Archive for the ‘Mortgages’ Category

The country is in the grip of foreclosure crisis – the worst in 16 years. The Federal Reserve and other allied banking regulators have taken the unprecedented step of appealing to the mortgage lenders not to rush on with proceedings. The man in the street has been surprised by the move – the likes of which they have never heard of hitherto. The authorities can only make appeals as the securitization transactions are contractual and anything contradictory to it cannot be enforced. It is not a good sign as it exposes the hard fact that except for appealing nothing can be done to rein in financial bodies playing havoc with loans. The government is giving priority to helping citizens keep their home fires burning in their own houses. Those who have provide services of securitized mortgages are asked to reach out compassionately to distressed house owners.

The strident appeal has come straight from President Bush and also from Federal Reserve chairperson, Ben Bernanke. They assured of standing beside those who had been trapped into teaser loans. Bush spoke of a plan to permit government housing administration to try to help besieged borrowers keep home fires burning. It is not just a mere coincidence that the joint statement is made a day ahead of a hearing of sub-prime collapse before US House Financial Services Committee.

Foreclosure figures are alarming. These point to worse days ahead. Nearly 1.3 million sub-prime mortgages is about to reset to higher rates this year. In the following year another 1.2 million will follow suit. It is the combination of high interest rate and low property value that has caught house owners unawares. Late payments and or debts rose to more than 14% during the first quarter of 2007 – making it the highest in four years. In July this year the number of foreclosures across the country doubled from what it was last July.

Sub-prime mortgage agents themselves are in trouble and many have been forced to down shutters as credit supply from investors has begun to dry up. Many jumbo lenders are desperately trying to contact borrowers for their own interests. For the lender foreclosure procedures are time and money consuming. Idle property is dead weight. They want money to trickle in. Generous options about refinancing and modifying rates are being made with Wall Street averse to real estate business.

Search Images

So far the going has been good for those with poor credit to try and own a house. In the sub-prime market not many questions had been asked and loans had been easy. But with the foreclosure raging through the country mortgage lenders have been tightening their belts making it difficult for house loans to be availed of. It is inevitable that such a situation would arise because after a grace period of two years or so monthly payments more than doubled. Borrowers just could not pay as flexible interest rates arbitrarily increased. The property slipped into foreclosure. Borrowers and lenders are now blaming each other.

It was a profitable venture for lenders. Since the credit history of the borrowers was poor they were charged high interest rates for being granted the favour of a loan. But the operation turned sour when with the spiraling of default numbers the very base of the exercise became shaky. Flow of money coming into the kitty came to a standstill. The fact that there was very little equity left in the units the borrowers could easily walk off without a backward glance. The property was not worth much to cry over and in any case their credit was bad. There was nothing new to lose!
Overnight shutters began to be pulled down on sub-prime divisions. Only a few limped along. Some filed for bankruptcy while others pruned the number of staff. Among the prominent ones who filed for the protection of bankruptcy laws in April are New Century Mortgage Corporation and its auxiliary Home 123 Mortgage Corporation The waves touched each corner and pocket of the country. The nation’s largest lender, Countrywide Financial Corporation, had borrowed $11.5 billion from 40 banks. The crisis had pushed its smaller cousins into insolvency.

Those lenders who had diversified income avenues and who have mixed and matched sub-prime with conventional prime loans will be able to surface from this catastrophe. There is little or no hope for those who had put all their eggs in the one sub-prime basket. They do not have a spare one to clutch on to.

It is estimated that 325,000 units are already in the foreclosure net. The quarterly rate during the previous two years was 230,000. It is this point from which the entire credit market is being infected says prominent economist Covarrubias from the University of Texas.

Search Images

Poku, a 55 year old taxi owner with wife and three children hails from Columbia. He had to move out of his house. Helped by his group members and a new state programme he shifted to rented accommodation. At lease he is not under the open skies!

One of his passengers Neil Carey, kicked off a fund administered by Grassroots Crisis Intervention Center, helped Poku meet his debts, his survival expenses as well as legal costs for fighting the matter out. Poku had been evicted a year ago having failed to legally prove that the original mortgage had been paid off during the refinancing period because of documents and checks had been lost by the jumbo financial body involved in this deal.

