New Jersey Real Estate Report

From the NY Times:

The Battle for a Mortgage

AS homeowners across the country have dealt with the declining values of their houses and their ballooning mortgage payments, most New Yorkers seem to believe that the market here doesn’t play by the same rules.

But in recent weeks, a growing number of New Yorkers, often with six-figure salaries and reasonably good credit, have begun to find that mortgages are harder to get as lenders try to stem losses from loans to the weakest, or subprime, borrowers.

While mortgage brokers insist that most buyers in New York can still close deals, they also warn that people with any red flags on their mortgage applications will face delays and will pay higher fees. Potential problems include low credit scores or high credit-card balances or listing a suspiciously high salary for a given job.

“You’re going to pay the piper for any little mistake,” said Melissa Cohn, the president of Manhattan Mortgage Inc. She said her brokers — who last year arranged more than $3 billion in mortgages, mainly in New York City — were spending twice as much time on each application as they did a month ago because of new lending requirements, and she expects the situation only to get worse.

“The impact is going to be much greater as banks demand that people have clean credit to get the best mortgages,” she said.
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“About three weeks ago, I would have gotten this done by snapping my fingers,” said Mr. Eisenberg, who is the executive vice president of the EFI Capital Corporation, a mortgage brokerage based in Garden City, N.Y. “Now it’s a very lengthy and time-consuming process where every bit of paperwork has to be done to the T. The guidelines are literally changing every hour.”

Until recently, many New Yorkers found it fairly easy to get mortgages. Then banks that made loans to subprime borrowers started running into trouble when the borrowers found it impossible to pay their mortgages and fell into foreclosure. As a result, banks have cut back on all types of loans.
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“Lenders are going to scrutinize borrowers more carefully” in the next six to nine months, said Doug Duncan, the chief economist at the Mortgage Bankers Association in Washington. He added, “The pendulum is probably going to swing too far in the other direction before it settles.”

From the Daily Record:

MORRIS’ UGLY SIDE

The Rev. Donald Bragg, of Parsippany Presbyterian Church, said he spent a lot of time attending board of adjustment meetings last year to see whether something finally would be done about the four-story steel skeleton of a building next door.

The rusting hulk has been sitting there for two decades.

Once, it was supposed to be part of an office complex, with a marble exterior, but the market for office space dried up, construction was halted, the owner was busy working on other projects, and the result has been an eyesore that stands behind Bennigan’s restaurant on Route 46 East. It is especially noticeable to anyone driving on nearby Route 80.
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A group of Asbury Park developers proposed building 100 units of condominiums on the site and had a conditional contract to purchase the property — subject to getting a variance to build a residential project. But they withdrew their application months ago, township officials said, and now the future of the property is unclear once again.
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That would come as good news for people who drive past the site on Route 80, and who have been wondering about the partially-built structure for decades.

“We see it when we go to the Rockaway mall, every time we go to Route 287,” said George Laiks, of Parsippany, a reader who submitted eyesore nominations that included the steel skeleton. “It has to be a desirable piece of land to put something in there.”

“I’ve always wondered what was going on with that,” said Charles Wood, 33, of Jefferson, during an informal survey this week.
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Dunn said Foody’s family wants to get some construction started at the site of the steel skeleton. Foody gave up on building offices there when the market suddenly dried up but now, decades later, Dunn said discussions could lead to a project that needs no variance, and which is close to the original concept.

From the AP:

Pot-Growing Takes Root in the Suburbs

In Coldwater Creek, a middle-class housing development outside Atlanta, the neighbors mind their own business and respect each other’s privacy — ideal conditions, it turns out, for growing marijuana in the suburbs.

Police this month raided an utterly ordinary-looking red-brick house on the block and broke up a pot-growing operation with 680 plants arrayed under bright lights.

“You’d never know from the outside. I guess that’s the idea,” said Doug Augis, who lives with his pregnant wife and a toddler in Coldwater Creek. “That doesn’t give you a really good feeling.”

Around the country, investigators are increasingly seeing suburban homes in middle-class and well-to-do neighborhoods turned into indoor marijuana farms. Typically investigators find an empty home, save a mattress, a couple of chairs, some snacks in the fridge and an elaborate setup of soil-free growing trays.
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Georgia, the latest busts averaged about 200 plants per house. With each plant yielding $4,000 on average per harvest, that works out to about $3.2 million per year, considering the plants can be harvested every three months.
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Nearly all of the grow houses busted in Georgia were connected, police say. Fayetteville resident Merquiades Martinez — a Cuban immigrant — and his wife, a real estate agent, are accused of recruiting other Cubans to buy homes that cost $300,000 to $450,000.
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In another elaborate scheme, more than 50 houses with thousands of plants recently found in Florida were traced to marijuana financiers in New Jersey who offered “relocation packages,” with 100 percent financing for the homes. Buyers would agree to operate a grow house for two years, after which they could sell the house and split the profits with their backers, or keep growing pot.

