Some Popular Notions about Foreclosure Punctured
An analysis of the foreclosure crisis by Seattle Times-ProPublica surveying three of the worst hit areas punctures some popular notions about it. The story of Jamie Jones is held up as an example to show that everything does not fall into one line.
Fifty year old Jones, a resident of Seattle worked for three decades going up in the financial service sector of the industry. From bank teller she became an executive in the mortgage world. In 2007 spring she purchased the house of her dream in Kirkland by contracting a fixed rate mortgage covering thirty years.
While Jones was enjoying a New Year’s holiday in Mexico, thunder struck. She lost her job with the closing of her division. She used up her savings for a year while attempting loan modification but it was to no avail; the bank filed for foreclosure. This is the typical story of lenders preying on irresponsible buyers leading to wild lending.
But the picture presented by the Seattle Times Pro-Publication tempers that picture. The majority foreclosed upon were young was the impression given. It is wrong. Similar to Jones half of the borrowers were over 40 years of age.
Another notion is that the predominating cause of foreclosures was predatory lending. But three fourths of the loans were sans any of three features that characterized predatory lending – ballooning payments,
penalties for pre-payments and exorbitant interest rates.
The third common idea is that the majority lost their houses to foreclosure; but their findings negates this. Over half were able to retain their property with some of them managed to even make a profit by selling them for more than their debts.
Thus the survey fills in some of the gaps because of insufficient data on residential loans. Although the regulators together with the politicians are taking action to get more information about lending operations and foreclosures, consumer advocates complain that the progress is very slow; moreover it is not clear how much will be freely available.
Carolina Reid of Federal Reserve Bank of San Francisco said, “For those of us who want to understand how the foreclosure crisis has affected borrowers and communities, it is frustrating to not have access to publicly available data that can really help us to understand what happened and why”.
It is difficult even to get basic numbers about those who are defaulting or being foreclosed upon observed Guy Cecala of Mortgage Finance, a trade publication.
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