The Trend Is Very Disturbing In Massachusetts
The Boston Herald reports from Massachusetts. “The Bay State’s battered but slowly reviving residential real estate market is poised to enter its most crucial test in years. The number of homes and condos on the market as the spring season starts is up over last year, according to the MLS Property Information Network.”
“The number of condos for sale is up about 500, to 13,787, while the number of homes on the sales block has risen by about 1,000 to 25,026, MLS reports.”
“Out in the suburbs, Kay O’Brien’s trying to sell a starter colonial in Weymouth, reduced in price from $333,900 to $309,000, among others. ‘We have high hopes,’ O’Brien said.”
The Eagle Tribune. “The Newburyport Daily News reported Friday that the number of foreclosure filings were at the highest level in Massachusetts in the past 20 years.”
“‘In some cases you actually had negative amortization - people going deeper into debt over time, rather than paying off their mortgages,’ Chuck Withee, senior lender at Amesbury’s Provident Bank, told Daily News reporter Nick Pinto.”
“‘People get left without options,’ Withee continued. For example, he noted, there’s the plight of those who took advantage of adjustable rate mortgages: ‘When your mortgage payments suddenly shoot up and you can no longer afford it, and your home isn’t worth what it was when you bought it, what can you do?’”
The Boston Globe. “An explosion in overdue mortgages tailored to home buyers with less-than-sterling credit has driven foreclosure filings to record highs in Massachusetts.”
“Subprime mortgages were lauded for helping more Americans than ever buy homes during the housing boom earlier in the decade. But four years after their popularity took off, the loans are backfiring.”
“In 2006, lenders filed 19,487 foreclosure notices against Massachusetts homeowners, surpassing the record high of 17,000 filings in 1991, during the state’s severe recession.”
“New research by the Federal Reserve Bank of Boston found that while subprime loans make up 12 percent of all mortgages in the state, they accounted for more than two-thirds of foreclosure filings in the third quarter of 2006. Most delinquencies were high-interest subprime loans with adjustable rates, which increase payments as interest rates rise.”
“Homeowners hit the hardest were in the working-class cities of Brockton, Springfield, Lawrence, Fitchburg, and Lowell, the Fed said. The trend is very disturbing, said Richard Walker, Boston Fed vice president. ‘We’re monitoring it closely.’”
“Tammy Amado obtained two mortgages to buy her Dorchester two-family home in January 2005 from a subsidiary of California-based Fremont General Corp. and one of the largest subprime lenders in Massachusetts. Despite having a good job, she fell behind on her payments.”
“‘I’m trying the best that I can,’ said Amado, who found a second job last year.”
“The interest rate on the bigger loan, for $380,000, was initially 6.4 percent and would rise after two years, according to her loan documents; a second, $89,000 loan had a permanent 11 percent rate. Her combined monthly payment: $3,225, the documents show.”
“Amado said she paid her mortgage the first year and landed a tenant for the rental unit, but her budget became strained when her 11-year partner, father of two of her three children, moved out more than a year ago and stopped contributing to the mortgage.”
“A Jan. 6 letter from the company servicing her mortgage said the rate on her mortgage was scheduled to increase March 1 to 9.4 percent, pushing her payment up $755. Based on 2006 income of $45,519 on Amado’s tax documents, her loan ‘probably would’ve become problematic’ even with her partner’s help, said Jason Wheeler, national refinance director at a nonprofit housing advocate. Amado applied to the agency for an affordable, fixed-rate mortgage to refinance her loan and save her house.”
“Michael Fratantoni, chief economist for the Mortgage Bankers Association in Washington, cited specific local conditions for a spike in filings. ‘Massachusetts’ job growth rate is lower than nationally,’ he said, adding that ‘home prices there declined while nationally home prices are still growing.’”
“‘You would expect Massachusetts to look worse, particularly among borrowers with credit problems,’ Fratantoni said.”
“‘Wall Street encouraged these loans to be made, and it looks like homeowners are paying the price, and it looks like investors may pay the price,’ said James Campen, economics professor emeritus at the University of Massachusetts at Boston. Campen said that HR Block Inc.’s subsidiary, Option One Mortgage Corp., joined Fremont as the largest subprime lenders in the state.”
