland Association of Mortgage Brokers, called the mortgage industry shakeout the ‘natural progression’ of a cycle in which the housing boom and credit expansion inflated the ranks of those in the business.”

“‘If your home purchase was closing tomorrow and your lender is going out of business, you’re going to have to start all over, and that’s a scary situation. That’s where people are scrambling.’ said DiPino.”

Please post off-topic ideas, links and Craigslist finds here.