Overwhelming support, but only in the face of higher taxes

Posted on July 25, 2007 by grim

From the Courier Post:

N.J. would rather sell roads than hike taxes

New Jersey residents overwhelmingly oppose the leasing of state assets, such as the lottery or the New Jersey Turnpike, to fix the state’s fiscal problems.

That is, unless the alternative is a tax hike. Then they overwhelmingly support the leasing of assets, a Monmouth University/Gannett New Jersey poll shows.

Nonetheless, residents are skeptical the money will be put to good use and fearful that if highways are leased, tolls will increase, said Patrick Murray, director of the Monmouth University Polling Institute.

“As a general concept, asset monetization, to use the governor’s parlance, just doesn’t sit well with New Jerseyans,” Murray said.

“While most New Jersey residents would choose leasing state assets over raising taxes, the residents don’t believe it’s a choice between the two,” he added. “Residents see this as just a one-shot that won’t change the way New Jersey does business. They see it as a pot of money that will disappear.”
…
“It shows the public believes it cannot tax itself out of long-festering problems and is receptive to alternatives,” spokesman Tom Vincz said. “We look forward to engaging the public on a plan that conforms with the governor’s principles and that directly answers the public’s concerns as expressed in the poll.”

The Monmouth University/Gannett poll showed that 55 percent of residents opposed the idea Corzine has dubbed “asset monetization” without explaining the details. Nearly 60 percent opposed the leasing of the turnpike or Garden State Parkway, and about the same number opposed allowing private developers to build on top of train stations. Leasing the state lottery or selling naming rights to state parks were also opposed by more than half those polled.
…
Respondents to the poll were asked to choose between leasing assets or raising taxes: 62 percent would rather lease the assets. Yet when asked whether the state should lease assets or make significant budget cuts, residents were split — about 4 in 10 favored both.

If the leasing is completed, 53 percent said they wanted the money sent to them as property tax relief, even though the state’s pension funding and budget crises have forced the asset monetization proposal.

Posted in New Jersey Real Estate, Property Taxes | 4 Comments

“The crisis”

Posted on July 24, 2007 by grim

From Reuters:

Enough subprime, let’s talk housing debacle:James Saft

Troubles are surfacing with loans made to better-off U.S. homebuyers in a worrying trend that indicates what’s been termed “The subprime crisis” may need to be rebadged “The housing crisis” and eventually maybe just “The crisis.”

While signs are tentative so far, credit rating downgrades and payment delinquencies are happening more frequently in what is called the “Alt-A” mortgage loan market, the slice just above subprime in creditworthiness.

The upshot is more pain for investors in mortgages, less appetite for other risky credits, such as leveraged buyouts, falling U.S. house prices, and the big one, a threat to consumption in the United States.

In the past week, both Moody’s and S&P have announced downgrades and reviews for downgrades for securities backed by Alternative-A loans, which are typically made to borrowers with less proof of their finances than prime borrowers or who have small credit problems in their past.

Delinquencies on Alt-A have been rising faster than for subprime, though at much lower levels. Between January and March, delinquencies for Alt-A rose by 17 percent, to 3.05 percent of loans, while subprime deliquencies rose by about 3.5 percent, to 14.83 percent, according to First American LoanPerformance data.

Fitch Ratings, too, has said it is “very concerned” about Alt-A loans, especially those with low early repayments which aren’t even sufficient to pay all of the interest.

The idea that problems in subprime were contained and would not spread to the general economy has been maintained by U.S. central bankers and policy makers. It has also been the market’s central assumption and underpinned the dizzying rise of stocks to new highs.
…
If Alt-A follows the path of subprime, there will be more forced sellers of U.S. houses, less available finance to buy that increased supply and an ever-growing number of homeowners who will realise, even if they are “prime” borrowers, that their largest single asset is worth less than they thought.
…
The U.S. economy has been the beneficiary of a self-reinforcing cycle in recent years, as easy credit and rising house prices combined to fuel economic and consumer confidence, making lenders and borrowers alike think the tide would continue to rise and float everyone over the risks they had taken on.
…
But signs of weakness in U.S. housing are weakening that trust, according to Robert Shiller, an economics professor at Yale, whose S&P/Case-Shiller Home Price index is showing a yearly loss of 2.1 percent.

