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Foreclosures rising in NC (Charlotte Observer 01/22/2003)

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North Carolina
Many of these folks have NO EQUITY due to inflated real estate appraisals?
When is NC going to do something about dishonest, incompetent and unethical appraisers?
Bob Ipock


Posted on Wed, Jan. 22, 2003

Foreclosure rates reach new highs
High volume of layoffs, ease of getting mortgages share blame
HEATHER VOGELL
Staff Writer




Finding space to post a foreclosure notice can sometimes be a problem at the Mecklenburg County Civil Courts building. JOHN D. SIMMONS


Never before have so many Carolinians faced losing their homes because they could no longer afford their mortgages, according to a new report from the nation's mortgage bankers.

Foreclosure rates in both Carolinas hit a new high each of the first three quarters of 2002, the most recent data available.

The rates were among the steepest in the country, driven skyward by job losses in manufacturing and the relative ease with which buyers secured mortgages during the 1990s boom, experts said.

The Mortgage Bankers Association of America's survey revealed that creditors were seeking to reclaim almost 16,000 N.C. homes and more than 9,000 S.C. homes in the quarter that ended Sept. 30. The report covered just over 1 million N.C. mortgages, more than twice as many as in South Carolina.

A drop in delinquent loans nationwide -- those overdue but not yet in foreclosure -- might signal an overall slackening in foreclosures is on the way.

But in the Carolinas, soaring delinquencies could mean relief is further off.

Not just a problem for the poor or irresponsible, foreclosure is striking typical owners of single-family homes with the most common home loan, the fixed-rate conventional mortgage.

North Carolina saw the greatest percentage of those loans land in foreclosure of all states nationwide during the quarter. South Carolina was tied for fourth.

"It's never been this bad," said York County Judge Buford Grier, whose S.C. courtroom is standing-room-only during monthly foreclosure auctions. "It's going up and up and up."

Salina Ngugi, 31, and her husband, Elijah, fell behind in payments after moving to a new house in the UNC Charlotte area in February. A foreclosure notice soon appeared in their mailbox.

They were frightened.

They had just relocated to Charlotte and had their second child. Both have master's degrees. He's a mental-health therapist, but had a car-sales job that didn't provide enough money. She'd been laid off as a social worker for a nonprofit. The mortgage bill was $1,046 a month.

Salina Ngugi was used to helping others.

"For once, I was sitting on the opposite side of the fence," she said. "There's definitely nights we couldn't sleep because, it's like, wow, where do we go?"

She visited a credit counselor at United Family Services in Charlotte who told her about a federal program that aids families with Federal Housing Administration-insured mortgages.

Now, her husband has found work as a therapist and the couple are waiting for confirmation that they were approved for the program. They are hopeful.

"God has a way," she said.

But credit counselors said many homeowners aren't seeking help until it's too late.

Because home mortgage lenders don't telephone or mail debtors as regularly as credit card companies, some borrowers underestimate the impact of missing loan payments, said Barbara Robinson, a service director for United Family Services.

They quickly find themselves too far behind to catch up.

"They need to pick up the phone the first time they're not going to make a payment," she said. "There are a lot of options early on that they don't have longer down the road."

The percentage of all home loans in foreclosure has been climbing for several years in both Carolinas, according to the mortgage bankers association. The group's state-by-state mortgage statistics date to 1979, when a lower percentage of Americans owned their homes.

American dream goes bust

The bust follows years of boom.Homeownership blossomed nationally and in both Carolinas during the past decade, climbing to 71.3 percent for North Carolina and 76.1 percent for South Carolina in 2001. The national rate was 67.8.

Michael Stegman, a professor of public policy and business at UNC Chapel Hill, said the growth in homeownership occurred largely among low- and moderate-income buyers.

"A lot of (those buyers) are in homes with very low down payments and pretty significant mortgage burdens," he said. When the economy turned bad, many lost their jobs and could no longer make hefty mortgage payments.

