American dream becomes nightmare millions face foreclosure

[Chuck]

WASHINGTON (AFP) - The dream of home ownership could turn into a living nightmare for millions of Americans in the next couple of years as home foreclosures are expected to skyrocket.

Alarmed lawmakers, such as Republican Senator Richard Shelby (news, bio, voting record) of Alabama, say the recent spike in home repossessions is just "the tip of the iceberg."

The fizz came out of the US housing boom last year after several years of stellar growth, fueled in part by a speculative binge, but also by sales of "exotic mortgages" including adjustable rate mortgages (ARMs).

Consumer advocates say such loans are costing many working class families an "ARM and a leg," and that buyers were often unaware ARMs can start out with a low "teaser" interest rate that fast kicks into a much higher rate.

Pressure is mounting on Congress to rein in unscrupulous lenders.

"Predatory practices need to end immediately and solutions must be designed to help the millions of distressed Americans who have mortgages they cannot afford," said Kirsten Keefe, a consumer lawyer and the executive director of Americans for Fairness in Lending.

Democratic presidential contender Senator Chris Dodd says the emerging "crisis" could see over two million Americans lose their homes to foreclosure in the next few years. Such grim predictions are backed by some industry analysts.

Over 500,000 mortgages, or 1.19 percent of all loans, were in foreclosure at the end of the fourth quarter 2006, according to the Mortgage Bankers Association which reported over 43 million loans in total outstanding at the end of last year.

A main focus has been "subprime" loans, or mortgages marketed to people with poor credit histories, now seeing the worst problems.

Jennie Haliburton, a 77-year-old widow, told a congressional hearing chaired by Dodd on Thursday that she took out an ARM loan with Countrywide Financial Corporation, one of the US' biggest mortgage lenders, without realizing her monthly repayments would leap from an initial 700 dollars to 1,100 dollars.

Federal banking regulators have also told Congress they are worried about rising foreclosures, especially in the subprime sector.

Mortgage executives promised Congress they would tighten up their standards, but cautioned against tighter regulation.

Top Federal Reserve officials have tried to soothe fears about the housing downturn and the National Association of Realtors (NAR) reported a surprise 3.9 percent rise in February existing home sales Friday.

But, as the sum of delinquent mortgage loans has swelled to around 150 billion dollars' worth, some like Democratic senator Robert Menendez (news, bio, voting record) believe the country could be on the cusp of a foreclosure "tsunami."

Pessimists seeking evidence of a gathering storm do not have to look far.

Several mortgage lenders, who mainly sold subprime loans, including People's Choice Home Loan, Inc., Ownit Mortgage Solutions Inc., and ResMae Mortgage Corp, have filed for bankruptcy in recent months.

British banking giant HSBC has set aside over 10 billion dollars to guard against sour home loans, and H&R Block Inc announced over 15 million dollars in mortgage-related losses earlier this month.

Aside from rising consumer complaints, such as those voiced by Keefe and Haliburton, concern is also increasing that major Wall Street banks could see their profits dented by the mortgage market.

A spokeswoman for Dodd said the senator is mulling whether to back legislation to improve lending standards and media reports suggest House lawmakers are moving to author a bill to check industry excesses.

Speculators "flipped" houses to make a quick profit during the boom, but the NAR report showed prices in some regions have fallen.

As a result, some speculators could owe more to a mortgage firm than they might be able to sell their properties for.

The wealthy are also feeling the squeeze and being forced to offer sales "carrots," such as a new Porsche, golf membership or free plasma televisions in a bid to sell million dollar mansions.

Some analysts argue, however, that it is not all doom and gloom.

Standard mortgage rates have fallen to near historic lows, according to the NAR which said rates on a 30-year conventional fixed rate mortgage had dropped to 6.16 percent in the last week, down from an average of 6.29 percent in February.

Source (http://news.yahoo.com/s/afp/20070325/bs_afp/useconomypropertypolitics_070325063724)

[kcredden]

You know, this sounds very familar. Like the S&L Bailout of a few years ago. Guess who they blamed? Appraisers for giving them inflated values. That forced us to go though standarization, classes and very tough testing before we became licensed. That's a good thing mind you. But this just sounds like the same old, same old.

Wonder who they'll blame this time when they have to bail out banks? Of course, they can't blame the banks, they're good! They got halos!

yeah right, and I'm the queen of England.

- Kc

[kybikertrash]

I just bought a foreclosure. Worked out good on my end! But I can see how this has happened. When interest rates went down, house prices went up. With the low interest, the payments didn't seem too bad. The sad thing is most of the prices on the houses were too high and now people can't sell a house for what they paid for it.

[mark]

..............I know...I know, it's George Bush's fault.
What isn't these days, right?

Part of the problem is.......folks getting too much house for their income. If your house payment is more than 25% of your take home pay, you have too much house.

Also, getting suckered into an ARM is also disaster waiting to happen.

Best thing to do?

Get a house you can afford on a 15 yr. fixed rate, especially since the rates are at a all time low............see ya mark

[TheMan]

Can ya help me find a house with the payment around 200 a month?

Try buying a house around here on a normal lower-middle class salary for this area. Not going to happen. I guess it's easy to use the 25% rule if you make more money...

[F_Farkell]

Can ya help me find a house with the payment around 200 a month?

Wow, did you get a raise???

Maybe we can build some cardboard condo's and sell em' for about that price,:drum:

[Maxwells]

I know when my husband and I were looking for a house to buy, it was just unbelievable what they wanted for houses. They would look good on the outside, "sometimes", and when you got in there, it was like, I don't think so, and they were wanting to much for the shape it was in. Sure I would love to be able to afford a big beautiful house on the hill with a two car garage, my husband has always wanted a two car garage, but anyways, we found a little house we could afford and did a little fixing up. Also when buying a house, always remember, if anything should happen to you or your spouses job, or they became ill or disabled, could you still afford the payments, live within your means. Been there done that. NOT PRETTY! A house is a house, you make it a home. Just my opinion.

