Archive for February, 2008

Oakland County foreclosures are rising to record levels as per statement of Oakland County Equalization. Highland Township, Milford Township and Village of Milford are scheduled to hold a seminar that will benefit local house owners who are grappling with foreclosures. The seminar will also discuss matters relating to budgeting income, credit problems and the importance of choosing the right mortgage when refinancing, stopping mortgages or facing foreclosures. The all important question about finding additional assistance will be discussed.

Triscia Pilchowski, Highland Supervisor commented that foreclosure or housing matter is not something that should be kept postponed. At the seminar there will be experts to help the people about how to steer through the problem and work in tandem with the lenders.
Those participating in the seminar are counselors from Oakland County Community and Home Improvement division, Lighthouse Community Development, Oakland Livingston Human Service Agency and with Oakland County Treasurer Patrick Dohany. No fees will be charged for counseling. There are several self-help steps to avoid trouble and a website will give additional assistance.

The primary thing is to spot the real reason behind failing repayments and try to eradicate that. Expenses need tracking so that there is a regular review of anything in excess and going waste. Creation of an emergency budget will be of great help. Funds can be drawn from unnecessary spending on frivolous matters. Controlling indulgence in fast food, dining out, gambling, smoking and extra clothing will soon begin to show and money will be saved. Money can be diverted from paying for extra magazines and cable channels. Deductibles on Insurances can be increased. A serious effort must be made for looking around for avenues leading to income increase. With all the cards open and analyzed the lender can be contacted for options. The counseling agency chosen should be genuine and approved otherwise it will be inviting trouble. Paying off mortgage installments should be given priority above other commitments.

The loan culture and more specifically the credit card can be blamed for the foreclosure crisis gripping the nation today. It was reasoned that by making loans easy the consumer would spend money and the market would be flushed with money. This in turn would generate production and consequently employment. Unfortunately a frenzy of taking loans overtook everyone leading to disastrous consequences. The epidemic has afflicted all and spared none – lender, borrower, governments and the community at large.

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A senate bill targeting prevention of foreclosures has come under attack from the White House for being a bailout scheme benefiting lenders and speculators. In fact the President might use veto powers to stall it.

The bill aims to allow bankruptcy judges to wipe out mortgage dues and provide billions for redoing abandoned properties. The Democrat led Senate is scheduled to discuss and pass the bill. But due to Iraq issues the measure has been postponed. This ‘Foreclosure Prevention Act’ is laced with multi layers that will attract criticism and support from both sides.
The plan to allow local housing agencies refinance wobbly loans by the issuing of bonds that are free from taxes is supported generally by the Bush administration. The issue about permitting bankruptcy judges to play around with house loans is resented by the mortgage industry as well as many Republicans. Lenders feel that by touching bankruptcy laws, borrowing costs would be pushed up. To guard themselves against bankruptcy the lenders will tend to hike up their charges. It will further muddle the market and pass on the costs to consumers at a point of time when just the reverse action should be taken, commented David Kittle, speaking for the Mortgage Bankers Association. The Democrats argue that the comprehensive plan was the right dose of medicine for the foreclosure malaise hitting right across the nation and spilling over to international markets. But White House said that the price was too heavy and would not meet the requirements of those in need – the besieged borrowers.

The increasing number of foreclosed houses going up for auction sales has hit the once zooming real estate markets in Florida, California, the Southwest and Midwest. Many areas are plagued with job losses aggravating the situation. The Democrats envisaged the bill to help the localities where foreclosures were the most affected. It is a big question whether the Republicans in the Senate will continue to be docile to Presidential orders or think about the welfare of the states they represent.

While arguments are thrown back and forth the nation suffers pockmarked with abandoned houses. Not only the borrowers but the renters too suffer – being abruptly evicted for not knowing that the house was foreclosed. Landlords vanished with security money leaving the renters high and dry. Hapless deserted pets are facing the consequences of man’s reckless unplanned behaviour.

