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Foreclosures are Ripping Away the Moral Fabric of Homeowners

Julie Parker — Wed, 29 Jul 2009 18:41:39 +0000

The situation is indeed a tricky one. As the American economy goes through one of its deepest recessions and unemployment rises, foreclosures have become very common. Now the question that arises is will a resident default on his mortgage payment if he had the option of making the monthly payment?

According to research conducted by the Booth School of Business and Kellogg School of Management, the answer to this is not very easy. The research has underlined that 26 per cent of the loan defaults are very strategic decisions – an attempt by homeowners to escape payment as their home values plunge below than what they owe to their banks.

According to Zillow.com, 22 per cent of homeowners are underwater. This means their mortgage amounts are more than their home values are worth. In certain areas of Nevada and California, more than 50 per cent of homes have negative equity. In certain areas, the deficit is mind-boggling. For instance, in the Salina, Calif area, the median equity of homes that were bought during the boom, has now become a negative $214,305, the study revealed.

Co-authors Paola Sapienza, Luigi Zingales and Luigi Guiso took interviews of 2000 residents to substantiate the view that although morality has had a constraining effect, yet negative equity is leading many to default on loans deliberately. The researchers also studied the effect of federal policies on foreclosures that touched a record high of 3.1 million.
Perhaps what touches the heart strings is that although 81 per cent homeowners feel that it is morally wrong to deliberately default, yet the a high percentage of owners crumble when the amount of negative equity grows wider. For instance, seven per cent of those who said it is immoral to deliberately default on mortgage payments, are prepared to walk out once the negative equity climbed to $50,000. At $100,000, 22 per cent said they would walk out of their homes. Once the negative equity climbed to $200,000, thirty seven per cent said they would have no qualms about defaulting while 38 per cent said they would default once the figure touched $300,000.
Of course, those who did not have the moral values the percentage rate was much higher. Twenty per cent of this group said they would default once the negative equity touched $50,000 while 41 percent said they would default once the negative equity became $100,000. It’s time the administration looked into this.

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Foreclosures Increase in the First Quarter

Julie Parker — Mon, 29 Jun 2009 15:02:02 +0000

Foreclosures are at an all time high in the US. Along with default notices, bank takeovers were noted on 803,489 homes in the first half of this year. This is a 9% jump from the earlier quarter and a 24% increase from the first half of 2008. This means one in 159 houses has been foreclosed in this quarter.

In March, there were foreclosure filings in 341,180 homes – a 17% jump from the February figure and a 46% from that of March last year. In fact, March saw a record number of foreclosures. Foreclosure filings had become very common in new properties and that means lenders were not making filings in existing ones due to legislative delays. James J. Saccacio, CEO, RealtyTrac, said that bank repossessions have decreased on properties because of a moratorium. However, this freeze will be lifted soon.

There is a brighter side to the picture also. The first time buyers are showing interest in foreclosed homes because their prices have hit the rock bottom now. However, this increased demand for homes will not be enough to offset the rising tide of foreclosures that increase as unemployment peaks.

The highest number of foreclosures was recorded in Nevada, where one in 27 homes has been foreclosed. This is at least five times more than the national average. In this city, 41,296 homes have been foreclosed, registering a jump of 19% from the earlier quarter and a phenomenal jump of 111% from the first half of 2008. Bank repossessions have come down by 3 per cent as compared to the previous half. However, defaults have increased (27%) and so have auctions (35%).

The second highest foreclosure rate was registered in Arizona, where one in 54 homes has been foreclosed. California stood a close third, where one in 58 homes was foreclosed. Florida, Illinois, Idaho, Utah, Michigan, Georgia and Oregon were the other states where foreclosure rates were very high. Illinois registered the fifth position where

38,966 homes have been foreclosed. In fact, 60% of the nation’s foreclosures were in California, Arizona, Florida, Nevada and Illinois. In these states, 479,516 homes were foreclosed. Of the 50 states, the lowest rate of foreclosure filing was noted in Vermont. Here only one in 147,191 homes was foreclosed.

