Thursday, 08/21/08 6:56 PM
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Thursday, 08/21/08 6:56 PM |
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News & Information : In Contract Magazine : March 2007 : Where are we with the foreclosure problem? Where are we with the foreclosure problem?More than 1.2 million foreclosure filings were reported nationwide last year, up 42 percent from 2005, according to the yearend data from RealtyTrac, Inc.'s 2006 U.S. Foreclosure Market Report. The number of total foreclosure filings rose from about 885,000 in 2005 to 1,259,118 in 2006, a rate of one foreclosure filing for every 92 U.S. households. The results from the top 100 U.S. cities, showed Columbus ranked 19th on the list with one house in foreclosure for every 45 households. We fared better than Cleveland, which was in 14th place, Dayton, which was 15th. Cincinnati came in at 49th on the list. The state wide average was one foreclosure for every 59 households, higher than the national average of one foreclosure filing for every 92 households, RealtyTrac data showed. According to county records, more than 4,000 homes in Franklin County were foreclosed on last year. And it's going to get worse before it gets better(Sorry, but there's no sugar coating this subject.) According to the Mortgage Banker's Association, adjustable rate mortgages accounted for 59 percent of the subprime sector last year, where borrowers have less-than-perfect credit profiles. Former chief economist for the National Association of REALTORS® John Tuccillo said in an address to the Wisconsin Bankers Association last month that with more than $1 trillion in adjustable-rate mortgages set to re-price upward this year, homeowners are looking at a 25 percent rise in the amount of house payments unless they refinance. Most borrowers who take out an adjustable rate mortgage expect to refinance or see enough of an increase in their annual income to cover the increase in their mortgage payment when it occurs. Those homeowners who are able to absorb large increases in their mortgages, they are going to reduce spending on other goods and services, which will have a softening impact on economic growth. Those borrower's who can't afford to refinance or absorb the increase in monthly payment are going to have difficulty selling in our market where we have more sellers than buyers, homes are taking longer to sell and selling for less. Add to this that interest rates have risen enough in the last year to prevent some potential buyers from being able to afford a home. Sub-prime lenders are tightening credit standards as they find investors are no longer eager to buy types of loans deemed particularly prone to default. "Piggyback" mortgages, a risky type of loan that helped prolong the housing boom by allowing borrowers to finance up to 100 percent of the purchase price, falls into this category. And with so many mortgages going bad, some investment banks have quit backing sub-primes and are actually kicking bad loans back to originating lenders, forcing some of them to close up shop. About two dozen of the largest subprime mortgage lenders across the country have gone under or stopped making loans since December, according to the Mortgage Lender "Implode-O-Meter," a new Web site tracking closures in the sub-prime lending industry. The site tracks only large lenders, so there are probably far more closures. The decrease in the number of sub-prime lenders and the pull-back of many of the remaining sub-prime lenders could put a further dent in the potential home buyer population. Ohio Foreclosure Prevention InitiativeThe Ohio Foreclosure Prevention Initiative was organized in April by Columbus Housing Partnership working with NeighborWorks America and 11 other non-profit organizations to address Ohio's high foreclosure rate. Since then, 195 families in the county were able to avoid foreclosure and 4,000 families statewide were counselled on where to find help to avoid losing their homes. Several government agencies and private companies donate money to the initiative's assistance fund. The program includes a hot line that provides families with information on where they can find help in preventing a foreclosure. The hot line averages nearly 15 calls a day. The average family counselled through the hot line earns less than $50,000. About 41 percent have a fixed-rate mortgage; 43 percent have an adjustable rate mortgage. Twelve community-based organizations in Ohio are involved in the Ohio Foreclosure Prevention Initiative, including CHP, 10 NeighborWorks organizations and the Corporation for Ohio Appalachian Development. Additional partners include NeighborWorks America, CitiGroup, National City Bank, JPMorgan Chase, and various local lenders. Ohio sets aside $1M for foreclosure preventionThis year, the Ohio Department of Development has made $1 million available in Ohio Home Rescue Funds to prevent foreclosures in the state. Loans are available on a first-come-firstserved basis through 11 non-profit agencies participating in the Ohio Foreclosure Prevention Initiative, including the Columbus Housing Partnership. Assistance through the Ohio Rescue Fund is available to homeowners whose annual income is less than 65 percent of the area's median income. That averages out to about $42,000 a year for a family of four. Those who are deemed eligible for assistance are required to take 10 hours of financial fitness classes to understand how to build credit and create a budget. Families typically need about $3,000 to help them make up for missed mortgage payments. The funds will probably help about 350 homeowners in Ohio. What can YOU do?As industry experts, you come in contact with buyers who are either taking on more than they can chew, or homeowners who already have. Here's how you can help: When working with buyers taking out subprime loans:
When asked/consulted by a homeowner in trouble:
Beware of Foreclosure Assistance ScamsIn a press release last month, the Ohio Department of Commerce cautioned Ohioans to be aware of foreclosure assistance schemes that promise to get citizens out of foreclosure for a "small fee." Also, we've gotten wind of a new predatory lending scam: Rescue Loans. Here is how the scam works. The home buyer gets behind on mortgage payments. The predatory lender offers a "loan to get caught up" on the delinquent mortgage payments. In exchange for the rescue, the homeowner signs over the title to the predator, who promises that the home buyer may remain in the home while paying rent. The predator then sells the house to someone else, and the original homeowner gets an eviction notice. And if anyone claiming to be a foreclosure intervention specialist suggests that the homeowner should not call the mortgage lender, this is a loud tip that the specialist is a scam. Foreclosure Intervention seminarsThe Franklin County Treasurer's office has also taken a strong leadership position in the fight against rising home foreclosures. Last year, they hosted seminars at the CBR Membership Headquarters. This year, they are taking the program out into our communities. Below are their upcoming Foreclosure Intervention seminars. Date Location Housing Partners Attending April 10th May 8th June 12th |
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