- Foreclosure prevention plan under attack

Lenders trying to derail legislation that would allow bankruptcy judges to reduce mortgage balances for home owners.
By Les Christie
Friday, February 29, 2008

NEW YORK - Two bills before Congress would give bankruptcy court judges the authority to reduce mortgage debt, which could save thousands of borrowers from foreclosure.

- White house to vito Foreclosure bill

$4 billion housing bill is too expensive for the administration and would 'slow the recovery of the housing sector.'

- Mortgage Rates Could Soar

Mortgage Rates Could Soar, Predicts Economist
by Blanche Evans
Sunday, February 17, 2008

There are few real estate economists more respected than Mark Dotzour, chief economist of the Real Estate Center at Texas A & M University. He says the time to refinance is now, and that there may not be a better time for years to come.

- Truth About Home Prices

Seller Incentives Skewing Numbers
Sunday, February 17, 2008

It's common and perfectly legal — homeowners give buyers cash back at closing to cover expenses such as closing costs, mortgage payments, taxes or even home improvements.

Take, for example, a recent home sale on Rosemont Avenue in Bristol. Agent Charlie Kaylor said the three-bedroom, ranch-style house sold for $193,000, but the sellers gave the buyer $5,000 at closing. The price was recorded as $193,000 — that is what the buyer paid — although the true sales price after the cash giveback was really $188,000.

Such givebacks, along with throw-ins such as sellers paying for new roofs and driveways, are a sign that it's a buyer's marketBut they're also artificially propping up home sales prices, which helps explain an economic oddity that Connecticut is seeing these days: The median price of homes keeps rising in the midst of a housing slowdown, as the number of homes sold each month keeps dropping and the number of homes for sale is creeping up.

The artificial prop-up means that the downturn in Connecticut's real estate market, and that of the rest of the nation, is deeper than it appears.

"It's a big deal because prices are, in fact, falling; we know they are falling, but that is not reflected in the numbers we see," said Ron Van Winkle, a West Hartford economist and town official.

It's impossible to tell how much seller incentives and givebacks affect those numbers. But cash givebacks of even $2,000 to $5,000, if they are typical across the board, could skew the overall sales price data by 1 to 3 percent.

That small margin means Connecticut's median sales prices actually are flat or falling — not rising, as the data have shown.

A recent report from the Greater Hartford Association of Realtors said sales of single-family homes in the region dropped 34 percent, from 831 in December 2006 to 550 in December 2007. At the same time, the median sales price of single-family houses increased 2 percent, from $250,000 to $254,000.

Another factor that can skew the data is simply that more expensive homes are selling. For example, if Fairfield County records a gain in the number of $1 million-plus houses on the market, the whole state median rises.

But cash givebacks, upgrades and improvements are, by many accounts, growing as a factor in bending the data. Late last year, a newly constructed home sold in Granby for $550,000, but the buyers received $25,000 in upgrades they wouldn't have gotten in a better market two years ago, including granite counters, upgraded appliances and hardwood flooring.

When the home sale was completed, the final sales price recorded was $550,000. But the $25,000 in upgrades given to the buyers wasn't recorded. In reality, the sales price of the house was $525,000.

"Instead of knocking down the price, they got the house they really wanted with the upgrades," said Kaylor, the agent RE/MAX Advantage in Avon, who represented the buyers on the deal.

Almost unheard of a decade ago, cash givebacks have become common — one Middletown agent estimated that half of all his home sales have some sort of seller incentive that doesn't show up in the final sales price — especially in a slowing market where homeowners are more willing to negotiate in order to sell their homes.

The advantage to buyers is that they can take out a slightly larger mortgage, based on the recorded sale price, leaving them with more money in hand. Givebacks are especially attractive to buyers who are scraping together enough money for a down payment, closing and moving costs, and for renovations or upgrades to their new homes.

And sellers like givebacks because they help lure in a buyer without dramatically reducing asking prices.

"There's no question that if sellers are giving something, even if that doesn't show up in the final sales price, it is still from the buyer's perspective a price reduction," said Lawrence White, an economics professor at the Stern School of Business at New York University. "But in terms of what is going to get reported in the sales price data, that isn't going to show up. Which means the sales prices are softer than the data are telling us."

The seller incentives have become so common that the multiple listing service, where real estate agents list and track home sales data, now has an entry line for seller concessions. For instance, in the last four months of 2007, 35 of the 191 homes that sold in West Hartford had seller concessions. (Agents, though, said that number is probably higher because there is no requirement that incentives and concessions be listed).

"It's very common, especially among first-time home buyers and any buyer who doesn't have a lot of cash in hand," said Tom Abbate, an agent with William Raveis Real Estate. "Buyers like to walk away from a closing and still have cash in their pocket."

The givebacks are legal, as long as they are disclosed to lenders. They become sticky if the sales price of the home, with givebacks, exceeds the true value of the home as determined by an appraiser.

- Timing the housing market

You want to buy a home but are scared to take the plunge in a crumbling market. Here's how to think it through.
Tuesday, February 19, 2008

Question: At some point I plan to buy a house in the $250,000 to $400,000 range. I have generally good credit and plan to make a down payment of 20 percent or more. But given the instability in the housing sector and generally tightening credit landscape, I'm wondering whether I should buy now or wait several months, maybe even a year, to see where the market settles. What do you think? - Daniel Akers

Answer: I don't recommend trying to time the housing market any more than I would timing the stock market. So if your aim by holding off is to try to get the best deal by buying just as prices have hit their low, I think that's unrealistic. After all, even assuming you can figure out the ideal time to buy - that is, when prices have hit not only hit a trough but are on the verge of rebounding - by the time you find the house you want, line up the financing and close the deal, the "best" time may have already passed. That said, given current state of the housing market, you certainly don't need to be in a rush. As my Money Magazine colleague Amanda Gengler pointed out in our December cover story on the outlook for 2008, house prices are already down more than 4 percent from a year ago. And given the huge inventory of homes already for sale plus the ones likely to come into the market as more homeowners default on their mortgages and go into foreclosure, prices are forecast to tumble another 6 percent or so in 2008.

Perhaps the Bush administration's subprime plan or some other proposal to help borrowers facing foreclosure may be able to limit the damage somewhat. But I don't think anyone believes prices will rebound in a significant way until 2009 at the earliest. So how do you factor all this information into your plans for buying a house? I recommend that you start looking around in different areas where you may be interested in living to get a sense of what the market is like and where it may be headed.