“This is likely to eventually have a greater impact on the economy than we now see in subprime and Alt-A, for it can have an effect on general economic confidence,” said Shiller.
…
Subprime may have been the first area to roll over, but pain has, is and will continue to spread to the Alt-A and Prime sectors of the U.S. housing market,” RBS credit strategist Bob Janjuah said in a research note on Monday.

And while Alt-A losses are still modest in percentage terms, the overall numbers are huge, with estimates of Alt-A lending at $386 billion in 2006, as against $640 billion in subprime.

If, or perhaps when, this all translates into a retrenchment by the U.S. consumer, the damage could be very large.

Posted in Housing Bubble, National Real Estate | 375 Comments

NJ DOBI issues statement on Subprime

Posted on July 24, 2007 by grim

From the New Jersey Department of Banking and Insurance:

BULLETIN NO. 07-15 – STATEMENT ON SUBPRIME MORTGAGE LENDING

On July 17, 2007 the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR), and the National Association of Consumer Credit Administrators (NACCA) issued their Statement on Subprime Lending. In substance, this statement parallels the Statement issued on June 29, 2007 by the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) and the National Credit Union Administration (NCUA) but it applies to entities not under the supervisory authority of the Federal agencies.

The New Jersey Department of Banking and Insurance endorses the July 17, 2007 Statement on Subprime Lending and now issues its own Statement, which is attached hereto and is also posted on the Department’s website at www.njdobi.org. All New Jersey licensed mortgage bankers, correspondent mortgage bankers, mortgage brokers, secondary lenders, their officers, directors and employees, and their registered mortgage solicitors are strongly
encouraged to review this Statement.

The Statement expresses concerns about adjustable rate mortgages with low initial payments followed by a rate reset that can result in payment shock, particularly when the borrower originally qualified for the loan based only on the low introductory payment rate. The Statement addresses additional concerns relating to prepayment penalties, the absence of escrow accounts that provide for insurance and tax payments, and the need to improve borrowers’ understanding of these products through enhanced disclosures.

The full statement can be found here:

STATEMENT ON SUBPRIME MORTGAGE LENDING

Posted in New Jersey Real Estate, Risky Lending | 10 Comments

“Why does it cost $6,000 more per year to educate my child?”

Posted on July 24, 2007 by grim

From the Record:

Hearing on River Dell breakup draws 500

An overflow crowd of 500 residents attended a public hearing Monday night on a proposal to dissolve the River Dell Regional School District, a sign that the issue has struck a nerve with residents of both Oradell and River Edge.

River Edge residents — who appeared to represent the majority of the group — wore yellow ribbons and buttons in a show of solidarity and argued that the plan proposed by Oradell would adversely affect the education of students in both boroughs.

But Oradell residents, tired of paying what they see as an unfair tax burden, responded that the only change would be to divide the taxes more equitably.

“The system is broken, and it needs fixing,” said Oradell Mayor Frederick LaMonica. “But there is no fix on the horizon. That is why we are taking this action, which is the only one available to us.”

The hearing was held by a special state review board, which is charged with deciding whether to allow the proposal to go to a referendum.

At issue is the current tax system, which allocates school taxes based on each borough’s total property value, rather than the number of students each sends to the regional district.

Oradell pays more than $2 million more in taxes each year despite sending many fewer students. The result is that each student from Oradell costs taxpayers approximately $6,000 more in school taxes to educate.

“Why does it cost $6,000 more per year to educate my child?” said Oradell resident Michael Chakansky.

Oradell’s plan would extend each borough’s district from kindergarten to 12th grade, rather than sixth grade. River Edge would control the middle school, while Oradell would operate the high school.

Each borough would pay the taxes to the other based on the number of students it sent to the other’s school, potentially saving Oradell millions of dollars while significantly increasing River Edge’s taxes.

