The Housing Bubble

The Recordnet reports from California. “Jerry Abbott, co-owner of Coldwell Banker Grupe, said the sales pace has quickened since September. He attributes some of that to an increasing willingness by banks to lower prices on the rising number of foreclosure homes in the area and to negotiate more realistically to sell properties that otherwise have languished.”

“Sales figures based on MLS data, showed that pending sales doubled from September to October. Granted, most sales are foreclosures, he said. ‘I think we hit the bottom of the market in September for sales,’ he said.”

“A total of 1,932 homes were repossessed by banks and mortgage companies in San Joaquin County in the first three quarters of this year, according to RealtyTrac.”

“‘For a long while there, you’d hold open houses and nobody would come,’ said Art Godi of Art Godi Realtors in Stockton. ‘Now we’re getting traffic and offers.’”

“The downside is that offers often are quite low, because buyers are hearing that ‘you can get a house for whatever price you want now,’ he said.”

“Lodi resident Antoinette Herrera said she and her husband were motivated by good prices to start shopping for another house in September. They recently bought a Morada foreclosure property - 1.2 acres and a house, which they plan to remodel and move into. They intend to keep their current home as rental property for an investment.”

“They competed with a few others to get the Morada house, she said, so they put in the then-full asking price of just less than $500,000 to get the house. But they figure they saved as much as $300,000 off the original asking price for a house that had been on the market for many, many months, she said.”

“Joe Anfuso, CEO of Stockton-based Florsheim Homes, said that although lower interest rates will be a positive force when the residential market settles down, they aren’t affecting the new home-sales market at all now. Actually, pricing isn’t either, he said.”

“It’s ‘buyers’ psychology,’ which continues to be negative about home buying so long as prices continue to drop, he said.”

“‘It’s really more the fear of: If I’m buying today, are prices going down tomorrow?’ Anfuso said. ‘There’s no sense of urgency.’”

The Mercury News. “Three home builders sat down recently with reporter Katherine Conrad to discuss the besieged housing market.”

“Q: What are you doing to sell homes? A: Vicky Nyland from Taylor Woodrow Homes: ‘A lot of projects we have had to discount the houses before we put them on the market. When we were going through the entitlement process on Modern Ice, we thought we would be in the $500,000 range. We didn’t think we’d be in the $400,000s. There has been some adjustment.’”

“A: Scott Menard from SummerHill Homes of Palo Alto: ‘Now our homes include upgrades such as granite countertops and landscaping. The buyers don’t ask about the price any more, they ask: What are you offering? We have no published incentives. Our traffic numbers are down but the market still looks like it’s OK - except for the bad press and that makes people more paranoid.’”

The Merced Sun Star. “Banks and mortgage companies could soon lend a hand in maintaining vacant houses abandoned to foreclosure.”

“The City Council voted 6-1 Monday night to ask lenders to keep up such properties, which are blighting neighborhoods across the city as Merced’s foreclosure rate continues to rank among the highest in the nation. The council considered four different options on how to keep lawns green and yards clean at such houses.”

“Before the vote, Mayor Ellie Wooten read an e-mail from Merced resident Kathy Price urging the council to not spend public money to maintain foreclosed properties.”

“‘I don’t want city staff time and my tax dollars spent on cleaning up yards because some lender allowed loans to the unqualified,’ read the message.”

“But another resident, Lisa Kayser-Grant, urged the council to move fast to address the problem even if it meant spending tax dollars. She told the council that a vacant graffiti-scarred house in her neighborhood had become a danger. ‘We need someone to protect us, and I think it’s you,’ Kayser-Grant told the council.”

“Merced isn’t alone in looking for solutions on how to care for vacant houses. Modesto recently put $50,000 from its general fund toward maintaining abandoned properties.”

“In Manteca, a new set of laws designed to tackle the problem goes into effect this week. The city’s police department will now be allowed to board up and secure vacant houses, but only if they’ve been deemed a safety hazard, said Police Chief Charles Halford.”

“The city will also have the power to slap homeowners with fines of up to $1,000 a day, up to $100,000 per house, for not maintaining their properties. Manteca will start its cleanup program with vacant houses that have completed the foreclosure process and are now owned by banks.”

“That way there’s a responsible party to threaten with those hefty fines, said Halford.”

The Bakersfield Californian. “After two delays, real estate agent David Crisp’s lavish Seven Oaks mansion has been repossessed by the lender. The home was up for public auction on the steps of City Hall Monday, with an opening bid of $1.8 million.”

“With no bidders ready to swallow that price, the 6,666-square-foot home went back to the lender, identified in county records as Irvine-based X Bancorp.”

“More than 100 defaulted Bakersfield properties have been linked to Crisp, Cole, their family members and their associates, a Californian tally shows. As of Thursday, 102 properties with more than $62.3 million in total loans can be traced to associates of the former Crisp & Cole Real Estate agency, according to The Californian’s ongoing survey of public records.”

