“We have found neighborhoods with abandoned homes, 200 at a shot”

From Bloomberg:

Fed Warned on Foreclosures as Mortgage Growth Cools

Federal Reserve Chairman Ben S. Bernanke and other policy markers were warned that rising mortgage foreclosures are likely to get worse, as the central bank reported the slowest pace of loan growth in four years.

The Federal Reserve Board’s Consumer Advisory Council, including consumer advocates and banks, met today in Washington, with Bernanke and Fed Governors Susan Bies, Randall Kroszner and Frederic Mishkin in attendance. Home-mortgage foreclosures were the first agenda item and the officials heard anecdotes of default and families at risk.

“We have found neighborhoods with abandoned homes, 200 at a shot,” said Louise Gissendaner, senior vice president and director of community development in Cleveland at Fifth Third Bancorp, the 10th-biggest U.S. bank by assets. “It has technically devastated our city to a great degree.”

Mortgage borrowing rose by $792.5 billion last year, the smallest gain since 2002, according to the Fed’s quarterly Flow of Funds report. The increase last quarter was the smallest since 1998, as two years of Fed interest-rate increases depressed loan demand and slowed the housing industry.

Fed officials heard stories from Cleveland, Philadelphia, Denver and New York, where neighborhoods are deteriorating because of abandoned housing resulting from foreclosures, or filings by lenders to seize borrower’s properties.

Bernanke and the other governors didn’t comment on interest rates, the economy or the direction of regulatory policy. They listened to comments from advocates and bankers, who indicated that foreclosures are likely to increase further.

“We feel like a canary in a coal mine,” said Stella Adams, executive director of the North Carolina Fair Housing Center in Durham. “It is sad for us to know that there 1.2 million families at risk from foreclosure.”

Delinquency rates on real-estate loans rose to 2.11 percent for all banks last quarter, the highest in four years, according to Fed data unadjusted for seasonal patterns.

“We are facing a foreclosure crisis in this country,” said Adams. “There is a distinct problem in the subprime market that is contributing to the foreclosures.”

Bankers attending the meeting urged caution against over- regulation.

“We are very much in favor of responsible underwriting,” said Mark Metz, senior vice president and deputy general counsel at Wachovia Corp. in Charlotte. “The concern I have is how we take this guidance and use it for other products.”

This entry was posted in Risky Lending. Bookmark the permalink.

15 Responses to “We have found neighborhoods with abandoned homes, 200 at a shot”

  1. SG says:

    Projected Foreclosure rates for 2006 sub-prime mortgages by state,

    NJ = 11% to 15%
    CA, NV, AZ, NY, MD, VA = 21% to 24%

    http://www.responsiblelending.org/issues/mortgage/foreclosure_rates.html

  2. SG says:

    I scrounged the web to see how many percentage of NJ loans were subprime. Well found this source finally.

    http://www.consumerfed.org/pdfs/SubprimeLocationsStudy090506.pdf

    On Page 16, they mentioned that in 2005, (22%) 20,726 of refinances were into Subprime mortgages. Total refinances were 91,022.

    If you were to take above projections, for 2005 loans, you have chance of 2695 (taking 13% mean of 20,726) foreclosures.

    Now that is loans done in year 2005. The subprime has been going on gang busters since 2002 at least. So multiplying that by 5 years (2002 – 2006), the chance of foreclosure number rises to 13,475.

    Not sure whether this is higher or lower compared to NJ standard. Well will research that later.

    Some food for thought !!!

  3. SG says:

    A Look at Foreclosures per State

    Barry Ritholtz submits: I am working on a new research project involving foreclosures in the sub-prime market. I keep coming across some really intriguing data sets.

    Courtesy of a RealtyTrac, below is a “Heatmap,” showing the foreclosure filings on a per capita basis. The Redder the state, the more per capita filings there are.

    Kinda surprising the way the concentration shakes out, ain’t it? Colorado leads the nation, followed by Nevada, with Texas and Florida not too far behind.

    http://seekingalpha.com/article/26319

    Looking at the colors, NJ is right behind those top 4 states, at same level as CA, MI, OH & IN.

  4. James Bednar says:

    Anyone having issues with posts not appearing immediately after they are posted? I’m not talking about moderation, but just a post that seems to have gone missing?

    jb

  5. BC Bob says:

    “We are facing a foreclosure crisis in this country,”

    I am a little bearish RE. However, I did not think that we would reach crisis level this quickly. I can’t even imagine what 2008-2009 will be like.

    JB [4],

    That happens to me often.

