CASPER - Wyoming’s property foreclosure rate is among the lowest in the nation.

The Bargain Network, a firm that provides real estate information, reports that Wyoming had 21 foreclosures last month. That represents one foreclosure for every 10,659 households and puts Wyoming’s foreclosure rate at the second-lowest in the nation.

Only Vermont had a rate lower than Wyoming’s, with one foreclosure for every 24,532 households. The national foreclosure rate is about one in 425 homes. Colorado’s rate was estimated at one foreclosure for every 161 households.

The Bargain Network reports that the number of foreclosures in Wyoming has remained fairly constant over the last six months. It reports that more than 80 percent of the foreclosure activity nationwide involves single-family residences.

John Robbins, chairman of the Mortgage Bankers Association, said earlier this month that foreclosures most often are the result of local economic conditions, not the result of loans to subprime borrowers. The association is headquartered in Washington, D.C.

“For example, the states of Ohio, Michigan, Indiana, Illinois and Wisconsin represent only about 14 percent of outstanding mortgages in the country but account for 28 percent of the loans in foreclosure,” Robbins said. He said subprime borrowers account for only about half of the loans in foreclosure in these states.

“This region has lost over 700,000 jobs since the middle of 2000 and it is clearly problems with the economy in this region that are driving the ability of borrowers to repay their mortgages or sell their homes if they get into trouble,” Robbins said.
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BOSTON — Some on the brink of losing their homes will benefit from the foreclosure delays advocated by Gov. Deval Patrick, but many are so financially troubled that a delay won’t make a difference, the state’s top lenders association said Tuesday. 

Despite their portrayal by some housing advocates as “predators,” subprime mortgage lenders want to help homeowners find better loans because they also lose money on foreclosures, said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. 

But by the time many cases reach the foreclosure stage, it’s often too late, “whether we wait 60 days or not,” said Cuff, whose trade group represents about 300 lenders. 

Patrick should use his influence to bring the nation’s largest lenders, which hold loans on much of the state’s foreclosed properties, into discussions on how to address the state’s high numbers of foreclosures, Cuff said. 

The state had a record 19,487 foreclosure filings last year. Last Wednesday, Patrick announced a plan to lower the foreclosure rate that would include making mortgage fraud a criminal offense and prohibiting abusive foreclosure rescue schemes. 

The next day, Patrick met with Bruce Marks, head of the Neighborhood Assistance Corporation of America housing advocacy group, and about 24 people in danger of losing their homes. After the meeting, Patrick instructed the state’s banking commissioner to seek, on a case-by-case basis, foreclosure delays from lenders for homebuyers who file a complaint about their mortgages. 

The state has no power to force lenders to negotiate new terms. 

“We hope the lenders will give us the time and work with us to see if there are any homes we can save,” said Kofi Jones, spokeswoman for the state Executive Office of Housing and Economic Development. 

The subprime lending market, aimed at people with poor credit histories, helps people obtain a mortgage with little or no money down, but generally with interest rates that are high or increase sharply after a short period. 

Marks said subprime lenders target people they know can’t pay the mortgages in order to profit from the numerous fees. Cuff said millions of people who wouldn’t otherwise be able to afford a home now have one because of subprime loans. 

Patrick has been criticized for his work with ACC Capital Holdings, parent of the national mortgage company Ameriquest, which has been accused of predatory lending practices. Patrick, a former member of the board of directors of ACC, has said he tried to correct problems at Ameriquest, but his job there has surfaced in the recent debate. 

Cuff said anti-foreclosure advocates have a sympathetic ear because of Patrick’s ties to Ameriquest. House minority leader Brad Jones, R-North Reading, said Patrick may be trying to politically get out in front of an issue that has dogged him. 

“Given the history, it’s certainly a situation where you don’t want to be accused of being behind the curve on what some people think you may have been able to do,” he said. 

Patrick spokesman Kyle Sullivan said the governor’s efforts to help people facing foreclosure predate last week’s announcements “by nearly two decades,” including work as a private lawyer and chief of the Civil Rights Division in the U.S. Justice Department. 

“The Governor is trying to assist families in the midst of personal financial crises,” he said. 

Rep. Jones also warned of unintended consequences of costly delays, such as mortgage companies reluctant to do business in Massachusetts, or quicker to start foreclosure proceedings. 

John Battaglia of The Cambridge Mortgage Group, a housing lender, said he applauded Patrick’s efforts, but said it will be a daunting task for the state to determine which complaints have merit and which are just trying to take advantage of the extra time. 

The state has received 35 complaints since Patrick’s announcement since Thursday. Kofi Jones said each will be looked at individually so people who truly need help get it. 

“We’re hoping to provide a little relief for those families who are facing a very daunting possibility,” she said.

http://www.TheHomeBuyingCenter.com

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Hollister - Despite making only $14,000 a year, strawberry picker Alberto Ramirez managed to buy his own slice of the American Dream. But his Hollister home came with a hefty price tag - $720,000.

A year and a half later, Ramirez has defaulted on his loan, and he’s hoping to sell the house before it’s repossessed. And according to many housing advocates and civil rights groups, Ramirez is not alone. As mortgage foreclosures rise, many minorities are suffering.

In April, the Leadership Conference on Civil Rights, the NAACP, the National Fair Housing Alliance, the National Council of La Raza and the Center for Responsible Lenders called for a six-month moratorium on subprime home foreclosures. Those groups reported that minorities receive a disproportionate share of riskier subprime loans, and while those loans make up only 13 percent of the overall mortgage market, they account for more than 60 percent of new foreclosure filings.

Heidi Li, co-director of the Oakland-based Housing and Economic Rights Advocates, agreed that minorities and non-English speakers are being hit particularly hard by the foreclosure crunch. Li’s organization has seen a dramatic increase in mortgage-related complaints in the past few weeks, and she said non-English speakers account for between one-third and one-half of those calls.

“Most people are vulnerable when it comes to mortgages, because the situation is very complex,” HERA Co-Director Maeve Brown said. “But (people of color) feel our choices are more limited; therefore we’re more vulnerable to those limited choices.”

Brown said the language barrier (Ramirez, a native Spanish speaker, is not fluent in English, and spoke to the Free Lance through a translator) can also play a big role.

“When you go into Washington Mutual … you can’t always get someone to speak your language,” she said.

Deidre Swesnik, director of public policy and communications at the National Fair Housing Alliance, said non-English speakers and minorities have been targeted by subprime mortgage brokers. A study by the National Council of La Raza showed that nearly all mortgage advertisements in Spanish-language newspapers were for subprime brokers, Swesnik said.

But Rafael Cebrero, whose company Rancho Grande Real Estate sold Ramirez his home and arranged his mortgage, said subprime loans are getting a bad rap. Those loans, he said, have made it easier for many people, including Latinos, to purchase a home.

So how did Ramirez, the strawberry picker with an annual income of just $14,000, purchase a $720,000 home without any money down?

He had help, for one thing. Although Alberto Ramirez was the only one to sign the purchase agreement and the only one named on the loan documents, he actually bought the house with his wife Rosa Ramirez, as well as their friends Jesus Martinez and his wife. However, even in a good month, the Ramirezes and Martinezes together don’t earn much more than a combined $6,500, and their official monthly payments were around $5,200.

Karl Skow, president of the Greater Monterey Bay Area Chapter of the California Association of Mortgage Brokers, said that as a rule of thumb, people shouldn’t pay more than one-third of their income for their housing. In California, where homes are more expensive, that’s a little unrealistic, Skow said, but he sad most lenders still draw the line at 50 percent.

With their combined incomes, the Ramirezes and the Martinezes estimated that they could afford monthly payments of $3,000 - around 50 percent of their income. However, the Ramirezes said Rancho Grande real estate agent Maria Avila promised they could refinance their home in three to six months to an affordable rate; until then, Rosa Ramirez said, Avila said she would pay for whatever they couldn’t afford.

Ramirez did supplement the mortgage payments on the Hollister home, paying about $2,200 per month for nine months.