The Orange County Register. “Cal State Fullerton professor Michael LaCour-Little has done a study looking at recent sellers of O.C. homes who sold for less money than they paid. (And that’s losses without transaction costs figured in.)”

“He found ….37.6% of all sales he tracked resulted in a loss. Typical ownership tenure of losers was two years. The average loss, in dollars, was $109,514.”

“He was startled by how the size and scope losses grew as the year progressed. For example, losing sales were slightly more than 20% of deals tracked in January but nearly 70% in October. ‘I didn’t expect to see so much of a time trend,’ LaCour-Little said.”

“Option One Mortgage Corp. will shut down its lending operations, close three offices and lay off 620 people nationwide after a deal to sell the subprime lender fell apart, parent company H&R Block announced today.”

“‘Obviously Irvine is affected, but as far as numbers, we’re not doing breakdowns,’ said H&R Block spokesman Nick Iammartino from Block’s headquarters in Kansas City.”

“The Irvine office has already lost at least 350 jobs this year as the company slashed staff in the wake of major losses as subprime lending dried up. Option One and related businesses lost $193 million in the quarter ended July 31.”

The Hesperia Star. “I’ve accepted the idea that the housing market is affected by cycles in the economy. I’ve observed for myself that there are buyers markets and sellers markets and sometimes events unique to us put us into the housing market at a disadvantageous time. I learned from economics not to be tempted to put blame for these cyclical corrections on the people who are losing their homes.”

“I worked at a savings and loan in the late ’60s in what was called the Real Estate Owned Department. At noon each Friday the manager of our department held public auctions trying to sell these homes. In those days one bought a home to live in not to speculate with so no one showed for bidding unless they were in the market for a place to live.”

“Later…during the late ’90s…because the economy was otherwise straining, the housing market was hyper-activated when lenders offered refinancing carrots that put money into the hands of the homeowners. They were supposed to spend us back to affluent times. It worked for awhile.”

“Builders learned from their mistakes in the ’60s and now build in stages. They no longer make interest payments while waiting for potential buyers. They only construct the houses for the buyers who have signed on the dotted line.”

“Homeowners now have the risk when the market goes belly up, tanks, tumbles, bursts its bubble, or is described by other clever slogans used to mask the fact that some real people lost their homes and it may take years to recover.”

“But we don’t have to fall down and play dead yet. I believe there are buyers for our homes. They just aren’t in town at the moment.”

The Gazette reports from Colorado. “Colorado Springs’ housing woes continued last month, as November foreclosures pushed the area’s year-to-date total to 3,106 - the highest in 20 years. Another bad month in December could give El Paso County the dubious distinction of breaking its yearly foreclosure record of 3,476, set in 1988. ‘It’s very possible we’ll beat that record,’ said Fred Crowley, a University of Colorado at Colorado Springs economist.”

“Through November, Springsarea single-family permits totaled 2,053 or a nearly 38 percent reduction when compared with the same 11-month period in 2006. With December to go, it’s likely this year’s permit total will be the lowest since 1,154 in 1991.”

“Builders have stepped up incentives, while sellers of existing homes have slashed asking prices and sometimes wait months to find buyers or take their homes off the market.”

“‘We’re doing everything we can,’ said Mark Long, VP of Saddletree Homes and Symphony Homes in the Springs. ‘We’re advertising. We change the incentives that we do frequently. Everybody who’s in the market to buy knows builders are going to do what they need to do to move product.’”

The East Valley Tribune from Arizona. “While the real estate downturn has devastated many households, it has also opened up opportunities for first-time home buyers and others to take advantage of more affordable prices and low interest rates.”

“One advantage for first-time buyers is that they don’t have existing homes to sell, experts say. That’s a problem plaguing many move-up buyers in today’s market with more than 50,000 existing homes for sale and builders offering big incentives that are hard to rival.”

“Others are stuck because they owe more than their current homes are worth. ‘It’s become tough to sell a house even if you have equity in it,’ Gilbert real estate agent Tra Bell said.”

“Mesa real estate agent Steffanie Countryman said she recently listed a bank-owned property in south Chandler for $469,000 — almost $200,000 less than what the former owner paid for it in 2006.”

“‘(Prices) jumped up so quickly,’ Countryman said. ‘It’s like anything else. You swing way up, you’re going to swing way down.’”

The Daily Courier from Arizona. “It is too early to tell, but if the housing market remains steady, property owners may see the full cash value of their property holding steady at the 2008 (2009 tax year) level.”

“County Assessor Victor Hambrick said, ‘We have seen a significant reduction in the volume of sales in Yavapai County. Our office processed 1,400 sales in July 2005 and only 200 in July 2007. What we have not seen is a drastic reduction in prices.’”