  6. sycmaster says:

    JB,

    That would greatly inhibit the “banter”, IMHO. Some of the best stuff I’ve read on this blog has been buried in banter.

  7. Clotpoll says:

    Here’s a weird one…submit a post in one browser (Safari), see nothing, switch to Firefox…and there it is!

  8. njrebear says:

    SG(1)

    NJ is actually 19.6%.

    From the link you posted, pick NJ from the drop down box.

    State Foreclosure Rate 2006 Loans
    New Jersey 19.6%

    MSA |Foreclosure rate |MSA Ranking

    Allentown-Bethlehem-Easton,PA-NJ 20.4% 34
    Atlantic City, NJ 22.2% 13
    Camden, NJ 16.8% 238
    Edison, NJ 21.4% 21
    New York-White Plains-Wayne, NY-NJ 21.7% 18
    Newark-Union, NJ-PA 18.3% 104
    Ocean City, NJ 23.5% 5
    Trenton-Ewing, NJ 15.3% 325
    Vineland-Millville-Bridgeton, NJ 15.2% 329
    Wilmington, DE-MD-NJ 14.1% 353

  9. njrebear says:

    jb(4),

    it just happened. Post just vanished.

  10. njrebear says:

    Economists warn Fed on inflation expectations
    To judge if their policies are working, central banks often rely too much on inflation expectations, according to a paper.

    http://money.cnn.com/2007/03/08/news/economy/inflation.reut/index.htm?postversion=2007030816

    Several economists warn the Federal Reserve and other central banks in a paper released Thursday against relying too much on inflation expectations to assess whether their policies are indeed keeping prices stable.

    “Our data findings serve as something of a cautionary note for policy-makers against excessive reliance on measures of inflation expectations as indicators of policy effectiveness,” wrote the economists in a paper on the inflation process to be presented at a conference Friday.

    In the current situation, Fed officials are worried about higher than desirable core inflation levels but cite low inflation expectations as grounds for optimism that core inflation will recede.

  11. James Bednar says:

    From Reuters:

    Hovnanian posts quarterly net loss on charges

    U.S. luxury homebuilder Hovnanian Enterprises Inc. (HOV.N: Quote, Profile , Research) on Thursday posted a fiscal first-quarter loss related to charges for Florida operations, and said second-quarter and full-year results will fall short of analysts’ forecasts.

    For the quarter ended Jan. 31, 2007, Hovnanian posted a net loss of $57.3 million, or 91 cents per share, down from a profit of $81.4 million, or $1.30 per share, in the year-earlier quarter.

    Sales fell 9 percent to $1.2 billion.

    Hovnanian said it lowered prices and boosted incentives early in the quarter, traditionally its slowest period for new contracts. It added that pricing has stabilized since then. Most markets have shown signs of stabilization, but it’s too early to call a bottom in the U.S. housing slowdown, the company said.

    It said not to expect a rapid recovery once the hard-hit U.S. housing market does reach bottom.

  12. Justin says:

    Clotpoll (#7):

    It’s either Server side caching or your browser caching the page. If you do a “Ctrl+shfit+right-click” then do a reload then it should clear the browser cache for this website. If it’s server side caching, then there is a time-limit set on the Server side to update the local cache and you’ll have to wait it out (usually 500 milliseconds).

  13. James Bednar says:

    Flying back to civilization tomorrow morning. Should have enough time to blog in the morning.

    jb

  14. James Bednar says:

    Justin,

    Might actually be a problem with the WordPress caching. I’ve found that I needed to clear the WordPress cache to get it functioning properly again.

    jb

  15. James Bednar says:

    From HousingWire:

    Option One Eliminates 100 Percent Mortgages in Subprime, Alt-A; Not Alone

    Irvine, Calif.-based subprime lender Option One Mortgage will no longer fund 100 percent loans, reflecting a broader change in the subprime market towards stricter underwriting standards.

    Housing Wire obtained a copy of a letter from Option One president Steve Nadon, sent to brokers yesterday, which said the company will no longer accept loan submissions for loans above 95 percent combined loan-to-value (CLTV).

    Option One officials confirmed the move to HW on Thursday afternoon, noting its decision applies to both subprime and Alt-A loan programs and that it expects no layoffs as a result of the changes.

    “We are getting a lot of 80/20s and 100% CLTV deals that used to go to our competitors,” the letter said. “While there is nothing inherently wrong with those types of loans from a pure credit standpoint, right now they have a fundamental flaw that we simply cannot overcome. That is the almost complete lack of appetite for the product by the bond market…To originate a loan product that no investor, in today´s market, wants to buy is irresponsible.”

Comments are closed.