But the refinance never happened, and Martinez said Avila stopped helping with the payments at the end of 2006. A notice of default has been filed on the home, but no foreclosure date has been set, and the Ramirezes and the Martinezes are hoping they can sell the house before they lose it in a repossession.

Cebrero said the Ramirezes’ and Martinezes’ situation is an unfortunate one, but he said Rancho Grande was only trying to help the two families buy the home they wanted.

“We feel we have done as much or more than we can do for these clients,” he said.

However, Pamela Simmons, whose Soquel law firm Simmons and Purdy is representing the Ramirezes, said the loan should never have been made. Simmons and Purdy attorney Alison Lawton said the firm sent a letter of demand to Rancho Grande in February alleging that Avila knew Alberto Ramirez could never afford the house and that she made the deal only for personal profit. Lawton said Simmons and Purdy are currently in settlement negotiations with Rancho Grande’s attorney, but if they can’t come to an agreement, the law firm plans to file suit.

Simmons said predatory lending and subprime mortgages aren’t a new phenomenon, but back when the area’s housing market was red hot, people who signed up for unaffordable loans could just sell their houses. As the housing market has slowed, more cases have come to light.

“The real estate boom covered a multitude of sins,” Simmons said. “Once the market started depreciating, the rug was pulled back to show the rot underneath.”
http://www.TheHomeBuyingCenter.com

April 26, 2007

SACRAMENTO -  Mortgage defaults and rising gas prices are among the top reasons why April of 2007 witnessed the lowest level of consumer confidence in over eight months.  New York’s Conference Board’s index of consumer confidence dropped to 104.0 this past month.  This figure is down from 108.2 in March.  Last year’s index average was 105.9.

Consumers reported that they don’t believe that there is an abundance of jobs and, as a class, few say they are planning to buy a house.  According to the National Association of Realtors previously owned homes are selling at their lowest level in practically four years.  Additionally, Americans who say they plan to buy a home in the next six months is at a more than two year low at 2.7 percent.

“Many people still want to buy homes, but prices have gone up so fast that the everyday consumers realize that home prices in most parts of the country are seriously over inflated.  We have thousands of people contacting my company every week who want to sell their homes, and only hundreds of people interested in buying a home.  This reflects that we are truly in a buyer’s market,” said Patrick McGilvray, J.D., CFP®, President of http://www.TheHomeBuyingCenter.com

As a result of this Mr. McGilvray reports that his company, which pairs motivated sellers with first-time homebuyers and real estate investors, is spending more time and energy helping homeowners negotiate with their lender to perform a short-sale.  This technique is used when a mortgage borrower is unable to keep making mortgage payments, and the bank agrees to accept less than they are owed in order to avoid the time, expense, and uncertainty of processing a foreclosure.  “Short-sales are keeping us and our partners across the nation very busy these days,” added McGilvray.

Home foreclosure rates are up again and, according to an April 18 report from RelatyTrac, more than 149,000 houses entered the foreclosure process in March.  This reflects an almost 50 percent jump from the previous year.

On an optimistic note, the Federal Reserve Board does not believe that the recent increases in foreclosures with significantly affect the larger economy nor the ability of most borrowers to obtain credit.  Federal Reserve Governor Frederic Mishkin recently said that the problems with subprime mortgage defaults “appear to have been minimal.”

April 24, 2007

WASHINGTON – Foreclosure activity and subprime mortgage borrowers are very connected in today’s residential real estate market in the United States, and members of the Senate are creating legislation to help troubled homeowners.  Senate Democrats urged the Federal Reserve Board on Monday to help future borrowers by restricting some types of loan products and to tighten standards that apply to mortgage lenders.

Not all mortgage lenders are banks that operate under Federal Law guidelines, and many operate solely under the control of the laws of individual states.  Senators on the Senate Banking Committee, such as Chairman and presidential hopeful Christopher Dodd (D) of Connecticut, are focused on ways to protect consumers from abusive lending practices.

One specific requirement that Senator Dodd would impose on mortgage originators is that they consider how a borrower will be able to pay back a mortgage loan even if the payments are much lower initially.

What this means is that lenders should not just look to a borrower’s ability to make payments during the initial low interest-only ‘teaser’ rate period, but rather when the loans ‘readjust’ to higher rates that begin to pay down principal.  Many of these borrowers used low-documentation or no-documentation mortgages, and this practice is also being scrutinized.

“Analyzing a borrower’s ability to pay the eventually higher payments on a mortgage just seems like a commonsense idea that should be standard practice, but common sense isn’t always so common, especially when politics are involved,” commented Patrick McGilvray, J.D., CFP® - President of http://www.TheHomeBuyingCenter.com.

Senator Dodd and his fellow senators wrote, “Quick action on these items by the Federal Reserve Board under its [legal] authority would be extremely helpful in extending important consumer protections to homeowners and buyers.”  The letter to Chairman Ben Bernanke also said that the Federal Reserve has not lived up to its responsibilities as defined in the Home Ownership and Equity Prevention Act of 1994 to prevent predatory lending activities.

Dodd also stressed that it was important for the federal government to act in a way to protect borrowers and homeowners from bank lenders and non-bank lenders as well.

Foreclosures putting downward pressure on prices

It is a tidy, sharp looking home.
The Mossdale neighborhood west of Interstate 5 is clean and desirable.

It has more than 2,200 square feet of bright living space and is less than two years old.

If you had bought it 15 months ago you would have paid in excess of $600,000. Now that home bought with 100 percent financing is in foreclosure. The lender is willing to take $379,900.

Five miles away at Del Webb at Woodbridge, home sales are brisk in the planned community restricted to residents 55 and older. Since sales started in August 2007, Del Webb has had four price increases in homes that start at $347,000 all the way up to a model that is at $532,000 plus.
Welcome to home buying in Manteca-Lathrop, 2007-style where Charles Dickens could have been inspired to make the same comments about the housing market condition that he did about the human condition during the French Revolution.

And depending upon where you are in your life and how it impacts your housing need, this is either a great market or the pits.

“It’s a great time to buy,” noted Brad Young of PMZ Real Estate who specializes in foreclosures.

He tells of a client who had sold their home at below market to avoid the problem of a slow sale in a buyers market. Then several months later bought a bigger, newer home in a better location at the same debt load he had with his previous house.

The go-go days of new home sales in Mossdale Landing 18 months to two years ago makes it susceptible to the sub-prime loan failures. Realtors said an inordinate number of new homes had unconventional financing often at 100 percent.

DataQuick — a real estate information system — noted that San Joaquin along with Sacramento and Riverside counties run the highest risk of loans going into default.

There were 586 notices of default sent to homeowners in the first three months of 2006 throughout San Joaquin County. That amount jumped by 193.7% in the first quarter of this year to 1,721 such notices. Lenders are quick to point out that such notices do not automatically lead to foreclosure. But with the glut of homes on the resale market — 550 currently in Manteca alone — home sales are sluggish even for short sales where the owner sells for less than is owned of the home.

But as Steve Roland of the Real Estate Group notes, the foreclosures this time around are a lot different than what happened in 1989 and 1990 but he still believes there is one common factor — greed.

“People going into foreclosure today aren’t losing their jobs nor did they have income reduced,” Roland noted. “They were simply living beyond their means.”

Roland noted that some people lost their jobs in the recession following the 1989 Loma Prieta earthquake that was coupled with the loss of Department of Defense jobs in California, most short sales back then were from people getting overextended taking out equity and then not being able to make payments.

Carol Bragan — another Realtor with extensive knowledge of the Manteca market — doesn’t mince words.

“It’s scary,” she said.

But even so, Bragan notes it is an ideal time for buyers who can get more house for the money, buy up if they are realistic in their asking prices, and take advantage of interest rates that are just under 6 percent.

“There’s a lot of good choices out there to chose from,” Bragan said.

Buyers are taking their time but some are reporting going to make offers on homes and finding they have just gone pending.

