Virginia Housing Market Report: Bad Credit Home Loans Not Probelmatic … Yet

Owners in Hampton Roads have a much lower percentage of subprime mortgages than the national average - and those riskier customers in the region are meeting their payments better than most of the country.However, the market still has a growing number of subprime mortgage defaults. The percentage of Hampton Roads subprime loans at least 60 days late rose from 4.5 percent at the end of 2005 to 7 percent at the end of 2006.Overall, about 10 percent of mortgages in Hampton Roads are subprime, compared with almost 15 percent nationally.According to First American LoanPerformance, the main provider of regional Virginia mortgage data to the industry, about 7 percent of those subprime mortgages in Hampton Roads were 60 days behind at the end of 2006. The national average was about 12 percent.”Mortgage markets are regional and tied to regional customers,” said Bob Visisni, vice president of marketing at First American. He mentioned how a mortgage market is linked to a region’s home price appreciation, the economy and employment trends.Any significant reduction in credit availability could reduce the number of people looking to become new homeowners. If the market also added mortgage-related sales and foreclosures, the trends could stop a real estate market pickup that some people have predicted for Hampton Roads.The general consensus among real estate watchers has been that Hampton Roads is poised to increase the numbers of home sales in 2007 as Virginia home prices stagnate.Perry Pilgrim, principal broker for Abbitt Realty in Hampton, thinks that the market will continue a recent upward turn in 2007.”I believe that very strongly,” Pilgrim said. “We’ve got a pent-up demand from last quarter.”However, the increase of troubled loans might translate into more foreclosures in 2007. Adam White, a Virginia Beach attorney who serves as a trustee for foreclosures, said he had seen a big increase in the past year.”I have never seen an environment like the one we are currently in,” he said, “with the rate of defaults and the volume of foreclosures. This is as bad as I’ve seen it in 18 years, and I think it’s going to get worse.”Mounting concerns about the bad credit home loan market came into sharp focus last week. The Mortgage Bankers Association announced that subprime foreclosures were escalating. Subprime lender New Century Financial was defunded and is under investigation by a grand jury and securities regulators.New Century has at least seven locations in Virginia, including one in Williamsburg and two in Virginia Beach. The Virginia State Corporation Commission, or SCC, is monitoring the subprime problems.The company has stopped making any loans, including those that it was in the progress of making. The SCC works with people and the mortgage company in these situations to get upfront fees back and find another lender, said Joe Face, director of the SCC’s financial bureau.Click here to read the rest of this Daily Press article.