Posts Tagged ‘foreclosure properties’

Borrowers took loans to buy a house and make it into a homeBut unwittingly they got into a financial snarl which is compelling thousands and thousands to abandon their hearth and home. It is a foreclosure crisis of jumbo proportions.

The sub-prime loans were an outrage – an insult to those with weak credit. Today it is not confined to the point from which it started but is spreading like a virus to infect other kinds of mortgages. This is the opinion of a renowned mortgage banker’s association. Last June the foreclosure notices rose to 0.65% - 0.58% jump over the first quarter of this year. Three consecutive quarters have thus performed a hat trick!

One lawyer has come forward to help 30-year-old Mendez who is a victim of multiple sclerosis and is partially blind. In May 2006, when she first got into trouble many lenders came forward to help her financially. One of these brokers from South California asked her to sign certain papers and somehow persuaded a reluctant Mendez to do so. Few days later the original lender contacted her and Mendez decided to opt for the latter.

The South California person did not object and she took the money from the prime lender and went about repairing her small house. Few months later default notices began to come. It was a grand confusion with everyone assuring her that she was being taken care of. Too late she realized that two loans had been foisted on her! Now she did not know who to pay what. Nobody could be contacted. She is now lagging behind.

The person from South California could not be contacted. The other lender, New Century who is facing criminal charges for accounts error in securities has filed for bankruptcy in April. Mendez’s lawyer filed a suit in Marin Superior Court to halt the sale of her house. It claims damages from both the lenders for willful cheating and fraud. The Judge granted a restraining order stopping the sale of Mendez’s house. Unfortunately Mendez could not produce a bond to secure the bond. Therefore the order had to be vacated. The lawyer is now confused about the next step. The insurance agent of Mendez is trying to interest another lender to take over the mortgage and somebody else to provide the security bond. Mendez keeps on hoping and praying.

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A disproportionate tax bill is a blow from an unexpected quarter for one who has failed to meet mortgage dues. Yet the bill accuses the person of having made an extra earning! This is unbelievable but true in Michigan and other parts of the country.
Those who negotiate with the bank for some unusual refinancing scheme are usually at the receiving end when they sell their houses for an amount, which is less than the outstanding dues. It is a three-pronged attack. First the victims lose their home and hearth. Secondly the amount they get is less than what they owe. Last but not least comes the tax bill from unsympathetic authorities. Many are ignorant about tax rules because so far real estate valuation has been rising. But the curve is now falling. If the bank forgives $20,000 on a $100,000 loan then the former is calculated to be an income with tax tags attached to it. Matters are spinning out of control in Michigan where recession is on an all time high binge.
A Michigan Democrat is up in arms against this and trying to change this rule before the year comes to an end. Unfortunately it will only be a temporary reprieve and will apply only to the original house of the borrower. Many had availed of easy loans to move into up swinging localities with better facilities. On 31st August President Bush gave his support to it as a part of the package helping house owners. The banks too approve of the scheme, as they do not benefit from foreclosures. The chief economist Richard DeKaser of National City Corporation in Cleveland is of the opinion that if changes are made and there was a tax freeze, borrowers will have more leverage for negotiation.
The only way to escape the dragnet is to file for bankruptcy. If the debt is repaid under the cloud of bankruptcy then tax is not levied. A second way out is to fill out a complicated tax form (982) and claim to be insolvent – their debts were bigger than assets. The average person is ignorant about such fine escape routes. Only a seasoned tax consultant could steer the victim out of the maze. It will not pull down ‘For Sale’ notices overnight but will certainly act as a cushion for future falls.

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Marengo based Linden Lumber business concern has been able to avoid the crisis of foreclosure by arranging for and repaying a debt of $5 million. This was stated by Federal Land Bank last Friday. The representative of the bank said that a new settlement has been arrived at regarding repayment of the $5 million dues. Linden Lumber, founded in 1955 is one of the largest companies in Marengo employing a large number of people. It operates one of the key industries. Of late the company has been financially stumbling. 150 employees were laid off and two prime sections closed down about three years ago.