"North Carolina leads the nation in layoffs in the manufacturing sector during this recession," Stegman said. "We've got lots of families under economic strain."

While layoffs are likely the main reason people start skipping payments, medical problems and divorces also shatter Carolinians' financial stability.

Teresa, a clerk who didn't want her last name published, found out Friday that her house in Charlotte would be sold at a Feb. 7 foreclosure auction.

Recently divorced after 14 years of marriage, she bought the house two years ago. But she fell behind in her $850 monthly mortgage payments after severe allergies caused her to miss more days of work than she had sick time.

She worked out a new repayment plan with her lender. Then in September, she mailed her check late and missed a cutoff date by three days. The lender, Aurora Loan Services, said she'd lost her last chance.

"So there's no way Aurora will work with me to keep the house?" she asked the lender's attorney at a foreclosure hearing in the Mecklenburg County Civil Court building.

"At this point, no," replied Kristin Ogburn, Aurora's lawyer.

Teresa said she's trying to get money released from her 401(k) retirement savings plan to pay for the move. She wished she'd dipped into those savings earlier.

"I just didn't know," she said.

Experts said low interest rates of the past seduced some buyers into pursuing more elaborate versions of the American dream than they should have.

"Many times they traded up and got a larger home, a more expensive home, when they should have stayed where they were," said Dave Whitener, a real estate attorney and professor at the University of South Carolina law school.

Across both states, some of the foreclosures involve manufactured houses, a popular fixture of the Carolina countryside. South Carolina has the greatest share of factory-built housing in the nation, census data showed.

In North Carolina, more than $1.7 billion in loans were made by manufactured housing lenders in 2000, according to the watchdog Community Reinvestment Association of North Carolina.

Now lenders are finding they were too quick to hand out mortgages, said Peter Skillern, executive director of the association.

"What's happening in the manufactured housing business is the bad lending practices of the '90s are biting them in the butt," Skillern said.

Steve Zamiara, executive director of the N.C. Manufactured Housing Institute, said the industry has been using more traditional financing methods that address the lending problems.

The state's high foreclosure rate isn't confined to manufactured-housing buyers, he added.

Plenty of blame to go around

Homebuyers from a variety of backgrounds walk into the United Family Services office looking for a credit counselor every day, Robinson said.

"This is a place that most people have never been before," she said.

Clients at one Rock Hill legal aid office have included elderly homeowners who became debtors again after refinancing paid-off homes for desperately needed cash, said attorneys at the S.C. Centers for Equal Justice branch.

Others include mobile home buyers who weren't looking closely at what they signed.

"They're not necessarily looking at what the interest rate is and they're not looking at the payment," said Jamie Bell, staff attorney at the center. "They just want to get in a home."

A few experts said some blame for soaring foreclosures rests with so-called subprime lenders, who make high-interest loans to people with poor credit who wouldn't have qualified for conventional loans.

New foreclosures were started on subprime loans seven to nine times as often as on conventional prime mortgages in the Carolinas in the third quarter, the mortgage bankers' association reported. The group said its survey of subprime loans isn't comprehensive.

Some consumer advocates also say predatory lenders continue to take advantage of unsophisticated buyers, charging stiff fees and penalties and tricking them into taking on more debt than they can handle.

There is hope even after foreclosure papers have been filed. Creditors are willing to work with borrowers, Stegman said.

Options include selling the house before foreclosure is finalized or restructuring loan terms. Some might file for bankruptcy, blemishing their credit but potentially keeping their house.

Those who land in foreclosure often have missed six to seven months of mortgage payments, said Stephanie Jamieson, hearing officer for the Mecklenburg court. The process can be completed in little more than two months in North Carolina. It takes longer in South Carolina.

The hearings keep Jamieson busy.

"I have some days in which I do no less than 40," she said.
 