Posted in Politics, Property Taxes | 3 Comments

“Trenton Makes, the World Takes”

Posted on July 24, 2007 by grim

From the APP:

Corzine’s global warming initiatives just smoke and mirrors

With Al Gore watching, Gov. Corzine signed the Global Warming Response Act into law earlier this month. That makes New Jersey the third state, following California and Hawaii, to enact such a law. Eight more are considering similar measures, but none is as aggressive as New Jersey’s.

The legislation requires the state to reduce so-called greenhouse gas emissions to 1990 levels by 2020, and to 80 percent below 2006 levels by 2050. No other state has set goals so far into the future, and no other state has required energy imports to adhere to these standards as well.

The bill drew broad bipartisan support. Republican state Sen. Tom Kean Jr., for instance, said enthusiastically, “having seen the direction that the Congressional Democrats intend to take on this crucial issue, I could not agree more strongly with those sentiments.”

There are clearly feel-good political points to be gained on the global warming issue, but what effect can the New Jersey state government actually have on global climate change? Consider the ambitious Kyoto Protocol, which seeks significant worldwide cuts in emissions. The National Center for Atmospheric Research estimates of lower global temperatures with full implementation of Kyoto are so negligible it would never justify the economic costs.

If the United States cannot make a material impact on climate change, it’s the height of folly to think a single state, New Jersey, can. Even if all industry ceased to exist in New Jersey, and the state never emitted another molecule of carbon dioxide, the effect on global climate would be meaningless.

This is all about symbolism, of course, and Corzine and Gore hope to set an example for other states and countries, they say. Unfortunately, that symbolism will cost many New Jersey workers and entrepreneurs their livelihood. New Jersey has lost 8,000 private sector jobs in seven years, and this “politically correct” feel-good nonsense will accelerate that sorry trend.

New Jersey is a major petroleum refining state and is one of the primary suppliers of petroleum products to the Northeast. It’s also one reason why gasoline prices are low in our state. This law will cripple that industry, costing the state one of its few remaining engines of growth, and it will serve as a hidden gasoline tax on every motorist in New Jersey.

The law broadly provides for state supervision and regulation of emissions, but it contains no specific proposals to lower emissions. That makes it difficult to determine exactly how much implementation will cost, which means the Legislature and governor enacted the law without even the possibility of a cost-benefit analysis. Assemblyman Joseph Pennacchio, R-Morris, noted the discussion of the ends but not the means was reminiscent of the Highlands Act, which took away local zoning powers and gave them to the state.

With one of the highest state and local tax burdens in the country and the third worst business climate, according to the Tax Foundation, New Jersey’s future looks more bleak every day. New Jersey was once an engine of prosperity and the envy of the nation.

The state capital’s famous motto: “Trenton Makes, the World Takes,” is a painful reminder our once powerful industrial economy is being strangled out of existence by taxes and regulation. Businesses don’t have to locate in New Jersey — they can easily move to Pennsylvania, South Carolina, Florida or China.

It’s a huge mistake to impose enormous economic costs on the state for feel-good symbolism that will have a negligible impact on global climate. The New Jersey economy is already in a hole. It’s time to stop digging and focus on cutting taxes and bringing jobs back to our state, not posing for photos with celebrities. Unfortunately, Corzine and his legislative allies are more in tune with their Hollywood idols than with New Jersey’s overtaxed working families.

Posted in New Jersey Real Estate, Politics, Property Taxes | 7 Comments

In the midst of “the greatest real estate slump in history”?

Posted on July 23, 2007 by grim

From Inman News:

The housing market: How bad will it get?

Speculation, rampant building, risky loans, overborrowing and escalating prices propelled the housing market to an unprecedented peak — and are now counted among its greatest failings.

The “soft landing” that so many analysts and economists had predicted has given way to a record number of foreclosures, an implosion in the subprime lending market, an oversupply of housing, and home-price declines in many market areas. The dreamy days of the housing boom have received a cold slap of reality.

Real estate markets are historically cyclical — that’s nothing new. But in this case, the nation is in the midst of a downturn following a long-lasting and massive real estate run-up, and it remains to be seen whether this period will become known as one of the greatest real estate slumps in history.

