The Housing Bubble

The Press Enterprise reports from California. “The numbers of Inland families who lost their homes to foreclosure surged dramatically last month, as risky subprime mortgages strained the budgets of more households. An especially telling statistic is the comparison of bank repossessions from last year, or even the prior month, to August.”

“In Riverside County, 21 homes were seized by lenders in August 2006. In July, 189 were seized. Last month 1,198 homes were repossessed. In San Bernardino County, 10 homes were seized a year ago. Lenders repossessed 518 in July. Last month, it was 708.”

“Riverside County posted 7,266 notices of defaults, trustee sales and lender repossessions, up 347 percent from a year earlier, and San Bernardino County posted 4,876 such notices, up 351 percent in a year, according to RealtyTrac.”

“Nancy Rubi said an unaffordable mortgage and falling home prices in her Orangecrest neighborhood forced her and her husband to try to sell their house even if it means getting less than they owe their lender.”

“The couple refinanced two years ago to consolidate bills, she said.”

“They intended to refinance again before the mortgage would adjust to a higher interest rate. But in August when their rate soared from 6.7 percent to 9.7 percent and their payment from $4,200 to $5,800, they learned falling values left them too little equity to refinance.”

“Making matters more difficult, she said, the couple two years ago bought a larger house to have space for their four adopted children. Then they rented out their first home for $2,000 less than the mortgage payment.”

“Rubi said that she and her husband, a retired schoolteacher, can no longer afford both mortgages.”

“Although her husband held an open house seven days a week since July 20, Rubi said they couldn’t get the $685,000 price they need to repay their mortgage. Their next step, she said, is to try to persuade their lender to accept less than the mortgage.”

“Because the couple is 30 days behind on their mortgage payments, she figures they have six to nine months to find a buyer before the house goes to foreclosure. ‘We never, ever thought it would end up like this,’ she said.”

The Union Tribune. “There were nearly 4,900 San Diego County foreclosure filings in August, an 80 percent increase from the previous month and the first of several waves of mortgage failures anticipated by real estate analysts.”

“San Diego County recorded 4,845 foreclosure filings in August, a year-over-year increase of 247 percent.”

“‘That is an indicator that homes going into foreclosure have little or no equity,’ he said.”

“In Chula Vista, Patricia Anguiano has fallen three months behind on the mortgage for her three-bedroom house, where she operates a day-care center.”

“Anguiano said yesterday that she wasn’t told how much her mortgage payments would rise when she refinanced her home loan and took out an equity line of credit in April 2006. She says that her payments have increased from $1,200 to $3,800 per month and that she now faces foreclosure.”

“‘I feel deceived,’ Anguiano said through an interpreter. ‘I feel guilty for not being more knowledgeable, but this is not just something that is happening to me. I want to see justice and people protected from this happening in the future.’”

“University of San Diego economist Alan Gin said weak loan-underwriting standards are a major reason for the spike in foreclosures. Many adjustable mortgages issued in recent years required little or no down payment, making homeowners more likely to walk away when the going got tough.”

“‘It just made it easy for people to give up,’ Gin said.”

“Bank repossesions were up 684 percent over the July 2007 figures, RealtyTrac VP Rick Sharga said.”

“‘You went from 77 to 604,’ he said. ‘That is an indicator that homes going into foreclosure have little or no equity. The homeowner doesn’t have the option of refinancing or selling. Banks don’t have much alternative but to take possession of the house and try to resell it.’”

“‘What we are seeing in San Diego we are seeing across the Southern California region: an increased number of bank repossessions,’ he said.”

The Daily News. “Foreclosures soared nearly 400 percent across the greater San Fernando Valley in August as the residential real estate market sank further and lenders tightened credit standards, a research center said Tuesday.”

“Last month, 289 families from Glendale to Calabasas lost their homes, 231 more than in August last year, or a 398.3 percent increase, said the Economic Research Center at California State University, Northridge.”

“So far, there have been 552 foreclosures in the first two months of the year’s third quarter, and the final number will likely top the 632 foreclosures in the second quarter, said Daniel Blake, the center’s director.”

“The center’s records go back to 1988, and, in that time span, foreclosures peaked at 1,854 in the third quarter of 1996.”

“Blake said foreclosures are rising because homeowners who bought a year or two ago with adjustable-rate loans cannot afford the higher payments they are seeing now as their interest rates spike. ‘It’s climbing right now, and I don’t see any reason for it to drop off that pace,’ he said.”