“In the past, home buyers applied to a bank, and either they qualified for a traditional 30-year loan or they were turned down. Those who qualified received a standard interest rate. Today, credit is easier to obtain from a broad range of poorly regulated mortgage companies, but at a price.”
“‘This is a whole class of mortgages that have never been tested in a down market,’ said William Apgar, senior scholar at Harvard University’s Joint Center for Housing Studies. ‘There’s a potential for quite a dramatic increase in foreclosures.’”
“The share of Massachusetts homeowners late on their house payments remains below the national average. But state foreclosures are ‘going up faster’ and the gap is narrowing, said Julia Reade, the Boston Fed senior research associate who prepared the report. ‘Certain neighborhoods are being hit really hard but don’t show up in the aggregate data.’”
“Since 2003, Brockton’s foreclosure filings have tripled. Chief assessor Bernie Siegel partly blames subprime lenders for a 10 percent slide last year in Brockton house prices.”
“First-time home buyers who get subprime loans don’t understand the ramifications of homeownership, he said. ‘It just becomes too much.’”
anyone have that lobster futures link?
about 3-4$ a pound in early 90’s
from Fleck
he’s got to be shtin me- who would expect RE price appreciation in 06-07 ?
. (Apparently, what they’ve built into their models is a housing appreciation on the order of 4% to 5%.) According to his sources, that may be under review, which could precipitate some downgrades of mortgage CDOs
…and the great unwinding continues…New Century down 8 today 59%
http://finance.yahoo.com/q/bc?s=NEW&t=3m&l=on&z=m&q=l&c=
Listening to CNBC. Seems some hedge funds have made over 70% in some portfolios due to shorting the ABX. Nikkei, Hang Seng down huge, yet the DOW is positive this morn…So the game continues…
Thanks to the PPT!
“So the game continues” Doesn’t it seem foolish to play in a “game” thats rigged, and the Stock Market keeps telling you its an insider’s game, and Yet, this board has players guessing up, down, sideways, gold, silver, currencies.
“When in Doubt, Stay Out” and sleep a whole lot better
The games cannot go on forever. If you’re right, then sit tight.
We’re close. Sell in May and go away. Ides of March next week. St. Paddy’s day, drink guiness and kiss a frog!
L. Ron Hubbard is rolling in his grave because he missed out on this Ponzi scheme.
“First-time home buyers who get subprime loans don’t understand the ramifications of homeownership, he said. ‘It just becomes too much.’”
Here is another factor that has not been discussed too much. As late as the early 90’s, it used to be that first time buyers were held to a higher standard of underwriting, (DI ratio, downpayment, etc), because lenders knew that many new homeowners underestimated the additional expenses in owneing a home. Maintenance, improvements, furnishings, etc, can become large expense for the unprepared.
I can see how the combination of this lack of knowledge with an exotic mortgage could magnify the problem.
“I can see how the combination of this lack of knowledge with an exotic mortgage could magnify the problem.”
Well said Dave. I remember my first house. Payment was $600 ish with taxes and insurance. That was about what I was paying in rent at the time. There’s no way I could have prepared myself for the $3K new roof and the $1,500 bill from the plumber in the same 30-day period. It’s a good thing my parents always promoted savings…but talk about being wiped away in a hurry!
Until we start pushing 5% down at MINIMUM with NO sellers contributions and minimum savings standards, we won’t see any real improvement in foreclosures. Stay tuned!
Geezus H. Krist.
The problem is that Gen X and Y Americans should never be trusted with credit.
There. I said it.
I know alot of boomers who are awful with credit also. It was also the boomers that coddled those kids and taught them they are number one no matter what. But the boomers will bust this country anyway wtih entitlements.
Back in the late 80’s we were discussing a first home purchase with my dad. When we mentioned payments would run around $2K, he turned really serious and talked about how simply making a $600 payment back in the ’70s was damned tough at times.
“First-time home buyers who get subprime loans don’t understand the ramifications of homeownership, he said. ‘It just becomes too much.’”
My heart goes out to these poor victims,
You are kidding right. The FB knew what they wanted and went for it. They failed to understand how the mortgage payments worked or cared less about it. That is their own fault not mine. So I don’t feel sorry for those fools.
“The FB knew what they wanted and went for it.”
