The Foreclosure Report

Subprime Defaults Jump In Maine

Maine Today reports on the states' foreclosure situation. "The state is ratcheting up pressure on so-called 'predatory' mortgage lenders. The effort comes on the heels of a report that says 21 percent of the 'subprime' mortgages that originated in Maine in 1999 have entered foreclosure, the highest rate in New England."

"The market is dominated by nonbank lenders and mortgage brokers, many of whom lend responsibly, the report said. In the first quarter of 2005, subprime loans in Maine accounted for 14.7 percent of the total mortgage market and 60.4 percent of all foreclosures."

"William N. Lund, director of the Office of Consumer Regulation, said more people have taken steps to refinance because property values have gone up. Lenders have been busy helping them tap into the increased equity in their homes. 'Why has it become a problem? Because of all the business out there, mortgage lenders and mortgage brokers grew very big very quickly and people entered the industry without having a whole lot of background in lending,' he said."

"'(Subprime lenders) might be willing to take the risk, but it may not always be in the best interest of the borrower," said Mark Walker, general councilor for Maine Bankers Association. 'They may find that they can't make the payments as rates go up or if something bad happens and that leads to an increase in foreclosures.'"

"Anthony Armstrong, a mortgage broker in Portland, said people are being bombarded by telemarketers and mail solicitations. 'The problem right now is that people are being pressured into accepting deals that are probably not the best deal for them,' Armstrong said. '"And what's making it worse is a lot of subprime loans being made with distressed credit are adjustable-rate mortgages that usually adjust in two or three years. Now the interest rates have gone up and the indexes that determine the new adjusted rate are much higher.'"

"Hanna Thomas, spokeswoman for CEI, said Maine is especially vulnerable to predatory lending practices because it has a high home ownership rate and an aging population at the same time its economy is declining and housing prices are escalating. 'When people are economically distressed, they start taking out equity from their homes to refinance and consolidate debt,' Thomas said."

posted by Ben Jones @ 12:05 PM