Posts Tagged ‘mortgage’

This time the women voters in
Clermont County are readying to battle foreclosures. The Clermont County League of Women Voters will be addressing the foreclosure problem during their meeting in May this year.

Foreclosures have churned into a national problem during the past few years. In Clermont County during 2006 there had been 2006 foreclosures as per figures released by Legal Aid Society of Southwest Ohio. In 2007 there had been over 1,000 foreclosures.

Analysts opine that there are three major factors behind this crisis. Firstly the credit standards had been too lax. It allowed people with modest income to be lured into buying houses they could ill afford. The temptation of no down payments and initial teaser rates were too much for them to resist. This predatory lending has harmed society and the economy. Predatory lending is that type of granting loans when the lender does not take into consideration the ability of the borrower to repay. On top of this the interest rates are usually very high. Loans were sanctioned after inflating the value of the property. But when the latter came down to realistic levels the loan amount remained higher than the price of the unit. Thus even by selling the house the borrower could not avoid the stigma of foreclosure. Predatory loans are also saddled with exorbitant pre-payment penalties making it impossible for the borrower to refinance.

Secondly the prices of essentials have suddenly started to increase. Medical bills, repair expenses have shot up while the income has often been going down if not been actually interrupted. Few weeks of unemployment will automatically lead to default in mortgage payments and end up in foreclosures.

The general depression in the economy has led to plants downing shutters. Layoffs have become common. Usually the income from two family members contributed to the running of the mortgage. Thus even if one lost a job the mortgage suffered. Illness and divorce have their negative impact also.

The women voters en bloc actively gave support to a bill passed in the previous year aimed at controlling predatory lending. The new law is being enforced now and it is hoped that it will address the abuses in the mortgage industry. The foreclosure on old loans however will continue to harangue society for many years to come. With interest rates rising there is apprehension that the country will be flooded anew with foreclosures.

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Adamaitis of Direct Mortgage Services said that in the long run persistence and perseverance pays when trying to avoid foreclosure. Adamaitis has most of his dealings in foreclosure-riddled Florida. Of all the innumerable cases he handled a particular one has remained etched in his memory. One day a woman from Manchester contacted him saying that the lender who had issued her a sub-prime mortgage had downed shutters. But her interest rate had jumped by 10% - something well beyond her affordability limits. Ultimately she was able to coax it down to 5%. Her monthly payment dropped by $, 1000 but not without a lot of running from pillar to post to make somebody listen to her. For full nine months she made phone calls, sent written pleas to congressmen and penned a formal complaint to the New Hampshire Banking Department before catching the ear of somebody that mattered. If she had not persisted and given up after the failure of the first phone call, her house would have been gobbled by foreclosures. Half the battle is won when somebody starts listening.

Whether one has fallen behind in mortgage payments or is about to do so there are steps that can be taken to avoid foreclosure. Foreclosure is not inevitable. Avoiding it may be difficult but not impossible. The resources available and its application are individual specific. The worst thing to do is not to do anything at all!

The very first thing to do is to contact the lender at the very initial stage when warning lights about impending financial trouble is blinking. It is not advisable to avoid creditors considering the present scenario. Today they are crushed by the sheer weight of foreclosure numbers and are as eager to avoid foreclosure as the borrower. Nothing can be said for sure but in all probability interest rates will be reduced and the mortgage changed to a long term fixed rate. This will make the contract viable and realistic.

Another point to remember that the ‘lender’ to contact is not usually the bank but the loan-servicing agency that collects the mortgages. Admaitis admits that in reality the first, second or even third person contacted turns out to be downright rude. Lenders turn a deaf ear to borrowers who are overdue for 90 days or more. Nevertheless one by one the clerks have to be side stepped to reach the proper person.

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Foreclosures are challenging Congress and as yet seem to be enjoying the last laugh. Democrat Rep. Tim Walz speaks about his own personal experience. The house next to his has been in foreclosure for more than a year and pulled down the value of his own unit by 20%. The story of Walz is being repeated all over Minnesota with the bursting of the housing bubble. Both Democrats and Republicans are harangued with complaints from community leaders about the rot spreading from foreclosed vacant houses. Leaders of both parties are huddled together sitting at the same table desperate to find solutions to tackle the common enemy.

The House and Senate have passed bills and more are in the offing. There are doubts if the Democratic led Congress will be able to come to terms with Bush administration and the President’s veto threat.

The House bill consists of three parts aimed at avoiding foreclosures with the hope of bringing back the mortgage market to its rails. It allotted greater powers to the Federal Housing Agency to be able to insure refinanced mortgages. On their part the lenders would have to reduce the amount of loan in tune with the prevailing market prices. Secondly the bill allows $11 billion as tax credits to buyers and mortgage holders who refrain form itemizing their respective tax deductions. This also includes the granting of $7,500 to new buyers. It allots to the state $10 billion for floating mortgage revenue bonds to help in the refinancing of sub-prime mortgages. Thirdly the bill made changes in the Freddie Mac and Fannie Mae mortgage companies that are federally sponsored.

