I found an interesting article in The Charlotte Observer about “soaring” foreclosure rates demanding legislative intervention. A sign of things to come elsewhere…?
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THE CHARLOTTE OBSERVER
Thu, Jan. 26, 2006
Foreclosure rate ‘disaster’ sparks action – state’s soaring foreclosure rate leads to new N.C. House panel
By LISA HAMMERSLY MUNN AND BINYAMIN APPELBAUM
N.C. House leaders on Wednesday began forming a study committee to attack the growing problem of home foreclosures in Charlotte and across the state.
Their aim is to propose actions for the General Assembly to consider when it convenes this spring.
Rep. Walter Church, who will chair the committee, says the effort was spurred by the Observer’s series last week on the rising number of foreclosures in the Charlotte area.
“We want to see what can be done to help save people’s homes,” said Church, a Burke County Democrat.
The problem of foreclosures is racing out of control, he says. In almost two decades as head of a savings and loan in Valdese, Church said he foreclosed on only five or six loans. The Observer reported that on average, 11 Mecklenburg County homes are now sold in foreclosure auctions every business day.
Foreclosures happen when borrowers miss mortgage payments. After three missed payments, a home can be seized and sold to repay the lender. An explosion of new loan products over the past decade make it easier than ever to buy a home, and easier than ever to lose one.
State regulators and consumer protection groups also said this week that they will propose ways to combat home loan failures.
N.C. Commissioner of Banks Joseph Smith says he favors listing the name of the person who arranges a loan, generally a mortgage broker, on public real estate documents. That would allow investigators and the public to see which loan-sellers are connected with foreclosures.
Smith, the state’s chief banking regulator, said the skyrocketing number of foreclosures is “a disaster.” The failure of so many loans could undermine public confidence in the mortgage lending industry, he warned.
Smith licenses and regulates 14,000 loan sellers in North Carolina. He has the power to suspend licenses. But without better records, Smith said it’s hard to trace the roots of problems.
Philip Humphries, executive director of the N.C. Appraisal Board, says adding appraisers’ names to public real estate documents also would be a good step if it helps reduce foreclosures. If an appraiser inflates the value of a home, borrowers can receive loans larger than the amount anyone else would pay for the house.
Alfred Ripley with the N.C. Justice Center says his group wants better record-keeping on the causes of foreclosures, especially to see if some industry professionals are taking actions that contribute to the foreclosure problem. “There are people in the marketplace who are misleading consumers,” he said.
Ripley says his group and other consumer protection experts will look at ways counties could provide more information on each foreclosed loan. His group also will talk about studying a particular group of borrowers who lost their homes.
The Observer found Mecklenburg has the highest rate of foreclosures per capita in the state. Foreclosures in the county have more than quadrupled in the past six years.
About two-thirds of those home-loan failures involve new types of loans designed for borrowers with lower incomes or problem credit. More than 80 percent involved homes valued at $150,000 or less.
That combination of easy credit and inexpensive homes caused clusters of foreclosures on more than 70 Mecklenburg streets, where at least 15 percent of the homes foreclosed between 2003 and early 2005. That’s at least five times higher than the failure rate on all loans in the U.S.
The newspaper found the high foreclosure rates depressed surrounding property values, trapping neighbors in homes they couldn’t sell, even if they paid their mortgages on time.
House Speaker Jim Black, D-Mecklenburg, decided to form the committee after hearing concerns from House members, said spokesman Angie Whitener.
“It’s an issue he’s very concerned about,” she said.
The committee’s work would get started in the near future. The finish line is this year’s short session, which begins May 9.
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