Archive for the ‘Foreclosure Crisis’ Category

With the surging waves showing no signs of receding, New Yorkers continue to be hemmed in by foreclosure crisis. It is alleged that fraudulent sub-prime mortgage lending has led to this meltdown. Each single foreclosure has a snowballing effect and affects the surrounding neighbourhood – its environment and property values.

Foreclosures are a costly judicial process. It is more profitable for the lenders, in this critical situation, to keep the borrowers in the houses that are their homes, so that they can continue to pay monthly dues. Abandoned properties become a headache for municipalities as these attract crime and disease.

The State Legislature has come forth with specific plans to help the foreclosure victims in New York. Last year there were about 3,000 foreclosure postings in Erie County. The findings of The Western New York Law Center show that 20% of these postings are related to the sub-prime adjustable rate mortgages. To see that that the laws are finally passed the two parties must be jointly committed rising above petty politics. The governor’s plan has a good framework that should be acceptable to all. It entails the sending of timely foreclosure notice to the borrowers, who are then to contact housing counselors. The latter will be able to guide them through the negotiating process. The new law will make it mandatory for lenders and borrowers to sit across the table in the initial stages of the process.

So far it has often been the case that the proper authority with whom negotiation can be done remains unidentified. But now it becomes compulsory that the appropriate person or authorized persons must do the talking without prevaricating. Lenders have complained that the foreclosure operation is too lengthy and a quicker way out would be welcomes. In Erie County the foreclosure process takes 135 days to run through its full course. The governor’s bill addresses all the issues in detail

A Wall Street Journal reports that by the latter end of 2006, about 61% of the sub-prime loans had gone into foreclosure. But most of the borrowers had enough credit scores to enable them to opt for conventional loans having better terms. It is generally understood that the lender will consider the repayment ability of the borrower after the expiry of the ‘teaser’ rates. It is the duty of the lender to see to the interests of the borrower and not to try to trip him or her anyhow and somehow.

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According to a recent report, “The Impact of the Mortgage Crisis on Children\”(http://www.firstfocus.net/pages/3401/) written by Philip Lovell and Julia Isaacs, 2 million American children will be directly affected by the subprime mortgage crisis as the foreclosure crisis swallows up their houses. The report shows that about 504,600 Latino children, 281,200 African American children, and 1.166 million white/other children will be directly affected by this mortgage crisis. The total number is 1.952 million children. These figures are expected to shoot up if the other populations are counted- kids whose parents default of conventional loans and children who are being forced out of their rented houses. It is predicted that these will take place in 2008 and 2009.

As Bruce Lesley correctly said, a lot is heard about how the stock market and nation’s economy is affected by the mortgage crisis but there is little or none heard about how the children are widely affected by the foreclosure crisis. As a result of foreclosures, children not only lose their homes, but they are also deprived access to certain services and their schools. Their physical and mental are also widely affected along with their education.

The above report also shows that the foreclosure often affects a child’s education and health – both physical and mental. Also, the foreclosures give way to certain behavioural problems in children who have been forced out of their neighbourhoods, as positive peer relationships disintegrate. The report finds show that the displaced children’s health is severely affected since their families can no longer pay for services such as health care and health insurance. Besides, they experience a wide range of behavioural problems, becoming more violent. The children forced out of their homes are liable to too much mobility. As a result, only half are likely to be proficient in reading as their peers. Some are held back and they finally drop out of school. The schools are also affected. Many children camp in the classrooms, homeless because of this mortgage crisis.

Lesley correctly pointed out that the federal government seeks to solve this foreclosure crisis by cutting down interest rates and take other suitable actions. But what they also need to do is shift their attention to the children who are getting affected. If no further steps are taken, the children will continue to be affected and this will leave big scars in their lives.

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In a statement the former mayor of Cleveland George Voinovich expressed his grave anguished concern for the ongoing foreclosure crisis in US. He is a senator from Ohio (R-Cleveland) and a former Governor.