From KBAK 29. “Marc Schmerler has been trying to sell his home for a year but like millions of homeowners, he’s stuck in the housing slump. ‘I’ve had quite a few offers, acceptances, people falling out because they no longer qualified for mortgages anymore.’”

“Foreclosures spiked 36% in August and that number is expected to rise. In fact, according to Bakersfield Appraiser Gary Crabtree, foreclosures jumped a shopping 750% in Kern County last month. Nearly 300 lost their homes for not making payments.”

The Ventura County Star. “In Ventura County, the total number of filings was 542 in August, up 46.9 percent from July and 298.5 percent from the same month a year ago, RealtyTrac reported.”

“The bulk of them — 432 — were default notices, the first step in the foreclosure process. Thirty-eight homes in Ventura County were repossessed by lenders in August.”

The San Francisco Chronicle. In the Bay Area, the number of houses scheduled to be sold on the courthouse steps quadrupled compared with a year ago, according to RealtyTrac.”

“In the nine-county region, 1,280 households were notified they were going on the block compared with 301 last August. By far the highest incidence of auction notices was in Contra Costa County, with 699 notices.”

“The number of homeowners behind on their payments hit 5,705 in the Bay Area, almost triple the 2,104 from last August.”

“The number of properties in the Bay Area that had reverted to the lender after foreclosure skyrocketed to 1,190 in August from 26 last year. Again, Contra Costa was most affected, with 574 bank-owned properties.”

The Contra Costa Times. “In the Bay Area, Alameda County had 166 bank-owned properties and there were 232 in Solano County.”

“Paul Ward, a broker associate in Danville, said that although many buyers are waiting for the market to hit bottom, others are already pouncing on foreclosed properties.”

“‘It’s in the tougher economic times that most of the wealth is accumulated and made,’ he said.”

The Mercury News. “The Federal Reserve’s move Tuesday to slash short-term interest rates by half a percentage point gave the financial markets a boost, but the Fed’s action is less likely to have an immediate impact on the people at the root of the problem: borrowers struggling to pay their mortgages or hoping to refinance into more affordable loans.”

“‘I don’t think we’ll see credit card rates dropping, or that all of a sudden the spigot will open and everyone will be making all those mortgages loans again,’ said Christopher Cagan, research director for First American Real Estate Solutions in Santa Ana.”

“In March, Cagan projected that nearly one-third of teaser loans taken out in 2005 and 2006 will default. ‘For a lot of them, you could lower the rate a full point, and it wouldn’t stop the defaults,’ Cagan said.”

The Sacramento Bee. “‘I don’t think at the consumer level anyone should anticipate short-term relief in terms of a return to the availability of easy mortgage terms,’ said Scott Syphax, CEO of Sacramento-based Nehemiah Corp. of America, which helps lower-income residents obtain down payments on home purchases.”

“‘This is a Wall Street interest rate cut, not a Main Street interest rate cut,’ he said.”

“Ron Leis, a real estate broker in Carmichael, said the region’s home prices are still too high for many first-timers — even with interest rate cuts.”

“‘The rate cuts will help,’ Leis said. But they don’t dent the affordability problem, he said.”

“Desperate times call for desperate measures. So over the weekend Richard and Dana Carrigan shoveled out a piece of their Fair Oaks yard, then buried a 3 1/2-inch statue of St. Joseph.”

“The couple are looking for any extra help they can get as their home goes up for sale alongside the 16,000 other area residences already on the market. ‘We’ll try anything,’ says Richard Carrigan.”

“The peculiar phenomenon seems to run in stride with chilly markets: It flourished during slow times in the 1980s, mushroomed again during the 1990s housing slump and now is again booming.”

“‘I think it’s about as efficient as an agent standing in the front yard waving a magic wand,’ says Marvelene A.J. Weyer, a veteran Elk Grove real estate agent. ‘I still think pricing property right will sell it rather than reverting to poor old Joseph.’”

10 TV reports from Ohio. “An excess of high-priced condominiums is forcing developers to get creative. A slowdown in the downtown condominium market is forcing developers to either drop prices or put them up for auction, 10TV’s Kevin Landers reported. ‘I think we’re going to sell them for less than what we hoped to sell them for,’ said Caryles Watch Condos developer Thomas Fortin.”