The forecast I referred to above is the broad-brush picture. But the national housing market is really a collection of many local markets, and the prospects can vary considerably from one locale to the next, depending on such factors as how hot the market got, the local employment picture and the volume of inventory and potential foreclosures. You can check out prices online and take the pulse of the market in different cities and neighborhoods by going to Superior Home Living.com as well as other sites that are featured in the "Know Your Home's Future" section of Money's January cover story, "The Best Money Web Sites."

But you'll also want to take time to do plenty of real-world legwork. Drive around different neighborhoods to see how many "for sale" signs you see and then talk to agents at several real estate offices to get an idea of how long homes are sitting on the market before they sell, how much below asking price they're going for and what kinds of concessions sellers are offering.
While you're at it, you should also contact a few mortgage lenders to see what size of loan you can likely qualify for given your income, expenses, assets and liabilities, credit rating and the size of the down payment you plan on making.

Part of the fallout of the subprime debacle is that lenders are now more stringent about the documentation they require before making a loan. You'll want to be sure you'll have access to documents like recent pay stubs, tax returns and savings and investment account statements so you'll be all set to apply for a loan when you're ready to buy. As I said before, you shouldn't feel under any pressure to make an immediate move. But when you eventually do see some houses you really like and feel you're ready to join the ranks of owners, you want to make the most of what is now most certainly a buyer's market. Find out what comparable houses have sold for recently and then consider starting your bidding at 10 percent to 15 percent below that price. Don't be surprised if the owner doesn't fall at your feet and thankfully accept your offer.

Even in a down market, many owners have inflated notions of the value of their home and will stubbornly stick to an unrealistic price. So if you want to pick up a real bargain, you've got to be ready to walk away and go on to another listing. Generally, you'll have the most leverage when the owner is under some pressure to sell - a looming foreclosure, a job relocation, a commitment to purchase another house, an investor looking to escape burdensome carrying costs, etc. On the other hand, you don't want to overplay the haggling game and end up losing out on a
great house for the sake of a few thousand bucks. For more advice on how to get the best deal, I suggest you check out the "Your Home" section of Money's 2008 outlook story. (This story also has tips on how sellers and owners can best cope in today's market.) And if you're considering buying a new home, you should also check out my colleague George Mannes's story in Money's January issue, "Boy, Have They Got Freebies for You," which explains how to evaluate the
discounts, upgrades and other incentives homebuilders are tossing around to entice you to buy a newly built home. This kind of opportunity doesn't come around very often in the housing market. So take your time, do your research and make the most of it.

- Five Banks Launch Mortgage Relief Initiative for New England

Tuesday, February 19, 2008

Every day we hear more and more about families facing rising mortgage costs and the very real possibility of losing their homes. To help prevent that from happening, five banks in New England have partnered together - with the encouragement of the Federal Reserve Bank of Boston - to provide assistance to homeowners before the threat of foreclosure becomes a reality.

Five banks are working together to reach out to some of the New England Homeowners who have been affected, or may soon be affected, by the recent mortgage crisis. The banks’ initiative, called the Mortgage Relief Fund, should make it easier for some homeowners who are paying high rates, and those who face a reset of an adjustable-rate loan, to refinance into a more affordable mortgage, avoiding delinquency and ultimately foreclosure.

The banks, Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America are stepping forward to play a positive role in the challenging situation facing many New England homeowners. The banks have together committed an initial $125 million for mortgage loans.

Introducing the Mortgage Relief Fund
Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America have committed $125 million in funds to create the Mortgage Relief Fund. Our goal is to help eligible homeowners in New England refinance into more conventional fixed-rate loans that will better meet their needs.

Who is this Fund for?
This Fund is aimed at helping homeowners who are in good standing with their current mortgage loan(s), but who may be experiencing difficulty making payments now and who expect to have greater difficulty making payments when their rates reset.

Part of the Solution, not the Problem
As corporate citizens that care about the communities where our customers live and work, Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America think it’s important to offer this Mortgage Relief Fund to homeowners during these difficult times.

This particular program is not designed for borrowers who are delinquent on their mortgage payments or facing imminent foreclosure. Borrowers in that difficult situation should contact the servicer of their mortgage as soon as possible, or a mortgage-counseling service such as Homeownership Preservation Foundation at 888.995.HOPE. To learn more, contact one of the banks below.

- Home Permits In The Basement

The Good News: Cutbacks By Builders Mean Less Inventory Is Left Over
By ROBIN STANSBURY
Tuesday, February 19, 2008