True. They were assisted by the media BS…you deserve it now, it only goes up, stretch yourself and buy the biggest property that you can, no more land…..
“So I don’t feel sorry for those fools.”
Do some research on lending practices in the subprime market and you will probably change your mind. Start with Household International acquired by HSBC. A lot of these mortgages are setup to fail from the start. IOW, there is a lot of sweet bait then last minute interest rate switching at the closing table. Subprime lenders are the scum of the earth. Here is an excerpt from a Forbes magazine article:
Forbes, Sept 2, 2002 p062
Home Wrecker.
Bernard Condon
William Myers paid off his credit card debt by refinancing his mortgage last year. But he says his new lender, Household International, charged him 11% interest, not 7.2% as promised. Then it added $14,400 in fees and insurance to his $80,100 loan and stuck him with a $15,000 second mortgage–at 20% interest. He didn’t notice it until the first bill.
“They’re nothing but a bunch of thieving, loan-sharking crooks,” he says of Household, the nation’s largest nonbank lender to borrowers of less than stellar creditworthiness. Myers, 66, was left owing a third more than his home was worth, scaring away rival lenders that might have come to the rescue. He sued Household in federal court, charging violation of disclosure laws; the case is pending.
Household is under fire for myriad tactics. In addition to the bait-and-switch on interest rates, it charges high prepayment penalties and service fees; it lures clients with proposals showing monthly savings that at times fail to materialize; and it structures mortgages to include last-minute second loans that make it difficult for borrowers to defect and get refinancing elsewhere. Household agents call it “closing the back door.” In July, FORBES has learned, authorities from more than a dozen states descended on Household to demand refunds and reforms.
He didn’t notice it until the first bill.
So, what, he didn’t read the forms he signed? That second mortgage should have at least stood out a bit, yes?
Yes. At the close Guido came out with a circular saw and threatened to cut off the borrower’s left hand unless he signed.
Yep. That’s why all these subprime loans got taken out.
See what happens when you don’t get a High School diploma?
They are not victims. They are greedy and stupid, a lethal combination.
C’mon, guys - Curt is just being sarcastic, don’t you sense it?
YUP
You know, sometimes y’all *do* go overboard on sneering at the FBs out there. Yes, some were greedy and stupid, though I’d guess that there are more investors in that category than people who simply wanted to settle into a place for their families to live. Many buyers really did buy their homes in good faith, *thought* they understood what they were getting into, and as someone else said, practices in the subprime lending market were and still are deceptive if not downright criminal.
… and didn’t read the forms they signed.
Have you ever seen those forms? They are massively confusing even for someone who’s very bright. It would be perfectly simple for the lender to slip in some real time bombs and have them go undetected.
Oh come on … He was asked to sign a whole stack for his second. He did not notice it. These morons make it difficult for people like us who insist on reading what we are signing. People roll their eyes every time I start to read a contract shoved under my nose. I say, great I hope they take his first born too, that hopefully would teach him to read before he signs.
Yes. It was elves what made them do it.
In 2006, lenders filed 19,487 foreclosure notices against Massachusetts homeowners, surpassing the record high of 17,000 filings in 1991, during the state’s severe recession.”
William Apgar, senior scholar at Harvard University’s Joint Center for Housing Studies. ‘There’s a potential for quite a dramatic increase in foreclosures.’”
Making a cautious prediction about the past, the Harvard brain trust at work.
Wasn’t Harvard telling us there wasn’t any problem just recently?
There are differences of opinion within Harvard, you know. (I work there; I do know!)
so do I; and trust me, many students and faculty at Harvard have discussed this problem (and been fans of the site) for a long time.
Ben, You’re right. I know you quoted some ditz in the Joint Center for Housing Studies in the last quarter, dismissing the “bubble” and clueless as to the sub-prime time bomb. You have to wonder who bankrolled this little study group–could it be the same RE clowns who funded the RE center at George Mason U?
“some ditz in the Joint Center for Housing Studies” = Nicholas Retsinas
http://ksgfaculty.harvard.edu/Nicolas_Retsinas
He is not an economist; it thus seems patently unfair to expect him to have any economic insights…
You’re right, calling retsinas a ditz is inappropriate…knucklehead pretty much covers it. So this dolt lectures at the biz school and has also managed to grab government paychecks at HUD and FDIC. Isn’t that special?