Realtors say that reflects the fact there are people qualified to buy who are no longer waiting to pass up on good buys. Most report a significant increase in interested and qualified buyers who are house shopping but still sitting on the fence.

The top of the market — $500,000 plus — has been hit the hardest.

Among the foreclosures in Manteca is a large custom home in the Mt. Vernon neighborhood south of Louise Avenue near Shasta Park that two years ago would have sold for $780,000. It’s available now for $560,000.

Impacting the market somewhat are longtime owners in Manteca who are 55 and older who are selling to move into Del Webb. Since they want to sell quickly and not languish on the market that one Realtor called “glutted” they are taking the advice of agents and pricing their homes a bit below market to attract attention and sales.

It works out well for them as giving up a little allows them to move into a lifestyle and home they want with little or no impact. They also get a chance to buy into Del Webb before the prices get even higher and take their one-time exemption for senior owners that lets them apply their Proposition 13 tax level from their previous home to their new one even if it is more expensive.

“It (Del Webb buyers selling homes) has had some impact on the market but it isn’t that big,” Bragan said.

Bragan noted that Del Webb and new-home builders are going to keep building because they have to recoup their investment in improvements such as streets, water lines, and sewer lines that are put in place at the front-end of projects.

And those new home buyers aren’t messing around. One model in Kennsington Place at Louise Avenue and Cottage Way was slashed almost $100,000 to jump-start sales. Builders also are tossing in incentives in upgrades and such that approach $$60,000 in some cases. That is also creating stiff competition for existing home sales.

Realtors tend to be a resilient lot and are quick to point out that the market isn’t even and that the concentration of foreclosures in Mossdale Landing where it isn’t unusual to see two to three empty resale houses for sale is an abnormality.

“It’s unbelievable,” Trinkle said of some of the foreclosure asking prices. “They’re great buys.”

“It’s a black hole,” said Realtor Tom Wilson in reference to foreclosures in the Mossdale area of Lathrop.

Sales activity in Lathrop has dropped almost 70 percent in the fist four months of this year compared to the same period last year. Sales in Manteca are just a bit better being off about 60 percent. But the gap between what a home lists for and what the seller actually gets is significantly better in Manteca.

There have been 18 homes sold in Lathrop so far this year for an average selling price of $416,721 compared to 54 homes selling for an average price of $454,225 last year.

Homes sold for within $182 of the asking price in the first four months of 2007 in Lathrop. This year, selling prices are coming in at $22,235 under the asking price.

In Manteca, there have been 102 home sales through April 15 with an average selling price of $401,014 that is just $5,947 under the asking price. There were 170 homes sold through April 15 in 2006 in Manteca with an average selling price of $440,358 just $2,125 under the average asking price of $442,483.

Wilson noted those on the sidelines shouldn’t panic at all about dropping prices.

“You can’t lose what you never had,” she aid of equity losses. “It only counts when you go to sell.”

Wilson and other Realtors believe 2007 will be a watershed year.

And as Bragan points out, this may be the absolute best time to be a buyer given inventory, prices, and financing.

http://www.TheHomeBuyingCenter.com

According to a story from DataQuick, the number of default notices sent to California homeowners in the first quarter increased to the highest level in almost ten years. They attribute this to flat appreciation, slow sales and post teaser-rate mortgage resets. Mortgage lenders filed 46,760 Notices of Default during the first quarter of 2007 which is up 8,766 from the previous quarter, a 23.1 percent increase. Compared to the first quarter of 2006 the increase in Notices of Default filings was 148 percent. According to the story loans were least likely to go into default were in Marin, San Francisco and San Mateo counties and more likely in Sacramento, Riverside and San Joaquin counties. It is clear, counties where there has been rapid growth and a great deal of new housing built during the past few years is where we are seeing the growth in foreclosure activity. The percentage of homeowners who actually end up losing their home to foreclosure after getting a Notice of Default is small. During the first quarter 40 percent of the homeowners who were in default last year lost their home. The increase is dramatically evident when you compare that to the last quarter of 2006 when only 9 percent lost their homes to foreclosure. 

Most borrowers end up bringing their payments current, refinancing, or selling the home. The time line from Notice of Default to setting a foreclosure sale date is 3 months and there are many step that must be followed and time for borrowers to bring their loans current or find other solutions. Unfortunately some of the solutions available in past few years are not there now or harder to obtain. In the past, rapid equity growth allowed homeowners to refinance easily or use equity lines of credit to help make payments. Today many of these borrowers are faced with little or no equity and tougher credit requirements to refinance. Actual foreclosures in the first quarter of 2007 totaled 11,033, almost double what it was in the previous quarter and up over 800 percent from the first quarter last year when only 1,223 houses were foreclosed. Foreclosures reached a record high of 15,418 in the third quarter of 1996. The lowest quarter of foreclosure sales was the second quarter of 2005 with 637 sales.  Looking at our local market reveals that with the exception of Placer County the foreclosure activity here is higher than the State levels. In Sacramento there was an increase of 184.7 percent in the first quarter compared to the same period last year with a total of 3,234 Notices of Default filed. El Dorado County saw an increase of 305.6 percent with a 219 NoD’s filed. In Yuba County there was 151 Notices filed which amounted to a 214.6 percent increase from the first quarter of 2006. Placer County was below the State percentage increase of 148 percent with 518 notices filed compared to 239 a year ago or a 116.7 percent increase.  News on the street says that lenders are working hard to find ways to help borrowers who are struggling to make payments. Freddie Mac said it would provide backing for up to $20 billion in new mortgages to aid distressed subprime borrowers and Washington Mutual Inc. said it will refinance up to $2 billion in subprime mortgages to help borrowers avoid default and foreclosure.  

The problem facing many troubled borrowers is that most of the adjustable-rate mortgages taken out recently can’t be easily rewritten, according to the chairman of the FDIC. About 75% of the $600 billion in subprime ARMs taken out in 2006 have been securitized (sold in the secondary market) which means that neither the servicer of the loan nor the original lender can easily negotiate with the borrower to change the terms of the loan. Reworking the terms of the loan after it’s been securitized “can be very difficult and may require extraordinary actions,” since “once the lender has sold the mortgage to the issuer, the lender no longer has the power to restructure the loan or make other accommodations for its borrower.”

http://www.TheHomeBuyingCenter.com

April 17, 2007

WASHINGTON – People facing foreclosure may soon be thanking Senator Jack Reed (D) of Rhode Island for crafting legislation that he hopes will help homeowners, especially first-time homeowners, avoid losing their homes.

The Senator’s spokesperson said that the bill, “would aim to help borrowers who are in trouble and help prevent others from facing such problems in the future.”

By most accounts America is facing a tidal wave of foreclosures and the wave is expected to grow.  The Mortgage Bankers Association reported that foreclosure activity in the last three months of 2006 shattered a more than three and a half decade record.

Senator Reed is the Chairman of the Senate Banking Committee’s Securities, Insurance, and Investment Subcommittee, and will hold a hearing today to discuss the state of the mortgage industry, particularly the subprime mortgage market.  These loans were often made to borrowers who stated their income or had bad credit histories.

The legislation hopes to help educate consumers and provide financial counseling.  It would also provide people more help after they’ve purchased a mortgage.  House of Representatives member Barney Frank (D) of Massachusetts is also reportedly working on legislation to address the subprime mortgage market.

“One of the main reasons that we are seeing such a rate of foreclosures and problems with adjustable rate mortgages is that consumers were often unaware of the complexities of their mortgages,” said foreclosure expert, Patrick McGilvray, J.D., CFP®, President of http://www.TheHomeBuyingCenter.com.  He continued, “in addition, many people who call me from across the nation tell me stories of how they were lied to by their loan officers about the mortgage they were eventually sold.”

One group, The National Community Reinvestment Coalition, is urging Congress to establish a national fund to help homeowners in trouble and prohibit lenders from foreclosing until at payments are at least 60 days behind.  The company’s president, David Berenbaum said, “we are worried that lenders are rushing to foreclose before a consumer has had a chance to sustain homeownership.”