Permits for new housing construction plummeted throughout most of Connecticut in 2007, marking the fewest permits issued in more than a decade, according to a state report released Monday.
But some experts said the drop contains some good news: Builders apparently cut back their construction plans as the housing market slowed, meaning the inventory of unsold houses is lower in Connecticut than it might be.
There were 6,619 housing permits issued in 128 Connecticut towns last year, a 17 percent drop compared to the almost 8,000 permits issued in 2006, according to the report from the state Department of Economic and Community Development.
The permits are issued for all new residential home construction, including single-family houses, apartments and condominiums.
The number of permits issued has not been lower for the 128-town region surveyed by the U.S. Census since 1996, when 6,582 were issued. The number of permits issued for all 169 Connecticut towns is not expected until May.
"With the credit crunch, the economy on the way to recession, soaring energy prices — all of this combined following a boom of several years resulted in this correction," said Kolie Sun, a senior research analyst for the state. "It's a very low number and not a good sign about the overall housing market."
Some housing experts said the drop in the number of houses being built — permits issued are down 35 percent since 2005, when more than 10,000 permits were issued — could indicate an impending housing recovery. It usually takes about nine months from the time a permit is issued until a house is built.
"The good news is builders cut back early. They saw the slowdown and wisely cut themselves back," said Ron Van Winkle, a West Hartford economist. "It's a good sign for the market because it says there isn't going to be a lot of inventory to sell off — certainly not as many homes on the market as there could be."
Permits varied widely by town. In Manchester, 326 permits were issued in 2007, an increase of 63 percent compared to 2006.
In Farmington, there were only 53 permits last year, a decrease of 48 percent. Stamford permits jumped by 87 percent, from 273 in 2006 to 512 last year.
In Hartford, permits dropped 62 percent, from 312 to 116.
Bill Ferrigno, president of the Home Builders Association of Connecticut, said that builders are simply responding to the market.
"We are building at a rate that is sustainable for the economy we're in," he said. "In the old days it was build, build, build. Now a lot of us are responding as we should."
Those "old days" were the boom years of the 1980s, when Connecticut's housing market was soaring and prices increased statewide by 25 percent two years in a row. Then, more than 20,000 permits for new construction were issued in one year, many built on speculation without a buyer lined up.
Following the crash in the early 1990s, new home construction came to a virtual halt. In Bridgeport, for example, only one residential building permit was issued in the first three months of 1991. In 1986, 633 had been issued.
"Builders are far more cautious. Even if you pull a building permit builders are cautious about starting construction," Greg Ugalde, president of Torrington-based T&M Building Co., said Monday.
Ugalde said his company has six subdivisions under construction, in Bloomfield, Ellington, Colchester, East Granby, Windsor Locks and Torrington, but plans to build between 15 percent and 20 percent fewer homes in 2008 than last year.
"We're still signing contracts, but not at the pace of those record years in 2004 or 2005," he said. "We are better off than most parts of the country, without a doubt, but we are influenced by that."
Ferrigno, however, who owns Sunlight Construction in Avon, said he plans to build more this year. He has two projects under construction, a modestly priced active-adult community in East Hartford and a 14-unit luxury development in Avon with homes priced between $1.5 million and $2 million. He even plans to build two spec houses there before he has buyers.
"I think there's pent-up demand," Ferrigno said. "In the past two months we've talked to more people than in the last four months before that. Are they more cautious? Yes. They are seeking more options. But we're planning on 25 percent more

- Sellers Sweeten The Deal

Tuesday, February 19, 2008

Real estate flipper Val Tatasciore last year offered a classic blue Mercedes two-seater sports car as an incentive to anyone who paid full price for his Madison beach house, then on the market for $1.44 million. But the Mercedes, valued at $26,000, failed to entice a buyer, so Tatasciore withdrew the offer.

His real estate agent, Lili Mastronardi of H. Pearce Real Estate, said Tatasciore has been paying the mortgage on this investment property while the house stays on the market and can no longer afford to sweeten the deal with the Mercedes. It is in the garage and also for sale — separately from the house.

Home sellers are using incentives like cash bonuses to the buyer's agency and gifts of personal property to the seller at closing, such as a pool table, dining room set or entertainment unit. But sellers aren't as desperate as the public may think, agents say. While incentives may bring more lookers to a home, ultimately it's all about the price, and many sellers are holding firm.

"I'm seeing more credits [than in previous years], like a $2,500 credit for decorating or a carpet allowance," said Marie Mansolillo, an agent with William Raveis in West Hartford. But, she added, "I haven't seen boats or cars or vacations."

Offering cash bonuses to agents has become increasingly popular, and amounts from $1,000 to $10,000 aren't uncommon. The seller of a $1.2 million home in West Hartford offered $7,500 to the agent who could bring a buyer in the door by the end of 2007, said Kara Flanagan, an agent for Coldwell Banker in West Hartford. When the bonus was advertised to agents, Flanagan noticed that traffic at the house did pick up. But the house is still on the market, and the bonus went unclaimed.

Flanagan said she had heard of a Windsor couple who successfully sold their home, offering two free plane tickets. They believe the incentive helped.

Some agents take a dim view of incentives; others think they can help, but only a bit.

"Offering plane tickets to buy a $500,000 house cheapens the transaction," said Evan Berman of ERABroder Group in West Hartford. He also said a cash incentive offered to him would not motivate him to sell a house.

"I am looking out for my client's best interest, and I'm in the business of building long-term relationships," Berman said. "A large percentage of my business comes from referrals."

Real estate agent Joe Kelly said one of his clients owns a car dealership and is thinking about offering a free three-year lease on a car to the person who buys his home.

The come-on might help create additional visibility, said Kelly, of Page Taft Real Estate in Essex, "but I don't think anyone is going to buy the place because of it."

Kelly has been experimenting with "value range pricing": Instead of offering one set price, the seller offers a low and a high price, indicating a willingness to negotiate. One of Kelly's listings is an unusual 1850 federal colonial on the Connecticut River in East Haddam, with a swimming pool and a deep-water dock. It has been on the market for more than a year, so the client decided to list it from $999,000 to $1.125 million.

"We're trying to create more activity, and to turn casual buyers into serious buyers," Kelly said. "If we just listed it at the $1.125 million, we wouldn't get as many people to look. It's a marketing strategy. The property owner is not required to take the low offer."

Buying down the mortgage is another incentive that can appeal to a home buyer. Mortgage broker Scott Beckwith of East Shore Mortgage Co. in Madison said a seller can offer the buyer a discounted rate through the mortgage company. If the buyer's mortgage would be $250,000 at 6 percent and the seller agreed to pay 2 points, that would effectively lower the mortgage rate to 5.5 percent. The monthly payment would drop nearly $80 a month, for a savings of more than $28,000 over the life of the 30-year mortgage.

This option isn't pushed by many real estate agents, because they don't know how to present it, said Karen Stephens, owner of Page Taft Real Estate in Guilford.

"If interest rates rise in 2008, you will see it more, because it can get a buyer into a house that they would otherwise not be able to afford," Stephens said. "It's all about the monthly payment. If the buyer can save $100 or $200 on the monthly payment, it may be enough."

Although mortgage rates are favorable, homes are staying on the market longer than last year, Mansolillo said. Many sellers believe their home should sell for the same price their neighbor's sold for a year ago, but the market has changed.

"If houses are priced correctly, they will get moving," Mansolillo said. "If the house is in good condition and just needs decorating, buyers are willing to jump, but you don't see the frenzy of multiple offers that you would have seen in years past. Houses are not flying off the shelf; you have to be realistic."

- Bush, House pen rebate blueprint

ANDREW TAYLOR and JULIE HIRSCHFELD DAVIS Associated Press Printable Version
Tuesday, February 19, 2008

WASHINGTON — If you get a pay envelope, Uncle Sam's about to put a little something extra in it. And he wants you to go out and spend, spend, spend.
Starting around May, most taxpayers can expect a $600-$1,200 rebate from the federal government under a deal announced Thursday by congressional leaders and President Bush.

