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!

---

• Foreclosures: "In May, foreclosures in N.J. jumped 89 percent"
• Mortgage Workouts: "Data on Housing Relief Questioned"
• NJ Sales: "Home sales plunged 30 percent in first quarter" -- Ledger | Gannett -- Correcting a major goof by the National Association of Realtors who at first claimed an INCREASE in sales.
• Maps and Data: "NJ By The Numbers" -- Click on 'Home Sales', then 'Subprime Lending', then enter an address.

-- Dan Damon

View today's CLIPS here. Not getting your own CLIPS email daily? Click here to subscribe.