Lowball! Bergen County 7/1-9/2

Posted on September 3, 2007 by grim

Welcome to another edition of Lowball!

Lowball! takes a look at home sales from a different perspective. For those new to Lowball!, a lowball offer is when a buyer offers a significantly lower bid than asking in hopes that the seller accepts the offer. We take a list of home sales from the past month and pick out the sales that have the highest percentage difference between original list price and selling price.

Since I haven’t done a Lowball! in a few months, there is quite a bit of data to be displayed. To make it easier to post, as well as easier on me, I’m going to post these up on a county-by-county basis over the next few days. We’re going to start with Bergen, and move through the counties alphabetically. Keep in mind the Bergen Lowball! sales are sourced from GSMLS, not NJMLS, so a significant number of sales are missing from the data.

On to the list!

MLS Town OLP LP SP % off OLP $ off OLP
2337734 Hackensack City $1,175,000 $925,000 $850,000 27.7% $325,000
2389558 Ramsey Boro $1,250,000 $999,938 $950,000 24.0% $300,000
2345985 Garfield City $319,900 $265,000 $245,000 23.4% $74,900
2383480 Ridgewood Village $729,900 $565,000 $560,000 23.3% $169,900
2392716 Oakland Boro $444,500 $359,900 $350,000 21.3% $94,500
2352992 Fair Lawn Boro $400,000 $300,000 $318,000 20.5% $82,000
2359059 Oakland Boro $419,000 $375,000 $335,000 20.0% $84,000
2370524 Glen Rock Boro $1,245,000 $1,073,000 $998,000 19.8% $247,000
2363313 Glen Rock Boro $1,150,000 $1,050,000 $930,000 19.1% $220,000
2351448 Wyckoff Twp. $799,900 $699,000 $650,000 18.7% $149,900
2288917 Franklin Lakes $719,900 $639,000 $585,000 18.7% $134,900
2239795 Fair Lawn Boro $369,000 $337,900 $300,000 18.7% $69,000
2304593 Rutherford Boro $599,000 $525,000 $490,000 18.2% $109,000
2343246 Ridgewood Village $689,000 $599,900 $565,000 18.0% $124,000
2379258 Harrington Park $634,900 $536,000 $521,000 17.9% $113,900
2366677 Hillsdale Boro $999,000 $849,900 $825,000 17.4% $174,000
2381954 Ridgewood Village $575,000 $500,000 $475,000 17.4% $100,000
2373561 Garfield City $399,000 $379,900 $330,000 17.3% $69,000
2385159 Fair Lawn Boro $409,900 $369,900 $340,000 17.1% $69,900
2387977 Fair Lawn Boro $239,000 $219,000 $200,000 16.3% $39,000
2326403 Waldwick Boro $639,000 $599,000 $535,000 16.3% $104,000
2359581 Fair Lawn Boro $739,000 $649,000 $620,000 16.1% $119,000
2344733 Saddle River Boro $2,499,000 $2,299,000 $2,100,000 16.0% $399,000
2396552 Ridgewood Village $1,495,000 $1,385,000 $1,260,000 15.7% $235,000
2388007 Fair Lawn Boro $239,000 $219,000 $201,500 15.7% $37,500
2370727 Rutherford Boro $258,900 $238,000 $219,000 15.4% $39,900
2409191 Franklin Lakes $1,999,900 $1,999,900 $1,700,000 15.0% $299,900
2327838 Waldwick Boro $599,000 $529,900 $510,000 14.9% $89,000
2328085 Tenafly Boro $1,387,000 $1,255,000 $1,190,000 14.2% $197,000
2384248 Oakland Boro $739,900 $739,900 $635,000 14.2% $104,900
2304254 Oakland Boro $529,900 $469,900 $455,000 14.1% $74,900
2320344 Mahwah Twp. $559,000 $524,000 $480,000 14.1% $79,000
2409177 Emerson Boro $899,900 $849,900 $775,000 13.9% $124,900
2412730 Franklin Lakes $8,445,000 $8,445,000 $7,300,000 13.6% $1.145m
2370198 Ridgewood Village $925,000 $795,000 $800,000 13.5% $125,000
2318280 Paramus Boro $379,000 $349,900 $330,000 12.9% $49,000
2398117 Lodi Boro $327,000 $319,000 $285,000 12.8% $42,000
2387315 Garfield City $389,900 $369,900 $340,000 12.8% $49,900
2395588 Ridgewood Village $749,000 $699,000 $655,000 12.6% $94,000
2300974 Mahwah Twp. $849,000 $774,900 $742,500 12.5% $106,500
2372219 Rochelle Park Twp. $479,900 $439,900 $420,000 12.5% $59,900
2402380 Glen Rock Boro $439,900 $424,900 $385,000 12.5% $54,900
2378161 Wyckoff Twp. $899,900 $825,000 $789,000 12.3% $110,900
2390180 Wyckoff Twp. $815,000 $749,900 $714,800 12.3% $100,200
2304941 Saddle Brook Twp. $469,900 $445,000 $412,500 12.2% $57,400
2384515 Wyckoff Twp. $1,195,000 $1,135,000 $1,050,000 12.1% $145,000
2399768 Midland Park Boro $995,000 $919,000 $875,000 12.1% $120,000
2392235 Oakland Boro $699,000 $629,000 $615,000 12.0% $84,000
2390143 Allendale Boro $1,079,000 $989,000 $950,000 12.0% $129,000
2366817 Waldwick Boro $464,900 $435,000 $410,000 11.8% $54,900
2363581 Ridgewood Village $1,700,000 $1,700,000 $1,500,000 11.8% $200,000
2325320 Allendale Boro $699,000 $619,000 $620,000 11.3% $79,000
2378810 Wyckoff Twp. $689,000 $649,000 $612,000 11.2% $77,000
2320022 Upper Saddle River $1,095,000 $999,900 $975,000 11.0% $120,000
2316931 Rutherford Boro $480,000 $460,000 $427,500 10.9% $52,500
2381664 Ridgewood Village $595,000 $565,000 $530,000 10.9% $65,000
2335667 Waldwick Boro $425,000 $385,000 $379,812 10.6% $45,188
2383061 Oakland Boro $575,000 $525,000 $514,000 10.6% $61,000
2359654 River Edge Boro $559,000 $537,000 $500,000 10.6% $59,000
2382077 Ridgewood Village $689,999 $639,000 $617,500 10.5% $72,499
2366742 Ramsey Boro $550,000 $518,000 $493,000 10.4% $57,000
2417655 Elmwood Park $484,900 $465,000 $435,000 10.3% $49,900
2319779 Upper Saddle River $924,900 $849,900 $830,000 10.3% $94,900
2379186 Mahwah Twp.* $919,000 $850,000 $825,000 10.2% $94,000
2415583 Fair Lawn Boro $529,000 $499,000 $475,000 10.2% $54,000
2379809 Tenafly Boro $739,000 $669,000 $664,000 10.1% $75,000
2362254 North Arlington Boro $345,000 $310,000 $310,000 10.1% $35,000
2294893 Wyckoff Twp. $739,900 $739,900 $665,000 10.1% $74,900
2385816 Wyckoff Twp. $839,900 $839,900 $755,000 10.1% $84,900
2380369 Upper Saddle River $1,099,000 $1,099,000 $989,000 10.0% $110,000
2413091 Ridgewood Village $524,900 $499,000 $472,500 10.0% $52,400
2391823 Garfield City $399,900 $389,000 $360,000 10.0% $39,900
Posted in Lowball | 38 Comments

