Many are not wallowing in self-pity but are actually taking up the challenge thrown by the foreclosure crisis and finding new avenues through which to benefit from. Some say that it was actually been the boom that pulled them out of the business. Economic necessity has now become the mother of new invention.

Jay Kverno previously had a job oiling machines in a lumber factory. Today, wearing spotless scrubs, he works in a dialysis unit while he thinks about the heat, fumes and dust of his old workplace.

Bemidji Minn has turned 50. He muses, “I used to be filthy. Now I’m sterile.” Three years ago he was laid off from Ainsworth Lumber and now is a registered nurse. At the lumber factory, he  toiled for a quarter of a century earning $40,000 to $50,000 annually. With a guaranteed overtime, he did not know any other world existed.

Availing from the help offered by the Dislocated Workers Program, he financed the tuition fees  he would need for nursing school. It fees amounted to $20,000. Thankfully, Bemidiji passed nursing school with flying colors and now likes his job. For him, it is the start of a new life.

His other colleagues,however, were not so fortunate. One went job hunting in Afghanistan but achieved no success.

Another success story is that of Caroline Blake. She lost the job she disliked but turned to find one dealing with animals – a field much to her liking. She took up pet care. About a year ago, 29 year old Blake resided in Kenilworth, New Jersey worked for a consulting firm. She quit when the atmosphere at her job turned foul. Not one to sit idle, she purchased a franchise of Pet Care after raising $10.000 in order to buy it. Many were doubtful of her success and asked her whether it was worth giving up a paying job to take dogs for walks. Starting early in the morning, she would work all days of the week. The last walk for her was usually at 11 pm. She continued for three months without ever taking a day off. Now pet care is part of her daily life no matter where she is – sunbathing or sitting before the television. Jogging with a dog is her passion. Her charges are $18 for a visit of 30 minutes and $55 per night as an overnight dog sitter in her own home. She is earning well – nearly 75% of her previous salary packet. She said with a grin, “Smartest thing I’ve ever done – every day, a different dog.”

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The treasurer of Luca County Wade Kapszukiewicz came up with a proposal in 2004 to sell the tax lines of those house owners who were delinquent as a new way of raising revenue for the benefit of local schools and other similar bodies. Till now $11.3 million has been collected though sale of tax lines to a debt collector based in New Jersey.

Unfortunately very recently Xspand has denuded the courts with foreclosures counting to about 100 within a span of two days. It is a potential threat to house owners losing their homes in this holiday season. The county court clerk Bernie Quilter pouring over piles of paper said, “We weren’t counting on this. Here we are – the county is asking us for budget cuts, and there is a skyrocket in the number of cases.”

Till the last month of this year Xspand has been filing dozens of foreclosures each month against those who have not paid their property taxes. In a matter of two days the court was flooded with about new 120 foreclosure filings. On Friday 60 new cases were filed and another 60 on Monday. These are what the company had purchased – the tax dues of the residents via a treasury sale. Xspand has filed 450 cases – the greatest number by any one plaintiff accounting for 10% of all the foreclosures that have been filed this entire year.

Foreclosures have risen to 4,100 in 2008 from 3,486 and 3,285 in 2007 and 2006 respectively. The sudden addition of cases towards the end of the year will shoot up numbers. Quilter explained, “Some of this property is junk property, but some of these are owned homes, and instead of working with (the owners) they’re kicking hem out of their homes.”

The deputy treasurer Mark Austin however says that the sale of tax-liens has lessened the foreclosure figures by allowing the taxpayer’s to work with the county before the lien is sold as to avoid trouble.

The house owners can skip foreclosure by coming to an agreement regarding payment with the county. The latter repeatedly sends notices before actually selling off the liens on the houses. If the county is convinced that the house owner is seriously trying to meet tax commitments then the lien will be removed. Along with the due taxes steep legal fees are added.

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Sometimes Kruk cannot believe it is happening to her. She has been hearing about foreclosures but hearing and experiencing it is quite something else. She is single and spent good many years looking after the vegetable patch in her family house. She rented out a part of the house and was quite content with her life. Her uncle who lived down the road was a politician and the street was named after him. For 17 years Kruk had been employed in a casino.

Foreclosure clouds began to gather when she lost her job and her unemployment cheque was not enough to handle the mortgage. Her mortgage, like that of many others, belonged to the sub-prime category with a tag of floating interest. Initially for the first two years it was fixed but then it began to swing upwards. She could hear foreclosure knocking as every three months it began to go up and up. She began to stumble and be late. This led to late fees. The net result was that the foreclosure warning knock began to get louder and louder as monthly payments began to rise and rise.

Why did Kruk opt for such a mortgage? For those in her station of life and income prime mortgages were not available. So at that time the sub-prime seemed to be a godsend and an answer to the American dream of owning a house. In Cape May County foreclosures have been hiking since 2004. It jumped to 615 in 2007 from 275 in 2004. In the first quarter of 2008 there were 247 foreclosure filings. If the trend continues then before the year draws to a close it is apprehended there will be 988 foreclosures.