How bad will the real estate market get before it gets better? Many experts have said they don’t expect a quick return from these doldrums, and this outlook could turn dire if the overall U.S. economy hits a snag. While there is not a nationwide epidemic of job loss, there are worries about rising inflation and energy prices, and declining consumer spending.

David Shulman, of the Anderson Forecast at the University of California, Los Angeles, said in his latest report that he expects a 10 percent peak-to-trough home-price decline that could extend into 2009, with the swell of foreclosures growing “well into 2008.” His forecast report bears a one-word title: “Turbulence.”

Real estate industry consultant John Burns said during a housing conference in May that the buyer’s market will continue for at least two more years, and “we’re heading into a year with more price declines,” with builders dropping prices by about 20 percent in some markets.

The National Association of Home Builders expects a 21 percent drop in total housing starts and an 18 percent drop in new-home sales this year compared to last year, and the National Association of Realtors expects a 4.6 percent drop in existing-home sales, a 1.3 percent drop in median existing-home prices and a 2.3 percent drop in new-home prices this year compared to 2006.
…
The sensational rise of the housing boom may be a key factor in its demise.

“This was sort of a market-fed downturn,” said Jay Q. Butler, director of Realty Studies at Arizona State University’s Morrison School of Management and Agribusiness. The rapid upswing in home sales and pricing was not sustainable, he said.

“A lot of the system was being stretched, both legally and illegally to some degree, with the idea that this was going to continue. So people got in over their heads. It really sort of turned in on itself. You usually find a (real estate) downturn associated with a downturn in the economy — we really haven’t seen the downturn in the economy.”

Likewise, the latest annual housing market report by Harvard University’s Joint Center for Housing Studies stated that the housing downturn “has been driven largely by the market’s own excesses,” including an oversupply of new homes that was artificially inflated by activity among investors and speculators.

Some familiarities exist now from past cycles, Butler said. For example, in a real estate boom there are always people who overextend themselves financially to purchase homes during a real estate boom, perhaps thinking that they will be able to sell the home for a profit based on the appreciation trends.

“I don’t think we really ever learn. The lenders and real estate agents and everybody else is more than willing to help people achieve this goal (of home ownership) because they make a commission for you to achieve this goal,” Butler said.
…
The lesson to be learned from this market cycle is that there was “way too much flexibility” in the loan products offered to consumers, which ultimately led some consumers to buy homes that they couldn’t afford, Jacobson said. “Sometimes that’s not the right house … they may not like what they hear but that’s the right answer.”
…
He said he would support a giant banner with a statement to consumers: “Stop going out and shopping like it’s a bottle of catsup.” He added, “There are a lot of people who are encouraging people not to do the right thing. During those boom years there were a lot of people getting into programs that were risky for them as well as the lender (and) were putting people really on the margin,” he said.

Posted in Housing Bubble, National Real Estate | 294 Comments

Lenders of last resort

Posted on July 23, 2007 by grim

From the Wall Street Journal:

States Aim to Stem Tide
Of Home Foreclosures
With Funds for Refinancing
By THADDEUS HERRICK
July 23, 2007; Page A2

Hoping to slow the quickening pace of home foreclosures, about a half-dozen states are setting up funds to help homeowners with high-risk subprime mortgages refinance to more-affordable loans.

The states — which include Maryland, Massachusetts, New Jersey, New York, Ohio and Pennsylvania — are expected to invest a total of more than $500 million in the effort. That isn’t much, given the size of the problem, but state officials hope it will be enough to keep some vulnerable low- and moderate-income neighborhoods from sliding into decline.

Some of the programs will be similar to existing government-lending programs, in which the state extends mortgages to homeowners and then sells those home loans, in some cases to companies such as government-sponsored mortgage-finance giants Fannie Mae and Freddie Mac. The state then recycles the proceeds from the sales to make additional loans.
…
More than one million American homes are expected to enter foreclosure this year; the total represents about 2.3% of the nation’s 44 million home loans, according to Freddie Mac, which bases its estimate on data provided by Mortgage Bankers Association, a Washington-based trade group. Freddie Mac says about 60% of those homes carry subprime mortgages. Subprime mortgages are home loans made to borrowers with shaky credit records.

