Upside Down Mortgage

Posts Tagged ‘economics’

Predatory Lending Housing Crisis

Recently homeowners in my corner of Harlem held a soiree in someone’s garden. We form a warm group of 130 people who represent the changing neighborhood — black old-timers with a growing number of whites. Everyone brought a dish or bottle and the talk over the macaroni was cheerful. Did anyone know a good contractor? How did the Little League do this summer? A door prize, a box of Godiva chocolates, was awarded to the longest resident — Dina Morrison, 93, who has lived with her older sister in the same place for 67 years.  No one mentioned foreclosures.

Foreclosure crisis? What crisis? Not in Harlem.

Harlem is full of the sort of people who are losing their properties all over New York City, namely little old ladies and working-class African-American families. But the nation’s black capital has been insulated from the sub-prime meltdown by the very thing usually blamed for destroying communities of color — gentrification.

While the dreaded G word has priced some residents out of the ‘hood, we’ve seen a paradoxical upside. The house values that have skyrocketed over the past 15 years in Harlem scared off many predatory lenders who targeted other black areas. These $1-million-plus price tags have also given homeowners who are struggling to keep apace with mortgage payments the option of selling out before the bank closes in.

“There tends to be a tight connection between property values and foreclosures,” explains Josiah Madar, from the Furman Center for Real Estate and Urban Policy at New York University.

He and other experts understand little about the mechanisms of abusive lending, other than the stark racial component.  Eight of the ten top neighborhoods hit by foreclosures in the city are overwhelmingly non-white. A map representing the worst afflicted areas — among them Bedford-Stuyvesant, East New York, North Bronx, South Jamaica — says it all. Each filing is a dot, and the aforementioned areas resemble solid metastasizing cancers, with several hundred foreclosures each.

Yet the area comprising Hamilton Heights, which claims some of Harlem’s most prized Victorian brownstones, had just eight foreclosure notices, so few one can discern the individual specks.

It appears that the conmen who besieged other black neighborhoods steered away from Harlem, wagering that anyone who lived in a valuable townhouse would be too financially sophisticated for their tricks. Unlike in the outer boroughs where the racial demographic is similar but house values lower, Harlem residents didn’t report a barrage of flyers pushed through mail slots that promised zero interest rates. The scam artists who solicited people to over-borrow just didn’t approach Harlem as aggressively. Take a look at the numbers. Only 0.8 percent of all home-purchases mortgages in the Hamilton Heights area in 2006 were sub-prime, versus 34 percent in Bedford-Stuyvesant and 39 percent in East New York. (EDITORS — These are the latest available figures.) Refinancing loans from risky lenders were likewise lower here.

“It was all a matter of the assumptions of the predators,” said Dwayne Jones, lending director of the Parodneck Foundation, a housing advocacy group. “They did not come to Harlem.” He credits the large concentration of organizations like his, as well as social networks like our homeowners’ association, for raising awareness among less savvy member of the community.

Those Harlemites who did borrow more than they actually owned could take the money and run. That’s what our next-door neighbor did. Literally a week before the bank jumped to possess her 1888 row house, she sold the property for a nice packet to a white family and found something cheaper. Granted, it’s disruptive to move but she was spared financial ruin.

The added positive effect is that properties like hers do not sit vacant during New York’s long foreclosure process. We see a vicious cycle in foreclosure-hit areas, where empty houses sink the cost of those nearby. As anyone who lived through Harlem’s dark ghetto days knows, no one wants to live next to a boarded up building that tempts drug dealers to loiter. Moreover, few people want to buy a boarded up building with a leaking roof, which is often the case as banks rarely maintain the properties they seize.

This is not to say that gentrification is great for everyone. Of course it has a bad side. Most Harlemites rent apartments and do not dwell in fancy mansions. The locale is losing its status as the last outpost of affordability in Manhattan. Those suffering are victims not of the white professionals who buy shells and fix them up. No, the destructive forces are the big developers who scoop up rent-stabilized apartment buildings and then try to force out tenants by doing improvements and jacking up the price. Some of these investors borrowed more than the value of their properties, and now risk default. Then what happens to the residents living on the premises?

For the time being, though, homeowners like Dina Morrison are in a good place. There’s talk among the homeowners of a jolly Christmas party, just like every year of plenty.

©2008 Judith Matloff

About the Author:

Judith Matloff is the author of Home Girl — Building a Dream House on a Lawless Block (Random House.)