Upon this negotiation depended the fate of 425 jobholders in an economically backward region. As per previous schedule foreclosure sale was to be held on Friday. The bank was reluctant to divulge the details of the confidential agreement. The company’s agents and spokespersons could not be contacted for their remarks and comments.

The agreement follows an approval issued by the Marengo County Commission on 24th August 2007 that allowed public funds to the tune of $5 million to $7 million to be used to save a sinking concern from drowning. The welfare and livelihood of many were tied to its fate and hence the concern and remedy. It is the first time that Marengo County has put into force its wide lending discretionary powers which Alabama Counties enjoy. This is as per an amendment made to the constitution of the state in 2006.

Woody Dining, the acting attorney of Marengo County said that it would take many weeks for the fund to be actually released; it might even be months. There were stipulations and strings attached regarding the meeting of certain requirements by the company. However the very fact that funds have been sanctioned meant that Linden Lumber had sufficient negotiating power to enforce a satisfactory agreement.

Although there had been unanimous voting in the meeting on 24th August in favour of bailing out Linden Lumber nevertheless the whole episode was not without criticism. There were many who disliked the idea of using public funds to help a private company. Most spoke in favour taking into account the broader perspectives but a vociferous minority opposed the move saying that the policy was bad and would set up a questionable precedent that would not bode well for the future.

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During the second quarter of this year the foreclosure rate in Utah is down in comparison to what it was the previous year. It remains far behind the average national figures where the number of foreclosure units is staggering.

Towards the end of the June 2007 there were only 0.55% properties in Utah suffering the trauma of foreclosures. It meant a drop of 0.74% in comparison to the figures last year during the same quarter. Among the lowest rankers in the foreclosure race Utah ranks 7th and sits comfortably well below the national rate of 1.40%. During the second quarter lenders began to foreclose on 0.65% of USA mortgages – which was an all time record. In Utah the rate was only 0.29%.

Analysts opine that this is primarily due to the relatively strong economic health of the state and also because there has not been much sub-prime activity.

Delinquent loans are those that have dropped behind their payment schedule by 30 days. In this group Utah’s dropped by 3.45 % in the second quarter this year. This was a considerable drop by 3.56% in comparison to the same months in the previous year. Utah’s average was well below the national figure of 5.12%. California, Florida, Nevada and Arizona are the leaders in the slanderous race. There has also been a decline in 34 states. Except for the big four the increase in other states has been minimal. The big four with have been in the doldrums for quite a number of years.

The early years of the new century saw frenetic activity in the housing market. There was a great demand for loans. To satisfy all, risky loans were doled out willy-nilly. But during this time Utah had been relatively flat and staid. It was only from 2004 that some flutter took place in sub-prime lending but it was never much to sing about. The job market was also upbeat. People did not run out of funds and as the economy attracted more job seekers from outside more buyers were available. Another factor behind the sunshine is the relatively high valuation of property. This meant troubled borrowers would get some equity left over even after paying their dues, and start life anew. Of late however property rates have started to fall making it difficult to benefit from a quick sell off.

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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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Abandoned homes and ‘For Sale’ signs dotting the landscape send shivers down the community. Elected representative are humming and hawing about finding funds to fight the menace but others in the locality are not willing to buckle under without giving a fight.

Mayors in the Chicago region consisting of 272 members recently held a meeting and came up with viable suggestions like opening web sites to connect sufferers with licensed counselors. The local officials were looking at the problem from the angle of police and fire protection. How far that would get at the root of the problem is a moot question.

The problem has now taken on national jumbo proportions with 179,600 reporting of foreclosure filings in July. It is touching not only the dispossessed but also indirectly the entire area. Overgrown lawns, pending property taxes and other ills are penetrating each level of the socio-economic structure. The municipalities should see into the matter for sake of their own interests. The least the federal department concerned with housing and urban development can do is to connect the house owners with certified help agencies and hotlines.

In this matter the village hall has an important role. Psychologically the distressed will find it more comfortable to approach the latter rather than contact an impersonal faceless mortgage broker. According to a survey more than half the suffering house owners are in such a traumatic stage that they try to act like the proverbial ostrich burying their heads, hoping that the problem will disappear.

Help however is trickling through. Some non-profit groups are making use of public buildings to hold their seminars.