Another politician, Senator Charles Schumer (D) of New York, Chair of the Senate Banking Committee’s panel on housing plans a bailout measure worth ‘hundreds of millions’ of dollars in aid to help troubled homeowners.

In ominous sign of more to come, capital region default notices also hit record highs during first quarter of 2007.

There’s a new kind of “For Sale” sign appearing in the region’s neighborhoods — offering property repossessed by the banks — and there will be more, according to the newest round of statistics.

Both notices of default, the first sign that homeowners are having trouble making payments, and foreclosures reached historic highs across much of the Sacramento area during January, February and March, a property research firm reported Monday.

Among many who received a default notice in March after missing payments was Mary Ann Wilson of Elk Grove.

“We had our house built in 2003, and we were both working, both making very good money, and in June 2006 I got sick,” she said.

The slow descent into default on a home equity loan ended Monday when the house was sold in a short sale in which lenders accepted less than owed to avoid greater losses.

“It was very difficult, very emotional, very hard for us,” Wilson said Monday two weeks after major surgery.

The statistics behind such stories are the newest indication of stress in one of California’s most troubled major housing markets. They come as spring sales already are slowing amid a glut of resale inventory and tightening of borrowing standards by lenders.

Real estate industry analysts call the region’s defaults an echo from the surge of home loans made during the summer of 2005 as the region’s real estate market soared. That summer, capital region buyers stretched their hardest to buy homes, with about 76 percent using adjustable rate loans, according to DataQuick Information Systems of La Jolla.

Many of those loans, as well as refinancings to tap housing boom equity for things like swimming pools and cars, are resetting to higher payments and pressuring the area’s economy.

“You can’t party that hard and not have a hangover. You just can’t do it,” said Keith McLane, who watches the market as principal of Carmichael-based West Coast Home Auctions, which offers sellers a quick sale for a lower price.

Notices of default — issued after a homeowner misses at least two monthly mortgage payments — reached their highest levels ever during this year’s first quarter in Amador, El Dorado, Sacramento, Sutter, Yolo and Yuba counties, DataQuick reported.

The number of defaults stopped rising only in Placer County. Nevada County remains below previous highs reached in the 1990s, DataQuick reported.

First-quarter foreclosure numbers also reached highs across much of the region — in Sacramento, Placer, El Dorado, Yolo and Sutter counties — according to DataQuick, which tracks county property records.

DataQuick said 1,505 homeowners in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties lost their houses to foreclosure during January, February and March. That’s up from 865 the previous three months.

DataQuick reported just 143 foreclosures in the eight-county region in the first quarter of 2006.

“A lot of these lenders are going to end up with an awful lot of properties,” said Pam Canada, executive director of Sacramento-based NeighborWorks HomeOwnership Center, which counsels people with mortgage trouble.

“It’s been difficult these past weeks particularly. There’s more of a tone of desperation from people we’re finding now. They have very few alternatives.”

DataQuick attributed part of the record-breaking numbers to a greater supply of homes and loans in the Sacramento region since previous records were established during the recession-plagued mid-1990s. But the bigger factor is a combination of risky 2005 and 2006 loans and falling home prices that make it difficult for owners to refinance out of trouble. Even in a time when the economy continues to generate job growth, selling the house is becoming harder.

“It makes all the sense in the world,” said Andrew LePage, DataQuick analyst. “This is probably the weakest (housing) market in the state, and showing some of the biggest year-over-year declines in home prices and some of the slowest sales.”

Still, the Sacramento region has plenty of troubled company. Statewide, defaults reached a 10-year high during the year’s first quarter. Among major urban counties Riverside and Contra Costa counties also had record levels of defaults, DataQuick reported.

Nationally, Yuba County ranked ninth and Sacramento 16th among more than 1,000 counties for the percentage increase of defaults from the first quarter of 2006, according to ForeclosureS.com, a Fair Oaks-based Web site that tracks them for investors. Placer and El Dorado counties ranked 19th and 20th.

Alexis McGee, the site’s president and co-founder, said many of those in default are first-time buyers.

“I don’t think a lot of them are going to stick,” she said.

http://www.TheHomeBuyingCenter.com

Bankruptcy law changes are needed if hundreds of thousands of American families struggling with abusive subprime mortgages are going to escape foreclosure and the loss of up to $164 billion in home-based wealth, according to a joint call for Congressional action issued by the National Association of Consumer Bankruptcy Attorneys (NACBA), the Consumer Federation of America (CFA) and the Center for Responsible Lending (CRL).The three consumer groups warned that — while primarily low-income subprime mortgage borrowers face often insurmountable bankruptcy hurdles to hold onto their homes — high-income individuals in bankruptcy court get preferential treatment when they seek to save second and third homes.

“The only chance many of these (subprime) borrowers have is through declaring bankruptcy,” the groups said. “The problem is that as currently enacted, the Bankruptcy Code favors home mortgage lenders over virtually all other secured and unsecured creditors.”

The amendment disfavoring protection of the debtor’s principal residence was added at a time — 1978 — when home mortgages were nearly all fixed-interest rate instruments with low loan-to-value ratios and were rarely themselves the source of a family’s financial distress. As a result, bankruptcy law singled out the home mortgage loan as the major debt for which the bankruptcy court is powerless to provide relief, they said. “Since that time, the mortgage market has shifted considerably. Subprime lending practices of the last six years, which have relied on property appreciation, and in many cases appraisal fraud, have left many borrowers with mortgages larger than the value of their homes. If the borrowers cannot restructure these debts, then they cannot get back on their feet financially.”Philadelphia bankruptcy attorney and NACBA President Henry Sommer said help is urgently needed for hundreds of thousands of American families at risk of losing their homes due to abusive home loans.

“For most of these families, bankruptcy is the only viable option to save their home, and this option will be available only if the Bankruptcy Code is revised to eliminate or limit the provisions that exclude home loans from bankruptcy protection,” Sommer said. “This current exclusion is contrary to sound policy, and operates to disadvantage low-wealth and middle-income borrowers as compared to debtors with the wealth to own more than one home.”

Allen Fishbein, director of housing and credit policy of the Consumer Federation of America, said two million or more homeowners face foreclosure over the next few years, with many of these resulting from negligent and reckless lending practices by mortgage originators.

“A sizable number of borrowers find themselves in this situation because their mortgages are larger than the current value of their homes. Modifying the bankruptcy laws to permit the write down of certain toxic mortgages would provide a critical life-line for these at-risk families to hang on to their homes. We urge the Congress to act,” Fishbein said.

Foreclosure Epidemic

“The purpose of bankruptcy is to give troubled families a chance for a fresh start,” said Eric Stein, chief operating officer of Self-Help and senior vice president of the Center for Responsible Lending.”Today we have an epidemic of homeowners who are in serious financial trouble, and whose houses are worth less than the balance due on their loans because of the irresponsible lending practices of subprime lenders,” he said. “To make matters worse, bankruptcy laws will actually prevent these families from recovering. Subprime loans have pushed millions of households under water; unless Congress makes some common-sense changes, our current laws will ensure that they drown.”

As 2006 drew to a close, 2.2 million households in the subprime market had either lost their homes to foreclosure or held subprime mortgages that likely will fail over the next several years absent intervention, the groups said.

These foreclosures will cost these families their homes, along with up to $164 billion in lost wealth. For increasing numbers of borrowers, foreclosure is the only option available. Lehman Brothers has estimated that 30 percent of subprime loans originated in 2006 will end in foreclosure.

The joint statement recommends a wide range of specific bankruptcy law changes, including the following:

• End the Bankruptcy Code’s special treatment of home mortgage loans.
• Remove time-consuming credit counseling requirements.
• Curb excessive fees during bankruptcy.
• End mandatory arbitration in bankruptcy.
• Create a minimum homestead exemption for the elderly.
• Amend chapter 7 of the Bankruptcy Code.

http://www.TheHomeBuyingCenter.com

March sales decline in region may be tied to stricter lending rules.

