Archive for May, 2008

Adamaitis of Direct Mortgage Services said that in the long run persistence and perseverance pays when trying to avoid foreclosure. Adamaitis has most of his dealings in foreclosure-riddled Florida. Of all the innumerable cases he handled a particular one has remained etched in his memory. One day a woman from Manchester contacted him saying that the lender who had issued her a sub-prime mortgage had downed shutters. But her interest rate had jumped by 10% - something well beyond her affordability limits. Ultimately she was able to coax it down to 5%. Her monthly payment dropped by $, 1000 but not without a lot of running from pillar to post to make somebody listen to her. For full nine months she made phone calls, sent written pleas to congressmen and penned a formal complaint to the New Hampshire Banking Department before catching the ear of somebody that mattered. If she had not persisted and given up after the failure of the first phone call, her house would have been gobbled by foreclosures. Half the battle is won when somebody starts listening.

Whether one has fallen behind in mortgage payments or is about to do so there are steps that can be taken to avoid foreclosure. Foreclosure is not inevitable. Avoiding it may be difficult but not impossible. The resources available and its application are individual specific. The worst thing to do is not to do anything at all!

The very first thing to do is to contact the lender at the very initial stage when warning lights about impending financial trouble is blinking. It is not advisable to avoid creditors considering the present scenario. Today they are crushed by the sheer weight of foreclosure numbers and are as eager to avoid foreclosure as the borrower. Nothing can be said for sure but in all probability interest rates will be reduced and the mortgage changed to a long term fixed rate. This will make the contract viable and realistic.

Another point to remember that the ‘lender’ to contact is not usually the bank but the loan-servicing agency that collects the mortgages. Admaitis admits that in reality the first, second or even third person contacted turns out to be downright rude. Lenders turn a deaf ear to borrowers who are overdue for 90 days or more. Nevertheless one by one the clerks have to be side stepped to reach the proper person.

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Foreclosures are challenging Congress and as yet seem to be enjoying the last laugh. Democrat Rep. Tim Walz speaks about his own personal experience. The house next to his has been in foreclosure for more than a year and pulled down the value of his own unit by 20%. The story of Walz is being repeated all over Minnesota with the bursting of the housing bubble. Both Democrats and Republicans are harangued with complaints from community leaders about the rot spreading from foreclosed vacant houses. Leaders of both parties are huddled together sitting at the same table desperate to find solutions to tackle the common enemy.

The House and Senate have passed bills and more are in the offing. There are doubts if the Democratic led Congress will be able to come to terms with Bush administration and the President’s veto threat.

The House bill consists of three parts aimed at avoiding foreclosures with the hope of bringing back the mortgage market to its rails. It allotted greater powers to the Federal Housing Agency to be able to insure refinanced mortgages. On their part the lenders would have to reduce the amount of loan in tune with the prevailing market prices. Secondly the bill allows $11 billion as tax credits to buyers and mortgage holders who refrain form itemizing their respective tax deductions. This also includes the granting of $7,500 to new buyers. It allots to the state $10 billion for floating mortgage revenue bonds to help in the refinancing of sub-prime mortgages. Thirdly the bill made changes in the Freddie Mac and Fannie Mae mortgage companies that are federally sponsored.

Democrats together with a large Republican approval supported the bill but the numbers were not strong enough to override the veto threat. The critics said that it was a bail out for buyers by putting the market at jeopardy. Republican Rep. John Kline criticized the bill for doing ‘little to address the current foreclosure problems’. The market should be allowed to find its level. However he did not oppose other forms of assistance. Walz stressed on voluntary moves between lenders and borrowers. He did not want the blame game to sling mud at each other. His contention was that since the forest is already on fire something should be immediately done before arguing about who started it. The problem should be tackled keeping in view the interests of the borrowers, the mortgage industry as well as the market.

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In the animal world a new terminology has made its debut to announce the arrival of a novel species – the Foreclosure Pet.

When foreclosure victims leave with bag and baggage, more often than not they leave behind their pets. Realtors and those engaged to haul junk come across more and more pets left behind in closed houses. Animal lovers are trying to find a solution. The evicted persons often do not bother to call the animal care societies. Some just leave ripped open a packet of dog food, a bowl of water and a prayer.

The Humane Society has engaged two Harris County constables to handle cases of animal cruelty. The two have their hands full tackling cases of Foreclosure Pets. There are so many cases that it takes a long time for the duo to respond to the calls. The first to arrive after the departure of the ex-owners are the junk haulers, real estate personnel, bank representatives and curious neighbours. They lack neither the will nor the interest to do something about the hapless quadrupeds.

The evicted owners try to justify their movements by saying that they would be coming back for the pets the following day. Society has to step in when a living creature is kept locked in without any means of survival – without being given a chance to survive.

Animal related problems have always been there but the latest foreclosure issue has made the situation go out of hand. The animals are found either chained or running around loose. People are suffering financially but that cannot excuse this sort of horrendous cruelty to those who share the planet with man.