He is especially concerned about the repercussions of the foreclosure crisis. Cleveland is his hometown and it is one of the worst affected zones. In his own locality three houses have been abandoned in front of his eyes – the owners have walked away leaving the properties to the mercy of vandals.

He had pitched in with others to revitalize the region with new sidewalks and saw to the repairs and maintenance works. For house construction he initiated a special tax abatement incentive. Now foreclosure clouds darken these same regions. One such locality is Slavic Village. It has the dubious distinction of ranking first in the foreclosure race. So on a very personal level he understands and realizes the sting of the foreclosure tornado that is sweeping through Ohio.
According to latest reports released by Mortgage Banker’s Association the foreclosure crisis is at its worst with Ohio being one of the hardest hit by it. It stands first with 3.72% of the loans slipping into foreclosures. The new law will allow three-year exception to the matter of debt forgiveness on house loans. There is also a clause that allows house owners to deduct mortgage insurance payments from taxable income.

An overwhelming majority by the House passed the second law, Expanding American Homeownership Act. By it Federal Housing Administration loan limits have been increased so that those facing foreclosures or resetting of interest rates will be easily able to refinance and move into safer harbours. The minor differences between the House and Senate bills will be ironed out and sent for the President’s signature in December.

The bill will give a fillip to the real estate market by bringing down the down payment condition from 3% to 1.5%. Consequently millions of Americans for the first time will get an opportunity to have a house of their own. This law also envisages a new counseling programme that will benefit those in the low and middle-income bracket.

Both pieces of legislation will be tools in the hand of the individual to preserve the sanctity and security of the home and the neighbourhood. There are still things to be done but a beginning has been made.

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Bush has given his signature on mortgage legislation, which aims to give financial relief to foreclosure victims. Hitherto if a mortgage debt was forgiven then it was considered to be income as it was taken to be a gain. But that will no longer be applicable – forgiven debts will not be taxed. Bush said that one is ‘worried about making’ payments. Higher taxes are insulting. Bush hopes that this step will make it a happy holiday season for the house owners threatened by foreclosures. The step is not without hiccups. It will cause the government loss of revenue running into millions but that will be offset by putting a limit to tax holidays enjoyed by owners who sold second houses.

The mortgage crisis, which came into focus last spring, threw a cloud over the economy. Foreclosures rode rough shod over the country. Its pace has not been brought under control yet. The bill was the government’s reaction to the imperative crisis that just could not be ignored considering the huge number of foreclosures. It is not just the borrowers – many lenders have downed shutters and investors are badly hit with jumbo losses.

It is calculated that about 2.5 million adjustable-rate mortgages valued to be worth approximately $600 billion is ready to jump to a higher niche This will make it impossible for many to keep the mortgage running. Inevitably they will be served foreclosure notices. That does not bode well for society at large and the economy in general.

The loan culture has landed the country in this situation. It is being exported across the globe too. Some had reasoned that loans would allow money to enter the market, push up sales and make everybody happy. Today it has made everybody unhappy – and not just the borrowers. Those evicted from foreclosed houses do not vanish into thin air – they crowd around rental accommodation or put up at state run homes. That puts a pressure on state funds. The disgruntled section – a huge chunk – is not good for the health of any society. Too many houses tagged by foreclosures have resulted in a glut in the real estate market. Buyers are hard to get. Often the value of the house is less than the lien on it. The abandoned houses attract criminals as well as snakes, frogs, algae and mosquitoes. Disease has already started to take toll.

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The local and state governments will be gathering down for the budget session for the fiscal years 2008-09. But they are in a tizzy and huddling together over the newsbreak that foreclosures will soon seep into the smaller communities. This will worsen the situation with another 1.4 million houses being caught in the foreclosure net. Real estate prices are expected to fall further.

The worst affected are Florida and California – the two states that lapped in the luxury of escalating housing prices during the boom. The Associated Press reports that the Global Insight, an economic consulting firm, had compiled a study for the US Conference of Mayors that held a meeting in Detroit last week. The focus was on the foreclosure crisis and its related problems of crime and misery in the locality. The foreclosure net is spreading to include the general economy, according to some of the mayors. It is telling on the social fabric by breaking the backbone of society – the families.