“We are no longer originating loans”

Posted on September 3, 2007 by grim

From the Record:

Is your lender a risk taker?

Which New Jersey-based mortgage lender makes the riskiest loans? According to SMR Research Corp., it’s CIT Group Inc., which is in the process of exiting its Livingston-based home-loan business.

The second- and third-riskiest underwriters among the largest lenders in New Jersey were Fortress Investment Group, which owns Champion Mortgage in Parsippany; and Opteum Financial Services, which in June sold its Paramus-based loan-origination business on Century Road.

The findings were part of SMR’s 250-page study, “The Mortgage Credit Crisis,” released last month. The study, the first of its kind by SMR, showed which of the 163 largest lenders nationwide have been the most lax in their underwriting, and which have been most prudent.

SMR looked at loan documents filed with county courthouses around the country and at loan data filed with the federal government to meet Home Loan and Mortgage Disclosure Act requirements. Credit-risk scores assigned by Hackettstown-based SMR were based on estimates of how much equity a lender’s customers had in their homes, said Stuart Feldstein, president of SMR.
…
Feldstein said that the recent spate of mortgage-lender insolvencies due to poor underwriting is probably near an end, but uncertainty about the quality of mortgage-backed securities continues to cause mortgage-market turmoil. “The industry crisis won’t end until investors regain confidence and home prices stabilize,” he said in a statement. “The companies whose underwriting errors caused their own demise are largely gone or are well-known to be among the ‘walking wounded.’ ”

A score of 1,000 was the average for the 163-member group of lenders.

Most of the lenders with SMR credit-risk scores of more than 1,750 are now “bankrupt, closed, sold or partially closed,” Feldstein said in a phone interview last week.

