Archive for the ‘Foreclosures’ Category

Reports coming in from Ohio show that the tenants are the silent victims of the foreclosure crisis. Their voices remain unheard. The income of the ordinary people is also going down because of the foreclosure tornado.

With more and more people being evicted from their houses the demand for rented accommodation has gone up. A recent survey shows that tenants now occupy 30% of all the residential properties. Another reading shows that the income of Ohioans is going down. Tenants have few legal rights and are at the mercy of unscrupulous landlords as well as scammers.

In Cuyahoga County foreclosure filings are rising according to the findings of Policy Matters Ohio. The study is mainly concentrated in Cuyahoga County. It is a non-profit body without any party affiliations delving in economic research. Residential foreclosures increased by 8% from 2007. The number of foreclosed houses occupied by tenants also increased but at a higher rate than the previous category. Renters occupied 30% of the residential properties that were posted in 2007.

Tenants comprise of over a third of the population of Cuyahoga County. They suffer the same trauma as the owners occupying houses but with less focus and fewer avenues of redress or escape. They are not considered to be part of the foreclosure process.

Most of the families are hardly given any decent time before being asked to vacate. To shift suddenly they have to incur significant expenses. It dramatically changes their lifestyle. They usually lose their security deposits and have to pay higher rents for the next shelter and suffer the attendant costs of shifting and storage. For the average family it calculates to $2,500. A rough estimate is that tenants have suffered in all, losses amounting to $10 million.

Over 35% of the foreclosure postings of Cleveland counting to 2,586 and East Cleveland counting to 175 are related to rented houses. Most of the houses in the inner-ring suburbs suffered considerable rise in tenanted foreclosure listings. Report from Cleveland Housing Court show that number of houses being foreclosed having tenants have doubled.

The report suggests enacting of laws for the protection of renters at the state and federal level. Proper and timely notice should be made compulsory. Loans (with no or negligible interest) should be made available for renters to be able to shift and set up home again. The banks should focus on incentives rather than evictions.

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Statistical evidence shows that over half of all Black borrowers who refinance in 2006 were made to swallow sub-prime mortgages. Latino borrowers faced a similar situation. Together they will suffer a loss ranging from $164 billion to $213 billion in the surging tide of foreclosures that have been wrecking havoc since that time.

Each family has a tragic tale to tell – individual and personal that is far more damaging than figures and numbers. The agony cannot be gauged by statistics alone.
A staggering number of people were sold sub-prime loans.

One woman whose literacy level did not permit her to understand the nitty-gritty of mortgage ins and outs. An agent sold her a string of refinancing loans that summed up to more than $100,000. Now the house she bought in the 70’s is going to be lost.

The unethical brokers sniffed out people who for generations never had the chance to build up a good credit record. They were told that a godsend chance had come for them to turn their equity to advantage. Some people are skeptical about the high talk of banks and lenders. But many others tended to trust them and the image they represent. They believed that the lending institutions have the best interests of the borrowers uppermost in their minds. It is this trust betrayed of the Hispanic and Afro-American neighbourhoods that the lenders betrayed.

Many who rose to the bait are now in the foreclosure net. They continue to have a guilty feeling of having done something wrong. This negative bent of mind is very important to the lender community because it prevents the victims from retaliating.
The foreclosure victims are traumatized into inaction.

To Afro-Americans the equity on the house is a very important thing – it is part of real wealth. There is no denying that a huge wealth gap exists between the black and while Americans. The lenders steered the minorities into high-risk loans in a very subtle way with the Judases among the Blacks who captured their prey in Black churches and meets.

Although the Afro-Americans and Hispanics will absorb about half the economic loss due to foreclosures they are definitely not half of all those who borrowed. The Black borrowers ranging from all economic levels were two to three times more likely to be saddled with sub-prime loans than the Whites.

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The surging foreclosures have deeply concerned the Federal Reserve Bank. Its San Francisco president, Janet Yellen has taken grave note of the impact on the foreclosures on families and localities. She was speaking at a conference in Los Angeles regarding community stabilization problems following the foreclosure crisis.
She said the swift pace of rising foreclosures has had a snowballing effect on not just the immediate locality but on the general economy of America.

She continued that the country is facing severe challenges from foreclosures accompanied by credit crunch and record breaking fuel and food prices. It is imperative that at this juncture the policy makers will have to carefully monitor the course of events. Timely intervention will have to be made to bring down inflation levels allowing for employment and financial growth. Yellen clarified that the Federal Reserve considered the sky rocketing foreclosures as an “urgent problem”. The call of the hour was to prevent foreclosures in both public and private sectors.

Yellen concentrated on the effects of foreclosure in her district – the 12th for the Federal Reserve. She acknowledged that although many regions are battling foreclosures, it is particularly bad and intense in Arizona, California and Nevada. It has been “sudden and substantial.” Foreclosures are devastating not only for the borrowers but are also badly mauling the surrounding neighbourhood.