It seems foreclosures have become an important feature in the US housing market.

Steps Being Taken in Nevada to Reduce Pace of Foreclosures

Julie Parker — Mon, 16 Feb 2009 12:53:34 +0000

Steps are being taken in Nevada to reduce the pace of foreclosures. Barbara Buckley, the Speaker of the Assembly, introduced on Monday a bill that she hopes will bring down of the number of foreclosed houses by nearly 12,970.

As per the provisions of the Bill 149, the lender would be expected to make a sincere effort to mediate and work out a new mortgage agreement with the borrower so as to bypass the foreclosure route.

The Democrats in Las Vegas said that the usually the borrowers fail to communicate with the lenders but carry on futile talks with the servicers. The borrowers have tremendous problems locating the entity that owns the loan. Buckley explained that the servicer has no interest or incentive to modify the mortgage. This leads to an impasse that ultimately ends up in foreclosure. On the other hand the lender has many reasons to be interested in a workout. To the lender the foreclosure will cost more than agreeing to a short sale. Even refinancing will be a better financial option to the lender than time and money consuming foreclosure.

Buckley said, “It will cost the lender more if they take the home back and then they have to sell it at a reduced price. In the end, studies have shown it will save them money to keep the owner in the home.”

There will be ongoing discussions on the bill. Marcus Conklin (Democrat – Las Vegas) said that a hearing on 25th February would discuss the position of renters in foreclosed houses and what could be done to help them.

Buckley made her calculation on the number of houses that could be saved based on an analysis made by Center for Responsible Learning. It is apprehended that 51,881 houses would be foreclosed upon in Nevada from 2008 to 2009.

According to the bill the court would ensure that the lenders take part in the mediation talks with those homeowners under foreclosure threat. It would be expected of lenders to authorize a person to talk about loan modifications. Including Republicans, many of the Assembly members signed in favour of the bill. However minority leader Heidi Gansert (Republican) opined that the bill did not specifically detail the deadlines for the lenders to take action.

At a news conference the Democrats said that 48% of the Nevada house owners with mortgages are now underwater – the loan amount being more than worth of the unit.

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The Authorities Have Not Gone To the Root of the Foreclosure Problem

Julie Parker — Wed, 29 Oct 2008 11:41:09 +0000

The figures are staggering. From July right through to September each day 2,7000 Americans surrendered their houses to foreclosures. A year ago the number was 1,200 per day. It is an indication that the measures undertaken by the mortgage world and the government are inadequate. The foreclosure victims continue to boil in the soup despite the measures. It shows that the authorities have not gone to the root of the foreclosure problem.

The head of FDIC Sheila Bair said, “We are behind the curve. We are falling behind.” She admitted that some progress has been made but it has not been adequate and hence the urgency to act. She added, “We need to act quickly, and we need to act dramatically to have more wide-scale, systematic modifications …”

Over 4 million house owners were in default with foreclosures knocking on their doors by the end of June as per data provided by Mortgage Bankers Association. A record number of 500,000 had already entered the foreclosure zone.

This poses the poignant question that why is it difficult to plug the foreclosure hole? One primary factor is the falling of house prices. At the time of the housing bubble – not just thousands but also millions of Americans began to think that the house was not just a home to live in but also an investment. This was especially so in regions like California, Florida and Nevada. These states are now the worst foreclosure hit areas. The bleeding is refusing to stop and might continue well into the coming year.

The average price of a house fell by 9% in September from what it was in the same month in 2007. It is less by 17% from the housing peak of July 2006 said the National Association of Realtors. About 23% of the borrowers owe more than the tumbled value of their houses. By next year the figures will go up to 28% as per predictions of Moody’s.

The majority of the borrowers are continuing with their payments anxiously waiting for the housing market to recover. But many are sending back keys to the lender and just walking away. The lender has no other option but to foreclose. Sophie Lapointe is a mortgage broker of Las Vegas. She comments that negative equity is the biggest problem. Without equity no lender will agree to loss by allowing refinancing.

