The Foreclosure Report

County Defaults Already Exceed 2006: Kentucky

The State Journal reports from Kentucky. "Local housing foreclosures after only one month are on track to exceed the number of properties sold in foreclosure last year, says Charles Jones, master commissioner of Franklin Circuit Court. 'Franklin County had about 90 foreclosure auctions last year, and already we could end up exceeding that by 25 percent,' Jones said."

"'Even though Ive not held the position more than four months, my prior knowledge leads me to think the numbers are certainly increasing,' Jones said."

"However, Jones said large out-of-state mortgage companies and not local lenders like Farmers Bank or First Federal file most of the foreclosure cases. A local bank executive, who asked not to be identified because of the sensitive nature of the information, agreed and said its because local banks have strict lending guidelines."

"'If you look at the legal notices in the Friday night papers you wont see Whitaker or First Federal or Farmers,' he told The State Journal. 'Most of it is Chase-Manhattan or Wells Fargo.'"

"The national mortgage brokers will charge up to $9,000 in closing fees, but offer a lower interest rate, the executive said. They also will lend up to 120 percent of the appraised value of the home, he said. But local banks will rarely lend more than 85 percent for a mortgage."

"'We like to see our customers put money into the deal because they have equity as soon as they close on the loan,' the executive said. The trend is the same across the nation, said Mike Fratantoni, senior economist for the Mortgage Bankers Association. The association conducts a quarterly survey that indicates the number of loans in foreclosure grew slightly across the country, from 0.98 percent to 1.05 percent."

"'The most significant increase was in sub-prime and adjustable-rate loans,' Fratantoni said."

"At the end of 2006, only about 2 percent of all fixed-rate prime loans were in foreclosure nationwide according to the report, but almost 10 percent of all sub-prime fixed-rate loans were in foreclosure. About 3 percent of all prime adjustable-rate loans were in foreclosure according to the Mortgage Bankers Association. More than 13 percent of sub-prime adjustable-rate loans were in foreclosure as well, according to the report."

"Kentucky also experienced a slight increase and is significantly above the national average with a foreclosure rate of 1.78 percent for all types of loans."

"Jones said foreclosures dont always end in an auction. He said the process is costly because there a lot of fees and commissions to pay along the way, and sometimes, the house sells for less than the appraised value. 'In many instances, the mortgage company will not be made whole on what is owed,' Jones said."

"If it does come to an auction, Jones said 90 percent of the properties are bought back by the lending agency. Occasionally, real-estate speculators or developers will buy a property, but Jones said it is a big risk because they cant inspect the home. Two citizens are required to appraise it, but neither Jones nor the buyers can actually visit or inspect the property."

"'They are buying it essentially on a windshield inspection of the property,' Jones said."

posted by Ben Jones @ 12:28 PM