The projected foreclosure rate — higher than during the oil bust of 1987 but not as high as in the 2002 recession — poses a significant threat to the housing sector, and possibly to the nation’s economy if it spurs consumers to maintain a tight grip on their wallets. “Falling home prices hurt consumer spending,” says Patrick Newport, an economist at consulting firm Global Insight.
…
For example, a borrower who took out a $300,000 ARM at 7.32% in mid-2005 would have had an initial monthly payment of $2,060.79. A typical adjustment would have pushed that payment to $2,692.63 this year, says Keith Gumbinger, vice president of HSH Associates, a New Jersey publisher of mortgage-rate data. Unable to cover the higher payments, a number of homeowners have fallen behind.

The trend can put neighborhoods at risk. Houses left vacant as the result of foreclosures tend to push property values down and cause neighbors that can afford to do so to sell out and move away, creating a snowball effect.
…
“No one is saying this will solve the problem,” says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University. “But it could make a difference.”

Posted in National Real Estate, Risky Lending | 2 Comments

“When you sell on your own, you need to be as creative as possible”

Posted on July 23, 2007 by grim

From the NY Daily News:

Advertising a house special

In a city obsessed with real estate, wearing your floor plan on your chest is a sure attention-grabber.

So Linda Longo dons a sandwich board and parades around Park Slope most recent Sundays.

The Brooklynite is trying to sell her co-op in nearby Prospect Heights – without hiring a broker.

“We want to save the money,” she said.

Hence the sandwich board, which features color photos of her place and a map, in addition to the floor plan.

In pedestrian-friendly Park Slope, couples smile when they see her coming. Tots lean out of strollers to watch her walk by. Cranky old ladies demand, “What’s that?”

“It is quite odd,” acknowledged Longo, a 43-year-old who grew up in Milwaukee and works for the U.S. Environmental Protection Agency in Manhattan.
…
The back of the sandwich board promotes the time and place of the open house, which will continue most Sunday afternoons at 225 Park Place, Apartment 1-D, until their place is sold. Inch-high black letters on orange paper note the $745,000 asking price for the 1,200 square-foot, two-bedroom apartment, as well as its $682 monthly maintenance.

Linda started the sandwich board ad campaign late last month. Her mom came up with the idea during a visit.

Longo had been putting open house ads on lamposts on Park Slope streets, but when she’d return at day’s end to take them down, many were already gone.

If she wore a giant ad on a sandwich board, nobody could throw it away. And if people were interested, she could hand them flyers.

“When you sell on your own, you need to be as creative as possible,” she explained to a couple waiting outside her building. They were the first of nine couples who came to the open house on a recent Sunday.

Posted in National Real Estate | Comments Off on “When you sell on your own, you need to be as creative as possible”

NJ thrifts suffer as housing turns soft

Posted on July 23, 2007 by grim

From the Record:

Mortgage woes hurt thrifts

Northern New Jersey thrifts, which rode the home-buying and refinancing booms to record profits in the early 2000s, are now proving the adage that what goes up comes down.

Shares in Hudson City Bancorp Inc., which increased as much as eightfold from their initial price from 1999 to the end of 2004, have slipped 17 percent this year at the largest New Jersey-based thrift. The stock hit a 52-week-low of $11.58 on Friday as demand for loans has fallen and high short-term interest rates have translated to high deposit costs and slim profit margins.

Shares in other local thrifts, including Provident Financial Services Inc., Kearny Financial Corp., Clifton Savings Bancorp Inc. and Oritani Financial Corp., have all seen double-digit declines this year.

“The weakness in the thrift sector is driven by the slowdown in the mortgage market,” said Collyn Gilbert, an analyst at Stifel Nicolaus & Co.’s Florham Park office on Friday.

The mortgage market is expected to continue to be weak at least through the rest of this year.