Austin

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If you will do a search of my posts from about last this year this time you will find a number of long debates I had with a young appraiser from Charlotte, NC, concerning time adjustments. I argued that I had never seen and did not believe that a time adjustment could be supported in an active market if for no other reason normal random variance would wash out any small adjustment out of the picture. My learned opponent replied that the market in Charlotte was so hot that prices were going up about 4% percent per month and he had to make time adjustments just to keep even with current sales less than one month old. He even stated that if he could not find comps to make a sale work, he would just wait a week or two for some new comp sales to come out and then he could make the deal work. I think I told him that it was just a matter of time because what he was describing was an inflated market which is almost always a temporary condition and that sooner or later prices would return to equilibrium. Well apparently judgment day has arrived. What can I say except that it couldn't have happened to a nicer state appraisal board that spent the whole damn year getting even with Tom Hilderbrandt. Not to mention that the mortgage business for manufactured homes collapsed and bankrupted the major lender due to fraudulent appraisals during the same period. I wonder if all of the other state appraisal boards still look to the NCAB as the model board? I should think not. Maybe when the NCAB gets into that new 1.5 million dollar office complex things will improve.
 
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The part that burns my buns is the subprime and preditorary lending and the "easy" qualifying system of other loan programs. I have said all along it was only a matter of time before all this crap blows up. Not to get too long winded but I have the perfect example living right beside me. My neighbor knocks on my door about two ago asking for a quick favor. "Need you to appraise my house for around $315,000." I chuckled and told him "not in this life time." You see about this time last year he was "hot and heavy" to build this house and was really excited to close around Easter. Easter came and went and no sign of my future neighbor. The builder put a "For Sale" up and listed for $260,000. About two weeks later the same guy that was hot and heavy was moving in. Out of curiosity, I checked the courthouse and it closed under someone else's name for $282,000! 8O I talked to my neighbor and he explained that the builder and mortgage company had somehow screwed up his credit and had to get a family member to cosign with him. This past Monday there was a brand new "For Sale" in front of his house. I ran back into the house, cranked up the computer and checked the listing. Listed for $315,000, owner is anxious and will be vacated by February 28th! I have only talked with this guy a couple of times and I have the feeling he does not even understand what happen to him. I do not know why I did not but I should have asked him if he had a copy of his old appraisal. Just to see who is doing some naughty work in my area. I guess my point is there is gonna be a whole lot more of this over the next year.
 

Don Clark

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Bob,

I read in todays paper that NC has the highest foreclosure rate in the country right now????

Now how could that be. With the laws passed that requires new restrictions on lenders in North carolina, and the toughest appraisal board in the country. How could this possible happen

Don :?: :roll:
 

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North Carolina
1) We have lost too many jobs. The textile industry is in shambles. The manufactured home FACTORIES are in a huge slump. We have had a lot of bank mergers with huge consolidation of jobs. The furnitue business is in a big slump and all state and local govenment agencies have hiring freezes.

2) NCAB tough? Tough on what? To the best of my knowledge they have NEVER revoked a license and ACTIVE suspensions are very rare.
I am not sure that many would say the NCAB has been tough as far as disciplinary action. Go to the NCAB website

http://ncappraisalboard.org/

and read the newsletters as far as disciplinary actions go. Click on NEWSLETTERS on left side of page. Nearly 90% of all supensions are "stayed" if the appraiser will take a class or two. PLEASE someone read the disciplinary actions and see if they have been tough on punishments! Bad process, unfair tactics...maybe so .....but not on harsh sentencing. It just ain't true.

It takes a year or two from purchase for most foreclosures to start and we are now seeing the results of wild lending from 1999-2001.
I would certainly not blame appraisers for people not making mortgage payments.....but what I know for a fact is that borrowers are being advised to walk away from their homes due to being UPSIDE DOWN on loan to value ratios. I do blame appraisers who overvalued homes right and left just to keep their lenders happy.

I talked to a lawyer last week who told me he will be filing suits in over 200 cases against lenders, appraisers and dealers in manufactured home deals across the state.
 
