1. foreclosure: a growing trend in this module: defining foreclosure foreclosure statistics
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1. Foreclosure: A Growing Trend In this module: Defining foreclosure Foreclosure statistics Reasons for foreclosure. Definition of Foreclosure The forced sale of a piece of real estate to repay a debt – mortgage, unpaid property taxes, builder and mechanic liens, delinquent income taxes - PowerPoint PPT PresentationTRANSCRIPT
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1. Foreclosure: A Growing Trend
In this module:
• Defining foreclosure• Foreclosure statistics• Reasons for foreclosure
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Definition of Foreclosure
• The forced sale of a piece of real estate to repay a debt – mortgage, unpaid property taxes, builder and mechanic liens, delinquent income taxes
• Can result from seizure/forfeiture due to criminal activity
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Foreclosures on the Increase
• 925,986 foreclosures were filed in the first half of 2007.
• This is a 55 percent increase from the first half of 2006.
• National foreclosure rate for first six months in 2007 is one filing for every 134 households.
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Why the Increase?
• Congressional reports & secondary mortgage market findings
• Impact of heavy refinancing
• Debt load of the American consumer
• General economy fears of inflation, higher interest rates & flat income
Underlying causes may point to mortgage fraud and predatory lending.
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Mortgage Fraud
• Deliberate criminal activity• “Lenders” that falsify information
Practices include:
• Ignoring the right of rescission• Using inflated appraisals and fake
documents• Selling to straw buyers• Phantom second loans
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Predatory Lending
• Misrepresentation of lending programs
Practices include:
• Guaranteeing approval and not verifying income
• Charging high fees and penalties• Delaying closing• Inflating appraisals• Asking borrowers to sign blank
documents or ones they don’t understand
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Predatory Lending
Creative lending programs, which will be covered in Module 3, should NOT be assumed to be predatory lending practices. Deceitful and abusive actions constitute predatory lending.
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Predatory Lending
Predatory lenders target subprime borrowers. Why are subprime borrowers attracted to these loans?
• More money for college education, home improvements, etc.
• Quick money• Assumption of continued increases in
home equity• “Perceived” lower costs associated
with ARMs and other types of financing
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Predatory Lending
Subprime mortgage market experiences much higher rates of delinquency and foreclosure.
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2.19
3.3
6.46
0.0
2.0
4.0
6.0
8.0
Prime VA FHA SubprimeFixed
SubprimeARM
Per
cen
t
Foreclosure Rates by Loan Type, 2007 Q1
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Foreclosure “Rescue” Scams
1. Companies tell desperate homeowners that they will renegotiate their mortgage terms and stop foreclosure proceedings for a fee.
2. Companies encourage homeowners to sign over title for a year or two, during which the homeowner can pay rent to the company. Once the homeowners are caught up financially, the company promises to sell it back.