Once thriving communities have become ghost towns with boarded house broken in by vandals and criminals. Foreclosures have laid a curse on the country.
What is the answer? At a Regional Housing Forum in Atlanta many suggestions were made and top priority was given to avoidance of bankruptcy. Help should be at hand as soon as the borrower is lagging behind 30 to 45 days in mortgage payments. After 90 days it will be difficult to stop foreclosure notices being issue. This is the general opinion of economic experts like Frank Alexander and consumer counseling groups. Alexander opines that banks should prompt borrowers to seek help as soon as warning signals blink.
The state Legislature along with the Governor should enforce extension of time gap between default and foreclosure sale. At present Georgia and Texas allow for only 37 days. The borrowers are hardly allowed time to breathe. Alexander and another economist Dan Immergluck suggests that there should be at least a three-month gap.
However it is too late for thousands of Atlanta families and individuals who have borne the brunt of foreclosures since 2001.
In an Utopian world the foreclosed houses would return to the market at bargain prices and families would once more light their home fires in their own houses. Although the lenders would benefit by quickly rehabilitating the abandoned houses and not let it pull them down like a millstone round their necks, they are under great pressure from the investors who want quick returns.
One suggestion is that they can take the help of Atlanta-Fulton Land Bank Authority and park their property there without having to pay taxes until these units are sold at a reasonable price. There is the option of working directly with non-profit groups who will see to the repairs as well as hunt around for buyers. The prime target of Atlanta Housing Association of Neighbourhood based Developers, is to replace the picture of street after street dotted with boarded abandoned houses with bustling families drying their washing and children tumbling all over. The Association has 25 members.
Local governments can pressurize lenders to maintain houses by putting a lien on the property. Atlanta city councilperson Mary Norwood has been cracking down on truant slum landlords. Foreclosures resulting in abandoned houses have led to innumerable problems like water shortage that has not spared even Grady Memorial Hospital.
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Twin Cities Habitat for Humanity is a non-profit organization working round the clock to bring back people from the precipice of the foreclosure fall. More and more cases are coming up in which the mortgage debt is being reconsidered. In one case the lender was obliging enough to slash off $21,000 from the debt without a murmur.
Till recently servicers and lenders have been throwing the ball back and forth between them with the former saying that their hands are tied, they cannot do anything about modifying loans; rather there was the fear that they would be sued by lenders for stepping out of turn.
Perhaps this argument would have held in normal times. But today 2.2 million Americans are about to lose their houses in the coming year because of foreclosures. The rot has started from the granting of sub-prime mortgages with teaser rates backed by predatory lending. Unwary people with little or no financial education, trying to improve their socio-economic status were made to swallow these loans. With high penalty clauses regarding closing one mortgage to shift to another made modification unaffordable.
But the sheer number of foreclosures affecting all, and not just the lenders, has made the politicians sit up. It is a question of vote banks. The bigwigs in finance and economy are feeling the hard pinch of cash crunch as more houses are knocked down by foreclosures and sitting idle with no buyers. Criminals are now ruling neighbourhoods. Tax kitty is getting slim – who will pay house taxes when there are no regular owners? It is a no go situation for all. The result is that servicers are talking on a low key recently. President Bush had appealed to them last summer to modify loans. The Congress has been growling about toughening mortgage laws. The American Securitization Forum with 350 representatives from investor, loan servicers and insurance groups recently made statements encouraging more modifications. According to them two out of every three services have discretionary powers without restrictions.
Habitat for Habitat is optimistic especially since recently 20% clients are modifying loans. This has increased their workload from 152 house owners in 20006 to 206 already this year.
But all are not happy with the slow pace where only few individuals are benefiting. It is not scratching the surface of the problem. Only 1% loans have been modified.
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In the present scenario obtaining in U.S. real estate market, where large number of homes in all the States are under some stage of foreclosure process, it is high time that the home owners in distress get necessary counseling on the subject. In such a situation, it would be intimidating to discuss the foreclosure with the mortgage lenders directly. People with low and moderate incomes are facing a serious situation by defaulted mortgage payments and they look upon for necessary guidance on foreclosure process. Fortunately for them there are a lot of service-oriented organizations throughout the country, which have come forward to provide the much needed counseling.
The necessity for contacting a counseling agency is very much felt, for the reason of confusion prevailing among the borrowers as whom to contact to sort out the issue, since the prime lending mortgages are bundled out and sold to sub-prime lending institutions. Even if that source of secondary investment is located, it is again a moot point whether that institution has a local representative available nearby to the homeowners. Further, viewing the matter from the emotional angle, the distressed home owners are afraid that the mortgage lending institution will be particular in retrieving their money and will not be helpful in solving the problem in favor of the home owners. It is here the service of a neutral third party counselors come up handy, in allaying the fear of the home owners and talking to them patiently to explain the logical solutions for the imminent problem of foreclosure faced by them.
There are a number of trust-worthy organizations doing this service and the details of such organizations are as follows:
- HomLoanLearningCenter.com: This website can be viewed both in English and Spanish. There is a Foreclosure Prevention Resource Center which provides helpful information in foreclosure process and ways of dealing with the mortgage lender. This site is operated by the Mortgage Bankers Association.
- Housing Help Now: The National Foundation for Credit Counseling runs this organization and the website housinghelpnow.com. The consumers can avail the services of this website in taking a Mortgage Reality Check to find out whether their proposed mortgage suits their budget and income.
- LULAC Home Buyer Center Programs: The League of United Latin American Citizens (LULAC) is the founder of LULAC National Housing Commission several years back. This organization conducts Home Buyer Center Programs in Chicago, Dallas, Phoenix and San Antonio for imparting vital information to home owners and future home owners.
