Archive for February, 2008

Oakdale Neighbours is a group working in tandem with Macatawa Bank. It has organized a twelve week course for those who are facing foreclosures. The Oakdale area is losing houses and house owners to foreclosures much faster than any other city A recent survey conducted by Community Research Institute of Grand Valley State University show that Oakdale together with two adjacent regions in Grand Rapids had foreclosure rates hovering around 16.2% during the years 2004 to 2007. To tackle the menace the group is joining up with Macatawa Bank to initiate a 12 week course dealing with finance. It has been termed The Money Map. The free sessions scheduled to operate from 20th February will include in its curriculum many facets of personal money matters like budgeting, borrowing, banking, purchasing money to buy a house, dangers of predatory lending and the like. Macatawa Bank is sending out invitations to the participants to open savings account by offering to match savings by 50% - going up to $150. Tom Bulten is the executive director of Oakdale Neighbours. He explains that by joining the course the participants will get first hand knowledge about how to budget income with expenses as well as get to know about the financial system. This will be their armour in times of financial crisis.

One strong view about the causes of the foreclosure crisis is that the borrowers who took the risky sub-prime loans did not know and were not aware of the implications of such deals. The lenders took advantage of this ignorance and peddled the loans to these gullible borrowers. Now that foreclosures are knocking at their door it is ignorance that is again letting them down. They do not know how to face the foreclosure tornado and plug the leaks. Organizations like Oakdale Neighbours are trying to fill the gap and make the people more aware – more financially literate. Statistics say that the foreclosures are most rampant in localities where the residents have modest income and are not fluent in English. Senior citizens and the handicapped too have been easy victims. Foreclosures are vitiating neighbourhoods by spreading crime and disease. Taxes too are falling crippling the power of the state to enforce law and order as well as fight fires. Vagrants are having a field day to the horror of all. The general economy is beginning to creak with ominous pointers towards recession.

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The pets are the latest victims of the foreclosure crisis. Families who are being evicted from their foreclosed houses are left with no alternative but to drop off their pets at animals shelters. Losing a house that is a home is bad enough. On top of that comes the trauma of losing a beloved family member – the pet. Dreampower is one such animal rescue group. It is overwhelmed by the number of foreclosure-pets. About 15 to 20 pets have been pushed on them exclusively because of the foreclosure drama. This has been going on for the past six months with a recent dramatic increase.

The families are on the verge of a nervous breakdown. Dreampower is one address more and more people are turning to when it comes to pet problems. Evicted families are finding it difficult to find accommodation for themselves. In most cases new landlords do not allow pets. One television channel tried to make the ex-pet owners talk but some of them were just silent – it was too much to verbalize their emotions. They did not want to relive again the horrors of the experience.

Sarah was adopted out eight years ago by Dreampower. Today the dog has come back again – the reason being foreclosure Two Siamese cats were found at an adoption fair picked up by alert neighbours who saw the family move out abandoning the house with the pets. Some of them leave the animals inside the house. By the time help comes the animals have passed out due to starvation and fear.
It is advisable for those facing foreclosure to think ahead realistically. Plans should not be postponed. The staff of Dreampower is ready to answer queries about availability of pets, donations and who to turn to incase of foreclosure related pet trouble.

Human society consists of flora and fauna – even in an urban maze. The animals nourish us indirectly but we are the only creatures able to actively and positively create an ambience that includes animals in our welfare setting. As such those foreclosing and those being foreclosed must give the pets and the green a thought. The law cannot do everything. In any case there are hardly any laws for our dumb companions - the pets. Unknowingly they nourish us with their love. City pets are the only link we have with Nature. Thus neglecting them is a crime towards Nature as well as to humanity.

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The situation here is far worse than the national foreclosure picture. Carol Thomas is 69 years old. She has just been handed a foreclosure notice and wonders how long she can brew coffee in her own kitchen. She had fallen into a trap laid by a scammer who kept promising that things would work out fine. Today that person is in jail and Carol continues to boil in the hot foreclosure soup without any hope of reprieve. On the other hand she had lost precious time and money trying to work out a deal with a scammer. The con artist is now in Prison but that does not help Carol right now. Her mortgage payments have trebled because of ARM’s. From 6.4% it skyrocketed to 9.4% and there is no surety that it is going to stop there. There are hints that again it will go up in May.

Carol is just one among the many in the Foreclosure soup tureen. According to recent reports Peoria and Tazewell County foreclosure figures are far above the national average. This has led to a phenomenal rise in counseling related to house matters. There are many lagging behind in payments – 30 days to 120 days. President Bush has just given his nod to another fund for counseling services amounting to $180 million.

The fact that many will not be facing foreclosures does not mean that the problem is solved. Foreclosed houses sell at a low price and bring down the general real estate market. This in turn affects the tax kitty. Thus there is very little left for police and fire protection. Yet these last two are the two important pillars of a government.

