Posts Tagged ‘wisconsin’

To avoid recession Federal Reserve has cut down key lending rate. Meanwhile foreclosures triumphantly marched on apace in November. The rate was slightly higher than that of November 2006.

In Racine County last month there were 74 filings. A year ago the number was 71. 729 foreclosures had been filed through November – an 11% rise since a year ago, when the number was 658. This year (2007) has seen high levels of foreclosures in contrast to the past year. From 2005 it was a 34% rise across the states. This year 89 foreclosures have been filed on every working day.

Alarmed at the uncontrolled rise of foreclosures, on Tuesday the Federal Reserve reduced interest rates for the third time during the past four months, aimed at reining in foreclosures. Federal funds also were cut by a quarter point bringing the federal funds rate to 4.25%. It is anticipated that the commercial banks will try to match these steps by pruning their prime lending rates. That would bring down the standard rate for millions to 7.25% - the lowest in a span of two years. Signals are being given out by Federal personnel that further cuts might be imposed if the foreclosure crisis begins to get worse.

The Fed had started pruning rates in September with a move of half point. This was followed by reducing funds rate by a quarter point at 31st October meeting. In addition the Fed declared that it was cutting down on discount rate also by a quarter point – to 4.75%. This is the interest being charged to make direct loans to banks. The idea was that banks could now borrow easily from the Fed. This is of special importance at this point of time when bad loans will compel banks to tighten credit. Without being able to take loans who will buy houses? Without buyers how will the real estate market stabilize?

The Chairperson of Fed, Ben Bernanke and his colleagues are worried about recession and desperately taking measures. Experts opine that this quarter and the one following it will be of vital importance to the economy. The economy is besieged on all sides with social problems dogging its steps. In 2008 the economic growth will record a weak 2.1% in the coming year. It would be the weakest GDP in the last six years. Foreclosures are now stepping into the rural areas with unabated ferocity.

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A dream log house in West Tisbury could not be save from foreclosure – dues had ballooned to two and a half times more than its original value. It was double the maximum resale permissible price allowed in the deed’s affordable housing covenant. The price being too steep officials of an organization, The Island Housing Trust, could not save it.

But in another instance they met with success in Oak Bluffs. They bought it and then resold it with the permission of the trust that held the property.

Because of non-inclusion of riders or covenants the risk is there that other properties could be at jeopardy. It is not at all complicated – a $10 second mortgage serves as an automatic alert to the holder of the lien of any deals like refinancing or sale.

These deed riders are effective only for a stipulated number of years. Very few are in perpetuity because the state lays down that these are for buyers whose income is 80% less than the average. Most buyers are well above this line. The towns that have established the affordable plots are not getting timely warning of any complications that arise on the properties.

Here time is the key factor. In one instance the town official had only 30 days in which to exercise its right of refusing to purchase the unit. In one such instance the representative of the town Ms Wansiewicz asked the bank for time to arrange matters with qualified buyers. The bank did not bother to reply. She went to the auction on September 4th with a copy of the covenant stating the resale price limits. But for all the noise and hullabaloo nothing positive resulted. The auctioneer claimed after few days delay that the unit had been sold to a bidder – Saxon Mortgage Company. Apparently the original lenders Freemont Investment had filed for foreclosure in February 2007 and assigned it to Saxon in July. The moot question behind all this maneuvers is that how did the property owner qualify for such a jumbo mortgage and that too without coming first to the town authorities? Affordable housing is about community investment. It must be well guarded to prevent dangerous cracks from developing.

The land trust and housing authority have but one prime aim – to see that affordable properties remain so for all times to come.

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Bankers are watching and waiting with uncertainty the snowballing effect of the sub-prime tsunami crisis.

Even though April provided a breather by a dip of 1% in foreclosure listing, it was still up by 62% compared to last year. Even then it will be far above the average of last year. Statistics pouring in show a worsening of the situation. No one knows the actual number of active sub-prime mortgages, its source of origin or refinancing procedures in Northeast Minnesota and Northwest Wisconsin.

Risky loans had triggered off this crisis. Some of the biggest sub-prime lenders like Ameriquest and New Century Financial are toppling down.

Some regions of the country have remained untouched by this virus – Wyoming, Vermont, North and South Dakota, Mississippi, Delaware and Washington D.C. Topping the list are 10 cities of which six are in California. These six ranks first among the group of notorious 10. Las Vegas comes first. Others claiming this dubious distinction are Nevada, Colorado, Connecticut, Florida, Arizona, Illinois, Michigan, Ohio and Georgia. As a result of this fall out Michigan, Minneapolis and Ohio are reeling under massive layoffs.

Big national financial services are practically non-existent in some important regions. Yet sub-prime activity has been typical with apprehended results. Real estate businesses having taken a U turn, lenders are tightening loan conditions thus putting marginal borrowers in a soup. Their rates of mortgage interest are rising while the value of their property continues to plummet.

The situation is so alarming that Lutheran Social Services have come forward to provide pre-bankruptcy counseling in Minnesota and Douglas County. The sub-prime lending has hit not only the borrowers but also local banks and communities. A ‘teaser’ rate tempts the borrower to fall into the net. Later the net closes in on the catch with disastrous consequences to all but the lender-agent nexus. Sub-prime lending essentially steals business from smaller entities.

Authorities have come forward and tightening the belt of the law – a grim reminder that playing around with lending will attract felony charges coupled with compensation and damages. However it applies only to current frauds and does not extend backwards. Thus primarily the focus is on prevention.

Wisconsin is the only state that has no limits on interest rates. Pay-day lending has been rampant which many regard as an unhealthy drain on the economy. The heat is on to find a solution and save the people.

Via

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An oceanfront residential community on Maui and residences at a well-known resort in Wisconsin.

More: continued here

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