The riskiest lenders in the country were Atlanta-based Southstar Funding; Domestic Bank of Cranston, R.I.; and Lenders Direct Capital Corp. of California. They were given scores of 2,704, 2,644 and 2,610, respectively. Southstar has closed and Lenders Direct exited its wholesale-lending business. Domestic Bank, a federally insured depository which says on its Web site that many of its mortgage loans are backed by the Federal Housing Administration, is still in business.

SMR gave CIT a score of 2,008.

CIT, which is primarily a commercial lender, blamed a $134.5 million second-quarter loss on hefty losses in its home-loan unit.

“We are no longer originating loans,” spokeswoman Mary Flynn said last week.
…
Two very conservative New Jersey mortgage lenders, Hudson City Savings Bank in Paramus and Trident Mortgage LP in Cherry Hill, were among the five lenders nationwide with the lowest or least risky scores, Feldstein said.

Trident Mortgage was given a score of 270, which means “it basically is not participating in risky underwriting,” Feldstein said.

Hudson City, which was given a score of 302, is “an extremely conservative lender, scoring way, way below the national average on risky lending,” Feldstein said.

Posted in New Jersey Real Estate, Risky Lending | 1 Comment

Home prices to fall by 50%?

Posted on September 2, 2007 by grim

From Bloomberg:

Value of city homes may decrease by half

Homes may lose as much as half their value in some U.S. cities as the housing bust deepens, according to Yale University professor Robert Shiller.

“The examples we have of past cycles indicate that major declines in real home prices — even 50 percent declines in some places — are entirely possible going forward from today or from the not too distant future,” Shiller wrote in a paper presented Friday at an economic symposium in Jackson Hole, Wyo.

Depreciating real-estate values may undermine consumer spending by spurring households to save more and by preventing them from tapping home equity. Residential property prices slid by the most in at least two decades in the second quarter as sales declined, a private report showed this week.

Because price gains were larger and more widespread this time compared with past speculative booms, the risk of “substantial” price declines is greater, wrote Shiller, also the chief economist and co-founder of MacroMarkets LLC.

“The implications of this boom and its possible reversal in coming years stands as a serious issue for economic policy makers,” Shiller said in his presentation to the conference, which is organized by the Kansas City Federal Reserve Bank.

The home-price gauge that Shiller and Wellesley College economics professor Karl Case established based on research from the 1980s fell by a record in the second quarter. The S&P/Case- Shiller index dropped 3.2 percent in the period after falling 1.6 percent the previous three months. The series goes back to 1987.

Shiller noted that 50 percent declines in the worth of some cities’ homes wouldn’t be unprecedented. Prices in London and Los Angeles fell by almost that amount from the late 1980s to mid-1990s.

U.S. home values, adjusted for inflation, rose 86 percent from the end of 1996 to early 2006, the peak of the most recent housing boom, Shiller said. Economic factors such as rents and construction costs don’t appear to explain the jump in prices, suggesting “speculative thinking” and a “boom psychology” was at work. “Extravagant” expectations for future price increases since the late 1990s fueled the bubble, Shiller said.

From the Boston Herald:

Economist eyes home value dive: Others skeptical of 50 percent decline

Think the subprime mortgage meltdown was frightful? Now consider the prospect of your home losing half its value.

An esteemed economist suggested yesterday that “real home prices” in some parts of the country could drop by as much as 50 percent, posing yet another worry for beleaguered homeowners.
…
As a result, Shiller argued, “the situation may well result in substantial declines in real home prices eventually.”

If a home’s price simply stays level for five years, its “real price” could fall by more than 20 percent during that time because the home value fails to keep pace with inflation.

“He’s sort of like the Al Gore of real estate economics,” said Tim Warren, chief executive of The Warren Group, the Boston-based provider of real estate data. Warren noted that Shiller provocatively “talks a lot about the possibilities of what the future might hold,” as Gore does with global warming.

Posted in Housing Bubble, National Real Estate | 53 Comments

Farewell Summer!

Posted on September 1, 2007 by grim

It’s September 1st, as well as Labor Day Weekend, so I’m going to officially close the 2007 real estate season. Unfortunately, the much-hoped-for recovery failed to materialize this year. Given the recent mortgage and credit market crisis, I don’t think we’ll see a recovery in the near future either.

September 1st traditionally marks the end of the real estate season. There are plenty of reasons for this, and we’ve talked about them before, so I won’t waste the space. Instead, let’s take a look at the patterns and sales trends that typically accompany the Fall and Winter seasons.

The first graph displays sales from August to February, from 2000 to 2006. This range was chosen because it illustrates the summer “peak” as well as the typical winter “trough”.


(click to enlarge)

The second graph shows the same sales period and trends, however, it is displayed as the monthly drop in sales from the August “peak”:


(click to enlarge)

By February, monthly closed sales fall to roughly 50% of the volume seen during the summer “peak” months.

Caveat Emptor!

