Quick response can mitigate foreclosure fallout

Maria Saporta
Originally Published in the Atlanta Constitution Journal on: 12/10/07

Vacant, boarded-up houses destroy communities. They become havens for crime, vandalism and deterioration, pulling down the value of neighboring homes and spreading unease for nearby residents.

Unfortunately, this is a reality that communities throughout the region face with the record number of foreclosures.

Formerly reviving communities are being hit with decline, and many families, once part of healthy neighborhoods, are in disarray and may even become homeless.

It's not a pretty picture.

Our region already faced a shortage of affordable housing. Foreclosures will exacerbate the problem, especially in the near term.

Much needs to happen in a short time.

At the Regional Housing Forum meeting last week, experts offered game plans on how to help attack the problem.

The best solution: Prevent homeowners from having to declare bankruptcy. As soon as a homeowner is 30 to 45 days late with a mortgage payment, help should be available before it's too late.

"The likelihood of stopping foreclosures is much more likely in that time period than after 90 days," says Emory University professor Frank Alexander, who is doing a stint at Harvard University until January.

Several entities, such as the Consumer Credit Counseling Service and the Home Ownership Helpline, can help homeowners restructure their debt and better manage finances. Alexander thinks banks should suggest homeowners get such help at the first sign of trouble.

One critical change that needs to happen is for the state Legislature and the governor to extend the amount of time between a declaration of default and the sale of a foreclosed home.

Currently, Georgia and Texas have the shortest window — 37 days — between default and sale, giving homeowners little time to work on a solution.

Alexander and his counterpart at Georgia Tech, Dan Immergluck, believe a three-month timeframe would be much more reasonable and would help keep people in their homes.

It's too late for hundreds of thousands of metro Atlanta residents who already have suffered foreclosures since 2001.

So what should happen post-foreclosure?

In an ideal world, foreclosed properties could return to the market at reasonable rates for working families.

That's easier said than done.

"These lenders are under pressure from their investors to maximize returns," Immergluck says. "Yet they need to bring down values of the properties that they own so that they're affordable."

It's to the lender's advantage to quickly get new residents into foreclosed homes. The value of their properties will rapidly decline the longer they remain vacant. There are several technical ways to structure deals so that banks can dispose of their property in constructive ways.

They can work with the Atlanta-Fulton County Land Bank Authority, parking the property there tax-free until it is sold at an affordable price. They can work directly with community development corporations or nonprofit builders that can help make repairs and find qualified buyers.

"We are looking at this as an opportunity to try to reverse the impact of having streets and streets of boarded-up houses in neighborhoods," says Andy Schneggenburger, executive director of the Atlanta Housing Association of Neighborhood-based Developers, which has 25 members.

Local governments also can play an important role. Alexander says it's vital that building bureaus pressure lenders and owners to keep properties in good shape. If a lender/owner is not maintaining a home or its yard, a local government can put a lien on the property.Atlanta City Councilwoman Mary Norwood has pushed the city to crack down on slum landlords, investigate mortgage fraud and seek affordable housing solutions.

She calls the current crisis a "foreclosure tsunami," and she is working with other organizations to create a task force to attack the problem.

She also hopes to work with major employers to provide housing grants for down payments and other incentives. It's an advantage to have employees live closer to where they work, which saves them time and money in transportation.

If the state, the region and local governments work together, Norwood sees a "once in a lifetime opportunity to match foreclosures with affordable housing." If not, the consequences will be extreme.

Norwood says half of the city of Atlanta's land area has been affected by foreclosures and fraud.

"The result is abandoned, unoccupied houses," she says. "My real goal is that we not allow our neighborhoods to deteriorate and become depopulated."