“Eight of the lofts will not have a minimum bid, Fortin said. That means that no matter what someone bids, the developer will accept it. ”

“Realtor Larry Schottenstein blames the condo cool down on slower sales in the suburbs. ‘If they can’t sell their home in Dublin, they aren’t going to move downtown,’ Schottenstein said.”

“Colleen Gilger, the city’s downtown development director, said that developers need to lower prices so that condo sales can pick up. ‘We definitely have more inventory at a higher price point and there’s definitely a need for more downtown housing at a variety of price points,’ Gilger said.”

The Columbus Dispatch from Ohio. “The foreclosure news keeps getting worse. In both central Ohio and the state, foreclosures increased sharply last month, mimicking a national trend.”

“A new report said 2,930 homes went into foreclosure last month in central Ohio, up 37.6 percent from July.”

“For the state, 17,793 houses entered foreclosure, ranking the state fifth nationally. That was a 33.6 percent increase from July and 138 percent more than foreclosures initiated in August 2006, according to RealtyTrac.”

“‘We’ve had such an artificial inflation of the problem that we need an urgent response to minimize the damage,’ said Ohio Treasurer Richard Cordray said.”

“Many of the loans, some of which adjust in as little as two years, were issued in 2005 and 2006 during the height of the housing boom. ‘There are a bunch of bad loans that are going to have to work their way through the system,’ Cordray said.”

The Monroe News from Michigan. “Plenty of homes. Too few buyers. It’s the recipe for what Kim Sachs, president of the Monroe County Association of Realtors, calls ‘a price-sensitive market.’”

“And it’s what makes it relatively easy to buy a home, yet relatively tough to sell one.”

“It’s no secret that Monroe County’s housing market has flattened in recent years. It’s also no secret that some people are caught between mortgage payments that are too high and incomes that are too low. Prices are down. Foreclosures are up.”

“‘Our job as Realtors has become increasingly hard this past year,’ says Fran Londo of Edward Surovell Realtors. ‘There are so many people in trouble.’”

“Although home values have been slipping, many home sellers still have misperceptions that their homes are retaining, if not gaining, value.”

“‘We all feel our homes are worth a million dollars but, in reality, what it comes down to is what the market is willing to pay and what homes have already sold for,’ says broker Annette Perna-Taormina. ‘If not priced right, the home will lose potential buyers and will be on the market longer and then everyone gets frustrated.’”

“‘Pricing is critical,’ agrees Marygrace Liparoto of Re/Max Experts. ‘Updating and maintenance are not upgrades and are not a factor in pricing,’ she adds. ‘If the roof was just replaced because it needed to be, the price of the house doesn’t go up because of it.’”

“‘If your home is not selling, serious sellers need to consider how much it is costing them to keep the home,’ Ms. Londo adds. ‘If it’s a $1,000 per month, consider dropping the price by what it would cost to maintain the home for a year.’”

The Detroit News from Michigan. “A glut of homes on the market combined with a sharp rise in foreclosure sales have driven Metro Detroit home prices down 17.7 percent since their peak three years ago, according to new data.”

“The region’s median home price fell from $188,275 in August 2004 to $154,919 in August 2007, according to data from Metro Detroit’s largest MLS. In Wayne County, the drop has been a staggering 35.6 percent.”

“‘The low prices are changing attitudes on both sides of the market,’ said Steve Cole, an agent in Birmingham. ‘Sellers are being very unrealistic about what they’re expecting to sell for; everyone thinks their house is the exception to the rule. Buyers are also expecting to have an offer at half the asking price accepted.’”

“Count John and Dana Declark of Warren among those who have seen their home investment shrink. Back in 1984, the Declarks bought their modest three-bedroom home not only to provide a roof over their family’s heads, but also as a retirement nest egg.”

“Just a few years ago, the value of their home seemed to grow by the day. Today, the Declarks have their house up for sale for $162,900, more than $10,000 less than its estimated worth just three years ago.”

“‘We decided now is the time,’ Dana Declark said. ‘Values are going down, people are losing their jobs. Looking at how many houses are for sale around here, we figured it’s now or later, when it could be worse.’”

“In Wayne County, 305 homes that were sold in August, or 18.4 percent of the county’s total, were foreclosure sales, the Realcomp report said. That compares with 10.2 percent in August 2006.”

“‘The only way this gets solved is by having a lot of people taking a huge hit in their home prices,’ said Don Grimes, a senior economic research specialist at the University of Michigan. ‘Until people make that decision, it’ll just keep dragging on and on.’”