From the Express Times:

Homes out of reach for many

Teachers, police officers, nurses and others who earn Lehigh and Northampton counties’ median salaries can’t afford the Lehigh Valley’s median-priced homes, according to a study released this week.

The study, conducted by consulting firm Mullin & Lonergan Associates Inc., identified a need for more affordable housing as one of the Valley’s biggest problems.
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Now we begin the process of finding out what people think about it and what they’re going to do,” he said.

The study says only 616 affordable homes are proposed or planned for construction, but they are linked to projects that could reduce the total number of such homes in the Valley by 43, the study says.

Also according to the study, another 688 affordable homes could be lost next year when owners may begin renting them at market rates.

The study recommends more than a dozen ways to boost the number of affordable homes in Lehigh and Northampton counties. Some suggestions are:

Provide relief from impact fees to developers who build affordable housing.

Encourage partnerships between nonprofit and commercial developers.

Conduct workshops on affordable housing practices and policies for local builders, tax assessors and other housing industry professionals.

“Frankly, at this stage of the game, we don’t know exactly how to do that, but that’s part of the challenge here,” Kaiser said.

From the Financial Times:

Credit Suisse sues subprime lenders

Credit Suisse has filed lawsuits against at least three US subprime mortgage lenders, marking an escalation of efforts by Wall Street banks to use legal action to purge themselves of bad housing loans.

DLJ Mortgage Capital, a unit of Credit Suisse, is separately suing the three mortgage companies for more than $30m, claiming the lenders failed to honour obligations relating to loans that it purchased from them. EMC Mortgage Corp, a unit of Bear Stearns, has filed at least one $70m lawsuit against a lender. Other suits are expected.
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The legal action comes as Wall Street seeks to limit damage from the subprime collapse. Banks including Credit Suisse, Bear Stearns and Lehman Brothers helped fuel the boom in subprime lending, providing billions of dollars to lenders as they bought mortgage loans to sell to yield-hungry investors.
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In two of its claims, DLJ Mortgage Capital is seeking to force Sunset Direct Lending and Infinity Home Mortgages to buy back mortgage loans that ran into payment problems soon after DLJ bought the loans.

In one instance, cited in the case against Infinity, DLJ claims it bought four mortgage loans totalling $838,000 made to an individual borrower for three properties on the same street in Irvington, New Jersey. DLJ bought the loans from Infinity between March and April 2006, and claims that the individual failed to make payments on three of the mortgages in May.

Citing contractual agreements that require loan repurchases after such “early payment defaults”, DLJ is seeking almost $24m of buy backs from Sunset and $3m from Infinity. Separately, DLJ is suing NetBank for $4m of payments relating to loans that its subsidiaries were servicing for DLJ.
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In an interview, Sunset CEO Bob Howard said he would also dispute DLJ’s claims, but said early payment defaults were a problem. “I can’t believe there is a soul that has been dealing in mortgage sales to Wall Street that hasn’t run into early payment default problems,” Mr Howard said.

He added that Sunset was no longer making new loans. He said employees had been given leave until the end of March, but that he had plans to reopen the firm under a new name in April.

From the Daily Record:

N.J. senator wants to aid subprime borrowers

A New Jersey state senator wants to create a program to help homeowners refinances mortgages they can’t afford, mirroring a similar plan in Ohio.

Sen. Ronald Rice, D-Newark, said Wednesday that he plans to introduce a measure that would allow the state’s housing agency to borrow at least $100 million to offer 30-year fixed-rate loans to homeowners facing foreclosure.

”Many of my neighbors face real financial peril because of rising interest rates and changes to the housing market,” Rice said. ”More people are making late mortgage payments, missing payments altogether and going into foreclosure.”

Rice’s plan comes after a move by Ohio, which had the highest foreclosure rate among the 50 U.S. states at the end of 2006, to issue $100 million in taxable municipal bonds to help homeowners refinance mortgages they can’t afford.