Anyone know who underwrites the Joint Center for Housing Studies–is this where harvard spends the bin Laden cash? I guess that would be appropriate, since it was made in the construction biz.
I thought foreclosures only happend in times of recession and widespread job loss.
You forgot, “in times of great stupidity”.
Amado said she paid her mortgage the first year and landed a tenant for the rental unit, but her budget became strained when her 11-year partner, father of two of her three children, moved out more than a year ago and stopped contributing to the mortgage.”
This woman as with most of the US, just does not make good decisions…Did we become stupid or did I just not see it in the
past?
Maybe Amado can hook back up with the other father (father of one of her three children) or perhaps she can get a new boyfriend (new father of one of her four children?) to help her pay her mortgage.
Yea…What does the new tenant look like?
Why didn’t the reporter ask why she just had to buy two homes?
Two family house I think.
Yes, it’s a two-family home. Very common in Boston, and before rents and mortgages (the fundamentals) got so unbalanced, a lot of people got a good start as homeowners by buying a two- or three-family and renting out the extra units. For first time buyers, this was often a better option than going for a condo or SFH.
A good strategy until 2001, when the bottom fell out of the rental market. A sharp pencil, and a willingness to accept an analysis that concluded not to buy anything, was needed to avoid this disaster. Most people lack the character to go against the grain.
I say that to myself every day……
You shoulda seen the story in the Boston Globe real estate section about a year and half ago, crowing about a pair of “empowered” HS educated secretaries who quit their jobs and started buying multi-units in Dorchester and Roxbury.
Their expectation at the time, was to clear $600k on the flip of three 2/4 unit apartment buildings.
hehehe…can you imagine a pair of newbie “investor” secretaries managing 3 run-down multi’s in Dorchester, with the flip rug now pulled out from underneath them.
Stupid greedheads.
Sure bet they’re singin’ the blues in foreclosure court just about now.
Heavens forbid, the Globe should do a follow-up story.
‘Massachusetts’ job growth rate is lower than nationally,’ he said, adding that ‘home prices there declined while nationally home prices are still growing.’
What is this about the prices in MA? A reverse “it’s different here” statement?
And why only mention jobs? What about affordability?
Right. Mass lost jobs BECAUSE of the lack of affordability, unlike say Michigan. A housing bust is probably good for the economy there long run.
new century down 50% possible bankrupcy…
wow, house prices can go down nationally - tell LIErah
and subprime can infect prime mort and general banking
call Kudlow
“Tammy Amado obtained two mortgages to buy her Dorchester two-family home in January 2005 from a subsidiary of California-based Fremont General Corp. and one of the largest subprime lenders in Massachusetts. Despite having a good job, she fell behind on her payments.”
Looks like Fremont is out of business.
FMT is down another 25%.
If entities like NEW and FMT can go out of business, I say the folks who got loans from them ought to be let off the hook. Free Houses for FBs! Boo-yah!
Maybe buyers of these notes (at very large discounts) will be willing to make a deal.
Yes, one or two organs, perhaps a kidney and and eye would suffice.
“Amado said she paid her mortgage the first year and landed a tenant for the rental unit, but her budget became strained when her 11-year partner, father of two of her three children, moved out more than a year ago and stopped contributing to the mortgage.”
This is why banks used to not loan beyond 3x gross income, why they didn’t want credit card debt, why they wanted to see 6 months cash reserves in the bank. Shit happens. The banked used to make sure the buyer could weather a storm. No reserves, no downpayment…no mortgage approval.
Only a greedy unscrupulous subprime lender would do a loan like Amado’s.
Yes, there was a time when banks would protect borrowers from themselves. But that made them vulnerable to charges of elitism. In the late ’70s, some banks started subprime lending in a good way; they would relax some criteria, but they would also work with community groups to educate the borrowers. That was still too stodgy for some, and “credit” became a “right”. It’s all very well to say that the FBs are responsible for their own mistakes, but the costs of the implosion will hit many others too.
And then the still in the basement broke down, and the meth lab in the kitchen was useless after she couldn’t buy bulk chemicals. She could only afford 3 cartons of smokes a day but the bright side was no more dental bills because all her teef were finally gone.
