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Bloomberg Radio - Foreclosures and the Housing Market

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04-18-2007

Steve Geimann, Anchor

Foreclosure filings nationwide jumped 47 percent last month from one year ago as the housing slump continues to take a toll on home owners. Those figures are from RealtyTrac.

California had the biggest jump with foreclosure filings rising to 31,434. That's more than triple the number of a year ago.

For more on foreclosures and the housing market, let's bring in Hugh Bromma, chief executive at Entrust Group in Oakland, California, which manages $2.3 billion in retirement assets, including real estate.

GEIMANN: Hugh, foreclosures shifted into higher gear both in January and February and that trend continued last month. Will there be a leveling off like last year when we had a surge in the first quarter and then we kind of moderated the rest of the year?

Mr. HUGH BROMMA (Entrust Group): I don't see that that is going to change. I think we're going to continue to see foreclosures happening for the rest of the year and continue at record levels and that's a sad situation but it's true. We're not through the subprime lender situation and it's going to be a little while.

GEIMANN: How much of it is driven by subprime? How much are other factors playing a role in these rising foreclosures?

Mr. BROMMA: Well, interest rates certainly have their impact because a lot of the adjustable rate mortgage loans that are out there are now actually up to higher rates. And they are not necessarily related to just subprime, but may actually cover individuals who are prime borrowers as well.

GEIMANN: Now California, Nevada, Colorado had the biggest gains. What matters to them being in that category?

Mr. BROMMA: Well, it's a fairly straightforward analysis. In California, for instance, there's a large number of individuals who are at the subprime. And also we have high rates and large dollar value homes in California. Colorado in and of itself had their kinds of gains in that they are part of let's say the California-Florida-Texas-Michigan-Ohio triangle--or--triangle--if you want to call it that--geographically, perhaps, that their particular problems are very, very similar in terms of the sizes of the loans that are being made there.

GEIMANN: Now, you talked about some of the other states. What is happening around the rest of the country? Where are we seeing the big drops beyond these three states and where are things not that bad?

Mr. BROMMA: Things are not that bad in those particular areas where the cost of houses are relatively low because people are able to make the increased mortgage payments, even subprime people. But when you get into higher cost houses and larger loan values and larger subprime borrowing, that's where you're going to have the problems. So even in pockets in California for that matter are not problems in areas that are rural because the home prices are not necessarily as high.

GEIMANN: How long should we expect to see this trend go on? Is there some light by the end of 2007 or is it just not going to resolve itself until '08?

Mr. BROMMA: I would wait until '08, really. I mean that's what we're dealing with. I think that no one should be surprised that we're going to see this continue on for a period--that particular period of time. Now, a lot of lenders are looking at providing new loan products and rewriting existing loans and to new products. We know that Freddie Mac is looking at providing some new
products themselves. So stability and financing I guess is the key that the industry as a whole and Freddie Mack are looking for that will help dig us out of this hole.

GEIMANN: Hugh Bromma, chief executive at Entrust Group in Oakland,
California, discussing a 47 percent jump in foreclosure filings nationwide last month.