Archive for the ‘Foreclosure Victims’ Category

The Secretary of US Treasury, Henry Paulson came forward with a plan to tackle foreclosures. According to it more than 200,000 borrowers will get notices from lenders hinting at renegotiating with new terms. Any borrower who has missed one payment commitment will get a single page letter from HOPE NOW. It is a Treasury sponsored move. The letters will be sent off from 19th November containing a connecting telephone number for house owners to avail of.

Paulson had said during the first week of October that mortgage firms, counselors and trade groups were coming together under one umbrella to help hard pressed borrowers about to lose their houses. The announcement last Wednesday can be interpreted as a move on the part of the authorities showing their commitment to the matter.

The real estate market continues to fall dragging down with it the housing and mortgage sectors. Over the next year and a half innumerable sub-prime borrowers will get notices for increase in interest rates. Paulson is worried after a discussion with members of the loan sector. Merrill Lynch, one of the big names in this category, apprehends that a quarter of all sub-prime loans will fall into default and wipe out $4,146 billion worth of property value during the next few years.

Despite a lot of noise from the government and social service groups only 1% of the wobbly sub-prime loans were altered from January to September this year. Consumer groups are far from happy with this token move and expect far more dynamism and proactive approach towards helping foreclosure victims.

It is to the interest of all to co-operate and try to get out of this foreclosure mess. The move is prudent taking into account the welfare of all concerned. The numbers of foreclosures have run into millions causing the government to sit up. Thousands of disgruntled people are suddenly out under the open sky desperately trying to hole in somewhere. This is putting a strain on government run shelters. Entire neighborhoods dotted with ‘For Sale’ signs is being taken over by overgrown gardens, stagnant pools and dangerous vagrants. Government coffers are jingling empty with nobody to pay property taxes. On the other hand with so many houses begging to be sold there are not enough buyers. Who will buy when the mortgage companies do not have funds coming in from loan repayment dues?

Government help with Foreclosures: Search US Foreclosures by top States:

• Texas Foreclosures
• Georgia Foreclosures
• Florida Foreclosures
• Michigan Foreclosures
• Colorado Foreclosures

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It is shocking but true that till date tax laws prescribed that savings on a foreclosure is taxable income. For instance, if a house with a mortgage of $140,000 is sold for $100,000 then the difference will attract taxes. It is a double slap for foreclosure victims undergoing the trauma of having lost their hearths and homes – robbing them of any chance to stand on their feet once more. A savings of $40,000 means paying $6,000 or $10,000 as taxes – an amount one could ill afford at this point of their lives. To plug this discrepancy the Foreclosure Relief Act was introduced.

The bill was well received by both sides of the net. With foreclosures continuing to be on the rise all are well aware of the impact of such an important measure on the electorate. House Resolution was introduced earlier in September through the House Ways and Means Committee. Most of the provisions have not gone through the final hurdle as yet – but hope is there that it will.

Those whose annual income is more than $100,000, those who have rented out the property in dispute, those with second or vacation houses will not be eligible for the tax relief. Only those who really need it will benefit. The wealthy will not gain from it. It is only for families who live in their houses.

Ohio, topping the list of foreclosures is likely to be most affected by this measure. The number of foreclosures is indicative of its economic health. Manufacturing has been badly affected in this region. Jobs have gone to developing countries where rules are different. The foreclosure points to the larger background of lack of foresight in the country’s trade policies and lending practices as well. The sub-prime category of mortgages is primarily to blame.

Another important factor is that the people are not financially educated and do not know what mortgages actually imply. The language should not be couched in legal jargon but should be more understandable for the common man.

The Senate will vote the Bill on whether another version of it might be considered for review. A Conference Committee will discuss the two versions before being forwarded to the President for enforcement. If all those steps are taken then the bill will come into force including 2007 as the tax year.

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Ted Strickland, the Governor of Ohio has strongly appealed to non-profit community organizations to sort out the muddle in the foreclosure crisis. His speech was the focus in the annual conference of Ohio’s Community Development Corporation held in Quaker Square at Crown Plaza Hotel at the end of the week. The organization has always been working at the grass roots level in the entire locality. It is their experience and knowledge that is best suited to chalk out a plan of action, said Strickland. Right now the community desperately needs help. These bodies committed to the development of the community are non-profit groups have their base in the locality. They reach out to the low and medium income group.

The conference started on Tuesday and included in its programme workshops on affordable housing projects, lending on payday, rapacious lending practices, prevention of foreclosure and also safety measures for the entire neighbourhood and locality. Strickland underlined the fact that the present crisis has never before happened and therefore SOS teams at all levels of the administration must immediately gear up for prompt and effective action. The exploits must filter down to each blade of grass that has been pressed under by the foreclosure steamroller. It must start from the federal level and then climb down to all the lower branches and points.

