Tuesday, January 17, 2006

From 'American Dream' To 'Terrible Nightmare'

The Charlotte Observer reports on what North Carolina real estate participants are saying. "Builder Lewis Homes of Indian Trail. The company constructed 17 Hamilton Oaks houses. Nine foreclosed (53 percent). The houses were sold through real estate agents. Company president Tom Lewis says he believes lower credit standards are a major factor contributing to the rising number of foreclosures."

"Even so, he points out that the majority of homeowners in Hamilton Oaks haven't foreclosed. Those owners 'get into houses and enjoy the benefits of home ownership,' Lewis says."

"Barber Builders of Charlotte built 38 Hamilton Oaks homes. Five foreclosed (13 percent). They also were sold through real estate agents. Freeman Barber Jr., company president at the time, says he's surprised and concerned about the high foreclosure rate in Hamilton Oaks. 'Our intention is to give people the American dream. That's the basis of our business plan. This sounds like a terrible nightmare.'"

"He says buyers' loan information isn't disclosed to his company, which didn't make the loans. But he would like to see changes that would prevent so many foreclosures."

"Mortgage broker Sharon Borst says she arranged mortgage loans for a handful of Hamilton Oaks buyers, including Cassandra Boone. Borst says she discusses all aspects of loans with her customers, including first and second mortgages. Borrowers sign disclosure statements that outline all loans as well as financing, interest rates and closing fees, she says. That information also is in the purchase contract the buyer signs."

"'I'm thorough in my explanations to borrowers. I don't take it lightly,' she says. Borst agrees with experts who say most home buyers don't fully understand the process. 'But I know my clients are told, numerous times. Lenders follow fair credit practices,' Borst says, 'and borrowers are qualified at the best available pricing based on their credit history.'"

"Consumer protection lawyer Andrea Bebber of Charlotte, works with people facing foreclosure. She filed bankruptcy for four Hamilton Oaks homeowners. Bebber sees a pattern in starter-home subdivisions like Hamilton Oaks: First-time buyers sign up for big loans with little down payment. They strain to pay their mortgages. If they have adjustable loans, their payments rise. Then a financial setback hits. Lenders add late fees and other penalties. Houses foreclose. Property values drop."

"'Let me protect my clients from any mistaken impression that their foreclosures or bankruptcies indicate that they are at fault or that they are somehow irresponsible,' says Bebber. 'These hard-working families bought their homes believing that they would increase in value. Instead, the values have plummeted, not because of anything my clients did or did not do.'"

5 Comments:

At 4:34 PM, Blogger DCBubbleHead said...

very scary stuff...this story sounds like the end result of what we're starting to see anecdotal evidence of in the hotter real estate markets.

 
At 11:32 PM, Blogger Pointlines said...

bet we see this story here in the OC repeated multiple times a year from now.

 
At 12:24 AM, Blogger Idaho_Spud said...

This comment has been removed by a blog administrator.

 
At 12:34 AM, Blogger Idaho_Spud said...

"'Let me protect my clients from any mistaken impression that their foreclosures or bankruptcies indicate that they are at fault or that they are somehow irresponsible,' says Bebber. 'These hard-working families bought their homes believing that they would increase in value. Instead, the values have plummeted, not because of anything my clients did or did not do.'"

I fail to see how housing asset appreciation/depreciation should have *any* impact on their ability to pay their debts.

Unfortunately, I suspect that that this story is just the beginning of a real torrent. These would seem to be people of modest means, who of course would be the first to get in trouble.

Wait until it hits all the folks who, ahem 'liberated equity', who lose jobs in RE, who financed with ARMS, who... you get the picture. If the cash doesn't flow, or expenses go up, even people of adequate means could be hurt. 2006-2008 will not be kind to debtors... or creditors for that matter.

 
At 7:53 AM, Blogger Jim A said...

They bet EVERYTHING on continued appreciation of their house and yet somehow they have NO responsibilty for their actions? I agree with the proposition that they're not solely responsible; there's plenty of blame to go around. But, you roll your dice, you take your chances.

 

Post a Comment

<< Home