The deal came together with unprecedented speed as Congress and the White House moved to begin rushing the tax rebates to most tax filers by spring, hoping they will spend the money just as quickly and jolt the ailing economy to life. Rebates would be even higher for families with children.

The one-time tax rebates are at the center of a hard-won agreement to pump about $150 billion into the economy this year and perhaps stave off the first recession since 2001. House Speaker Nancy Pelosi, Republican leader John Boehner and Treasury Secretary Henry Paulson worked out the details in negotiations that stretched into Wednesday night at the Capitol.

Approval by the Senate is needed, too, but pressure is strong for quick action by all concerned.

About two-thirds of the tax relief would go out in rebate checks to 117 million families beginning in May. Businesses would get $50 billion in incentives to invest in new plants and equipment.

Individual taxpayers would get up to $600 in rebates, working couples $1,200 and those with children an additional $300 per child under the agreement. In a key concession to Democrats, 35 million families who make at least $3,000 but don't pay taxes would get $300 rebates.

- CT Housing market becoming numbers game

PAM DAWKINS
Tuesday, February 19, 2008

Connecticut homes kept their value in 2007. Prices dropped for many Connecticut homes in 2007. Prices were stable, except for pockets of the market. It took longer to sell a home in 2007. Some homes flew off the market. Sales are languishing.

Pick whichever statement strikes a chord with you, because they're all part of the picture that is the Connecticut housing market these days. It's impossible to sum up the state of housing here with one sentence, or even one story. Calling them local is too broad a term for housing markets, especially in a financially diverse state like Connecticut, where the market conditions can differ from street to street.

Relying on numbers to tell the story is also problematic. The mix of multimillion-dollar estates, suburban McMansions, mid-century developments and urban wastelands — sometimes all located in the same city — can skew results.

"The contrast between Greenwich and Union it's like a different solar system," said Jeffrey Blodgett, vice president of research at the Connecticut Economic Resource Center.
This contrast is especially apparent between the "panhandle" region of lower Fairfield County and the rest of the state, Blodgett said. In the eastern part of the state, meanwhile, housing is generally more affordable, in part because "the population is a little less likely to migrate out."

"They're a terrible predictor [of future activity]," Vincent Valvo, group publisher at The Warren Group, said of past sales data. Its products include The Commercial Record; the company tracks real estate sales and other data in New England. Connecticut's housing sales have remained pretty stable, but the number of sales is off in some places, said Valvo. A look through The Warren Group's data of median sales in 31 cities and towns in southwestern and western Connecticut shows an area of contrasts.

The median price — the middle value in the series — for a single-family home between 2000 and 2007 peaked in Bridgeport in 2005 at $253,000. It fell to $245,000 in 2006 and to $235,000 in 2007. (The company's data for 2007 is only through October.)

Prices in Danbury also peaked in 2005, at $369,000, before falling to $365,000 in 2006 and $346,750 through October 2007.

Down county, prices in Norwalk and Stamford peaked in 2006, at $545,000 and $693,250, respectively. By October 2007, they measured $525,000 and $680,000, respectively.

But prices in Brookfield, Darien, Derby, Easton, Fairfield, Greenwich, Milford, New Canaan, Oxford, Redding and Westport haven't dropped yet — at least not through October 2007.

And even in cities and towns in which prices are off the peaks, the median is still generally higher than 2004 levels. A lack of sales at the lower end of the spectrum can drive up the median, even if fewer houses are selling, Valvo said. Homes sold in Bridgeport reached a peak of 1,627 in 2004; as of October 2007, only 498 sales were recorded. Danbury sales peaked in 2000 at 965, see-sawed through 2005, when they hit 788, then dropped to 584 in 2006. So far in 2007, 380 homes have sold. Norwalk hit a peak of 1,076 in 2005 and Stamford, 1,137 in 2004.

The non-urban areas varied widely in the measured period. Fairfield, for instance, hit a peak of 1,121 sales in 2004 but fell to 795 in 2006. "You have to look at both the numbers and the geography," and analyze the data, Valvo said.

A different time

The last time Connecticut's housing market was hit hard by a downturn was between 1989 and 1993. Then, Blodgett said, the more affluent towns suffered less than places like Bristol, Meriden and Torrington. There, home values fell by 20 to 30 percent.
The reason for the disparity, he said, is people in more affluent towns are probably less dependent on cyclical industries. "[It's] the same reason Cadillacs sell in a recession and Chevrolets don't," he said.

The 1989-1993 downturn followed a particularly overextended time for the state's housing market.
At the peak in 1988 and 1989, the state issued 28,000 housing permits, Blodgett said, which was three times the normal number. That unsold inventory took time to clear out.

Today, the state issues about 10,000 permits a year, he said. Nationally, the housing market started heating up in the late 1990s and early 2000, thanks in part to the high-tech boom, Valvo said. While Blodgett sets the start of growth in the housing market at 2000 and 2001, Realtor Bob Stone of William Pitt Sotheby's in Fairfield remembers the market heating up around here in the mid-to-late 1990s. "The prices really went crazy I would say 2004, 2005 and 2006," Stone said.

A lot of people — and not just retirees — cashed out, he said, and moved south. There's still plenty of money to be made, especially for people who have owned their houses for more than a couple of years. "The prices now are basically 2004 prices," Stone said. But, "the time on market has definitely increased."

Connecticut today doesn't have the overhang of inventory that hit the market in the early 1990s, said Blodgett and Todd Martin, of Todd P. Martin Economic Services in Fairfield. One difference between Connecticut of the late 1980s/early 1990s and today is banks are more stable and cautious, Blodgett said. Also, he thinks the condominium market is in balance, so there isn't the oversupply of the last downturn. All this means Connecticut is seeing a "diluted" version of what's happening nationally.
"We haven't been on a building boom," agreed Valvo. But, Martin said, there is still an increased supply of homes matched with declining demand.

"There's so many different dynamics going on and working against the housing market now," he said. For example, people who either had subprime loans or the creative financing that let them buy homes without a downpayment might now not be able to afford the payments. And because home values have sunk a bit, they might owe more than the house is worth. It's now harder for first-time buyers to get financing, which could have a "trickle up" effect — a lack of buyers for entry-level homes means owners who want to buy a bigger house can't, and so on up the line.