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Foreclosure Counselling In Nevada

Julie Parker — Wed, 18 Jun 2008 12:39:05 +0000

For the 17th running month Nevada remained holding to the top position as the worst foreclosure offender. In May the foreclosure rate in Clark County is 1:96. Alarmed at the continued trend the leaders are organizing foreclosures counseling sessions to stem the tide. Senator Harry Reid (D- Nevada) has given the lead. The third foreclosure prevention session was held on the weekend. The meetings help the borrowers to find out if they can skirt foreclosures and if so through what means. Reid clarified that these sessions cannot solve the problems of each and everybody but useful information will give some a chance.

The foreclosure figures are grim – 1.8 million are being foreclosed upon, Reid disclosed. He added, ‘sadly, a lot of them are in Nevada.” In Nevada the foreclosure rate is 1:118. The worst pocket is Clark County where the ratio is 1:96. It is a 66% jump from the May of 2007 and 21% from April 2008. 7,880 houses were served with foreclosure notices in Clark County. These were inclusive of 4,286 default notifications.

Apart from being the top foreclosure offender, the state is also weighed down by the “highest debt load of any city in the nation.” With so many top-ranking positions there is little wonder that bankruptcies are common in Nevada, chipped in Michele Johnson of Consumer Credit Counseling Service.

Kirk Clausen of Wells Fargo Bank feels that despite this gloomy picture it is not always inevitable that foreclosures will have the last word. At the counseling sessions representative of 20 lenders were present who came forward to help people stay in the houses that are their homes. The lenders are sometimes amenable to modifying loans at lower rates, consolidating loans or freezing the rates. Clausen pressed house owners to contact the counselors at Cashman Center or their respective lenders without delay. It should be done as soon as the person gets to know that finances problems are beginning to blink. If the matter is delayed then nothing can be done.

If the hapless victim finds that there is no possibility of holding on to the house, then there are counselors for giving advice about what should be done next. There is the option of short sales wherein lenders permit the sale of the house at an amount that is less than the loan. In another alternative the borrower can deed the house to the lender, allowing the lender to take over the house and do the needful without having to foreclose.

Presidential Candidates On Foreclosures

Julie Parker — Wed, 04 Jun 2008 11:48:20 +0000

With the housing crisis being uppermost in the minds of vote seekers the presidential candidates views on foreclosures are of great importance.

In North Las Vegas, Democratic candidate Barrack Obama hit out at Republican John McCain for his link with the foreclosure related mess made by the Bush administration. McCain was derided for being “out of touch with the struggles of working people”. Obama in the middle of three-day campaign in the battle ground states of the west, focused on the travails of families in Las Vegas struggling with foreclosure threats. The limping economy arising out of the millions of foreclosure became the main theme of his address.

Obama knocked on the doors of a single-storey stucco house occupied by Felicitas Rosel who worked as a maid and her husband Francisco Cano who was a porter. Both worked in a casino. They had bought this house – the first time they owned a home – about three years ago with the help of a sub-prime adjustable rate mortgage. But with the rising interest rate they are now facing foreclosure. Obama, the senator from Illinois, showed grave concern saying that all across Las Vegas as well as Nevada foreclosures have become “a serious problem”. He opines that that had the banks been better regulated this situation would not have arisen.

Later Obama while talking to his supporters in a college in south Nevada reference was made to what McCain had said about not understanding economics as much as he should have. He also criticized McCain for by passing the foreclosure crisis. Obama also mocked McCain in regard to a private fund raising programme in which Bush was present. There were instructions that there were to be no cameras or reporters because McCain did not want be caught hand in hand with a President whose polices have failed. It would have tantamounted to saying that for another four years the same policies would continue if McCain won the presidential crown.

Tucker Bounds the spokesperson of McCain however contended that previously McCain had offered a solution to the foreclosure crisis and pointed to advertisements that highlight his determination “to fight foreclosures”. Bounds said that Obama was making a misinformed political attack on McCain. Obama does not have much of solution to offer except playing around with $50 billion of taxpayer’s money with no surety that will not fall into the hands of speculators and no-gooders.

Clinton also lashed out at the failed policy of the Republicans.

