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Archive for Sunday, July 20, 2008

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Mortgage crisis creeping into town

July 20, 2008

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Chris Earl, agent for Stephens Real Estate, is representing the owner of a home that has been foreclosed on, and now is going through a waiting period in which the owner can buy it back by satisfying the debt, plus fees and interest.

Chris Earl, agent for Stephens Real Estate, is representing the owner of a home that has been foreclosed on, and now is going through a waiting period in which the owner can buy it back by satisfying the debt, plus fees and interest.

Compared with May 2006, sheriff's sales of foreclosed homes are up more than 60 percent.

Compared with May 2006, sheriff's sales of foreclosed homes are up more than 60 percent.


The phone will stop ringing soon in an east Lawrence home. For the past few months, it has rung four, maybe five times a day.

It's collectors who are calling, always with the same question: When will the homeowner catch up on missed mortgage payments?

Her answer is always the same. She doesn't have thousands of dollars to make good on the loan.

But in recent weeks, something has changed.

Her house now is slated for a short sale, meaning a buyer will purchase the house for slightly less than what is owed on the mortgage. The money goes straight to the bank.

After purchasing the home 10 years ago with $20,000 down, the 72-year-old woman will walk away with nothing. She and her two cats will move into a low-income apartment. Her 50 years of home ownership have ended.

The woman, who didn't want to be named by the newspaper, had taken out a mortgage from an out-of-state company when she first bought the home. A few years later, she took out a second mortgage to cover car and home repair costs.

When she retired, 50 percent of her income went to paying off these mortgages. About a year ago came more unexpected car repairs, medical bills and home fixes. Her house slipped into pre-foreclosure status.

"I just got behind trying to pay everything," she said.

A steady stream

This woman is one of many who have sought help from Housing and Credit Counseling Inc. Counselor Anju Mishra said Lawrence continued to see a steady stream of homeowners defaulting on mortgages.

Douglas County hasn't seen the steep increase in foreclosures more common on the coasts - and even in Topeka and Kansas City.

Compared with the same time last year, the number of homes that are foreclosed on and sold at sheriff's sales has climbed by 25 percent in the first five months of 2008. And, for the same period in 2006 - long before the mortgage crisis mushroomed - the number of sheriff's sales has increased by more than 60 percent.

A total of 55 homes were auctioned in Douglas County from January to May.

Many say it has yet to have any effect on Lawrence's housing market.

Local real estate appraiser Jeff Hatfield said while some parts of town are overbuilt and had seen a stagnation in prices, values aren't declining. And foreclosures aren't being factored into the selling prices of neighboring homes.

"We have got a very resilient local economy," Hatfield said.

Tightening credit

However, some Lawrence homebuyers are feeling the effects of the national foreclosure problem.

Rebecca Buford, executive director of Tenants to Homeowners Inc., said first-time homebuyers now had fewer lending options.

The disappearance of risky loan products keeps homeowners away from what could turn out to be messy financial transactions. However, those same loan products did help some first-time buyers, Buford said.

"It really does hurt people who maybe are able to use those financial options wisely, but suddenly they don't have that option any more and now they have to come up with 4 to 7 percent down. It's another obstacle for first-time home purchases," she said.

Rick Jackson, first vice president at Capitol Federal Savings Bank, said conservative lending practices kept his institution safe from the rash of foreclosures experienced in the subprime market. However, nationwide underwriting standards mean borrowers must have lower debt-to-income ratios and higher credit scores.

Now getting a loan with a 620 credit score (formerly considered the bottom edge of good credit) is "very tough," Jackson said.

And, Robert Baker, a counselor at HCCI, said that even with a credit score of 680, extra closing costs could be added on to loans or some kind of down payment may be required.

At the same time that higher credit scores are needed to get into loans, Buford said many prospective homebuyers she sees are carrying high debt loads - as much as $800 a month.

"A lot of Realtors would say it is much more of a buyers' market than it was two or three years ago because they are not selling as quickly, there is not as much demand. Now you can say that is partly because people don't have access to these easy loan products and people are in more debt," Buford said.

Finding help

The increase in foreclosures has spurred new lines of work. Rob Lang, a Realtor, now is a certified foreclosure prevention specialist. In a role reversal, Lang wants to help people keep their homes, not buy new ones.

For those on the verge of foreclosure, Lang said he would work with lenders to determine whether loans could be modified and, if not, to help with a short sale.

People continue to wait too long before seeking help, said Baker, who counsels homeowners through HCCI, a nonprofit organization. And, he noted the foreclosure problem hasn't abated, forcing people into tough choices.