Earlier in September the Ohio Foreclosure Prevention Task Force made 27 suggestions meant for borrowers, lenders and consumer counseling groups. The call was given to government self-help teams and local bodies asking them for their intervention. The lenders and loan service providers were told to find out viable avenues of escape without harming anybody.

Governor Strickland’s administration has set up an office for urban development and its related infrastructure. The purpose is to directly link the state government with mayors, members of the city council and city planners. This would lead to more cohesive action. The office would be able to point out to the state government the specific gray areas relating to promoting jobs and improvement in the overall infrastructure. Strickland was very categorical and forthright in his speech saying the revitalizing is not just pushing on the old to chug along but is about creating an atmosphere where the people will want to stay and continue to live lighting the fires of their homes and hearts.

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Last Friday President Bush took a positive step in sending a cabinet colleague to Chicago. This was part of a programme to lessen the number of people being made homeless because of the foreclosures. Last year in Chicago alone more than 18,000 house owners were adversely affected. From a report released by CBS 2’s it is learnt that $27 million is being granted to community groups all around the country to help besieged householders.

In 2002 Regina Garrett set up her home in the first house she ever owned. But within two years she was on the verge of losing it. She lost her job and fell behind in one monthly mortgage payment. To make matters worse her stars were against for because it was at this critical juncture that interest rates shot up from $900 to $1,200. Foreclosure hung over her head. Desperate Regina began to lose her cool and sank into a traumatic state of confusion. By chance a well wisher asked her to knock on the doors of Neighborhood Housing Services of Chicago. She was now advised and able to negotiate new terms with the lender and save her roof. She availed of a loan from the agency to rehabilitate her house. Words fail Regina when she wants to express her thanks to them for standing beside her in her hour of need.

There are many Reginas in the state who are now benefiting from the programme. U.S Treasurer Henry Paulson opined that the primary message he has for the victims is that at the first sign of stumbling immediately contact counselors. The government wants more success stories like that of Regina to make the rounds. There are about 60 counseling agencies like Neighborhood Housing across the country with whom the $27million will be distributed for the express purpose of helping the unfortunate borrowers of housing loans.

Jim Wheaton, a spokesperson of Neighborhood Housing Services of Chicago said that using discretionary powers, in specific cases a small loan would be advanced for reinstating mortgages. These would be for those who had lost jobs or undergone a tragedy like illness or death in the family. Anybody threatened by foreclosure can apply for a credit of $10,000. The uniqueness of this loan is that one need not have to repay until the property has been transferred, refinanced or sold.

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According to a survey in 2006 Detroit recorded the highest high-cost mortgages in the previous year. A community activist organization, Acorn, has been studying in depth the fall out of mortgages. They have concluded that relatively more Afro-American and Hispanic borrowers have been victims of high-cost mortgage schemes in comparison to the whites. Thus more of the minorities are buckling under the pressure of increased mortgages and losing their houses. The Association of Community Organizations for Reform Now (ACORN) has a website of its own and caters to the needs of low and medium income groups.

The study has been conducted on 172 American cities. Afro-Americans are 2.7 times and Hispanics 2.3 times more susceptible to avail of high cost loans than the whites. These minorities were also more prone to get high-cost refinancing loans – Afro-Americans 1.8 times and Latinos 1.4 times.

68 of the 178 cities had the same story to tell. On an average one out of three loans fell under the high-cost category with the interest being reset at a higher level. The high cost loans clustered around Detroit, Laredo, Texas, Mcallen, Jackson and others.

The president of Acorn, Maude Hurd is of the opinion that it was because the minorities had less chance than their white brothers to avail of prime loans that they had no alternative but to opt for the sub-prime category. The irony is that it is this deprived group that needs the maximum help to live under their own roof.

Foreclosure listings are increasing by the day with more areas falling under its grip. Owners are helpless sandwiched between rising interests and falling property prices, which in turn affects equity. Acorn is keeping regular tabs and releasing regularly its findings. Acorn scrutinized facts detailed in 2006 availing of the Home Mortgage Disclosure Act. According to the latter (HMDA) lenders have to state the race, gender and census tract of their borrowers. From this it can be estimated whether the loan fell under the sub-prime or high-cost category. Information was got about 363 lenders. It represented 68.5% of all mortgages (residential units) that started off in 2006 and 50.5% of the sub-prime category. These facts were the materials for study.

According to Acorn loans having a percentage rate of a minimum of 3% per annum above the rate on US securities fall under the high-cost category.

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