The Housing Bubble

Please post items of interst from outside the US here.

The LA Daily News reports from California. “Foreclosures soared 435.5 percent in the San Fernando Valley last year as nearly 3,000 homeowners surrendered to higher monthly house payments brought on by rising adjustable rate loans, the San Fernando Valley Economic Research Center at California State University, Northridge, said Tuesday. The center’s numbers cover an area from Glendale to Calabasas, where sales of new and previously owned houses and condominiums fell an annual 32.6 percent.”

“Realtor Patricia Beltran is about to be counted in this year’s foreclosure statistics. The payment on her four bedroom, three bathroom home in Porter Ranch has jumped $1,200 to about $5,000 a month. She can no longer afford it and is desperate to sell.”

“‘I, like a lot of other people, was under the assumption that after two years I would refinance and my payment would go down,’ she said.”

“Beltran, who bought the home 2.5 years ago for $620,000, tried to refinance last summer, but by then credit standards had tightened and the market, and her source of income, was dwindling.”

“‘There’s nothing we can adjust for you because you won’t be able to pay it anyway,’ she recalled a loan officer saying last summer.”

“She listed the house four months ago for $765,000 and has since dropped it to $719,000. Beltran, a single mother, now has 11 listings, and eight of the sellers are in the same fix.”

“She’s been in the business for seven years and used to do 25 to 30 sales a year. Last year she did six. ‘We’re surviving off her (daughter’s) paycheck. She’s a college student,’ Beltran said.

“In December, the median price of a previously owned home or condo in the San Fernando Valley fell an annual 7.2 percent to $580,000 and sales fell 51.5 percent to 804 units.”

“Daniel Blake, a CSUN economics professor and the center’s director, notes that December’s median price is 12.1 percent under the record $660,000 set last May. But even with the kind of market distress we are seeing now, percentage price declines won’t match sales declines.”

“‘Prices would have to fall by half to even get to the 2001 (level) and that’s a huge drop. I don’t think it’s going to go that far,’ he said.”

The Daily Breeze. “South Bay home prices experienced across-the-board declines in December as the market continued to cool, according to a report released Tuesday. Each city cited in the report had a year-over-year drop in median price for all homes sold in December - from Carson, down 15.5 percent, to Torrance, which fell 4.8 percent.”

“As for the drop in South Bay sales, one notable omission in the CAR report may bring this reality home to area residents. Manhattan Beach, which CAR consistently lists as one of the top 10 highest-priced areas, if not the highest, was excluded from the December report of individual communities.”

“That’s because the trendy beach city did not meet the report’s threshold of at least 30 home sales in a month.”

“‘The Manhattan Beach market is somewhat uncertain more because in the last 10 years it has gone up more than any other market in Los Angeles County,’ said John Parsons of Horrell Realtors in Redondo Beach. ‘It used to be second or third to Palos Verdes Estates or Rolling Hills Estates. But now it’s more than anything on The Hill.’”

The San Gabriel Valley Tribune. “In Los Angeles County, the median home price fell 16.9 percent to $487,190 in December, from $586,540 a year ago.”

“Locally, Pasadena took the biggest hit, with a year-over-year price drop of 30.1 percent from December 2006. Azusa weathered a decline (-17.6 percent) that outpaced California’s annual price drop.”

“Marty Rodriguez of Century 21 Marty Rodriguez in Glendora, said that Pasadena’s sharp decline probably reflects that fact that homes in that city were priced substantially higher than many surrounding cities to begin with.”

“‘The higher the price the harder they drop,’ Rodriguez said. ‘Those very, very expensive homes probably aren’t selling that well.’”

“‘The whole year of 2007 was a pretty sharp decline,’ said Tom Adams, owner of Century 21 Adams & Barnes in Glendora.”

“‘The downturn, Adams said, has been a normalization process that’s weeded a lot of people out of the industry, which he views as a good thing. ‘I think it has taken a little while for the public to realize now is a good time (to buy a home),’ he said.”