“Realtor Lee Amble said housing prices ‘are down 15 percent to 25 percent from the final quarter of 2005; sales are down about 50 percent.’”

“In a Nov. 2 letter to the Arizona Department of Revenue, Hambrick wrote, ‘We are seeing an overall trend of declining sales continuing beyond the June 30, 2007, cutoff date. This is of great concern to us as we begin our market adjustment process. We feel in order to serve in the best interest of our County and its taxpayers, using sales available after the June 30th cutoff date would more accurately reflect the market for the 2009 valuation cycle.’”

“Hambrick said the reason he talked to the ADR is that the county wants to ‘be at the bottom of the market. Our goal is to reflect the market as accurately as possible.’”

The Yuma Sun from Arizona. “If economic trends continue, Yuma County’s budget will face a shortfall at the end of the fiscal year. This did not come as a complete surprise, said county finance director Scott Holt.”

“Back in the spring, when the budget was being finalized, former County Administrator David Garcia itemized three ‘risk factors’ for the board that might cause revenues to dip: a downturn in the housing sales market; a similar dropoff in housing-related industries such as construction; and a fragile overall economy due to increased prices on gas and other essentials.”

“‘All three of those risks are coming to fruition,’ Holt said.”

“Tight budget times are not unique to Yuma. The state is facing a deficit of $800 million or more by some legislative estimates. Counties all over the state are facing the crunch and taking various measures to compensate.”

“Maricopa County has asked all departments to cut administrative spending by 5 percent and froze all non-essential spending. Mohave County has imposed a hiring freeze. Yavapai County is dipping into its contingency fund.”

”It’s going to be an ongoing, developing situation,’ said District 4 Supervisor Tony Reyes. ‘I don’t believe the sky is falling but there is a problem.’”

The Boston Globe reports on Nevada. “In America’s ultimate boomtown, the signs of economic trouble literally show up in the streets, with ‘for sale’ sign after ‘for sale’ sign stuck in the front yards of homeowners who lost their houses because they couldn’t afford to pay their mortgages.”

“Las Vegas now suffers the highest foreclosure rate in the country. Nearby Henderson now has more than 300 properties in foreclosure or preforeclosure and some streets have as many as six houses in the process of being sold because the owners couldn’t keep up the payments.”

“‘I think it has huge political ramifications,’ said Jeremy Aguero, a financial analyst with a Las Vegas-based economic consulting firm. ‘We have a crisis situation in southern Nevada.’”

“It is also having a ripple effect on the entire economy, according to housing and financial specialists. ‘It’s like being on the Titanic. It doesn’t matter if you are in first class, the sides of the boat or the bowels of the boat, we’re all going down,’ said Gail Burks of the Nevada Fair Housing Center, which helps residents avoid foreclosure.”

“In addition, some wealthier buyers bought homes well beyond their means, taking ‘interest only’ loans. These buyers assumed the value of their homes would increase dramatically before they would have to start paying on the principle. But as the housing market has softened, these higher-income buyers are finding that they cannot sell their homes at the price they want - or at all, Burks said.”

The Review Journal from Nevada. “State officials on Monday rejected a proposed plan to help homeowners who may owe more than their homes are now worth.”

“Mendy Elliott, director of the Nevada Department of Business and Industry, outlined a proposal for the Legislative Commission Subcommittee on Lending and Housing to help homeowners who may now owe more than their homes are worth, but she dismissed the idea almost immediately as being imprudent.”

“Nevada officials briefly flirted with the idea of floating bonds to finance the portion of the debt that exceeds the property’s value. ‘I don’t think that we would be in a position, as the state of Nevada, to take that kind of risk,’ Elliott said.”

“Assemblyman Marcus Conklin,chairman of the Legislative Commission Subcommittee on mortgage lending and housing, said the state could be left holding the bag if borrowers failed to repay their loans.”

“Other states are talking about adopting a similar plan, but Conklin said the subcommittee doesn’t favor that approach. ‘There’s no solution’ for people who are faced with homes less worth than their home loan, he said.”

“Former state Sen. Joe Neal also opposed using state bonds for unsecured home loans. ‘I see this as a bailout for the bankers association in this particular area,’ Neal said.”

“State Sen. Michael Schneider criticized national home builders and mortgage lenders who helped drive speculative frenzy that helped fuel today’s mortgage problems. ‘They were just slamming people into these loans, because it was profitable for them,’ he said.”

“Nevada and the other states encountered a housing bubble and mortgage debacle because homes were built faster than the population increased. ‘It probably indicates overbuilding,’ said Douglas Duncan, chief economist for the Mortgage Bankers Association. ‘You had speculative overbuilding related to a rapid run-up in housing prices, and now you’re seeing the reverse of that.’”

“The inventory of foreclosed inventory in Nevada increased to 1.57 percent in June 2007, up from 0.45 percent a year ago.”