Howard County based Congregation Concerned for the Homeless has been operating for the last 17 years. The state on its part has started off the Family Stabilization Program through the county government to help sufferers like Poku. Its scope of activity involves continued support, counseling on budgets,, use of credit, proper parenting and business advice.

The help programmes try to get the business going again. Poku is one of their ideal subjects. Foreclosure had given him a bad name and so it was not easy for him to find a rented home without help. But finally one was found that suited the work compulsions of his wife and himself. The group saw to the waiver of security fees.

Poku insists that the loan had been paid off but the Seattle based mortgage firm denies it. Poku found his house sold off within six weeks of his being issued a notice. As per Maryland law quick foreclosures are the norm and do not require lenders to prove that the borrower had been notified. Many Maryland officials are keen to change the law. Right now these resolutions will not help Poku who had migrated from Ghana and struggled to set up his small business. He had built up his taxi service from scratch after learning everything about repair and maintenance during off work period at night.

Poku’s lawyers failed in May to prove his point in the Court of Special Appeals. Right now two court actions are pending after the matter was again filed. His lawyers are demanding compensation and a share of the proceeds from the sale of the house.

Via

Search Images

According to reliable sources foreclosures rose by 93% from July last year to July 2007 across USA. It went up by 9% from June. In July last year the number of foreclosures had been 92,845 but this year during the same month the number read 179,599. In June the foreclosure number was 164,644. The figures have been released by one of the oldest reliable online groups, keeping track of this specific situation. The national foreclosure rate is 1:693.

Five states of California, Florida, Michigan, Ohio and Georgia bore the brunt of more than half the country’s foreclosure burden. In the middle are squeezed in Missouri (18th) and Kansas (32nd). In Missouri the ratio was 1:1,275 and in Kansas it was 1:2,782.The figures are inclusive of default, sale and bank repossession notices. Because of multiple mortgages some of the property units may have been counted more than once. But the tracking group has listed separately individual properties. During the first six months of the current year 573,397 properties showed foreclosure activity in some form or the other. It amounts to 58% rise from the first half of 2006 and 32% rise from the last six months of that year.

In July Nevada, Georgia and Michigan showed the highest numbers. California, Florida and Ohio were the states with the highest foreclosure numbers.

The sub-prime loans and ARM loans have been battering the mortgage market during the last few months. One by one delinquency is being reported and houses are being foreclosed. Falling real estate prices have added woe to misery with owners not being able to sell off units and pay off dues. Sub-prime loans had been given to those with shaky credit history. It started with interest-only repayments but when the grace period was over the cracks began to appear and widen.

But the story did not end there. From the housing credit category it infected the country’s savings and loans. Never had the situation been so bad in the past 14 years. USA Office of Thrift Supervision is nervous and edgy with $14.2 billion in repossessed assets and loans whose dues are more than 90 days old. In other words property is lying around idle with no cash flow coming in. To avoid further decline it is being advised that properties should be sold off quickly without thinking of profit and loss.

According to reliable sources foreclosures rose by 93% from July last year to July 2007 across USA. It went up by 9% from June. In July last year the number of foreclosures had been 92,845 but this year during the same month the number read 179,599. In June the foreclosure number was 164,644. The figures have been released by one of the oldest reliable online groups, keeping track of this specific situation. The national foreclosure rate is 1:693.
Five states of California, Florida, Michigan, Ohio and Georgia bore the brunt of more than half the country’s foreclosure burden. In the middle are squeezed in Missouri (18th) and Kansas (32nd). In Missouri the ratio was 1:1,275 and in Kansas it was 1:2,782.The figures are inclusive of default, sale and bank repossession notices. Because of multiple mortgages some of the property units may have been counted more than once. But the tracking group has listed separately individual properties. During the first six months of the current year 573,397 properties showed foreclosure activity in some form or the other. It amounts to 58% rise from the first half of 2006 and 32% rise from the last six months of that year.
In July Nevada, Georgia and Michigan showed the highest numbers. California, Florida and Ohio were the states with the highest foreclosure numbers.
The sub-prime loans and ARM loans have been battering the mortgage market during the last few months. One by one delinquency is being reported and houses are being foreclosed. Falling real estate prices have added woe to misery with owners not being able to sell off units and pay off dues. Sub-prime loans had been given to those with shaky credit history. It started with interest-only repayments but when the grace period was over the cracks began to appear and widen.
But the story did not end there. From the housing credit category it infected the country’s savings and loans. Never had the situation been so bad in the past 14 years. USA Office of Thrift Supervision is nervous and edgy with $14.2 billion in repossessed assets and loans whose dues are more than 90 days old. In other words property is lying around idle with no cash flow coming in. To avoid further decline it is being advised that properties should be sold off quickly without thinking of profit and loss.