The plight of the borrowers can hardly be fully expressed in words. It is not just about the loss of the houses that are homes, but impairment of equity, bad credit ratings that limit the future accessibility of getting loans and starting life anew in a new house.
The communities of the foreclosure regions are trapped in a “self-reinforcing cycle of decline”. Increasing foreclosures crowd into the market putting a strain on the local housing market that in turn leads to rise in further foreclosures from defaults.

Especially hurt are the families with low and middle income. Foreclosures are putting a stop to all endeavours to revitalize and upgrade neighbourhoods. This means that the results of foreclosures are going far beyond the housing sector. She added that meeting this challenge would require more vigorous and direct intervention both in the local as well as the federal level.

While all the talk and hype goes on, foreclosures continue to gallop ahead gleefully cutting into all sections of the socio-economic divide and sparing none.

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All the indications are there of the worsening of economic gloom as foreclosures continue to increase unabated. The crisis gripping Fannie Mae and Freddie Mac, the two pillars of the mortgage industry, spells disaster. It means that getting a loan to buy a house is going to be more difficult than what it already is. There is bound to be a rise in mortgage rates. This is a warning to those thinking of buying a house or refinancing a property loan.

Those whose mortgages are already backed by Freddie Mac and Fannie Mae need not worry provided they are not in a pressing need to refinance.

Further increase in rates will cause a further rush of foreclosures. Already thousands are grappling with reset mortgage rates from this summer. The lending crisis will also affect those looking for other types of financial assistance in the form of car or student loans.

Michael Kitces of Pinnacle Advisory Group, Columbia, aptly opines that a bank that loses out million on mortgage loans can hardly afford to advance money for more loans. The dollars are just not there.

The latest panic has been caused by the loss of confidence in the government supported loan giants – Fannie Mae and Freddie Mac. The timing has been disastrous. The jumbo mortgage giants badly need funds to stay on the rails. Keith Gumbinger of HSH Associates said that although it is difficult to predict the forthcoming maze of events, one thing is clear – capital will have to be raised somehow. To attract buyers to buy bonds for a shaken company, higher yields will have to be offered. The higher cost will then have to be passed on to those seeking loans. If the government fails to send out a lifeboat to Fannie Mae and Freddie Mac then mortgage rates will have to be pushed up above 7% for the first time since the last six years. This will considerably delay the recovery of the real estate market of the county. Even if the government gives a helping hand, increase of interest rate by at least half a percent is unavoidable because of the rising cost of selling mortgage-supported securities.

The national housing loan totals to $12 trillion. Freddie Mac and Fannie Mae own or back half the loans. In the past week all these loans have lost half their market value following doubts about the companies not having sufficient funds to meet the foreclosure crisis.

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No matter what the pundits say the dramatic jump of foreclosures in June points to recession. Bush, Bernanke and Paulson know it but will not admit the truth. Foreclosure activity has reached record heights since the 1930’s Depression. The trio thinks that by ignoring facts and looking aside they can roll on till the November elections. The hard harsh fact is that America is in recession and the Bush government is trying its level best to cover the tracks. They refuse to go beyond admitting that the economy is slowing down. Periodically announcements are being made of the foreclosure cloud clearing allowing the economy to bounce back again. It all sounds like a cock and bull story.
There is no denying that millions are without jobs although Washington claims that the numbers are low. Billions of new dollars are being created to bail out the lender group including banks and brokers. Yet Washington says that money supply is at low ebb.
Washington’s statement about inflation seems to be blatantly erroneous. It says that inflation rate is 4.2% but one has to go to the market to find out first hand the reality of things. Each month the price of things are rising rapidly.
Adding insult to injury are foreclosure woes. The average family in the country owes $119,173 in loans (mortgages, credit cards, car loans etc.). The average saving rate is only 0.4%. There is no way these figures can be swept under the carpet.
The world is intently watching the plight of USA. Agence France-Presse from Europe reports, “A downward spiral for mortgage giants Fannie Mae and Freddie Mac was unabated” despite assurances from treasury secretary Henry Paulson. Fears centred around trillions of dollars in the housing system.
Bloomberg bluntly states foreclosure facts “The foreclosure problem is getting worse and will stay with us well into the next decade. Mark Zandi of Moody’s Economy commented that since the 1930 Depression foreclosure activity has never been as strong and intense as it is today. ReltyTrack predicts that before this year draws to an end there will be 1 million foreclosed houses taken over by the bank. It will amount to about one fourth or one third of all the houses for sale in the real estate market. Seizures by banks have tripled. The sharp drop in property value is forcing many people to succumb to foreclosures and lose the houses that are their homes.

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Although clouds of foreclosure continue to gather many see a silver lining peeping behind it in Florida. It is impacting however on the real estate market causing prices to slump. This trend will continue throughout this year and perhaps spill on to 2009.

According to RealtyTrac 40,351 residential units in Florida were foreclosed in June this year. This makes Florida rank second in the national foreclosure race coming behind California. In California in June there were 67,000 foreclosure postings.