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Just my thoughts

Perhaps, Perhaps, the real problem, is a poor performing economy which has brought lower property values in certain markets. Just perhaps the combination of the declining property values and lost jobs is causing the foreclosures. Just perhaps the difference between the loan appraised values and the current values is just due to these weak economic factors. Perhaps the foreclosure rate is due largely to aggresive (and poor) risk analysis regarding lending issues that have very little to do with the appraised value or poor appraisals.

No, I am not saying that there are not appraisers who do push values (both upward and downward) as their clients direct them. These individuals should be identified over time by discerning analysis by the regulatory staff charged with investigating (reviewing) their work in accordance with USPAP Std 1 & 2.

Appraisers who say other appraisers are bad, yet due to client instructions, avoid at all costs signing certifications that they are independent, impartial and objective, and appraisers who deny competency requirements by citing years of experience in lieu of knowledge, those appraisers who make up data to support preconcieved ideas of value so they can criticize peers work are as guilty as those who inflate (and deflate ) value for the same reasons, these appraisers deserve to be removed from our profession. These are unethical practices.

By the same token, regulatory boards who encourage their staff to violate these same ethical principals need to be taken to task and identified for what they are, unethical.

Appraisers who encourage unbridled prosecution to get rid of "bad appraisers", those who would have harsher punishment regardless of the ethical obligations required by USPAP for competency and objectivity in criticism of their peers work, those who suggest that boards should be given special license to deviate from ethical practice to get the "bad appraisers" are just as much a part of the problem with our profession as those appraisers they categorize as "bad appraisers."

Regards

Tom Hildebrandt GAA
 

Farm Gal

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Gentlemen:

Is there any truth to the rumor I have heard from several little birds that some of the major lenders (Chase WF) and backers (Fannie, Freddie) have temporarily halted ALL new purchase money originations in what is now several of the southern states: specifically quoted: Georgia, Lousiana, Alabama? 8O ...

I was told that refinance transactions of exisiting mortgages will continue but that purchase money fund avaiability is on temporary hiatus in nearly all the major markets in those states?!?!?!

I understand the issue with Goergia is relevent to the State action taken, but the other states are due to a concern as to viability of the market combined with some uncovering of substantial abuses in the major metro market areas?
 

Austin

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Tom: What you say may be true depending on the depth we delve into this problem. At one level I certainly agree with you, it is mostly the economy. I live on a 120-acre farm about 5 miles from town. About 1 mile from me is a county subdivision of 20-year-old rancher homes average price of $90,000. Net clean and highly stable subdivision for the last 20 years until the present. Today about 20% of these houses are for sale and right across the road is a new subdivision with new houses being built. Today one house that has been for sale forever was offered at absolute public auction. I drove by one half hour after the auction and the Realtor’s sign was back in the yard. Apparently they didn’t get a bid.
Now lets look at our local economy. Ten years ago we were the largest tobacco market and tobacco-growing region in the country. The entire tobacco market has been done away with and the crop allotments are about 25% of what they were 10 years ago. We have Dan River Mills that use to be one of the largest textile companies in the world. Fifteen years ago they employed 10,000 people. Now they employ 3,500 high tech people. Goodyear Tire makes most airplane and truck tires here. They don’t know from one day to the next what to do. A year ago they hired 500 new employees, then six months later laid them all off, then they brought them back, and now they are laying them off again because one of their largest truck customers went bankrupt and the airline industry is about bust because of 9/11 and 9/11 was because some people don't want a global economy and is attempting to make it impossible. The Federal government has destroyed the local economy for purely political reasons. It is no accident that what Lee Ann described is happening to the Southern States. They were targeted for destruction because they are the home base of Conservatism in this county.
Now lets dig a little deeper. Why is this all happening? In my view, it is because of the global economy that we are now a part of. We are no longer sovereign economically and if anybody does not believe it, go to the WTO Webb site and read the WTO charter. What drove us into this situation? When you combines all of these forces in this country: Highly inflated housing prices; medical cost; tort law suits mainly; OSHA; labor unions; equal employment laws; government regulations, and on and on, the cost of doing business in this country is so far out of kilter that companies can’t compete here. How can an American worker that lives in a average priced house of $100,000, has to pay 61% of his pay check in taxes, has to have a $25,000 auto or more, has to have health insurance for a family at about $1,000 per month (my brother has a wife and 3 kids and his is $1,300 per month), auto insurance, fire insurance being required-you get the picture, then how can an American worker compete with a Chinese worker that makes $7 per day with none of the above? I lived in the Far East around 1970, and I have seen some of those sweat shops. I went with a buddy to get a ring sized once and the jewelry factory was above a row of bars. We walked in and there were about 75 people sitting at a long table working 12 hours a day making 75 cents an hour and they were not dummies. These were highly skilled people.
This stuff gradually built up over time until the system has started to implode. The health system is about bust, Medicare is on the ropes, and local economies like ours in this area are wiped out. It just happened to hit the Southern States first because they were destroyed earlier in the 90’s before the bottom started falling out nationally.
Who is to blame? In my view it is the government or lack thereof. My dad once told me that this country was the greatest country in the world because the American People were governable, and we ceased being the greatest country in the world when the American People became ungovernable. Instead of governing, the government has gone into the social engineering business and attempted to be the great equalizer and the proof is in the pudding. Very shortly all Americans I fear will be very equal all being broke and right back where we started 40 years ago when this crap all started. My dad also told me: "There is not a force in the world strong enough to hold a good man down or a bad man up." That is the lesson the federal government is about to learn.
 