The Humane Society and the two constables have not been able to keep track of the numbers found in foreclosed houses. These are simply listed as abandoned. It is difficult to prove that there was malice involved in this sort of behaviour. No charges could be brought against owners who left their boxer chained to a tree in the backyard and another who kept a Labrador tied to a water tap. Constable Timmers had found 15 dead animals; they must have died a slow death. In each of those instances cases were successfully filed.

Most of the pets found are in poor health condition. Efforts are made to nurse them back to normalcy and arrange for adoption. Nevertheless the problem is so acute that about 15% have had to be euthanized.

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By getting temporary freeze, Philadelphia has bared its fangs and is one up in the battle against foreclosures. The City Council allowed for enforcement of moratorium on house mortgages. The sales scheduled for April auctions were put off, said Curtis Jones, a city council person. He was one of the sponsors for the resolution and says that now his aim is to suspend the court auctions indefinitely. Economic justice is imperative so that people do not get thrown out of houses that are their homes.

The council legislation however is non-binding. It aims to give the residents time to work out alternatives with lenders. The Sheriff John Green as well as the Common Pleas Court President, Judge Darnell Jones gave their support for it to be implemented.

The legislation is not without precedent. In 2004 the City Council had called for the Sheriff’s intervention when 1,120 units were up for foreclosure sale. A stay was granted on the sales in Philadelphia. At the same time the Pennsylvania Department of Banking conducted a survey across the state. It was this study that has led to the passing of the legislation putting a hold on foreclosures.

In 1983 in another instance, the then Sheriff – Joseph Sullivan had successfully got a one year stay on approximately 300 units that were ready to be auctioned in the court.

A report released by ACORN says that 3,206 risky loans contracted in 2006 are likely to face foreclosure. Ian Phillips of ACORN commented that there is a difference between the suggested moratoriums this time and the previous ones. The former is the result of predatory lending and not a product of recession-like conditions. Considering the nature of the crisis strong intervention is necessary.

However Robert Levy of Mortgage Bankers Association of Pennsylvania holds a different view. He contended that it would drive the city lenders out and hike interest rates because of the risk involved regarding intervention from the authorities. In the long run this ‘onerous methodology’ will cause serious harm to the system. It is inevitable that this will take place when lenders are prevented from realizing their dues. Levy hastened to add that the association is keen to be involved in community programmes for financial education and counseling. He would also try to prevent the banks from leaving the Commonwealth of Pennsylvania as a reaction to these consumer protection efforts.

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The raging foreclosure crisis has put pet owners in a tight corner. The shelter and rescue organizations for animals are facing increased pressure, as more pets are being abandoned or surrendered by the foreclosed owners. The suffering animals have come to be termed ‘foreclosure pets’. Some are left behind either outside or trapped inside the doomed house. Few have been thoughtfully brought over to the local animal shelters. Under the changed circumstances the evicted persons neither have the will nor the power to continue to care for their pets.

Sarah Swanty of Fort Collins Cat Rescue comments that ‘those people really have no choice’ as they have lost the houses that were their homes. The number of cases are sharply increasing and keeping pace with the increase in foreclosures.

The Larimer Humane Society has not been particular about keeping specific records of pets abandoned because of foreclosures. Usually the reasons cited are ‘moving’. The people do not want to elaborate further most probably out of a sense of shame. It is the economy that is behind this deluge and the dumb creatures are paying for it. The responsibility for caring for these animals has shifted to the non-profit animal caring societies. But the latter have neither the infrastructure nor the funds to manage the increasing pressure of work.

It is difficult to find homes for the pets, as the economic condition makes few willing to come forward and adopt a pet. The older the age of the pet the more acute is the problem considering medical expenses. The animals that are over the age of two take a longer time to be adopted. Generally the potential pet owners prefer the sweet cuddly young ones rather than mature cats and dogs that have a mind of their own and cannot forget the past. An agonized Swanty said ‘it’s devastating when people with 13 year old pets call and want to get rid of them.’ Nobody wants to take on the responsibility of an old cat. Yet Swanty’s organization does not undertake mercy killing.

It is the same story across the country. Everywhere the animal shelters and like-minded organizations are facing the same problem. March and April found the least number of potential adopters. It has never been quite so low. Funds too were not forthcoming. Swanty is worried whether For Collins Cat Rescue will live through its second birthday.

