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December 09, 2007 12:50 am
How to avoid foreclosure in a state that's leading the pack
Homeowners across the nation are struggling to keep up on their mortgage payments, but few are having as much trouble as Hoosiers.
By Lisa Hurt Kozarovich
CNHI News Service
JEFFERSONVILLE, Ind. — Homeowners across the nation are struggling to keep up on their mortgage payments, but few are having as much trouble as Hoosiers.
Indiana ranks ninth in the United States for foreclosures, with one in every 196 homes being foreclosed on, according to RealtyTrac, which charts foreclosures across the country. Kentucky ranks 36th.
The company says that 45 of 50 states have reported increased foreclosure rates from 2006 to 2007, and that this fall’s foreclosure rates are the highest seen since it began tracking the trend in 2005.
In Clark County, foreclosures are up about 25 percent over last year, according to Ronald Hawkins, who arranges the auctions for the county sheriff’s office.
Most of the homes auctioned off, he said, were worth $100,000 and up, and usually a case of people “getting in over their heads.”
“It’s not usually the lower-end homes. We have some of those, but the majority are the more expensive homes,” said Hawkins, adding that homeowners with mortgages in the $900 to $2,000 range seem to be the most at risk.
Last year, Hawkins auctioned a number of homes valued at $300,000 and up. Included in the sheriff’s most recent sale was a home valued at $214,000.
Floyd County also has seen some high-end homes wind up on the auction block, such as two homes in the exclusive Woods of Lafayette development in Floyds Knobs, according to Joyce Banet, who organizes sales for the Floyd County Sheriff’s Department.
Those homes were priced in the $300,000 to $400,000 range. Despite rumors that dozens of homes in the development have been foreclosed on, Banet said she has only had those two homes up for auction.
There is currently a $500,000 Main Street home for sale, she said, adding that the most expensive home she’s seen at auction was a $650,000 home on Phillip Schmidt Road.
In a typical month, Banet auctions 25 to 30 homes, most of which are in the $70,000 to $100,000 range, she said.
Hawkins and Banet agree that most of the auctions are because of people being approved for more money than they could afford.
“Last summer, I refinanced my house. Well, they called me back and said they’d approve me up to $400,000 and I said, ‘well, that’s great, but there’s no way I can afford that,’” Hawkins said.
“To me, it looks like (mortgage lenders) are just lending too much credit.”
In fact, Banet said, one banker told her, “We tell them they can afford it, what we don’t tell them is that taxes have gone up.”
Increased taxes have upped many local homeowners’ mortgage payments $100 a month or more.
Banet’s own mortgage payment jumped 55 percent — from $600 to $1,150 — because of higher taxes, she said. A neighbor’s went up $300, she said.
“A lot of people bought new homes that hadn’t been assessed [for taxes] yet. All of a sudden, they go from an estimated tax of $2,000 to actually having a $4,000 tax bill,” Banet said.
Between increased taxes, bogus appraisals and predatory lending — offering money to people who could never meet the terms of the loan — homeowners can suddenly find themselves unable to make their mortgage payment.
In Southern Indiana, about 11 percent more homes have been foreclosed in 2007 than in 2006. With many adjusted rate mortgages scheduled to reset in 2008, experts predict the country can expect even more foreclosures next year.
Lisa Hurt Kozarovich writes for The Evening News in Jeffersonville, Ind.
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Tips for avoiding foreclosure
If you are unable to make your mortgage problem, or expect you will be in the near future:
• Contact your lender immediately. Foreclosures are expensive for lenders, and they’d rather work with you to resolve the problem. They have options available, but the further behind you become, the more likely that you will lose your house.
• Open letters from your lender. The first notices you receive will offer information about foreclosure-prevention options.
• Find your loan documents and read them so you know what your lender may do if you can’t make your payments.
• Contact a housing counselor, offered through the U.S. Department of Housing and Urban Development for free or very low cost. Counselors can help you understand options, organize finances and represent you in negotiations with your lender. Call 800-569-4287.
• Prioritize your spending. Look for optional expenses — cable TV, memberships, entertainment — that you can eliminate. Delay payments on credit cards and other “unsecured” debt until you have paid your mortgage.
• Use your assets. Do you have assets — a second car, jewelry, a whole life insurance policy — that you can sell for cash to help reinstate your loan? Even if the effort doesn’t significantly increase your available cash, it demonstrates to your lender that you are willing to make sacrifices.
• Avoid foreclosure-prevention companies. While these may be legitimate businesses, they will charge you a hefty fee — often two or three month’s mortgage payment — for information and services your lender or a HUD housing counselor will provide free.
• Don’t lose your house to foreclosure recovery scams. If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home.
• If you or your spouse is on active military duty, you may qualify for a reduction in your interest rate resulting in lower payments, under the Servicemembers Civil Relief Act of 2003.
— Staff reports
NOW WHAT?
If your problem is temporary, call your lender to discuss these possibilities
• REINSTATEMENT: Your lender is always willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option.
• FORBEARANCE: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time. The money might come from a hiring bonus, investment, insurance settlement or tax refund.
• REPAYMENT PLAN: You may be able to get an agreement to resume making your regular monthly payments, plus a portion of the past due payments, each month until you are caught up.
If your situation is long-term, call your lender to discuss these options
• MORTGAGE MODIFICATION: If you can make payments on your loan, but don’t have enough money to bring your account current or you can’t afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable
• PARTIAL CLAIM: If your mortgage is insured, your lender might help you get a one-time interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan.
— Staff reports
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