Global Insight apprehends that property values will dip by $1.2 trillion in the coming year. California will account for half the figure. Here prices will go down by 16% whereas in the rest the drop will be by 7%.

The problem is from the drinking of a witch’s brew consisting of lending to high-risk borrowers in the sub-prime mortgage category. Now the poison is beginning to work and spreading like toxic fumes over all who made and took the drink and hapless bystanders also. With interests doubling, the borrowers just cannot manage. The inevitable result is foreclosure.

Politicians and lenders are in a scramble to help borrowers – in an attempt to save their own skins. ACORN – Association of Community Organizations for Reform Now is a consumer advocacy group operating across the county. It has recommended three suggestions to the mayors. Firstly to make the lenders agree to a 30 year fixed rate loan by modifying the existing loan so as to make the loan affordable to the borrowers. Secondly to finance counseling so that vulnerable families can be assisted and thirdly to call a moratorium on ongoing foreclosures.

Given the present scenario it is to everybody’s interest to halt the dreaded forward march of foreclosures. That includes the federal government, as overzealous lenders have been primarily responsible for this catastrophe. However the communities should be cautious about any tax-payer-subsidized plans.

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As part of taking corrective action on the foreclosure problem plaguing the State and for collecting tangible evidence from the Mortgaging companies indulging in malpractices, officials served subpoenas on these companies yesterday. The non-cooperative attitude of the mortgage lenders in sorting out the problem loans, rather than subjecting the properties under foreclosure, as envisaged by the State, warranted this legal action and taken them by surprise.
The subpoenas are issued in the course of seeking evidence on violation of consumer protection laws by indulging in anti-trust, infringement of civil rights etc. by the multiple companies of mortgage industry in multiple levels as well and more than a dozen of them have been served. The specific details of the subpoenas are not made public by the office of the Attorney General yet.

In the meantime, Mortgage Bankers Association, which represents some of the nation’s largest mortgage lenders and its Ohio branch has called for a summit with a view to have a “a frank and open dialogue” on the issue, to be attended by its members, Governor Ted Strickland and other state officials concerned.

In the absence of any lender forthcoming to sign a “compact plan” to address the problems of loan repayment instead of going in for foreclosure, as suggested by Gov. Strickland, there was an alternative plan put forth by Ohio Mortgage Bankers Association on behalf of its members this week. Eventually this is rejected by the Governor as not coming from the individual banks and also lacking in specific details.

According to the spokesman for the office of the Governor, there is no likelihood of the summit happening, in spite of the Governor being ready to talk with the lenders with an open mind. It was further informed that in April, the Governor met with 11 top sub-prime lenders and convened a foreclosure task force consisting of government officials, financial industry representatives and people from non-profit service organizations towards addressing the crisis of growing foreclosures in the State. The spokesman further justified the present action taken in view of the trade association’s request is not meeting the standards for a serious and meaningful commitment emanating from its members that can help Ohioans keep their homes saved from foreclosures.

The statistics on the sufferings of Ohioans is so glaring that according to prominent real estate sources, there are thousands of Ohioans continuing to forfeit their homes to foreclosure and in the third quarter of this year Ohio State ranked 5th in the nation on the rate of foreclosures. As many as 46,818 housing properties went into foreclosure, indicating one foreclosure filing for every 107 households, during that period.

The main reason being the adjustable rates of interest on sub-prime mortgage loans, which escalate rapidly in the subsequent years of repayment to the tune of hundreds of dollars more on monthly installments as against what the homeowners believed to be paying in the initial years of the mortgage loan.

Notably one of the largest holders of sub-prime mortgages in Ohio, Washington Mutual, a Seattle-based bank is among those lenders refused to agree with the plan of the Governor and they say they have a plan of their own, started this spring to help preventing foreclosures.
Ohio bankers association in a statement regretted the attitude of its mortgage serving members in not finalizing a mutually acceptable compact agreement and hoped that some progress is in the making.

