'Underwater' Mortgages Sink New Yorkers

I'm most impressed (and surprised) by the # of mortgages per property stat.

Not that $1.35mm of negative equity is exactly unimpressive!

I am impressed with the 1.47 mortgages per property in NYS. If one assumes that NY is similar to the rest of the country in that 40% of all property owners have no mortgage, that would mean that the remaining 60 % have an average of 2.5 mortgages each. Banks and mortgage brokers,appraisers and the like all joining with foolish homeowners (owners? - how do you "own" something when you have negative equity?) in this mess.

>"It just shows even though we're a market with very little foreclosure activity, there's clearly a lot of exposure to default," says Jonathan Miller<

Good point

Power up that COOP force field... looks like we are headed into an asteroid belt.

1) xtra cream cheese, chk
2) extra lube, chk
3) pony farm in connecticut, chk
4) tripled up on studio in 2007, chk
5) lock in 30 yr fixed rate, chk
6) dozen bialys, bagels and challah, chk

Fasten your seatbelts mofkers... it's gonna get bumpy!

TO $500

"Owners of Manhattan condominiums and single-family homes had the largest average amount of negative equity — a whopping $1.35 million?"

So what? Less than 1% of housing units in Manhattan are single family residences.

We need a government program to get the single family homeowners back to positive equity.

Well it means that certain property types underwent more price inflation from the bubble, doesn't it?

So while everything got overvalued, condos and single-family houses got overvalued more than coops and multi-family houses.

Coops were protected by their more rigorous entry standards and multi-family houses can command a premium as investment properties.

I think in a simliar way, parts of the city saw more price inflation than other areas, and as times goes by we'll see more defaults in the areas that got more over-valued.

I just don't see how how the outer boroughs can sustain anything like the pricing they reached during the bubble. There just aren't enough people with big-enough incomes to support $800k apts that are an hour commute from midtown.

What's missing from this story are the equity take outs. All the data I've seen shows that many of the under-water borrowers got there not by buying at the wrong time, but by taking out mortgage after mortgage on the same property and continually extracting cash in the process.

Equity take outs not missing - 2.5 mortgages per property owner w/ a mortgage - seems like a lot of take out right there. Another issue that I recently heard about - foreign purchasers - dual citizens, etc. who extracted huge amounts of cash from their "equity" and simply left the country.

I don't know numbers about dual/foreign citizens and mortgages, but it definitely occurs. Unfortunately the mortgage system is not exactly working properly. The mechanisms for discovering and pricing risk are very much absent, abused or politicized. Right now your starting to hear how unfair it is to limit home purchases to only those that can afford them(e.g. the down payment rule)

In my opinion,it is inadequate down payment or unrealistic equity assessments /minimums that are largely to blame for this problem. Difficult to walk away when you have over a 50% stake in a property to begin with. No home equity loans or secondary mortgages if you will go under the 50% minimum of owner equity based on realistic appraisals. If you do not have the minimum down payment, you can rent. Home ownership is a privilege, not a right.

Here's one: http://therealdeal.com/newyork/articles/kent-and-liz-swig-face-foreclosure-on-740-park-co-op-bank-of-america-moves-in

I'd thought 740 Park was all-cash, but the board lets owners use their shares as loan collateral.

Captain, a direct hit to coop force field...... Can NoT hold on much longer...

Pledging shares to subvert coop rules -oh my- seriously, noone knew rich ppl do that all the time? My group use to get clients from private banking and they'd be leveraged to the hilt, and yes coop shares were pledged. Flmaozzzzzzzzzzzzzzzzzzzz

Pledging shares of coop is not a right, its a privilage for the really fktarded.

Coop force field back on!

NWT, of all the crazy and stupid news out there, this actually made me gasp in shock. holy crap! is the earth still spinning?

>My group use to get clients from private banking and they'd be leveraged to the hilt, and yes coop shares were pledged.<
Lotsa phonies w/o equity?

What is an intelligent amount of leverage? No more than 35%? Should leverage be based on net worth or cash flow?

Swig, Macklowe: slow, involuntary deleveraging.

The RE press portrayed them as visionaries, but, it was all a big gamble & they lost. Bet too much on the wrong pony at the wrong time.

> We need a government program to get the single family homeowners back to positive equity.

Is this serious? So that the HELOC mania can re-start without having learned anything? Debt is great, till it needs to be paid back. Who isn't going to avoid being over-indebted the next time around when the gov bails you out? And you cannot treat the same way a young couple that bought at the peak with an old one that bought 30 years ago for almost nothing and HELOC like there's no tomorrow, you just cannot bail out the 2nd case.

> What's missing from this story are the equity take outs. All the data I've seen shows that many of the under-water borrowers got there not by buying at the wrong time, but by taking out mortgage after mortgage on the same property and continually extracting cash in the process.

Exactly!

> Another issue that I recently heard about - foreign purchasers - dual citizens, etc. who extracted huge amounts of cash from their "equity" and simply left the country.

I know some of those cases too. Funny, the "equity" was used buying real estate abroad. This bubble was just pervasive.

> What is an intelligent amount of leverage? No more than 35%? Should leverage be based on net worth or cash flow?

was told that "rich" was defined as the lack of need to be in debt and lack of dependency on the labor market. did that definition ever make any sense? guess not, it describes a frugal retiree better than it does the supposedly "well heeled"

I think as long as they don't bring securitization of home loans, there will be no bubble.

Where there is securitization, there is a bubble.

> What is an intelligent amount of leverage? No more than 35%? Should leverage be based on net worth or cash flow?

was told that "rich" was defined as the lack of need to be in debt and lack of dependency on the labor market. did that definition ever make any sense? guess not, it describes a frugal retiree better than it does the supposedly "well heeled"

I think as long as they don't bring securitization of home loans, there will be no bubble.