“The value of homes in Nevada declined 9 percent to 10 percent over the last year, ‘and we expect it to fall further,’ Duncan said. Nevada residential foreclosures tripled between June 2006 and a year later, Duncan said.”

“Jeremy Aguero, a principal in a Las Vegas financial consulting firm, said the news media is creating a bad image of Nevada as a boomtown state that went bust. ‘It seems we have emerged as the Paris Hilton of states,’ he said.”

From Las Vegas Now in Nevada. “State lawmakers met on Monday to continue the dialog about helping homeowners affected by the foreclosure crisis. The problem is, most don’t want to appear that they’re bailing out speculators.”

“Committee members do not want to appear soft on home buyers who came into the market to make some quick cash.”

“‘Because you’re not only bailing out the homeowner, you’re bailing out the lender that made a questionable loan in the first place. And those people need to suffer,’ said Senator Warren Hardy.”

The Nevada Appeal. “The head of an independent Southern Nevada research firm told lawmakers Monday nearly 60 percent of homes in foreclosure there are not occupied by their owners.”

“That means they are either rentals or homes purchased by speculators during the housing boom of the past couple of years.”

“Jeremy Aguero, of Applied Analysis in Las Vegas, said of the nearly 30,000 unsold homes on the market, 42 percent are vacant and another 11 percent occupied by renters.”

“Doug Duncan, economist for the MBA said Nevada, California, Arizona and Florida are in the same situation and the cause is a mix of over-development and speculative investment.”

“‘Housing construction should be in proportion to population growth but there’s been a dramatic increase in housing construction compared to population growth,’ he said. ‘There’s a massive supply of houses on the market.’”

“The housing market took off, especially in Southern Nevada, in 2004-2005. Homes sold within hours after they went on the market, driving prices up relentlessly. Aguero said the average sale prices of a new home in 2001 was $170,000. Now, he said, it’s $305,000 and that’s down a bit from last year.”

“But the market has effectively collapsed, not just in Nevada but nationwide. Homes are now on the market for months, selling sporadically when owners agree to drop prices.”

“Duncan said the percentage of loans delinquent in Nevada was 2.8 percent in June 2006. This past June, he said, it was 4.8 percent. He said it’s still lower than the national delinquency rate.”

“He said large numbers of those speculators who see their investment dropping in value and the market stalled ‘will simply turn in the keys and walk away.’ When they do that, he said, the house doesn’t show as delinquent.”

“Aguero said there are more than 6,000 foreclosures in Nevada ‘in the pipe’ today. And Duncan said the situation won’t turn around soon. ‘We expect sales will continue to fall for some time,’ he said.”

“He said up to 45 percent of loans made during the boom are ’subprime,’ which effectively means they were made to people who probably didn’t have good enough credit for that large a loan, and 42 percent have adjustable-rate mortgages.”

Some housing bubble news from Wall Street and Washingon. Bloomberg, “H&R Block Inc. shut its subprime home-lending unit and will cut 620 jobs after an agreement to sell Option One Mortgage Corp. to Cerberus Capital Management LP unraveled. H&R Block will try to sell the portion of Option One that does billing and collections, the company said today in a statement. The decision may result in $200 million in pretax charges.”

“Chairman Richard Breeden is trying to salvage part of the sale of Option One begun by his predecessor Mark Ernst, who once predicted the entire company would fetch $1.3 billion.”

“‘The company is determined to complete our exit from subprime mortgage lending without further delay, and today’s action largely completes that objective,’ Breeden said in today’s statement.”

“‘This is not a market where people are willing to step up and assume risks that may be unquantifiable, and that was the albatross around the neck of Option One,’ said David Roberts, who oversees $20 million for Harvest Investment Advisors, including H&R Block shares.”

The New York Times. “On Monday, Treasury Secretary Henry M. Paulson Jr. said he hoped to reach agreement this week with lenders and institutional investors on a plan to temporarily freeze the teaser rates for certain qualified borrowers. But industry analysts and executives were skeptical about the government’s ability to produce a high-speed approach to handling thousands of cases with a few simple principles.”

“‘There is no cookie-cutter approach that can be taken to this,’ said Bert Ely, a longtime banking consultant. ‘This is going to be a mess. I hear the tone of a mandate. It’s government-mandated collusion.’”

“According to the broad outlines of the plan, the Treasury will divide subprime borrowers into four groups. Group 4 includes those who can continue to make their mortgage payments if the teaser rate stays in effect or the maturity of the loan is extended. For this category, and this category alone, help is on the way.”

“How do you spell b-u-r-e-a-u-c-r-a-t-i-c n-i-g-h-t-m-a-r-e? If fraud was widespread during the housing bubble, the current plan has its own set of incentives. ‘People will come up with eight ways of rearranging their finances to stay in Group 4,’ said Ram Bhagavatula, managing director at a New York hedge fund.”

