The Housing Bubble

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The News Journal reports from Delaware. “President Barack Obama on Wednesday pledged $75 billion to help homeowners at risk of default. In September, Delaware saw its percentage of loans 30 days past due hit 4 percent, nearly a full point above the United States average and the ninth-highest rate in the country. Delaware officials could not say how many local borrowers might be among the 9 million the Obama initiative could help, but one local borrower said the program could help him save his house.”

“William Watson bought his Bear home in 2006 when the economy was humming. He said he and his wife were both working and took comfort from the lenders who told him he could easily refinance as real estate prices continued to climb. Now, the 35-year-old father of five is ‘upside down’ — paying $1,800 a month for a home that was recently appraised at $194,000, thousands less than what he still owes on the mortgage. His wife is now out of work.”

“‘I’m willing to pay for my home,’ he said Wednesday. ‘I have kids. I just wanted some breathing room. I don’t want 60 percent of my pay to go toward a mortgage.’”

From WHP CBS in Pennsylvania. “At The Home Builders Association booth in Strawberry Square, if you want to buy or sell, you can ask an expert. Bill Pierce of the Fulton Mortgage Company says now is the time to buy a new home. Interest rates are low. There is a big tax break for first-time buyers and the icing on the cake? President Barack Obama’s 75-billion dollar mortgage relief plan. ‘Here in Central Pennsylvania, we’re seeing a 20-percent increase in foreclosure related activity,’ said Pierce.”

“Julie Hoover says she’s struggling to pay her mortgage. ‘I think it’ll help with the economy. I think that’s what we need. We need to start buying,’ said Hoover, homeowner, South Middleton Township.”

The Philadelphia Inquirer from Pennsylvania. “Even when mortgages are modified, the end result in many cases is a higher payment. Government surveys show that more than half of the loans modified in the first six months of 2008 slipped back into problems before year’s end. Brian F. Duross, who lives in the Pennsylvania suburbs, modified his 8.5 percent adjustable-rate loan in July to an 8.5 percent fixed rate, but after his mortgage servicer tacked on late payments and fees to the balance, his monthly payment was the same.”

“‘The problem is people like me who legitimately try, are not helped by that,’ said Duross, who contacted the lender in January for a further modification, but has not heard back.”

“Philadelphia economist Kevin Gillen maintains that both mortgages and the homes that securitize them must be marked to market, meaning ‘that the values of both need to drop, but not by too much.’”

“Second, the government needs to distinguish between deserving households and undeserving households, not just between flippers and primary buyers. ‘My biggest concern remains the long-term moral hazard this will impose,’ Gillen said. ‘The administration runs the very real risk of signaling to the public that making stupid decisions is OK, provided that enough people make them.’”

From North Jersey.com. “Mortgage broker Wendy Nastasi…cited one recent customer who in June paid $278,000 for a Mahwah condominium, putting 20 percent down. The homeowner tried to refinance in December into a lower rate, but was unsuccessful because an updated appraisal set the condo’s value at $258,000, a 7.2 percent drop in six months.”

“But Obama’s foreclosure programs won’t be much help to the growing number of New Jersey homeowners who are unemployed, Nastasi noted. ‘Anybody who’s lost their jobs, they’re probably not going to qualify,’ she said.”

“In announcing his foreclosure plan, Obama endorsed a proposal in Congress to allow bankruptcy judges to lower mortgage payments for homeowners who have filed for bankruptcy. Lenders strongly oppose the bankruptcy proposal, arguing that they would have to raise interest rates and tighten credit to offset the added risk, and that would impede a housing market recovery. ‘If that came in, you’d need higher credit scores and lower loan-to-value ratios to get a loan,’ said Alfred F. Buzzetti, president of Bank of New Jersey in Fort Lee.”

The Gazette from Maryland. “While low interest rates have brought a ‘big rush’ in refinancing loan applications, Adam Avery, managing partner of AA Mortgage Group in Frederick, just wishes there was a big rush in closing them.”

