Saturday 10 March 2007

It's An Ill Wind

That does no one any good when it blows. The slow motion train wreck in the US housing market is providing lots of business for foreclosure brokers:

Massachusetts (Reuters) - The red Victorian home on Maple Street has a wounded, abandoned look: trash litters the yard, the pool has frozen over, old clothes are strewn across dirty floors. Renovations are half-done.

On a window hangs a "for sale" sign posted by a broker who specializes in foreclosures, which have hit record levels in Massachusetts and surged nationwide after a housing slowdown that put millions of "subprime" borrowers -- those with poor credit records who pay higher interest -- at risk of default.

"This is normally the way we get them. Totally beaten up," said Marc Charney, president of, as workers cleared debris and prepared the 2,180-sq-ft (203 sq meter), 10-room home in Northborough, Massachusetts for sale.

"There's a real pattern that you're seeing with people who are foreclosed. They over-leverage themselves by getting an interest only-loan or some sort of an adjustable rate mortgage. They take that money and plan an addition on the house.

"They start the addition but then realize they want to buy a car, or a sister needs money or something like that. So the work is half done. But you're out of money and lose your job, or you get divorced and can't make payments," he said.

"This is a dirtier side of the business because you're trafficking in despair and loss."

Sad, yes, but it's important that all of these things are done quickly. Far better that the loss is crystalised, taken, and the asset moved on to someone else who can make use of it. Harsh but true.

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