“Rodriguez said homeowners looking to sell must realize what houses are selling for now. ‘The reason we have so much inventory is that the sellers don’t understand,’ she said.”

The Voice of San Diego. “As economists and real estate professionals offer split opinions on what’s ahead in 2008, data released Tuesday recapped an indisputably dreary end of 2007 for those on the selling side of San Diego County’s housing market.”

“The year’s foreclosure filings in San Diego County totaled 38,917 — triple the total in 2006 and eight times as many as 2005, foreclosure tracker RealtyTrac reported.”

“And Standard & Poor’s/Case-Shiller home-price index for November 2007 (showed) San Diego County’s prices for resale detached homes dropped 3.4 percent in one month, a significant monthly drop surpassed only by Los Angeles among the 20 cities examined in the index.”

“Between November 2006 and November 2007, prices declined 13.4 percent, a yearly decline second only to Miami’s 15 percent drop. And the county’s prices were down from the peak in November 2005 by 16.3 percent.”

“Rob McNelis, president of One Stop Lending and Realty in Santee, said there’s an industry understanding that any homes that come on the market between the second week of November and the second week in January are desperate sellers. And so since Tuesday’s data referred to deals struck before that time, he expected the data to get worse in the next couple of months.”

“‘Scary as it may sound, that’s not going to be the scariest number,’ he said. ‘December and January are going to be worse.’”

“Bank-owned homes constitute a large portion of the homes on the market, 31 percent of all home sales in December, according to analyst Andrew LePage from DataQuick.”

“‘We are experiencing … the effects of someone who’s drank too much wine,’ said John Robbins, immediate past chairman of the national Mortgage Bankers Association. ‘The good news is we’ve stopped drinking. The bad news is we’re going to have a hell of a headache.’”

The Union Tribune. “Tania Jones and her husband recently were able to purchase a home in Rancho San Diego for $417,000, but only after Tania spent five months working at her hospital job 12 hours a day, five days a week to pay off bills and save enough for closing costs and to put some extra money in the bank.”

“The couple could not have afforded the original asking price of $485,000 for their 1,200-square-foot house, Jones said. Now with a mortgage payment of $3,300 and other monthly bills totaling $2,500, they have to live frugally, watching what they spend and rarely going out to eat, she said.”

“‘I still think it’s expensive to buy a house here in San Diego,’ said Jones, who previously paid $1,200 a month in rent for an El Cajon apartment.”

“‘When we were looking at houses in La Mesa, all the ones that were under $400,000 were very beaten up. In five months, the price on our house went down, so I feel very lucky,’ she said.”

The North County Times. “Riverside County had one of the worst foreclosure rates in the nation during 2007, seeing a meteoric 191 percent jump from the previous year to about one home out of every 23 entering foreclosure, according to RealtyTrac. 29,826 county homes were in some stage of foreclosure in 2007.”

“An avalanche of data showing a slumping housing market has led some in the housing industry to forecast a long, steep decline in area home prices. Others, such as the California Building Industry Association, have predicted the housing market will see a modest recovery this year.”

“‘I see this being a tough market on through 2010 and into 2011,’ said Lyle Anderson, a Poway real estate agent. ‘I had people come to me last year who’ve been in the business 20 years and saying everything’s going to be fine this year. I’m looking at them thinking, ‘What are you smoking?’ I don’t see it.’”

“Norm Miller, a professor with the University of San Diego’s Burnham-Moores Center for Real Estate, said he agrees with Anderson that local home prices will continue to decline for two or three years. He said the market would then stabilize but recovery would not come until 2012.”

“‘We’re seeing a real, fundamental decline in house prices,’ Miller said. ‘Home appreciation does not pay for mortgages. That’s the lesson we’ve learned.’”

The San Francisco Chronicle. “In the Bay Area, December sales of existing, single-family homes plummeted 38.1 percent from a year ago, according to the California Association of Realtors.”

