Delaware Mortgage Lenders, Applicants Must Share Responsibility

The Wilmington (Del.) News-Journal opines that if you live in the nation’s second-smallest state, chances are that you may know someone who has or will soon lose their home to foreclosure.

Foreclosure filings in Delaware for 2006 increased by 36 percent over the previous year in Delaware. Nationwide, foreclosures jumped by 42 percent, the research firm RealtyTrac notes.

Several factors are responsible, but the most troubling is the ignorance of home buyers about the risks involved in home loan programs that are “too good to be true.”

Until the end of the housing boom early last year, too many Delawareans were enticed by adjustable-rate loans that can lead to higher mortgage rates - which means higher monthly payments - without notice.

Across the U.S., interest-only mortgage programs also have been a lure for those who believe they can save more money now by paying only the interest on the mortgage and make a scheduled balloon payment later.

The current housing decline has flattened many prices, so some troubled sellers no longer are thinking about making a sizable profit.

For those who want to hold on to their lifelong dream of home ownership, mortgage refinancing is more troublesome. The repayment penalties on ARMs don’t make this an option.

And the subprime [or bad credit home loan] lenders, who made a killing with mortgage refinancing programs over the past five years for buyers with poor credit, are losing their backing from investors who are disenchanted with the rapid rate of foreclosures.

These get-a-house-quick programs have done quite a smear job on the stability of longer-term 30- and 15-year mortgages that offer, for most people, the best chances of being able to maintain a savings account through economic highs and lows.

Thankfully, consumer advocates like the Delaware Community Reinvestment Action Council (DCRAC), are ramping up their public presence to warn and assist current and prospective mortgage applicants with marginal credit.

Just the same, at some point that gut instinct that a 1 percent interest rate on a $500,000 Delaware mortgage is too good to be true needs to be heeded. Be smart.

SOURCE: The News-Journal