Florida foreclosure numbers showed a double jump from 2007. Its foreclosure rate calculated to 1:211 – this being the fourth worst in the nation and 2.4 times higher than the national median.

Among the 230 metropolitan regions, Orlando ranked 22nd. The weakest Florida real estate market was Fort Myers. Fort Lauderdale region stood 9th. However sale of single-family units and condos are slowly picking up. Those with schools nearby are attracting customers. There are more cash offers. The locality around Central Florida University is getting warm. Anee-Maire Wurzel of Coldwell Bank said that she had three offers on a house in the university area within a month. One offer came within five days of the property entering the market. Offer for another town house came within two weeks of its entry.

The increase in gas prices is showing an effect in the sense that people want to buy houses in areas from where they do not have to commute far to their places of work. Thus the preference is being given to downtown Orlando remarked Lloyd Page. Page is a senior vice president of Coldwell Banker Residential Real Estate of Central Florida.

Steve Kodsi is a condo developer based in Orlando. He said that with his father he has been in the real estate business right across Central Florida. Other members of the family like the cousins and uncles develop real estate in South Florida. Kodsi’s projects in South Eola region of Orlando are the hottest in his list. Steve commented, “In fact, if we only had the Sanctuary and Star Tower (condominiums), we’d be having a profitable 2008.”

It is too early to comment but perhaps the various measures being taken by the government, lenders and community welfare agencies are having an effect. Or perhaps economics is following its own course of turning around after a plunge. Whatever it may be –many are getting the chance to own affordable houses.

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Shelby is a bubbling sixteen year old. But like many others in her age group foreclosures are casting a shadow on the vulnerable young. Understanding the plight of her mother and knowing that their home will soon break with the bank foreclosing on it, she is coming face to face with a financial reality that most children of her age do not experience. Watching her mother cry, a sense of frustration swells up inside her. She ventured forth into the big bad world, got a server’s job in a nursing home. There is tension in the house. She admits to blaming her mother, knowing it has not been her fault.

Some have to surrender pets and this has a traumatic psychological effect on the young. The foreclosure victims either shift to the house of friends and relatives or end up in homeless shelters. Phillip Lovell of First Focus that focuses on problems of families and children moan the fact that the foreclosure crisis is “taking away the innocence of our kids.” Children being children take their homes for granted. They do not realize that the house, which is the home, can be taken away by irreverent, indifferent, uncaring third parties. It has long-term impacts affecting the education, behaviour and overall health of the young. Mostly impacted are the children from low and middle-income families.

Researchers have just begun to study the effect of the foreclosure crisis on the country’s future generation. Their findings are grim. It is estimated about 2 million children will be directly impacted by the foreclosure crisis. This is according to a First Focus report released in April. The number is on the lower side because the families of renters and those who are facing foreclosures from prime mortgages have not been included.

Apart from behaviour problems the children might end up with learning deficiencies – especially in mathematics and reading. Health problems will multiply with the families being unable to keep up with health insurance schemes. There will be emotional issues like a sense of shame, persistent anxiety and the like. Earlier studies of First Focus show that 77% of the children who frequently move are more likely to be afflicted by various problems, than those who do not.

Further study shows that children who are not at the age of expressing emotions are also, if not more, likely to be affected. As a result motor skill developments will be delayed.

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There are many foreclosure victims in Region 8 although the situation here is not so bad as the rest of the country. Recently West Tennessee Legal Services are providing help to Legal Aid for them to reach out to risk house owners of Arkansas. It is foreclosure counseling. Those who are lagging behind few months in mortgage payments may call on them to be advised about it. Their income and expenditure are budgeted to find out what has been the root cause for their falling into foreclosure. Brian Miles of Legal Aid said that in many cases the houses have been saved due to timely action. Usually the foreclosure victims are so traumatized that they do not know what to do when.

There are myriad of reasons for borrowers to lag behind and come under the cloud of foreclosures. Sometimes it is health problems. For the majority it is the hike in interest rates. The ARM’s have gone up to such high niches that it is impossible for them to keep up with it. The aid group finds out how much they can afford and then puts forth the suggestions to the lenders. The goal is to save the houses and stop evictions. Nobody – lender or borrower, state or community wants abandoned empty houses. The Legal Aid group puts forward proposals to the lenders to avoid foreclosures.

In 2008 up till now Legal Aid of Arkansas has tackled 18 foreclosure related cases. Of these only few houses could be saved. At present 16 cases are running in Region 8. By not opening mails from lenders the borrowers make a great mistake. It leads to a point of no return. If they are made aware that help is at hand they would not resort to this ostrich like behaviour and bury their heads in the sand hoping that the problem will blow over.

The programme is specifically directed at Poinsett, Greene and Craighead counties. A survey done by NeighborWorks show that these are one of the worst hit zones. Miles is optimistic that many houses can be saved because the banks are actually reluctant to take them back. It is not a seller’s market right now. All that is required is to give them a reason for them to give the borrower a chance to delay or stop foreclosure. It is not a governmental bail out but a way of showing that the authorities are trying to help.

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