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The distinction of being the foreclosure capital of the country goes to San Joaquin County. It has even a earned a prominent place in the newsmagazie ’60 minutes’. It is apprehended that the foreclosure pace will continue till October this year as more low rates are ready to make high jumps.

A housing seminar is being planned for Saturday at Tracy that will spread an awareness campaign amongst house owners facing foreclosures, renters affected by it and buyers wanting to purchase foreclosed units The latter may qualify for the down payment assistance being offered by the city as real estate prices continue to fall. The city spokesperson Matt Robinson stressed that the running theme of the seminar is to see that people continue to stay in houses that are their homes and that people buy houses and make it into their homes.

Many have had difficulties to getting information related to their own specific problems. The Community Development Agency of the city hopes that the seminar will provide the solution to many unanswered questions. All the options available for the interested will be patiently detailed. Renters will also learn how to grapple with the issue and what they can do to find a solution. Those living next to foreclosed units are also being affected by increased criminal activity and falling house prices resulting from too many houses up for sale and vitiated neighbourhoods. The residents will be asked to alert the city keepers about overgrown gardens, criminal activities and other things that make for eye sores. At the seminar the people will have the chance to sit down individually with counselors with their specific problems. HUD (Housing and Urban Development) counselors will be available together with counselors from Acorn Housing, By Design Financial Solutions, Sacramento Mutual Housing-Neighbour Works, Visionary Home Builders of California, Fannie Mae, El Concilio and the Neighborhood Assistance Corpn. Of America. Robinson also urged first time buyers to talk with housing specialist Ana Reynoso about the down payment plans of Tracy and find out if they qualify for the same.
At all levels – local, state and federal, solutions are being suggested but all seem to be pain killers and not remedies attacking the root. Foreclosures seem to be having the last laugh at the legal, government and community efforts. It is neither benefiting the lenders who seems to have chewed more than they can digest. Ripples are felt internationally.

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The agencies claiming to help are failing while the scammers are making hay. In 2007 the country saw an increase of 65% in foreclosures as compared to 2006.

Mave Elise Brown speaking for Housing and Economic Rights Advocates in California opines that ignorance and desperation are the twin causes for house owners failing to grapple with the foreclosure problem. Rescue scammers sneak in with suggestions of negotiation and title transfer which glistens for that time – but is not real gold.

The con artists say that for a fee they will save the house by talking with the lender. Clutching at any straw the house owner squeezes out few hundred or thousand dollars without ever seeing the scammer again. The money vanishes along with the house. Transfer of title is a little more sophisticated. The scammers manage to obtain the signature of the owner that gives them the title deed. The ex-owner is made to believe that he can continue to stay on as a renter but will get back the ultimately. In reality this never happens and one fine day the renter-cum-owner finds the open sky the roof above the head.

Brown warns the gullible to be cautious about those who come knocking unsolicited, contact over the Internet or force an introduction en route to church or work. The Federal Trade Commission reports that scams are on the rise. Brown repeatedly emphasizes that nobody should be trusted. The scammers usually come from the same community as the borrowers taking advantage of common language and appearances. It is like the blacks preying on the blacks and the Latinos on their brothers and sisters. The best is to turn to government sponsored non-profit agencies for help.

The foreclosure crisis triggered by the sub-prime predatory lending peddling teaser rates has created a crisis that has spilled over from the playing court of the lenders and borrowers to all sections of the country creating a grim socio-economic crisis. The lenders are now weighed down with more house ownerships than they can digest. No mortgages means no money rolling in. Empty houses means more criminals and less money for the police force and fire fighters. Less house transactions means less tax collection for the government. Disgruntled evicted persons roaming for shelter spells alarm for vote seekers. Wall Street is shivering with a cold while the world stock exchanges have caught a cold.