For two months, it looked like Sacramento might finally be climbing out of its housing slump. Then the bottom fell out of the subprime loan market and threw home sellers a curve.

“It’s kind of a tough market,” said Pradeep Gosai, who relisted his $529,000 house in Natomas this week after turning down offers last year that were “different from what we wanted.”

“Now it’s a lower price than last year. I hope we make it,” he said.

According to industry analysts and newly released housing reports, Sacramento-area home builders who saw sales climb in January and February saw them decline again in March — just as news about subprime lending woes hit. Inventory of unsold homes, meanwhile, rose. With last month also a disappointment for sales of existing homes, hopes the market was turning up are being challenged by fast-moving developments.

Like thousands of sellers, Gosai anxiously watches a market filled with mixed signals. He’s selling after transferring to a new job near Dallas, where he bought a $167,000 house — the same size as his Natomas listing.

Builders and real estate agents attribute the unexpected March slowdown to negative publicity from the subprime lending industry meltdown and tightening of lending standards that eliminated would-be buyers.

Sacramento real estate agent Carey Covey said many first-time buyers no longer qualify for today’s more demanding loans. Across the nation, lenders battered by rising defaults and foreclosures are again requiring down payments from buyers and detailed proof of income.

“They actually wanted the buyers to have a pretty good credit history and a job and some income coming in,” said Covey, who now is trying to sell 42 properties repossessed by the banks.

DataQuick Information Systems reported this week that the median price of homes fell from February to March in five of eight area counties — dropping by $20,000, to $460,000, in El Dorado County, for example, and by $15,250, to $340,000, in Sacramento County.

But with lenders tightening credit, prices were still too high for many buyers.

The North State Building Industry, which tracks about 50 percent of new home sales in the region, reported 120 fewer sales in March than February.

“Certainly, (sales) dropped in March, and we haven’t actually seen a comeback yet in April,” said Mark Levens, vice president for sales at the Sacramento division of Newport Beach-based John Laing Homes. “We need some good publicity out there.”

Real estate agent J. Scott Carpenter offered some: Placer County has 483 escrows in progress this week — compared with 368 for the same week last year. Meanwhile, interest rates on 30-year fixed loans are at 6.22 percent, low by historical standards. Still, the new housing reports show a market searching for a foundation:

• Sales of 2,695 new houses during the first quarter of 2007 in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties represented a 30 percent sales increase over the same time last year, according to the Folsom-based Gregory Group. But most sales were in January and February, builders said. The numbers represent openings of escrow and account for buyer cancellations.

• March escrow closings for all homes in the region totaled 3,223, beating January and February, but still a “tepid” opening to the spring sales season, said Andrew LePage, an analyst with La Jolla-based DataQuick. The numbers were down from 4,571 recorded the same month last year in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.

March closings represent sales started in December, January and February before extensive publicity about imploding subprime lending firms and tougher new lending rules.

• The inventory of resale homes on the market continued its seasonal rise in March, according to Sacramento-based TrendGraphix, raising the specter of further price declines and fierce seller competition ahead. TrendGraphix reported 12,500 listings — 1,090 more than last month — in El Dorado, Placer, Sacramento and Yolo counties, while the Gregory Group showed new home builders have 4,268 houses in their unsold inventory, a 15-week supply.

“Inventory is still the elephant in the living room,” said Gold River real estate agent Randy Dunham. “That’s why we’ve had an almost 1 percent drop in values each of the last six months.”

The median sales price of a new house in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties was down 9 percent from the same time a year ago, reflecting more smaller houses and price cutting by builders unloading excess inventory, the Gregory Group reported. DataQuick, likewise, said median sales prices of existing homes remain about 6 percent lower than last year in Yolo and Sacramento counties and about 7 percent lower in Placer. Median is the point where half the homes cost more and half cost less.

While that represents a positive development for buyers, uncertainty continues to rule the lives of builders, real estate agents and sellers like Gosai. Wild cards include the continued lending ability of the battered subprime lending industry, which fueled 27 percent of home purchases in six area counties last year, according to First American LoanPerformance.

Subprime lenders offer loans with higher interest rates to people with blemished credit histories. Analysts like Scott Syphax, president and chief executive officer of Sacramento-based Nehemiah Corp. of America, a national community development firm, also worry about the ability of people with adjustable-rate mortgages, or ARMS, to refinance in a time of tight credit.

As many as 72 percent of Sacramento-area buyers used such mortgages at some point during the past three years. Thousands of three-year ARMs taken out during the housing boom’s 2004 peak frenzy will reset this year with higher monthly payments.

“Everyone assumed when these resets happened, the guidelines would remain unchanged, and even if payments went up, there was still credit available in the marketplace where they could roll it over and have another two years to reset their interest rates and keep their payments down,” Syphax said. Now, no one knows how they’ll be affected, he said.

“If they don’t hang onto their property and end up in mortgage default or foreclosure, what does that do to the marketplace?” he asked.

http://www.TheHomeBuyingCenter.com

After unprecedented gains in homeownership, experts say Latinos and other minorities are now suffering disproportionately from the risky loans offered during the raging housing boom.

Rosa Gonzalez used to pay cash for everything. She passed up credit cards offered her at Sears. When she wanted to buy something, she saved up enough money and bought it, free and clear. She’d moved to the United States from Mexico as a teenager and, as an adult, rented the same apartment in National City for more than a decade.

A house cleaner, Gonzalez’s first foray into credit was for a car, which she’s still paying off. But when she was left $10,000 by two clients who passed away, she decided to invest it in a home. She found a two-bedroom, two-bathroom condo in Barrio Logan for $235,000. Because she hadn’t built a very thick credit file, she ended up with a loan geared toward those with bad credit. The two loans she got in September 2004 to cover the cost of her home were at interest rates of 7 and 11 percent. The standard mortgage rate at that time was just less than 6 percent.

Since then, she said she’s been paying only the interest on the loans, and even that, at $1,500, is $200 more than she’d told the broker she could afford each month. And that doesn’t account for taxes, insurance and homeowners’ association fees. She was intimidated by the fact that the loan papers, laden with technical and legal terms, were in her second language, English.

“You sign the papers, but it’s so hard to understand,” she said.

In September, she’ll have to start paying part of the loan’s principal, forcing her to either refinance or face much higher monthly payments. Her brother already lives with her to help with the mortgage. She said she doesn’t know what she’ll do if she can’t make the loan more manageable come September.

Borrowers like Gonzalez fall into the now-famous category known as subprime — borrowers whose low or poor credit leaves them with interest rates higher than those of standard, or prime, loans.

As the nation’s attention has been drawn recently to the fallout in subprime lending, advocates and real estate professionals say minority and immigrant populations are suffering disproportionately from the foreclosure wave sweeping through many states, as they were more likely to rely on risky loans as their ticket into the market. In San Diego, the communities hit hardest by foreclosure have larger-than-average Latino populations and tend to be closer to the U.S.-Mexico border.

“We’re seeing a huge amount of foreclosures and defaults, and unfortunately, a lot of those are going to be in the Hispanic market,” said Leo Simpser, managing director of the San Diego-based Hispanic National Mortgage Association.

This decade, a national push to increase homeownership among Latinos coincided with one of the longest, most dramatic periods of appreciation for home values. Latino mortgage and real estate professionals put forth aggressive outreach campaigns in the community, while lenders reached out to huge, untapped sections of the market by loosening qualifying standards.
Educational computer kiosks sprang up at malls and public places, mortgage advertisements bore Latino faces, and lenders and agents translated more brochures into Spanish. In some places, a mobile mortgage center complete with bilingual homeownership counselors rolled to soccer games, churches and public events.

Because a widened lending gate allowed many more Latinos and other minorities into the housing market than had entered previously, lawmakers and special interest groups championed the lenders’ efforts to extend homeownership to those groups. But the loans that largely propped that gate open were loans that have turned dangerous quickly as the market cools, sticking borrowers with skyrocketing mortgage payments and causing many to lose their homes.