A March 13 survey by the Mortgage Bankers Association found that Ohio’s foreclosure rate across all loan types was 3.38 percent while New Jersey’s was 1.85 percent.

The survey also showed Ohio had the highest rate of subprime loans in foreclosure at the end of 2006, at 11.32 percent, compared with New Jersey at 4.18 percent.
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Rice blamed lenders for offering low introductory ”teaser” rates that reset higher after a certain period of time and for allowing subprime borrowers to get loans without making down payments or documenting their income.

He said the state was justified in bailing out homeowners and mortgage lenders who made the loans.

”It’s going to cost us a lot more if people become homeless,” he said in a telephone interview. ”We have a real problem out here.”
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Rice said he needed to work with the administration of Gov. Jon S. Corzine to determine eligibility requirements and efforts to safeguard homeowners who refinance their loans from foreclosing again.

From the Ithaca Journal:

Schumer: ‘Liar loans’ could cost many in Upstate their homes

More than 50,000 Upstate New York families are in danger of losing their homes because unscrupulous lenders sold them “liar loans” offering low mortgage payments that quickly swelled to as much as four times the original cost, Sen. Chuck Schumer said Wednesday.

Nearly 9,000 families in the Rochester-Finger Lakes region and nearly 4,000 in the Southern Tier are at risk of foreclosure because of unregulated subprime loans offered by rogue mortgage brokers not affiliated with traditional banks or lending institutions, the New York Democrat said. Nearly 6,000 families could face foreclosure in Monroe County alone, Schumer said.
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Schumer, who serves on the Senate banking committee, is offering legislation to regulate all mortgage brokers, outlaw “liar loans” in which borrowers are not properly informed of escalating payments, and create a New York task force to try to help affected homeowners restructure their loans and keep their houses.

“The subprime market is the Wild West of mortgage loans and it’s time we bring a sheriff into town,” Schumer said. “The first step is making sure that borrowers are protected from these usurious lenders. It’s long past time that we ensure that working people are protected from loans that promise them the world and instead give them a mountain of debt and leave them homeless.”
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“What I have seen of late troubles me deeply,” said John Robbins, chairman of the Mortgage Bankers Association in testimony this week before the House banking committee.

“Responsible lenders only extend credit to borrowers who are willing and able to make mortgage payments,” he said. “They do not trick borrowers into loans that are unsustainable. And they do not hold out something that is only a mirage of the American dream. Yet bad loans were made. They were not made responsibly or with the best interest of consumers in mind.”

New York Sen. Hillary Rodham Clinton, the current front-runner for the Democratic presidential nomination, recently called the subprime mortgage loan market “broken” and called for the Federal Housing Administration to issue more mortgages at lower rates to working-class families.

From Bloomberg:

Housing Slump Erodes Budget Gains From Florida to California

Florida’s tax receipts are falling for the first time since 1975 as a slump in construction and home sales dims the economy of the Sunshine State.

“We’ve been on a pretty steep incline,” said Florida State Senate Majority Leader Daniel Webster, a Republican from Winter Garden. “There was always going to be an end to that, and it’s flattened out.”

States from New Jersey to California are getting pinched, just a year after many enacted the biggest spending increases in almost two decades. They’re drawing down $16.6 billion from reserves this year — 29 percent of their total savings — even as legislators debate tax cuts and plans to expand programs such as government-subsidized health insurance.

“A lot of states are starting to worry,” said Iris Lav, who follows state budgets for the Center on Budget and Policy Priorities, a nonprofit Washington group that monitors state finances. “We have yet to see the effects of the bursting of the property bubble.”
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The slowdown in tax collections comes after five years of expansion, surging demand for new homes and soaring real estate prices produced windfalls that gave many states surpluses. California and New York won improved credit ratings and the borrowing climate remains favorable — for now.
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In New York, Spitzer has battled lawmakers to limit increases that he says would lead to an $8 billion mismatch between spending and revenue next year.

New Jersey, the most densely populated state and the one with the highest average property taxes, is facing a $2.5 billion budget shortfall next year, putting the strain on state agencies as Governor Jon Corzine pursues a cut to property taxes that soared along with home prices.

“We remain one of only six states with a structural deficit after four and a half years of national economic expansion,” Corzine said this month.