“Alan and Lauren Ducharme of New York City are betting low prices will yield them a big home with a small price tag in Brighton, where they’re returning to be closer to family. Looking around their target neighborhoods in Brighton, the couple is confident they’ll be able to shave $15,000 to $20,000 off asking prices simply by waiting.”

“‘We’ve been keeping our eyes on a few homes and seeing how long they’re lingering,’ Alan Ducharme said. ‘We’re betting that if we wait until the right time, we can drive a hard bargain. They’ll get sick of that ‘For Sale’ sign eventually.’”

The Grand Rapids Press from Michigan. “Foreclosures continue to be up in Kent and Ottawa counties. Kent recorded 657 foreclosure filings last month, up 105 percent from August 2006 and 55 percent from July. Ottawa recorded 137 filings in August, up 128 percent from last year and just more than 5 percent from July.”

“The state saw 15,565 foreclosure filings last month, which is 11 percent higher than July and 127 percent higher than August 2006.”

“The Kent County Register of Deeds tallied 281 properties going to a sheriff sale last month, one of the steps in a foreclosure process. That compares with 193 in 2006 and 159 in 2005. The August number brings the total this year to 2,115, according to Chief Deputy Register Jerry Czaja, compared with 2,478 for last year.”

“‘It looks like it’s going to be over 3,000 this year,’ he said.”

“Home sales in the Grand Rapids area last month were 3.5 percent lower than August of last year and nearly 18 percent lower than August 2005.”

From ABC 7 Chicago in Illinois. “The rate cut is too little, too late to rescue many Americans who got caught in the mortgage mess. A new report out Tuesday shows foreclosures more than doubled from this time last year.”

“In Illinois, there were 72,000 filings last year. In Cook County so far this year, the number of filings is up by more than 50 percent.”

“The Federal Reserve’s decision could help builders. Overnight, the cost for developers to borrow big money for projects, such as the Granville condo complex on Chicago’s north side, will go down. And that could spur more construction and lower prices.”

“‘A half-point is a big difference in a project of this size, and that cost savings will be passed on to consumers,’ said Bill Platt of the Access Group.”

The Star Tribune from Minnesota. “As the housing slump worsens, home builders are resorting to tactics typically reserved for Labor Day furniture sales and year-end auto blitzes.”

“National builders with overbuilt developments in suburbs such as Maple Grove and Woodbury are now paying condo association dues and closing costs, as well as giving away upgrades worth tens of thousands of dollars in the hope of wooing buyers in a saturated and sluggish market.”

“Betty Hardle in Columbia Heights, has been in the home-building business for nearly four decades. She said that incentives certainly aren’t new but that the scale is greater ‘and the giveaways are more popular in this downturn than any other I’ve seen.’”

“Area home sales posted their worst monthly showing in August in more than a decade, according to numbers released last week by the Minneapolis Area Association of Realtors. In the past year, demand for new construction has dropped nearly 23 percent.”

“There are a record 10.39 homes on the market for each active buyer, more than double the inventory per buyer in September 2005, according to the Realtors group. Average price per square foot of new-construction units is down 8 percent.”

“Most of the incentives are coming from larger, publicly traded builders such as K. Hovnanian, which have monthly production and sales schedules to meet and shareholders to satisfy.”

“‘National builders have lumber contracts and lots of other things they’ve contracted for that they can’t stop,’ said John Shaw, manager of the Edina Realty corporate office in Edina. ‘They would rather build a home at low profit in order to keep going than to stop the corporate machine.’”

“Eva Tangen of Coldwell Banker Burnet, said she’s bringing more buyers to look at new-construction homes these days. Incentives are making nicer homes more affordable, which makes it tougher for existing homes to compete.”

“‘They can get brand new for the same price,’ Tangen said.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Builders in the U.S. began work on the fewest homes in 12 years in August. Building permits dropped 5.9 percent to a 1.307 million pace, also the lowest since 1995. The National Association of Home Builders/Wells Fargo index of builder sentiment dropped to 20, matching the January 1991 reading as the weakest ever, the Washington-based association said yesterday.”

“The housing market is seeing ‘more rapid descent,’ Ara Hovnanian, CEO of Hovnanian Enterprises Inc., said yesterday at a conference.”