Nearly half of the Latinos in California who purchased a home in 2005 did so using loans meant for consumers with poor or weak credit, according to the Center for Responsible Lending. Those loans usually featured low introductory rates but reset after a couple of years, pushing monthly mortgage payments to impossible heights for some borrowers, and increasingly resulting in foreclosure. Thousands of homeowners now face the jarring terms they’d figured they would avoid by refinancing or selling their home if finances were tight. Some say they understood little of the financial future they were setting up for themselves, others claim they were outright duped by their brokers.

Of the 84,000-some such loans made to the state’s Latinos in 2005, the center predicts nearly 17,000 will foreclose — nearly one in five. Following unprecedented gains on the Latino homeownership front, the current and impending foreclosures have some researchers fearing the Latino community will have sustained a net loss in homeownership when the foreclosure wave subsides. Some advocacy groups are calling for a federal bail-out for borrowers facing foreclosure.

“We want it to be the American Dream, not the American Nightmare,” said Aracely Panameño, director of Latino affairs for the Center for Responsible Lending.

Latinos account for about 30 percent of San Diego County’s 3 million residents, according to Sandag. Nine of the top 10 county ZIP codes where homeowners are currently having the most trouble making their mortgage payments have higher than average Latino populations. And as Latino and homeownership advocates alike examine those trends against each other, they worry that San Diego’s foreclosure woes are just beginning, especially for the region’s minority communities.

But not all analysts agree on what caused the propensity for Latinos to borrow such risky loans. Some say some consumers made bad choices based on greed and desperation to catch the housing train without really understanding the agreement they were signing first. Others believe consumers were preyed upon by loan brokers who knew that homeownership would prove a desirable symbol of “making it.” The Spanish-language barrier proved a huge obstacle for consumers forced to trust that their brokers would obtain the best deal possible for them.

“The promotion of homeownership is not, in and of itself, a particularly malignant force,” said Paul Leonard, California director of the Center for Responsible Lending. “But these products have, in many cases, been fundamentally flawed.”

The choice of loans for homebuyers from neighborhoods with low incomes and large minority populations were once even starker — either you qualified for a traditional loan, requiring a credit file much thicker than many such borrowers had, or you didn’t get any loan. Lenders actually used to draw red lines on maps around neighborhoods where they’d bar residents from getting mortgages, as recently as 10 or 15 years ago. In such “red-lined” neighborhoods, minorities were often rejected immediately in their applications for mortgages, Leonard said.
Leonard said foreclosures have exploded disproportionately in poor neighborhoods in historical housing downturns. That’s often because such families have less of a financial buffer in case their homes lose value. But what makes this foreclosure wave different is the dramatic way in which previously red-lined minority groups were targeted for loans with high interest rates, exacerbating the woes of those ethnic communities when the music of the housing boom stopped.

As analysts and real estate trend-watchers attempt to compile an obituary of the housing boom, lax lending standards are credited with a lion’s share of its life and death. They’re looking not just at the standards that allowed consumers to qualify for the loans, but also at the standards for becoming a loan officer, especially the ethics they say such an officer should possess. Certain loans garnered brokers higher commissions, and brokers often pushed consumers into them by citing the rapidly escalating market as a safety net — if the loan became too much to handle, the borrower could refinance or sell at a profit, no harm done.

“The lenders were motivated to get more people into the market,” said Gary Acosta, founder of the National Association of Hispanic Real Estate Professionals, based in San Diego. “A lot of these consumers really didn’t understand the nuances, the fine print.”

Of those top 10 San Diego ZIP codes with high foreclosure rates, four are in the South Bay region and another three are clustered near southeastern San Diego, according to RealtyTrac, a foreclosure tracker.

In three Chula Vista ZIP codes on the list, 91910, 91911 and 91913, Sandag estimates Latino populations of 49 percent, 62 percent and 36 percent respectively. The 92154 Otay Mesa ZIP code has a 57 percent Latino population. Encanto, the 92114 ZIP code in southeastern San Diego, has a 32 percent Latino population and a 26 percent black population, representing another minority group hit hard nationally by predatory lending.

And 92105, City Heights in San Diego, has a 51 percent Latino and 15 percent black population. In that ZIP code, nearly one in three people were living below the poverty line when the 2000 Census was taken.

Among minorities, the pull toward using an agent or a loan broker from the same minority group is strong. And any language barrier accentuates that necessity.

“People tend to go with a loan broker or officer that they know,” said Gabe del Rio, director of homeownership for Community HousingWorks, a nonprofit housing organization in San Diego. “Everybody’s got a cousin or a friend who’s in the business. And, especially in ethnic communities, there’s a propensity to stay with someone you know.”

But sometimes, the broker the borrowers know is also the broker who takes advantage of them, abusing the trust of their client by tacking on fees or inadequately explaining the terms of the contract they’re signing.

“We have a ton of people in the industry who are completely unprofessional and don’t know what they’re doing, who are taught to be predatory,” del Rio said. “You shouldn’t pick a loan based on who you know. It’s a purely financial decision.”

Acosta said nearly four in five Latino homebuyers are first-time homebuyers, making it imperative that they find a trustworthy loan broker because they’re new to the process. While he emphasized that the consumers still bear responsibility in the end for the documents they signed, there’s a lack of communal experience to draw from.

“They’ve not been through the process, and they don’t even have extended family who understands the process,” he said. “They have to trust the people who are navigating them through.”

Del Rio sees another disturbing trend in the neighborhoods experiencing high foreclosure levels. When homes go into foreclosure or are sold in short sales, the values in the surrounding neighborhood drop. That means more homeowners in the surrounding homes could find themselves upside-down — owing more than their house could sell for — very quickly.

“It all feeds into itself,” del Rio said.

Simpser said his company has developed a “third way” to the dichotomous choice faced by many Latino would-be homebuyers to finance a home with a subprime loan or to not buy a home at all. Instead of doing away with requirements that the borrower demonstrate income or credit scores, the association looks at alternative measures of financial responsibility and ability to repay a mortgage, such as regularly wiring money to family members in other countries, or paying monthly rent.

Bruce Norris hosts a real estate radio show in Riverside County. He said the impact of foreclosures will eventually be widespread among both rich and poor neighborhoods, even though it has been so far contained in some low-income neighborhoods in Southern California counties. He said the worst is yet to come.

“This certainly hasn’t played out yet,” Norris said. “It inevitably has to turn more ugly. More and more foreclosures being sold in the marketplace will depress prices even more.”

http://www.TheHomeBuyingCenter.com

Homeowners in New York’s predominantly minority neighborhoods of Brooklyn and the Bronx are more likely than other borrowers to have subprime mortgages and many now face foreclosure, according to a university study.The rate of subprime home purchase lending in New York City rose to about 23 percent in 2005, and in some poorer neighborhoods the share of new home purchase loans was 50 percent or higher. The national average is 17 percent, according to a New York University draft report on mortgage foreclosures in New York City presented on Wednesday.

“The risk of foreclosure is likely to increase as the housing market cools,” said Jenny Schuetz, a research fellow at NYU’s Furman Center for Real Estate and Urban Policy. “Subprime borrowers are more likely to be in lower-income households, non-white and in houses in rapidly depreciating markets.”

Schuetz spoke at a New York State Banking Department conference on mortgage fraud at NYU.

The rate of foreclosure starts, the first step in the foreclosure process, was highest in Bedford Stuyvesant, Bushwick and East New York/Starrett City in Brooklyn and Belmont/East Tremont in the Bronx, according to NYU’s study, based in part on county court data collected between 2002 and 2005.

In Bedford Stuyvesant, the rate of pending lawsuits against a property owner — the first public record of loan distress — was 307 per 1,000 housing units, the preliminary study found. In Manhattan, the rate was between 3.4 and 6.7 per 1,000 housing units.