“Meanwhile, the average cost of those homes fell 8.6 percent in the region, the November Standard & Poor’s/Case-Shiller Home Price index said. That’s the largest drop since it began reporting numbers in 1988.”

“‘Basically, the markets are coming back into a bit of reality,’ said Maureen Maitland, VP of index services at Standard and Poor’s. ‘We’re definitely in a housing recession.’”

The Bay Area News Group. “Bay Area foreclosure filings continued to soar at the end of 2007 compared with a year ago, with one home in every 93 slipping away from its owners.”

“The number of San Joaquin County foreclosures rose 301 percent from the last quarter of 2006, the most in the Bay Area. Next were Santa Clara (254 percent), Contra Costa (218 percent), San Mateo (193 percent), Alameda (180 percent) and Solano (125 percent) counties.”

“California led the nation in total foreclosure filings and the number of homes in some stage of foreclosure last year. In all, 1.9 percent of households in California received foreclosure filings.”

“Alan Fisher, executive director of an organization that advocates increased access to credit and banking to low-income and minority communities, said that…upper-middle-class homeowners who saw the downturn coming were able to sell their home and had enough equity to come out with a profit. They may be renting now and waiting to buy.”

“‘You don’t see them on the foreclosure rolls, but they are affected by the phenomenon,’ he said.”

From The Sun. “Buck Byers remembers the humorous scene like it was yesterday. At the housing boom’s peak, dozens of trucks crammed the street in front of his San Bernardino lumber operation while their enraged drivers yelled vulgarities as they navigated through the congested mess.”

“‘That was all good, but that’s not today,’ said Byers, owner of Barr Lumber on Mill Street.”

“Traffic problems are the least of his worries these days. The housing market is racing downhill and local lumber dealers like Byers are struggling to keep workers employed.”

“‘Right now we’re just trying to keep our people employed, our trucks running,’ Byers said.”

“Among the company’s six branches - four of them in the Inland Empire - Barr Lumber has laid off 80 employees since August. Its San Bernardino work force was cut in half and went from generating $8.5million per month in sales to $ 3 million over the last year.”

“It used to charge customers double for lumber, compared with what it charges now.”

“But 2008 doesn’t hold much promise for a turnaround. Byers is almost certain more layoffs are on the way. ‘The biggest reason is because all the development companies are holding their cards so close,’ he said. ‘You have no idea what their financial positions are.’”

“Even 57-year veteran Barry Johnson at Chino Lumber is trimming to the bone on his budget. Johnson remembers charging more than $3 per 2-by-4 a couple of years ago compared with about $2 these days.”

“‘I haven’t seen these prices since the mid-’70s,’ Johnson said. ‘This could top that.” The lumber industry’s last calamity was during a nationwide recession in the early 1990s, Johnson said.”

“Byers said the industry will have to hunker down until business improves. ‘Everybody always asks, ‘Is this the bottom of the market?’ he said. ‘I’d like to think it is, but I consistently see it getting worse. This is the worst we’ve ever seen it. It makes profiting virtually impossible right now.’”

“Byers still daydreams about 2004, his best year ever. ‘It was unbelievable the amount of work we were doing,’ he said. ‘It was like we were the smartest guys in the world in the best market.’”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Centex Corp., the second-largest U.S. homebuilder, reported a $975.2 million third quarter loss as the housing slump and tighter lending standards cut demand. Centex wrote down $554 million in land and property values in the quarter and has cut more than 40 percent of its workforce since 2006. The company closed on 6,657 houses, a 20 percent decline from a year earlier. The average price fell 11 percent to $268,588.”

“‘The housing market continues to correct and tighter mortgage underwriting standards are affecting home prices,’ Tim Eller, Centex’s CEO, said in the statement.’

The Orange County Register. “Orange County mammoths Standard Pacific Homes in Irvine and William Lyon Homes in Newport Beach…have seen their credit ratings downgraded and both have sold properties – often at a loss – to raise cash as they struggle to stay afloat.”

