Should the Government bail out people who may lose their homes to foreclosure?

[Mr. Big Dog 10,747]

Credit is not upward mobility, peeps.

It can be, though. As long as the loan costs less than the return it produces. That strategy just has quite a risk attached to it. And apparently not just for the one trying to get rich quickly and easily...

[AnaAndDaniel 0]

I do not know. I've heard a local financial talk show hots make statements to the effect that this will really affect a very limited amount of ppl. that the media is making it bigger than what it is. So his take is that let go and let he shakeout do its job.

i tend to agree, but I really have no idea of the magnitude. If it is large, then it could affect the economy and then it might be best if the guvt do something. Not sure what the sumthing would be though.

Daniel

:energetic:

[cmartyn 0]

Drop the interest rate two points and keep the party going.

"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . .

Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers." (emphasis added)

-Remarks by Chairman Alan Greenspan on Consumer Finance

At the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005

You can not make this stuff up. I say buy gold. At least some. A teeny bit. Oh wait, I mean buy Oil. No Gold / oil / gold I can't decide. As long as its not paper printed by monkeys.

Edited March 23, 2007 by cmartyn

[w¡n9Nµ7 §£@¥€r 123]

Foreclosures Force Suburbs to Fight Blight

March 23, 2007

By ERIK ECKHOLM

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.”

Cuyahoga County, including Cleveland and 58 suburbs, has one of the country’s highest foreclosure rates, and officials say the worst is yet to come. In 1995, the county had 2,500 foreclosures; last year there were 15,000. Officials blame the weak economy and housing market and a rash of subprime loans for the high numbers, and the unusual prevalence of vacant houses.

Foreclosures in Cleveland’s inner ring of suburbs, while still low compared with those in Cleveland itself, have climbed sharply, especially in lower-income neighborhoods that border the city. Hundreds of houses are vacant because they are caught in legal limbo, have been abandoned by distant banks or the owners cannot find buyers.

The suburbs here are among the best organized in their counterattack, experts say, but many suburbs elsewhere in the country have had jumps in foreclosures and are also working to stem the damage.

Outside Atlanta, Gwinnett and DeKalb Counties have mounted antiforeclosure campaigns while several towns south of Chicago are forcing titleholders to fix up empty houses, or repay the government for doing it.

Here in Ohio, there are more than 200 vacant houses in Euclid, a suburb of Cleveland north of here. In the last two years more than 600 houses in Euclid have gone through foreclosure or started the process, many of them the homes of elderly people who refinanced with low two-year teaser rates, then saw their payments grow by 50 percent or more.

Euclid has installed alarm systems in some vacant houses to keep out people hoping to steal lights and other fixtures, drug users and squatters. The city has hired three new building inspectors, bringing the total to nine, to deal with troubled properties and is getting a $1 million loan from the county to cover the costs of rehabilitation, demolition and lawn care at the foreclosed houses. (When the properties are sold, such direct maintenance costs will be recovered through tax assessments.)

The Euclid mayor, Bill Cervenik, said the city, with a population of 53,000, was losing $750,000 a year in property taxes from the empty houses.

At greatest risk in Cleveland’s suburbs are the low- and moderate-income neighborhoods where subprime lending has soared. The practice involves lenders issuing mortgages at high interest rates for people with lower incomes or poor credit ratings, usually involving adjustable rates and sometimes no down payment and no investigation of the borrower’s circumstances.

“What makes the subprime mortgages so devastating from a community perspective is that they’re so concentrated geographically,” said Dan Immergluck, a professor of city planning at the Georgia Institute of Technology.

Rosa Hutchinson Yates, 62, had kept up payments on her tidy two-story house on Chagrin Boulevard in Shaker Heights for 30 years. Now, she may well lose the house because of a disastrous refinancing deal in 2003 that brought her $24,000 in cash but bills she could not pay.

Ms. Yates, who has worked as a beautician and a cocktail waitress, was emotional and confused as she tried to explain what happened. Though she signed the closing documents, she said she did not realize that she was getting an adjustable rate mortgage that did not include taxes and insurance.

