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Tuesday, June 17, 2008

How bad is Plainfield's subprime mortgage picture?

A foreclosed property in the First Ward.

Friends in real estate are not happy these days, for good reason. The subprime crisis which has brought the mortgage banking industry and the financial markets low has yet to be fully worked out at Plainfield's local level.

I have been saying since last summer that we are not out of the woods yet. And we're not.

While New Jersey and the NY metro area have fared better than much of the rest of the country, Plainfield is on thin ice. As you can see from the Star-Ledger database (go here), more than 40% of mortgages issued in Plainfield through 2006 (latest figures) were subprime.

While many of these have had their first interest rate reset, those issued in 2006 are looking to reset in Q3 and Q4 this year, and any from 2007 will begin their resets in Q1 of 2009. As Bette Davis said, 'It's going to be a bumpy ride'.

Map showing Wards 1, 2 and 3 data.

Those who got into subprime mortgages and are not able to handle the adjustments away from artificially low teaser rates to much higher market rates will be in danger of losing their homes, increasing pressures on the already fragile home sales market in our area.

Add to this the fact that mortgage lenders are NOT REALLY helping people work out the problems with their loans (see more here), and you are beginning to see the shape of a BIG problem coming down the pike.

A Plainfield Realtor® friend recently told me that her research found nearly 1,300 properties in pre-foreclosure status in Plainfield.

'Pre-foreclosure' status means the property owner has either missed enough payments to be considered in default or has moved down the pipeline to Sheriff's sale status.

In a community with 16,000 dwelling units and 8,000 of those being apartments, we are looking at a potential foreclosure rate of 16% -- or 1 in 8 residential properties. Make that TAXPAYING
residential properties.

Elsewhere in the country (the Cleveland and Detroit areas are similar to Plainfield, but there are others), foreclosures have brought whole neighborhoods to their knees with boarded-up properties, unkept yards, overabundant 'for sale' signs and worse -- in some places, the lenders are not even paying the taxes as
their resources are stretched thin and the properties are so overvalued in relation to the current market.

When taxes go unpaid, there are only two options: Towns can curtail services or pass the burden along to taxpayers who
DO pay.

What preparation has the administration of Mayor Sharon Robinson-Briggs made to handle this potential onslaught?

My guess is none.

Already, you can drive around town and see forests of 'for sale' signs as well as more and more boarded-up properties like the one pictured above.

What will become of us?

At least, after January 1 we have the possibility of a more activist approach as Annie McWilliams and Adrian Mapp are expected to join Cory Storch on the Council. That raises the possibility of a Council that can get the attention of the Robinson-Briggs administration.

Now wouldn't that be good news!

-- Dan Damon

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Anonymous said...

If Annie and Adrian have answers to the subprime problem, WHY aren't they talking? Do you know how any homes and families they could save? They should be talking to Bernake, even to the president! Plainfield is important, but if they have all these great creative answers, ESPECIALLY what Annie learned in Business School, then PLEASE tell us NOW!!! Don't wait until January! People will lose their homes before then!!!

Anonymous said...

You may go to for a blog/discussion on Real Estate in NJ from the average man point of view [not the professionals who make commi$$ion$ on say how wonderful everything will be]

Dan said...

The Council cannot do anything for the individual finding themself in trouble with their mortgage.

But they can put pressure on lenders to advise when a property goes into foreclosure, maintain the property, pay the taxes and safeguard the property from squatters, copper thieves, etc.

More than that is going to take a new President...which will have come January 21, 2009.