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ISSUE: Foreclosures increase in 2012
OUR VIEW: Buyers, lenders need workable solutions
This year, foreclosures on Hardin County properties are expected to climb to as many as 400, up from 216 last year.
That’s not necessarily an indication that mortgage defaults are up in 2012. Rather, holds on foreclosures and a moratorium in some instances because of lenders’ and mortgage servicers’ documentation problems kept the number of foreclosures artificially low in 2011.
In several states, mortgage providers were accused of using illegal affidavits and there have been numerous reports of homeowners making payments under trial modification plans, waiting for permanent modifications, who lost their homes to foreclosure anyway.
There are indicators that some at-risk homeowners have found relief. Last week, the first progress report on the $25 billion settlement with the five of the country’s largest banks — Bank of America, JP Morgan Chase, Wells Fargo, Citi and Ally — was released. About $20 billion of that is dedicated to consumer relief.
From March 1 to June 30, 477 Kentucky homeowners received $14.1 million in relief such as restructured loans. Most of the relief, about $9.3 million, came in the form of short sales for 206 borrowers. And 84 families found relief through refinancing mortgages that were greater than the value of their home, with an average interest rate reduction of more than 3 percent.
Kentucky’s portion totaled $58 million, with more than $38 million to be used for consumer relief and $19.2 million spread among agencies that create affordable housing. It provides relief or legal assistance to homeowners facing foreclosure and redevelop vacant properties to reduce blight.
The report is a piece of good news in the slow recovery of the housing and credit markets. It’s a three-year agreement and in its first four months, a significant amount of money has made it to struggling borrowers. However, the short sale figures are concerning, as a goal of the settlement is to keep people in their homes.
The banks recieve credits toward their obligation based on the type of activity. For example, they recieve 20 to 45 cents on the dollar for completed short sales. So, in the end, the figures will total more than $20 billion in consumer relief and the recent report doesn't indicate what percentage of the obligation has been met.
At the federal level, in 2009, Americans heard the Home Affordable Modification Program was expected to help 3 to 4 million homeowners. More than 900,000 have been helped, according to program reports issued early this year. Hitting the original goal of the program has all but been written off. Eligibility has been expanded and the application deadline has been extended until the end of next year, though.
Hardin County was spared the worst of the housing crisis. While homeowners in other parts of the country were more likely to face upside-down mortgages with no hope for equity, home values in Hardin County did not plummet. Today, prices remain reasonable.
Still, foreclosure figures from the Hardin County Master Commissioner indicate local home and business owners have taken some licks.
Foreclosures are hitting more expensive homes. A few years ago, a home sold at foreclosure action typically was valued at about $100,000. Now, homes worth three or four times that are being auctioned.
And at the auctions, there’s rarely a third-party interested. Commonly, the bank that owns the mortgages puts in the only bid. A lack of bids might not mean a lack of interest, either. It simply may mean a lack of means as credit has tightened and financing has become harder to come by.
Despite disappointment in the national housing market, homeownership is still a key to personal and community prosperity. Recovering to historically normal foreclosure rates is important for everyone with a home, a business, a job or any other stake in the Hardin County. Remember, not even a free-and-clear homeowner is immune to the consequences of foreclosures.
Programs available to those struggling must be accessible and easy to use. The money is there but it helps no one if the adequate business infrastructure and points of contact aren’t there.
Borrowers have responsibilities, too. They must be realistic about their financial health and liabilities. Only the payer truly knows what he can afford — not a loan officer, not a relative and not the Joneses.
And borrowers in trouble have a responsibility to seek out help. While some assistance is available, no one is going to bring it to your door.
The editorial represents a consensus of The News-Enterprise editorial board.