In Face of Foreclosures, NAR Educates Borrowers About Adjustable-Rate Mortgages
A recent report from RealtyTrac.com showed a national foreclosure rate of one new filing for every 961 U.S. households, the highest monthly foreclosure rate reported so far this year.
Such figures have alarmed the National Association of Realtors, which says it is concerned over the rising rate of defaults and foreclosures occurring in many areas around the country. The probable culprit is lack of understanding over the risks of taking out exotic home loans, or even more basic adjustable-rate mortgages.
In a conference call yesterday with the Center for Responsible Lending and the Leadership Conference on Civil Rights, NAR President Pat Vredevoogd Combs urged consumers to make sure they understand the risks and rewards of all types of mortgages before they make a decision on a loan.
She also advised consumers to consult with a Realtor and to participate in mortgage education programs sponsored by Realtors before they buy a home.
“We are committed to helping people buy - and keep - the home of their dreams, and an educated consumer really can make the best decision,” said Combs. “Realtors help Americans achieve the dream of homeownership. We work to ensure that home buyers have access to the proper information so they can fulfill their homeownership goals.”
Foreclosures are not only a disaster for families but also for communities. Problematic home loans are often made in concentrated areas, and high foreclosure rates of single-family homes can seriously threaten a neighborhood’s stability and a community’s well being.
“Foreclosures can lead to high vacancy rates, which in turn, can cause all homes in the neighborhood to lose value,” said Combs.
Says Ralph Roberts, author of Flipping Houses For Dummies, points out there were over 1 million homes foreclosed in 2006, and currently, there are over 6 million families that are on the way to foreclosure or in foreclosure. That means they are over 60 days behind in their loans.
It’s difficult not to blame ignorance regarding adjustable-rate home loans for the problem.
“There are a lot of reasons why more homes are in foreclosure,” he says. “The economy has slowed but homeowners have used their homes as ATMs for way too long, and the ARMS are increasing risks tremendously. We’ve also had taxes go up so if homeowners are short in their escrow there’s more money going toward the shortfall.
ARMs are adjusting, the Federal Reserve affects credit cards and ARMs, not fixed-rate loans that are already in place, so I’ve seen payments go up as much as 10 percent a year … It’s almost a fraud to put people into these ARMs to qualify them.
“People in foreclosure don’t know where to turn. Not all have good options but sometimes they can sell, renegotiate, go into bankruptcy, and there are options. As Realtors we need to work on short sales (where the mortgage lender will take less than the principal amount due to declining value.) We need to start embracing foreclosure as a niche and learn as much as we can. It’s a growing market.”