Democrats together with a large Republican approval supported the bill but the numbers were not strong enough to override the veto threat. The critics said that it was a bail out for buyers by putting the market at jeopardy. Republican Rep. John Kline criticized the bill for doing ‘little to address the current foreclosure problems’. The market should be allowed to find its level. However he did not oppose other forms of assistance. Walz stressed on voluntary moves between lenders and borrowers. He did not want the blame game to sling mud at each other. His contention was that since the forest is already on fire something should be immediately done before arguing about who started it. The problem should be tackled keeping in view the interests of the borrowers, the mortgage industry as well as the market.

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South Bay foreclosure figures are alarming. The question is – how much more can this region take? Statistics show that on each average working day there are 1,038 foreclosure related auctions. In April Santa Clara County recorded 500 postings – this being a 47% hike from the previous month of March 2008 and a 585 jump from April 2007. The county now ranks 40th in March this year among the counties in California a regards foreclosures per capita. Loans worth $292.4 million were foreclosed upon last March.
Foreclosure is a judicial process. Of late it has hit the headlines because of the alarming increase in numbers. When a borrower defaults a notice is sent regarding foreclosure. The county records office is also intimated. If after about four months the borrower is unable to become current in mortgage dues then an auction sale is conducted at the courthouse. For last year or so the houses are not being sold at the public auctions and are reverting back to the bankers. The latter are offering huge discounts but even that is not letting the ball start rolling in the real estate market.
In Santa Clara on an average 15% discount is being offered at the auctions. It means that if the previous owner owed the bank $400,000 the bank isnow willing to settle the matter for $340,000. Increase in default notices point to escalation of the foreclosure crisis. It is definitely not petering off. In April there were 44,101 notices in the state. It was an increase of 14% from January 2008. The lenders are now more often agreeing to short sales for a quick settlement of the matter without going through the whole process of foreclosures. A short sale takes place when the lender allows the borrower to sell the house even though the value of the house is less than the loan amount. However the process of short sale involving approvals from the lenders is painstakingly slow. Invariably the borrowers complain that they have managed to find a buyer in these difficult days but the approval has not come through. So the deal is put off. The lenders complain that they are deluged with such requests and do not have the infrastructure to deal with it swiftly. Each one is a specific case and has to be handled accordingly. The best way is to seek refinancing and modification so that the borrower can continue to stay in the house that is the home.

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More and more personal stories are tumbling in to show that despite anticipations more lenders are failing to stop foreclosures. The companies do not have the infrastructure to handle the sudden increase in volume of work.

Thomas and Tracy Barboza are just one of many who are suffering. Three times they found an escape route from foreclosure but three times their lender failed expectations. Finding it impossible to continue with their mortgage the Barbozas are trying to sell their house. Since last summer they have got three offers. The offers are however less than the mortgage amount. This made their lender – Countrywide, refuse to write off a part of the loan and allow the sale. The couple has already moved to a sparse flat ready for the sale. But things are not maturing. Thousands of others like them are in the same boat. The lenders remain adamant and unrelenting.

On the other hand the loan companies complain that they do not have the infrastructure to deal with thousands of negotiations and appeals for short sales. This is one of the reasons for their silence, which may be interpreted as refusal. Those affected in and involved in the matter like the house owners and realtors compare this to a black hole; the system just cannot be cracked and everything is sucked into it. Automated phone calls cannot be penetrated and callers are made to wait for hours. Inside the company paper work is piling up and those dealing with the matter do not have the final authority to make a decision.

The American Securitization Forum that comprises of mortgage holders and companies in the loan servicing business, say that all steps are being taken to address the issue. The problem is that nothing can be steam rolled as each case is specific and needs individual attention. Some loan companies have introduced online application forms. Nevertheless short sales pose specific problems, as it would mean waiving a chunk of the principal loan. This could be something around $100,000. First and second mortgages on the same property further complicates matters.

But consumer groups say that rejecting a short sale offer is something positive and cannot be explained away easily. Countrywide has now agreed to expedite the matter of short sale. The firm has apologized to the Barbozas but as yet the couple has not got a positive reply.

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The virus is raging across the country. Foreclosures respect nothing – socio-economic barriers, regions, or celebrity status. Like fire it has an insatiable appetite and is truly communistic in its approach – levels high and low into one big gulp. It is a challenge – one of the many mankind has always been facing. Man, being man must rise to it and go about immunizing foreclosures – taking steps to neutralize it.

Foreclosures jumped by 57% from March 2007 to March 2008. It increased by 5% from February to March this year. The blame is being put on predatory lending practices. When interest rates began to increase foreclosures began to take over the scene. One by one the houses began to tumble and fell vacant. The borrowers lost their property as well credit ratings. The lenders found themselves overwhelmed with unsold units while the neighbourhoods became dotted with eerie desolate houses. Crime and disease began to play havoc. A massive credit crunch hit the economy while tax kitties began to dry up. Foreclosures also resulted from the usual personal causes – illness, death, job loss and or divorce.