New York, a city of renters, has the lowest homeownership rate among major cities in the United States, but subprime loans helped open up the possibility of owning homes to “marginal homeowners,” Schuetz said.

The homeownership rate in the United States climbed to about 67 percent in 2005. In New York City the rate rose to 33 percent in 2005, up from about 29 percent in 1990.

The study also found that three quarters of homeowners earning less than $50,000 annually pay more than half of their income to housing costs.

Meanwhile, several leading Democratic lawmakers said on Wednesday the federal government should offer troubled borrowers hundreds of millions of dollars to bail them out of subprime mortgage loans.

“The federal government can send in an infusion of (money) to prevent foreclosure,” said Sen. Charles Schumer, a New York Democrat who is also chairman of the Joint Economic Committee, a joint committee of Congress.

The cash infusion is needed right away and should go to both help fund community groups aiding troubled borrowers and to directly fund bailouts, Schumer said.

In New Jersey, Assembly Deputy Speaker Neil Cohen on Wednesday called for a state-imposed moratorium on subprime mortgage loan foreclosures, pending an investigation into the problems in the subprime lending market and its effects on New Jersey homeowners.

The New Jersey attorney general’s office had no immediate response.

http://www.TheHomeBuyingCenter.com

Pennsylvania’s mortgage foreclosure rate ranked 19th highest in the nation last year, according to a report released today by the congressional Joint Economic Committee in Washington, D.C.

One in 137 households in the commonwealth was in foreclosure at some point in 2006. The national rate was one in 92 households.

The report was compiled using numbers from RealtyTrac, a foreclosure-tracking firm based in Irvine, Calif. Colorado had the highest foreclosure rate in 2006 with one foreclosure per 33 households while Vermont had the lowest rate with one foreclosure per 6,542 households.

Meanwhile, Pittsburgh had the 50th highest foreclosure rate in the nation with one foreclosure per 92 households, or 1.1 percent of households, in 2006.

The Detroit metro area topped the city list with one foreclosure per 21 households or 4.9 percent of households experiencing foreclosure.

However, the chairman of the Mortgage Bankers Association, John M. Robbins, said the data was “faulty” and “inflated” and “paints a far more dire picture of the landscape than MBA’s studies support.”

http://www.TheHomeBuyingCenter.com

SACRAMENTO – Foreclosures and subprime mortgage defaults are factors that are hurting the business activities of some of America’s biggest home builders.  The largest of these companies, D.R. Horton, Inc. said Tuesday that orders for new homes fell 37 percent in the first quarter of 2007.

Chairman Donald Horton lamented that the spring home buying season, traditionally strong, has not gotten off to a good start.  D.R. Horton reports that as many as 40 percent of people who buy its homes are first-time homebuyers, and these people are having a harder time qualifying for loans than in the past.

Other major builders, such as Lennar Corp. and Ryland Group Inc. also indicated that they were not seeing a great start to the spring sales season.  They blame unsold inventory and large numbers of existing homes on the market.

One factor that helped create this situation is the collapse of many lenders in the so-called subprime mortgage market.  These companies specialized in lending money to buy houses to people with poor credit or to people who did not want to prove how much money they were making.  Many of these, especially New Century Financial Corp., are experiencing severe financial distress.

This poor overall situation suggests that the drop in the housing market in the United States has not reached its lowest point yet.  “People across the country keep hoping that we’re going to turn the corner and see [home] prices start to go up, but we may be in for a longer and deeper correction than many had anticipated,” commented foreclosure expert Patrick McGilvray, J.D., CFP®, president of http://www.TheHomeBuyingCenter.com.

This Sacramento-based company matches distressed homeowners with individual investors and prospective home buyers, and he reports that calls from across the nation keep pouring in as people struggle to avoid foreclosure and deal with increased mortgage payments.

California, which saw incredible price appreciation between 2000 and 2005 leads the nation in a drop in orders for D.R. Horton Inc.  The company reported a 59 percent drop in orders for new homes in the state.

Even the priciest metro areas aren’t immune to rising foreclosure rates.

During the first quarter, foreclosures have jumped sharply across the nation’s top urban markets, according to CNBC.

In Miami, foreclosures are up nearly 31%, in Los Angeles 24%, and in New York City, up 56%, the website said. Properties in the borough of Queens accounted for the bulk of the New York foreclosures, jumping 91% alone.

Miami experienced the highest quarterly foreclosure rate per household. In Miami-Dade County, there were 987 residential auctions in the first quarter, which translates into 127 foreclosures per 1,000 households. Miami typically has foreclosure rates higher than the national average because it attracts investors that buy into properties before they’re developed with hopes of flipping them later at a profit.

Now that prices have peaked in urban markets, investors are left holding properties that they need to unload in a soft housing market. In addition to investment speculators, many subprime borrowers have overextended themselves with creative financing or little money down on homes they couldn’t really afford.

Foreclosures occur when an owner is behind in mortgage payments and the lender initiates foreclosure action on the property. That process can take 12 to 18 months, so foreclosures are a lagging indicator of the broader housing market.

But California — where foreclosures take only about six months from payment default to auction — may mirror national trends.  While it may not be surprising that Los Angeles’ low-income areas, including Lancaster, Palmdale and Long Beach, are the most affected, PropertyShark’s chief executive officer, Ryan Slack, said he believes a coming rise in foreclosures across the nation will be severe.

Los Angeles “with its mix of urban and predominantly suburban neighborhoods, its large mix of wealthy and less wealthy areas, is definitely an indicator of trends elsewhere,” Ryan Slack, chief executive officer of PropertyShark, told CNBC.

Slack said the areas most vulnerable to rising foreclosure rates are those that have experienced the most price appreciation like the coastal urban markets.

http://www.TheHomeBuyingCenter.com

Mark Celeste says he made a grave mistake, and he may have to pay for it with his home.

Celeste and his wife, Julie, find themselves immersed in the ongoing mortgage “meltdown,” as the Wall Street Journal has called it. Their lender recently filed a foreclosure action on their house at 3333 Erie St.

It began last August when Mark, then a cook at Great Lakes Naval Station, quit that job because of the long drive. “I decided to try to get something in Racine,” he said.

But Celeste hasn’t stuck at any job since. He’s currently a third-shift dishwasher at the Iron Skillet restaurant on Interstate 94.

Meanwhile, Julie’s home day care business has suffered from a plethora of new competitors as well as some nonpaying customers.

“If people don’t know what to do, they go into day care,” she said. “Nowadays, there’s one on every corner.”

The couple found themselves unable to come up with their $1,200 mortgage payment in January for the home they bought in 1990. Nor could they scrape up payments for February or March. The lender rejected their offer of partial payments.

Previously, the Celeste home was most notable as a creation of the architect John Randall McDonald, a Frank Lloyd Wright protege.

Now it’s a statistic, part of a wave of foreclosure filings that was running at full steam throughout 2006 and continues this year.

According to data released Thursday, foreclosures here in the year’s first quarter continued to match last year’s abnormally high levels. The numbers from ForeclosuresWI.com showed 180 foreclosures were filed in Racine County from Jan. 1 to March 31, an average of 60 per month.

That matched last year’s escalated pace, when Racine County reflected the national surge in mortgage defaults. In 2006, the county had 719 foreclosure filings, about 60 per month.

That pace is well ahead of the 2005 average of 44.25 per month.

Statewide, in the first quarter an average of 77 foreclosures were filed every business day.

Combined forces

Robert Jansen, said several factors have combined to force homeowners into mortgage default: a mix of rising interest rates; a softening housing market; and the underlying dynamics of the subprime mortgage market.

In the past decade, federal regulators tightened controls on making loans to people with low incomes or poor credit histories. But the volumes of those loans rose as much of the subprime lending shifted from traditional banks to companies outside the reach of federal banking regulations.

The Wall Street Journal reported that 52 percent of subprime mortgages originated in 2005 were by companies with no federal supervision, primarily mortgage brokers and finance companies. Those companies are usually state-regulated, and the impact of their recent practices is becoming painfully evident.

