Too little, too late for debtors?
Too little, too late for debtors?

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By Richard Mize
Published: September 1, 2007

Whether "significant,” or a "Band-Aid” on a "huge gash,” President Bush's action Friday to help people struggling to keep their homes is something, which is better than nothing.

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That was the assessment of some Oklahoma City housing and lending professionals.

The president said the Federal Housing Administration soon will launch a new program, FHA Secure, that will allow homeowners with good credit, but who can't make rising house payments, to refinance into FHA-insured loans.

The president also asked Congress to allow the FHA to insure bigger loans and reduce its down-payment requirements, and to temporarily suspend the taxation of forgiven mortgage debt.

Also, this fall the Housing and Urban Development Department will seek changes in the Real Estate Settlement Procedures Act — the federal law that governs home purchases — to help shoppers find the best loan terms.

They're all good steps, but could be too little too late for too many people, said Oklahoma City real estate broker Mary Berry, who handles foreclosures for HUD and for Countrywide and other lenders.

Oklahoma had almost 7,000 foreclosures through June, 26 percent more than in the first half of last year, she said.

"It's probably going to help, but it's like a huge gash you need to put 10 stitches on and you put a Band-Aid on it,” said Berry, broker-owner of Century 21 All Pro in south Oklahoma City.

Massive home loan defaults and price depreciation have hit regions of the country hard before, as in the oil-state bust of the 1980s, but not the nation as a whole, she said.

"It's not going to respect anyone this time, she said.

Inflated appraisals, which are at the heart of much of the housing problem, are disappearing, she said. "Finally, the appraisers are starting to take notice. They're coming in under contract prices now.”

That's here, not just in formerly overheated housing markets on the coasts, and in the middle of the market, not just the high end.

Berry said one of her agents just handled a sale in Midwest City that might be a warning: Buyer and seller had agreed on a price of $104,900, but the appraisal came in at $100,000. Rather than scrap the deal, the seller dropped the price.

As the market works through its troubles, foreclosed homes here could sell for about 75 percent of their appraised value at foreclosure, far less than the 95 percent they fetched not long ago, she said.

A more stable market
The effect on the market as a whole? Berry said housing here could see average depreciation of 3 or 4 percent before things turn around.

Allowing people to get out of a subprime, or delinquent loan, and into a fixed-rate FHA-insured loan will help stabilize the entire market, said David Feisal, senior vice president of Tulsa-based SpiritBank and immediate past president of the Oklahoma Mortgage Bankers Association.

Home builder Jeff Click he was encouraged to see the White House's attention.

"A sound lending industry is vital to the recovering health of the broader real estate market, and homebuyers need to be able to have confidence in their financing options, while existing homeowners need to have reasonable options to preserve their ability to remain in their home,” said Click, vice president and secretary-treasurer of the Central Oklahoma Home Builders Association.

But Oklahoma City loan officer Scott Senner said allowing struggling homeowners with good credit to refinance will answer just part of the problem.

"One of the biggest reasons that borrowers have some of these exotic mortgages is that they did not have good credit histories in the first place,” Senner said.

Nonetheless, the reform is part of what the National Association of Realtors has been asking for, said Victoria Caldwell, president of the Oklahoma City Metro Association of Realtors.


 

Related Topics: Business, Real Estate

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Please don't take this as a "slam", Jamie. It's not meant to be at all, but rather a a clarification from my point of view... Credit issues due to such experiences like divorce or, say, a bad bout of cancer in extreme cases, do happen. However, I have a concern about the "Need to have a house" concept. I don't think people take into full account the cost of maintenance, repair, appliances, etc.. into the comparison. You will not come into the 'black' for a very long time. In most cases you don't 'need' to buy a home, and you will be throwing almost all of it away the first 7 to 10 years anyway - just as if you were renting. People in these situations usually don't descriminate well between 'need' and 'want', and get themselves into trouble. saving $400 per month from a bad mortgage rate (including insurance, bills, etc) in addition to not buying that brand new car can erase huge amounts of debt within a couple of years. People need to take more ownership of their responsibilities instead of assuming someone else (like the taxpayer) will take care of them. It sounds like you did a very good job - unlike most other folks in your position. Unfortunately, some people will be caught in the wide-casted net due to the major errors of the few.
James, Oklahoma City - Sep 2, 2007 at 1:23 pm
My husband and I were one of those ones that didnt have good credit when buying our home. Matter of fact we had a bankruptcy on our credit from a year before. Those debts occured from previous marriages and my hubby and I felt we would never get a chance at our life if we didnt file. So Then we needed to buy a home. We didnt go out of of league becasue we knew we would be penalized for our Bankruptcy being onour credit. The First 7 or so lenders could not help me out becasue of it. Made for very difficult times since we needed to buy a house.

Now for those of you that say its all teh subprime mortgages that are causing this you are wrong...there may be a few that are representing this wrong, but this has been a great tool for us, as we were able to get into a home in our price range and have made all the paymentys since we have been here. SOMETIMES PEOPLE NEED SECOND CHANCES and we were igven one. It just depends on the person and whether then intend to continue ruining their credit the ways they had before. My husband andI just wanted a chance to bring up our credit and not be blowing over 10,000 a year on rent. We want our return on our money the same as anyone else does...so why rent ?
We are ona two year arm bar to compensate for the bad credit and at the end of two years when our payments have been made and we have earned the creditors trust , we will refinance to a fixed and be set.

So its not all bad when one takesa subprime loan, if they have every intention of keeping it good.

jamie, bethany - Sep 2, 2007 at 12:33 pm
I watch House Hunters and other shows on HGTV. It amazes when people have to borrow so much for a home. So many NEED a bigger family because they're having a second child and the 2000 sq.ft is just to small. We had a new house of around 1200 sq.ft. when we had our 2 children. Three bedrooms and a bath and a half was great for us. We had plenty of room. Today it seems like most think that have to start at the top. I understand prices are higher now but I would rather have smaller paid for than something all my money goes to.
american, anywhere - Sep 1, 2007 at 1:44 pm
The "mortgage crisis" shouldn't be a surprise to anyone since it has been predicted for CA, FL, NV and some other places for at least 3 years. Speculation and easy money from lenders that were too young or too stupid to remember the 1980's, coupled with consumers that bought over their means, accounts for those in trouble now. There are still MANY people with the down payment, cash in the bank, and good jobs in our market so don't expect any big problems here. There are so many oil and gas jobs opening here every month bringing in people from out of state buying houses. Oklahomans, don't listen to the national coverage about real estate, because we're doing fine.
Chris, Oklahoma City - Sep 1, 2007 at 8:37 am
If borrowers did not have good credit histories, and didn't have the income or down payment for a regular loan, who thought giving them one was a good idea? Should this mortgage crisis be a surpise to anyone? Realtors and lenders need to help an individual or family be realistic about their ability to afford a home. Greed has caused this mess,and we the taxpayers will have to bail these people out. I suppose it's too much to hope that somewhere out there, there are realtors and lenders who are feeling guilty about the emotional trauma they've created.
Jill, www.okcthunderfans.com - Sep 1, 2007 at 6:45 am
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