Considering the atmosphere even if one is not in foreclosure it is better to be forewarned so as to be forearmed. It is like being vaccinated to avoid ahead the attack from the virus.

The latest buzzword is ‘save’! Observe thrift and save for a rainy day. Put something in the piggy bank everyday if not every month. If there is a temporary loss of income one can tide over the mortgage commitments by dipping into this fund. The best thing is to target putting an amount that will cover a lapse of three months.

Saving will become effective by reducing expenses. Cutting down on unnecessary expenses like dining out or disconnecting premium cable channels will go a long way in reducing spending.

If the house is already inside the foreclosure risk zone and the borrower has tripped on one payment there is still hope to remedy matters. The house that is the home can still be saved. The banks do not want any more foreclosures. Consequently they are amenable to talks since the process is costly for the lender also. To foreclose a house the average cost is $40,000. Free advice and often help is available from HUD authorized counseling agencies. The avenues of help open are forbearance, reinstatement, modification, short sale, deed in lieu of foreclosure and assumption.

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Foreclosures increased in Denver seven county metropolitan regions during the first quarter of 2008 but the rate is half of that noted during the same period in 2007. This year there were 7,459 foreclosure postings – 16% increase from the 6,410 listings during 2007. There is no respite in the pace – foreclosures are still rising, said Zachary Urban of Brothers Redevelopment. It has not peaked as yet and remains a hot issue.

Comparing foreclosures in 2006 (first quarter) with that of 2007 it is seen that the increase has been more than 30% in Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson Counties. The annual rate of increase during the first quarter of 2008 was thus halved. It brings cheers to some that the trend is going in a reverse direction. The expectation is that it will continue to do so during the forthcoming months. At the end of the month the total number of foreclosures might actually decrease.

In contrast to Denver and Colorado other states are showing jumbo increases. But Dan Bloomquist in the brokerage business since the last 40 years does not share this optimism. He thinks that the crisis will go on for another two years till 20010. The worst years will be 2008 and 2009 and maybe also 2010. The sun will start peeping from 2011 or the latest from 2012. Dan says that there is a bright side – this is the time to pick up a real bargain. Houses are being sold for $80 to $90 per square foot, whereas previously it was $150.

Analysis points to lending disparities. A good percentage of Latinos and Afro-Americans were peddled risky sub-prime mortgages in comparison to the Whites. This has raised eyebrows regarding discrimination and predatory lending in Colorado. A grant of $300,000 from HUD was sanctioned to the Colorado Division of Civil Rights to research this matter. It was found that while one out of five Whites contracted sub-prime mortgages, one out of every 2.3 Afro-Americans were trapped into these risky agreements.

Originally the idea of implementing the dream of every American owning a house was laudable but greed and ignorance mired the scheme. The prime loans were available only to those with good credit history and income proof. As such a sizeable chunk of the population was left out. The sub-prime mortgage became a tool for making quick profits and duping those who could not understand the implications.

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Metro bus driver Eduardo Montesiro was one of the many house owners who crowded in to attend the Watsonville housing symposium held to help foreclosure victims last Saturday. It was organized by credit and mortgage specialists. Attendance was free.

Eduardo somehow slipped through the foreclosure net that trapped about 250 house owners in Santa Cruz County last year. In Watsonville he manages two mortgages. It is a balancing trick as he juggles to keep his income feeding rising payments while looking after his spouse and two children. Unfortunately he feels that by the end of the year he will have to surrender. The future looks bleak.

Eduardo was one of the participants at the workshop that was conducted both in Spanish and English. The aim was to help the borrowers to be realistic about their income-expense ratio and face up to the fact about keeping up with their mortgages.

The Latino families have been the worst affected by the foreclosure tornado raging through California. At the root are the sub-prime adjustable rate mortgages that were peddled to vulnerable borrowers. Today it has hit the general economic health of the region. The Hispanics are at the receiving end especially because of language problems, scant knowledge about mortgage implications and adverse changes in income patterns.

Owning a house is part of the Latino culture. Nobody understands it better than Maria Enomoto a consumer credit counselor. She was one of the prime movers of the workshop. A house translates into success. She has worked with many families ranging from professionals to field workers. She notes that the majority spend all their income battling with mortgage payments – there is very little left over for survival essentials like groceries or gas. So they dig into credit cards – something which cannot be sustained. The agency Enomoto works in, will start a new office in Watsonville office at 240 Westgate, Suite 240. She told the foreclosure victims that the first thing they should do is to be realistic and evaluate their income with their expenses.

On an average the first time Latino buyer is 24 years old , while a white buyer will not indulge in a house until the person is 32. The former does not have any idea about the loan implications and complications. The mortgage company should be contacted for loan modifications but this cannot be done unless the party is able to pull along.

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