I can only imagine that many of you are frustrated by the site performance issues we’ve been experiencing. For others it’s probably a welcome vacation. Either way, the performance issues are out of my control. These issues are affecting a number of servers at the hosting company, and there is nothing that I can do to improve the performance. I’ve gone as far as attempting to bribe tech support to move my site to a functioning cluster (they called me cheap). Thanks to everyone who emailed me offering technical support, and even more thanks to those who offered to help pay for dedicated hosting. A few weeks back we moved to the new hosting company in hopes of better performance, and for a while it was clearly an improvement.

Unfortunately, there is nothing that I can do to improve performance until they fix the issue. Server performance is so poor that it would literally take me daysto get a backup of the site and database. So we’re stuck here until they resolve the issues (unless they kick us off for causing the issues).

Check back on a regular basis, they’ve informed us that the issue should be resolved by the weekend (can’t expect much more from a $25/month host).

jb

From the NY Times:

Behind Foreclosures, Ruined Credit and Hopes

After Franklin Abazie fell behind on his mortgage last year, he tucked one of his foreclosure notices, still in its ripped envelope, into the visor of his car — a looming reminder of why he had to take a second job.

Rashid and Yvonne Moore, a middle-aged couple whose lenders are threatening foreclosure because they have fallen behind on their mortgage payments, have begun thinking the unthinkable: moving in with his parents.

For Quintin Fields, it may take a miracle to keep his house; he owes nearly as much in late payments as he will earn all year.

“Everything is closing in on me right now,” Mr. Fields said.

Broad swaths of Newark are groaning under the weight of mortgage debt, much of it accumulated in the building boom of recent years that has transformed some parts of the city with gleaming redevelopment.

But in many of these neighborhoods, a heavy mortgage debt has led thousands of residents — many of them first-time homebuyers — close to financial ruin, experts and local officials say. According to recent census figures, more than 40 percent of Newark homeowners spend more than half their income on housing, one of the highest percentages in the New York metropolitan region and among the highest in the country.
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Federal lending data show that a high percentage of mortgages for homes on the north, south and west sides of Newark — as much as 50 percent in some neighborhoods — are subprime loans. And a national study by the Center for Responsible Lending, a nonpartisan research group based in North Carolina, predicts that more than 18 percent of the people holding those loans will go into foreclosure in the next three to four years.

From the NY Daily News:

Set up for a fall

In some areas of South Jamaica and Bedford-Stuyvesant, as many as 10 homes per block faced foreclosure last year.

The reason: subprime mortgages offered by unscrupulous real estate brokers and predatory lenders, according to a new study on the epidemic of citywide foreclosures.

The crisis has even spawned a new group of real estate predators that offers to counsel homeowners in default, or “help” them refinance their homes.

In neighborhoods like Brooklyn’s East New York, signs have sprouted on street poles offering cash on the spot to buy homes in foreclosure.

More than 9,000 New York City home owners faced foreclosure last year - an astounding 50% increase over 2005 - and that number has skyrocketed even higher during the first months of this year.

Mortgage lenders have filed 3,116 new motions to foreclose against delinquent homeowners since Jan. 1, according to a soon-to-be released study by the nonprofit Neighborhood Economic Development Advocacy Project (NEDAP).

Our city is now on track to surpass 15,000 filings this year, more than double the total two years ago, according to the study, which examines one- to four-family homes.

The foreclosure wave has struck hardest in minority neighborhoods of South Jamaica and Cambria Heights in Queens, Bedford-Stuyvesant and East New York in Brooklyn and Williamsbridge in the north Bronx, the NEDAP study shows.

From the Record:

Lobbyist: Don’t get too tough on subprime woes

E. Robert Levy, the mortgage industry’s top lobbyist in New Jersey, has been talking lately about the need to simplify disclosures given to consumers on the terms and conditions of loans.
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Q. What are you saying to lawmakers you have spoken to?

I told them we must avoid draconian measures that will hurt consumers and make it make it more difficult for renters to become homeowners.

Q. What kind of loans are most to blame for the rising defaults?

It’s expected that the stated-income loans [which do not require borrowers to provide pay stubs, tax documents or other proof of income], the low-documentation and no-documentation loans, the payment-option ARMs [adjustable-rate mortgages] with negative amortization and the interest-only loans, will likely be the ones that were problematic.

Then you have the mortgages that were closed with the borrower qualified at the initial teaser rates, and when the rates adjusted upward, borrowers were not prepared to make higher payments.

Obviously it’s a problem we don’t want to see occur again. But the point has to be made that 85 percent or more of the subprime borrowers are paying according to their terms.

The stated-income loans are subject to abuse and the industry is going to rethink whether that loan product is continued. Some of the problems came from customers giving inaccurate information which is, in essence, mortgage fraud.