When Kruk lost her job the bank warned it would foreclose on her. It did so in September 2007 with the bank demanding $118,000. The bank agreed to a short sale by which the lender was willing to accept less than the loan amount. But no buyer could be found. At the last minute there was some hitch or the other. Finally she had to surrender her house to a foreclosure auction. As she prepares to move out, among the mementos littered on the floor is a frayed rug that belonged to her grandmother.

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The Congress was mounting pressure on James Lockhart, Director of the Federal Housing Finance Agency, to use his resources in order to assist house owners caught in the foreclosure mesh. The senators, Menendez of New Jersey, Schumer and Brown of Ohio and Casey of Pennsylvania felt that the giant mortgage companies should implement whatever steps necessary to stop additions to the foreclosure list and subject them to “suffer the economic and personal disaster of foreclosure.” Fannie Mae and Freddie Mac had approximately $5 trillion in outstanding mortgages, which constituted more than half the country’s total. The ‘freeze in foreclosure’ that the lawmakers had urged the companies for, were to last for at least 90 days, and would not be applied to all the loans mentioned.

The Federal Government had seized control over the housing mortgage companies is a fervent bid to restore the housing market and the financial crisis that had engulfed the country and failed to show any signs of recovery for the past two years. Chief Executives of both the companies had been ousted and replaced and Mr. Lockhart had been advised to follow the example of Sheila Bair, Head of Federal Deposit Insurance Corporation although the conservative policy might add the burden on the taxpayers.
Bair‘s line of work was to urge banks to modify their lending policies and develop a comprehensive plan, which would offer a dignified solution to defaulting borrowers. The FDIC had first temporarily frozen house foreclosure, and went on to allow seriously distressed borrowers to swap loans at affordable rates. Fannie Mae and Freddie Mac were expected to work on the same lines. Mr. Frank, the Chairman of the Senate Banking, Housing and Urban Affairs Committee was to examine how the foreclosure prevention law was working.

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Nobody knows this better than Shih Tzus of Associated Humane Societies branch in Newark. He said that in the last six months he has had to give shelter to dozens of dogs and cats that were surrendered by owners who had no homes of their own at that point of time; neither did they have the means to feed extra mouths. The owners giving up their pets come in crying and upset.

Across the state all the shelters are reporting a rise of minimum 10% to a maximum of 25% in the number of animals seeking protection. The director of Public Policy at the American Humane Association apprehends that as many 1 million pets could be affected nationally. This is inferred from the fact that foreclosures will hit as many as 4 million families.

The regional director of the Humane Society of the United States, Nina Austenberg analyzed that when the economy is bad everything suffers. A pet then becomes just another mouth to feed. The old animals need medical attention. Previously the owners did not count the expenses. But now the reality is different – people are without jobs and at threat from foreclosures.

One of the acute problems being faced by pet owners displaced by foreclosures is that many apartment complexes have adopted a no-pets policy. Apart from that under the duress of foreclosures, the pets are no longer uppermost on the minds of the family members. It has been calculated by The American Society for the Prevention of Cruelty to Animals that the average cost of caring for a dog is anything between $580 to $875 per annum. Cats cost around $670 annually. Many people do not fully realize that they have to give up a pet until the talk out details of the budget with the housing counselor. At the last minute there is very little time to hunt out a proper shelter or arrange for a friend or relative to take charge of the pet. Caught in the pincers many just abandon the animal to fend for itself and vanish. The pets are left confined within the four walls of the foreclosed abandoned jail. The police in Newark, Irvington and South Orange are flooded with reports of pets left cruelly deserted in confined environment. It is a trend that is causing alarm for all animal lovers.

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A plan was launched in Detroit by the HUD (Housing and Urban Development) meant for borrowers with loans that have been insured with FHA (Federal Housing Administration). It is meant for those who have bought a house for the first time. It will permit the lender to submit an insurance claim on the mortgage when it arrears, but before it starts to fail. HUD has the task of overseeing the work of FHA. It now transfers the mortgage to be serviced by another company. The borrower then comes into the picture and the loan is restructured to affordable levels.

Steven Preston of HUD said that the plan would serve a double purpose of helping the borrower as well as the neighbourhood. One foreclosure alone has the power to depress the entire locality by bringing down the value of the houses not in foreclosure. Buyers are attracted to the foreclosed houses as theseare sold at a heavy discount. Moreover empty houses attract crime and disease causing damage to the law and order of the area.

