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  • From: Rob <becida AT comcast.net>
  • To: homestead AT lists.ibiblio.org
  • Subject: [Homestead] Poor housing news
  • Date: Fri, 16 Feb 2007 21:33:38 -0800

I read the article below and wondered about the 1.2 mil homes in foreclosure, is that a high number? Down below is an article on the 2005 foreclosures.

Rob
becida AT comcast.net




SEATTLE POST-INTELLIGENCER
http://seattlepi.nwsource.com/opinion/304015_trahant18.html

Time to get some closure on foreclosure

Sunday, February 18, 2007

By MARK TRAHANT
P-I EDITORIAL PAGE EDITOR

These are the best times ever. A new report by the Mortgage Bankers Association brags that we Americans are demonstrating "the greatest and widest availability of mortgage finance in our nation's history, which in turn has made possible record homeownership rates."

The bankers call it the credit democracy. The wonderful era when nearly everybody could borrow freely with few documents, lighter restrictions and self-proclaimed income.

"In light of the mortgage lending industry's achievements in democratizing credit, the debate no longer concerns whether credit is sufficiently available to borrowers," the bankers say. "Rather, the debate now has turned to whether the loans particular borrowers receive are in their best financial interest. Because of claims of lending abuses and foreclosures, some consumer advocacy organizations have recently suggested a 'suitability standard' should be imposed on the mortgage lending industry."

I rather like the phrase "because of claims of lending abuses and foreclosures." It only takes a few words to dismiss the growing data that suggest we're headed for a credit meltdown. If you can find the news beyond strange celebrity behavior, consider that several banks (probably members of the Mortgage Bankers Association) last week reported a sharp increase in defaults on risky mortgages.

Last week, for example, ResMae Mortgage Corp. filed for bankruptcy protection. According to Bloomberg, it's "at least the 20th mortgage company to be sold or closed as delinquencies rise and the market for home loans to risky borrowers contracts at the fastest pace ever."

"The sub prime mortgage market today is a quiet but devastating disaster," said Martin Eakes from the Center for Responsible Lending and Center for Community Self-Help. "The ultimate effects are very much like Hurricane Katrina, as millions of citizens lose their homes and the fabric of entire communities is threatened."

Eakes testified before the U.S. Senate's Committee on Banking, Housing and Urban Affairs earlier this month about predatory lending practices.

"Our analysis of subprime mortgages made in recent years shows that 2.2 million families will lose their homes to foreclosure -- foreclosures that were, for the most part, predictable and entirely avoidable through more responsible lending practices," Eakes said.

"As housing appreciation slows down in many areas of the country, it is clear that problem will only grow worse. All indications are that subprime mortgage loans are headed toward the worst rate of foreclosure in modern mortgage market history."

This is a big deal because so many mortgages today are considered subprime -- it's estimated that 20 percent of all home loans fall into this category worth $1.2 trillion in outstanding debt.

One reason why this financial hurricane will wreak havoc: Many of these home loans started with "teaser" rates, special deals that made it easier for consumers during the first few years of the loan. That process might work as long as housing prices continue to rise, but when home prices stay steady or decline, the consumer is on the hook for increased principal. In the language of bankers: The loan is a negative amortization loan -- one where the debt burden grows.

And, eventually, the monthly payment will have to catch up with that debt burden. Not to mention the interest rates that are growing to nearly 12 percent (in this low-interest environment) per year.

"Lenders and mortgage insurers have long known that some home loans carry an inherently greater risk of foreclosure than others," Eakes said. "However, by the industry's own admission, underwriting standards in the subprime market have become extremely loose in recent years, and analysts have cited this as a key driver in foreclosures."

But is it too late? Can we avoid the hurricane? Is there enough evidence to shift course?

We'd better try. A national suitability standard might prevent more consumers from being trapped in a predatory loan. And perhaps there's a way to help people move from unsuitable mortgages into the plain-vanilla-type loans.

But we'd better hurry. Some $600 million in adjustable rate mortgages will be reset this year, making it even tougher for some people to continue making their house payments on time. Already, last year Realty Trac reported that more than 1.2 million homes were in the foreclosure process.

And these numbers reflect a strong economy, the best times ever. We'd better pray it stays that way. Our credit democracy is at risk of bankruptcy.


Mark Trahant is editor of the editorial page. E-mail: marktrahant AT seattlepi.com.

© 1998-2007 Seattle Post-Intelligencer
`````````````````````
http://www.realtytrac.com/news/press/pressRelease.asp?PressReleaseID=86
>>NATIONAL FORECLOSURES INCREASE IN EVERY QUARTER OF 2005 ACCORDING TO REALTYTRAC™ U.S. FORECLOSURE MARKET REPORT
Nearly 847,000 Properties Enter Foreclosure During The Year; Florida, Colorado and Utah Post Nation’s Highest Foreclosure Rates. <<




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