Senator Dick Durbin says that it has a ‘negative ripple effect’ going down and down. He has come forward with some suggestions People in bankruptcy should also be allowed to refinance loans. So far this has not been allowed. The law does not allow modification of loans on the primary residence but only on vacation houses and farms. Durbin wants to change that law also.
Counselors feel that the best thing is to put a halt on foreclosures and find out ways for refinancing. If this is not done then thousands of houses will have ‘For Sale’ signs pasted on them – all because of foreclosures. It bodes ill for the socio-economic structure of the entire nation.

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In September 2007 50,000 or more residents of Maryland were lagging behind in mortgage payments. Experts opine that this year the numbers will increase with adjustable mortgage rates ready to reset to higher levels. However there is no point in negative worry. Help is available.
The first thing is to contact the lender. Today lenders are more amenable to a rapprochement than before considering how badly they are themselves affected by the rising tide of foreclosures. Adverse criticism too has played its role in making the lenders softer in their approach. Foreclosures are affecting collection of revenue and taxes. Law and order problems are antagonizing communities facing health problems and criminal activities stemming from abandoned houses. Thus the lenders might freeze for the time being the interest rate or forgive payments for a certain period. So borrowers are advised to contact immediately the loss-mitigation department of the lenders. The best option would be contact a housing counselor belonging to any non-profit organization. They will broker the agreement between the lender and the borrower. In Maryland there are many HUD approved help agencies having their own websites and hot line numbers. HOPE is another port of call. The borrower could suggest short sale. If the loan amount and house value are at par the lender will readily agree to it as both the parties gain by avoiding foreclosures. While going about the work the borrower should be on the alert for foreclosure scam artists who come forward with unsolicited help. They will cause further damage. The basic point is that borrowers must not sit idle simply fretting and worrying. By it nothing will be done. If immediate action is taken there is hope of help.

The government, mortgage giants and the local help agencies are working together to save the country from recession. As yet no positive results can be seen. The number of foreclosures continues to rise. The intensity varies from one locality to another. Many analyze that the modest income groups and the minorities are the worst sufferers. Another view is that places like Florida and California are the worst affected because these places were happy hunting grounds for construction activity during the zooming period of house building. Here speculators made hay. Now they have just walked off. Another view is that the sluggish economy combining with rising medical bills and divorces are responsible for the foreclosure scenario being witnessed today.

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On Hendry Street, Dorchester heads of city government arrived in a futile attempt to stop the spread of the foreclosure virus. But when the mayor, police commissioner and the housing inspector arrived all was over. Mayor Menino standing in front of a boarded up three decker house on Hendry Street promised that he would do his level best to restore the health of the region. For this the city fathers will have to seize the property tax on grounds of delinquency. But unfortunately most of the houses are not encumbered with unpaid taxes. A different aggressive approach will have to be taken.

Nearly a dozen properties in Hendry, Coleman and Clarkson streets dotting a modest to low income locality that the Menino authorities had ear marked for public safety, playground facilities and economic upliftment were listed on foreclosure postings. This has been going on for the last five years.

This region is known for being a high crime area where money plays around. TV crews and troops withdraw simultaneously. But this time it seems that the mayor is deadly serious about his ‘foreclosure intervention team’. The chief attorney of the city, William Sinnott is trying to see if the banking officials of the state can freeze the assets or take off the licenses of the mortgage lenders who refuse to cooperate. Working with him are other city officials to find out if behind the scenes fraud or such activity is taking place.

In 2007 nearly 700 properties in Boston were clubbed down by foreclosures. A hot debate is raging whether greedy borrowers or predatory lenders are to be blamed. The apprehension is that another 2,000 house owners are about to face further mortgage rate rises. Thus many more will meet the same fate as those of Hendry street.

There are indications that efforts are paying off and more mortgage lenders are coming forward with a helping hand. One of them is the mortgage giant Wells Fargo. But there is a lack of communication between the servicers and the borrowers. In 1960 bad mortgages had sent out the same bad smells in Dorchester. It took decades for the mess to be cleared up. Menino understands this. Crime rise is associated with abandoned empty houses. The plumbing and electricity fittings are stripped off and the houses becomes dens for vagrants and prostitutes. This brings down the overall real estate market.

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Six mortgage giants together with Bush administration announced on Tuesday fresh plans for giving relief to foreclosure victims. Treasury Secretary Henry Paulson said that the aim was to help as many as possible. He admitted that although some steps have been taken there is still much to be done – especially in the wake of thousands of mortgages about to be reset.
The new operation is named Project Lifeline is different from the previous one Hope Now. It targets those house owners who are 90 days behind in payment. It also covers all types of house loans – prime and Alt A, as well as 2nd lien mortgages and home equity loans. Hope Now concerned itself mainly with sub-prime borrowers who were current but would be at risk if their loans reset to unmanageable heights.

