Posts Tagged ‘philadelphia’

The nationwide foreclosures have literally shoved the American people into a debt abyss. Irrespective of the reasons and circumstances, the financial crunch that has gripped the country has not spared the native or the immigrant, young or old, poor or the affluent. America\’s money lenders and brokers have acted the Pied Piper in leading millions of American public into the debt trap, who identify themselves with the miners of old, steeped in debt to the store and unable to repay. Each passing day witnesses several additions to the number.

Harrowing tales of distressed borrowers are splashed across the nation through the media and to the world. Diane McLeod was a valuable customer to her lenders. She was able to secure two mortgages at a time, with varying interest rates. With the fluctuating housing market trends and interest rates mounting to spark off the high rates of foreclosure, Ms McLeod began to stagger. She had a car loan to repay and a high cost credit card. Like any other American she was used to high living and spend more than she earned. She lived with her 20-year-old son in a small two bed-roomed ranch house in suburban Philadelphia and drove her car to work. She was separated from her husband and handled two jobs to fulfill her dreams, which she was doing until rates began to soar and medical emergencies left her drained. She defaulted on her mortgage payments and her credit card bills mounted. She was terminated from her job and left to ruin with her house in foreclosure and her reputation at stake. She was bombarded with calls from the house mortgage agencies, almost 20 times a day, trying to slap a foreclosure notice which she in utter frustration, refused to respond to.

Ms.McLeod represents the average American today. However her lifestyle was not totally to blame. The financial giants Citigroup, Capital One and GE Capital had begun to collect interest payments that accounted for more than 40% of her total income, adding thousands more to it as fees. These financial companies with their non-transparent loan policies that land borrowers in knee-deep trouble when things go awry, are also to blame.

In recent years, the practices that had boosted the American economy and acquired record profits for many banks for decades, have floundered and jolted the nation’s economic system in its entirety, spiraling defaults, losses and foreclosures, crippling the nation.

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By getting temporary freeze, Philadelphia has bared its fangs and is one up in the battle against foreclosures. The City Council allowed for enforcement of moratorium on house mortgages. The sales scheduled for April auctions were put off, said Curtis Jones, a city council person. He was one of the sponsors for the resolution and says that now his aim is to suspend the court auctions indefinitely. Economic justice is imperative so that people do not get thrown out of houses that are their homes.

The council legislation however is non-binding. It aims to give the residents time to work out alternatives with lenders. The Sheriff John Green as well as the Common Pleas Court President, Judge Darnell Jones gave their support for it to be implemented.

The legislation is not without precedent. In 2004 the City Council had called for the Sheriff’s intervention when 1,120 units were up for foreclosure sale. A stay was granted on the sales in Philadelphia. At the same time the Pennsylvania Department of Banking conducted a survey across the state. It was this study that has led to the passing of the legislation putting a hold on foreclosures.

In 1983 in another instance, the then Sheriff – Joseph Sullivan had successfully got a one year stay on approximately 300 units that were ready to be auctioned in the court.

A report released by ACORN says that 3,206 risky loans contracted in 2006 are likely to face foreclosure. Ian Phillips of ACORN commented that there is a difference between the suggested moratoriums this time and the previous ones. The former is the result of predatory lending and not a product of recession-like conditions. Considering the nature of the crisis strong intervention is necessary.

However Robert Levy of Mortgage Bankers Association of Pennsylvania holds a different view. He contended that it would drive the city lenders out and hike interest rates because of the risk involved regarding intervention from the authorities. In the long run this ‘onerous methodology’ will cause serious harm to the system. It is inevitable that this will take place when lenders are prevented from realizing their dues. Levy hastened to add that the association is keen to be involved in community programmes for financial education and counseling. He would also try to prevent the banks from leaving the Commonwealth of Pennsylvania as a reaction to these consumer protection efforts.

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Foreclosures in the subprime market have nose-dived. The news media are choking with information. The sub-prime was set up to help the low-income group or those with bad credit history. But it is this group’s dream houses are crumbling like sand castles. But mortgage representatives as well as the Federal Reserve Bank have rushed in with the assurance that these are merely teething troubles.

Center for Responsible Lending opines that what is happening is just the tip of the iceberg. 2.2 million borrowers in the sub-prime group have either lost or will lose their houses within few years. It comes down to the harsh statistics of one out of every five sub-prime borrower in 2006-06 being affected. The figures remain unmatched in the history of modern mortgage.

Till yesterday Philadelphia and South Jersey had seen appreciation in the real estate market with a climb of about 70% to 80% in the last five years. For sub-prime owners this was a boon because if they defaulted in their installments they could sell their property. It would not only clear their dues but also leave something extra for the future. But the reverse is taking place. Foreclosures are increasing and property rates are falling.

In Philadelphia appreciation of property is at 5% against 14% in 2004 and 2005. This will lead to about 17% house owners to forfeit their property through foreclosures. Similar is the pattern in Camden region where the appreciation rate has plummeted from 16% to 6%.

Till now the comfortable appreciation rate had made the regions an oasis safe from the depredations of foreclosure. People without funds just could not get an entry. But the sub-prime strategy played upon the feelings of those who coveted rich houses. They fell for the trap with disastrous consequences.

The mortgage rates are temptingly low at first but begin to climb after two years. It is as high as a 45% increase. To add insult to injury, sub-prime borrowers who improved their credit and wanted to move onto loans with better terms had to pay thousands in penalties. Never has such fraud taken place in the prime mortgage market.

Some players in the mortgage field are optimistic that the market will automatically correct itself. But words will not fill empty hopes. Strong legal action based on common sense is the need of the hour.

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Downtown Riverhead is hoping to bring some of the bustle back to Main Street with a new culinary school.

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From Panama to Shanghai, buyers are paying top dollar for properties with pedigrees and developers are prioritizing careful renovations of historic buildings.

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Foreclosure statistics in the Baltimore area can be deceiving. While during the past four years the number of foreclosures in Baltimore has fallen by nearly 8%, the foreclosure market in Baltimore is still ripe. The percentage of foreclosures as compared with the number of homeowners in the city is nearly double in Baltimore what it is in Philadelphia. So while the number of foreclosures has dropped, the cities rate of foreclosure is still very high.

However, these are very different cities, so comparing them we can draw some conclusions that can be universally applied when examining the real estate situation in any city. Philadelphia is marked by a growing economy and a rising number of ocupants. New jobs have been created, and more people are moving to Philadelphia. Baltimore has been marked by a sluggish economy, and while statistics on how many residents were moving in and out wer enot available at the time of this article, it can be assumed that more people are moving out of Baltimore than moving in. Since the amount of foreclosures has gone down, but the rate of foreclosure has remained the same, it’s safe to assume that people have moved out of Baltimore.

Therefore, while it may be easier to purchase a foreclosure in Baltimore for less than in Philadelphia, buying in Philadelphia is probably still a better investment. Sure, more foreclosures on the market means better prices for investors, but the probability of turning a profit on that home in a city which isn’t experiencing growth could be difficult. Turning a foreclosure in Philadelphia for a profit may be more lucrative, since there are more people moving into the city, and thus the demand for real estate is higher.

It’s important to remember to consider statistics such as these when deciding which foreclosures to buy, where and when.

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