“More to the point, ‘this policy solution smells of the tenets of Marxism: from each according to his ability to each according to his need,’ he said.”

“If you think getting mortgage servicers and investers to agree on an outcome is tough, just wait until the lawyers get involved.”

“‘The modification of existing contracts, without the full and willing agreement of all parties to these contracts, risks significant erosion of 200 years of contract law,’ said Joshua Rosner, managing director at an independent research firm in New York.”

“While Paulson has been busy devising a plan that limits the damage to the economy without encouraging more risk-taking in the future, ‘Treasury hasn’t thought through’ one aspect of the plan, Rosner said: the implication for Fannie Mae and Freddie Mac, the two government-sponsored mortgage behemoths.”

“‘Guess who’s the largest single holder of AAA notes? Fannie and Freddie,’ he said.”

“The way these CDO structures are set up, defaults in underlying mortgages trip certain triggers that serve to protect senior noteholders. If the plan inhibits defaults, ‘the cash flows that should be reserved for the AAA holders will end up going to the residual owners,’ Rosner said. ‘Treasury is pushing a plan that could cause more losses at already weakened Fannie and Freddie.’”

“Aside from violating the sanctity of a contract and scaring off potential investors, what’s the good news here? ‘It’s a big misconception to think that (mortgage) resets are responsible for the delinquencies,’ said Andy Laperriere, a managing director at the ISI Group in Washington.”

“Of the subprime loans made in 2006 and scheduled to reset in 2008, some 25 percent are already delinquent, he said. ‘What’s driving the delinquencies is that people can’t afford the initial payments,’ Laperriere said.”

“That’s a problem Paulson’s plan won’t fix.”

From Reuters. “Top executives from four of the world’s biggest banks told British lawmakers on Tuesday that errors were made during the recent credit-market crunch but said they had not been reckless or failed to tell clients of risks.”

“‘Mistakes were made, there’s no question about that,’ Gerald Corrigan, managing director and co-chair of risk at Goldman Sachs, told the cross-party parliamentary committee. ‘But it’s also true that conditions that materialised, especially in the subprime mortgage market, are by any standards quite extraordinary.’”

“The four banks acknowledged that the search for higher yields during a period of low interest rates had boosted the demand for more complex and sophisticated investment products. ‘It’s inevitable that when markets are strong and booming there’s a natural aversion to being the first one into a market and the last one out. That’s a fact of life,’ Corrigan said.”

“Thursday’s committee hearing also included the questioning of Northern Rock’s auditors, PricewaterhouseCoopers, who said they had not failed in their statutory duty and brushed off criticism over fees received for ‘comfort letters’ written for Northern Rock ahead of securitisation deals.”

“‘You’ve audited and provided comfort to the biggest banking disaster in nearly 150 years,’ parliamentarian Michael Fallon told the auditors.”

“Florida’s pension fund owns more than $1 billion of the same downgraded and defaulted debt that sparked a run on a state investment pool for local governments and led officials to freeze withdrawals, according to documents obtained by Bloomberg News.”

“‘These were highly inappropriate investments for taxpayers’ money,’ said Joseph Mason, a finance professor at Drexel University. ‘This is the tip of the iceberg for pension funds. We know the paper is sitting there. There are substantial subprime-related losses that haven’t shown up yet.’”

“In freezing the pool…the state stopped the clock. The same clock is ticking for every state in the country where school districts and cities and towns put their faith in someone else, usually at the county or state level, to manage their money.”

“What’s It Worth? Of course, that’s the problem with Muniland in general: Nobody ever really knows precisely what’s going on when a crisis like this hits. There might be as many as 100 pools like this across the nation, with assets of something like $200 billion.”

“For Wall Street, the choices are either…come up with a solution or having one forced on them by regulators, according to former U.S. Securities and Exchange Commission Chairman Arthur Levitt. To regain investor confidence, ‘we cannot ignore the need to be transparent at all levels,’ he said at an industry conference last month.”

“‘The market should demand transparency,’ said Mark Amberson, who runs the $5 billion Russell Money Fund, and buys asset- backed commercial paper. ‘I wouldn’t loan my brother money if he hands me a bag and says ‘Don’t look in there, but trust me, it’s really valuable.’”

“Investors and Wall Street firms rely on their own software, models bought ready-made from vendors such as Moody’s, and quotes from brokers to value their debt.”

“Dan Fuss, vice chairman of Boston-based Loomis Sayles & Co., hasn’t found an adequate system to help value CDOs so he refused to include them among the $22 billion of securities he manages.”

“‘It’s like teenagers: You sort of know what’s going on but not really,’ said Fuss. ‘We spent a fortune on software, $75,000 a month. And what do we end up with? A bunch of zip codes.’”