Via

Search Images

One by one the chapters of the foreclosure story are unfolding. That which began in Wall Street has spread on to Main Street. The author of the script is the ARM or Adjustable Rate Mortgage. It initially gives the borrower a teaser interest rate, which is low. Later it resets at a much higher rate. The borrowers fall for the smart talk of the lenders who tell them that to avoid the increase they can easily go for refinancing.

Inevitably ARM’s gained in popularity during the first half of this decade. Brokers with the bait of commission dangling before them went all out to sell the mortgage scheme. The legal side with was purposefully not fully explained to the borrowers. But when the time came for the actual work of refinancing it was difficult to get in touch with the person whom the lenders had never seen. When the foreclosure went public prospective buyers began to crowd in. Such a situation spells trauma for a family with children.

Some are fortunate to refinance into a longer period fixed rate mortgage but others have to move out bag and baggage unable to repay mounting debts.

Chicago recorded 10,294 foreclosures in 2006 according to reliable sources keeping track of the situation. The number is 36% higher than the figures of 2005. This year and in 2008 the fear is that the numbers might rise to anything between 16,000 and 17,000.
During the early part of the defaulting crisis the families who were mostly affected came from the low or moderate income groups. However the scenario in Chicago is not quite so bad as that in other parts of the country because the economic picture here is diverse. A factory closing down in one place does not affect the whole of Chicago, unlike the tendency in places like Michigan and Ohio.

In Chicago foreclosures on prime loans jumped to 46% in 2006 as compared to 21% in 2002. Until the new players butted in Fannie Mae and Freddie Mac were the two largest loan wholesalers dealing with conventional loans. But the new comers saw to it that borrowers could not go back to the shelter of the traditional market by imposing fines for premature loan closure. The mortgage market became liquid trying to accommodate all and sundry. Solutions are being tried out but till then the borrowers remain in limbo.

Search Images

In only three months time Round Rock, the home of the Stony Point Tigers registered 248 foreclosures. This makes it the 182nd most foreclosed in the country. In Texas it ranks 6th. Pflugerville ranks 450th in the country.

Mortgage experts of the locality pin down the cause to the usual disasters that grips the populace from time to time – divorce, death and unemployment. The situation gets aggravated with natural calamities. Unfortunately this reasoning is not holding water this time.

McCoy, President of Mission Mortgage points her experienced finger at the investors who speculated in Austin. Based on promises investors would walk in and buy up units. But reality did not live up to their dreams. These investors are now having problems tackling their mortgage payments in their home territory. So they want to get rid of units here in Austin, which is having to shoulder other people’s crosses.

Mortgage broker Bray of Lone Star Lending warns borrowers never to sit idle on default notices. Communication lines between lender and borrower must be kept open at all times. The lender doesn’t want the house but wants the money coming from it. It is to their interest to see that the borrower is doing the utmost to keep the home fires burning.

There are five clear instructions. Take the initiative and contact lender for discussion. Secondly arrange for debt counselling with the object of refinancing the deal. Thirdly if the house has equity then the monthly payments may be lowered for a short term with high interest loan to tide over the immediate crisis. Fourthly grace periods are not impossible to get. Lastly directly sell the house. This option is much better than slipping into the foreclosure coma. A foreclosure victim has rights. Know it.