Posted in New Jersey Real Estate | 94 Comments

Weekend Open Discussion

Posted on August 31, 2007 by grim

This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.

For readers that have never commented, there is a link at the top of each message that is typically labelled “[#] Comments“. Go ahead and give that a click, you might be missing out on a world of information you didn’t know about. While you are there, introduce yourselves to everyone.

For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past year. The archives can be accessed by using the links found in the menus on the right hand side of the page.

Posted in General | 318 Comments

Bush addresses subprime crisis

Posted on August 31, 2007 by grim

From the Wall Street Journal:

Bush Moves to Aid Homeowners
By DEBORAH SOLOMON
August 31, 2007; Page A4

President Bush, looking for ways to respond to the subprime-mortgage crisis, will outline a series of policy changes and recommendations today to help borrowers avoid default, senior administration officials said.

Among the moves will be an administrative change to allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to guarantee loans for delinquent borrowers. The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; the guarantees help homeowners by allowing them to refinance at more favorable rates.

Mr. Bush also will ask Congress to suspend, for a limited period, an Internal Revenue Service provision that penalizes borrowers who refinance the terms of their mortgage to reduce the size of the loan or who lose their homes to foreclosure. And he will announce an initiative, to be led jointly by the Treasury and Housing and Urban Development departments, to identify people who are in danger of defaulting over the next two years and work with lenders, insurers and others to develop more favorable loan products for those borrowers.

The moves are the first visible steps the Bush administration has taken to help stem the fallout from the subprime crisis, which has roiled financial markets and threatened to contaminate the housing sector. Defaults and foreclosures are increasing as borrowers — many of whom got interest-only or no-money-down loans — begin having trouble making their mortgage payments as higher rates kick in. Many homeowners believed they could refinance their loans, but that has become much harder as lenders tighten their standards in the face of defaults and foreclosures.

With more than two million loans expected to adjust to higher rates over the next two years, possibly triggering many more defaults, the Bush administration is looking for ways to stem the damage.

“The president wants to see as many homeowners who can stay in their homes with a little help be able to stay in their homes,” a senior administration official said. “We’re not looking for an industry bailout or a Wall Street bailout. The focus here is on the homeowner.”

Mr. Bush is instructing Treasury Secretary Henry Paulson to look into the subprime problem, figure out what happened and determine whether any regulatory or policy changes are needed to prevent a recurrence.

For now, the administration’s primary vehicle to help homeowners will be the FHA, which doesn’t originate loans but helps riskier borrowers qualify by guaranteeing their loans against default. By allowing the agency to back loans for delinquent borrowers, the FHA estimates it can help an additional 80,000 homeowners qualify for refinancing in 2008, bringing its total of refinancing guarantees to about 240,000, senior administration officials said. Mr. Bush also plans to announce that the FHA will begin charging “risk-based” premiums, a move that will enable the agency to help riskier borrowers since they can charge those individuals higher insurance rates. Right now, FHA premiums are a flat 1.5% of the loan, and the change would give the FHA flexibility to charge some borrowers as much as 2.2%.

Still, the move will help only a small portion of homeowners — and few in high-cost states such as California or New York — because the FHA faces constraints on the size of the loans it can back and strict rules that borrowers must meet. The Bush administration has been pushing Congress to enact overhauls that would eliminate the required 3% down payment and raise the size of the loans the FHA can insure to as much as $417,000 from $362,790. Senate Banking Committee Chairman Christopher Dodd (D., Conn.) said recently that FHA reform will be among his priorities when Congress returns from its August recess, and a bill is expected to head to the full House this fall.

Posted in Housing Bubble, National Real Estate, Risky Lending | 46 Comments

Scams increase along with foreclosures

Posted on August 31, 2007 by grim

From the Times Trenton:

Foreclosure opening the door for scam artists

As the number of foreclosed homes in New Jersey keeps rising, so does the list of people looking to defraud those who have lost their properties, state consumer affairs officials are warning.

One scam being seen more and more involves taking advantage of residents once their homes have been sold at a sheriff’s auction. In some instances, properties are sold for more than what is owed on a mortgage — meaning the surplus funds may be available to the former homeowner.

But not many people are aware of surplus funds, and authorities say unscrupulous companies or individuals have been contacting former homeowners and charging them exorbitant fees to recover the money.

“It is definitely going to be a major concern for us,” said Lorraine Rak, a deputy attorney general and chief of the consumer fraud prosecution section in the Division of Consumer Affairs.

“It’s when consumers are most vulnerable that companies take advantage of them,” she said.

Earlier this month, Rak’s section filed a civil complaint against a Glouster County man, alleging he collected tens of thousands of dollars from homeowners for retrieving surplus funds after a sheriff’s sale. Samuel E. Goodwin III, a licensed real estate agent, was accused of charging people between 15 percent and 65 percent of the surplus funds.