The Associated Press. “Also needed…to prevent a recurrence of today’s problems are tighter restrictions on mortgage lending, said Robert Toll, CEO of luxury homebuilder Toll Brothers Inc.”

“Toll said home prices ‘may not have stopped falling yet,’ adding that it may not ‘be the best time to buy a home.’”

“Echoing the complaints of consumer advocates who have long pushed for mortgage lending reform, Robert Toll said stronger restraints are needed to prevent a recurrence of today’s problems. ‘We had mortgages available to the alive and standing and that was the only criteria,’ he said. ‘There’s no reason why we can’t set limits.’”

“Toll also said…buyers should take advantage of the opportunity to snap up houses at low prices.”

“Problems are starting to show up in loans made to homebuyers with strong credit records because real estate prices continue to slide, added Kerry Killinger, CEO of major lender Washington Mutual Inc., saying he supports the central bank cutting interest rate cuts again as well as temporary expansions of Fannie Mae and Freddie Mac’s funding capacity.”

“Angelo Mozilo, CEO of Countrywide Financial Corp., said he also backs allowing Fannie and Freddie being allowed to buy bigger home loans and keep more of them on their books as a way to improve liquidity for the battered industry.”

“‘This is the time for (Fannie and Freddie) to step up to the plate and take action and try to bring liquidity back to the market,’ Mozilo said.”

“Countrywide Financial Corp CEO Angelo Mozilo said on Monday he doesn’t expect the largest U.S. mortgage lender to file for bankruptcy protection, saying the ‘elements are certainly not there.’”

“‘Countrywide is a strong, viable financial company,’ Mozilo said. ‘Bankruptcy is an issue that nobody can ever eliminate, although I don’t think it’s possible or probable for Countrywide.’”

“A national labor union launched a campaign Monday against Countrywide Financial Corp., calling on members and other consumers to boycott the mortgage lender’s banking subsidiary until it guarantees it won’t foreclose on borrowers who have fallen behind on adjustable rate loans.”

“By targeting Countrywide Bank, the labor union hopes to hurt the lender’s ability to generate the funds needed to make new home loans. Countrywide began relying on its banking arm to fund loans in the wake of the liquidity crisis that rattled financial markets following the spike in home loan defaults this summer.”

“It has been aggressively courting new deposits and expanding its bank branches.”

The Northwest Herald. “Dee Biedermann is living in a crowded RV parked next to the neat, taupe-colored house she used to call home. Next week, Biedermann will move out of her neighbor’s driveway and into a rented duplex in Lakemoor, an outcome common for millions of Americans expected to lose their homes through foreclosure this year.”

“Biedermann fell behind in mortgage payments as her loan adjusted upward once, twice, a third time – eventually reaching 20 percent higher than her initial rate, she said.”

“‘I’m living here with the dog, two cats,’ Biedermann said. ‘[My neighbor’s] got the parrot.’”

From MarketWatch. “Housing will revive when prices come down to the point where demand rises enough to reduce the huge supply of unsold homes now overhanging the market. That said, this point is a long way off. Right now, there is at least a 10-month supply of unsold homes at current selling rates.”

“To whittle this supply to more normal levels, demand has to rise. That will happen when prices fall, since right now, housing prices are much too high relative to family incomes.”

“Today, median home prices are 3.5 times the size of median annual family incomes. This may be down from the recent peak of 4.2 times incomes reached last year, but it’s way above the 2.8 times that home prices averaged during 1984-2000, when lots of homes were bought, sold and built.”

“And if you think 2.8 is low, check out the early 1970s. That was when home prices were only 2.3 times median family incomes, and housing was selling like gangbusters.” “To equal the affordability of the early 1970s, prices would have to fall a whopping 38%.”

“Sellers could always hold the line and wait for family incomes to rise. But this clearly won’t happen overnight - and, besides, it’s a buyer’s market and no one wants to buy today knowing that prices might well be lower tomorrow.”

“After all, when it comes to housing prices, what matters most is not the cost of construction, nor what surrounding homes might be selling for. Simply put, it’s affordability. And until they are more affordable, houses won’t sell.”

The Boston Globe reports from Massachusetts. “The recent spike in home foreclosures in Massachusetts is caused primarily by falling housing prices, and not by rising mortgage payments, according to research released yesterday by the Federal Reserve Bank of Boston. The contrarian report suggests the common understanding of the foreclosure crisis is somewhat mistaken. Unaffordable loans don’t cause foreclosures directly.”

“Even as subprime lending became more common, even when people fell behind on mortgage payments - during the economic downturn in 2001, for example - foreclosures were rare because house prices continued to rise. In part, people were able to escape trouble by selling their homes at prices high enough to cover their debts.”

“But the research also suggests that troubled borrowers tried harder to make the necessary payments, in the expectation they would profit eventually.”

“Conversely, when prices started falling, people struggling to make payments had less incentive to find the money. Housing price movement ‘plays a dominant role in generating foreclosures,’ the report concluded.”