Article Source: ArticlesBase.com – How Gentrification Saved Harlem

Remarks on predatory lending

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Mortgage Fraud Stories

Question: Any probs w/ Colorado State Business Group/CSBG/Core Realty? I’m sgl mom w/2 kids!! I WANT 2 KEEP OUR HOME!

Please let me know if you have! I need similar stories! I’m in the middle of trying to get SOMEONE to look into the fact that Im a victim of fraud under a rent-to-own scheme by Colorado State Business Group aka CSBG aka Core Realty. There’s alot of web info about rise in mortgage & appraisal fraud & articles on how all these various politicians intend to do something about it, meanwhile, I cant get ANYone to look into my particular case. I “bought” a house from CSBG (Chris Stiebler, Andy Klein, owners) which I was to rent from them for 1 year, paying 1% of THEIR purchase price (claims paid 140k but I found out they paid 112k) which was $1400/mo. (I was to get 1/2 back for down pymnt- DIDN’T).At the end of the year I was to buy the house from CSBG for 15% above THEIR purchase price OR the appraised value, WHICHEVER WAS LESS. The appraiser THEY hired appraised at 165k. I found out @ refi later that appraisal was inflated & value @ the time was closer to 130K. I WAS SCREWED! HEEEEELLP!

Answer: Wow. That is so unfortunate. I would love to help you, but you say you want to keep your home. What is stopping you from keeping your home? I need more information. For future references, use your own appraiser or one that you both agree on...

Real People, Real Stories: Avoid Foreclosure Rescue Scams

Subprime Meaning

Question: What does Subprime Mean? and has anyone seen this….?

What is subprime? and prime minus half (or wut ever its called)? has anyone else seen this vid. So is Obama Bad?

http://www.youtube.com//watch?v=H5tZc8oH–o

and is fannie and freddy….everywhere in the us or just in some areas.

Answer: Subprime means that the loan does not meet normal criteria, that there is a greater risk that it will fail.

Justin OBrien: Future of Financial Regulation

Subprime Video

The current mortgage rate credit crisis is a golden opportunity for real estate investors to turn a quick profit, provided they’re looking in the right areas of the country. Rising foreclosure rates are quickly becoming a problem for banks and communities across the country.

The President, Congress and the Federal Reserve working to make an amicable rate freeze on Adjustable Rate Mortgages to slow the problem. Yet, even with this effort a total of 437,498 foreclosures were filed in the first quarter of 2007. According to Realtytrac.com, this is an increase of 100,000 foreclosure filings compared to the first quarter of 2006. Imagine what the first quarter of 2008 holds for the real estate investing market!
Savvy business investors interested in pre foreclosure investing can turn these rising foreclosure rates into a golden opportunity. Investors can buy a record number of distressed properties in short sales deals, and flip them with minimal renovations for a high return.

States with the Highest Rates of Foreclosures
Areas such as Nevada, Colorado and Georgia are ripe with opportunities for pre foreclosure investing. According to realtytrac.com in 2007, these states reported an average of one foreclosure filing for every 75 households. That is triple the national average of pre foreclosure properties.

New real estate investors can find these pre foreclosure opportunities in even greater numbers in California, Florida and Texas. According to Realtytrac.com, these states have reported the largest totals of foreclosure filings in the country. California alone reported 80,595 foreclosure filings in the first quarter of 2007. This is double the number of foreclosures in the state with the second highest numbers of foreclosures, Florida which came in with 45,156 foreclosures in the first quarter.

Who’s to Blame?
Many real estate investing experts blame the rising foreclosure rates on the practice of subprime lending. Also known as near prime or second chance lending, this practice involves giving higher rate loans to homeowners with spotty credit, lower incomes and other problems that preclude them from better home mortgage loans. Naturally, these homeowners will have a harder time keeping up payments on their property mortgages.

This unprecedented number of foreclosures has created a problem for the banks. Banks do not want to have foreclosed properties on their portfolios. They simply do not have the time or interest in maintaining these homes until they can be sold. In addition, banks must reserve enough cash to cover that mortgage should it foreclose entirely in every single one of those some 400,000 pre foreclosure properties in default. That’s millions, even billions of dollars that the banks can’t use to make their own profits on!

What it Means for Real Estate Investing?
As you can imagine the banks want to sell those properties, those mortgages or to have their homeowners to catch up bad loans. Investors can easily negotiate great short sales with the banks to pick up these pre foreclosures at a discount. Never before has pre foreclosure investing held so many opportunities for success.