In 2006, broke and bewildered, she stopped making payments and the lender started foreclosure proceedings. A Shaker Heights city attorney said it appeared that illegally high fees might have been charged and that the broker had overstated Ms. Yates’s income, raising the possibility of a legal challenge.

Ms. Yates, preparing for the worst, has learned that she can move into a subsidized apartment for retirees. But the thought is devastating.

“When folks pay for a home, they expect to die in it,” she said, breaking into tears.

In a report for Shaker Heights, Mark Duda and William C. Apgar of Harvard University found that expensive refinancing deals had been aggressively “push-marketed” in the city’s less affluent west and south sides, bordering Cleveland. They said that “the rising number of foreclosures threatens to undermine the stability” of those areas.

“The moral outrage,” Ms. Rawson, the mayor, said, “is that subprime lenders have targeted our seniors and African-Americans, people who saved all their lives to get a step up.”

About one-third of the residents in Shaker Heights and Euclid are black.

Early last year, James Rokakis, the Cuyahoga County treasurer, started a countywide foreclosure-prevention program, which pays community groups to educate people about loans and help defaulting borrowers negotiate with lenders.

In the late 1990s, Mr. Rokakis said, the flight of manufacturing jobs was the major cause of rising foreclosures but around 2000, the surge in careless lending began to wreak havoc.

Mr. Rokakis estimated that more than three-fourths of the current foreclosures in Cuyahoga County involved subprime loans, some of them blatantly unwise or dishonestly portrayed to buyers. Only last year did Ohio tighten its laws to require more complete disclosures to borrowers.

With so many homeowners running into trouble, the City of Cleveland has been unable to keep track of the number of vacant houses, said Mark N. Wiseman, director of the county prevention program. He estimates that 10,000 of the city’s 84,000 single-family houses are empty.

Suburbs like Shaker Heights are trying to avoid the experiences of blighted neighborhoods in Cleveland like the one where Barbara Anderson lives. Ms. Anderson, 59, said her block of East 76th Street was fully occupied three years ago, but now about half the houses are empty.

Many of the houses are filled with smelly trash and mattresses used by vagrants. They have been stripped of aluminum siding, appliances, pipes and anything else that scavengers can sell to scrap dealers.

“It stifles you,” Ms. Anderson said of the squalor. “It lowers the value and affects the kind of people who are willing to move here. I’m embarrassed to say I live here.”

Ms. Anderson, who works for the city ombudsman’s office, is president of a street association that is working with a county-financed group, the East Side Organizing Project, to salvage some homes. But so far, she said, “when we try to board the houses up, someone comes and tears the boards down.”

Things are not as bad in the Moreland section of Shaker Heights, but residents are worried and angry all the same. Robert O’Neal, 52, has lived there nearly all his life and, until recently, could not remember a house being empty for more than a month. Now on his block, 4 of the 12 houses are vacant, 3 of them for more than a year. Lost jobs, divorces and predatory loans have all played roles, he said.

“It’s sucking the life out of the neighborhood,” said Mr. O’Neal, the town’s chief probation officer. “These are big empty houses near the Cleveland border, and people start worrying about letting their kids out to play.”

[Mirorgate 0]

Read an article on MSN regarding much of this... minority peoploe are getting hammered the hardest. My wife almost got taken by a guy that caters to the hispanic market.. yet all his paper work is in english. And since he owns 51% of the motgage lending co... I can only guess what rates they were shoving at people.

[w¡n9Nµ7 §£@¥€r 123]

Read an article on MSN regarding much of this... minority peoploe are getting hammered the hardest. My wife almost got taken by a guy that caters to the hispanic market.. yet all his paper work is in english. And since he owns 51% of the motgage lending co... I can only guess what rates they were shoving at people.