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The recent figures released by RealtyTrac making in depth studies of 100 areas worse affected by foreclosures has detailed numbers in cities, percentage of houses being foreclosed upon and the percentage changes from the previous year. The figures continue to cause concern but it seems that the crisis is more localized than general. However it will not take long for the foreclosure fire to spread. Right now it will dampen the spirits of those who are continuously presenting a gloomy picture of impending doom.

The national rate of foreclosures has risen by 79% since 2006 – undoubtedly a big increase. In the previous year it was 1.033% . It will be well to note that 30% of all the houses are free from mortgage and therefore only 7/10th of 1% houses are inside the foreclosure zone.

In the housing market amongst the top 100 the foreclosure rate was 1.38% - a rise of 78% in comparison to the previous year. If the top 100 were to be ranked then it will be seen that 34 had foreclosure rates more than the average. 51 regions had rates of 1% or even less. The rates of 14 among the group of 100 had actually fallen. The regions suffering from high foreclosures are comparatively very small. For instance Bethesda saw foreclosures rise by 1,288% against 0.682%. This means that in 2005 foreclosures were virtually non existent there. Today also it is well below the national average. The same applies to Albany – rise of 638% against 0.25%, Baltimore – rise of 544% against 0.73% and
Providence rise of 354% against 0.41%. Figures also show that the top ten foreclosure zones in the country are places where prices fluctuate to extreme levels – changes that are far from the national average of 46.2% during the past five years. Seven of the group of top ten saw major price rise in real estate during the past five years. Three saw increases much lower than the national median. This pattern is consistent in the top 25 foreclosed zones. The seven averaged a remarkable 91.6% rise – double that of the average of the country. In its turn the national average was triple the inflation rate of this period.

It is little wonder then that the foreclosure rates are zooming figures. Anybody who bought within the past few years with a 5% or 10% down payment has a good chance of turning upside down as the bubble bursts.

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Barbara Anderson of Cleveland is very specific in her choice of presidential candidate after having lost her house to foreclosures few year ago. She is not interested in the fate of Wall Street – she wants a president who will see to her house, her city and her mortgage interests. She loves her Main Street much more than Walls Street. This is the mood of the majority of voters in the Ohio region, either directly or indirectly hit by foreclosures as they listen to the oratorical renderings of Clinton and Obama. Ohio is plagued with the foreclosure curse – a 88% increase from 2006. Only California and Florida ranked higher in ranking.

Clinton is talking about freezing rates and a 90 day moratorium. She is also talking about $30 billion pool to help local administration struggling with foreclosure fall outs. Obama is discussing the creation of a $10 billion fund for preventing foreclosures and is critical about Clinton’s plan because it will make it difficult for ordinary people to avail of mortgage loans to buy houses. He wants a change in bankruptcy laws. On the Republican side McCain is avoiding the solution and talking about penalizing ‘greedy speculators’.

The Bush administration Hope Now operations is extended with another one named Project Lifeline. A five year freeze has been put on certain types of sub-prime mortgages. Six mortgage giants backed Bush for holding in abeyance for a month all foreclosures while talks would be thrashed out. The Mortgage Bankers Association backs Bush but is not ready as yet to whole heartedly support the presidential candidate.

Looking at the explosive figures of foreclosures, Cuyahoga County Treasurer Jim Rokakis, a Democrat, refers to the efforts of the Bush administration as ‘useless political gestures.’ He feels that the call of the hour is an indefinite moratorium on foreclosures. With nearly 12,000 abandoned and decaying houses Cleveland requires a urban Marshall Plan. These houses will not magically vanish by themselves.

Jeffrey Dillman of Cleveland’s Housing Research and Advocacy Center says that credit regulations should be modified so that the modest income group can avail of proper mortgages. Right now all the tax and other benefits go to the rich. Freezing will not help all. One criticism leveled against Obama is that his plans about bankruptcy will help only the lenders. Nobody is coming up with remedies but only with temporary pain killers.