“‘Applications and approved loans are two different animals,’ Avery said in an e-mail to The Gazette. ‘Although rates have dropped dramatically, only a small percentage of homeowners qualify given the more stringent guidelines for credit score, debt ratio, and LTV [loan-to-value]. … Just because a low rate is offered does not mean an application will be approved and funded.’”

“Avery called the lower rates a ‘public relations campaign’ by the government and said that the homeowners who truly need refinancing are those who have subprime loans and may be facing foreclosure. Struggling homeowners are now required to pay up to $800 upfront to apply for refinancing with no guarantee that they will even qualify, he said.”

“Avery said he was skeptical about the plan’s ability to reverse housing market woes and called it ‘window dressing.’ ‘The federal government is primarily responsible for the debacle we find ourselves in. Why would anyone believe they would be the solution to get us out?’”

Delmarva Now on Maryland. “County councilwoman…Sheree Sample-Hughes said most economists agree a ’second wave’ of foreclosures is on the way. Many who default on their home mortgages this year will have lost their jobs in the recession. For a county that had two armed robberies this week — including one at an ATM on Mount Hermon Road that severely wounded 69-year-old County Administrator Ted Shea — crime is a hot topic.”

“Foreclosures are pushing criminal activity up across the country, said Wicomico County Sheriff Mike Lewis, who planned to meet today with Salisbury Police Chief Allan Webster and the local Maryland State Police barrack to discuss increased patrol efforts. ‘Desperate people do desperate things,’ Lewis said. ‘People see their whole lives deteriorating around them. Things they used to be able to do financially, they no longer can.’”

The Frederick News Post from Maryland. “The National Association of Home Builders, in conjunction with Wells Fargo, released its Housing Market Index, which rose one point to nine — out of potential 100 points — for the month of February. ‘It basically fell to its lowest point ever (in January),’ said David Crowe, chief economist for the National Association of Home Builders.”

“Crowe added that the score ‘clearly indicates that builders aren’t seeing the end of the tunnel.’ ‘Builders are competing at lower prices. Some of the prices are below what it costs builders to build the houses,’ Crowe said.”

The Richmond Times Dispatch from Virginia. “Chesterfield County is looking at ways to limit the number of people living under a single roof. The county’s exploration of the housing issue comes in response to complaints during the past year that large numbers of people were living together in single-family homes. Jo Trout, a resident of the 500-home Surreywood subdivision north of Hull Street Road, was one of those who complained about a house in her neighborhood.”

“‘We have actually had a situation where a group of immigrants purchased a house in our subdivision. They made bedrooms out of the living room, the dining room. They had a huge two-car garage where everybody ate — they actually put some stoves and things in there,’ she said.”

The Daily Press from Virginia. “An $8,000 tax credit for first-time homebuyers could be a shot in the arm for a struggling real estate market, some local real estate agents said. Bob Sullivan, president of the Virginia Peninsula Association of Realtors…said there are historically low interest rates, a slew of homes to pick from on the market and sellers willing to negotiate. ‘Man, it’s like the perfect storm for homebuying,’ Sullivan said.”

“Buyers are looking for something that they can afford and eventually sell for a profit, Sullivan said.”

The DC Examiner. “The Washington area is expected to be slammed by a second wave of foreclosures later this year as a new crop of adjustable-rate mortgages resets to higher rates and homeowners struggle with rising monthly payments. The problem is with ‘Alt-A’ loans. The region has some of the highest rates of Alt-A mortgages in the nation, according to the Federal Reserve Bank of New York: Maryland ranks third with 16.8 such loans per 1,000 owner-occupied houses, a December report found. D.C. homeowners have a 16.7 rate, while Virginia comes in at 12.9. California led the nation with 40.8.”