“I know foreclosures are up,” said Racine County Treasurer Elizabeth Majeski.

When she goes after tax-delinquent properties, she runs across the foreclosure filings. “Then I hold off,” she said, because the lender usually pays the property taxes to protect its own interests.

“I’m seeing more of that,” Majeski said.

Statewide foreclosure filings rose by 34 percent last year compared with 2005. For Racine County the increase was about the same: 35.4 percent.

“Increased interest rates, compounded by adjustable-rate and exotic mortgages, have caused many homeowners’ monthly mortgages payment to skyrocket to unaffordable amounts,” Jansen said.

“Furthermore, the cooling of the housing market has made it more difficult for those facing financial trouble to quickly sell their home and avoid foreclosure.”

No money down

Racine County Register of Deeds Jim Ladwig said: “I think what you’re seeing is a lot of people got mortgages with zero percent down, or 110 percent mortgages, and a lot of them were with a variable interest rate.

“The problem is: When they came due, people can walk away because they’re not losing anything. People paid interest, but not principal; there were lots of them that were interest-only loans.

“When the value on houses is going up 15 percent per year, that’s a good deal.” But it’s not so good if housing values are only climbing by 2 or 3 percent.

Jansen said Foreclosures has seen a significant increase in its subscriber base with the foreclosure explosion. Many more people - including real estate agents who want the listings of homeowners forced to sell - are now recognizing the opportunity foreclosures offer, he said.

“Home buyers and investors are able to purchase a foreclosed property below market value, while also helping the homeowner save equity and avoid further damage to their credit by selling their property before it goes to auction.”

But that doesn’t ease the hurt for people don’t want to give up their homes.

The Celestes did not get into mortgage default because of the forces that created the current national foreclosure boom. But they still face the anguish of being in that position.

Their mortgage holder, Homecoming Financial, has reduced their interest rate and made it possible for them to make good on their missed three payments simply by resuming their $1,200 payments.

Their only problem is coming up with $1,200 each month.

“I probably think the easiest solution to this whole thing is: Sell the house and get something that we can afford,” Mark said.

But Julie, who said the house and yard are perfect for her child care business, said she’s not ready to consider selling the house - yet.

“We’re not going to get a penny if we sell it,” she said. “I don’t want to pay rent for 20 more years.”

http://www.TheHomeBuyingCenter.com

Many still lost houses, but saved some equity, escaped credit damage. At least four out of five callers to the Colorado Foreclosure Hotline who meet with housing counselors avoided foreclosure, according to the state’s division of housing.

The hotline’s number connects callers with local non-profit homeownership counseling agencies around the state. Homeowners who call can meet with housing counselors and prepare a plan for working with their mortgage company to avoid foreclosure.

The hotline gets about 75 calls per day.

The number of callers who received counseling but still lost their homes is likely between 7 percent and 19 percent, though the exact number was hard to determine given the difficulty in contacting many callers later, the housing division said.

The most common outcomes for surveyed callers who received counseling were:

38 percent will stay in their current homes,

34 percent will leave or have left the home.

28 percent are still working to resolve the situation.

While the homeowner generally considers losing their home for any reason to be an unfortunate outcome, the avoidance of foreclosure, even if the home is lost, remains a primary goal for counselors since foreclosure can cost a homeowner any remaining equity in the home and seriously damage the homeowner’s credit.

http://www.TheHomeBuyingCenter.com

Congress will explore possible responses to the recent increase in home mortgage foreclosure rates, with particular emphasis on foreclosures affecting subprime loans, those made to people with poor credit histories.

The House Financial Services Committee will hold a hearing on the subject April 17. The hearing will include representatives from Fannie Mae, Freddie Mac, the Federal Housing Administration, consumer organizations and representatives from the mortgage industry.

A study by the nonprofit, nonpartisan Center for Responsible Learning found that 19.4 percent of subprime loans made in 2005 and 2006 will fail, or go into foreclosure. The projected failure rate for subprime loans made in the Portland area is 20.4 percent.

http://www.TheHomeBuyingCenter.com
 

If you’re lying awake at night, fretting about whether you’ll lose your house to foreclosure, you may not be the only insomniac on your block.More than 2.1 million Americans with home loans missed at least one payment last year, according to the Mortgage Bankers Association. Even more troubling, the rate of new foreclosures hit a record.

The problem is likely to get worse. As adjustable-rate mortgages adjust to higher rates, many borrowers are finding they can’t afford their payments. And the collapse of the subprime market has made it harder for those with tarnished credit to refinance. But be aware: Even if your mortgage has become an intolerable burden, letting the bank foreclose could lead to a lifetime of hurt. Losing your home is just the beginning. A foreclosure will wreck your credit report for years, making it impossible — or at least extremely expensive — to buy another home, says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies. If the proceeds from the sale of your home don’t cover your loan, your lender might sue you to recover the unpaid balance.

Many borrowers who lose their homes to foreclosure haven’t tried to negotiate with their lenders. That’s unfortunate, because lenders are usually willing to work with borrowers to avoid foreclosure, says John Lamb, co-author of “Solve Your Money Troubles.” “With the number of foreclosures on the horizon, lenders are going to be more willing to work with people, because it doesn’t do anybody good to have a glut of foreclosed houses on the market.”

Ideally, you should call your lender before you miss your first payment, says Bob Walters, chief economist for Quicken Loans.

If your payment is due on the first of the month, call before the 15th, which he says is usually when your lender will report the late payment to credit-reporting agencies.

The longer you wait, the fewer options you’ll have. Once your loan is declared in default — typically after you’ve missed three or four payments — you’re “past the point of no return,” Walters says. At that point, most lenders won’t accept a partial payment of what you owe. Unless you can come up with the money to cover all your missed payments, plus any late fees, your lender will start foreclosure.

Avoiding default

If you’re suffering a temporary financial setback, your lender may offer programs that will help you get back on track. They include:

More than two million Americans with home loans missed at least one payment last year, and many had bigger problems. Foreclosures jumped to a record high.

Sam Arens from the Philadelphia Unemployment Project says the problem is likely to get worse.

“We’re getting an influx of people who have adjustable rates and these subprime and predatory loans are going sour.”

How does this happen? Interest rates go up, making it difficult for subprime borrowers, especially those with adjustable rate mortgages to keep up with their payments. Doctor Susan Wachter from the Wharton School says even though these types of loans are attractive, they’re very risky.

“They have low initial payments, but the payments can spike dramatically. They can go from a payment in year one of $700 to a payment in year 3, 4, 5 of $2,000. That’s quite a jump.”

“Once somebody gets two to three months behind, the mortgage company can begin the foreclosure process,” adds Arens.

If that happens, you could lose your home and all the money you’ve invested. So you don’t want to miss any payments. But if that’s the road you’re going down, call your lender right away, there are programs to help you get back on track.

Some are:

Forbearance: an agreement that lets you make a reduced payment, or none, for a specific amount of time.

Or reinstatement: You agree to pay the full amount of your missed payments by a specific date, sometimes combined with forbearance.

And modification: Your lender agrees to change the terms of your loan to make payments more affordable.

Simply put, Dr. Wachter says: “Look at your choices. Be informed.”
http://www.TheHomeBuyingCenter.com

April 5, 2007

SACRAMENTO – Troubled mortgage lender New Century Financial Corp. received authorization from U.S. Bankruptcy Judge Kevin Carey to secure up to $150 Million to keep operating while in Chapter 11 proceedings.

CIT Group Inc. and Greenwich Capital Financial Products, Inc. (a unit of Royal Bank of Scotland Group Plc) agreed to lend money to New Century before it filed for bankruptcy protection on April 2^nd, 2007.

Judge Carey wrote, “Terms…are fair, just, and reasonable under the circumstances [and] reflect the debtors’ exercise of their prudent business judgment consistent with their fiduciary duties.”

The judge set April 19 as a deadline for interested parties to object to the financing plan.  A final hearing is set for April 24.

New Century was the biggest independent lender in the United States that provided