Mortgage Woes Spread
A: Just a quick report on this one. American Home Mortgage, covering about 2.5% of US mortgages and specializing in prime and alt-a loans (in between prime and sub prime), announced on Friday that profits won't meet expectations as they are experiencing high delinquencies in their alt-a borrowers. This is significant because many experts have been arguing that the subprime woes have been largely contained and that trouble in the higher quality world are yet to be seen. Well, here it is!
According to BusinessWeek's article, "Mortgage Mess: Now It's Prime Time":
So far investors have worried for weeks mainly about mortgage companies that have exposure to the riskiest borrowers, but the pain could be spreading.Not surprising folks! And then I notice this article from the The Washington Post (via Calculated Risk) titled, "Condos Feel The Mortgage Crunch", discussing how the domino effect of troubled homeowners are starting to hit condo fees:"We see this news as evidence that troubles in the residential mortgage market are spreading beyond subprime," Standard & Poor's equity analyst Jason Willey said in a research note.
American Home is the latest lender to take a hit as more people fail to repay their mortgages amid shaky housing prices during recent months -- but most of the recent worry has focused on lenders who have exposure to the highest risk debt.
In a sign that the turmoil in the subprime mortgage industry is affecting entire communities and not just individual homeowners, condominium association officers, property managers and real estate lawyers throughout the region say they are noticing more delinquencies in monthly fees.Interesting. While NYC is 75% co-op, I certainly would be interested on any data that shows signs of rising maintenance defaults in our neck of the woods! While it seems a logical symptom of the times we are in, I still think the New York City real estate market is an entirely different animal than any other market in the country. I would expect Manhattan to be hit at a lag, if at all, with unit maintenance defaults and don't see this as having any significant impact on investment opportunities here."If someone is not paying their mortgage, they're not paying their condo fee, and the condos need money to pay bills," said Jeffrey van Grack, a community association lawyer with Lerch, Early & Brewer in Bethesda.
About one in six Americans live in a community run by a condo or homeowners association. Fees pay for such services as water, garbage removal, cleaning and repairs.
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