Investigation on erring mortgage lenders’ activities is going on increasingly in a number of States. The Government sponsored lenders Fannie Mae and ‘Freddie Mac have not also been spared and subpoenas are announced by the New York Attorney General this week to investigate into the home appraisal practices. Ohio has gone forward as the first State to issue subpoenas directly to the sub-prime lenders and it is appreciated by the observers in the economic field.

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Foreclosures have become a socio-economic problem of jumbo proportions. Local groups have been formed supported by the government, to involve lenders in a more proactive manner but the latter are only talking – not doing anything. Of the borrowers 57% bow to foreclosures and 33% to short sales when they are unable to meet rising mortgage costs. Lenders have been approached to negotiate but they agree to only short-term solutions, which does not touch the core of the problem.

The Community Housing Development Corporation of North Richmond is busy with foreclosure related activity. One counselor opines that the lender offers repayment plans but is reluctant about modifying loans. They are asking for the impossible. If the borrowers had that kind of money they would not have been in this foreclosure soup. With cash gone and credit card scratched off how will the borrower talk? The monthly average is that out of 50/60 coming with hope only 10 see the light of day. For the others it is the inevitable foreclosure.

A report given out by California Reinvestment Coalition was important because it triggered off a debate and focused on the ambivalent role of the lender in this foreclosure crisis. The general opinion is the lenders can do much more than what they are doing now. The Coalition scrutinized 33 certified housing agencies in California, which had attended to about 9,8000 customers personally in August. Only 1% of the sub-prime loans got modified.

The mortgage industry does not agree with these findings. At the root is the point that lenders do not benefit from opting for the foreclosure process. Each case of default is individual specific and no rule of thumb applies to all. It requires going through details and working out matters from person to person. Previously except for a death, divorce or job loss such considerations of workouts never arose. Some of the lenders complain that in the previous year 30% of those who went into foreclosure did so without even contacting the lenders.

Lenders have become part of HOPE NOW that is working in collusion with the federal government to reach out to the hapless borrowers around whose necks the noose of foreclosures are tightening. Bank of America stated that since they are not in the sub-prime business they have not been much affected by the foreclosure crisis.

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Following the footsteps of foreclosure woes are scammers wearing rescue masks – out to dupe the vulnerable. They pick the bones clean leaving nothing but despair and hopelessness.
Jon Richards (D-Milwaukeee) compares the situation to a lifeline being turned into a noose to throttle the foreclosure victims. Together with Senator Jim Sullivan (D-Wauwatosa) Richards introduced the Homeowner Protection Act that will make it a criminal act to obtain property deed by deceit and falsehood.

At the root of the foreclosure rescue move is the re-conveyance contract. By it the title is transferred to the person posing as rescuer. The borrower is made to believe that this is the only way he can save the house. But the terms are couched in deceit and too late the ex-owner realizes that he has been taken for a ride. A representative of the Legal Aid Society opines that so far there has not come been a single instance of an ex-owner regaining lost ground via the rescue-scam route.

Milwaukee County was the happy hunting ground for sub-prime predatory lenders. Today it shares with the nation the rising rate in property foreclosures. A couple of vultures are now looking around to muddle up the mess further.

The new law is intended to rope in foreclosure scammers and send out warning signals. According to its tenets the owners must get a contract in writing with the right to cancel it within 5 days. Repayment is to be planned according to the ability of the owner. Any form of deceit undertaken to close the deal will amount to fraud. The idea is to protect owners from eviction and for this any complaint will primarily lead to delay in the process. The penalties that will be imposed on foreclosure scammers will be stiff – a fine up to $10,000 with the responsibility of paying for 150% of the damages. This package comes may come with the bonus of a visit to the jail.

More and more incidents of fraud are coming up leading to falling housing conditions. With resetting looming large more foreclosure listings are anticipated. This year the number of foreclosures may well reach 5,000. Since 2002 The Metropolitan Milwaukee Fair Housing Council has stumbled upon 800 loans that raise questions.
The bill is comprehensive and because of strong public feeling will in all probability it will pass through without a hitch.

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