“It’s tough,” she said. “Some [thrifts] are hunkering down and reining in growth, but there are not a lot of levers they can push.”

Thrifts traditionally rely more on residential mortgage lending than commercial banks, so their financial performance tends to suffer more when the housing market turns soft.

The SNL Thrift Index, which includes 167 thrifts around the country, was down 12 percent for the year as of Friday. The KBW Bank Index, comprised of large commercial banks, has fallen 5 percent in 2007.
…
Among the few bright spots for thrifts is that the interest-rate environment has begun to improve and they’re feeling less competition from the finance companies caught up in the sub-prime mortgage shakeout, said Gerard Cassidy, analyst at RBC Capital Markets in Portland, Maine.

“There is a bunch of capacity coming out of the business,” he said

Posted in New Jersey Real Estate, Risky Lending | Comments Off on NJ thrifts suffer as housing turns soft

Weekend Open Discussion

Posted on July 22, 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 | 468 Comments

Risky loans fall out of favor

Posted on July 22, 2007 by grim

From the Record:

Refinancing replaces ARM loans

Faced with rising monthly payments, many homeowners who took out adjustable-rate mortgages a couple of years ago now want to refinance into fixed-rate loans.

“People are moving toward safe and secure fixed-rate mortgages,” said Susan M. Wachter, a real estate professor at the Wharton School of Business at the University of Pennsylvania. “There’s an increasing recognition out there of the potential for mortgage payment shocks with adjustable-rate mortgages.”

But some who want to refinance now may find that tighter lending standards, combined with flat or lower house values, have closed off that option.

A buyer who took out a no-down-payment loan, for example, may not have any equity because house values have flattened or even declined in the last couple of years. And lenders are no longer making loans where the homeowner has no skin in the game.

“A lot of those products have gone away,” said Robert Wilderotter of the Real Estate Mortgage Network in River Edge.

He predicted that some of these homeowners — in a house they can’t afford, with no way to get a cheaper mortgage or sell their house at a profit — will end up in foreclosure.

Many recent homeowners bought their houses using mortgages that kept payments artificially low in the first three to five years. The loans had adjustable interest rates or allowed homeowners to start with “interest-only” payments. And with some “option” loans, homeowners could even pay less than the full monthly interest, adding that amount to the loan balance.

But you’ve got to pay sometime, and for lots of people, “sometime” is approaching fast.

“Borrowers have a new understanding of some of the pitfalls of these exotic instruments,” Wachter said.
…
Alex Grinewicz, chief lending officer for Columbia Bank in Fair Lawn, expects the refinance rush to pick up even more next year. “That’s when a lot of adjustables are coming due,” he said.

He said homeowners should consider refinancing now because interest rates are still at relatively low rates, and banks are aggressively courting business.

But lenders are undeniably more conservative than they were a few years ago. The mortgage industry has tightened loose lending standards, under pressure from regulators. They’re also reacting to the fact that many subprime borrowers are having trouble making their monthly payments.

Some who were subprime borrowers a few years ago may be able to move into the regular mortgage market, if they have improved their credit scores in the meantime, said Keith Gumbinger, vice president of HSH Associates, a Pompton Plains company that tracks the market. Those borrowers can now refinance to a loan with an interest rate below 7 percent, he said.

But others will not be so lucky. And it’s not as if they can solve their problems by simply selling. The housing market has softened, and sellers who bought in the last couple of years may get less than they paid. Buyers are hanging back, hoping to get a better deal if house prices fall further, said Alex Giassa, a mortgage consultant with First Interstate Financial in Paramus.

“The buyers are very tentative,” Giassa said.

Homeowners in such a bind are advised to call their lenders as soon as they realize they’re going to have problems paying. They may be able to work out payment plans that give them a break.

“You don’t want to wait till you haven’t made payments for several months,” Gumbinger said. “That makes it that much more adversarial.”

Posted in New Jersey Real Estate, Risky Lending | 5 Comments

South Jersey housing slump continues

Posted on July 21, 2007 by grim

From the AP via ABC:

Phila. area home sales fall, housing remains in slump

A report from a real estate brokerage says home sales in the Philadelphia area fell by nine-point-five percent in the first half of the year.