“One implication of the report is that current attempts by local and federal officials to help borrowers may be ineffective.”

“The number of foreclosures will be determined mostly by ‘how far housing prices fall,’ said Boston Fed president Eric Rosengren, who introduced the report yesterday.”

“Rosengren highlighted a reason for optimism. On a typical subprime loan, the interest rate increases after the second year. Historically, most borrowers either sell or refinance before the rate resets. Rosengren said investors were never counting on a long-term income stream.”

“‘It’s not like they expected the borrowers to be there for 30 years,’ he said.”

The Standard Times from Massachusetts. “U.S. Treasury Secretary Henry Paulson offered encouraging news for cash-strapped homeowners Monday, announcing that an agreement was near on a proposal to help thousands avoid foreclosures by temporarily freezing their mortgage rates.”

“However, area banking and mortgage experts still have questions about how the freeze will be implemented and what its long-term effect will be on the mortgage industry.”

“‘There are a number of other people who took loans, who are able to make the monthly payment as it stands now,’ said Tom Farmer, a spokesman for the state’s affordable housing bank. ‘A lot of these folks are working two jobs, three jobs, but they are making the payment.’”

“Questions remain on how a rate freeze would be implemented and what kind of effect it would have on the mortgage industry. ‘I don’t think you’d want to freeze them for a long time,’ said Rick Presbrey, CEO of Housing Assistance Corp., a Hyannis nonprofit. ‘Unless you have somebody who understands the long-term consequences of that, I’d be real careful with that.’”

“‘A lot of these have been packaged and repackaged and sold on Wall Street to other investors, so you have to get everyone on board, which isn’t always easy to do,’ said Carl W. Taber, senior VP of Citizens Union Savings Bank in Fall River.”

“David Brennan, senior VP of Cape Cod Five Cents Savings Bank agreed, adding: ‘To some degree, those investors are going to be asked to take the hit.’”

The Metrowest Daily News from Massachusetts. “As of October there were more than 6,000 foreclosures statewide, three times the number of foreclosures during the same time period last year.”

“‘Lenders have apparently lost patience with borrowers, and it’s pretty clear that a lot more Bay State homeowners are going to be getting a visit from the Grinch this year,’ wrote Warren Group CEO Timothy Warren Jr.”

“Eric Rosengren, president of the Federal Reserve Bank of Boston, said the recent foreclosures stemmed in part from interest rate spikes after two- to three-year lower introductory rates expired. Rosengren said lenders, market analysts and borrowers alike expected borrowers would sell their properties or refinance their mortgages before interest rates went up.”

“‘People expected that this product would have a problem if we got into difficult economic circumstances, but I don’t think people anticipated that we would see as elevated a problem as we have under what happened in a fairly benign economic situation,’ said Rosengren.”

“He estimated that 26 percent of subprime mortgage holders would be able to refinance given their credit scores and current market conditions.”

“‘It’s expected that foreclosures are going to increase in 2008 so it’s just a question of what can we do at a state level to minimize that impact. I think no matter what the adjustable rate, mortgages are going to go up,’ said Phil Hailer, spokesman for the state Department of Housing and Community Development.”

The Republican from Massachusetts. “Statewide, there were 6,324 foreclosure deeds through October of this year, compared to 2,112 at the end of October 2006. There were just 2,634 foreclosure deeds in the state for all of 2006.”

“Foreclosure deeds in October jumped 119.5 percent, from 333 last year to 731 this year. Deeds are also up from 673 in September 2007.”

“Foreclosure deeds…means properties whose ownership has changed. ‘The property belongs to somebody else,’ said Katie Curnutte, spokeswoman for the Warren Group. ‘They’ve either gone out to auction, or the lenders have bought them back.’”

“Meanwhile, more petitions to foreclose were filed in Massachusetts during the first three quarters of 2007 than during all of 2006, The Warren Group said.”

“Through September, the latest for which statistics are available, foreclosure petitions in Massachusetts were 21,055, compared with 18,926 for 2006. In September, petitions were 2,509, up 34.1 percent from 1,871 a year earlier, the smallest percentage increase all year.”

“‘Petitions to foreclose in September might have fallen when compared to August, but I think we’ll see petitions during the rest of this year continue their steady upward march,’ said Warren. ‘August’s numbers were incredibly high, but we will probably see them matched before too long. Petitions may seem to have calmed a bit in September, but that is likely temporary. I think we’ll see more record-breaking numbers before the end of 2007.’”

“Meanwhile, many Massachusetts homeowners with subprime mortgages are finding they need to find new lenders to refinance as they seek to avoid foreclosure. Eight of the 10 largest subprime mortgage specialists in Massachusetts are no longer lending in the state.”