[mark]

Can ya help me find a house with the payment around 200 a month?

...

Nope, unless you buy a fixer-upper. In those cases, one neds to save up a bunch of cash & then put a larger downpayment one something nicer.

If one has the willpower, it can be done...........see ya mark

[Rebelyell]

Can ya help me find a house with the payment around 200 a month?
I sure can!

Go all the way down West Second Street and start walking toward town. Then walk down East Second Street. Look on other streets. Look for the modest, slightly run-down houses.

Examples: I purchased a really nice duxplex on West Second Street about five years ago for $26,500. It needed cleaning, it needed paint, it needed carpet. But it does not kill people to do these things. It really doesn't. One floor can be rented for an amount almost equal to my payment to the bank. The other floor can house a couple with a small child, or the entire building could be used as a house for a large family.

Another 3-bedroom on West Second sold for $14,000 about four years ago. It was on the market quite a while. It is now on the market for $39,000.

A West Second townhouse or duplex recently sold for $15,000. Don't ask me how I missed this one.

A West Second townhouse that was livable but in need of some repair recently sold for $8,500. I looked at it, but it was right as I was moving into town. I was Hemorrhaging cash and just didn't have the money.

A nice duxplex across the street from the Catholic Church recently sold for $30,000. My business partner is still mad at me for not buying it.

Let me add that I know of several cases where the Bank of Maysville has loaned money to local people to buy these houses. They do their own underwriting and don't rely on some formula written a thousand miles away, so if your credit is reasonably good they know the value of downtown housing.

Maysville is just chock full of cheap housing, but it takes some effort on your part, and you have to be willing to pick up a paintbrush and broom. No, you can't live in the fanciest neighborhood if you don't have a high income. The fact is that if your income puts you at the bottom 20 percent of the income pool, you ought to live in the bottom 20 percent of the housing pool.

Maysville is just awash with opportunity. If one can't make it here, I'm afraid one can't make it anywhere.

[mark]

I sure can!

Go all the way down West Second Street and start walking toward town. Then walk down East Second Street. Look on other streets. Look for the modest, slightly run-down houses.

Examples: I purchased a really nice duxplex on West Second Street about five years ago for $26,500. It needed cleaning, it needed paint, it needed carpet. But it does not kill people to do these things. It really doesn't. One floor can be rented for an amount almost equal to my payment to the bank. The other floor can house a couple with a small child, or the entire building could be used as a house for a large family.

Another 3-bedroom on West Second sold for $14,000 about four years ago. It was on the market quite a while. It is now on the market for $39,000.

A West Second townhouse or duplex recently sold for $15,000. Don't ask me how I missed this one.

A West Second townhouse that was livable but in need of some repair recently sold for $8,500. I looked at it, but it was right as I was moving into town. I was Hemorrhaging cash and just didn't have the money.

A nice duxplex across the street from the Catholic Church recently sold for $30,000. My business partner is still mad at me for not buying it.

Let me add that I know of several cases where the Bank of Maysville has loaned money to local people to buy these houses. They do their own underwriting and don't rely on some formula written a thousand miles away, so if your credit is reasonably good they know the value of downtown housing.

Maysville is just chock full of cheap housing, but it takes some effort on your part, and you have to be willing to pick up a paintbrush and broom. No, you can't live in the fanciest neighborhood if you don't have a high income. The fact is that if your income puts you at the bottom 20 percent of the income pool, you ought to live in the bottom 20 percent of the housing pool.

Maysville is just awash with opportunity. If one can't make it here, I'm afraid one can't make it anywhere.

I couldn't have said it better, especially the last line.

Well said my friend............see ya mark

[Chuck]

I couldn't have said it better, especially the last line.

Well said my friend............see ya mark

And where is this imaginary bank located that will loan the money to people that are barley keeping their head above water?

I am sure you all qualify for the loans it takes to get these 2nd and 3rd rental/Investment properties. But 1000's here in Maysville can't.

Now come back to reality with me for just a moment. The banks won't loan money on houses that need fixing up to people that work in the lower paying jobs.

What about appraisals and inspections that are required. That up front cost that is incurred. Usually around $500 bux up front.

It is easy to brag about buying investment property when you have the money.

It is hard (At Best) for a person making 30K a year to get a loan for a house. It is just not that easy for a person that make less than 15K year.

I agree that the opportunity is here in Maysville. People in the less than 30k bracket can't just jump in to a house for 15k and dump another 15k in to it to fix it up.

[Rebelyell]

Chuck,

Saving is hard regardless of one's income. But someone who really wants a home will find a way to save, even if it means moving in with a relative for a few months in order to save a down payment, taking a second job, or just doing whatever it takes.

Many of these "run down" homes I'm talking about are livable right from the git-go. The just need some paint and a good cleaning. Sure they need some repairs, but they don't have to be done right away.

For example, I spent about $5,000 on fixing my duplex up, but I could have done it on $500. I hired out all the work, and put in all new carpet.

The government has numerous programs to help first-time home buyers. All HUD foreclosures are held off the market for 90 days and offered to first-time and lower-income home buyers on favorable terms before investors get a shot at them.

It just seems to me that a single person working 60 hours a week or a couple working 100 hours a week ought to be able to make something happen when it comes to housing -- unless they just decide "I can't." It might not be easy, but they can save a down payment.

I'm sure there are some who are in such terrible shape that they "can't," but most can own a home, albeit a modest one, if they really, really want to.