Goodwin allegedly convinced consumers the process was complicated and needed his expertise, but state officials said applying for surplus funds from the Superior Court Trust Fund is a simple process that requires less than $100 in fees.
…
Rak said the state is investigating other suspected post-foreclosure frauds. The lawsuit against Goodwin marked the first official action under the state’s Consumer Fraud Act involving deceptive actions related to surplus funds.

The increase in complaints coincides with an increase in the number of actual foreclosures in New Jersey. Mortgage lenders took possession of 215 homes in the state in July, a 25 percent increase from June and a 65 percent increase from July 2006, according to the latest figures from RealtyTrac, a California firm that tracks real estate data.

At least one county has started alerting people whose homes have been foreclosed on and sold at a sheriff’s sale about surplus funds. Since early last year, the Ocean County Sheriff’s Department has been sending letters to former homeowners, said Undersheriff Wayne Rupert.

Posted in New Jersey Real Estate | Comments Off on Scams increase along with foreclosures

Asbury redevelopment in question

Posted on August 30, 2007 by grim

From the Asbury Park Press:

It’s being built, and they’re coming. . . albeit slowly: Market slump makes buyers, not building, Asbury’s priority

The beachfront developers getting the headlines this summer have been the men showing their money — Metro Homes’ Dean Geibel, who is building the beachfront Esperanza high rise, and Madison Marquette’s Gary Mottola, who is renovating and rebuilding the historic boardwalk buildings and pavilions.

The first builders to come in five years ago — Kushner Cos.’ Westminster Communities and Paramount Homes — aren’t getting quite the same attention.

But representatives of both say they are concentrating on selling the condominiums they have built and will continue to do so despite a housing market that, in Geibel’s words at a business luncheon last week, is “frozen in place.”

Sam Gershwin, president of Westminster Communities, which built its first 91 town homes and condominiums on Wesley Lake, said Tuesday that reports of Kushner Cos. refocusing the company’s commercial and residential investment opportunities in New York City are true but that construction on current New Jersey projects is not being shut down.

“We still have a very vibrant and active construction company ongoing,” Gershwin said. He said there are seven projects in New York, New Jersey and Pennsylvania.

“The marketplace is not good,” he said. “We’re building for those people who have bought units and finishing the rest of the buildings we have on the way.”

Gershwin said current buildings in Asbury Park, Cranford and Perth Amboy are being completed.

But at the same time, he said that in Asbury Park, for example, the focus is to get the St. James, the first planned lakeside building, sold out. What happens next on other blocks Westminster has contracted to develop is not clear.

“The St. James building we will finish,” Gershwin said on Tuesday. “When we or someone else can figure out when the marketplace is going to change and people want to buy real estate, we will get involved again. We would look at opportunities.”
…
“Asbury Partners did file litigation against us,” Gershwin said. “We presently are working with them to come to a mutual, agreeable resolution, and both parties have agreed to adjourn the court actions pending a negotiated resolution.”

Deputy Mayor James Bruno, asked if it was possible that another developer could come in and replace Westminster, said “it is possible — any developer who comes in must be approved by the City Council.”

Posted in New Development, New Jersey Real Estate | 12 Comments

Maryland examines regulation, legislation

Posted on August 30, 2007 by grim

From the Baltimore Sun:

Lending reforms explored in Md.

With the mortgage-sparked credit crisis expected to worsen over the next year, Maryland lawmakers are exploring legislation aimed at protecting consumers and forcing lenders to examine a borrower’s qualifications more carefully before offering loans.

“We need to prevent people from getting into loans that set them up for failure,” Maryland’s secretary of labor, licensing and regulation, Thomas E. Perez, said yesterday at a hearing in Annapolis. “Foreclosures not only tear families apart, but they undermine communities.”

About a dozen states have begun to make legislative and regulatory changes aimed at protecting subprime borrowers. Gov. Martin O’Malley and Attorney General Douglas F. Gansler have convened task forces to examine the subprime market and find ways to help forestall foreclosures. Legislative fixes could become a major thrust of the General Assembly session that begins in January.

Problems in credit markets, which have hit disparate segments of the global economy, began with rising defaults and foreclosures on subprime mortgages, those extended to borrowers with weak credit histories.
…
Industry groups are girding for a fight. Representatives with the Maryland Bankers Association, the Mortgage Bankers Association and the Maryland Association of Mortgage Brokers urged the Senate Finance Committee, which held the hearing, to be wary of legislation that could destroy the subprime lending market.