But if those people can take a lower price on their house — for example, if they've been in it a few years and have some equity — and have saved some cash for a bigger downpayment, they'll be in a decent position, Valvo said. This because there won't be as much competition for the middle-level homes.
Valvo cautions against believing everything that is said about the state of the housing market.
"Some of it is real," he said of the downturn. However, "some is a massive perception [of a] market in freefall."

To Martin, the silver lining is sinking values might create more affordable housing.
And Connecticut never saw the exorbitant price increases of Nevada, California and Florida. There, speculators dove in, buying up properties in hopes of flipping them and making a quick buck.
"We didn't have that going on here," Martin said. But around here, some bought duplexes and triplexes in hopes of flipping, Valvo said. "In particular, the people who were investing in the small multifamilies are getting burned."

There's also the possibility homebuyers will believe the bargains should be better than they are, Valvo said. Buyers putting off purchases could drive prices down, he said. But as soon as consumers get a whiff that the tide might be turning, he said, they'll start buying.
Connecticut is better situated than other New England states. There was a lot of building in Massachusetts, for example, which also had a heavy biotech presence. The slowing in that industry, Valvo said, is exacerbating the housing downturn there. Looking ahead Martin expects the housing market here will remain under pressure through 2008 and into 2009. "These housing cycles take a while." Blodgett expects prices will bottom out in 2008 and not start appreciating until 2009.

Valvo said the true state of the market won't make itself known until late February or early March, because December and January are generally "dead periods" for real estate.

The biggest worry until then is consumers will cut back on spending. Consumer spending has been the economy's main prop during the last few years, especially when business spending petered out earlier this century, Martin said. But those consumers now might not have any equity left in their homes, due to somewhat lower values and earlier use of equity to remodel or add on. Not only might there not be any source of funds for new, big purchases, but many people are struggling with higher fuel and heating bills.

Doing the math, Martin said, means, "Discretionary income for consumer spending has to decrease."

- The Current Credit Reporting System

Interview: Evan Hendricks
By Leslie McFadden
Tuesday, February 19, 2008

Addressing problems with the current credit reporting system and ways in which consumers misunderstand it, privacy expert and author of "Credit Scores & Credit Reports: How the System Really

Works, What You Can Do"

Evan Hendricks explores the deep end of the credit-scoring pool.
While busting several misunderstandings consumers might have about credit scores, he also offers his insight and advice about advanced credit scoring topics, such as mixed consumer credit files,

when to seek the help of an attorney and how the credit card industry uses credit scores to make customers pay more.
Why check your score?

Q. You say in your book, "Credit Scores and Credit Reports," that since there are five industry versions of the classic FICO score, consumers cannot rely on a score they bought online, even if it

really is a FICO score. Why then should consumers bother to check their FICO scores before applying for a major loan?

A. You should check because you can still get a general idea of where your score stands by going online and getting your own score. Getting a general idea sometimes is important because if

you're really high on the score line, then you'll be in good shape and if you're in the middle you know where you stand and then you know you can take certain actions if you were way down on the

score line. It's still worth it to start with a general idea of what it is.
And certainly a point to understand is that when the rubber hits the road and you apply and the creditor pulls your credit report -- there could be some difference between the score you receive from

what the creditor gets.
Are you really getting a FICO score?

Q. Consumers have three FICO scores based on the credit reports from the big three credit bureaus, but two of the big three credit reporting agencies sell credit scores directly to consumers that

are not FICO scores at all. Do you think people realize what they're getting when they purchase these scores?

A. Unfortunately, no, I don't. I've just seen many examples where a consumer's trying to be an educated consumer and get an idea of what their score is and what's offered to them from Experian

and TransUnion are the knockoff scores, or FAKO scores. Those will differ even more greatly than what the creditor will judge them on, in most cases. Partly because the other scores such as the

TransUnion TrueCredit score operate on a different scoring scale. I think TrueCredit goes to either 900 or 950 -- whereas the FICO stops at 850. So the TransUnion score will give the impression

oftentimes that your score is better than it is.
To my knowledge, lenders don't use any of these scores that are sold directly to consumers by Experian or TransUnion. That's why they're called educational scores. But sometimes the education

is very bad.
Preapproved offers & scores

Q. Some people might think there's no need to check their score because the preapproved credit card offers they're getting in the mail offer great rates. Would you discuss why the rates and other

come-ons mentioned in "preapproved" offers may not mean that the consumer has a high credit score?

A. The name of the game in credit cards is to acquire as many customers as you can and then drive them up to as high an interest rate as you think that they will pay. It's called "rate

maximization." The name of the game is rate maximization, because the higher the interest rate that card customers pay, the more the credit card company makes. And so, there's a lot of

ingenuity used in marketing to customers that might be in precarious credit situations with large credit card balances. That's where the whole balance-transfer approach came from. There's a certain

part of the market or the industry that likes catering to people with middle, lower and really-low scores because they see there might be greater profit margins there. That's what drove the whole

subprime credit business for the last several years, which now has the chickens coming home to roost.
But the basis of the philosophy is: These are consumers that either have trouble saying no to credit, or when they get credit, they have trouble managing it responsibly, but if we give credit to them

and they pay the way they're supposed to at our rates, we're going to do very nicely. In some sense, it's kind of like a suckers list. There are car dealers and others that will get lists of consumers

who just went through bankruptcy, and they start marketing to them. It comes it all shapes and sizes.
So, you can't be sure you have a good credit score based on the preapproved credit card offers you receive.

Q. Do you think people realize they are not really preapproved?

A. I don't think people appreciate the fact that preapproved does not mean preapproved. When they send you that so-called preapproved offer, they always have a right to run one last check. And

worse, there's what they call a "counter-offer loophole." In that preapproved offer, if you respond and say "yeah, I want this card at this attractive rate," they can send you a card that has a higher

interest rate and only tell you about it in the fine print. Then, if you accept that card and activate it, you've accepted the counter offer. Most normal people really wouldn't be expecting to find in the

fine print that oh no, I didn't get the 6.9 percent they offered me, I got a 13.9. It's a very tricky business.
“Pre-approved does not mean pre-approved.”
I just think that while credit cards are this wonderful, convenient thing that allows us to go out and buy stuff -- even if we might not have the cash in pocket -- a smart consumer would have a very low

trust level for credit card companies. Credit card companies basically do best the higher the interest rates they can charge and when they have several reasons to charge higher interest rates. You

just can't be very trusting when it comes to credit cards.
The problem of mixed files

Q. In your book, you talk about the problem of mixed files. Could you briefly discuss what they are and how they can wreak havoc on consumer credit reports and scores?