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South Bay foreclosure figures are alarming. The question is – how much more can this region take? Statistics show that on each average working day there are 1,038 foreclosure related auctions. In April Santa Clara County recorded 500 postings – this being a 47% hike from the previous month of March 2008 and a 585 jump from April 2007. The county now ranks 40th in March this year among the counties in California a regards foreclosures per capita. Loans worth $292.4 million were foreclosed upon last March.
Foreclosure is a judicial process. Of late it has hit the headlines because of the alarming increase in numbers. When a borrower defaults a notice is sent regarding foreclosure. The county records office is also intimated. If after about four months the borrower is unable to become current in mortgage dues then an auction sale is conducted at the courthouse. For last year or so the houses are not being sold at the public auctions and are reverting back to the bankers. The latter are offering huge discounts but even that is not letting the ball start rolling in the real estate market.
In Santa Clara on an average 15% discount is being offered at the auctions. It means that if the previous owner owed the bank $400,000 the bank isnow willing to settle the matter for $340,000. Increase in default notices point to escalation of the foreclosure crisis. It is definitely not petering off. In April there were 44,101 notices in the state. It was an increase of 14% from January 2008. The lenders are now more often agreeing to short sales for a quick settlement of the matter without going through the whole process of foreclosures. A short sale takes place when the lender allows the borrower to sell the house even though the value of the house is less than the loan amount. However the process of short sale involving approvals from the lenders is painstakingly slow. Invariably the borrowers complain that they have managed to find a buyer in these difficult days but the approval has not come through. So the deal is put off. The lenders complain that they are deluged with such requests and do not have the infrastructure to deal with it swiftly. Each one is a specific case and has to be handled accordingly. The best way is to seek refinancing and modification so that the borrower can continue to stay in the house that is the home.

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More and more personal stories are tumbling in to show that despite anticipations more lenders are failing to stop foreclosures. The companies do not have the infrastructure to handle the sudden increase in volume of work.

Thomas and Tracy Barboza are just one of many who are suffering. Three times they found an escape route from foreclosure but three times their lender failed expectations. Finding it impossible to continue with their mortgage the Barbozas are trying to sell their house. Since last summer they have got three offers. The offers are however less than the mortgage amount. This made their lender – Countrywide, refuse to write off a part of the loan and allow the sale. The couple has already moved to a sparse flat ready for the sale. But things are not maturing. Thousands of others like them are in the same boat. The lenders remain adamant and unrelenting.

On the other hand the loan companies complain that they do not have the infrastructure to deal with thousands of negotiations and appeals for short sales. This is one of the reasons for their silence, which may be interpreted as refusal. Those affected in and involved in the matter like the house owners and realtors compare this to a black hole; the system just cannot be cracked and everything is sucked into it. Automated phone calls cannot be penetrated and callers are made to wait for hours. Inside the company paper work is piling up and those dealing with the matter do not have the final authority to make a decision.

The American Securitization Forum that comprises of mortgage holders and companies in the loan servicing business, say that all steps are being taken to address the issue. The problem is that nothing can be steam rolled as each case is specific and needs individual attention. Some loan companies have introduced online application forms. Nevertheless short sales pose specific problems, as it would mean waiving a chunk of the principal loan. This could be something around $100,000. First and second mortgages on the same property further complicates matters.

But consumer groups say that rejecting a short sale offer is something positive and cannot be explained away easily. Countrywide has now agreed to expedite the matter of short sale. The firm has apologized to the Barbozas but as yet the couple has not got a positive reply.

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Foreclosures are gobbling up exclusive towns – not even the sophisticated exclusive ones like Nantucket, Edgartown and Weston. This shows that the foreclosure debacle in Massachusetts is going further downhill. Today some the richest towns are being bitten by the foreclosure bug. The sky jump in these areas is more than the average of the state.

Massachusetts’s foreclosures have risen by 37% in the first quarter compared to the same period in 2007. The exclusive zones of the state have caught up late with the foreclosure crisis. The buyers who purchased ritzy villas or gated accommodations in the exclusive zip codes are now struggling to meet mortgage payments like the others in the state. This is further weakening the economy and causing real estate markets to tumble. There are no boundaries anymore. Foreclosure the great leveler is hard at work. Jeremy Shapiro opines that ‘communities rich and poor, urban and suburban and rural are all being impacted.’

In the forefront are towns with triple digit jumps – Belmont, Oak Bluffs and Nahant with 200%, 217% and 240% spikes respectively. Many rich suburban towns are also entering the club of Bay State communities of 25 members where the foreclosure rates have doubled. On the islands foreclosure numbers skyrocketed in Edgartown, Tisbury and Nantucket by 100%, 150% and 113% respectively. In some of the fancy western suburbs there were dramatic increases in foreclosures. In Medfield, Boxboro and Weston it increased by 114%, 144% and 138% respectively.

With the sliding down of the general economy and especially the real estate market even the wealthy are finding it difficult to wiggle out of the foreclosure net. To add insult to injury there are numerous job losses. The alternative of selling the house and escaping the ignominy of foreclosure is no longer available. The loan amount, more often than not, is greater than the fallen value of the mortgaged property. At the root of the problem is the real estate slump.

There is talk that those investing in real estate might avail of a rare opportunity on student rentals in Boston. In the two neighbourhoods of Allston and Fenway, packed with students, 518 apartments and 24 properties are up for grabs. The sale of so many is raising eyebrows. With rents at an all time high it is feared that the investors are out to put on the squeeze taking advantage of foreclosed victims searching for houses.

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