State officials also said they don’t want to hurt the market. Subprime loans have opened up credit to many who would not have qualified for a loan a decade ago, especially lower-income and minority borrowers.
…
D. Robert Enten, general counsel for the Maryland Bankers Association, said legislators should be careful not to over-regulate an industry that is already subject to federal regulation. He said the “cyclical” credit crisis will pass, and higher defaults on subprime loans should not be surprising.

“These are people for whom it’s a stretch,” Enten said. “It’s a stretch to make these loans.”

Industry officials, many of whom are participating in the task forces, said they might support some legislative proposals. David Pulford, president of the Mortgage Bankers Association, said his group would like to see increased enforcement of existing regulations and more education and counseling about financial issues, especially mortgages.
…
Some states are looking to require that mortgage brokers act in the best interests of consumers. Roughly two-thirds of mortgages are originated through brokers, and consumer advocates say some steered borrowers to high-cost loans or deliberately excluded real estate taxes and insurance escrow to make mortgage payments look more affordable.
“I firmly believe most mortgage brokers are trying to do the right thing, but the pressure is enormous for them to close the deal,” said Steve Silverman, chief of the consumer protection division at the attorney general’s office.

Other proposals are aimed at tightening standards used in deciding whether to make loans. One would require that lenders verify a borrower’s income. Another would force lenders to consider a borrower’s ability to repay an adjustable rate mortgage at the higher reset rate. Many borrowers signed up for such loans at low initial rates and fell behind on payments once the rate reset after a period of time.

Posted in National Real Estate, Risky Lending | 2 Comments

Pennsylvania’s proposed regulation

Posted on August 30, 2007 by grim

From the Observer Reporter:

New mortgage rules sought

Pennsylvania’s acting secretary of banking told lawmakers Wednesday the state needs to toughen its regulation of mortgage companies.

But during an informational meeting with members of the state House Commerce Committee chaired by state Rep. Peter Daley, D-California, representatives of the banking and mortgage industry asked that legislators refrain from making regulations so stringent that they would be unable to compete with banks from other states.

The meeting, held at the Belle Vernon Holiday Inn, was to present proposed regulations that aim to improve oversight of home mortgage lenders on such things as fuller disclosure of terms and ensuring that borrowers understand and can afford the loans they sign.

The Department of Banking has proposed regulatory changes that would require mortgage lenders and brokers to clearly disclose key loan features, such as the presence of a prepayment penalty, balloon payment or an adjustable interest rate. It also would require companies to evaluate the borrower’s ability to pay back the loan.

Steven Kaplan, acting secretary of banking, who expects to be confirmed when the state Senate returns from its summer break, said stronger regulations are needed because of the number of foreclosures stemming from subprime mortgages, those written for people with lower credit scores or other credit problems.

“Too many people have been getting mortgages they simply can’t afford,” Kaplan said. “Clearer disclosures and better documentation will help all parties to focus on loans that are safer and more realistic.”

Several people representing the banking industry in Pennsylvania reminded the panel that banks and savings institutions are already closely regulated by several federal bodies, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.
…
One of the main recommendations of the banking department calls for creating a new licensing category for individual mortgage originators – those who deal directly with the consumer by soliciting, accepting or offering to accept mortgage loan applications or negotiating loan terms.

Under the current laws, first- and second-mortgage lender and broker companies, as well as consumer discount companies that originate mortgage loans, are licensed but the employees of the companies are not.

The department also wants to amend regulations for real estate appraisers to increase maximum civil penalties the board may assess from $1,000 to $10,000 for each violation for the improper inflating of home values.

Posted in National Real Estate, Risky Lending | Comments Off on Pennsylvania’s proposed regulation

“There’s a high presence of risky [mortgage] loans and a massive overhang of homes for sale”

Posted on August 29, 2007 by grim

From the Wall Street Journal:

Steep Home-Price Drop Stirs Fears
Market May Get Worse Still As Effect of Stricter Lending Has Yet to Show Up in Data
By KELLY EVANS
August 29, 2007; Page A3

The decline in U.S. home prices accelerated in the second quarter as a glut of unsold homes and tighter lending standards continued to weigh on the market.

Home prices nationwide tumbled an average 3.2% from a year earlier, according to an index compiled by Standard & Poor’s Corp. The decline was sharper than the year-to-year decline in the first quarter, when the S&P/Case-Shiller national home-price index dropped 1.6%.

Lehman Brothers Holdings Inc. economist Michelle Meyer attributed falling home prices to a “huge imbalance” in the housing market: “There’s a high presence of risky [mortgage] loans and a massive overhang of homes for sale,” she said.

Home prices have been falling for more than a year and economists had widely expected the S&P/Case-Shiller index to reflect that trend. But the size of the latest decline was worrisome in part because it was larger than that of competing home-price indexes. A separate report released Monday by the National Association of Realtors found that the median sales price of existing homes slipped to $228,900 in July, down just 0.6% from a year earlier.