Anti-Foreclosure Bill

Julie Parker — Fri, 09 May 2008 11:36:26 +0000

House Democrats are going ahead with a bill, which will offer states $15 billion in grants and loans to buy and revamp deserted homes. The Bush administration has threatened to veto this legislation. The White House’s Office of Management and Budget said that if the bill were to be presented to President George W. Bush, he would veto it, on the advice of his senior advisers. According to a statement released in Washington today, the White House has said that the ones to benefit from this plan would be private lenders – who now own abandoned property- rather than homeowners who have been struggling hard to prevent their homes from going into foreclosure. However, the House Democrats still plan to go ahead with the measure tomorrow.

The measure has been initiated by the House Democrats. The U.S. House of Representatives may have to weigh tomorrow as lawmakers try to arrest this foreclosures in the wake of the sub prime mortgage crisis. According to Irvine, California based RealtyTrac Inc, the foreclosure filings have shot up by 57 percent in March from the previous year.

The plan proposed by the House Democrats is as follows. The states would repair the abandoned homes. They would find people to stay in these homes since, according to lawmakers, the foreclosed property bring down the value of the neighbouring properties. Funds would be allotted based on a state’s percentage of foreclosure. Obviously therefore, the worst victims such as Ohio and Nevada would benefit the most.

According to the OMB, the above-mentioned legislation would just create an incentive for more lenders to foreclose rather than sort out matters with homeowners. However, the House Financial Services Committee Chairman Barney Frank, who put forward the plan in March, refused to accept the criticism, stating the Federal Reserve’s rescue of Bear Stearns. The House has decided to take into consideration Frank’s plan to allow the Federal Housing Administration insure up to $300 billion in mortgages, only after loan holders agree to cut down the principal. This legislation has brought in negative attention from House Republicans at a press conference in Washington.

John Boehner is a House Minority leader and an Ohio Republican. He said that they were talking about a $300 billion bailout for those people who were scamming the market. Besides, the lawmakers have also put forward another plan. It includes a one-time homebuyer tax credit of up to $10,000.

Busloads Of Hunters Hunting Foreclosure Game

Julie Parker — Tue, 04 Mar 2008 12:43:43 +0000

The hunting instinct has not gone out of vogue – is very much there with outward cosmetic changes. Today busloads of hunters are on a foreclosure safari – trying to target sitting ducks. It is a common scene now – also in Prince William County.

Real estate companies chartered a bus carrying 25 prospective buyers to view the thousands of houses afflicted by foreclosures. This was the first tour of its kind in the region. Mortgage attorney Art Grace told the hunters that they have a great chance to snap up a deal. The public here are not even aware of the gold mine they are sitting on. The bus touched on nine foreclosed units in Gainesville and Haymarket within three hours. There were town-houses and stand-alone houses with price tags ranging from $200,000 to $600,000. One house was practically brand new.

The idea of bus tours is catching on across the country with similar buses rolling in California, Nevada, Michigan and Illinois. These states have been worst hit by the foreclosure crisis.
The spokesperson of the tour operator (Long & Foster Realtors) in Prince William, Eileen Durkan said that hearing about similar hunting parties in California she decided to set the wheels rolling here also. California ideas always run eastwards. She decided to pick it up fast. Compared to other areas in the D.C region Prince William has been severely mauled by foreclosures. In Washington, Arlington and Alexandria metro zone there were 28,455 foreclosure postings in 2007 making it rank 41 amongst the top 100 metros of US. The leading cities were Riverside, San Bernardino, California with 102,506 listings. Los Angeles, Long Beach recorded 93,696 foreclosures.

Amongst the hunter tourists were novices, investors and people who were just curious and interested. While on the bus the passengers were given information about foreclosure hunting by a house inspector, house warranty agent and a loan officer. Information brochures were distributed together with water bottles labeled ‘Foreclosure Tour’. One participant commented that the idea was great and would have been greater if it had started earlier.
Experts feel that if somehow the market is made to turn around things will improve. Right now there are too many units and too few buyers. With more foreclosures in the offing more houses are expected to roll in. Buyers are in a fix sans loan facilities. So it is a no go situation.

