January 13, 2012

The Downward Spiral That We See Today

It’s Friday desk clearing time for this blogger. “In 2007, Mohamed and his wife, Wanda, owned their three-bedroom Hallsville home free and clear. But with their five children, the husband of their oldest daughter and a grandchild also living under their roof, they needed a larger home. When the Sultans first sought to buy a new home, they had no debts or liabilities but little savings and a modest income, court records show. To help them finance the purchase of a new home, their real estate agent referred them to a loan specialist at a local branch of Countrywide Financial.”

“In May 2007, they found a five-bedroom home in north Columbia with a price tag of $208,000. They thought they could afford the home and said the Countrywide loan specialist told them they’d be able to make the payments. They took out a $165,000 loan to buy the property, according to court records. On the advice of the loan specialist, the Sultans also borrowed $60,000 against their home in Hallsville. Part of the money was to be used as a down payment for the new home, and the rest was to make repairs to the Hallsville property, which they wanted to rent out.”

“After two years of making payments, the Sultans fell behind. ‘We exhausted everything we had,’ Mohamed says. ‘We exhausted everything to keep the house.’ ‘We trusted Countrywide,’ Wanda says. ‘Why would they lie to people and tell them they can afford something?’”

“Scores of UAW members joined friends and activists Tuesday in marching with a Southgate husband and wife to a Bank of America branch to protest the foreclosure of the couple’s home and efforts to evict them. The couple paid $138,000 in 2004 for the three-bedroom ranch, now worth about $30,000, they said. ‘We’re not the only ones being forced out of our home, and this has got to stop,’ Debbie Henry said after the group marched to the bank.”

“Eugene-based Gorilla Capital CEO John Helmick said he’s paid $20,000 for a house that had a $200,000 loan before foreclosure. ‘I can see this being a $50,000 loan but, really, a $200,000 loan on an 1,100-square-foot house in the middle of nowhere?’”

“Residential properties with foreclosure filings in Connecticut dropped sharply in 2011 compared with the previous year. Jeff Gentes, a staff attorney and foreclosure expert at the Connecticut Fair Housing Center in Hartford, said the center has not seen a slowdown in borrowers facing foreclosure. ‘When we declared there was a crisis in 2007, the numbers were far lower than what they are now,’ Gentes said. ‘I don’t see a slowdown in overall need. I still see us stuck with problems of this nature for another three years.’”

“It took nearly three years, on average, to foreclose on a property in New York in the fourth quarter of 2011, the longest delay of any state in the nation, according to a report. Michael Smith, president of the New York Bankers Association, said the delays are bad for bank bottom lines and serve as a disincentive for extending credit to other borrowers. ‘If there’s no way to ever collect on a [defaulted] loan or a portion of the loan, then what’s the incentive to lend?’ Smith said.”

“A bank has foreclosed on portions of another prominent West Des Moines development. It’s the third major development in West Des Moines to face foreclosure action since the economy turned south three years ago. In the past, such foreclosures could taint a development for some time, according to Gerard Neugent, CEO of Knapp Properties.”

“‘There is no question that when property undergoes foreclosure, there is a taint that can develop over it and create concern about the property’s viability,’ Neugent said. ‘But my sense is that the taint is much more temporary and goes away a lot more quickly than it has in the past because of all the foreclosures that are happening right now.’”

“Josh Barker of ReMax Town & Country Realty in Redding said foreclosures are still plaguing the local market. About two-thirds of all sales in Shasta County in 2011 were either foreclosures or short sales. Barker expects foreclosures to be a big part of the north state’s real estate market through 2014 because so many homeowners still owe more on their mortgages than their houses are worth.”

“‘Most people are going to foreclose, not so much for financial reasons anymore, but it will be more for strategic reasons,’ meaning they realize they may never get more for their house than they paid, Barker said.”

“This week we’re tackling the debate on whether or not it’s a good idea to foreclose on your home. Tracy W. Smith with HomeSmart Realty says she respects all of those that honored their mortgage contract and held up neighborhood stability. Dean Wegner with WJ Bradley Mortgage Capital says you have to do what’s best for your family and not put your mortgage company above your family’s well-being.”

“Smith: In my view if everyone paid there mortgage payment on time we would have no housing crisis. In fact home prices would have moved down a little but no where near the amount we have seen from the so called strategic-defaulters. It created the downward spiral that we see today and created a giant housing hole we are slowly crawling out of…Somehow our mortgage came with a guarantee that said in the event your home value declines you can stop making payments and we will be just fine with that, who cares if you drop your neighborhoods value and send our beloved country into the worst recession since the great depression.”

“The truth is when home values were going up, no body thought of defaulting their mortgage to ‘get out of it.’ Every lunch table in town the conversation was how great the market is doing and how much equity they have now and how they are buying investment properties. Nobody called their mortgage company or the banks crooks. But now all of a sudden they are the bad guys, are they really the bad guys because if home prices were still up would you be mad? I see this anger for people to rationalize and default on their home loans and seeing the market further down the drain.”

“The Villages of Avignon Community Development District in Palmetto is the latest of more than 160 special districts to default on its development bonds since the housing bust. The problem is too many projects were started at the same time — the boom days of 2005 and 2006 — before the market dried up. After that, the developers kept pushing forward like there was no housing crisis, said Richard Lehmann, a Miami financial adviser who runs a website that keeps tabs on district finances.”

“‘This has been going on a couple years now,’ he said. ‘They’re all in trouble. We’re talking about a large amount of property across the state.’”

“The number of foreclosure filings in the Roaring Fork Valley portion of Eagle and Garfield counties soared in 2011. There were 107 foreclosures filed by lenders in the Eagle County portion of the valley in 2011, according to research by attorney Garret Brandt, also a real estate agent with Chaffin Light Real Estate. Brandt said there didn’t appear to be any areas of the middle and lower valley that were hit particularly hard or spared from foreclosure actions. ‘They’re still all over the place,’ he said.”

“However, in the Glenwood Springs and Carbondale areas, the average amount of the foreclosure filings was for $508,000. That suggests there are a lot of homes in lower price ranges targeted for foreclosure, not just more expensive luxury properties. ‘It seems like the really big projects are all done with,’ Brandt said, referring to the projects facing financial trouble. Now more foreclosure actions are affecting less expensive homes and condominiums, property owned by ‘average people,’ Brandt said.”

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