Foreclosures and Debt

Religious leaders and community activists and others gathered in Washington D.C. to meet with Federal officials, Congress and members of the Barack Obama transition team for a solution, such as more loan modifications and the like, to slow down the ever-growing foreclosure crisis that is affecting millions of homeowners. The religious leaders and prayerful were also there in Washington, D.C. to pray for some relief to homeowners facing foreclosure and eviction. Their prayers may have been answered, somewhat.

Fannie Mae and Freddie Mac, two of the largest home loan lenders in the U.S.,  have agreed to stop foreclosure and evictions for about six weeks beginning Nov 26, 2008 through January 9, 2009, just in time for the holidays. The suspension of foreclosures and evictions during this time period is designed to allow time for loan servicers to put in a place an efficient loan modification program to assist struggling homeowners.

According to Fannie Chief Executive Officer Herb Allison,

we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step to ensure that homeowners with the desire and ability to prevent foreclosure have an opportunity to stay in their homes.

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There has been another shattering record number of foreclosures in the last quarter of 2007! In the last three months of 2007, home foreclosures hit an all-time high and an increase in the number of borrowers defaulting on their home mortgage loans.

Not only are the value of homes falling as a result of large home mortgage foreclosures, but also borrowers who are stuck with home mortgages that cost more than their house is worth, are simply walking away. There are still many home mortgages in the coming months that are due to “reset” or as I call it rise in mortgage payment.

The rate of failing home loans should climb through much of the year as national home values sink, said MBA chief economist Doug Duncan.

“You should expect to see, as long as house prices are declining, an increase in delinquencies and foreclosures,” he added.

Lower home values make it difficult for struggling homeowners to refinance and can create an incentive for them to simply walk away from their home and mortgage.

“We don’t expect to see the peak in delinquencies or foreclosures until mid to late 2008,” Duncan said.

Subprime mortgage borrowers were taking all of the heat for this mortgage mess, but all across the spectrum of borrowers, mortgage payments are falling behind. In the last three months of 2007, there were about 1 out of 20 delinquent payments from home loan borrowers, and about 1 out of 6 delinquent subprime borrowers.

As far as subprime mortgages go, many people think that this subprime lending business just started in the last year or so. Not true, there have been over ten years of subprime lending practices going on, but mostly targeting minorities. The mass appeal of the money that was made from over-charging home loan borrowers with subprime mortgages was to great of a payday for Wall Street and other investors. The end result of these fraudulent loan practices is what we are seeing today in the record breaking number of foreclosures. To stop foreclosure has become almost impossible. [Read more →]

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Will the Federal Reserve’s rate cut revive the housing market and stem foreclosures?

Don’t count on it.

The Fed’s interest rate cut is largely symbolic. It makes more funds available to depository institutions — old-fashioned banks — but old-fashioned banks aren’t where the crisis is centered. The Fed’s move will do little for what ails the U.S. economy: Falling home prices, tighter lending standards, rising foreclosures and the ever-growing number of unsold houses on the market.

Nor will President George W. Bush’s $150 billion economic stimulus plan prevent Americans from losing their dream of homeownership to foreclosure. The Fed’s move will spark an avalanche of refinancing for homeowners with good credit. But that won’t necessarily translate into lower mortgage costs for some 2 million Americans with risky subprime home loans with rates that are scheduled to adjust sharply higher over the next year. Many subprime borrowers have mortgages larger than what the properties are worth, ruling out the possibility of refinancing from an adjustable rate loan into a fixed mortgage rate.

For the economy to rebound, home values have to return to historic norms. Slowly, home prices are beginning to fall back to more reasonable levels. Over the last year, home prices in the U.S. have fallen by about 6 percent on average, according to the Standard & Poor’s/Case-Shiller index of housing prices, which measures the value of homes in 20 cities.

So, expect a rising tide of foreclosures to continue to add inventory to an already over-saturated housing market. A growing inventory of unsold houses, in turn, will pull down home values, dragging more homeowners into foreclosures as prices drop. Spooked buyers, waiting for the housing market to bottom out, will nervously wait on the sidelines — further depressing prices.

For foreclosure investors and homebuyers this year could be a great opportunity to buy at bargain prices.

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More than 2.2 million foreclosure filings on nearly 1.3 million properties. A 75 percent increase in foreclosure activity from 2006. Those are the headlines from RealtyTrac’s 2007 year-end foreclosure report.

But there’s more to the story.
…(read more)

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California cities are exploding to the top of the foreclosure list. Three cities with the highest foreclosure rates in the nation are Stockton,Ca., Detroit, Michigan, and Riverside-San Bernardino, Ca. Two (three, if you separate Riverside and San Bernardino), in California are at the top of the list.

According to RealtyTrac.com, these cities had the highest foreclosure rates among the nation’s 100 largest metropolitan areas during the third quarter in their 2007 “Metropolitan Foreclosure Market Report”. California had seven cities in the top 25 metro foreclosure rates.

James J. Saccacio, chief executive officer of RealtyTrac stated,

Although cities in just three states — California, Ohio and Florida — accounted for more than two-thirds of the top 25 metro foreclosure rates, increasing foreclosure activity was not limited to just a few hot spots. In fact, 77 out of the top 100 metro areas reported more foreclosure filings in the third quarter than they had in the previous quarter. Still, there continue to be pockets of the country — most noticeably metro areas in the Carolinas, Virginia and Texas — that have thus far dodged the foreclosure bullet.

The breakdown of mortgage foreclosures by household puts more reality on the numbers. As shown below, even if you are not in foreclosure on your home loan, you may have a friend, neighbor or relative somewhere in this nation, who is trying to stop foreclosure on their home. [Read more →]

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Today, Thursday November 15, 2007, the House of the U.S. Congress passed a bill aimed at mortgage lenders, that requires additional safeguards in the home loan process to prevent more mortgage loan crisis.

In a reaction to the huge number of foreclosures on home loans, the House passed legislation to put the hammer down on home mortgage lenders. The main idea of the bill is to make lenders responsible for borrowers who are unable to repay their home loans because the lender did not fully qualify them. The bill also wants mandatory licensing for lenders and to issue fines to lenders for leading unsuspecting borrowers to higher-risk subprime mortgage loans.

H.R. 3519 known as “Mortgage Reform and Anti-Predatory Lending Act of 2007” , sets standards and more guidelines for the mortgage loan industry in order to prevent more homeowners from falling into the foreclosure abyss.

It is expected that more than 2 million mortgage rates will adjust up in 2008, possibly triggering an avalanche of foreclosures in effect crippling the home loan and other financial markets further.

Of course, there is always some form of opposition on the political side of this bill. Some of the Republicans are saying that this bill will make it harder for people to refinance their mortgage loans with all of these requirements of mortgage lenders. In effect, under this legislation, the home owner seeking to refinance their home loan, may not qualify for a new loan and this will also fuel the foreclosure crisis! Below are a few things the legislation will provide. [Read more →]

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