“It looks like they’ve made the same old mistake: buying too much land at too high a price. ‘The companies that survive will be those that don’t have huge ownership of lots of land and that aren’t highly leveraged,’ said Kerry Vandell, professor of finance and real estate at the UC Irvine’s Merage School of Business.”

“William Lyon owned $1.62 billion in real estate inventory and had just $34.5 million in cash, according to its most recent financial report. Standard Pacific reported an inventory of $2.95 billion and only $5 million in cash.”

“‘This downturn is more protracted than anyone forecasted, and so their financial position is worsening,’ said Joseph Snider, Moody’s senior credit analyst for the housing industry. ‘Since October, we’ve had 20 ratings actions – all negative.’”

“Standard Pacific has a $150 million note due in October and $1.2 billion due between 2009 and 2015. ‘Getting out of this situation is going to be extremely hard if not impossible,’ said Tim Backshall, chief strategist of Credit Derivatives Research. ‘It’s very likely – given the lack of cash flow, the large interest and expenses – that these guys won’t survive.’”

The New York Times. “UBS, the largest Swiss bank, said Wednesday that it would write off $14 billion in losses on the troubled U.S. housing market and post a net loss for 2007. The numbers ‘include around $12 billion in losses on positions related to the U.S. subprime mortgage market and approximately $2 billion on other positions related to the U.S. residential mortgage market,’ the bank said.”

“UBS said Dec. 10 that it was writing off $10 billion of subprime investments for the fourth quarter, so the numbers Wednesday represented $4 billion more in losses than it had previously disclosed.”

“The bank had already announced a $4.4 billion loss on subprime investments in the third quarter. The figures Wednesday bring its 2007 U.S. residential mortgage-related losses to $18.4 billion.”

“Merrill Lynch & Co., the world’s largest brokerage, plans to exit the business of underwriting collateralized debt obligations and other structured credit products after the securities led to a record loss.”

“‘We are not going to be in the CDO and structured-credit types of businesses,’ new CEO John Thain said today.”

“Merrill posted its largest-ever loss last year after writing down the value of its CDOs and other assets related to subprime mortgages by more than $24 billion. The New York-based bank was the biggest underwriter of CDOs from 2004 through 2006.”

The LA Times. “The FBI is conducting 14 criminal investigations of mortgage lenders and the firms that turned their high-risk loans into complex securities that have left investors worldwide with huge losses, a top official at the federal agency said.”

“‘We’re looking at the whole range of those involved — including the investment banks and other entities that bundled the loans up for sale and the institutions that held them and reported [to investors] on their value,’ Neil Power, head of the FBI’s economic crimes unit, said in an interview from Washington.”

“The sub-prime lending investigations also extend to home builders, he said.”

“The principal focus of the probes is whether companies juggled their books to conceal problems with mortgages made during the frenzy of the housing boom. In some cases, Power said, agents are looking into whether corporate executives used inside knowledge of lending problems to benefit themselves at the expense of other shareholders.”

“In another development that came to light Tuesday, a fired loan officer alleged that a joint venture between No. 1 mortgage lender Countrywide Financial Corp. and Los Angeles-based builder KB Home improperly inflated home appraisals and falsified incomes to put borrowers into homes they couldn’t afford.”

“Officials at the Securities and Exchange Commission are conducting more than 30 investigations into the mortgage meltdown. Erik R. Sirri, head of the SEC’s market regulation division, said recently that securities firms and banks sold ‘too many lottery tickets’ tied to home loans and failed to look closely enough at their growing risks.”

“The FBI is looking at many of the same cases as the SEC, the agency said. ‘There is a lot of overlapping,’ Power said.”

From Reuters. “The FBI said it is cooperating with the Securities and Exchange Commission, which has confirmed opening at least three dozen investigations related to the subprime mortgage market.”

