Government plan could restore confidence locally

BY JOHN-LAURENT TRONCHE
December 24, 2007

The subprime mortgage crisis largely has avoided Dallas-Fort Worth, but residents might still reap the benefits of nationwide efforts to repair the damage.

President George W. Bush’s plans to stabilize the housing market, announced Dec. 7, along with Federal Housing Authority reforms in the Congressional pipeline, are steps in the right direction toward helping homeowners who may be facing steep payments or possible foreclosure, local and national analysts said.

Those efforts should restore confidence in the housing market, even in the Metroplex, where the reality of minimal foreclosures has been overshadowed by “a barrage of negative news” about tumbling home values, said Ted Wilson, a partner at Residential Strategies, a Texas-based real estate research firm.

“Our market is in much better shape than the rest of the country,” Wilson said.

“The reality is that Texas only saw modest increase in housing prices during the first part of this decade so we didn’t really have the inflation issues,” he said. “The majority of what we saw was mortgages that were focused on households that had weak credit scores – where our foreclosures are coming from.”

As previously reported, the Dallas-Fort Worth area has experienced a 7 percent drop in units sold from last year for the January to October period, according to the North Texas Real Estate Information System; the organization’s CEO said that drop is result of the cyclical nature of real estate, and not a housing slump.

Despite the reported stability of the local market, foreclosures are up nationwide; California-based foreclosure tracking company RealtyTrac reported Wednesday a 68 percent increase in foreclosure filings from November 2006.

The White House-endorsed HOPE NOW initiative could assist up to 1.2 million homeowners by helping “subprime borrowers who can at least afford the current, starter rate on a subprime loan, but will not be able to make the higher payments once the interest rate goes up,” according to a statement. Borrowers would be helped by one of three measures: refinancing an existing loan into a new private mortgage, moving subprime

borrowers into an FHASecure loan or freezing subprime borrowers current interest rates for five years.

The plan is a “small step in the right direction,” but more will need to be done to work out the problems in the housing market, said David Hamermesh, a senior analyst in the consumer lending service at TowerGroup, a Massachusetts-based research and advisory firm focused on the global financial services industry.

“My impression of the moves is that the Bush rate-freeze plan is a very limited in scope of its impact,” Hamermesh said. “It only benefits a very narrowly defined set of borrowers.”

However small of a step the plan may be, many agree the initiative will help spark repairs in consumer confidence.

“It will help a limited number of people,” said Mary Trupo, a spokesperson at the National Association of Realtors, “but it sends a good sign to the market that the administration and Congress know there is a problem and things need to happen.”

The Dec. 7 plan is essentially helping homeowners by asking “who can actually stay in the house by getting a rate freeze?” Hamermesh said.

“I give the administration credit for coming up with a solution that does help some people without throwing away money,” Hamermesh said, “without taking government money and throwing it at people who can’t even afford their houses now.”

Local homeowners, potential homebuyers and the Dallas-Fort Worth housing market should benefit from the government’s involvement, even though Wilson said the plan “won’t have as dramatic of an effect in the our market as it might in other markets,” such as California and Florida.

“Anything you can do to assist the consumer is a good thing,” Wilson said, adding “we think a lot of the issues will be cleaned up by the end of the spring or beginning of summer.”