Mountain Man

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Georgia
viability of the market combined with some uncovering of substantial abuses in the major metro market areas?

Lee Ann,
Whaaattt? Ya' sayin' we are cheaters down here? 8O :lol:
Actually, I know what you mean. A few of us feel like a ship without a harbor. :wink: Despite the recent legal beagle stuff in GA, it is still easier to foreclose on a property here than some other nearby states (we have security deeds, not mortgages or deeds of trust). So.... if you can get a loan, the rate is usually lower than other nearby states. But even that does not help ease the risk when the lenders promise the moon and appraiser roll over for a belly scratchin'. :twisted:
 

Austin

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Speaking of North Carolina’s economic problems and the crisis in the Southern States, this from January 26, 2003, Sunday Paper, Danville Register and Bee:

http://www.registerbee.com/MGB70GHDEBD.html

A 'sad day' for Chinqua-Penn By BILLY BAKER / Register & Bee staff writer

REIDSVILLE, N.C. - It's said that Betsy Penn was fond of loading her nine cocker spaniels into her 1960 Cadillac limousine and cruising around town with her chauffeur.
On Saturday, that limousine, along with 440 other items owned by the Chinqua-Penn Foundation, was auctioned off at the historic mansion Penn shared with her husband, Jeff, just outside Reidsville, N.C.
"It's a sad day for Chinqua-Penn," said Libby Cole, chairman of the board of the Chinqua-Penn Foundation, a nonprofit that has run the estate since 1994. "I'm disappointed in a lot of different people, but I'm particularly disappointed with the state (of North Carolina)."
Chinqua-Penn has struggled financially for several years as state funding withered up and dried, leaving the foundation in debt and forcing it to close the doors of the estate this summer.
"The state always looked at Chinqua-Penn as pork barrel spending," said Cole, the wife of N.C. state rep. Nelson Cole, D-Rockingham. "But it's not pork barrel. This is about economic development and promoting tourism in this region."
In 2000, the foundation used those items as collateral on a $150,000 loan from BB&T to cover operating expenses, and proceeds from their sale will go to pay off that loan.
"This was the premier tourist attraction in Rockingham County," Cole said. "People could walk through the house and see the world. Now it's gone."
We use to go there at Christmas to see the decorations. It was an unbelievable place.
 
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