"We are seeing people give up the house before giving up the credit cards. You need credit cards for gas in the tank and to buy food," Baker said.

Comments

BarbaraAnnJackson 5 years, 8 months ago

Be WARNED about mortgage lenders' false IRS form 1099-A's or 1099-C's. Here's the gist of what I wrote, and a link to my entire statement:http://www.lawgrace.org/2008/08/08/my-august-8-2008-statement-to-the-louisiana-secretary-of-state-office-of-financial-institutions-concerning-wells-fargo-irs-and-mortgage-frauds-sham-foreclosures-and-judicial-collusion-and-national-app/GE Capital Mortgage Services, Inc., became defunct in year 2002 when it merged into GE Mortgage Services, LLC. It is impossible for foreclosure auction to have LAWFULLY been carried out in 2005 on behalf of non-existent GE Capital Mortgage Services, Inc. Also, it is NOT POSSIBLE in 2005 for Wells Fargo to continue being the "mortgage servicer." Further, if my property was acquired by GE Capital, there is NO LAWFUL REASON for the 1099-A to exhibit Wells Fargo's name. Using defunct GE Capital's identity, debt collector __, fraudulently seized and flipped my property for over $80,000. And contrary to that1099-A, the Fair Market Value was not $12,000. The letter failed to state that I initially acquired my residence property in 1993 through AmSouth Bank. For home improvement in 1999, I refinanced it with GE Capital. I had equity in the property, and I never had a subprime loan. (Marriage failure caused me financial ruin; )A lot of foreclosed former property owners will one day discover there is a 1099-A or a 1099-C for which the IRS wants answers. If that 1099 is replete with false information, there could be severe tax effects and a lot of needless untangling to be burdened with. --Law & Grace, Inc www.lawgrace.org>

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acg 5 years, 9 months ago

I know three people that have purchased new homes in West Lawrence in the last 5 years. Within 2 years of purchase, my friend's deck was rotten in places and was too dangerous to walk on. Another friends basement walls were cracked and leaking within 3 years and yet another friend's place has settled so much she has 1/4 gaps around her windows in some rooms. Those new west Lawrence homes are total crap. But that's what happens when you use substandard labor and substandard supplies. You get a piece of cookie cutter crap that sits right next to another piece of cookie cutter crap and while you're shelling out that fat mortgage, its falling apart around your ears.

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jafs 5 years, 9 months ago

And, while I agree that people should be much more careful about what they sign, there seems to be quite a bit of evidence that there has been a lot of fraud and collusion involved in the current housing mess.

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jafs 5 years, 9 months ago

An interesting statistic:In the last 35 years, there have been only 4 in which our government has had a surplus rather than a deficit.Those 4 years were the second term of President Clinton.

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beatrice 5 years, 9 months ago

Sigmund, instead of worrying about the bill from a healthcare program that doesn't exist, why aren't you concerned about the bill coming due on the war in Iraq and the tax cuts given to the uber-wealthy as our national debt has doubled to more than $9 trillion.Lets look at the current debt: If the debt starting at one dollar escalated at the speed of light, we are now nearing two light years of debt. That is more than $35,000 for every person in this country. And you are worried about something that hasn't yet happened? Time to think about the here and now. The cost of the war in Iraq and the cuts given to the wealthy during the war far exceeds any healthcare changes that might come at some point in the future.

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HMcMellon 5 years, 9 months ago

Sigmond, my cynicism went way over your head. I think most readers understand that I am against what the Neocons have done to my Party and my Country. It is not just the big banks who are staying in business due to our taxes, nearly every dollar we send to Washington ends up in the hands of one big corporation or another. In fact, most major corporations nowadays exist partly or solely on taxpayer funds. Very little of it comes back to those of us who are footing the bill. Even at the local level, a big part of our taxes go to pay for infrastructure that subsidized all the development during the past several decades. We have seen corporate welfare at every level and are now paying a further price at the gas pump and grocery store (as if subsidizing all this waste, fraud and abuse were not enough!)Your sidetrack to xbusgy's excellent comment was over the top. The total cost of health care in most countries is a fraction of what it is here, and it is better care. We are wasting hundreds of billions in tax dollars each year propping up our so-called "free market" system. All we really do by continuing the status quo is make sure all those pharmaceutical and insurance company executives keep taking home those multi-million salaries and keep reaping the windfalls from those massive tax cuts that Senator Roberts and Jim Ryun gave them. Free markets are great when they are free. Ours is not free. Today, the energy companies, pharmaceutical companies, defense contractors and other big monopolies ARE the government, and most of them could not exist without government handouts. America has become a socialist state, run by a politburo of monopolies who own most members in Congress. Socialism is also alive and well in Lawrence, Kansas. Those who are heavily invested in these tax-sucking monopolies promote this socialistic, so-called "free market" at the local level, while looking for ways at the local level to increase their own bottom lines with local tax dollars.In general you will find that those who support commie-lovers like Roberts and Ryun, are also heavily invested in the oil companies and other corporations that receive subsidies voted in by Roberts and Ryun. They often are also the ones who defend a similar kind of corporate welfare at the local level by putting shills on the City and County Commissions who will vote for the City to pay infrastructure costs for development boondoggles they bring before them.