A. A mixed file is when someone else's information comes on to your credit report. It can wreak havoc because if you have good credit and the other person whose information is coming onto your

credit report has bad credit, those bad accounts -- or tradelines as they're called in the industry -- are going to lower your credit score.
And, if you try and dispute this and correct it, it doesn't always work, mainly because the system is so automated. Sometimes the dispute process works, but it's so automated that sometimes the

computers look at your dispute and wrongly verify the information without doing a really good investigation. You get a letter back saying the credit agency verified this information, when in fact it

verified false information. And that wreaks havoc on people because then they have to dispute again. And then finally, even if the dispute does work, it could come back on your report. There have

been cases where because of the way information is routinely reported every month by the big creditors to the credit bureaus, the word doesn't really get back to the creditor who's doing the original

reporting and so, they don't take the bad information out of their computer systems that do the reporting every month and so in another month or two, it can be back on and you won't know about it.
The only way you'd know about it is by getting another copy of your report and finding out that "oh gosh, it's back on again."

Q. What causes mixed files to happen?

A. Mixed files happen because of similarities first in Social Security numbers, and then in names. Addresses and geographical locations also will play a role. So, the first thing people have to

understand is the use of what we call a "partial matching algorithm" to decide if you are you, or what information goes into your file that they're going to sell to a creditor. The general rule is if seven

out of the nine digits match, they consider that a partial match, provided that some of the name information will match up as well. So, people who have only one or two digits different in their Social

Security numbers and have enough common letters in their names and live in the same geographic region could be considered to be the same person by the computers, and that causes a mixed

file.

Q. If a consumer's file is mixed with somebody else's, will the consumer be able to see that on his or her credit report?

A. Well, if consumers get their report, they will be able to see that at a minimum, there are accounts on their credit report that they know are not theirs. What often happens is that in a mixed-file

case, the address of the other person will either become your current address or your previous address. And that will be your hint that you're a victim of a mixed file. The same goes for identity theft,

by the way, because the credit bureaus rely on what's reported to them by creditors. And so, if Leslie A. McFadden in Savannah has information coming in from Capital One and you -- I don't know

what your middle name is -- Leslie B. McFadden, you have this two digits' difference in your social, then you're going to start seeing rotisserie addresses -- basically, where whoever reported most

recently becomes the current address. The address can start flip-flopping if you get your credit report every month.
When to call an attorney

Q. When should a person get an attorney?

A. I think that when you've gone though the dispute process, and you've sent in a dispute and you've attached the documentation such as your driver's license, copy of your Social Security card and

any other information showing why the information is wrong, and they still don't fix it after a couple disputes, it's time. Or, if they do fix it and it's back on in a couple of months and you dispute it

again. Once it goes wrong two or three times and you can't get any justice, then I strongly advise seeking an attorney that specializes in these sorts of cases. You find them at the Web site

Naca.net, which stands for National Association of Consumer Advocates.

Student loans & credit reports

Q. A point made in your book is that students and graduates who have student loans should check their credit reports. Why is this necessary if the student or graduate is making payments on

time?

A. They should check firstly for the same reason as anyone else, to make sure that their payments are reported correctly because inaccuracies can creep in anywhere in this huge, automated

system. The second thing is that student loan information will sometimes multiply like rabbits on the credit report because student loans are sold from one company to another and the old company

continues reporting and then the new company continues reporting it and it might make it look like you have more loans than you actually do. Then if they're showing any late payments, you can get

hit with double whammies on late payments as well.

Q. And they can get those duplicate entries removed?

A. Yes. When you dispute, they're supposed to investigate -- or, I guess the statutory term is reinvestigate -- your dispute, and make a decision in 30 days. Either remove it or modify it or tell you

that it's been verified. And so, when the dispute process works the way it's supposed to, it's a good system. It's just I can see the cases where it doesn't work the way it's supposed to

Are credit scores colorblind?

Q. Where do you stand on the issue of whether credit scoring disadvantages minorities?

A. That gets into a wonderfully philosophical debate about where people stand in society. I would agree that in one sense that credit scoring is colorblind because it's based entirely on information in

the credit report. That way I would agree with industry's defense of credit scoring. But on the other hand, different people from different cultures have different ways of looking at their finances. And,

there's been a low trust of the financial system among significant segments of the African-American community, the Hispanic community, the Asian community, just to name a few. And some of

the people who are most suspicious in those communities, and even Caucasians who are suspicious of the way the financial system and consumer finances work, are actually very responsible with

their money. They pay their rent or their loans, they just don't like having a lot of credit cards or they don't like having a lot of loans out. But when something happens in their life and they actually

need to buy a home or help a relative buy a home, then they're going to be at a disadvantage because they don't have a thick enough credit history to produce a good credit score. And so, the

philosophy in my book is that yeah, there are definitely philosophical reasons to question how powerful the system has become. But there's no question it's a powerful system, and that you need to

know about it so you can make the right decisions for yourself and your family

Credit scores & insurance

Q. Should credit scoring be used, in your opinion, in insurance granting and pricing decisions?

A. I think it's problematic that credit scoring is used in many, many ways for car and homeowners insurance. The industry is passionate in saying that the research shows that customers with low

credit scores cause insurance companies more losses. But even there, I'm not sure to what extent that should justify the way that they use credit scoring for setting auto and homeowners

insurance. It seems to me it should be based on standard underwriting criteria. But putting that philosophical debate aside, there's no question that it's a very important factor in setting those rates,

especially for new applicants. And so, I think it's something that people don't understand intuitively but need to know because sometimes the credit score can be just as influential as your driving

record when it comes to your auto insurance rate.

Consumer protection

Q. What, in your opinion, should be done on the federal level to help protect consumers with regards to credit reports and scores?