From Builder Online. “Officials from Hovnanian Enterprises, Beazer Homes, The Ryland Group, Standard Pacific, TOUSA, Toll Brothers, D.R. Horton, and MDC Holdings sang from the same song book about market conditions, which took a turn for the worse in August - ‘the cruelest month,’ quipped Boyce Thompson, editorial director at Hanley Wood, BUILDER’s parent company, which co-sponsored the Credit Suisse’s Homebuilders Conference.”

“Mark Zandi, chief economist for Moody’s Economy.com, who was the conference’s luncheon speaker, delivered a cold slap in the face to anyone who thinks that buyer demand is about to revive any time soon.”

“Zandi says that a combination of negative forces, too much unsold inventory (about 950,000 new and existing units, by his calculations), the prospect that between $400 billion and $500 billion worth of mortgages will default this year and next, and the steady 25,000- to 30,000-per-month job losses in housing-related companies - suggest that recovery is a long way off.”

“Some builders share this pessimism; ‘Things are not very good in the housing industry,’ said TOUSA’s chief Antonio Mon, in classic understatement. And the mortgage mess continues to instigate cancellations, which are still in the 30 to 33 percent range for the conference speakers.”

“All of the builders have made significant - and in some cases massive - reductions in their land assets, either by selling lots they own or abandoning land-options they control. They are also extracting price concessions from product suppliers and, in several cases, altering their house plans to use less building material.”

“Toll Brothers’ CEO Bob Toll said he’s not disposed yet to sell land in favorable markets his company has owned or controlled for years. ‘We have land in Florida that I’m not going to give away, at least not as long as we’re positive [in earnings],’ he said.”

“That being said, through October Toll had reduced its land position by 31 percent this year.”

The Associated Press. “The chief financial officer of homebuilder D.R. Horton Inc. said Tuesday the homebuilder was focused on driving down costs and reducing debt to contend with continued pricing pressures.”

“‘It is certainly a challenging market,’ said CFO Bill Wheat in a presentation at a conference. Wheat and Treasurer Stacey Dwyer said one challenge faced by the homebuilder is to absorb the higher levels of home supply.”

“‘There’s still too much inventory,’ Wheat said.”

From MarketWatch. “Residential builders are launching promotional price reductions and other incentives in a bid to attract anxious homebuyers and move standing inventory off their books.”

“‘Market conditions have changed,’ said Hovnanian during from a home-builder conference. ‘The market has been fraught with concessions and incentives.’”

“Also, potential buyers hear negative commentary on the housing market in the media and the problems shaking the mortgage market, he said.”

“‘It’s something we have to accept. It’s part of the business today,’ said Beazer Homes USA CEO Ian McCarthy, who added that his company has been running promotions since June 2006 and is planning more. ‘The market needs to be addressed in different ways today.’”

“‘People just don’t turn up anymore,’ McCarthy said.”

“‘People will mistrust their prices,’ said real estate expert Danielle Babb. She questioned if big sales events like Hovnanian’s trade short-term gains for long-term pain.”

“Also, buyers may end up simply waiting to see if another ‘Deal of the Century’ comes along. ‘Buyers are seeing how desperate builders are, so they figure there might be more deals,’ Babb said.”

From Reuters. “The Federal Reserve’s rate cut sent U.S. home builder shares soaring, but one influential home builder said the half-percentage point cut may be sending the wrong message.”

“‘I would have done a quarter instead of a half because it signals we’re in deep doodoo,’ said Robert Toll, CEO of Toll Brothers Inc.”

“The supply glut has been exacerbated by a crisis in the mortgage markets that started with defaults by the riskiest borrowers. ‘Does anyone want to call this the bottom because of the Fed cut?’ he asked, while speaking at the Homebuilder Conference. ‘I don’t think you can call it yet.’”

“Central banks may not have the tools to restore stability to credit markets amid the ‘Panic of ‘07,’ and instead should demand greater transparency from financial companies, Moody’s Investors Service said today.”

“‘The new financial paradigm has brought with it some problems, which the world’s financial policy technicians have not yet solved,’ Moody’s said in a report by Vice Chairman Christopher Mahoney and Senior VP Pierre Cailleteau. ‘Each credit crisis teaches new lessons, often resulting in corrective reforms. The current `Panic of ‘07′ will as well.’”

“Moody’s itself, as well as Standard & Poor’s and Fitch Ratings, were criticized by investors, lawmakers and regulators for being too slow to respond to the rising defaults. Policy makers…have pointed to possible conflicts of interest between the ratings companies and the banks that pay their fees.”