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HMcMellon 5 years, 9 months ago

xbusguy, good point. The terrible example being set by Senator Roberts and the other borrow-and-spenders in Washington makes people feel that going deep into debt is the right thing to do.Our elected representatives have created a vicious downward spiral: Federal borrowing devalues the dollar, As a result, it takes more dollars to buy a barrel of oil, which causes increased costs, which causes increased borrowing, and on and on. Those who were talked into these bad mortgages are in even worse shape because they don't have a Communist China or a Saudi Arabia who will keep loaning them money. Republicans are supposed to stand for fiscal responsibility. Neocons like Roberts and Ryun (while he was in office) kept increasing the size and scope of government, which caused Federal expenses to skyrocket. Even worse, much of the spending was connected with waste, fraud and no bid contract. In return, those who received all this corporate welfare now pay for TV ad spam to get their sugar daddies re-elected.

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Sigmund 5 years, 9 months ago

HMcMellon (Anonymous) says: "I love living in a country where nearly every big bank and monopoly is making money because of taxpayer funds." and then, oddly ... "Speaking of Communism, isn't it also wonderful that the funds to bail out the banks and prop up the monopolies is being borrowed from Communist China and totalitarian Saudi Arabia?"First most banks are struggling and their shareholders are paying the price for the bad loans they made. Second, very few banks have been bailed out but when it has happened the "bail out" was not paid to the investors/owners in the bank, it is the depositors that get bailed out. Third which monopolies are you referring too? And finally, growth goes in cycles both nationally and internationally. Nothing goes up forever nor down forever. That will be true for the US and for China.fundamental (Anonymous) says: "The article says the woman will "walk away with nothing," presumably meaning that she has lost her initial $20,000 investment. This is not exactly true. She used some of that initial investment when she took out the 2nd mortgage. If she doesn't tap the equity with that 2nd, she's probably not in the situation she's in. People can't use their houses like an ATM forever. Once you leverage your equity, you lose much, if not all, control you have where your property is concerned. Having used some or all of her equity, she was at the mercy of the market. Now that the market has stagnated, she's unable to sell it for what she owes. It's unfortunate and sad, but blame ultimately lies with the homeowner. Sympathy is warranted, but she is not blameless in this."Absolutely true and goes to prove that one can live beyond their means in East Lawrence as much as anywhere else. Nearly the same thing happened to my grandmother. If my brother and I hadn't stepped up and paid her mortgage and pay for her living expenses she would have been forced to move. Ironically, in order to qualify for some government assistance the government itself forces you to spend down your savings and home equity first.xbusguy (Anonymous) says: "Live within your means, pay off debt first, save first, spend later, 2+2 will always = 4:.. These oldies but goodies hold true, not just for us, but for our elected officials as well."No chance of that happening soon. Can't wait till get the bill for Government Health Care. Until the US government can live within its' budget you are better off investing overseas.

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Chris Ogle 5 years, 9 months ago

Live within your means, pay off debt first, save first, spend later, 2+2 will always = 4..... These oldies but goodies hold true, not just for us, but for our elected officials as well. .

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fundamental 5 years, 9 months ago

One quick thing on this story. The article says the woman will "walk away with nothing," presumably meaning that she has lost her initial $20,000 investment. This is not exactly true. She used some of that initial investment when she took out the 2nd mortgage. If she doesn't tap the equity with that 2nd, she's probably not in the situation she's in. People can't use their houses like an ATM forever. Once you leverage your equity, you lose much, if not all, control you have where your property is concerned. Having used some or all of her equity, she was at the mercy of the market. Now that the market has stagnated, she's unable to sell it for what she owes. It's unfortunate and sad, but blame ultimately lies with the homeowner. Sympathy is warranted, but she is not blameless in this.

