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Foreclosures Hit Record Levels; One Home In 519

LOS ANGELES—The increasing number of “For Sale” signs being displayed on lawns do not fully describe a situation that is occurring nationwide.
Since foreclosure filings climbed to 65 percent in April, nationwide, which means one in every 519 homes received a foreclosure filing, near-ghost neighborhoods are springing up in certain areas.
    Whether it’s in Nevada, California and Florida, where delinquent homeowners were hardest hit, or the 18 percent in Virginia whose homes were repossessed in February, the foreclosure story is taking on the shape of a germ which spreads and then wipes out some neighborhoods.
According to Realty Trac Inc., foreclosure filings are up 4 percent over this time last year. Since about 244,000 homes received at least one foreclosure notice in April, suggesting many homes were new entrants to the foreclosure process, it is a grim story that is unfolding nationwide.
In cities like Columbus, Ohio, for example, the number of vacant or abandoned properties increased from 3,100 to 4,100 in the past 18 months, according to Michael Coleman, Columbus’ mayor.
   “We’re seeing the destruction of entire areas of the city as a result of the mortgage crisis,” Coleman said. “Vacant property attracts crime. There is not a city in this country that can handle the extent of this problem. How do we get the mortgage industry to step up and take care of these properties?”
The same story is unfolding in an increasingly boarded-up Las Vegas neighborhood near the Vegas Strip. It is facing one of the highest foreclosure rates in the country. It ranks No. 15 among 20 zip codes with the highest foreclosure rates in the nation.
    But many government and business leaders are not content to sit and watch certain neighborhoods slowly evaporate. For example, Coleman is cracking down on landlords in Columbus, using tougher code enforcements. The city is even offering to help pay for roofs, furnaces, and to make other improvements which will keep homeowners in their properties. Some properties are being acquired directly for rehabilitation or demolition. Coleman says the city has managed to address 600 homes in this way over the past 18 months.
    Meanwhile, in the nation’s capital, Connecticut lawmaker Christopher J. Dodd actually compared the sub prime crisis to a contagion, as he addressed members of the Senate Banking Committee, which he chairs. He recently proposed legislation that would provide $1.7 billion over 10 years to insure troubled loans.

   

Posted May 21, 2008

   “This issue is now affecting municipal finance, student loans, commercial mortgage-backed securities,” Dodd said. “It is the contagion effect of all this that is spreading beyond housing.”
    So, his $1.7 billion proposal is designed to stop the sub prime loan’s pathogenic spread over the next 10 years.

   Specifically, lenders would have to reduce loans, while borrowers would have to pay for the insurance.
   “This isn’t for the speculator,” Dodd explained. “It isn’t for the person who never could afford the mortgage in the first place. It’s (for) that owner-occupied residence that’s in deep trouble.”
    But critics, who analyzed a recently passed House bill which is similar, said Dodd’s legislation is too little too late. Only 325,000 of the 2.8 million homeowners who could face foreclosure actually qualify for the federal help he’s proposing.    Moreover, congressional wisdom goes something like this: The market is adjusting itself. Doing nothing will hasten the recovery.
   It’s a familiar story, or a vicious circle. Many cash-strapped homeowners can’t find buyers since some owe more than their home is worth. So, securing an affordable loan is out of the question. And, a regulatory or governmental solution isn’t likely.
    But there are government leaders like Willis Blackshear, the county recorder in Dayton, Ohio, who is also taking action.
    Working with an academician and a former mortgage company employee, they identify the most active sub prime lenders in the country. Then, they send out of thousands of letters, hoping to alert homeowners to potential problems before their interest rates are reset and they find themselves unable to make monthly payments. Many are referred to money mentors, who help them qualify for more favorable loans before things get out of hand.
   “Most people won’t seek help until the problem has basically exploded,” Blackshear said, explaining that he has a 10 percent response rate. However, “the funds that keep basic city and county government running are going to suffer until this turns around.”

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