- Legal Aid is provided through many offices around the nation towards legal representation for the benefit of clients who are at par or below the poverty line and therefore can’t afford to hire attorneys of their own.
The home owners are advised to act fast in availing the voluntary service of the above organizations before it is too late. Foreclosure can be avoided by restructuring the payment schedule of the mortgage loan and it is imperative that the mortgage lender is contacted by phone or personal visit in this regard.
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In one voice the residents of Warren voted in favour of waiving a foreclosure on rifle range property on Route 90, the owners being Richard and Kathleen Dunican. The Dunicans owe more than $16,000 to Warren town starting from 1999. But because of environmental related problems on the property the town has decided to waive foreclosure. This is the sixth year in succession that it has done so.
The Dunicans had used 200,000 yards of plastic fibre material on the property to stifle the noise of the rifle range. To do this tractor-trailers working for seven days in a week had to work for more than six months. It was no easy task to transport 200,000 yards of the material to the site. The Town Manager of Warren, Grant Watmough acknowledged this fact. It was as per the development plan of the property. A sound buffer zone for the range was thus created. 100 yards had to be buried at one time.
But financial problems arose. The Dunicans could no longer develop the property. The fibre was left exposed to the elements on the site. Although it was not threatening the water table of the area it is an undeniable fact that it is an eye sore apart from being a potential fire hazard.
The cost of cleaning the property is far in excess of the market value of the unit. Attorney Paul Gibbons representing Warren in this legal tussle posed the querie as to who is supposed to be responsible for clean-up operations. He attended the town meeting to explain why it would be to the best interests of all to waive foreclosure. He explained that because of certain court ruling the Dunicans would soon acquire funds necessary for the cleaning up. But until further legal steps are taken that cannot be said for a certainty.
The Town Manager is optimistic that it is going to get done although the same sentiments have been expressed before. The expectation is that the Department of Environmental Protection and the Attorney General’s Office will soon find a way out. It is their job to do so since they are at the helm of matters. It is they who have taken recourse to the law. They should now come forward and get the matter settled. Considering expenses the stuff most probably would be buried and not carted away.
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Indiana is ranking third amongst the nation’s foreclosure offenders. The state government can no longer remain a spectator. With the implications of foreclosures touching each and every aspect of the socio-economic scenario it is to the interest of all – government, lenders as well as of course the borrowers to pitch in.
What makes the foreclosure tale more tragic is that winter and the merry season is just around the corner. Community non-profit groups have also joined hands with the state to find some solution to the inevitable foreclosure. The state has launched a new programme called the Indiana Foreclosure Prevention Network with high hopes. Importance is being placed on the vital role of the adviser. Arrangements are being made first to make the borrowers become aware of the necessity of the counselor and then to tell them that the advisers are only a phone call or a mouse click away.
As a first step a new hot line has been set up with a toll free number. The whole operation will be in secret and it is open on all days of the week for 12 hours each day. Questions are asked and answered over the phone and when a framework for help has been chalked out physical contact is made. In all probability the adviser is the help just around the corner.
The borrowers are being made to understand, is that time is of great importance. They should not delay matters. The quicker they report the more avenues are open for them. Psychologically the borrowers are shy about contacting the lender directly. The counselors do the negotiating. More often than not, considering the present scenario, the lenders are equally concerned about avoiding a foreclosure.
Borrowers are being repeatedly reminded that they should not worry about fees when asking for help because the counseling is free. The state understands that given the constraints of the situation the borrowers hardly have any money to spare for charges and the like.
The State has also set up a website giving all the particulars of the type of help and contact details. Confidential questions are dealt with online and the answers will decide the type of help that the individual requires.
Already the organization is abuzz with activity. On the very first day of opening the call center in Indiana received one hundred calls. This is just the beginning.
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With many foreclosures on the rise many are keen to know what is meant by foreclosures and what its implications are. Those directly affected will be keen to know about it before sitting down to talk with the lenders. It is especially the low and middle-income group that needs to be financially educated so that they are not intimidated or bullied by the lenders during negotiation talks. Many non-profit organizations have come forward to fill in this gap.
HomeLoanLearningCenter.com is under the operation of mortgage bankers association with an English and Spanish website. It instructs how foreclosures can be avoided, gives foreclosure information and explains mortgage related technical terms.
Housing Help Now is a subsidiary of National Foundation for Credit Counseling. Its website gives necessary information about housing including what one should know about mortgages. The most important point is about loan amount being in parity with income figures. There is also information about what should be done if already one has fallen behind in mortgage payments.
The LULAC has been formed several years ago and deals with the travails of Latin Americans. It has counseling branches in Chicago, Dallas, Phoenix and San Antonio. Several other centers will soon be coming up. Assistance alternatives, contact with lenders and foreclosure laws are some of the issues it deals with.
Legal Aid has many offices around the nation. It arranges for legal representation for individual persons and families who do not have the means to hire lawyers of their own.
NeighborWorks America is a conglomeration of 238 organizations right across the country arranging counseling and education to house owners to enable them to survive in the foreclosure impasse.
It cannot be denied that these groups are doing invaluable work but these are only the first steps. Much more is required. The primary need is to open a dialogue with the lender that will lead to renegotiation.
Borrowers should reach out for help before the situation reaches the delinquency and foreclosure stages. Once the Rubicon is crossed there are very few alternatives to opt for. One step swiftly catches up with the other. The warning for delinquency is followed by foreclosure and auction sale notices and then finally comes eviction. The consumers who have knowledge ahead of the crisis will know how to fight off foreclosures. Ignorance is the most dangerous thing.
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