The region faces a wave of problems — record draught and water shortages, congestion and limited transit, an embattled Grady Memorial Hospital and escalating foreclosures. Let's hope our leaders are ready to take action in all these areas and that metro Atlanta will be able to survive this challenging era.

rpr by permission

Bankruptcy doesn't have to end in foreclosure, debt group hears.: Source By David Flaum

Helping people who filed wage earner bankruptcy petitions stay with their repayment plan could help one in 10 of the potential dropouts from losing his home to foreclosure. That was the conclusion of Berje Yacoubian, whose firm, Yacoubian Research, studied bankruptcy and foreclosure trends in Shelby County for the Memphis Credit & Bankruptcy Collaborative. Advertisement The collaborative is a loose confederation of credit counselors, bankers, real estate people, consumer advocates, educators and government workers set up to assess and deal with personal financial issues and education. Yacoubian researchers studied 46,000 Chapter 13 bankruptcy petitions filed by Shelby County residents from 1999 to 2002. Chapter 13 is the part of the bankruptcy code that allows someone to keep his home, car and some other assets while he repays his debt on a schedule filed with the court. The process is designed to take three to five years. "The primary purpose of Chapter 13, if you own property, is to save your house," Yacoubian said. Of the 9,721 petitions filed in 1999, only 584 had been discharged by April 2003, meaning the debtor had completed his program, Yacoubian said. Another 2,462 cases were still open and 6,675 had been dismissed, meaning the person filing them had dropped the ball on the repayment plan, he said. Foreclosure is "the ultimate nightmare" for Chapter 13 filers, Yacoubian said. And about 35 percent of the 15,000 foreclosures in Shelby County since 1999 were filed against people who had petitioned for Chapter 13 bankruptcy protection, he said. At the current pace of Chapter 13 bankruptcy filings, we're likely to see 4,700 foreclosures in Shelby County this year, Yacoubian said. "Foreclosure is really the last step in the process," he said. "Not everyone who files for Chapter 13 and is foreclosed on can be saved. Intervention to counsel homeowners at risk could prevent about 10 percent of the foreclosures." Members of the collaborative have to decide where there are opportunities for financial education to accomplish that, said Beth Dixon, president of The RISE Foundation, a nonprofit group that sponsors the collaborative. Saving 10 percent of Chapter 13 filers homes from foreclosure is possible "if you have the resources," said Ron Roudebush, regional manager of the Consumer Credit Counseling Service of Memphis. Based on the number of households, Chapter 13 bankruptcy is far more common in the "center city" - the 14 Zip Code areas mostly west of Highland - than in the suburbs (the remaining Zip Code sections), Yacoubian's research found. About 19 percent of center city households filed for Chapter 13 from 1999 to 2002 compared to 7.4 percent of suburban households, he said. Foreclosures follow a similar pattern, but the gap is closing, Yacoubian said. The number of foreclosures in the center city was 18 percent higher in 2002 than in 1999, but the suburban figures were up 55 percent. "This is no longer just a center city problem," Yacoubian said. - David Flaum: 529-2330 Copyright, The Commercial Appeal, Memphis, TN. Used with permission.

Home Foreclosures Hit Record High - AP

By JEANNINE AVERSA

WASHINGTON (AP) — Home foreclosures shot up to an all-time high in the third quarter, fresh evidence of the problems afflicting distressed homeowners amid the housing meltdown....

The percentage of subprime adjustable-rate mortgages that entered the foreclosure process soared to a record of 4.72 percent in the third quarter. That was up from 3.84 percent in the second quarter. Late payments jumped to a record high of 18.81 in the third quarter, up from 16.95 percent in the second quarter.

The association's survey covers more than 45 million home loans nationwide.

The new figures came as President Bush, accused by Democrats and other critics of not doing enough to help stem the mortgage crisis, was set to unveil a plan Thursday that would allow some homeowners with certain subprime home loans to freeze their interest rate for five years. The plan aims to prevent some distressed borrowers from losing their homes. It also is intended to ease the danger facing the economy from a wave of foreclosures — something that would further aggravate problems in the housing market....

California and Florida — the two largest states in terms of outstanding mortgages — were key drivers in the increase in the national foreclosure rates, the association said. The two states together accounted for 33.7 percent of the subprime adjustable-rate loans that entered the foreclosure process in the third quarter. The two states combined also accounted for 42.4 percent of creditworthy "prime" adjustable-rate mortgages that started the foreclosure process....This article is available in it's entirety here.