Friday, September 22, 2006

Putting People In 'Houses They Can't Afford'

The Memphis Daily News reports from Tennesee. "There's a laundry list of reasons why the struggling Frayser community, found in Memphis' 38127 ZIP code, is propelling home foreclosures in Shelby County to four times the national rate. Or why foreclosures abound in Frayser more so than anywhere else in Memphis."

"The Frayser Community Development Corporation report indicates that certainly isn't the case in Frayser, and that even Memphis proper has cause to worry. First, even though home sales prices rose 11.5 percent per square foot in Frayser last year, equity levels there remain dangerously low, according to the report."

"Frayser leads the Memphis area in rates of subprime loans, which are loans that charge borrowers high interest and other fees. 'There's just a limited source of funding for low- to moderate-income folks right now, so a lot of times people in that range will go someplace they shouldn't go,' said Fran Warner, sales manager at First Tennessee Home Loans. 'They don't know what they're getting, they just know they're getting into a house right now, no money down, and the payments will be this.'"

"'We are, for various reasons, just a center for subprime and predatory lending, and that is a phenomenon that could and should change,' Steve Lockwood, executive director of the FCDC said. 'That's partly just a public education thing. There is also credit available even to folks with some pretty poor credit scores.'"

"'If you talk to the prime lenders, they are dipping down into some pretty low scores to loan really decent mortgage rates to folks. But that sure beats them taking out high-risk, high-interest loans with balloon payments after five years and prepayments and lots of other things that make it riskier,' he said."

"Especially in Frayser, many homeowners have gotten 'upside down' on their loans, meaning they owe more than their homes are worth. In 2005, Frayser's 38127 ZIP Code had 477 actual foreclosures, up from 267 in 2004, according to the report. With a total of 9,868 owner-occupied homes in the community, last year's figure put Frayser's foreclosure rate at 4.8 percent."

"By comparison, the MBA's first quarter 2006 National Delinquency Survey showed the percentage of loans in the foreclosure process was 0.98 percent."

"Over the last five years, one in four households in the city of Memphis has experienced some kind of foreclosure notice,' said Beanie Self, a longtime civic leader in the area. 'The American Dream is home ownership, and one of the things that concerns me is - while the dream is wonderful - we are not really prepared for it.'"

"'People don't realize you have a real estate industry, an appraisal industry, a mortgage industry now that can really push to put people into houses that a lot of times they really can't afford,' Self said."


At 8:23 PM, Blogger Chip said...

I had always thought that Memphis would be too cold for a native Floridian like me. But I suppose, at the *right* price anything's possible.

At 1:54 PM, Blogger SLO renter said...

Wow! One in four households facing foreclosure!

I visited my in-laws in Memphis this summer. It was strange seeing lines of row houses and poverty right next to new, very upscale (and expensive) housing. People there seemed bemused by how all the million-dollar properties were selling, but also certain that the increase in prices were real and would continue. Which makes Memphis like many other parts of the country these days, I guess.


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