Archive for October, 2006

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Indian Foreclosure Rate Still Rising

Monday, October 9th, 2006

Foreclosures in Indiana climbed this spring, along with interest rates and energy prices, which have been blamed for squeezing homeowners on a tight budget out of being able to make mortgage payments.

The Mortgage Bankers Associationreported that the percentage of mortgages that from 2005 to 2006, the rate of foreclosure rose to .43% nationwide. This figure is an increase from the first quarter, which had a rate of 0.41 percent.

Even with the increase, the new foreclosure figure is still low by historical standards and thus not overly worrisome to lenders. But it suggests that some borrowers are feeling pinched.

Foreclosure rates in the second quarter were highest for homeowners with adjustable rate mortgages, and bad or no credit. ARMs are usually the type of loan most readily available to those less financially secure, an ironic fact considering they are often the hardest to keep up with, as their rate is given to sudden increase. If rates continue to rise, and expect to see this trend continue in Indiana, which already has one of the highest foreclosure rates in the country.

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Mortgage Default in San Diego on the Rise

Monday, October 9th, 2006

According to recent studies on the San Diego real estate market, the foreclosure rate has risen 219% between July 2005 and July 2006. County records statistics show that in July 2005 there 345 properties in default in the city, whereas in July 2006 there were 756 homes in default.

As in other parts of the country, this trend is attributed to a number of causes including predatory lending practices, aggressively rising interest rates, and little or no money down adjustable interest rate loans. When homeowners get locked into loan deals that may at first seem to their benefit, such as ARMs, they often find that once the rates start rising, they are stuck with extremely expensive mortgage payments. On top of this, the decline in the demand for housing as well as property values has led to many citizens being unable to sell their homes to get out of their situation. Unfortunately, default on payment and subsequent foreclosure then becomes a very real possibility.

According to HUD and the Center for Responsible Lending, a national watchdog organization, predatory mortgage lending involves a wide array of abusive practices including excessive fees, abusive prepayment penalties, kickbacks to brokers, loan flipping, and unnecessary products and add-on fees. HUD warns that while many people believe these loan practices target only lower class homeowners, the incidence of predatory lending with middle and upper class homeowners is on a quick rise.

If you feel you have become the victim of predatory lending, be sure to visit the HUD website for information on who to contact for help.

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New Types of Low Down Payment Loans Contributing to High Foreclosure Rate

Monday, October 9th, 2006

One of the many reasons contributing to the recent increase in the amount of foreclosures is the relatively new presence of loans available for little or no down payment to buyers. These loans came about in response to rising property values during the past few years, and were intended to allow buyers who were unable to make proportional down payments to still buy a home. PRRelease.com reports new findings that homebuyers who bought houses in the first half of 2005 put less than 5% down on the purchase price, up 30.6% since 2000.

This trend can be seen in different lights, but many these days are pointing to it as the reason we are seeing rising foreclosure rates around the country. Often times, the types of loans that offer such minimal down payment make up for it in other ways, such as Adjustable Rate payment schedules. While the loan stays at a constant rate for the first year, after that the interest rate is subject to change. Since the housing market has cooled off as of late, interest rates are rising drastically, and many of these less well-off homeowners are finding it increasingly difficult to keep up with their monthly payments. This leads to default, the first step towards foreclosure.

What makes this situation worse is that since the homeowner has provided such a small down payment, they have almost no equity in their home built up. This means refinancing is often eliminated as an option. And, since property values have fallen, selling their home may not even bring in enough to break even.

It is important for homeowners to be on top of their own financial situation in regards to their mortgage in order to avoid foreclosure. With home values continuing to fall, one of the most important things to figure out is whether or not you owe more on your mortgage than your home is worth. If this is the case, action must be taken, and it might be a good idea to sell before values fall any farther.
To learn more about how to avoid foreclosure, visit the Department of Housing and Urban Development website at www.HUD.gov.

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