There’s always a silver lining somewhere.
How do they figure that an increase in inventory is a good sign? Last year in Mass. there was simply more inventory than potential buyers; many sellers failed to sell. So now we’re starting off with even more and that’s supposed to mean the market is recovering?
Working class area of Boston?
Two loans totalling 490k
Income 45 K and 3 kids by 3 absent impregnators!
Looks like sound underwriting to me
MA is in so much denial it’s not even funny. I can’t wait until the state wakes up.
Friend bought a condo in a 3-family unit in Cambridge’s central square for $350k in summer of 2005. Guess what the entire 3-family unit sold for in 1993?
$150k.
But, in 2005 no one wanted to waste a minute thinking about this 7x increase in price over 12 years. Realtors were telling them to buy or be priced out forever.
Summer of 2005? Ouch - that’s when the market peaked.
Your friend’s condo is probably worth 20-25% less today than when he or she bought it.
“The Bay State’s battered but slowly reviving residential real estate market…
Slowly recovering my butt. The bottom is not even close until MSM, despite its utter shamelessness, stops this garbage propaganda.
California will recover before Mass. does. Don’t bother wasting a moment thinking about Mass. housing market. It will go nowhere but further down, and longer than most of the rest of the country. Except maybe Detroit.
There is a tremendous amount of denial here in the Boston area about the weak state of the housing market.
Prices are reportedly down at least 15% in nominal terms from the peak, and perhaps as much as 25% if you factor in inflation, seller givebacks, and the apples-to-oranges comparison problem inherent in measuring a median home price.
But you wouldn’t know it from talking to people. “I won’t give my house away!” the sellers cry in a spectacularly vainglorious attempt to change macroeconomic forces through sheer effort of will.
So the market just slows down. I’m not stupid enough to pay these inflated prices (yes, a 25% discount from “insane” leads only to “inflated”) and clearly a lot of other potential buyers feel the same way. So the market just slogs along, down, slowly down.
Of course, even molasses rolling down hill eventually get to the bottom, but it would be better for everyone if we could just speed up the process and be done with it so we can move on with our lives. But stubborness rules the day. And the stubborn will be duly punished - they’ll just make everyone wait a long time before it happens.
The denial here is especially amazing considering New England had a devastating real estate crash only a decade ago. Sheeple have no memory.
Of Course, Massachusetts is famous as the only place where large amounts of molasses flowing downhill has actually killed a number of people…
‘The Molasses Disaster of January 15, 1919′
California hasn’t even started its crash yet.
Like an Independence Day fireworks show, it’s going to be the grand finale that will wipe clean this country’s slate.
You guys have no idea what kind of money will be lost when Los Angeles and San Francisco implode.
A Jan. 6 letter from the company servicing her mortgage said the rate on her mortgage was scheduled to increase March 1 to 9.4 percent, pushing her payment up $755. Based on 2006 income of $45,519 on Amado’s tax documents, her loan ‘probably would’ve become problematic’ even with her partner’s help
Let’s see…
Income = $45,519
current payment = $3,225
payment increase = $755
new monthly mortgage payment = $3,980
new yearly mortgage payment = $47,760
So, the new mortgage payment is greater than her gross income. I’d have to agree that, yes, her loan has become “problematic.”
…Ya think?…
Greed and stupidity. Read what you sign and do the math.
She was to busy cranking out kids.
“Life stinks when you’re stupid” John Wayne
Mazzholeand will continue to muddle along because like everywhere else in New England there is a female spouse employed somewhere in the public sector, usually education or social welfare system, where the government paycheck is steady and the taxpayer picks up 100% of the family’s health insurance costs.
The trend is exemplified by the recent disclosure that Mazz is paying for 2000 state employees by the issuance of bonds. As the news commentator noted-it’s like paying your kids allowance with cash advances on your credit card.
Throw in the Greatest Gen crowd and older boomers whose house value has been inflated 10X, and it’s fat city for those who got lucky enough to time their housing purchase.
Anybody not in this crowd is f*cked, like all the 20/30-somethings who got locked out of the pre-80’s housing inflation; young familiies who are priced out communities with decent schools systems; divorced wage earners; and anybody knocked out of a decent private sector job.