The southern New Jersey suburbs showed the biggest decline, down 13 percent. Northern Delaware is down 11-point-seven percent.

Southeastern Pennsylvania fell by seven-point-five percent. That’s according to all multiple listing service data of existing single-family homes and condominiums compiled by Prudential Fox and Roach in Devon.

Homes in the region also stayed on the market an average of 66 days. That’s up from 52 during the same period last year.

Posted in Housing Bubble, New Jersey Real Estate | Comments Off on South Jersey housing slump continues

Too little too late?

Posted on July 20, 2007 by grim

From the Herald News:

N.J. may home in on broker rules

A consortium of 26 states took steps earlier this week to protect future homeowners from getting saddled with the risky mortgages that have left thousands of New Jersey residents on the brink of losing their properties.

But some housing experts say the guidelines provide too little, too late. That, and New Jersey wasn’t among the states who initially signed on.
…
State banking authorities say it’s just a matter of time before New Jersey signs on. Regardless, housing advocates argue that no single set of recommendations can erase the damage done by loose lending standards to homeowners, pension holders and the economy.

On Tuesday, a group of banking regulators agreed to extend new guidelines for federal mortgage brokers to ones charted on the state level — where many experts say the riskiest loans come from.

The guidelines would require brokers ensure that borrowers can afford a loan at its maximum monthly rate, not just an artificially low “teaser” amount. Brokers would also face new restrictions in issuing loans without income verification, which became a commonly abused practice in recent years.

“Hopefully, this will get more of the unscrupulous players out of the industry,” said John Allison, a member of the Conference of State Bank Supervisors from Mississippi.

Unscrupulous brokers have already done extensive damage. On Wednesday, Federal Reserve Board Chairman Ben Bernanke devoted half of his assessment of the American economy to the negative impact of the mortgage and housing markets.
…
Homeowners struggling to hang on are in the eye of the storm. New Jersey ranked ninth in the nation for the number of loans in jeopardy of default in May, according to Bargain Network, a company that tracks the industry. In the past three months, more than 12,000 loans went into default in New Jersey, a 25 percent increase from the beginning of this year.

Not all loan defaults turn into foreclosures. But those have been on the rise as well.

In Passaic County, foreclosures are projected to rise by 22 percent this year, an analysis of county Sheriff’s Department statistics shows.

Tighter standards for who can receive a loan would have prevented much of the hardship, according to Melissa Totaro, a West Orange lawyer who previously worked for the Passaic County Legal Aid Society.

“It’s just a matter of common sense,” Totaro said. “Any guidelines are better than just trusting the market.”

Last year, risky loans like these constituted 20 percent of the mortgage market. Most went to low-income borrowers, people with bad credit or those who had personal debt to refinance.

Jacqueline McCormack, spokeswoman for the New York State Banking Department, said that signing onto the guidelines was a no-brainer because they mirror federal ones. “This needs immediate attention,” McCormack said.

But New Jersey regulators opted to ruminate longer on the standards. “We wanted to make sure we understand them before we sign on,” said Marshall McKnight, a spokesman for the state Division of Banking and Insurance.

McKnight said he couldn’t estimate exactly when the state would make a decision, but it should be soon.

The guidelines will give regulators more ammunition to crack down on mortgage brokers that bilk homeowners into a loan they can’t afford. But they don’t outlaw the practice cold.

“One would hope (the guidelines) will be followed. But they don’t have teeth,” said Henry Wolfe of Legal Services of New Jersey.

Totaro, the lawyer, said that any measure helps.

“It’s too late for people who are in foreclosure,” she said. “It’s not too late to stop this craziness and help people in the future.”

Posted in New Jersey Real Estate, Risky Lending | 15 Comments

Newark “land grab” halted

Posted on July 20, 2007 by grim

From the New York Times:

Judge Stops Newark Redevelopment Project

A New Jersey judge effectively killed an ambitious downtown redevelopment project in Newark yesterday, ruling that the city’s decision to condemn 14 acres of property on behalf of a private developer was ill-conceived and wrong. The project, the Mulberry Street Redevelopment Project, a proposed collection of 2,000 market-rate apartments and stores in the shadow of the city’s new hockey arena, would have been the largest development initiative here in decades.