Another trend I have noticed in the last few years is builders building on land that is just bad for building. For example, in South Bound Brook in New Jersey, Hovnanian has a townhome complex in a floodzone. It was selling like hotcakes for much of 2005 and then the slowdown hit. Most of the buyers? Immigrants who weren't even around during Hurricane Floyd when that whole damn town was under water. Also, a lot of newer developments are right underneath or extremely close to high tension lines. Again, most of the buyers in those developments are also immigrants.

[JayJay 4]

Whew - I was lucky. Luckily my mortgage broker didn't overstate my income and DID tell me exactly what I was getting into. A fixed rate mortgage at 7.5% interest for a girl with no credit history (depending on three 1year payment lines to make a credit history). I did good, and shortly after I got the mortgage, the loan was sold to Countrywide Home Loans, who have been fabulous and easy to deal with. In fact, I hope the loan never gets sold again. I've managed to make every payment on time and it's not been a worry - I'ts been cheaper than renting our house - in which we actually did pay gas and utility costs etc!

I suppose what saved me was being rather afraid of this huge loan I was getting myself into and looking into it day after day after day, asking tons of questions and annoying everyone! In the end I felt as though I could almost have turned around and taught someone else how to do it! The taxes and insurance are going into an escrow fund - the only thing I didn't realise was that the first year's insurance would in fact be coming out of my bank account and not the escrow fund - no-one had explained that to me, so when the first charge came out I was little Miss Angry Customer, calling the insurance company being a right cow on the 'phone, until the lady apologetically told me this was quite a common situation and that not everyone gets told they need to pay....heh! But it's alright.

Also, we can just about afford to live completely on my income alone. Which means if Ben isn't working, everything will NOT go down the tube. Leaway, folks. And savings. They'll get ya through anything.

Anyway - nope, I don't think government funding should be allocated really, unless for example someone's wife has died and the husband is paralyzed with three kids to provide for. In extreme examples like that, perhaps exceptions could be made and help provided.

However....ooooh...the sub-prime lending industry. Ha - that's another story. bunch of money-hungry circling sharks, they are. Moral code of business ethics? Not your sub-prime lenders, that's for sure! Yep, they need bringing to task about the way things have been going - no doubt about it. Something DOES need to be done about unscrupulous businesses like this wherever they reside, and feeding on the blood of the poor is no way to make a living, not matter how "desperate and stupid" the poor people in question are. Not good. Not good at all - karma will get them. Or new legislation - either way is fine with me. Both would be REALLY sweet! :D

Edited March 24, 2007 by JayJay

[w¡n9Nµ7 §£@¥€r 123]

I suppose what saved me was being rather afraid of this huge loan I was getting myself into and looking into it day after day after day, asking tons of questions and annoying everyone!

Asking questions is key!

Too many people think they're asking "too many" questions. There is no such thing.

[Dan J 277]

Goverment has no business bailing out any one wether it be the homeowners who are close to foreclosure or the companies that had loaned money to those people.

The market will correct itself. The mortgage/homebuilding industry will go through a bit of a retraction as there will be more available houses and fewer buyers. Home prices will probably stagnate or fall. In some areas it could go down alot. Such is the price of unsustainable growth. It has a nasty habit of catching up on you.

Sure the mortgage/lending indsutry could use a bit more regulation on unethical sales practices, but people need to take the time to read the fine print before they sign on the dotted line. In America it seems to always be someone elses fault.

[JayJay 4]

Heck no there aren't! I called my mortgage broker almost every single day the entire time the thing was going on! I am one person who, with or without the freedom of information act, will get the information she is looking for

I was a super sleuth in my previous life

[meauxna 15]

the loan was sold to Countrywide Home Loans, who have been fabulous and easy to deal with.

They are good JayJay, but keep an eye on them, and deffo shop if you're refinancing or looking at a HELOC--they didn't love me up as much as I thought they should have.

Don't forget to look at dropping that mortgage insurance policy as soon as you have +20% equity.. that will save you a lot of money.

Many people also prefer to make their insurance and tax payments to themselves in a savings account--you are not required to use their escrow service.

Good on ya, gal!