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Marin Independent


Jonas and Tammy Hedberg are paying extra for their new home, just to be safe.

Described by their broker as "rock-solid borrowers with great credit," the Greenbrae couple - first-time homebuyers with 6-year-old twin boys - didn't want to lose the $1.1 million house amid a crazed credit crunch. They closed escrow about eight days early, and will pay an extra $1,800 to $2,000 in interest because of that.

"The thing is, once we signed all the papers in escrow I thought we were done," said Hedberg, senior director of sales operations for a San Jose-based storage company.

"I didn't understand initially that that wasn't the case - that they could pull (the funding) at any time," he said of the lender. "The chances were slim that it would happen, but for a few days of interest it's well worth the insurance. É The downside is huge."

In Marin, the national mortgage meltdown has done lots more than just make buyers like the Hedbergs anxious - it has cost hundreds of mortgage industry and other housing-related jobs, kept houses on the market longer and boosted the county's foreclosure rate.

Last week, Novato-based mortgage lender GreenPoint was shuttered, eliminating the jobs of 430 Marin workers - the most recent in a series
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of job cuts at Marin mortgage companies in recent months. A week earlier, Restoration Hardware, citing the decline in the national housing market, announced it would cut 100 jobs at its Corte Madera headquarters.

Foreclosures in Marin have risen sharply since last year, jumping from two in July 2006 to 11 in July of this year, although the county's numbers - when compared with the Bay Area and the nation - are still the envy of the region.

The number of foreclosure filings reported in the
Jonas and Tammy Hedberg move a stereo cabinet from the garage into their recently purchased home in Greenbrae last week. They closed escrow early to ensure their loan came through amid the lending market volatility. (IJ photo/Jeff Vendsel)
U.S. last month jumped 93 percent from July 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.

The fallout comes after a nationwide five-year housing boom turned to bust last year. The combination of higher interest rates and weaker home values have clobbered homeowners, especially those with higher-risk "subprime" mortgages. Mounting defaults have forced some lenders out of business. Credit problems have spread to other borrowers. Nervous lenders have tightened standards, making it harder for individuals and companies to obtain credit - the lifeblood of the economy.

The Marin real estate market is weathering the storm, although borrowers and home sellers are feeling the pinch, real estate and lending experts said.

"You're a very small elite market, so you're certainly not representative of the state as a whole," Leslie Appleton-Young, the chief economist for the California
Association of Realtors, said of Marin.

Still, she said: "No one is immune from what's happening in the marketplace right now. No one."

Marin's median single-family home price fell to $950,000 last month, higher than this time last year but below last month's record $1.125 million. The median is the point at which half the homes cost more and half cost less. In April, the county's median single-family home price hit $1,010,000 - the first time any California county broke the seven-figure barrier - before slipping to $925,000 in May.

"The real estate industry is cyclical, particularly with the crisis with the lenders," said Valerie Castellana, president of the Marin Association of Realtors. "They're taking some steps backwards, but we expect it will normalize over time. It's just a matter of when they will normalize."

While rates have remained largely unchanged in conforming loans, jumbo loans, notes over $417,000 not backed by the federal government, are more expensive. About 80 percent of Marin's borrowers hold jumbo loans, real estate officials said.

Nationally, lagging home sales and flat or decreasing home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt, spurring the rise in foreclosure activity.

Loan types seeing higher delinquencies and defaults in general are home equity loans or second mortgages used to cover a down payment, subprime loans to people with shaky credit histories, and Alt-A loans, which can include interest-only and adjustable rate mortgages sold with little or no documentation.

In California, the expectation is the foreclosure numbers will get worse before improving, the California Association of Realtor's Appleton-Young said.

At Charlie Christensen's Sausalito brokerage, CWC Financial, some clients are feeling the pressure. Several, like the Hedbergs, have closed escrow early.

"It's very dicey out there - it's unprecedented," he said. "It's going to be tougher for people to qualify for new loans."

"We're kind of on an island here," he said of Marin. "It may not be as bad as it is in some other places, but I think it's going to be a little worse than people think unless the Fed steps in and takes some radical steps."

Tighter restrictions have affected both mortgage brokers and retail lenders, who offer loans from a single source, rather than shopping a borrower around.

"It's touched us a lot," said Lee Aubry, a mortgage consultant with Wells Fargo Bank. "The bottom line is, cheap, easy loans are becoming very quickly a thing of the past.

"Lenders are basically going to be more conservative," Aubry said. "This is going to take years. Now more than ever people will need down payments - they'll need good credit."

"You just have to be a lot smarter now," said Nick Cooper, a founding agent with Vision Real Estate in Corte Madera. "Money isn't as cheap as it was. If you look historically, it's still cheap. We got so spoiled."

Houses are selling, he said, especially at the higher end of the market. Proper pricing is key, he said, pointing to a San Anselmo teardown that was reported last week to have 14 offers.

"I would say it is making people more on edge," he said. "(Properties) are slower to move, but É you're not seeing this downturn. It's a great time for entry-level buyers if you have the money and the credit - it's an ideal time."

Hoping to help buyers caught in the crunch, some skittish sellers are putting up money, hoping to bridge the financial divide to close the deal. It's not something you see often in Marin, agents said.

"We haven't seen seller financing in 10 years," said Kathy Schlegel of Lucas Valley Properties.

The situation will lead to positive reform, experts said.

"It was so unrealistic to have the money so easily available," said Bill McKeon, a broker associate at Pacific Union Real Estate in Greenbrae. "That's what everyone's talking about. It was very common to have zero-down purchases É a lot based on stated income, and that was bound to end. I think what's catching everyone by surprise is how abruptly it ended."

"As ugly as this is, it's going to shake down the unscrupulous lenders," said mortgage broker Lisa MacLean-Fonarow of Larkspur-based All California Mortgage.

"The end result is it's not going to be better for the lenders to have practices like this. It's going to be better for the consumer."

Money is still out there, albeit at a higher price. "What is important É is to find lenders or brokers who do not sell their loans on Wall Street," Christensen said. "I think it's going to take a couple of years to correct itself, but I don't think we're going to go back to the lending practices of the last five years."

Creative solutions exist, brokers said.

"I had a client, his credit was 696, and we locked him on a program that only required him a 660," MacLean-Fonarow said. Credit scores, used to determine the likelihood borrows will pay debts, are based on payment history, debt owned, length of credit history, new credit and types of credit used. The higher the scores - which can range from 300 to 850 - the lower the risk.

"Overnight it (loan terms) changed to a 700 - my client was four points away," she said. "I'm a mortgage broker É I can take him somewhere else and he could have paid a little more for it. (Instead) we perused the credit score and found those four points."

MacLean-Fonarow and her client linked the four points to an open credit card account. The client closed the account, obtained a letter from the creditor indicating the debt was settled, and got his score changed to qualify for the cheaper loan, she said.

"We had to play some games, but it still worked," she said.

Like all corrections, this one shall pass, Christensen said.

"I think people need to take a deep breath and let this thing settle out," he said. "There's a correction occurring. Some people are going to lose their homes, some in Marin.

"Is it going to be biblical proportions? I don't think so."

Contact Jennifer Upshaw via e-mail at jupshaw@marinij.com; the Associated Press contributed to this report.
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