This is why the market is still overpriced! As long as they can get away with it, they will. Sucker born every minute……….
By Emmet Pierce
STAFF WRITER
April 26, 2007
Many consumers are being sold costly mortgages they can’t afford, despite recent efforts by federal regulators to tighten lending standards, Harvard University’s Joint Center for Housing Studies reported today.
A recent national spike in foreclosures “suggests that some borrowers are taking on debt that they have little or no capacity to repay, selecting products that are not suitable for their needs, or signing up for mortgages that they don’t understand,” analysts concluded.
Especially worrisome is the increased use of subprime loans, which are more expensive and often extend credit to people at greater risk of default.
“The concentration of foreclosures in many of the nation’s lowest-income and economically vulnerable minority neighborhoods threatens to reverse recent gains in efforts to expand housing opportunities for all,” researchers wrote.
Officials at the Federal Reserve yesterday received a briefing on the findings. Last week, similar issues were aired before the San Diego City-County Reinvestment Task force.
Banking consultant Steve Bouton told the San Diego panel that a review of census tracts showed that county neighborhoods with large minority populations had been hard hit with risky subprime loans.
A record number of San Diego County residents lost their homes in the first three months of the year as default and foreclosure activity rose throughout the state.
The Harvard housing center said recent federal interagency guidance designed to tighten underwriting and end abusive lending practices nationwide was too narrow.
“Since this guidance generally only applies to federally regulated deposit-taking institutions, the federal government should consider extending the guidance to all lenders, including non-bank independent mortgage companies,” analysts wrote.
Harvard’s report stemmed from companion studies that examined market participants and industry practices linked to an increase in subprime mortgages. Locally, the reinvestment task force has begun its own examination of subprime loans.
In San Diego County, 1,182 foreclosures took place from January through March, according to DataQuick Information Systems. The figure represents trustees’ deeds filed, reflecting homes sold at auction or returned to the lender. The first quarter also recorded 3,931 notices of default, the first formal step in the foreclosure process, DataQuick reported.
Most loans that went into default in California during the first quarter were originated between April 2005 and May, as a peak of nearly 78 percent of all first trust-deeds were being financed with adjustable-rate mortgages. Adjustable loans typically have initial low “teaser” rates that can rise sharply later.
RealtyTrac, which monitors foreclosures differently than DataQuick, yesterday reported about 437,500 combined default notices, auction sale notices and bank repossessions nationwide in the first three months of the year. That was an increase of 27 percent from the previous quarter and up 35 percent from the first quarter of 2006.
California logged 80,595 such foreclosure filings during the first quarter, more than any other state and 18 percent of the national total, according to RealtyTrac. The company ranked San Diego County 30th in such activity among the nation’s 100 largest metro areas, with 6,310 filings reflecting various stages of foreclosure.
While rising, foreclosures remain only a fraction of the home-loan market.
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