“Goldman Sachs, Morgan Stanley and Bear Stearns — among Wall Street’s largest banks — each said on Tuesday that government investigators are seeking information from them about their subprime activities.”

“The subprime crisis began after the housing price bubble burst months ago and left millions of U.S. homeowners with bad credit holding high-interest rate mortgages they could no longer afford. Many are now losing their homes.”

“As an economic slowdown and the subprime mortgage crisis deepen across the United States, Hispanic immigrants are increasingly in danger of losing their jobs and their homes.”

“Both legal and illegal immigrants joined Americans in buying homes they could barely afford when the market spiraled upward and many have been caught with mortgages higher than the value of their homes as prices have slumped in the past year.”

“Unemployment among Hispanics in the United States jumped to 6.3 percent in December, up from 5.7 percent the previous month and well above the national average of 5 percent, U.S. Department of Labor statistics show.”

“And almost half of the mortgage loans in the hands of Hispanics are subprime, making them especially vulnerable to the housing downturn.”

“Nelson, a 29-year-old legal immigrant and construction worker from El Salvador, had a miserable run of luck in November, when he lost his job and his subprime mortgage bills jumped $650 to about $2,650.”

“Like many caught up in the crisis, the father of three said he had no idea his monthly payments would soar two years into the mortgage when he closed the adjustable-rate subprime deal.”

“‘You have to sign a lot of things when you buy a house, so I didn’t read, I just signed. I think it was the anxiety, the happiness of buying my house,’ he said. ‘I feel a bit betrayed.’”

“He says he now has to sell the home he bought in Maryland in 2005. If he is unable to sell in the next four months, he will have to foreclose, meaning an even bigger financial loss and a damaging black mark on his credit record.”

“‘I have to practically give it away,’ he said.”

From AFP News. “Former Federal Reserve chief Alan Greenspan cast doubt on the ability of the central bank to prevent a US recession in an interview to appear on Thursday.”

“Greenspan told the German weekly Die Zeit that the Fed or political policies could ‘probably not’ keep the world’s biggest economy from sliding into recession, as financial markets widely expected the US central bank to cut its main lending rate.”

“‘The influences of the global economy today are stronger than almost any monetary or budgetary response,’ the German-language weekly quoted Greenspan as saying.”

“‘Real long-term interest rates have much more influence over the heart of economic activity than national decisions,’ he was quoted as adding. ‘And central banks have less and less power to influence long term rates.’”

“Some analysts have said that low interest rates under Greenspan’s watch were responsible in part for the US housing bubble that burst last year, and led to the current financial crisis.”

“Die Zeit quoted him as saying he found it hard to understand that ‘the Federal Reserve policy had somehow allowed housing and stock prices to rise.’”

“Fallout from the crisis, which began with a meltdown of the US market for high-risk, or subprime, mortgages, continues to rock international financial markets and now threatens the US economy with a recession.”

“For Greenspan however, the turmoil was ‘entirely the result of market forces at a global level.’”

The Charlotte Observer reports from North Carolina. “Home building and sales are falling more sharply in the Charlotte area than nationally, a sign the housing slump is worsening in what has been one of the country’s stronger markets. Building permits, an indicator of future home sales, fell 40 percent in the eight-county Charlotte region during the fourth quarter, compared with the same period in 2006.”

“Sales of existing houses, townhouses and condos also fell 24 percent in the fourth quarter, according to Market Opportunity Research Enterprises.”

“‘The national malaise was late coming to Charlotte, but it happened very quickly once it arrived,’ said Chuck Graham of Newton Graham Consultants, a veteran of the area real estate market. ‘I think we still have a little further to go.’”

“Robin and Todd Calhoun are feeling the pinch. In 2004, they bought a four-bedroom house, built about 30 years earlier, for $165,000. Robin Calhoun says that an appraisal last year for refinancing valued the northwest Charlotte house at $210,000.”

