Prince William County Battling Foreclosures

Posted in Foreclosures, June 5th, 2008 |

Fannie Mae predictions are that the real estate prices will fall further by 25%. The head of the mortgage body said that it was the ripe time for action to make the market turn around without being specific. It is too early to say if Bush will give the green signal to the bi-partisan housing bill that would robustly regulate the two giants – Fannie Mae and Freddie Mac. The bill is the handiwork of Senators Chris Dodd and Richard Shelby. It will allow the government to insure $300 billion of refinanced mortgages through FHA. The money would be tapped from Freddie and Fannie.

While Washington is thus engaged in wrangling, the states and their counties are not waiting but moving ahead with their own plans to address the foreclosure problem. Prince William County is battling foreclosures having the highest rate in Virginia. It is desperately looking around for solutions. In Prince William County there are 5,500 Repo houses – about 4% of all the houses in the county. Since the previous year the prices have tumbled by 28%.

The county is mulling over a scheme of offering its employees, 14,000 in number, mortgages with low interest. It is hoped that the plan will be beneficial in two ways. It would make a sizeable number of employees interested and happy while cutting into a big chunk of the foreclosure problem. The employees will get a chance to stay and earn in the county without having to move out. To finance the plan the county would have to move away funds investments already held by banks to allow for the discounted mortgages. In this way the banks too will benefit. The 3% to 4% interest that the county gets from the investments would remain undisturbed while the bank would make loans available to the county employees.

Foreclosures are costly operations according to the Center for Responsible Lending. Within a radius of 8 miles the valuation of the neighbouring houses will drop by 1%. Foreclosures have a snowballing effect in the localities where there are large concentrations of it. The people of the locality, the state and the local government have to pay the price for these increasing foreclosures. The property taxes too go down with the fall in prices. That affects the revenue collection. So there is less money for community development projects. The local government enters a stage of seize with an increase in crime and health problems emanating from foreclosed units.