“Moody’s, S&P and Fitch waited until April to downgrade some subprime securities, after their value had fallen by as much as 80 cents on the dollar.”

“Investors have an ‘over-reliance on ratings for pricing,’ Mahoney said. Some ‘have no idea what they have and they have no idea how to price it.’”

“‘What turned an overdue risk reappraisal into a financial panic is the combination of untested financial innovation, price- sensitive accounting rules, leverage and opacity,’ Mahoney and Cailleteau said. ‘This cocktail has proved explosive.’”

“For those on the brink of foreclosure…and for those who also are subprime mortgage borrowers, the Fed move is of little consequence.”

“‘It will help those who need it the least,’ said Richard Hastings, an analyst at Bernard Sands LLC. ‘But for those who need the most help, this does nothing for them. The Fed cannot help them at all.’”

The Atlanta Journal Constitution. “Lost in the furious debate over how hard the Federal Reserve should work to head off a downturn lurks a nagging and unpleasant thought: Maybe the economy needs a recession.”

“Not too many experts will come right out and say so — most say it does not — but a minority chorus has long argued that the Fed should reverse the easy policy that successively fueled a dot-com boom, a consumer spree and an unprecedented surge in the housing market.”

“‘We borrowed trillions of dollars to remodel our kitchens, buy SUVs and plasma TVs, and there are consequences,’ said Peter Schiff, president of Euro Pacific Capital. ‘We are in serious trouble. The piper has to be paid.’”

“The Fed cut…will only delay the inevitable, ‘It will be terribly painful, but it’s therapeutic. It’s like a drug addict going through withdrawal from heroin. It is awful, but it’s what will get us better,’ Schiff argued.”

The LA Times. “Angelo Mozilo, CEO of beleaguered Countrywide Financial Corp., said Tuesday that the lender was making progress in adjusting to the harsh new realities of the home mortgage market.”

“‘With pain comes opportunity,’ Mozilo said at an investment conference.”

“Mozilo said flatly that ‘we are out of the sub-prime business.’ In subsequent remarks, he appeared to qualify that comment by saying Countrywide would continue to make a limited number of sub-prime loans that could be sold to Fannie Mae and Freddie Mac.”

“Mozilo criticized media coverage of the mortgage meltdown several times Tuesday, saying reporters incorrectly blamed ‘aggressive lending and exotic reset products’ for rising foreclosures.”

“During the boom, many lenders, including Countrywide, gave borrowers loans without requiring them to document their income. It was widely assumed that many of the borrowers didn’t document their incomes because they were lying.”

“Though Mozilo said stated-income loans were indeed much more likely to go into default, the reason the owners gave for their distressed status was the same as for those with fully documented loans.”

The Wall Street Journal. “Subprime-lending woes will have an impact on General Electric Co.’s third-quarter results, in the latest sign that earnings in the current quarter will be pinched by housing-market weakness.”

“The conglomerate said it would take a hit of $300 million to $400 million related to its planned exit from the subprime market. It will mark the third time in as many quarters that GE’s results will be affected by subprime woes.”

From CNN Money. “If the banking industry, with its load of worries caused by the subprime meltdown, has another month like it did in August, it will be in record territory for job losses.”

“Last month, banks with ties to the subprime mortgage industry laid off more than 26,000 employees, the most of any month since global outplacement consultancy Challenger, Gray & Christmas began keeping such records in 1993.”

“Scott Stern, CEO of LendersOne Mortgage Cooperative, said he believes the worst may be yet to come, but that the industry will survive and return to profitability.”

“In fact, Stern said, getting some of the people out of the industry who came in during the boom years won’t be a bad thing. There simply are more people now than there is business, and once that equation evens out things will get better, he said.”

“‘The mortgage industry grew and grew because we created buyers who traditionally wouldn’t have qualified,’ Stern said. ‘All those people that are leaving the industry, it’s probably necessary because now there will be an equivalent number of industry people compared to transactions. There will be a lot less transactions, a lot less people, but a better market.’”

Bloomberg reports on New Jersey. “Robert Murray of Middletown, New Jersey, said he didn’t pay enough attention when he took out a five-year adjustable-rate mortgage in 2002. This month, his payments ballooned to $1,800 from $1,300. Because he makes about $90,000 a year, and hasn’t missed a payment, he said he hoped he might be a good candidate to refinance.”