“Her husband wants to move out of the city and get a house on several acres. They’ve been trying to sell for 15 months, through a Realtor and on their own. They’ve been unable to buy three houses they liked because they haven’t been able to sell. They’ve pushed their asking price below $180,000. They’re willing to negotiate lower.”

“‘We know people are having a hard time getting loans, and the economy is so bad,’ she said. And they’re competing with all the new houses around.”

“‘People could go in and buy a new home, no money down,’ she said. ‘For younger couples, they might want that.’”

The Times Dispatch from Virginia. “Foreclosure filings in Virginia jumped nearly 460 percent in 2007, according to RealtyTrac. According to Connie Chamberlin at a housing advocacy group in Richmond, 2007 is just the tip of the iceberg for Virginia.”

“‘We expect to see another 25,000 foreclosures in the next year,’ she said.” Chamberlin blames the situation on unscrupulous brokers who took advantage of homebuyers with poor credit by putting them in high-fee adjustable subprime loans. Those loans, she said, are now starting to reset, which explains the jump, she said.”

“Chamberlin said this predicament would make it difficult for some consumers to get themselves out of the bog. ‘Some of these loans should have never been made and can’t be fixed,’ she said.”

“Chamberlin called what is happening in Virginia ‘fundamentally a disaster.’”

The Carroll County Times from Maryland. “According to an estimate based on monthly data from Metropolitan Regional Information Systems, last year saw the lowest number of homes sold in Carroll — 1,649 — since the late 1990s.”

“One reason for fewer sales is a lack of confidence in the real estate industry because of the national subprime lending crisis of 2007, said Carroll County Association of Realtors President Rus Blackburn.”

“This lack of confidence has contributed to the fall of the housing market while taking away some demand for houses, he said. ‘Your listings or your inventory are your supply, and the demand is just not there, and people who just have to sell their properties in this market are going to suffer some on price,’ Blackburn said.”

“House prices aren’t increasing as dramatically as they were a few years ago, when the county’s average price soared from about $194,000 in 2001 to more than $358,500 in 2005.”

“While the final sale prices have changed slightly, sellers aren’t getting as much as they had hoped for their homes. In December 2007, the average sold price for a home in Carroll County was $345,820, about 90 percent of the average list price of $386,784.”

“In the real estate boom years between 2001 and 2005, homes routinely sold for 98 percent or more of list prices, according to MRIS data. ‘It’s not underpriced or overpriced,’ said real estate agent Terri Mand. ‘It’s what the market is doing.’”

The Cape Gazette from Delaware. “Sussex County has been averaging about 275 sheriff’s sales a year, but the number jumped to 418 in 2006. And there have been 137 scheduled so far in the first two months of this year. If that trend continues, the county could see more than 600 sales this year.”

“A recent state foreclosure task force found that the number of foreclosures in Delaware increased 90 percent over the same period last year and the number of those who are seriously delinquent in payments (90 days behind) jumped 57 percent from 2006 to 2007.”

“Most people are under the impression that sheriff’s sales are places where people can find unprecedented bargains on houses. That is usually not the case. Attorneys representing banks or other mortgage lenders bought most of the 40 or so houses sold during the Jan. 15 county sale.”

“That is the case across the country. About 80 percent of all houses are sold to the original mortgage holder, according to The Real Estate Library information center.”

“Lynn Kleb, who works full time on the mountains of paperwork involved with the county’s sheriff sales, said her work load has doubled over the past four to six months. She also said foreclosure trends are changing to include more expensive homes in coastal Sussex. It’s not unusual to find homes in excess of $400,000 or $500,000, or even more.”

“‘We are seeing a lot more in eastern Sussex towns like Lewes, Milton and Ocean View where we had very few in the past,’ she said. ‘And we are seeing condos that we never had before.’”

“She said many more second homes in the resort area are also showing up in the sheriff’s sale listings. ‘For some it comes down to a sale or foreclosure – whichever comes first – because they want to get out from under that second payment,’ she said.”

