[highlights added, along with a companion article at the end]

NEW YORK - Foreclosures are spreading to near-epidemic proportions, expanding beyond a handful of problem states and now affecting almost one in every eight American homeowners.

It's an economic role reversal: The economy, driven down by the collapse of the housing bubble, is in turn driving the growth of the housing crisis.

Figures released Thursday show that nearly 12 percent of all Americans with a mortgage - a record 5.4 million home-

owners - were at least one month late or in foreclosure at the end of last year.

That's up from 10 percent at the end of the third quarter and up from 8 percent at the end of 2007. In addition, the numbers now include many once-qualified borrowers who took out fixed-rate loans.

Data from the Mortgage Bankers Association also showed that nearly half of homeowners - a startling 48 percent - who have subprime adjustable-rate mortgages are behind on their payments or in foreclosure.

The ill-advised lending and borrowing practices in such states as Florida, California and Nevada that were at the center of the problem are no longer driving up the nation's delinquency rate.

Instead, foreclosures are being fueled by a spike in defaults in places such as Louisiana, New York, Georgia and Texas, where the economy is deteriorating and unemployment is climbing.

"It's jobs: People are losing their jobs left and right," Houston real estate agent Michael Weaster said.

On Thursday, the Labor Department said new unemployment claims last week totaled 639,000, lower than expected but still at elevated levels.

That trend highlights one of the biggest challenges confronting the Obama administration's mortgage-relief plan that was launched this week.

Although the plan could help change the loan terms or refinance up to 9 million homeowners, unemployed borrowers will have a difficult time qualifying.

The key to the housing market is what kind of workers are losing their jobs. Unemployment for people with college degrees, some college education or technical training - those most likely to own homes and have prime fixed-rate loans - has nearly doubled in the past six months, according to the bankers association.

To give debt-burdened homeowners more leverage to negotiate with their lenders, the House passed legislation Thursday to give bankruptcy courts the power to reduce mortgage payments.

The legislation is intended to give bankruptcy judges - who now can modify loans for cars and student loans but not for primary residences - new power to cut the interest rate and principle on a home mortgage.

The Senate is expected to take up the measure in a couple of weeks.

The only bright spot in the foreclosure report was that the damage caused by subprime adjustable-rate mortgages is waning. Their 30-day delinquency rate continues to fall and is at the lowest point since the first quarter of 2007. Most of those types of loans have made their way through the system as lenders stopped originating them in the first half of 2007.

That offers little comfort to Florida, where 60 percent of homeowners who have a subprime adjustable-rate mortgage are at least one payment behind and one in five of all mortgage holders are not current on their loans.

And though the worst does not appear to be over for Florida, the problems appear to be just beginning in once-healthy markets such as Houston and New York.

The number of unsold homes in Houston skyrocketed to a 17-month supply in February from an eight-month supply in January because homeowners fear they will soon be in financial straits, or they already are, Weaster said.

And in the New York area, where the financial industry is hemorrhaging jobs, homeowners who once had good credit are defaulting at an increasing clip.

J.W. Elphinstone, ASSOCIATED PRESS
03/06/2009

Source: http://www.statesman.com/business/content/business/stories/realestate/03/06//0306foreclose.html

Group asks lawmakers to help families facing foreclosure
ACORN pushes to extend the foreclosure process
By Sara Higgins, AMERICAN-STATESMAN STAFF
http://www.statesman.com/news/content/region/legislature/stories/03/06//0306acorn.html 
March 06, 2009
 
Hundreds of ACORN members from across Texas gathered at the Capitol on Thursday to ask state lawmakers to help families facing foreclosure.

The crowd shouted, "Who's got the power? We've got the power," and "Predatory lenders, criminal offenders," as they collected on the Capitol's steps and front lawn.

In addition to holding a news conference and rally, the group met with legislators throughout the day to push for bills that would lengthen the foreclosure process in Texas, provide fair-notice requirements for homeowners and tenants, and require prepurchase counseling for borrowers seeking a potentially high-risk home loan.

ACORN is a grass-roots community organization for low- and moderate-income families, with more than 400,000 members in 110 cities across the country. The organization made political news before the 2008 presidential election when it was investigated on charges of fraudulent voter registration.

ACORN said that one in 35 Texas homeowners probably will face foreclosure by the end of 2010. In Texas, property can be auctioned within 21 days of notice, which is the fastest foreclosure process in the U.S.

Sabra Battle, an ACORN member from Houston, said an adjustable rate on her mortgage payments began increasing every six to 12 months. When she was injured on the job, she said, she struggled to keep up with the increasing payments.

"It was a tremendous stress, daily stress for me," she said. "I didn't find anyone willing to help me, and my payments were becoming more and more unaffordable."

Last summer, Battle went to ACORN, and the organization was able to help lower her interest payment. It took the group three months to negotiate Battle's new payments, but ACORN spokeswoman Ginny Goldman said people don't always have that much time.

"To work out a loan modification can take two to three months," Goldman said. "If the foreclosure period is very quick, the people are racing the clock."

One of ACORN's priorities for the legislative session is to push for laws that would create a mandatory mediation process between lenders and borrowers. The process would halt foreclosure proceedings for 90 days so the parties could negotiate a loan modification, according to ACORN.

Rep. Rafael Anchía, D-Dallas, said the biggest complaint he has heard in the past four or five months is from people with properties in foreclosure who said that lenders haven't been responsive.

He said he would support legislation that would benefit both parties.

"It's better for the banks because they don't have a default," Anchía said. "And it's better for the families because they're not being thrown into the streets."

shiggins@statesman.com ; 445-3641

 ↑ Back to Top