Republicans Blocking Democrat Bill On Foreclosures

Julie Parker — Mon, 03 Mar 2008 12:24:29 +0000

The Democrats have brought in a bill that if made effective will curb further foreclosures by changing laws related to bankruptcy. This was the opinion given by Senate majority leader, Harry Reid, Democrat from Nevada last Thursday. He apprehended that in all likelihood Republicans will block the bill. The test vote might extend up to Friday latest. If the Republicans stall the limited debate Reid will try to bring it back to the Senate floor the following week. He said that he would permit amendments to the bill that White House has threatened to veto.

He qualified his statement by adding that the amendments would relate to the present housing problems that has entangled 2 million house owners who are all set to face foreclosures and will not include other red hot issues like estate taxes. The Republicans in the Senate are scheduled to present their own interpretations of the housing bill on Thursday.
The clause in the bill that is causing controversy is about allowing judges to cancel bankruptcy debts.

If the bill is blocked by the Republicans Reid will manage to bring it back to the Senate floor sometime late the following week. By then the Ohio and Texas presidential primaries will be completed and the two senators, Clinton and Obama, backing the bill will return to Washington to give support to the legislation.

The criticism leveled by the Republicans is that the bill is actually a bail out to the lender’s lobby. The bankruptcy reform provision will give the right to judges to modify the principal of the mortgages on first time residences. The new measure is more bold than the economic stimulus package signed by Bush last Wednesday. This bill termed Foreclosure Prevention Act of 2008 includes many items that the Democrats had wanted to be incorporated in the original package related to economic stimulus. The Democrats in the Senate are keen to see the bill bypassed in the usual committee review process so as to fast track it for consideration when the Congress returns after the recess. The bill plays up to the popular sentiments of voters and there are many members seeking re-election. As such the bill must be enacted into law – opines many. Reid feels that in the face of an uncertain economy the bill is the right dose of medicine. The bill should be carefully considered so that those seeking help are nothurt by it.

Laws To Check Foreclosures

Julie Parker — Wed, 05 Dec 2007 12:19:08 +0000

Senator Harry Reid and Assembly Speaker Buckley made a public announcement saying that Nevadans must be helped because the foreclosure is worse than what has so far been projected. Democrat Buckley from Las Vegas feels that it is imperative to come forward and see that the victims of foreclosure are getting the right type of help. This public service announcement running 30 seconds will be broadcast over television and radio stations throughout the state this week. A hotline telephone number will be made available for all to note.

Nevada ranks first in foreclosure listings with a proportion of 1:165. The latest figures show a worse situation – 1:154. This relates badly with the national average of 1:555. Foreclosures affect all – the borrower, the lender, the state, the county as well as the city. All these combined naturally has a telling effect on the nation. Renters are neither spared. They too get hurt. Without knowing anything suddenly somebody knocks on the door and tells them that foreclosure is closing in. The rapid growth of Nevada is the root cause for its rapid fall today.

Reid and Buckley make up a mobile team forever on the move trying to liaison between lenders and borrowers for an amicable viable solution to the foreclosure problem. They have helped hundreds in Nevada. During a stop at Las Vegas about 600 came calling. They have been able to help about 300 victims. Their schedule of two hours was extended to five. One senator said that it was an eye opener to learn that from lenders that the borrowers are in such a traumatic state that they do not respond to telephone calls. The worst thing they are doing is not to do anything. The toll free number connects the borrowers with Nevada Fair Housing Center and other bonafide non-profit counselors. Care must be taken that in the process of seeking help they do not fall into the clutches of scammers.

Burks, the president of Nevada Fair Housing Center says that the response has been unexpectedly tremendous. This is a good sign. The people have realized that there are foreclosure escape routes.

Henry Paulson, US Treasury Secretary said on Monday that the agreement regarding temporary freezing of rising interest is about to be announced and enforced. Appointing Paulson is one of the best things Bush has done – although it took some time for him to make up his mind.