“Since the value of his home has declined from the $265,000 he owes on two mortgages, Murray’s equity has vanished. If Murray were to apply for an FHA-insured refinance, he’d be out of luck. Murray borrowed more than his home is now worth, so he would have to write a check of at least $45,000 to close a refinance. He doesn’t have the cash.”

“‘I’m way upside down,’ Murray said. ‘The payments will kill me now. I don’t know what I’m going to do.’”

“About 48 percent of subprime borrowers wouldn’t qualify to refinance into a mortgage that conforms to the underwriting rules established by government-sponsored agencies, according to a report by UBS AG, Switzerland’s largest bank.”

“‘There are a number of people who have mortgage debt that’s more than the value of their house, and a lot of those people are going to walk away,’ said David Olson, president of Wholesale Access Mortgage Research & Consulting. ‘That will put more homes on the market, which already has too many.’”

“The Federal Reserve’s half-point benchmark interest rate cut yesterday will have little impact on borrowers whose mortgages are adjusting, said Ed Leamer, director of the UCLA Anderson Forecast. ‘It’s not going to alter the housing situation, or clarify defaults and delinquencies,’ Leamer said.”

“Investors seem to be looking to Washington for solutions to subprime problems that may never come, said Andrew Laperriere, a managing director at International Strategy & Investment Group. ‘There is no silver bullet from Washington that will prevent home prices from falling further,’ Laperriere said. ‘A lot of people are operating on a mistaken impression.’”

“‘The myth here is that the resets have been the driver of payment delinquencies, but the fact is if the borrower can’t afford the teaser rate payments, then they can’t afford to ever pay back the loan,’ he said.”

“For now, Murray will struggle to make his monthly payments, foregoing vacations, restaurants and perhaps parochial school for his 5-year-old daughter. He yearns for help from the government.”

“The Federal Reserve Bank pumped $62 billion into the banking system on Aug. 9 and Aug. 10 in an effort to soothe a credit crisis. Murray said the Fed should do the same for borrowers. ‘If they gave us that money, we’d be able to be out of this predicament,’ he said.”

The Star Ledger from New Jersey. “At least 8,000 of the 143,898 New Jersey borrowers who opted for subprime mortgages went into foreclosure in the first half of this year, state Division of Banking officials said yesterday.”

“Testifying before the Senate Community and Urban Affairs Committee in Trenton, state officials and lenders said another 11,000 of those borrowers are up to three months behind on their mortgage payments.”

“Of the 15,426 first-time foreclosures filed in New Jersey in the first six months of this year, 53 percent involve borrowers with adjustable rate mortgages. Nationally, the figure is 37 percent for the same period. In Newark, 12.7 percent of subprime mortgage holders are more than three months delinquent in their payments.”

“‘If anyone in this room believes that the worst is over in the subprime mortgage fiasco, you are very, very wrong,’ said Phyllis Salowe-Kaye, director of New Jersey Citizen Action. ‘A tsunami of interest rate hikes on thousands of loans is headed our way.’”

The Asbury Park Press from New Jersey. “A state official told a state Senate committee Monday that New Jersey may finally launch a $30 million rescue program for homeowners facing possible foreclosure, but hours later a state spokesman said the program was not yet ready.”

“Jerry Keelen, an official at the New Jersey Housing and Mortgage Finance Agency, told the committee the program is expected to help 150 to 200 homeowners. However, Keelen said, some 1,600 residents have already contacted the state about signing up for the program, which was initially announced in May.”

The Telegram & Gazette from Massachusetts. “Lenders filed 1,370 foreclosure notices against Worcester homeowners over an 18-month period ending in June, giving the city a foreclosure notice rate about three times higher than the state’s median rate, according to an analysis by the Massachusetts Housing Partnership.”

“The flurry of foreclosure notices was replicated in towns and cities across the state, arriving largely because homeowners who had refinanced their homes in recent years found themselves with unmanageable loans, said Clark L. Ziegler, executive director of the Massachusetts Housing Partnership.”

“‘Their loan terms were probably terms they never could’ve made,’ Mr. Ziegler said. ‘The loans were in trouble the day they were made.’”

“The analysis ranked Worcester ninth among the state’s top 10 communities with the highest foreclosure rates. Lawrence ranked first. Central Massachusetts communities on the list included Fitchburg, which was ranked fourth, and Athol, ranked seventh.”

