Posts Tagged ‘sub prime mortgages’

Bills are being rushed through to help both borrowers and renters continue to stay in the houses that are their homes. In Minnesota the lawmakers dubbed the foreclosure situation as historic. They initiated a package of 10 bills to help the foreclosure victims. More than a dozen foreclosure related bills are in the Legislature.

In the Twin Cities (seven counties) foreclosures doubled in 2007 as compared to 2006. In January Hennepin and Ramsey Counties set records in foreclosure listings. The reason was unmanageable sub-prime mortgages, unemployment, credit crunch and the like. Although core city suburbs like Bluff, Frogtown and North Minneapolis have been hit the epidemic is also spilling over onto the suburbs hitting farm towns.

A close parallel is being drawn to the Great Depression and most of the experts feel that this situation will drag on up to 2009. Others say that foreclosures will continue for many years. Allen Fishbein, the director of housing and credit policy for the Consumer Federation of America said there is concern about the sweeping effects of foreclosure penetrating all levels of the market. Foreclosures have also badly affected the lenders and they have responded positively to the appeal of President Bush to modify loans.

In 2007 Minnesota passed the strongest anti-predatory laws in the country. The new bills aim to take stiff measures like preventing cutting of essential supply like water, gas and heating so long as the renters continue to be current. Another bill makes it compulsory for lenders to link borrowers with foreclosure counselors to sort out matters. A coloured pre-foreclosure notice will have to be mailed to the borrower giving information about counseling. Yet another bill requires the setting up of an electronic system by the state to monitor foreclosure movements. It is a pity that till date an archaic method still continues to hold sway.

A flat moratorium on foreclosures have not been considered as this is something unrealistic and unconstitutional. Quasi moratorium proposals are being considered. The Minnesota Sub-prime Foreclosure Deferment Act of 2008 would for the time being defer foreclosure proceedings for a year under certain conditions – the main one being that the borrower must be occupying the house in dispute.

The package of bills is the outcome of the working together of 38 organizations representing the government, lenders and communities at all levels. One of the salient points is that attention is being given to the plight of the renters.

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According to the Colorado Division of Housing 7,117 Colorado foreclosure homes were sold at foreclosure auctions since January 2007. During the first quarter the total was 5,586 and during the second quarter it rose to 6,322. Each state has different foreclosure laws. In Colorado a unit can be sold at auction to a third party or the lender after 45/60 days from the date of filing the foreclosure notice.

During the first three quarters of this year 19,025 houses in Colorado have been sold at foreclosure auctions. In 2006, during these three quarters 15,112 units had been sold. 2007 has seen the highest number of sales since the Department of Housing has been keeping track of numbers from 2003.

Foreclosure is a legal process involving many steps. There is the possibility that all the numbers filed do not end up in auction sales. In the first, second and third quarters of 2007 the number of foreclosure filings were 9,443, 10,017 and 9,500 respectively. During the first three quarters of this year 28,960 filings had been listed. In 2006 the total number during this same time period was 28,435.

The information has been collected from County Trustee offices of Colorado. Foreclosure numbers decreased in the third from the second quarter in Adams, and Denver counties by 22% and 17% respectively. The trend was slowing down also in Pueblo and El Paso Counties. But in Weld, Jefferson and Boulder County it rose by 15%, 8% and 28% respectively.

The foreclosure crisis was triggered off by the housing boom, which had been fueled by a frenetic buying of houses by taking easy loans from the sub-prime mortgages. Some were genuine borrowers who did not understand the implications of low rates but were interested in improving their socio-economic status by owning houses. Many were speculators and investors who were sanguine that house prices could never tumble down. But when more and more borrowers found it impossible to cope with increased rise in interest houses began to foreclose. When the numbers reached jumbo figures the lenders realized that they had chewed more than they could digest. It became a giant crisis affecting both society and economy. Politicians became alarmed and all heads got together to sacrifice some scapegoats and work out a viable solution – at least for the time being. Perhaps the slowing down is partially due to this move but the overall trend is not good.

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