Moreover, the latest S&P/Case-Shiller survey covers the April through June period, prior to the sharp deterioration in the health of the nation’s mortgage lenders that came to light this month. That trend, which has been unfolding for months, picked up pace in August as Wall Street cut off funding to mortgage lenders and mortgage companies sharply curtailed their lending to consumers, squeezing a number of buyers out of the market. That could lead to further deterioration in home prices in the future.

“These pricing pressures have not been seen in post-World War II history,” said economist Brian Bethune at Global Insight. “It’s very difficult for the markets to be able to deal with that kind of stress.”

Mr. Bethune noted that today’s price declines are worse than those during the housing bust of 1990-91 that preceded a national recession. “The housing market is definitely a leading indicator of a potentially more serious downward moment in the economy,” he said.

BY METRO AREA
The S&P/Case-Shiller Home Price Index includes data on major metropolitan areas. January 2000=100.

Metro area June 2007 level % change from year earlier
Atlanta 136.12 1.6%
Boston 171.30 -3.7%
Charlotte 135.05 6.8%
Chicago 165.96 -0.7%
Cleveland 118.54 -3.6%
Dallas 126.53 1.6%
Denver 138.09 -1%
Detroit 109.57 -11%
Las Vegas 221.86 -5.1%
Los Angeles 262.12 -4.1%
Miami 264.89 -4.8%
Minneapolis 164.35 -3.8%
New York 208.52 -3.4%
Phoenix 212.52 -6.6%
Portland 185.76 4.5%
San Diego 231.37 -7.3%
San Francisco 209.48 -4%
Seattle 191.92 7.9%
Tampa 219.37 -7.7%
Washington 233.52 -7%
Posted in Housing Bubble, National Real Estate | 354 Comments

Six-year reign is over

Posted on August 29, 2007 by grim

From the Record:

N.J. loses its place at the top

New Jersey’s six-year reign as the state with the highest household income is over, according to U.S. Census Bureau data released Tuesday.

The state, with a median household income of $64,500, is now second to Maryland, according to the data, which also showed a decline in New Jersey’s household and individual spending power.

Workers and households have less spending power than in 1999, after the figures are adjusted for inflation, the data show.

Bergen County’s inflation-adjusted median household income, for instance, has fallen from $80,800 to $75,900 since 1999, the data indicate. Passaic’s median income fell from $61,000 to $49,900.

The data also show New Jersey’s median household income rose by $600 in 2006 compared with the year before, after adjusting for inflation — only the second increase in the last six years.
…
The data release came amid a growing debate over the state of New Jersey’s economy, and whether it can continue to provide the high incomes and quality of life its residents are accustomed to.

Critics say New Jersey’s regulations, taxes and red tape put it in danger of losing the competition with other states for corporate relocations and expansions, and the new jobs that go with them. The state has added 15,400 jobs so far in 2007, a slower job creation pace than in 2006.

Hughes and another Rutgers economist, Joseph Seneca, argue that the state is creating higher-paid jobs at a much slower rate than low-paid health, hospitality and other positions.

Seneca said that could explain the decline in individual earnings, which include only salaries and wages. Median earnings in 2006 dropped to $35,500 from $36,700 in 2005.

He said the growth in household income likely reflects the strength of investment gains in 2006, because the data include dividends, capital gains, interest and other non-salary income.

“It indicates again an income profile that is one of the highest in the nation,” but is vulnerable to volatility in the financial markets, he said.

The state’s median household income rose to $64,500 in 2006, an increase of about 1 percent. That trailed the national rate, which rose by 1.7 percent as inflation-adjusted median household income increased from $47,700 to $48,500, the data show.

(emphasis added)

Posted in Economics, New Jersey Real Estate | 2 Comments

CIT to close Livingston lending unit

Posted on August 29, 2007 by grim

From the Record:

CIT will end home mortgage operation

CIT Group Inc., the nation’s largest independent commercial-finance company, said Tuesday it will close its Livingston-based home-lending unit and eliminate 550 jobs around the country within the next 30 to 60 days.

Company spokeswoman Mary Flynn said in a telephone interview that she did not have any information on how many, if any, of those jobs are in New Jersey.

“We are working with the affected employees to help ease the transition,” she wrote earlier in the day in an e-mail response to questions. “Severance will be provided.”

Like many mortgage lenders that serve high-risk borrowers, CIT’s home-loan division was clobbered this year by the investment community’s loss of appetite for such loans, amid rising defaults and concerns about the value of the homes that back the loans in a sluggish real estate market.

The company said in a statement it will take a $35 million third-quarter charge for severance and other exit costs.
…
CIT, which employed 7,354 people at the end of 2006, said this month it planned to close a business-finance office in Mahwah at the end of September and lay off the 137 employees who work there.