There are agencies of renown that buy these loans and do whatever is feasible to help people keep the roof above their heads.

Many Americans are losing hearth and home because of defaults in the sub-prime market but that is not happening in Texas. Of 7,000 loans here not a single one is ARM. It is not saleable here in Austin, Texas. This means that the people here are not those who cannot afford the readjustment in instalments. It is good news for the market. Texas is standing out as an island in the turbulent sea all around.

Search Images

Birmingham based Shore Mortgage watched with caution the stirring up of the mud in the sub-prime real estate market. But the young lender at the helm is ever ready to jump in and take a chance again. Brian May an office bearer of the company spoke about having helped a Romanian engineer. The latter had no credit roots in USA, which would enable him to take a loan. May justified their action by underlying the human aspect to the problem.

The company comprises of human beings and not just robotic computers. This is the guiding force motivating the action of the company. May went on to add that his company is mainly concerned with government loans to people who can keep up the mortgage commitment but whose credit ratings may not meet the usual loan standards. Shore Mortgage has always been particular about not entering either the sub-prime or Alt-A loan areas if they are not satisfied with the proof of the income of the lenders. They take into consideration people who can show employment records of about two years and are able to make a down payment of 5% in ready cash. Then they overlook the aspect of the credit history being good or bad. If the clients lack traditional credit cards and previous history of repaying loans Shore takes into account their records relating to payment of bills and rent. That is why till date they have not had any problems about foreclosures.

Shore Mortgage advances about 4,000 loans annually and has been in this business since 1984. However the real estate fiasco has meant a slow down in the business of Shore Mortgage. It has under its umbrella 200 employees in six offices across Michigan. Ohio and Alabama too feature under its zone of operation.

Michigan had the distinction of ranking third in the mortgage delinquency rates, new and old foreclosures during the first quarter of this year according to figures released by Mortgage Bankers Association. The President of Michigan Mortgage Brokers Association Paya Leyrer opines that although sub-prime has been mainly blamed for the foreclosure there are other economic factors like unemployment. In Michigan a good number of people have lost their jobs. A lot of effort is being made to make the borrower aware about what taking a loan involves and how to avoid failure and register success.

Source

Search Images

There seems to be no second opinion that aggressive mortgage lending during the time of the recent property boom is responsible for the bubble burst. Some seasoned experts see similarities between today and what happened 35 years ago due to a government programme. Flipping is one such practice in which one quickly re-sells a home for a huge profit. In 1970 Congress investigated one such deal in which an investor pocketed $95,000 from one deal. In another instance a speculator got involved in a lawsuit for purchasing 184 duplexes in a run down Indianapolis neighbourhood and by re-selling them quickly raking in $70,000 per home. There is a difference between government and private programmes in the housing sector but in both cases the obvious soft targets have been the borrowers. The immediate neighbourhood has suffered being dotted by abandoned houses, which has become haunts of drug and crime addicts. The worst home sufferers are those living in Detroit, Cleveland, Brooklyn, Baltimore and Atlanta.

Shock waves are now touching the global financial markets. Calvin Bradford, a real estate researcher says that the actors have changed but the same drama with cosmetic changes here and there continues to be played out. In the sixties the housing issue was a big one due to the race riots. Till then the black and Hispanic localities had been sharply defined. But in 1968 an ambitious housing project brought about radical changes. President Johnson surveying the damage had remarked that in black localities those who owned houses had not been overly destructive. During the last decade the number of Hispanic and Black owners have risen although the gap between the white majority and the minority had not shrunk. During both the periods the lenders as well as the government had fundamentally altered lending rules to rule out any possibility of default. Or so they thought. Reality turned out to be different.

But by the end of the first quarter of this year about 20% of loans to sub-prime borrowers had gone into delinquency. Mortgage bankers cite optimistic figures saying that 80% loans are still running and 68% Americans are house owners. But others despair that one out of five houses is abandoned. Other suggestions are that the mortgage brokers be paid monthly as a reward for good performance of loans. The opinion in favour and against down payments swings.

Via

Search Images