Pre foreclosure investing is an excellent way to take advantage of these foreclosure filings. By negotiating with the banks on short sales deals you’ll be able to pick these properties before they are foreclosed on, and you’ll be helping the homeowner avoid bankruptcy.

Foreclosure rates are skyrocketing, and this is merely the first wave of a credit crisis that’s been looming for the past three years. As other credit products eventually adjust to realistic market conditions, the number of opportunities for short sales on foreclosed properties is going to increase. Being a savvy investor, that’s something you can capitalize on in pre foreclosure investing.

Learn more about protecting your short sale position at Realestateinvestor.com. We feature an instant network of investors, shortsalers and buyers for the real estate investor. In addition our real estate resources, tools, documents and videos are some of the most helpful one the web.

Colin Egbert is an experienced Real Estate Investor with plenty of short sale techniques to aid fellow investors in their quest to succeed and make huge profits. He’s the author of the ebook “Getting Started with Short Sales” providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.

About the Author:

Colin Egbert is an experienced
Real Estate Investor with plenty of short sale techniques to aid fellow investors in their quest to succeed and make huge profits. He’s the author of the ebook “Getting Started with Short Sales” providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.

Article Source: ArticlesBase.com – Pre Foreclosure Investing – Rising Foreclosure Rates are a Great Opportunity

Market Meltdown – An Elliott Wave Look at Subprime Sentiment

Mortgage Fraud Risk

Greed, ignorance, and good intentions are the various starting points for mortgage fraud. Whether a person is looking for a home to live in that’s nicer than he can legitimately afford, or he’s looking to flip a property to make a quick buck, mortgage fraud entails lying or hiding information from the bank to get more favorable loan terms.

There are two main types of mortgage fraud: “fraud for profit” and “fraud for house.” While “fraud for profit” schemes are fairly clear-cut in their dubiousness, “fraud for house” is often committed by people who aren’t aware of the seriousness of their actions. Some truly don’t think of what they’re doing as wrong.

“Fraud for house” is committed when a person falsifies her income or credit information in order to qualify for a home loan that she knows she couldn’t qualify for based on her true financial circumstances.

Oftentimes this type of fraud seems innocent—after all who’ll get hurt if I fudge the numbers just a little bit? However, as we’ve seen with the record number of foreclosures happening in recent years, too many people have gotten themselves involved with real estate deals that they simply couldn’t afford.

A single foreclosure can reduce the property values for everyone on the street, which can lead to entire neighbourhoods with slumping real estate values. Thus, one little lie on an application can have serious consequences: for the bank who never recoups their money, for the homeowners who lose their homes, and for the rest of the economy that takes a hit right alongside the real estate market.

“Fraud for house” cases commonly involve a buyer exaggerating their income on the application form, or in some cases, by getting financial aid from the seller without notifying the lender. This type of loan is known as a “silent second,” where the seller offers to help the buyer come up with the down payment, while keeping the bank in the dark. This is problematic because the bank gets a false picture of the buyer’s financial resources. The bank then authorizes a loan based on inaccurate information, and risks not ever getting their money back.

Another popular form of mortgage fraud involves what’s known as a “straw buyer” or a “nominee loan.” In this type of fraud, a buyer uses someone else’s credit and income information on their loan application. He may decide to pay a person to use their information, or he might steal somebody’s identity to get their data.

The person whose financial information is being used is known as the “straw buyer.” She is simply the buyer on paper, and has no intention of ever living in the home or of making the mortgage payments.

For the bank, this situation is very risky. There is a person that they don’t know that’s living in the home. They could have very low income or a poor credit history, which means that the bank’s chance of getting their payments is very slim. Fortunately, if the bank doesn’t receive its monthly payments, it’s within their rights to go after the straw buyer for remuneration.

Lenders check borrowers’ financial information for a reason. They want to make sure that you get a home that you can actually afford. Buying beyond your means can result in a financial disaster for you, and major losses for the bank. While you may have your eye on an upscale property, if it’s beyond your means, it’s beyond your means. Lying to the bank to get the financing you need is illegal and unethical, no matter how sincere your intentions were.

About the Author:

Complete Calgary real estate listings search: View all Southwest Calgary homes including Signature Park homes for sale. Access photos, virtual tours, neighbourhood info, maps and more at JustinHavre.com.

Article Source: ArticlesBase.com – “Fraud for House” Mortgage Scams

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