A. There's very little in the way of enforcement by any of the federal agencies when it comes to credit reporting issues. The Federal Trade Commission is supposed to take enforcement actions

against the credit bureaus. They've done a handful of cases about not answering the telephones, but they haven't gone to the heart of these problems.
And, the law is designed so that you, as a consumer, can only go to court after you've submitted your dispute to the credit bureaus and the credit bureaus have relayed it to the creditor and then the

creditor failed to do a reasonable investigation. Then you go to court.
In the meantime, the whole thing about initial reporting from creditors to the credit bureaus means the creditors are supposed to report accurate information. But individuals can't go to court to

enforce those rights, that's left to the banking agencies -- the OCC, the Federal Reserve and the others, maybe the FDIC -- those agencies have not taken any enforcement actions in 10 years.

That's a glaring hole. When I told you that these companies don't care because they don't feel they have to, one reason is because those federal agencies are not doing their job and taking

enforcement actions to make them care.
Congress has, since the law was enacted in 1970, done a major strengthening of the law for consumers in 1996 and they did another strengthening of the law in 2003, but the credit bureaus and

many creditors on these issues are like naughty children. If you don't keep the boot on their neck, they're just going to continue to have procedures in place that disadvantage consumers. In other

words, you give them wiggle room, they exploit it to disadvantage consumers. So they're going to need to have even more specific standards in place so consumers can get their errors corrected

without having to go to court. The law basically will need to be strengthened again.

- Subprime News + Mortgage Delinquency bad day on wall street

Feb 2008

Lots of chickens came home to roost on Tuesday but they didn't exactly fly in unannounced First the stock market tanked for the second time in two weeks and while the subprime mortgage market got a passing mention the last time around; on Tuesday the blame for the 242.66 drop in the Dow Jones was laid squarely at the feet of the housing market. First the news about the subprime mortgage market got even worse with several major subprime lenders releasing news about their financial condition that could only be described as disquieting. Then Mortgage Bankers Association released delinquency figures for the fourth quarter of 2006 and that sent the market straight over the edge. New Century Financial which had taken heavy hits to its stock price over the last ten days and stopped taking new loan applications last Friday announced early on Tuesday that its warehouse lines had been closed by several major financial institutions making a bankruptcy almost inevitable. Analysts predicted that stockholders would not recover a cent from their holdings of the stock which was, within the last few months, valued at around $20. Later in the day the stock was de-listed from the New York Stock Exchange. Other mortgage companies were scrambling to secure continued funding as major banks eyed their own exposure to the subprime market through warehouse lines. Accredited Home Lenders said it had paid $190 million in margin calls from its creditors thus far in 2007 and is trying to raise fresh capital and renegotiate some of its financial relationships. Even General Motors which was reporting a lot of good news from its automotive business was hit by the mortgage market as mortgage losses at its former financial division, 50 percent of which it has recently sold, dragged down the results that Wall Street had expected. Then there were those delinquency figures. The MBA report is worth a thorough analysis, particularly in light of the many categories they use to present their data and we will attack the complete report later this week. Suffice it to say the headlines alone were enough to bring the stock market the rest of the way to its knees. The overall delinquency rate for one-to-four-unit properties, seasonally adjusted, was up 28 basis points from the third quarter to 4.95 percent. This was 25 points higher than the fourth quarter of 2005. Subprime and FHA loans were, as always, the hardest hit; 13.46 percent of all subprime loans are now delinquent, an increase of 77 basis points since the third quarter and an identical percentage of FHA loans were also not performing, an increase of 66 basis points. Delinquent prime loans increased from 2.44 percent to 2.57 percent and VA loans went from a delinquency rate of 6.58 percent to 6.82 percent. The stock market made a modest recovery on Wednesday with the Dow up nearly 60 points an hour before the closing bell. But where does the fallout end? A pessimist will tell you that many 401Ks hold stocks with subprime lenders or with the banks that own them as subsidiaries. Banks such as Citi and J.P. Morgan have warehouse lines with subprime lenders and with New Century already admitting it can not pay its creditors, can other lenders be far behind in defaulting on theirs? Then there are the builders who are already looking at large inventories of unsold houses that will now be harder to sell with many potential buyers closed out of access to sufficient credit or maybe even any credit. Those builders may pull back from plans to resume full-scale building this spring meaning more layoffs in the construction industry. Carrying it a step or two down the road, lumber mills, appliance manufacturers, and local tradespersons will also be effected as will retail outlets for building materials such as Lowes. As subprime lenders fail or file for bankruptcy, commercial building owners will be confronted with leases that are no longer enforceable although New Century's landlord stated Tuesday it would have no trouble releasing the several hundred square feet occupied by the company and at a higher rate than New Century had been paying. On the other hand, is this a time to panic? 96 percent of mortgagees are making their payments on time. Freddie Mac and Fannie Mae, the big players in the mortgage market claim they have little exposure to subprime loans. And it's not as though this shakeout has come as a surprise - analysts and economists have been expecting it for over a year. A few high risk companies will undoubtedly bite the dust and shareholders are going to wish they had opted for safer investments with a lower return. It is probable that cooler heads will prevail and that they will do so soon. Better managed and more risk adverse companies will purchase portfolios of their bankrupt competitors at a discount and go on to make more money, housing prices will return to more reasonable levels to compensate for tightened credit, a lot of people will get burned a little bit, a few will really suffer. But we probably aren't looking at Armageddon.

- A red single-lane

A red single-lane covered bridge in Cornwall, a popular weekend town in northwestern Connecticut.
By C. J. HUGHES Published:
February 9, 2008