Posted in General | 2 Comments

NY’ers are minority buyers

Posted on August 29, 2007 by grim

From the Jersey Journal:

Locals snap up Jersey City condos

Real estate pundits love to highlight New York City’s supposed love affair with Jersey City’s real estate market, citing the familiar trend of Big Apple residents being seduced across the Hudson River by lower prices and proximity to Manhattan’s job market.

But although they may lack the news appeal and marketing value of the mighty New Yorker, Jersey City residents are purchasing homes here in great numbers, an interesting and often overlooked trend in the local housing market.
…
For example, roughly 53 percent of the first 223 properties sold in the Liberty Harbor North development went to Jersey City residents, according to the project’s developer Peter Mocco.

“What it clearly demonstrates is a large number of Jersey City residents who had been renters or temporary residents have made the decision to be permanent homeowners in Jersey City,” Mocco said.
…
“People are here, and they see home prices rising, and they are buying a home with the confidence that they are going to continue to rise,” said Mary Boorman, senior vice president of Pinnacle Properties, which has seen 40 percent of the first 161 units at its Mandalay on the Hudson go to local buyers – compared to 25 percent to New Yorkers.

There are similar trends at The Residences at Dixon Mills, where roughly 50 percent of the first 50 available units went to local buyers, while 22 percent went to New Yorkers.

Posted in New Development, New Jersey Real Estate | Comments Off on NY’ers are minority buyers

Lies, damn lies, and statistics

Posted on August 29, 2007 by grim

From the Home News Tribune:

CPI fraud directly linked to subprime credit crisis

In 1983, the Bureau of Labor Statistics was faced with an awkward dilemma. If it continued to include the cost of housing in the Consumer Price Index, the CPI would reflect an inflation rate of 15 percent, thereby making the country’s economy look like a banana republic. Worse, since investors and bond traders have historically demanded a 2 percent real return after inflation, that would mean that bond and money market yields could climb as high as 17 percent.

The BLS’s solution was as simple as it was shocking: Exclude the cost of housing as a component in the CPI, and substitute a so-called “Owner Equivalent Rent” component based on what a homeowner might “rent” his house for.

The result of this statistical sleight of hand was immediate and gratifying, for the reported inflation index quickly dropped to 2 percent. (This was in part because speculators needed to offset their holding costs by renting out their homes while their prices skyrocketed, thereby flooding the market with rentals that pushed down the cost of renting a house or apartment.)

While the BLS was correct in assuming that this statistical ruse would fool the average citizen into believing that inflation was only 2 percent (and therefore be willing to accept a meager 4 percent return on his bank savings), what is remarkable is that the ruse also fooled the bond traders, and apparently continues to do so, leading analyst Peter Schiff to describe these supposed savvy bond traders as the “hormonal teenagers of the capital markets.”

The present subprime credit crisis can be directly traced back to the BLS decision to exclude the price of housing from the CPI. It is now clear that the “benign” inflation figures reported over the last 10 years in no way reflected the skyrocketing rise in home prices, with states like California experiencing annual home-price increases of as much as 30 percent. With the illusion of low inflation inducing lenders to offer 5 percent and 6 percent loans, not only has speculation run rampant on the expectation of ever-rising home prices, but homebuyers by the millions have been tricked into buying homes even though they only qualified for the “teaser” rates that quickly escalated to unaffordable levels. As long as home prices continued to skyrocket, buyers could refinance based on the increased value of their equity as collateral; but once home prices stabilized and even declined, many families were forced into foreclosure.

If economic history were a required subject in our public schools, borrowers would be aware of the dynamics of such frequent bubbles that have occurred in the past. In 1624 in Holland, frenzied speculators saw that the price of tulip bulbs was rising and rushed to buy them on the expectation that the price would rise even further and they could make an easy profit. Banks were eager to lend money to such speculators, because they, too, stood to make handsome profits. Oblivious to the underlying value of the bulbs, more buyers entered the market, pushing the price of a single bulb to the preposterous price of 3,000 guilders (equivalent to perhaps $100,000 today).

Houses are today’s tulip bulbs, and in California they are the equivalent of the 3,000 guilder tulip bulb. But instead of letting the bubble play itself out in order to create conditions for long-term economic stability, the Fed, under extreme political pressure from the power brokers and banks, seems determined to keep the bubble from bursting for as long as possible by continuing to lower interest rates and flood the market with liquidity, much as the Dutch banks did in 1624 to keep up the price of tulips. Such a short-sighted strategy will not only keep the price of homes beyond the reach of the average American, but will make the final and inevitable collapse that much more horrendous.

Posted in Economics, National Real Estate | 4 Comments