In the pre-dawn darkness of a steamy night of sub-tropical rain, a
queue of anxious, soggy people snakes around the palm trees outside a
cavernous Florida convention centre. Some have erected camp beds or
makeshift tents. All clutch sheaves of mortgage documents.
to America's biggest jamboree of delinquent borrowers. For five days,
the Neighbourhood Assistance Corporation of America (Naca), a
not-for-profit organisation, is working round the clock to help
homeowners hang on to their houses. More than 12,000 people have signed
up in advance and more than 20,000 are expected to turn up, travelling
from as far afield as California, Georgia and Maryland.
either feed your kids or pay your mortgage," says Omayra Delgado, a
33-year-old special education teacher whose Miami house has slumped in
value from $160,000 (£103,000) to $60,000. "My home is in foreclosure.
I'm trying to keep it."
Politicians' talk of an economic recovery
is laughable to many of those here. This is a last, desperate bid to
cling on to home ownership – the event is shrewdly named "save the
Inside, hundreds of loan advisers sit behind trestle
tables. They are colour-coded: Bank of America workers wear red,
Citigroup are in blue and Wells Fargo are in black. Even the moribund
government-supported refinancing giants Fannie Mae and Freddie Mac are
here, but their budgets don't run to natty coloured clothing.
go through orientation and financial counselling sessions. Then, for
the luckier applicants who can show a steady income, the loan advisers
have the power to reduce interest rates or even write off a proportion
Bruce Marks, Naca's chief executive, says this is the
only way to dig the nation out of the housing morass: "What you hear
from the Obama administration is 'we're helpless, our programmes aren't
working'. What you hear from Congress is 'we don't know what to do so
we're going to do nothing'."
Every little adjustment is crucial,
because for all the White House's hopes of a swift bounce back from
recession, the US property market is showing signs of renewed distress.
Some 10% of US households with mortgages are behind on their payments,
according to figures last week from the Mortgage Bankers Association.
The percentage of people beginning to have trouble with their loans has
begun to rise again, after falling earlier this year – loans that are
one month in arrears have gone up from 3.31% to 3.51%. And home sales in
July were down 12.4% on June, dropping to 276,000 – the lowest since
records began in 1963.
Radar Logic, a
property data firm, says the usual summer uptick in property prices has
barely happened this year. Thousands of repossessed homes have been put
on sale by banks at knockdown prices, inhibiting any vitality in the
market. "The inventory of distressed property for sale in this country
is just staggering," says Radar Logic's chief executive, Michael Feder,
who predicts an imminent "double dip" in housing. "There's just no
momentum in pricing, no momentum in inventory."
The US treasury's
efforts to help borrowers aren't bearing fruit. The government's "making
home affordable" programme was supposed to protect 3 million homeowners
from foreclosure. But the treasury admitted this month that only
422,000 loans have been permanently adjusted so far. The rate is
slipping by the month and 616,000 trial modifications have ended in
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This outlook is alarming. In the same way the mortgage
crisis pushed America into the worst financial storm since the 1930s, a
fresh collapse in housing could scupper a fragile recovery that is
barely taking root in the world's largest economy. Goldman Sachs puts
the chance of a double-dip recession in the US at 25%. Mark Zandi, the
chief executive of rating agency Moody's, has raised his view of the
likelihood from 20% to 33.3%. Nouriel Roubini, the economic guru dubbed
"Doctor Doom" for his early prediction of the credit crunch, reckons the
probability is more than 40%.
Experts at Capital Economics
predict that by the end of the crisis, as many as 4 million Americans
may lose their homes: "Aside from the considerable social costs, this
does not bode well for consumer spending, bank profits or the housing
Florida is an ideal spot for the latest in Naca's
mortgage-altering marathons, which have also taken place in Washington,
Atlanta, Phoenix and Las Vegas. The Sunshine State, beloved of British
holidaymakers, is in property hell. About 45% of homes here are in
negative equity, according to CoreLogic, a research firm, which
calculates that Florida's stock of property is worth $859bn but has
$771bn of mortgage debt outstanding.
Irresponsible borrowers are
partly at fault. As Tea Party activists never tire of pointing out,
property purchasers should not have taken on mortgages they were not
able to afford. A CNBC presenter, Rick Santelli, articulated this view
with an on-air rant that went viral on the internet last year, calling
for a referendum "to see if we really want to subsidise the losers'
mortgages", claiming government aid for strugglers "will make Thomas
Jefferson and Benjamin Franklin roll over in their graves".
irrespective of blame, many of those who have travelled to Palm Beach
are simply desperate. Darnette Anderson, a receptionist whose husband,
Kenneth, spent the night queuing, says her house, which she bought for
$115,000 in 2004, was recently valued at $42,000. With her husband out
of work, she cannot afford mortgage payments of $1,400 a month: "I just
hope and pray that we can get this settled and move on to a comfortable
Yrena Cruz, a Wal-Mart worker from Miami,
says she and her boyfriend were sucked into an unrealistic mortgage by a
low "teaser" rate which subsequently changed to an impossible amount –
and the housing crash made it unfeasible to refinance. She said: "I'm
worried sick. I can't wait to get this finished with. My house was worth
$400,000. Now, it's probably half that."
Some come from
surprising backgrounds. A Californian dentist, Dennis Jacobs, 65, flew
2,600 miles from San Diego to try to renegotiate a mortgage on his
apartment. He sold his dentistry practice to pay off debts and is now
working part-time. He is pessimistic: "I don't see any uptick in the
economy at all. I think the unemployment figures are understated – there
are large numbers of people underemployed."
The jobless rate in
the US is 9.6% and has stayed stubbornly close to double figures in
spite of Barack Obama's $787bn economic stimulus package. One reason,
say economists, is that older people in states such as Florida are
delaying their retirement to cope with straitened finances.
chief executive worries the US property crisis may have swung to the
opposite extreme, with risk-averse banks reluctant to write even the
most sensible of mortgages. Marks says banks "just refuse to lend"
because they see no prospect of the "abusive" profits they once made. He
is pessimistic about a short-term return to stability: "If somebody is
used to getting intoxicated, to taking an extreme amount of drugs or
alcohol, then they're never going to be satisfied with just a beer."