Mortgage crisis overwhelming credit counselors

Reuters via CNN
Until last year, financial counselors at the Home Ownership Center of Greater Cincinnati spent most of their time teaching Americans how to buy a first home. Now, they’re deluged by broken and bereft homeowners facing foreclosure.

“Oh Lord, there is no way we can keep up with these calls,” said Kaye Britton, a foreclosure counselor at the downtown nonprofit group that promotes home ownership to minority Americans, among others.

Britton has been helping clients reach the American dream of owning a home since 2002. Handmade wall signs urge would-be buyers to “sweat the small stuff” and note the lender’s golden rule: “They have the gold, they make the rules.”

Foreclosures were formerly rare, caused mostly by the loss of job, divorce or medical bills.

But when rising interest rates began driving up mortgage payments last year, homeowners started to feel the pain. Phones at credit counselors across the country are now ringing off the hook.

The industrial heartland has been particularly hard-hit. Ohio had the highest number of home foreclosures in 2006, while neighboring Michigan and Indiana — all sideswiped by the faltering U.S. auto industry — were close behind.

Housing analysts predict between 1 million and 3 million U.S. homes will be foreclosed upon in 2007. Already a wave of defaults on subprime mortgages held by those with poor credit have caused a crisis in parts of the industry, and some economists believe a recession could result.
(23 March 2007)

Foreclosures Force Suburbs to Fight Blight

Erik Eckholm, NY Times
SHAKER HEIGHTS, Ohio – In a sign of the spreading economic fallout of mortgage foreclosures, several suburbs of Cleveland, one of the nation’s hardest-hit cities, are spending millions of dollars to maintain vacant houses as they try to contain blight and real-estate panic.

In suburbs like this one, officials are installing alarms, fixing broken windows and mowing lawns at the vacant houses in hopes of preventing a snowball effect, in which surrounding property values suffer and worried neighbors move away. The officials are also working with financially troubled homeowners to renegotiate debts or, when eviction is unavoidable, to find apartments.

“It’s a tragedy and it’s just beginning,” Mayor Judith H. Rawson of Shaker Heights, a mostly affluent suburb, said of the evictions and vacancies, a problem fueled by a rapid increase in high-interest, subprime loans.

“All those shaky loans are out there, and the foreclosures are coming,” Ms. Rawson said. “Managing the damage to our communities will take years.”
(23 March 2007)

Subprime lenders push back

Les Christie, CNN
Everyone is blaming “explosive ARMs” for the crisis in subprime loans. But several spokesmen for the mortgage industry told Congress this Thursday that these variable mortgages have not contributed much to rising default rates.

Testifying at a Senate Banking Committee hearing, Sandy Samuels, an executive with Countrywide Financial, said the spike in recent delinquencies is not a result of the failure of hybrid ARMS, ones with low “teaser” rates and payments that jump explosively after the first two or three years. Countrywide is a leading provider of subprime loans.

The majority of hybrid ARMs have not yet gone through a reset, said Samuels. Samuels said that during the past five years Countrywide had issued approximately 540,000 of these loans with only 20,000 going into foreclosure. ..

These borrowers are far from alone. Janis Bowdler, a policy analyst with the National Council of La Raza, says the mortgage market is not working well for minorities. In the Latino population; foreclosure rates are at a record high. Bowdler said that many families are steered to inappropriate subprime products.

Senator Robert Menendez, Democrat from New Jersey, reported that 52 percent of African Americans receive subprimes and 47 percent of Latinos do as well. Many, however, could qualify for a prime rate loan. ..
(22 Mar 2007)
Institutionalised racism is an ugly phrase, but not nearly as ugly as its practice.-LJ

Income £517, mortgage £430. It’s the new housing scam

Jill Insley, The Observer
Council house tenants are losing their homes after being targeted by mortgage companies encouraging them to borrow ridiculous amounts of money to buy their properties.

Debt advisers say there is a growing trend of people living in council properties being targeted with loans and mortgages they don’t have the ability to pay. Ismail Ali, 71, was persuaded to take out a mortgage costing £430 a month, despite his monthly income being just £517. He has now lost his council home of 15 years and is living in a seamen’s hostel in east London. ..

Capitalise, a government-funded partnership that provides free debt and money advice in London, says similar cases are emerging in other parts of the city. Cases include a 78-year-old woman sold a 38-year mortgage, a man earning £1,100 a month whose mortgage also costs £1,100 a month and a woman with a loan costing 80 per cent of her monthly income.

Mark Allan, head of service for Capitalise, says: ‘We’re seeing a small but growing trend of people living in council properties being specifically targeted with loans and mortgages that they don’t have the ability to pay. ..
(25 Mar 2007)

Fed official: ‘We could have done more’ to stave off subprime mortgage problems

Sue Kirchhoff, USA Today
A top Federal Reserve official admitted Thursday that the central bank could have done more to prevent the escalating crisis in the subprime mortgage sector, as lawmakers told the Fed to use its broad power to clamp down on abusive lending.

“Given what we know now, yes, we could have done more sooner,” said Roger Cole, director of the Fed’s Division of Banking Supervision and Regulation. He added that the worst of the problems in the subprime sector — high-cost loans to consumers with impaired credit — didn’t emerge until last year, when lenders stepped up use of risky adjustable-rate products.

The Senate Banking Committee hearing on the issue comes as dozens of subprime lenders have gone out of business and markets have soured on bonds backed by subprime loans. The carnage isn’t over.

About 14 percent of $1.2 trillion in outstanding subprime mortgages are in default. A million will adjust to higher rates and payments this year, and 800,000 more in 2008, said Sandra Thompson, director of the Federal Deposit Insurance Corp. Division of Supervision and Consumer Protection. ..
(23 Mar 2007)