Ohio's 2006 Foreclosure Rates Jump 24% in One Year

The stats are "in" for 2006 on foreclosures and they are not going to make you happy. Depending on whether or not you use the measure of the Mortgage Bankers Assn. (which says we are first in foreclosures for 2006) or RealtyTrac (which says Ohio is 8th), the rise in precentages is mind blowing. The number of new cases rose 24% in one year. Policy Matters released their figures this week and in Cuyahoga County alone, there were 13,610 new foreclosures.

I was alerted to this in an article on Cleveland.com, written by Plain Dealer reporter Thomas Ott. I blogged before about the NeighborWorks program, and this article talks about a case involving Adjustable Rate (ARM) mortgages. A few years ago, while interest rates were about 5.5% on the National Level, people were getting ARMs for 10-14% interest rates.

Cuyahoga County Commissioners Dimora, Hagan and Jones issued a report (in pdf here) based on calls, meetings, public meetings and discussions. It's worth a read.

Folks, all I can say is, please contact one of these programs before it gets to the critical stage! It only takes about three months of missed payments for things to spiral out of control. And I have to say again, if the only way you can buy a home is to pay 13% interest rates when the going rate is 6.06)% (as of today), please wait until you can qualify for a much lower rate. The County Program is called 'Don't Borrow Trouble,' and if you have any inkling that you might have difficulty making your payments in the future, even for a few months, please call them at: 216-436-2000. There is also a United Way hot line and you can reach it by simply dialing 211.

Other relevant posts:
Professor Kathleen Engel discusses predatory lending
What to Look Out For: Avoid Predatory Lending

March 28th Follow Up: PD Reporter Ott has a very interesting follow up article you can read on Cleveland.com. It deals with a law proposed in Ohio to require lenders who foreclose on homes to file their deeds - maybe I am naive, I didn't know this was not required! I know Title technically does not transfer to new owners until the title is filed at the Court house...at least for us 'regular' people. This is a great article dealing with the thorny issue Cleveland has had to deal with, tracking down owners of long abandoned buildings, collecting taxes, etc.

Peace Out - 3C

Predatory Lending: What to Look Out For As You Search for a Home

The weather is better, more people are looking to buy homes. Caution please, about the type of loan you get. Specifically, avoid predatory lenders. Here are some tips about what to watch out for:

*Someone tries to get you to buy a home for more than it is worth based upon an inflated or false appraisal. You can help avoid this by working with a real estate professional who can provide you with real comps. Not to downplay the Internet appraisal models like Zillow, but, a Realtor® in the trenches can get you the best, updated information about home sales in a particular area.

*A lender is a predator if they are knowingly lending more money to you than you can repay, lending more than 100% of the value of the loan, or charging high fees in connection with a loan. You can help ensure you make a wise loan decision by talking to at least three mortgage lenders. You can weigh what all three tell you. And keep in mind, going with the one that seems to promise you the moon may not be wise: if it seems too good to be true, it probably is.

*If a mortgage lender encourages you to falsify any information (yearly salary, etc) in order to qualify for the loan, be wary and seek another lender. Mortgage fraud is not good. Note: do you look good in prison orange?

*The home you want to buy looks a lot like others sold in the area, in similar condition, but someone wants you to pay a lot more for the home than the others. This may sound like the first point, but it's a tad different. There may not be an appraisal involved. Make sure a qualified professional advises you on home sales so you can make a wise decision.

*You are asked to sign blank documents, with people telling you the details will be filled in later. This may sound like a no brainer, but believe me, it happens.

*Someone writes up a purchase agreement for a home, and it has an addendum stating that the Seller will be holding a second mortgage which will be 'forgiven' by the Seller immediately upon your taking Title to the home. This is a big red flag. It means someone is inflating the price of the house - and someone is getting the difference in the real price of the house and the inflated price - that someone should not be you, a broker, a lender or an appraiser. It's fraud.

*You are told that your only chance of getting a loan will be through this one lender. Now I know the American Dream is to own a home. But, if only one mortgage lender in the World will qualify you to get a mortgage....it probably should make you think: is this really the right time for me to buy, or should I wait and save money, clear up my credit, first? And of course if you have checked with other mortgage lenders as I stated above, you will have a better idea about whether now is the right time for you to consider buying a home.