“Kleb said there is help for homeowners who face losing their home. Her first question is: ‘What have you done to rectify the situation?’”

The Courier News from New Jersey. “New Jersey’s prime location, situated in the metropolitan triangle of New York, Connecticut and New Jersey, seems to be providing some housing protection for both homeowners and Realtors.”

“According to RealtyTrac, 4,232 foreclosures were filed in New Jersey in November 2007, and 60,802 for the year through November.”

“Carl Reed of ERA Reed Realty Inc., which serves the Plainfield area, said the Queen City’s foreclosure situation probably is ‘a little better here than elsewhere.’ ‘The majority of my clientele are in a position where more is owed than there is equity from a fair market price on the property,’ Reed said.”

“Peter Cagnassola, a top-selling agent in Bedminster with almost 25 years in the field, and Reed pointed a long finger of blame at the lending institutions. ‘Some were willing to lend buyers 110 percent on new construction,’ Reed said.”

“Home buyers in the 1980s, housing’s last boom period, ‘would never have gotten today’s loans,’ Cagnassola said.”

“And he blames the lending markets for creating a pool of buyers not truly eligible to sustain a mortgage. When these new homeowners went out and got a second loan on the property, their problems increased.”

“Brian Graham of Century 21 Worden & Green in Hillsborough, with its own Real Estate Owned Department, gave a more sober appraisal of the state’s real estate situation than other Realtors contacted.”

“‘The market dried up about four years ago, and in the last two years there have been more foreclosures,’ he said.”

“And again, Graham cited the ‘high-end properties’ as succumbing to foreclosure, ‘much more than in the last wave a dozen or so years ago.’”

“Jack Gulla of Century 21 Golden Post Realty in Middlesex, reported median home prices at about $325,000, but added, ‘the more new suburban areas are another animal. All that new construction and subprime mortgages were being fed to buyers.’”

Fox Business from New York. “Thirty-four years worth of progress assembled street by street, block by block, house by house is crumbling before Cathy Mickens’ eyes.”

“‘It’s hard to see the neighborhood being torn apart,’ said Mickens, director of the Neighborhood Housing Services (NHS) of Jamaica, the gritty eastern edge of New York City.”

“Wander any of the side streets just off Jamaica Avenue, the neighborhood’s main drag, and her meaning is clear. Dozens of empty homes, ‘For Sale’ and ‘For Rent’ signs jammed into first floor windows, stand testament to an exploding housing crisis brought on by a flood of foreclosures tied to subprime mortgages.”

“Mickens said she and her staff of eight have been watching the storm clouds gather since around 2000, when they first began to see gimmicky loans created to help people with little money or bad credit — or both — obtain mortgages.”

“So they weren’t surprised when defaults and foreclosures started picking up around 2005. Still, they said they were taken aback by the deluge that poured down in 2007, when their client roster surged by 40% from a year earlier. ‘This isn’t a new problem for us, but now it’s huge,’ said Mickens.”

“Jackie Camacho, an NHS loan counselor, said many of her immigrant clients were duped into mortgages that promised payments of, say, $1,700 a month on loans often in excess of $500,000. Sounds great, right? A loan of that size would typically generate a monthly payment of more than $3,000.”

“But no one said anything about the interest rate adjusting higher in two or three years, at which time the monthly payment might jump by $1,000 or more. And no one said anything about prepayment penalties that penalize borrowers from paying off loans before those rates adjust higher.”

“Cerinelly Disla, an NHS foreclosure advisor, said many of her clients clearly got in over their heads. One client with a $28,000 annual income used a ‘no income verified’ loan (the name speaks for itself) to obtain a $650,000 mortgage.”

“Was there an element of greed at work on both sides — homeowners grasping for something too good to be true meeting brokers out to make a fast buck? Absolutely, said Disla.”

“Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million. The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other. It didn’t work out that way.”

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