All the cases cannot be generalized. Each has a specific story to tell. For instance an individual invested in a number of houses in Lakewood Grove subdivision but already ten to fifteen of them have been abandoned. In other cases house owners let out the units on rent and then hiked up the rate as soon as lenders began to put the pressure. This led to the sudden eviction of many tenants. Houses became empty with piles of garbage on the front porch giving the entire community an off colour appearance.

The first thing is not to ignore the problem but to directly contact the lender. The latte does not want the house – but wants money. Respond to negotiations and be alert about legal pitfalls taking advice from proper quarters.

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Gang and drug parties have become the bane in Manteca. At one time people had thronged to light the fires of their hearths in the Central Valley in search of their dream homes. A curse seems to have brought down the pox of foreclosures – houses with neglected overgrowth and broken boarded windows are inviting the scum and grave diggers of society. The worst affected are the affluent new sections of southern and eastern Manteca. Here most of the 66 foreclosures are concentrated. Most of those who were buying houses for the first time preferred the valley to be more affordable than the Bay area. But they did not qualify for conventional loans.

Manteca and other cities are reeling under this socio-economic malaise which is a result of the foreclosure. There is a rise in gang operations, wild boisterous drug parties and activities of dangerous vagrant squatters. Politicians, law enforces and ordinary citizens are all at their wits end. The very quality of life is at stake.

Pressure is being put on mortgage holders to look after their units. Laws too need to be overhauled to give more teeth to civil authorities.

The sub-prime mortgage sector’s failure is the principal cause for this scenario. It was only when the numbers started rolling in that the concerned authorities woke up to the fact how extensively the net of sub-prime had spread its tentacles. Loans began to go delinquent. Prices of houses fell. There developed a job crunch.

In such a scenario who bothers to clean the backyard? Police complain of an increase in criminal activity. One family survived for few days the tragedy of death living without water or electricity. Units sitting on the limbo stage when it belongs to neither the bank nor the previous owner are the worst affected. It becomes a no-man’s land – a headache for the nearby neighbours. Pressure is being put on the banks and other lenders who now own the property to take proper steps to maintain the properties. Realtors opine that the situation will not improve but slowly slide down for the worse. Foreclosures are on the increase. San Joaquin and Stanislaus are one of the worst affected areas. Arsonists have become active. Lights and taps of abandoned homes are kept running. In desperation the neighbours are pitching in to maintain the the locality.

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If President Bush has his way then the residents of Las Vegas victimized by the foreclosure crisis will heave a sigh of relief. The President does not think it is a bail out operation to help lenders and speculators but is meant to help borrowers who are in the soup worried about the roof above their heads blowing away.

Christine Young based in Henderson is just one among the many boiling in the cauldron. Her property unit consisted of a 2,000 square feet four bed roomed house. About a year ago she had refinanced it under the impression that she was moving into a fixed mortgage scheme. But that was not so in reality. Within a year the ARM shot up beyond her means. It is $700 more with the due date of 1st September looming ahead. Christine squarely puts the blame on predatory lenders. They shrewdly trapped her to sign a mortgage that she had tried desperately to avoid. The smart ways of the mortgage agent made her gullible to his sales talk. At that time she thought him to be a nice honest fellow.

There are thousands of Christines across the length and breadth of the country ready to tell the same tale.
Nevada ranks first in the foreclosure race. The filings have gone up by 93% from what it was the previous year.

Last Friday President Bush detailed steps the federal government would take to help the besieged borrowers. He repeatedly assured that his focus was not to save the lenders and speculators who are also in the red. He emphasized that this operation will give Americans with a good credit past, but cannot bear the burden of recent rises, to refinance into FHA mortgages that are insured.

Pam has yet another story to tell. She had put her house on the market shelves many months previously. She was hoping to sell before the house foreclosed. In this way of direct selling she calculated on cutting down her losses. The initial asking price was $389,000 but now she has climbed down to $299,000. It meant her losing $90,000. Even then she would be lucky to sell it off right now without further loss.

The plans of President Bush will not help the Christines or the Pams because even if sanctioned it will not come fast enough to stop more heads from rolling.

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