Where there is securitization, there is a bubble.

"What's missing from this story are the equity take outs. All the data I've seen shows that many of the under-water borrowers got there not by buying at the wrong time, but by taking out mortgage after mortgage on the same property and continually extracting cash in the process" - exactly! The equity bubble mess has been largely portrayed as innocents buying at the wrong time. If the average property in NY State that is not paid off has 2.5 mortgages, it would seem to me home equity loans, refinancing with a higher balance to be paid, and no down payment mortgages are the real culprit. Will the government step in and restrict / end such lending? Can our economy continue to grow without consumer spending based on home equity credit when home equity no longer exists?

sjtmd, I wonder if the NYS number counts a coop's underlying mortgage again and again for each unit, rather than counting the total number of mortgages statewide. Thus, nearly every coop unit would have its own mortgage plus the wraparound, using that counting methodology.

Sorry if that theory is merely cognitive dissonance, hard at work.

"rich" was defined as the lack of need to be in debt and lack of dependency on the labor market. did that definition ever make any sense?"

notadmin, that is the one and only definition of rich. everyone else is just "well heeled"

Ahart good point however it says "Owners of Manhattan condominiums and single-family homes" which appears to leave out co-ops.

This is anecdotal, but I see a lot of co-op UCC1s, and virtually all of them are accompanied by a UCC3 for the previous loan. So no pattern of people milking their would-be equity with multiple loans.

No idea, though, whether the buildings I happen to look at are representative of co-ops in general.

> This is anecdotal, but I see a lot of co-op UCC1s, and virtually all of them are accompanied by a UCC3 for the previous loan.

what is UCC1s? UCC3s? sorry, really don't follow

How is it that the Swig's could go 22 months without paying their mortgage before the bank took any action. That is the problem. I know NY has strict policies but 22 months? No wonder so many people are doing strategic defaults. Consider that it will probably take another couple of years to get all the way to court and Ms Swig will have had a very nice long free ride. No wonder her father doesn't bail her out. If the bank is willing to support her, why should family feel the need to step in.

UCC = Uniform Commercial Code

A loan made with co-op shares as collateral is recorded by the lender with a UCC Financing Statement form, called a UCC1. It says the borrower owes an unspecified amount to the lender, with however many shares of the co-op corporation as collateral.

Once the loan is paid off, the lender files a UCC3 form saying it no longer has an interest in those shares.

Unlike a condo mortgage filing, which says how much is owed, UCC forms for a co-op share loan tell you only that there is a loan, but not how much. All you can see is the pattern of whether there're loans and how many of them.

super clear NWT, thanks!!!

NWT: but the most recent mtge could be a cash-out refi. If the refi was made in the heady days for 80-20 on a very positive appraisal, it is possible that co-op mtges are underwater in Manhattan.

Apt23: yes, so far, I've only seen a couple of short sale co-ops (advertised as such) s. of 96th. Maybe it's something like 3-4 years?

Right, it could be cash-out, so no telling how much they're in hock.

A while ago it was reported that NYC or NYC or both, whichever collects tax on real-property loans, would start collecting the tax on co-op share loans as well. If that happens, loan amounts would be recorded, so we'll know. (I can't wait.)

What I see, and again there could be some selection bias in the buildings I follow, is some people financing only when they buy, others never borrowing at all, and others who re-fi every few years.

"Owners of Manhattan condominiums and single-family homes had the largest average amount of negative equity — a whopping $1.35 million"

For those who thinks there are not too many of these, take a look at the following...

http://si.wsj.net/public/resources/images/NY-BA073A_NYMAR_G_20110617192403.jpg

One thing you should all have confidence is the fact bankers will all unload all their POS at the same time. And when it happens you as a seller will comPete with fecal matter no matter what.

Goodz luck.

> One thing you should all have confidence is the fact bankers will all unload all their POS at the same time. And when it happens you as a seller will comPete with fecal matter no matter what.

when?

Its "Manhattan condominiums and single-family homes", dummy, not just SFHs.

>> We need a government program to get the single family homeowners back to positive equity.
Is this serious?

No, I was joking around with Socialist who hasn't met a government program he didn't like.

hi hb!

stop talking and turn around

Here's a radical solution. Gov't stops manipulating the housing market. Prices drop, more people can afford homes without big mortgages and we save the tax payers money in housing subsidies.

Of course some would prefer the gov't prop up the housing market so they could sell at high prices and that tax payers subsidize mortgages, again to maintain high prices so they could sell.

> Here's a radical solution. Gov't stops manipulating the housing market. Prices drop, more people can afford homes without big mortgages and we save the tax payers money in housing subsidies.

Bring it on! but for that Obama will have to be replaced by Romney imho

any thoughts on potential collateral damage?

Anyone ever been to Columbia County?

> any thoughts on potential collateral damage?

sure. one of the worse collateral damages of keeping prices artificially inflated: diminished discretionary income of young families, is not going to be there. that means more ability to save, more ability to consume and invest. what's not to like?

i assume you are being somewhat facetious. i was referring to collateral damage from the suggested freefall in home prices. i am not pleased by the current situation; i just am concerned about what could happen without government support.

typical columbiacounty. Government is the solution. He has no responsibility.

http://www.nytimes.com/2015/09/20/realestate/fewer-underwater-mortgage-holders.html

The share of underwater mortgage holders — those who owe more than their homes are worth — has dropped by more than half since peaking in early 2012, according to new data from Zillow.

The question now becomes , are they available for HARP, or are their numbers still too deep "underwater" to matter