Gonna be interestin’ who is left holdin’ the bag on all the debt as all the real producers bail.
The place is totally disfunctional.
Ya gotta be on dope to spring for a house in Mazz.
Despite the disfunction, there’s a lot to like about MA. Regardless, what goes up eventually comes down. I’ll spring when the price is right. The bottom will hit everyone.
MazzRenter-
Go check out the story in today’s Glove about the woeful condition of Mazzland’s parks.
$1.2 billion in deferred maintenance. Aka…overflowing pit toilets and no contracts to empty the Port-o-Potties.
No wonder everybody bags out for ME and NH.
I never said it was perfect, either. I can’t afford to leave the state due to my and my spouse’s job. I also have all of my family in the state. Leaving would mean disconnecting myself from everything that is meaningful in my life. It IS a shame that MA is in this condition, but perhaps things do need to get worse before they get better. Not everyone has the luxury of just packing their things and leaving. And there are some places in the country I wouldn’t move to if you gave the house away. I’ve been to ME and NH. Nice places to visit…
I am finding it extremely difficult to rent an apartment in a two -family that I own in Boston. I have never seen it so bad. $1300 for 1200 ft apartment, which is in very good condition. House is paid for, but apartment has been empty since Summer. Prospective tenants have been less than stellar. Rents have been flat for the past few years.
Where is it located?
It seems like it would make more sense to drop the rent by a couple hundred instead of leaving it empty. Any reason you decided not to do this?
How can anyone be surprised at stories like Ms. Amado’s?
She simply borrowed WAY more money than she could comfortably repay under any but the most optimum circumstances. She should have known this going into the purchase.
How have people in the U.S. become SO CARELESS with their own finances?? Do they think things will just take care of themselves so why worry, or plan, or even look forward to make sure they aren’t getting themselves into trouble?
I can’t feel sorry for these people. Not even a little. They are adults, and therefore responsible for their decisions. When you make bad/stupid decisions, bad stuff happens. No one should be surprised.
“How have people in the U.S. become SO CARELESS with their own finances??”
Greed makes careless people reckless. Don’t read the paperwork, don’t work the math, don’t use common sense, don’t stop and think.
If they’ve wrecked their futures and their financial lives, I could care less what happens to them. Like termites, they undermine the country’s financial foundation.
….and like termites they better develope a taste for wood because they may have to eat that McMansion.
“Amado said she paid her mortgage the first year and landed a tenant for the rental unit, but her budget became strained when her 11-year partner, father of two of her three children, moved out more than a year ago and stopped contributing to the mortgage.”
So her ‘partner’ ( sperm donor) left.
F**ing genuis this women is
“‘In some cases you actually had negative amortization - people going deeper into debt over time, rather than paying off their mortgages,’ Chuck Withee, senior lender at Amesbury’s Provident Bank, told Daily News reporter Nick Pinto.”
No s**t Chuck. And some how, as senior lender at Amesbury’s Provident Bank that is now news to you.
So, how many Neg Ams did you write (approve), Chucky Boy?
Hey guess what else, Chuck? Banks were actually lending money to people that didn’t qualify and had no hope of ever repaying the loan!!
Gee, I could go on and on Chuck!! Golly, there’s lots of stuff I bet you weren’t aware of!!!
LMAO…
Its’ astounding the quotes that come from the lending crowd.
What no bread? Why can’t they eat cake?
““‘As the sellers finally get their head around the idea that they may be taking losses, they are listening more to the brokers,’ ”
yes….the same brokers who set them up for failure while taking profit for themselves.
People who are first-time buyers and sub-prime borrowers should be required to go through a home financing/ownership course.
I am a boomer and one reason why learned to manage my finances is due to my Japanese mother who experienced the Tokyo fire-bombings —and saw her family’s wealth evaporate in the war - so she passed on that “concern” to me. The banks froze,etc., Samarai swords were collected for bullets, her family was reduced to selling Kimono’s to get $ to eat. My sister & her husband –also boomers, do not know how to save and although they are responsible, it seems that they burn through a lot of $. I am not sure what makes a person financially conservative, but I know there are just as many boomers who are just as ignorant about finances as there are WHYs and EXCESSES.