I may be a Realtor® and yes I only make money if people buy or sell homes. However, I need to be able to sleep at night! Those of us who are true professionals only want you to buy a home when you are ready, willing and able. On that note, if you have concerns and know you cannot buy a home now, but want to figure out a strategy so that sometime in the future you CAN buy a home, let me know. There are financial counselors, free of charge, who will work with you for a year (in the mortgage 'arm' of my company) so that you can begin to get your finances on track. Here is an article from The New Standard written by Michelle Chen, about Ohio's Predatory Lending Laws. Peace Out - 3C

Helpful Phone Numbers?

Browsing through any of the neighborhood redevelopment corporation websites is uesful. Today I was on the Kamms Corner site. They have a terrific list of useful telephone numbers -

Kind of a timely link here, since we have talked about predatory lending which can lead to foreclosures.

And maybe the best link; if you are worried about making your mortgage payments, DO NOT WAIT until it's too late to try to resolve the issue. Two things to do.

• Don't let letters from your lender sit unopened. talk to them!


• Call the Cuyahoga County Foreclosure Prevention Office

Peace Out - 3C

Predatory Lending History and Issues Discussed by Professor Kathleen Engel at 'Meet The Bloggers' Coffee House Discussion

Gypsy Coffee House in Cleveland's West Side was the scene of a fascinating and lively discussion and was a 'Meet the Bloggers Event'. I had another meeting and left before I was able to get all the blog info from participants but people like Jeff of YellowDogSammy and George of BrewedFreshDaily were there among others. A shout out to the organizers of this event. Manager Mark and I were very pleased to be at this informative session.

The focus was on predatory lending and Kathleen Engel, esteemed Professor at Cleveland's Marshall Law School was our guest. We've heard a lot about predatory lending and like all of you, the practice makes my blood boil. Kathleen Engel and a colleague, Patricia McCoy (Law Professor at University of Connecticut) have written a wonderful paper called Turning a Blind Eye. It's well worth the read. Professor Engel was instrumental in working and initiating the predatory lending laws proposed for Cuyahoga County.

Why are we in this mess and what does it all mean? Synopsis according to Professor Engel: Once upon a time, if you wanted a loan, you provided proof that you could make loan payments. You were given a loan based on what you could afford to pay each month on the loan.

These loans were 'prime' loans or standard loans. There were FHA and VA loans which could be considered sub prime because people can get those loans with no money down, but what happened (I think in the 80s) was the rise of a private, conventional sub prime loan market.

This was a 'make money for Wall Street' idea, to put it in simple terms. Entrepreneurial (to be kind) financial types decided loans could be sold on the open market so that the original loan holders no longer had a stake in the outcomes. Ms. homeowner gets a loan from one company and before you know it, her loan payment forms are changing names faster than you can say 'sold on the open market'. I remember loans like that, as a homeowner in Maryland.

Anyway, Kathleen Engel focused on fiduciary responsibility, or in other terms, the loan providers legal and moral responsibility and to whom. When you get a prime loan that stays in house, or with the person you bought the loan from, they have a responsibility to you AND their own lending institution. Once the loan is sold, that loan just becomes a commodity in a sub prime market and their responsibility is only to their shareholders. Can you see why we got into this mess?

Now we have people with 125% loans (PLEASE do not ever get a loan like that) in a market where your home is not worth 125% of it's original sale price.

And when the loan payment becomes too high - because really you should have waited a year or two to save money and not GET a 125% loan - you want to sell your house and then don't understand why it can't be listed and sold at a price that matches your mortgage.

To me it's almost like a bait and switch program. But those in the field are much more adept at explaining this than I am. So read Turning a Blind Eye.

Interestingly enough, Brian Brady, one of my pals and fellow bloggers, is a mortgage lender and an insightful one at that. He has a fantastic post explaining this scenario in detail. It's called Bad Loans Buried in the Back of the Breadbox and also explains how we got into this mess.

What's the answer? Save your money and buy a home the old fashioned way: when you can afford it? Or at least keep in the back of your head: if it seems to good to be true, it probably is.

Peace Out - 3C