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There are plans to legalize reduction of mortgage balances for borrowers. But lenders are up in arms against it. Two bills are pending before the Congress that would authorize judges to reduce mortgage debts. If it sees the light of day then thousands of borrowers would be saved from foreclosures. But lenders are seeing red. How can judges seize mortgage portfolios? Advocates for the consumers argue that considering the present unique situation such a law is the call of the hour.

The two bills – Emergency Home Ownership and Mortgage Equity Protection Act of 2007 as well as the Foreclosure Prevention Act of 2007 aims to help house owners who are in bankruptcy. To avail of its benefit the borrowers will have to be residing in their houses and holding sub-prime non conventional mortgages like interest only. About 600,000 would then be able to stave off foreclosure in 2008 and 2009. In industry language this policy is known as the cram-down. It will bring down mortgage balances and monthly payments in relation to the decrease of the value of the house.

Governments and consumer groups are frantically persuading lenders to modify loans. They are doing so but the numbers are not sufficient to halt the march of foreclosures. There are more foreclosures than modifications – the ratio being 7:1 respectively. Sub-prime ARM modification ratio is 13:1.

Opponents of the bills argue that these will increase the mortgage borrowing costs for all. Prospective house buyers – that is anyone who applies for a mortgage will be affected. Those who have taken risky loans should now be prepared to face it – one cannot eat the cake and have it too. The borrowers are being indirectly encouraged to continue making bad debts. By forgiving debts the risk is transferred from borrowers to lenders – those who invest in mortgage backed securities. Thus in the long run interest rates will have to go up to attract investors. Everyone’s interest rate will go up by 1 ½% - a $200 month increase on a $2000,000 loan contracted for 30 years at fixed rate. It will drive away investors to other fields as they will fear that this might happen again. The solution is not to forgive debts but to postpone it. The cram-down plan will benefit a very limited few considering the vast numbers at risk. In the country there were 800,000 bankruptcy filings.

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Detroit has seen ups and downs during the last forty years. At one time it was proud to have the highest figures as regards house ownership in the entire country. Today it topped the ranks of foreclosure offenders in 2007.

This has aggravated its woes. About 5% of all the houses in Detroit was in some stage of foreclosure in the previous year. The rate is five times higher than the national average. It is 68% higher than 2006. There were 72,616 default/action notices or bank repossessions on 41,273 units in the Wayne County cities of Detroit, Livonia and Dearborn. In the adjacent counties of Oakland and Macomb foreclosures are also on the rise. Here more than 2% of all the houses were in the foreclosure embrace – the rate being 95% higher than 2006. Of the jumbo cities in US, 86 saw foreclosure increases – of these the notables were Stockton, California, Las Vegas and Nevada, with the last two ranking second and third.

Detroit has been reeling under the automobile crisis. Nearly 150,000 have lost their jobs because of trimmings in the auto industry. Workers are being offered half the wages as a compromise. Little wonder then that foreclosures increased.

Michigan has the third highest foreclosure rate in the country with over 2% of all houses sitting in the risk zone. There was an increase of 68% over 2006 and an awesome rise of 282% from 2005. Michigan has the highest number of sub-prime loans as well as unemployment rate.
Personal bankruptcies rose in US by 30% in January. Over 1 million sub-prime adjustable rate mortgages are ready to reset in the current year of 2008. The American Bankruptcy Institute is gearing up to meet the avalanche.

The Attorney General of Michigan organized a workshop in Detroit on 12th February focusing on the foreclosure crisis. Kevin Anderson was one of the many with a sad story to tell. He had been peddled a mortgage then went up from $1,300 to $1,778. In all probability it will go up to $2,778 per month – something well beyond his means. Another person named Duane Fox said that he had refinance his house twice for a house that has been his for generations. Both times fees on various heads were charged but still the debt is a staggering $80,000.
The general feeling is that this sub-prime ARM programme was a crime from the start – set to fail.

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