Dawn Lamb watches in frustration as a friend of hers earns $2,500 a month, with her mortgage payment taking up $1,900 of that. Her car payment is another $300, leaving her with $300 to pay for everything else.
Lamb’s friend defaulted on her car insurance, and now is in danger of losing her car. If that happens, she won’t be able to get to work and likely will lose her job.
“It’s just terrible, the situation she’s in,” said Lamb, a loan officer with Hilltop Financial Mortgage in Sacramento, Calif. “She doesn’t want to sell her house because she feels like that’s her house. That’s probably the only other option she has at this point.”
Lamb believes her friend got into the situation because a real estate agent who helped her through the process advised her to use her potential, not actual, income to qualify for a mortgage. Lamb, who didn’t handle her friend’s loan, said she’s seeing more and more people have a difficult time making their mortgage payments.
More than half–57 percent–of respondents in a recent Inman News‘ survey on foreclosures said they’ve seen an increase in foreclosures or troubled homeowners in their markets.
Experts predict an increase in foreclosures over the next year due to rising interest rates and slowing home-price appreciation. But lenders also are taking advantage of technological advancements in managing home-loan defaults and the foreclosure process, which may ward off a negative market fallout from increased foreclosures.
Lenders have become more efficient at getting their properties that have been foreclosed into a listing agent’s hands and back on the market. But lenders also are working on technology that helps prevent a situation from escalating to that point. They’re improving their default management systems, which are the processes they use to handle their delinquent loans.
Foreclosure can be a time-consuming and costly process for lenders, which is one reason taking someone’s home is used as a last resort. Despite the resistance to foreclose and new technologies to help the entire process, some in the real estate field remain concerned about what they see as an increase in foreclosures and troubled homeowners in general.
Jim Faur, president of Premier Appraisal Concepts in Akron, Ohio, attributes the rise to a number of factors: predatory lending practices, a soft local housing market, property flipping and rent-to-own deals. Faur said the local Akron market is very soft and has an overabundance of listings. Homeowners who are trying to refinance are finding out their homes are no longer worth the mortgage they’re paying, Faur said.
Faur said he also has seen lending situations “where people were absolutely taken advantage of.” Those predatory loans, which often charge much higher interest rates than normal or put borrowers into inappropriate mortgages, are leading to more foreclosures, he said.
Faur also believes lenders in general have been too quick to seek out higher risk borrowers, such as those with no down payments or low credit scores. Faur said not all those loans end up in foreclosure, of course, but having a higher percentage of those borrowers can lead to more delinquent loans.
“They’re high risk to begin with,” Faur said.
Kathryn Nelson, a realty agent with Heritage Texas Properties, believes some of the uptick she’s seen in foreclosures is residual from the events of Sept. 11 and the resulting economic downturn. Businesses weren’t doing well, and people lost their jobs. And, she said, many more people put their homes on the market, making it difficult for people to even recoup what they originally paid for their houses.
“It’s not uncommon for people who bought in 2000 to see them really happy if they can get what they paid for it,” said Nelson, who works in the Woodlands, a community north of Houston.
Some houses are even selling for 20 percent less than what they sold for in 2000, she said.
Lamb believes the economy as a whole is playing a large part in the rising foreclosures she’s seeing.
“In today’s economy, people are not making the money they used to,” Lamb said.
Other survey respondents cited banks being unreasonable with troubled homeowners and troubled homeowners not maintaining their homes as contributing to foreclosures.
Of the respondents, about 30 percent said they hadn’t seen an increase in foreclosures or troubled homeowners in their market. Another 8.5 percent weren’t sure, and 4.3 percent responded in the category of “other.”
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