“A common problem, housing experts said, is that homeowners refinanced multiple times with adjustable rate mortgages, sometimes with little understanding of the agreements they were signing and treating their homes like cash machines.”

“One analysis the agency did of nine homes in the Bell Hill neighborhood showed that homeowners took out high-rate loans with no down payments; agreed to adjustable rate mortgages, or ARMs, with rates going up to nearly 18 percent; and refinanced multiple times for larger and larger amounts.”

“The story is the same in other Worcester neighborhoods, according to local housing officials.”

“‘It’s pandemic,’ said Miguel A. Rivera, lending director for Worcester Community Housing Resources Inc. ‘It crosses all geographies, all stereotypes.’”

“Trouble could continue for the next two years, according to Mr. Ziegler. ARMs on about 200 more Worcester homes are scheduled to reset before the end of this year, he said. About 1,000 more ARMs reset in Worcester next year, followed by 1,000 more in 2009, he said.”

“Mortgage proceedings seem to get stuck in a bureaucracy that well-intentioned outsiders cannot alter, according to Dominick Marcigliano, executive director of the Worcester East Side Community Development Corp. Inc. ”

“The CDC recently tried to buy a foreclosed property next to its Shrewsbury Street offices, offering $320,000 to the mortgage holder only to be rebuffed, Mr. Marcigliano said. Months later, after the mortgage holder had completed its foreclosure process, including an auction that produced no bids, the CDC bought the property on the open market for the lower price of $280,000.”

“‘Once that process starts, it takes on a life of its own,’ Mr. Marcigliano said.”

The Salem News from Massachusetts. “Diane DiSanto’s small, home-redevelopment business took off as soon as she started it nearly four years ago. First, it was condo renovations in Amesbury, followed by three successful house-to-condo conversion projects in Ipswich and Beverly.”

“Then she bought two single-family homes in Beverly, sank big money into big improvements, and hit a wall. ‘We were buying property, fixing it and flipping it - that was fine,’ said DiSanto’s husband, Lou. ‘But the market tanked around the time we were finished the (Beverly) projects. I think we homeowners are in trouble.’”

“Now, a four-bedroom, white colonial on Dodge Street in Beverly, where they spent $180,000 on renovations, has languished on the market for two years.”

“Diane DiSanto has tried everything. She slashed nearly 25 percent off the original $509,000 asking price, and held an open house last weekend where people could buy on the spot, for ‘$390,000 or better offer,’ she advertised.”

“Still nothing. Now she is considering a lease-to-buy option.”

“The DiSantos of Hamilton are far from alone, according to North Shore real estate figures. ‘Considering when we had the big push a few years ago and multiple offers on properties, the time frame for selling is more lengthy,’ said Juilanna Tache, owner of Tache Real Estate in Salem.”

“Local realtors say it is a long-needed adjustment to inflated house prices, and it has improved the market for buyers.”

“‘I think the market is adjusting necessarily,’ said Steve Archer, co-owner of Keller Williams Realty in Beverly, ‘because it all starts with the first-time home buyer. They get the ball rolling. If first-time home buyers can’t afford to break into the market, then prices have to come down.’”

“The rental market may be harder to track, but anecdotally, rent prices at the large new apartment development at the old Danvers State Hospital site are, on average, $350 less per month than originally advertised. The Web site is also advertising two months free, whereas previously it had been just one month.”

“Brendan Russell and his wife moved to Boston a year ago with the idea that they would buy a house. Now, they are entering their second year of renting a home in Beverly. ‘The half-million sticker price was a big shock when we got here,’ said Russell. ‘We held off on buying and rented. Obviously, we’re renting at mortgage prices, but at least we’re not committed.’ “And they didn’t have to come up with a down payment.”

“Russell was lured to DiSanto’s open house last weekend, but said he’s still uncomfortable with an overall variance in prices. ‘You’ll see a $60,000 to $70,000 difference, and it doesn’t make any sense to me - prices vary so much,’ he said. ‘I think people are hoping the housing market is still there, but as I drive around, I see too many sale signs out.’”

“DiSanto’s other property, a few blocks away, finally sold, after 11/2 years on the market, for $385,000, which was 26 percent less than the original $519,000 asking price. ‘It sold for way under break-even price,’ Lou DiSanto said.”

“‘Buyers don’t understand that it’s not about greed anymore,’ Diane said of the current market. ‘Buyers are trying to get every last penny out of it, but for a lot of sellers, it’s really about survival.’”

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