Q. Congress is considering requiring lenders to qualify borrowers who apply for certain adjustable-rate loans based on the long-term repayment costs, not just teaser rates. Do you support that?

The [existing] non-traditional guidance [which applies to option ARMS and interest-only loans] is OK, but should be limited to those products.

If underwriting is based on fully indexed rates, there will be a number of customers who will not qualify for home loans.

If you are going to make that decision, it depends on whether you want to increase homeownership or decide that some consumers should not get loans.

Q. Lawmakers also are talking about requiring improved disclosure of loan terms and conditions. Is that a good idea?

I think disclosures are not working as well as they should. We provide way too much paperwork to consumers who do not fully comprehend the nature of the loans.

Q. Would you describe the present state of affairs in the mortgage industry as a crisis?

No. There will be a major shakeout nationwide and in New Jersey as well. But the market will adjust. There’s going to be a tightening of credit and there will be problems for some consumers getting a loan. While it’s distressing, it kind of cleanses the market.

From Standard and Poor’s:

The New Year Begins With Negative Returns According To The S&P/Case-Shiller® Home Price Indices (PDF)

January data released today by Standard & Poor’s for its S&P/Case-Shiller® Home Price Indices, the leading measure of U.S. home prices in the United States, shows home price composites pummeting into negative terrain.

From Bloomberg:

S&P/Case-Shiller Home Price Index Declined 0.2%

The price of homes in 20 U.S. metropolitan areas fell in January for the first time in at least six years, a private survey showed today.

Home values dropped 0.2 percent last month from January 2006, according to the S&P/Case-Shiller home-price index. The decrease was the first since the group started keeping year- over-year records in January 2001.

The numbers follow a report yesterday that showed new-home sales at the lowest level in almost seven years as builders struggled with a glut of unsold dwellings. Falling prices make it harder for owners to borrow against home equity and may make lenders even more wary as delinquencies climb.

Today’s data “are a good indicator of the dire state of the U.S. residential real estate market,” said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University.

From Marketwatch:

US home prices fell in January - S&P/Case Shiller

The prices of existing U.S. single-family houses extended their slide in most regions in January, according to an index of major metropolitan areas.

The composite month-over-month Standard & Poor’s/Case-Shiller Home Price Index of 10 metropolitan areas declined 0.6 percent to 220.90, or a 0.7 percent year-over-year loss, S&P said on its Web site.

The composite month-over-month Standard & Poor’s/Case-Shiller Home Price Index of 20 metropolitan areas showed a 0.6 percent drop in January, to a 202.03 reading, or a 0.2 percent percent year-over-year loss.

From Standard & Poors:

Home Price History (XLS)

From USA Today:

Bergen County, N.J.: High-priced insanity levels off

Home prices in Bergen County, N.J., across the Hudson River from Manhattan, are still falling — or coming back to earth, as would-be buyers might say. And that means the spring selling season should be better than last year’s.

During the real estate boom, prices in Bergen County rose with mind-boggling speed. As bidding wars raged, buyers would sometimes make offers on houses they’d never seen, just to get into the market, recalls Karen Murphy, branch manager for Coldwell Banker in Tenafly, a town in Bergen County.

“The market came to a screeching halt in November 2005, and we were seeing the effects in January and February of 2006,” Murphy says. “Buyers just said, ‘No, we’ve had enough.’ ”

Homes languished on the market until sellers had no choice but to cut prices. This year, the supply of homes for sale is down, and open-house traffic is up. But prices remain weak, especially for homes priced over $1 million.

From the Courier Post Online:

Sales taxes sought to support open space

With the fund for securing open space, farmland and historic sites in the state running dry, two South Jersey lawmakers joined environmentalists Monday to garner support for renewing the Garden State Preservation Trust.

Assemblyman Douglas H. Fisher, D-Bridgeton, and Assemblyman Nelson T. Albano, D-Vineland, have proposed asking voters in November to amend the state Constitution to dedicate $175 million to the trust from sales tax money each year from 2009 through 2038.

The trust would issue up to $1.75 billion in bonds by 2018 and use the sales-tax dedication to repay the debt.

Fisher said because of the rapid rate at which land is being developed in the state — estimated to be 50 acres a day — time is running out to preserve land.

“We have a race against time,” said Fisher. “Once the land is developed, it cannot be returned to its natural state. . . . Every area of the state, from north to south to central, has a stake in this. Every citizen has a claim.”