Sunday, November 19, 2006

Reality bites back - are you watching?

Entry for Tues, 31 January, 2006

This article appeared on yesterday, a link from the Boston Globe:


Housing slowdown squeezes borrowers

Foreclosure cases hit 12-year high

By Kimberly Blanton, Globe Staff | January 30, 2006

The number of foreclosure notices filed against Massachusetts homeowners last year reached their highest level since the housing bust of the early 1990s, as homeowners fell behind on their mortgages and lenders began the process of taking back the properties.

Paradoxically, the sudden halt to sharply rising home prices put a squeeze on many borrowers, analysts said. Homeowners who stretched their finances to the limit to buy a home found it more difficult to make their payments on variable-rate mortgages as interest rates rose, but they were less able to refinance their loans at more attractive rates -- or sell and pay off their debts -- because the value of their homes fell or remained flat.

''When prices are skyrocketing, you have the option" of selling the house for a gain or refinancing, said Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University.

''In an economy where price appreciation is more modest or doesn't exist, what option do you have left?" he said. ''Sadly, one of those options is foreclosure."

Last year, there were almost 11,500 foreclosure filings in Massachusetts Land Court, where most notices are filed by banks and mortgage companies against the homeowners, according to ForeclosuresMass Corp., which compiles and tracks filings. That is a 32 percent increase from 2004, pushing the number of filings on record to its highest level since 1993, when a once-booming housing market was in a tailspin. The biggest increases were in Eastern Massachusetts.

During the housing boom of 1999 to 2004, the average price of Massachusetts houses and condominiums surged by at least 10 percent every year except one, putting the state's home-price appreciation among the nation's highest. But last year, price gains slowed to 5 percent, and single-family home prices were flat or even declined in some Boston and suburban neighborhoods.

''There's an epidemic of foreclosures," said Boston lawyer Gary Klein, who represents borrowers in lawsuits against lenders. ''We're getting a steady stream of referrals of people who are looking for any option to save their home."

Jeremy Shapiro, president of ForeclosuresMass, predicted filings would rise again this year, because many homeowners with adjustable-rate mortgages will see their monthly payments begin to rise along with interest rates.

''As we get into '06, '07, '08 and beyond, we're going to see more folks whose rates adjust," he said.

When notice is filed, it typically takes a mortgage lender three to four months to complete the foreclosure process and seize the property. Only about one in three filings actually results in a bank or mortgage company taking ownership of the home, but they provide a gauge of financial hardship.

The biggest spikes last year occurred in Essex County, north of Boston (up 48 percent), Barnstable County on Cape Cod (47 percent), Suffolk County (45 percent), and Bristol County (44 percent).

Divorce, separation, and job losses are the main reasons people lose their homes. While high-income individuals in divorce proceedings or spending beyond their means are vulnerable, working-class cities including Lynn and Worcester, where residents are more likely to live on a tight budget, were hardest hit last year. Also, people with poor credit ratings who qualify for mortgages from lenders charging high interest rates are also concentrated in these neighborhoods.

''People can't pay their mortgage," said Juan Ortega, a real estate agent in Lawrence in Essex County. ''They're up to the top. They bought very high, and now they can't make the mortgages."

Lawrence's housing market surged with the rest of the state. But lately, said Ortega, a Century 21 agent, he is spending his time helping clients facing foreclosures, which seem particularly acute in one predominantly Latino neighborhood north of downtown Lawrence.

A rash of foreclosures can drive down property values in a neighborhood, as lending institutions that do not want to hold onto the houses drop the prices to sell them quickly.

In the winter of 2004, Susan Chamberlain lost her part-time job as an IRS tax examiner. She recently was rehired, full time, but that earlier layoff precipitated a November foreclosure filing. She and her husband, Kevin, initially purchased their Lawrence home for $158,000 in the spring of 2001 with US Veterans Affairs financing.

In December 2002, they refinanced and withdrew some money to pay off a car and some bills, bringing their mortgage debt to $206,000.

The interest rate on the new mortgage was variable, initially averaging 9 percent but rising since then.

With the Veterans Affairs loan, the Chamberlains paid $1,200 a month on their mortgage; their current monthly payment is $1,900.

In the Boston area, house prices are so high, Klein said, that mortgages consume a growing share of monthly take-home pay. ''It used to be, if you lost a job you'd be at risk of losing the house," he said. ''Now, if you lose overtime, many families are so close to the brink, and that can create problems."

Kimberly Blanton can be reached at

I hate to say "I told you so," but I did, you know. People refused to take a realistic look at their income and budget and realize that a mortgage payment can't take the jobs of two people and half the family's budget and have the family's financial situation remain viable.

And, as I have said before, the banks are 100% culpable for giving interest only loans, balloon loans, and other questionable mortgages to people who they knew good and well couldn't really afford them. But don't look for a law protecting the victims of these scams anytime soon, or even at all. Those big banks who just conveniently paid congress to change the bankruptcy laws to prevent people from not being screwed by them will also be happy to pay congress to look the other way now, when it is becoming obvious that what they need is to be re-regulated, not to have increased confiscatory power via rigged bankruptcy laws.

And it's only going to get worse in the coming months, as the price of gasoline and home heating fail to get better by next fall, and may even get worse if the US has to take on Iran to keep the fundamentalist Arab nutcases from developing nuclear bombs for their new and improved terrorist operations.

And why is the Fed still raising rates? Because they can. Don't forget - the Federal Reserve is not a government agency. No, the US turned its money supply over to a bunch of unelected unaccountable bankers years ago. Yes, you heard that right - bankers. The guys with their hands in the cookie jar are the same guys deciding how much usury you get to pay to make up for their greedy, predatory lending practices.

Aren't you thrilled, class? Trust your banks now? Ha! If you haven't already, you should run, not walk, to a shredder and ditch your credit cards. The only real way to get back at the banks is to stop contributing to their pilfering spree.

Long live the revolution!

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