Floyd Robinson, an executive of Bank of America Consumer Real Estate, commented that loan modifications will be done wherever possible. Mortgage debts today are 20% higher than the value of the house. The bank would not totally negate the idea of loan write offs but it would not be general but on a case to case basis.

Paulson and Alphonso Jackson of HUD have been putting pressure on lenders and servicers to bring into line speedily their efforts to stop further rise of foreclosures. The housing market is beginning to correct itself through two ways – decline of house prices being offset by a growing economy. At a point water will find its level. Paulson reiterated the forecast of the administration that the although growth will be slow there will be no recession in the current year. The mortgage revision plans aims to pep up the economy.

The situation is so grave that politicians of all shades are beginning to sit up to the crisis and fish in troubled waters. Foreclosures have become a poll issue. Statistics is pouring in. It seems that those areas which saw the maximum housing activity like Florida and California is seeing today the maximum number of foreclosures. It is calculated that here there had been a lot of speculation. Today the investors are just walking off leaving the regions desolate with abandoned houses. There are many who bought houses for residential purposes and they are a troubled lot. Also badly affected are the tenants without rights, and dumb pets who have been left to die or fend for themselves.

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Some mortgage lenders – the top six giants – are about to disclose plans to locate the borrowers who are seriously at risk so as to put a brake on foreclosures while the loan will be rescheduled and other alternatives worked out. The lenders will work in tandem under the operation termed Project Lifeline. Those who have crossed the 90 days line of mortgage dues will be identified and foreclosures stalled till matters got resolved.

US Treasury Secretary Henry Paulson will be working with Washington Mutual Inc, Bank of America Corp., Wells Fargo, JP Morgan Chase, Citigroup and Countrywide Financial. The plan fits in with other foreclosure prevention measures that are already in operation. It will give more assurance to the borrowers that they can avoid foreclosures even if lagging behind in payments.
Lenders are not anticipating a bail out but in all probability a reasonable period of forbearance will be offered. Lenders will then be able to assess if the borrower can manage to pull along at all or not. The plan focuses on sub-prime mortgages.

Last December HOPE NOW introduced a rate freeze for those who could continue with present rates but would be unable if the rates increased as per the original loan agreement.
Today the lenders and the authorities are coming forward because the foreclosure drama has roped in all – lenders, borrowers, government and the community. A couple of years ago sub-prime loans were distributed to any and everybody without income checks. Some critics have compared this predatory lending to drug peddling. Gullible borrowers were tempted to unrealistic loans. The agents and investors benefited. There was a false housing boom. This raised prices which have now come down drastically. The result is that for delinquent borrowers there is no scope for refinancing as the value of the house today is less than the loan amount taken yesterday. Families are being evicted. Abandoned houses are attracting criminal activity and health problems. The authorities are not being able to collect taxes or revenue. The lenders are suffering from a cash crunch. Renters too are in a state of limbo as their lease agreement had been with house owners who are owners no more. The banks refuse to take the responsibility of renters. They want vacant houses that the can quickly sell off. Also affected are hundreds of pets left behind by fleeing residents! It is a heart rending scenario triggered by foreclosures.

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Nothing has been resolved as yet and talks are still on between real estate giant Harry Macklowe and his lenders regarding Manhattan office buildings. He had purchased these in the previous year. Technically the inconclusive talks place Macklowe in a default position although according to reports none of the lenders are going on with the process of foreclosure as yet. In the following week there is a chance of resumption of talks. Macklowe’s spokesperson did not comment on the issue.

In February 2007 Macklowe had borrowed $5.8 billion from Deutsche Bank to purchase seven office buildings in Manhattan area – properties that previously belonged to Equity Office Properties. Last week there had been a tentative deal that Macklowe would turn over the units which he had purchased for $7 billion. The bank declined to comment on the report.
It is alleged that Macklowe owes the bank $5.8 billion by way of acquisition financing or non-recourse. This would give Deutsche control of the buildings but not rights over the rest of the empire of Macklowe.

Macklowe, it seems, put in $50 million from his own resources but he is still short of $1.2 billion to repay a bridge equity loan he had taken from Fortress Investment Group. Macklowe purchased the units together with Blackstone Group LP’s acquisition of the Equity Office in 2007.
The crux of the problem for Macklowe is that the ongoing foreclosure crisis has all but wiped out easy debt financing. Lending has become more difficult and very expensive. The commercial mortgage backed securities CMBS, has to all practical purposes dried up. Banks are besieged by the foreclosure crisis in residential sub-prime mortgages. This has left Macklowe in the lurch. With fears of recession looming large the future is bleak for commercial real estate market.
The market cannot be studied in isolation. One leads to another and this snow balling effect of the sub-prime crisis is being felt in all spheres of the economy. There is a strong hue and cry against the lenders although there are indications that even before the 9/11 drama indications of the downtrend were visible for those who could read. There were job losses, divorces and illness. All joined hands with rising interest to create the foreclosure crisis. The government at all levels, communities and politicians are all pitching in to salvage the situation and bring back the country on its rails.

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