“Carol Robinson, a counselor at HomeFree-USA, estimated that at least one-third of the organization’s clients are facing loan resets. ‘Unfortunately, a lot are not even aware that their mortgages are due to reset,’ she said. ‘We ask to see their note, and then it becomes evident that they have an adjustable-rate mortgage — it takes them by surprise.’”

“(Prince William County) held a lottery Feb. 10 to provide county employees the opportunity to buy low-cost homes in the county, including foreclosed properties. Teresa Dakon, who works in the county’s budget office, was one of more than 150 winners. She said she had been considering buying a house before the event, but had reservations because of the tough market. ‘I was just very worried,’ she said. ‘I wanted to be careful.’”

“‘One of the things to look at is to right-size the loan, meaning to bring property values down to where they should be, given today’s market,’ Robinson said.”

News Channel 36 from North Carolina. “They’re all the rage in states like California, Florida and Nevada. Charlotte’s foreclosure numbers don’t look anything like Las Vegas or Fort Myers, Fla., but three south Charlotte real estate agents decided to give the foreclosure bus tour a try here.”

“Natalie Terry and the other realtors say there are plenty of distressed homes out there and if a house is foreclosed, the banks are ready to deal. Terry added, ‘We still don’t have the same numbers as the rest of the country does, but we are seeing that trend. You know, the prediction for Charlotte is we’re the last ones into this shift and we’re going to be the first ones out.’”

The St Petersburg Times. “It’s too early to tell if Linda Dubayah will qualify for President Obama’s $75 billion housing rescue package. But time is running out for Dubayah and scores of other Tampa Bay area homeowners. The 58-year-old Dubayah is selling her household furniture to fend off foreclosure.”

“‘The savings is gone. Everything is gone,’ said Dubayah, who can’t work because of a disability. Her only source of income, a Clearwater rental home, is threatened by foreclosure. ‘I have to figure something out. I don’t have a lot of time.’”

“Local real estate experts, community development officials and attorneys who specialize in foreclosure say the optimism may be fleeting. ‘This is an artificial Band Aid,’ said Peter K. Murphy, a real estate consultant in Ybor City. ‘It’s not going to fix the market. It’s going to postpone the pain.’”

“‘For certain people it could be great,’ said attorney Michael Alex Wasylik, referring to the plan. But Wasylik, who works throughout the Tampa Bay area defending clients against foreclosures, said that because of some of the restrictions, ‘I think a lot of people are not going to benefit from this.’”

“A Pasco County housing official said Obama’s refinancing plan is not that different than one offered in 2007 by President George W. Bush. Most homeowners were ineligible for the Bush plan simply because they owed more than what their homes were worth. George Romagnoli, Pasco County Community Development Manager, was unsure Obama’s plan would change the dynamics. ‘If you didn’t put a big down payment down, and most people didn’t, I think it will be tough to qualify,’ he said.”

“Ken Thomas, a Miami based banking consultant and economist, said the Obama administration’s attempt to arrest the falling housing market is probably doomed to failure. Real estate will have to go through the messy process of healing itself, Thomas said. That includes more foreclosures and more people abandoning homes they consider to be losing investments.”

“‘There’s no immediate cure for the housing recession no matter what the government does,’ Thomas said. ‘It’s like a canker sore: It will cure in seven days with medication and a week without medication.’”

“For some, the offer of help comes too late. Kimberly Kaloski has felt the real estate bust from more than one direction. She was an energetic, always busy real estate agent in St. Petersburg until ’something happened where I just couldn’t sell. Nobody wanted to buy anything. I just couldn’t produce.’”

“She moved to North Carolina, but the market went bust there, too. And then she couldn’t keep up the payments on her St. Petersburg house. She said her house in the Gateway area is scheduled to be sold in a foreclosure sale today. Late Wednesday, she was still making phone calls from North Carolina, trying to stop the sale.”

“‘I had so much anxiety, I had heart palpitations,’ she said. She tried to negotiate a better deal with her lenders, but it was nearly impossible.”

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