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HMcMellon 5 years, 9 months ago

Sigmond asks, "How can you bail out the borrowers without bailing out the bank they owe money too?" I love living in a country where nearly every big bank and monopoly is making money because of taxpayer funds. The World hasn't seen such a magnificent program of socialism and centralized government since the Politburo in the old days of the Soviet Union. I'm sure it will work better here than it did over there.Speaking of Communism, isn't it also wonderful that the funds to bail out the banks and prop up the monopolies is being borrowed from Communist China and totalitarian Saudi Arabia? It is fantastic to know that all we are spending for oil and cheap Chinese goods is being loaned back to us. And being able to pay them interest on all those borrowed funds from now until forever is another great benefit. Thank you, Senator Roberts.And thank you, Sigmond, for all you have done to raise our taxes for development here in Lawrence. Please don't worry, if development continues to go sour here, development is booming in China. You can still live off our tax dollars over there since a big chunk of our federal budget is interest on the money Senator Roberts and other commie lovers borrowed from them.

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newsreader 5 years, 9 months ago

Why it is the governments fault? These people messed up, didn't read the fine print, or whatever... I bought a house i could afford, but no government program comes to help me out... just people that live above their means.

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Pilgrim 5 years, 9 months ago

merrill (Anonymous) says: So why do officials continue to approve housing projects anywhere that will further drop the value of existing homesthus will create a need to increase taxes and fees further because the bedroom community has no way to generate revenue to pay its' bills?*******The city doesn't need to increase taxes and fees, Richard. It needs to find ways to live within its existing income. Like dumping that $3 million per year black hole for tax dollars, the empTy.Get back to basics. Police, fire, water, wastewater, and streets. Everything else is not a core need, and can stand to be reduced or eliminated.

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Sigmund 5 years, 9 months ago

"Compared with the same time last year, the number of homes that are foreclosed on and sold at sheriff's sales has climbed by 25 percent in the first five months of 2008... A total of 55 homes were auctioned in Douglas County from January to May."So that is an increase of what, 12 houses in 5 months, an increase of a little over 2 houses per month? I guess that qualifies as a "crisis" and a "meltdown" requiring "government bailouts" these days. Obviously it qualifies as front page headlines from the news media.

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Sigmund 5 years, 9 months ago

HMcMellon (Anonymous) says: "Also as soon as Senator Roberts bails out more banks and financial institutions, the banks can go back to loaning money to JOCO families who don't qualify for regular loans. That way they will have incentives to move to Lawrence and start complaining about the SLT."How can you bail out the borrowers without bailing out the bank they owe money too? Anyway don't worry too much about Johnson County they are doing just fine without you. They have better schools, better roads, better bike trails, better buses, better libraries, and better jobs. All the things that Lawrence desperately wants but can't afford. Now it is true that Johnson County doesn't have a domestic registry and as many quaint street people and homeless as Lawrence so there is some room for improvement there.Lawrence would be better off if it focused on actually growing this community to the point where it has a tax base that can afford all the things you want.

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RockFockingChockFockKu 5 years, 9 months ago

I made a ton of money from 2001 to 2005 in the housing market in Lawrence, Topeka and surrounding small towns. I bought and sold 17 properties and put tens of thousands in my bank account and I got out of the entire housing market, including all mortgages before it crashed last year. Wanna know how? Because I followed the market and listened to the experts, oh I'm sorry the conspiracy theorists as you liberal idiots call them. Ha ha. My cars are paid for, all 4 of them, NO bank mortgages, I buy my properties from individuals with no bank involved, etc. Good luck suckers..............

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Sigmund 5 years, 9 months ago

twaldaisy (Anonymous) says: "Well, the westside's houses are just as crappy and overpriced, even if they are newer. Yes I know because I live in one, but not for long. Also you are butt up against your neighbor in your newer home and can hear your neighbor's t.v. As for maintenance, just because the house is newer doesn't mean it is built better."Sure there are exceptions like yours on both sides but in general newer homes are much less likely to need new plumbing, electrical, foundation, roofs, and are more energy efficient with better insulation than older construction. Newer single family homes are much less likely to have been bought and sold by landlords as rentals (or in neighborhoods full of rentals) with all the abuse that implies. Newer homes are much more likely to be in better neighborhoods, with better schools, roads, utilities, and less crime.Now lots of people like the older homes and more power to them! They love a challenge and have a ton of money, time, and tools to deal with all the issues. My comments were directed at merrill who can't understand that even though there is square feet for sale on his Eastside, the Prospect is that they aren't going to be nearly as attractive to a very large number of buyers who find more advantages to the Westside than disadvantages. Just because a house on the Eastside goes unsold doesn't mean there isn't demand for homes on the Westside. It is the same mistake the PLC/GRA make with retail square feet. Real estate is unique and there are no two properties that are identical. Just because no one wants to move into the old Food-4-Less does NOT mean a new grocery store on the Westside shouldn't be approved and built, for instance.

