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Foreclosures at record levels.

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Elite Member
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Jan 15, 2002
Professional Status
Certified Residential Appraiser
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North Carolina
Posted on Sun, Nov. 24, 2002

Owners default at rising rate
Home foreclosures, repossessions especially severe in Indiana
PETER T. KILBORN
New York Times

INDIANAPOLIS - The epitaphs of foreclosed homes have spread like crab grass across Indianapolis.

On one block of Dearborn Street on the city's Near East Side, half of the one- and two-family row houses have been shuttered.

"This property was found vacant," seven-month-old stickers on one say, "and in accordance with mortgage agreement, HUD or V.A. guidelines, has been secured."

Sixty-eight percent of all American families own homes, the most ever and a sizeable increase from 64 percent a decade ago. But now, merchants of the dream have become its morticians. More mortgages than ever are being foreclosed, and more homes repossessed.

Nowhere is the problem more severe than in Indiana, long a leader in home ownership.

At midyear, the Mortgage Bankers Association of America found 2.22 percent of Indiana's home mortgages in foreclosure, the most for any state. Experts attribute the trend to the state's loose lending regulations and its rising unemployment rate, the byproduct of a struggling manufacturing economy. The home ownership rate here has slipped to 72 percent from 74 percent.

In the three months that ended in June, the association reports, creditors across the country began foreclosing on 134,885 mortgaged homes. That's about 4 in every 1,000 -- the highest rate in the 30 years the association has been monitoring mortgages. Creditors' backlog of foreclosed homes reached 414,772, another record.

Foreclosures among the 26.4 million families with sound enough credit to get conventional loans are rare but growing. The association reports that since late 1999 when the boom was slowing, the number of foreclosed conventional loans has climbed 45 percent to 76,526. It's the highest level in 11 years.

They are much higher among low- and moderate-income families with subprime loans -- higher-interest-rate loans for those with imperfect credit. Of their 5.4 million mortgages, 150,000 were being foreclosed in June.

"We're seeing the implications of reduced standards that subprime lenders applied," said William Apgar, the federal housing commissioner in the Clinton administration, now a senior scholar at the Joint Center for Housing Studies at Harvard.

Apgar said people with subprime mortgages -- rare five years ago but commonplace now -- were eight times more likely to default than those with prime, conventional mortgages.

With the rise in foreclosures, record numbers of families have been applying to hold on to their homes under Chapter 13 of the federal bankruptcy code. At midyear, the Administrative Office of the U.S. Courts reports, Chapter 13 covered 220,720 homeowners, 8 percent more than a year earlier and the most ever.

Maj. Shirley Challis, who conducts sales of foreclosed property for the Marion County Sheriff's Department here, said she listed fewer than 1,000 a year five and six years ago. By Thursday, she had listed 5,532 this year alone.

Foreclosures have been climbing in spite of a 5-year-old Department of Housing and Urban Development program intended to hold them down.

When a family falls behind in payments, HUD sends the lender a check for the delinquent amount. The homeowner signs a note promising to repay the agency without interest. A senior HUD official said 72,000 families are participating this year, almost triple that of three years ago.

Families fall behind because of lost jobs in the sour economy, medical emergencies and divorce. They trip on credit cards and inflated expectations for their incomes.

Many also succumb to fine print, slick salesmanship, deception and fraud.
 

Austin

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Jan 16, 2002
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Certified General Appraiser
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Virginia
Mean while, back at the ranch, the appraisal profession is sitting in a circle engaged in arcane discussions about purpose, intended use, sale history, and the new version of USPAP that 45% of the experienced instructors can’t pass a test on. Over at the bank the guys and gals making the loans are valuing collateral with a gizmo about which they haven’t the faintest idea while the hacks over at the state appraisal boards are taking licenses to practice because the appraiser didn’t follow FNMA guidelines on an appraisal that was not even a FNMA loan. While this is all going on, FNMA has been on the radio all week bragging about how they alone are responsible for the boom in home ownership and how much money they are going save the purchasers by doing away with costly appraisals.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Hey Austin,

I can't help but wonder if this new FNMA drive to 'assist' minority and lower income people become homeowners is more of a smokescreen tactic to keep the books looking rosy for as long as possible, rather than a genuine concern for helping out the less fortunate.

The foreclosures are piling up, and there are no lines of buyers willing to pay top dollar for them. As the old song goes, "If you ain't got nothin', you ain't got nothin' to lose", so the least financially stable will be risking nothing by signing on the dotted line moving in.
 

Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
Dee Dee,

Well said. We have loans given out in which little if any investment is made by the purchaser. Hell, we even have programs to "give" purchasers the money to put down. Now it is Neamiha, next it may be Jerimiah, but wait, the Phillistines are at the door. You think the foreclosure rate is bad now? Wait until the interest rates start to creep back up. But the residential market is not the only place where this is going on. We have massive vacancies in office buildings and yet the commercial developers keep building new office sape. In my building alone we have over 20% vacancy and yet we have our city in a joint venture to build a high rise hotel, office space complex, and upscale apartments in what is laughingly referred to as "Town Center". In my city of Virginia Beach we do not have a conventional style town. It actually has the city hall and municipal center over 10 miles from the new supposed center of town, the resort are is over 8 miles away, with pods of commercial and residential development scattered everywhere. We are what is often referred to as a multi nuclei style of development. Yet the city is trying to force the idea of a center of town and has invested millions of dollars in commercial development but can't seem to find the money to afford raises for firemen, police, teachers or city employees. Our state is just as bad. At a time when there is a shortage of nurses, we have closed the nursing program at a local college, yet we have built a multi million dollar sports complex. Foreclosures? You ain't seen nothing yet. The coming bust in real estate and the financial community will make the S & L crisis pale in comparison.

Don Clark, IFA
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Don,

Funny you should mention the commercial vacancy rates rising. Just read an article last week in the Denver Post saying that our vacancy rates are moving closer to those seen during the oil bust back in the 80's and early 90's.
Apartment complexes are offering two free months rent for moving in, no credit checks and the incentive packages are getting sweeter as each month goes by.
Yet the developers keep building.

All I can guess is that these developers have a bunch of VERY ignorant investors backing up the projects.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Downtown Dallas has commercial vacancy rates in the mid 20's. That is coupled with buildings that suffer from significant functional problems that cannot be either torn down or remodeled due to asbestos, etc, creates a vacancy rate that may not be overcome.

Apartment vacancies are up, new apartment unit construction is off. Entry level housing is being offered at $0 move-in. Anyone know what subdivisions are going to suffer the highest foreclosure rate?

Roger
 
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