THE way bumper stickers and T-shirts tell it, husbands would rather be fishing. But that doesn't mean they can't be house-hunting at the same time. In fact, a second home that sits just steps from a favorite fishing hole may be what all serious anglers dream about. Well, Bruce Whiteford made it happen. In May, he bought a house in Cornwall, a Litchfield County town in northwestern Connecticut whose ragged western border is formed by the Housatonic River, where he has fly-fished for years. His two-story house, built in 1900, has four bedrooms, three baths and 3,400 square feet under its gabled roof, and sits on about half an acre in West Cornwall, one of the town's three sections (with Cornwall Village and Cornwall Bridge). The house, which cost $500,000, also has a sunny studio where the previous owner used to paint - in Cornwall, creative types, like bass and trout, are plentiful - and that will be put to good use by Mr. Whiteford's wife, Briggs, who also paints. Both of them, and their two children, are also pleased that their country retreat is just 50 miles from their year-round home in Katonah, N.Y., a hamlet in Westchester County. And much of that drive is on uncrowded and scenic back roads. "Cornwall doesn't take a lot out of you to get to, and to go home from," Mr. Whiteford said. "And even though it's fairly close, it seems very rural and quaint." Its quaintness sometimes seems to channel Currier & Ives, especially in West Cornwall. There, a 242-foot-long red covered bridge, wide enough for just one car, drops drivers amid a tidy clutch of 19th-century wood-frame buildings. The village is protected on three sides by pine-laced hills. In Cornwall Village, slender rock posts in front of center-hall colonials are topped with metal rings once used by travelers to tie their horses. And in Cornwall Bridge, Greek Revival homes with thick pilasters are squeezed between river rapids and railroad tracks. That historic charm sealed the deal for James Sheffield. Twenty-five years ago, he paid $180,000 for a 2,500-square-foot house in Cornwall that has four bedrooms and three baths and is on five acres down a dirt road. Today, it could fetch $700,000, he said. A devout canoeist and kayaker, Mr. Sheffield, who lives in the Gramercy Park neighborhood of Manhattan, raves about Cornwall's bodies of water, including the Housatonic, Mohawk Pond and Cream Hill Lake. The town's charitable spirit also earns his praise. Residents actively support neighbors who need help, said Mr. Sheffield, who once ran an international health agency. Volunteers with the local chapter of Friends in Service of Humanity - FISH in Cornwall - for example, drive elderly residents to doctors. In addition, a local foundation, the Wilbur A. Johnson Fund, can be approached to help pay bills for heating oil. As it is, Cornwall's skyrocketing house values make living there too expensive for some local residents, Mr. Sheffield said. "But we've mobilized ourselves to deal with the challenges," he added. The Scene With five-acre zoning throughout much of Cornwall, there's typically a lot of space between homes, allowing for plenty of privacy. During the winter, Mohawk Mountain Ski Area is a draw for those who like to hit the slopes where snowmaking was pioneered back in 1949. Mohawk, in its 60th year, now has 24 trails, half open at night. A lattice of cross-country trails - hiking paths come summer - also graces the town. A fairly flat section of the Appalachian Trail, along the river in Sharon next door, is also a popular place to ski. Writers who call the town home, like Alex Prud'Homme, occasionally stage readings at the four-year-old library in Cornwall Village. The former library, next door, now holds town offices and a community center and was the site of a three-hour contra dance on a Saturday night last month. Restaurants in Cornwall are few and far between, though places like West Cornwall's Wandering Moose Cafe, which serves three meals a day, pick up some of the slack. The corner table provides a near-perfect view of the covered bridge. There are only a handful of working farms left. But weekenders often lease parts of their land to farmers to grow crops, or even just give them their pasture grass, which becomes cow feed, in exchange for mowing it. Bucolic landscapes are a result. Further solidifying the town's rural nature is that much of the land is protected state forest. Also, hundreds of acres are permanently off-limits through easements, in which property owners donate future development rights to private conservation groups in exchange for tax benefits. The West Cornwall Market, which sold groceries, closed last December after a three-year run. Although Baird's General Store in Cornwall Bridge sells locally grown produce, for large grocery purchases, residents must drive to the Super Stop & Shop in North Canaan, 16 miles from the town hall. The Real Estate Market There are just 833 residences in Cornwall, according to a recent tax assessment, and they don't change hands often, real estate brokers say. And what does sell tends to be expensive. Home values increased by up to 50 percent from 2001 to 2006, with the average house and lot now worth $467,000, according to tax records. Ten houses sold in 2006, according to the Connecticut Multiple Listings Service. They ranged in price from $275,000 to $1.8 million, with the most expensive houses situated in West Cornwall and Cornwall Village. The average price, $686,000, might be for a house whose oldest section dates from the mid-1800s, with three bedrooms, three bathrooms and at least three acres of land, according to Frankie Winter, an agent with Sotheby's International Realty in Washington Depot. Such a house has probably also had just a few owners, which means that outbuildings may need a lot of work, especially if they're going to be turned into guest cottages or offices, Ms. Winter said. Cornwall homes are generally listed at about 10 percent less than similar ones in Roxbury and Washington, two weekender-friendly towns to the south, according to current listings. Brand-name cachet could explain the difference, though Cornwall buyers, according to brokers, usually use different criteria. "Cornwall is not so flashy," Ms. Winter said. "It's definitely a lower-key spot." For those fortunate enough to have big plots of land passed down through generations, building can be an option. Adam Van Doren put up his own 3,500-square-foot, two-story shingled home in 2001. It has four bedrooms and three baths, and is on a former farm near West Cornwall that his grandfather bought in the 1920s. Mr. Van Doren, a watercolorist who lives in Manhattan during the week, shares the 200-acre compound with his parents, uncle and cousins, who have their own homes. But the land, said Mr. Van Doren, seems uncrowded and pastoral. "If my grandparents came back," he said, "they would actually recognize this. " Lay of the Land POPULATION 1,489, according to a 2005 estimate by the Census Bureau, plus probably at least 1,000 weekenders. SIZE About 46 square miles, including Cornwall Bridge, Cornwall Village and West Cornwall. WHO'S BUYING Painters and fly-fishers, New York City bankers seeking rural retreats and European investors in the market for third homes. GETTING THERE Cornwall is about a two-hour drive from Midtown Manhattan. From the Triborough Bridge, take I-278 to the Hutchinson River Parkway, to I-684, to Route 22, and head north for 20 miles to Wingdale, N.Y. Drive east on Route 55 to Route 7, then north 12 miles to Cornwall Bridge. WHILE YOU'RE LOOKING Until May, off-season rates are available at the Cornwall Inn & Lodge (270 Kent Road, Cornwall Bridge; 800-786-6884; www.cornwallinn.com), where the 13 rooms start at $119 and include breakfast. Thursday through Sunday nights, the inn's restaurant is open for dinner, and on the first Friday of every month, the adjacent tavern, with the only full bar in town, features local bands playing folk-rock, blues or zydeco. Slightly north, find the Hitching Post Country Motel (45 Kent Road, Cornwall Bridge; 860-672-6219), where 12 rooms, most with king-size beds, cost $65 until April, when warm weather kicks in the higher seasonal rates.