In New Jersey another kind of step is being taken with the lead being given by the Federal Home Loan Bank of New York. It lends money to about 300 local banks in places like New York, New Jersey, United States Virgin Islands and Puerto Rico for the purpose of financing mortgages. This programme is termed Housing Assistance and Recovery Programme (HARP). The Magyar Bank of New Brunswick (New Jersey) was lent $6 million. Magyar Bank works in tandem with the First Baptist Church of Lincoln Gardens in Somerset, New Jersey. The latter has a network of counseling services and locates the house owners who are at risk from foreclosures. Then negotiations start with the lender to pull off foreclosures in place of a viable affordable solution. The lender is asked to buy out the loan. Magyar bank pumps in 70% on the assumption that the lender will write off the remaining 30%.

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Only when interest rates began to rise that they woke up with a shudder to succumb to foreclosures. The sheer number of foreclosures raging across the country has made sociologists, economists, legal fraternities and even the politicians sit up. All were affected. Bush made an announcement on Thursday regarding help for foreclosure victims.

On an average day the number of calls was 1,500. But since the foreclosure crisis the number has shot up to 5,800 said Tracy Morgan, vice president of communications and business development for the Homeownership Preservation Foundation. This is the story ever since Bush announced plans to soften the foreclosure crisis. Borrowers were asked to call 888-995-HOPE. The calls on Thursday were three to five times higher than those received on Monday. There was a sense of high alert following the President’s declaration.

The Homeownership Preservation Foundation works in tandem wit six other credit counseling bodies across the country. One in Greater Atlanta, Consumer Credit Counseling Service took 920 calls within four hours. The average is 75 to 80. The pressure is compelling them to engage extra personnel to attend to the calls. Many are working overtime. Whatever the odds they have been able to manage the workload. Calls are kept on hold to talk to counselors.

In New Jersey Novadebt handles hotlines. They received 1,600 calls on Thursday. Through the year the number of calls have been steadily rising corresponding to the rise in foreclosures. It is also due to the publicity these hotlines are being given. The calls have increased by 100% from the first to the second quarter and 94% from the second to the third quarter.

Homeownership Preservation Foundation has increased its strength of counselors receiving the hotline calls. By the end of the year 70 more will be added to their team bringing the total to 250. It is a non-profit organization funded by the US Department of Housing and Urban Development in partnership with mortgage lenders and servicers as well as charitable bodies.

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The foreclosed house usually ends up in the court auction. The lenders, who are usually the banks, do not want to sit on these units. That is why the banks are not motivated by high price. They are willing to settle for low prices and this tends to push down the general real estate market. There are more houses in the market than ever before – thanks to foreclosures.
The general story in the housing market is that for every buyer there is a seller. When a buyer sells a unit he or she usually does so to buy another house. But in the case of foreclosure an owner in distress is selling the house. A loan is being paid off. This does not leave anything left over for buying another house. Thus too many foreclosures lead to imbalances with the supply being more than the demand. This causes prices to go down and has far reaching implications for the economy starting with the immediate locality.’ For Sale’ signs dotting the region make the neighbourhood looks eerie and abandoned. Criminal activity sets in. Nature hates vacuum. With development pausing, labourers and builders find themselves without work. Suppliers and others connected with house décor suffer. It sets of a chain reaction that touches adversely each corner of the regional society and economy.

However the housing sector will recover opines the esteemed economist. There is a silver lining in the cloud. The sub-prime sector in the mortgage industry might be in the red but the prime category is still alive and kicking. It means that those with reasonable levels of income and can invest in a small down payment can still avail of housing loans. By next year things may stabilize although it is unlikely that there will be a housing boom again. Unless there is a general economic recession the market will become healthy once more.

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The Vice President of Diversified Capital, in Lakewood, New Jersey dealing with business development, said that although they are not happy and are grumbling, they would pay all the dues. But one thing for sure was that they were not going to surrender the property to foreclosure.

In May 2007, the ruling of the District Court judge was that SJG Partners, limited partners of Diversified Capital, is liable for the payment of taxes that have accrued since 2000. SJG Partners had purchased the property on South Main Street and Allen Avenue. It was a property under the hammer of the foreclosure. At that point of time, August 2005, the previous owners had failed to pay taxes to the tune of $695,000. As per the Sales Order issued by the office of the District Court the tax bill had shot up to $917,319. The date fixed for the auction is 7th August.

Diversified was sued by both Fort Worth, Tarrant County and Fort Worth School District in January last year (2006). Diversified answered that they did not owe taxes because they were not owners of the said property during the years the taxes had been accounted.

The property in dispute was the first hospital in Tarrant County. It was founded in 1885. It is a 12 storey structure made from red brick was added to the original structure and came to be called St. Joseph. It came to be owned by HCA/Columbia Healthcare Corporation when in 1995 it had to be closed.

Heritage Geriatric Housing Development of California bought the unit and redid the lower floors into Alzheimer’ Centre, St. Joseph’s Garden. It had to be closed in 2000.

Stern gave the information that Diversified has further ambitious plans. It is moving ahead to develop further the property with shops, offices and residential quarters that would be worth more than $50 million. He also added that recently there plans had been afoot to sell the property to a local oil and gas concern but the deal fell through.

Via

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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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