In her decision, Judge Marie P. Simonelli of Superior Court said the administration of Mayor Sharpe James misused the state’s rules on condemnation when it declared 62 parcels “an area in need of redevelopment.” She said the row houses, mechanics’ shops and parking lots, while somewhat tattered, were not “blighted” and suggested that the decision to condemn the property was politically motivated.

In her decision, Judge Simonelli mentioned the close links between the developers and the James administration, adding that large contributions had been made to the former mayor and the Municipal Council, whose approval was needed for the area’s condemnation.

The decision comes after a landmark State Supreme Court ruling last month that restricted the ability of towns and cities to use eminent domain as a way to seize property they deem could be put to better use. “It clearly shows that the teaching of the Supreme Court is having an effect,” said Ronald Chen, the New Jersey public advocate. “If they want to declare land blighted, municipalities are just going to have to work a little bit harder to make their case.”

In her decision, Judge Simonelli cited documents from 2002 in which the developers essentially dictated the terms and scope of the project, including tax incentives. She observed that there was evidence that the project was “a done deal, a fait accompli, before the required statutory redevelopment process began.”

John H. Buonocore, a lawyer for the residents and business owners facing eviction, said he was pleased with the judge’s decision, which contradicted the city’s contention that the neighborhood was beyond repair. “The court, to the contrary, found that the Mulberry Street area is structurally sound, fully occupied, tax generating and well-maintained,” he said. “We’re delighted that the court saw through this prearranged land grab on behalf of politically favored developers.”

Posted in New Development, New Jersey Real Estate | 15 Comments

“It’s a very, very serious issue.”

Posted on July 19, 2007 by grim

From Bloomberg:

Syron, Chanos, Faber Say More Losses Coming in Subprime Bonds

The worst is yet to come for mortgage bonds as more holders are forced to sell the securities in a falling market, Freddie Mac Chief Executive Officer Richard Syron and investors James Chanos and Marc Faber said.

“Unfortunately I don’t think we have hit bottom,” Syron, whose company is the second-largest source of money for home loans behind Fannie Mae, said in an interview yesterday from McLean, Virginia. “Things are going to get worse.”

The extent of the declines in bonds backed by home loans to borrowers with limited or poor credit histories is being masked by investors’ reluctance to buy or sell the securities, said Chanos, president of New York-based Kynikos Associates. When Bear Stearns Cos. was forced to bail out two hedge funds in the past month after bad bets on subprime mortgage bonds, “the banks went out of their way so they didn’t have to liquidate” the bonds and establish a price, and instead refinanced them, Chanos said.

Moody’s Investors Service cut credit ratings on $5 billion of subprime mortgage bonds in the past two weeks, while Standard & Poor’s cut $6.4 billion. Fitch analyst Robert Curran said July 12 the decline in housing prices is “as intense, if not more severe” than it was earlier this year.

“The issue here is passing the hot potato,” Chanos said. “No one wants to give these pieces of paper up for cash because that is an actual transaction that people could point to as opposed to a refinancing or trying to finesse your way out.”

Defaults by subprime borrowers are at the highest in a decade, dragging down the value of homes and bonds. Those declines have helped increase borrowing costs and have become a “drag on the economy,” Syron said.
…
Moody’s, Standard & Poor’s and Fitch Ratings all warned in the past two weeks that the housing slump is broadening.

“There’s a lot more to come,” Chanos, who oversees $4 billion and specializes in short sales, said in New York. “What we’re seeing already is a spreading of the contagion.”
…
Freddie Mac’s Syron said he was concerned enough to talk to Federal Reserve Chairman Ben Bernanke about declines in the subprime market.

“Ben is a friend of mine and I have talked to him about this,” Syron said. “It’s a very, very serious issue.”

Posted in Economics, National Real Estate | 371 Comments