Wednesday, March 01, 2006

Lenders 'Learned To Profit Even When Loans Fail'

More reports on foreclosures in two eastern states. "New Hampshire’s primary foreclosure reporting service, has discovered a disturbing trend in the foreclosure market and boldly predicts that this trend will continue through the end of the year. In the seven-month span from August 2005 to February 2006, the percentage of foreclosed properties in N.H. that were purchased or refinanced in the last two years has jumped from 28 percent to 52 percent."

"This dramatic increase in foreclosures for these homeowners is a direct result of homeowners who couldn’t afford their home but were able to obtain financing with interest-only, adjustable-rate or discounted-rate mortgages. Also contributing to this trend is the softening of the housing market, which is making it more difficult for homeowners facing foreclosure to sell their home."

"'This statistic speaks volumes about the state of the housing market,' says James Kenney. 'It’s becoming more evident, especially over the past seven months, that N.H. homeowners who financed their home with an interest-only, adjustable-rate or discounted-rate mortgage were unprepared when their mortgage payments increase anywhere from 20 – 40 percent.'"

In North Carolina. "A special committee of the N.C. House received a two-hour education Tuesday on all that can go wrong when a person borrows money to buy a home. The payments may be more than the borrower can afford, experts told the legislators. The borrower may not even understand the loan terms."

"The hearing is the first step for the committee, which is to come up with ways to reduce the number of N.C. foreclosures. The committee, created in response to an Observer investigation published in January, plans to propose reforms to the full House by May, leaders said. 'I don't think there's anyone in there today that walked out thinking we don't need to do anything,' said vice chair Becky Carney, D-Mecklenburg."

"The number of foreclosures filed by lenders against N.C. residents tripled between 1998 and 2003, and stayed at roughly the same level the last two years. The Observer reported an even steeper increase in foreclosures in Mecklenburg County."

"The committee, gathered in a drab chamber in the Legislative Building, heard several state officials and consumer advocates talk about the reasons. It is easier than ever to get a loan, they said, even for people with bad credit or lower incomes. That's largely because the lending industry has learned how to profit even when some of its loans fail."


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