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HMcMellon 5 years, 9 months ago

Our City and County Commissioners need to raise taxes to pay for more infrastructure for more housing developments to attract more commuters. While they are at it, they also need to raise our taxes to help developers build more sorting warehouses down in the flood plain. Those warehouse are essential for storing and sorting all those goods being shipped out of Mexico and China. Sure, both development ideas are based on cheap fuel, but our brilliant commissioners know that the price of gas and diesel will soon drop below $1.00 per gallon. Also as soon as Senator Roberts bails out more banks and financial institutions, the banks can go back to loaning money to JOCO families who don't qualify for regular loans. That way they will have incentives to move to Lawrence and start complaining about the SLT. The commissioners also need to give sorting warehouse tax abatements to make them want to locate on our best farm land. We will never need that farm land for food anyway since gas is always going to be cheap, and we will always be able to bring in salmonella-loaded food from Mexico and Chile. Those simple steps will make housing for more commuters and sorting warehouses viable economic alternatives (as long as we taxpayers don't mind subsidizing them).

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le 5 years, 9 months ago

all this cuz you idiots voted for a scrawny li`l vietnam dodging wannabe cowboy...for prez...housing is outta control..gas prices outta control..and a war he started outta control..way 2 go you G.O.P. ruckin fetards...and the bankers are planning a lavish vacation with the 20,000 + the elderly woman handed over 2 them...ah..the american way ...wine em ...dine em..then fine em....there is a special place reserved for you kinda people (G.O.P. & bankers etc. etc.) in hell....I think you will find Diablos accomadations 4 you not as comfy as ya got it here on earth....so enjoy it while you can.....yer gonna luv havin that red hot pitchfork rammed up yer @ss....hee !Burn baby Burn!

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twaldaisy 5 years, 9 months ago

Well, the westside's houses are just as crappy and overpriced, even if they are newer. Yes I know because I live in one, but not for long. Also you are butt up against your neighbor in your newer home and can hear your neighbor's t.v. As for maintenance, just because the house is newer doesn't mean it is built better.

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Sigmund 5 years, 9 months ago

merrill (Anonymous) says: "So why do officials continue to approve housing projects anywhere that will further drop the value of existing homes"Because no one wants to pay for the over priced crappy homes on the Eastside, but there is demand for newer homes out West. At current prices your square feet on New York street that is for sale just isn't as attractive as the same square feet out West where the houses are newer, don't require nearly as much maintenance. and are in better school districts just to mention a few advantages.

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Chris Ogle 5 years, 9 months ago

It is too bad that when people in the community need a break, our Taxes go up.... Wake up Commisioners!!!

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bondmen 5 years, 9 months ago

Saving for a down payment now in order to purchase a home later - what a novel idea! ..Who'da thunk it?Government policy to promote home ownership in America via premeditated Congressional action and Federal Reserve Bubble Policy forcing short term interest rates to excessively low levels for extended time periods; the financial alchemy and greed (commissions and higher yields) of Wall Street along with mom and pop (and larger) mortgage companies greasing the financial wheels - top all this off with a gullible public (look at the Obamanites) who didn't bother to read the fine print (that's where the dirt and important details are hidden in plain sight) and you have the home mortgage crisis in America. We didn't even mention real estate appraisers, homebuilders, condo converters, other developers and financial institutions who purchased bogus paper!By looking closely at all those who are involved, how could anyone possibly conclude anything other than it's nobody's fault but our own? Let's take responsibility for our mistakes, pick up the pieces and carry on! If you can't do that then you meet the true definition of a whiner.

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chucknoblet 5 years, 9 months ago

Remember, McCain's chief Finance advisor (who resigned from McCain's campaign this week) says this lady is just a whiner.

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gccs14r 5 years, 9 months ago

If we had universal healthcare and a public transportation system that worked, this woman probably wouldn't have lost her house. OTOH, buying a house with a mortgage at 62 probably wasn't the best idea, either.

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Richard Heckler 5 years, 9 months ago

So why do officials continue to approve housing projects anywhere that will further drop the value of existing homesthus will create a need to increase taxes and fees further because the bedroom community has no way to generate revenue to pay its' bills?Go figure!

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