“Last Friday, Gov. Deval L. Patrick signed a compromise bill that aims to bar lenders from issuing mortgages that borrowers can’t repay and creates a new licensing system for certain mortgage brokers.”

The Daily News from Massachusetts. “Late last month, Gov. Deval Patrick signed a bill written by Sen. Susan C. Tucker Rep. David Torrisi to improve state oversight of the lending industry while providing resources for people at risk of losing their home.”

“Tucker said the new law is meant to end abusive lending practices but won’t help everyone. ‘The intent of our legislation was to put a halt to the whole game that created this crisis,’ Tucker said. ‘The bill is not a rescue plan.’”

“Every town in the Greater Newburyport area saw the number of foreclosures rise in the first 10 months of 2007 as the home financing crisis rapidly spiraled across the state. The ripple effect is likely to depress already declining home values even more, experts say.”

“‘There’s a ripple effect foreclosure sales have on overall values in eastern Massachusetts,’ said Thomas Callahan, executive director of the nonprofit Massachusetts Affordable Housing Alliance. ‘It depresses the market most severely on your block. But when there are so many foreclosures in Essex County, you can get to point that all of those foreclosures on the market have an effect of dampening values going forward.’”

The Boston Herald from Massachusetts. “As the subprime market collapse spirals, a local law firm has created a new group to deal with its impact. Boston-based Mintz, Levin, Cohn, Ferris, Glovsky and Popeo’s new subprime practice group has been meeting for about a month, group co-chairman Richard Moche said yesterday.”

“‘It’s the biggest financial story of the year, and the impacts will reverberate for a while,’ said Moche about the subprime mess, and its ensuing international investment woes.”

“Now, at Mintz, Levin, the group’s two dozen lawyers - who specialize in litigation and bankruptcy law, as well as governmental investigations, insurance coverage, and white collar crime - are helping financial institutions, investment groups and insurance companies deal with subprime-related legal matters.”

“‘There may be investors in companies that have subprime exposure, and the investors may feel that the companies didn’t adequately expose the risks,’ Moche said about the firm’s potential clients. ‘In other cases, there may be government investigations, where regulators are trying to assess the landscape, and people will need to respond, not necessarily as targets, but as witnesses.’”

“Mintz, Levin decided to form the group after three separate clients approached the firm for subprime-related help, Moche said. ‘It’s been a very recent development,’ he said.”

The Union Leader from New Hampshire. “The continuing wave of foreclosures on subprime mortgages prompted U.S. Rep. Paul Hodes to meet with lenders, lawyers and regulators yesterday. Hodes termed the failure of subprime markets unprecedented in its scope, noting that it is being felt around the world by business and residential borrowers.”

“Foreclosures, up 100 percent in almost every county in the state, come in the midst of the worst housing slump in 16 years, Hodes said. Predictions are that 4,300 homes will be taken by the end of 2009.”

“Subprime lending quadrupled in New Hampshire over the past four years, rising from about 5,000 a year in 2003 to more than 20,000 in 2006, accounting for one third of all new mortgages in that time.”

“A New Hampshire Bankers Association said in a study released in August that subprimes account for 70 percent of foreclosures, although they make up 13 percent of all mortgages.”

“A proposed state law would impose licensing requirements on mortgage bankers, brokers and originators. ‘We’re trying to stop the monkey business,’ Hodes said. ‘Frankly, they were playing fast and loose with sound lending practices.’”

“Hodes said, ‘the fact is we’re going to have some rough times going forward with mortgage foreclosures. There is no easy way around that.’”

“Hildreth urged homeowners who suspect they will run into a problem with their mortgages to contact his office early. His office has held borrower conference sessions around the state, but turnout has been disappointing, he said.”

The Eagle Tribune on New Hampshire. “The housing slump could translate into savings for some school building projects, according to managers at several construction companies.”

“‘It’s sort of a buyer’s market,’ said Steve Ingram, an owner of Ingram Construction Co. in West Swanzey. ‘If I had a municipal building or a school to do, or even a private building, this would be the time to do it.’”

“‘Because of the fact there are fewer projects out there and work is less plentiful, contractors are willing to reduce (profit) margins,’ he said.”

“Statewide, construction company managers and owners are battling one another for jobs by cutting their profit margins, Ingram said. ‘The margins are smaller,’ he said. ‘They just have to be.’”

The New York Sun. “New York City could face a budget gap of more than $6 billion for fiscal year 2011, the city comptroller, William Thompson Jr., predicts in a report issued yesterday.”

“‘New York City’s economy is at a turning point,’ Mr. Thompson warned. ‘Turmoil in the nation’s housing and mortgage markets has reverberated through the financial sector, threatening to produce a marked slowdown in local economic activity.’”

“Mr. Thompson said in the report that the ‘collateral effects’ of the housing crisis are likely to include financial losses and layoffs that will ‘fall disproportionately on New York firms and workers.’”

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