HomeLatest NewsFeatured HomebuildersHome Buyer ResourcesBinding ArbitrationResource LinksSubmit ComplaintsView ComplaintsTake Action 101!Report Mortgage FraudMortgage Fraud NewsForeclosure NewsConstruction DefectsHome DefectsPhoto GalleryFoundation ProblemsHomeowner Website LinksHOA Reform
Main Menu
Home
Latest News
Featured Homebuilders
Home Buyer Resources
Binding Arbitration
Resource Links
Submit Complaints
View Complaints
Take Action 101!
Report Mortgage Fraud
Mortgage Fraud News
Foreclosure News
Construction Defects
Home Defects
Photo Gallery
Foundation Problems
Homeowner Website Links
HOA Reform
Featured Topics
Builder Death Spiral
Report Mortgage Fraud
Foreclosure Special Report
Mold & New Home Guide
Special News Reports
Centex & Habitability
How Fast Can They Build Them?
TRCC Editorial
Texas TRCC Scandal
Texas Watch - Tell Lawmakers
TRCC Recommendations
Sandra Bullock
People's Lawyer
Prevent Nightmare Homes
Choice Homes
Smart Money
Weekly Update Message
HOBB Archives
About HOBB
Contact Us
Fair Use Notice
Legislative Work
Your House

 HOBB News Alerts
and Updates

Click Here to Subscribe

Support HOBB - Become a Sustaining Member
Who's Online
ABC Special Report
Investigation: New Home Heartbreak
Trump - NAHB Homebuilders Shoddy Construction and Forced Arbitration
Houston-area foreclosures rise
Sunday, 28 August 2005
Disturbing wake-up call in American dream
FOR thousands of Houstonians, the American dream of owning a home has become a financial nightmare.  In 2004, lenders foreclosed on 8,300 homes in Harris, Montgomery and Fort Bend counties — more than double the number five years before... More homeowners are also getting right to the brink of foreclosure. The number of homes posted for foreclosure — a warning that the bank can foreclose in 21 days — totaled 19,866 in Harris County last year, the highest since 1989...
Texas leads the nation in home foreclosures, according to the Foreclosure Economic Advisory Council
Houston Chronicle
Disturbing wake-up call in American dream
As Houston-area foreclosures rise, experts blame aggressive lending, strapped buyers

By NANCY SARNOFF

Copyright 2005 Houston Chronicle
Aug. 28, 2005

GRAPHIC
• Foreclosures by subdivision: Listings of 162 area subdivisions with 10 or more foreclosures in 2004. The neighborhoods account for nearly one-third of the 8,300 foreclosures in Harris, Fort Bend and Montgomery counties during the year.

FOR thousands of Houstonians, the American dream of owning a home has become a financial nightmare.

In 2004, lenders foreclosed on 8,300 homes in Harris, Montgomery and Fort Bend counties — more than double the number five years before.

And in the first seven months of this year, Harris County foreclosures jumped 16 percent over the same period a year ago, according to the Foreclosure Information & Listing Service.

Divorces, layoffs and serious health problems have always been blamed for foreclosures. But homeowners, real estate agents and market observers are now pointing to new reasons: overextended borrowers, aggressive lending practices, stagnant home prices and fast-rising property tax bills.

"More and more people are having problems with their jobs, a lot of people bought houses without a lot of money down, taxes are escalating, and they haven't gotten that kind of a raise," said Frank Lucco, a real estate consultant with Frank J. Lucco & Associates. "We're seeing foreclosures of houses only 2, 3 or 4 years old."

More homeowners are also getting right to the brink of foreclosure. The number of homes posted for foreclosure — a warning that the bank can foreclose in 21 days — totaled 19,866 in Harris County last year, the highest since 1989. That number includes a small percentage of commercial properties.

When owners get this warning, they must act quickly to avoid losing their homes. Their alternatives are to reach a deal with the bank on the past-due payments or sell their houses in a hurry to repay the debt.

In the country's hotter housing markets, homeowners facing default can put their homes up for sale and quickly walk away with a check for more than what they owe on the property. That's often not an option in Houston, where home-price appreciation averaged less than 1 percent last year and fell in some neighborhoods.

"A rapidly appreciating market hides a lot of sins," said Ray Allison of AllisonSpear.com Realtors. "In a slower-appreciating market where people are buried in debt, those sins float to the top."

That rings true for Claudette Turner, who lost her south Houston home in Morningside Place to foreclosure.

Turner wanted to spend $80,000 on a new home, but she bought a house that cost nearly $20,000 more because she qualified for 100 percent financing. Just weeks after buying the 1,800-square-foot house in 2001, Turner lost her job.

She found a roommate to help defray costs, but ultimately her mortgage payment took a back seat to buying groceries and paying the light bill.

She tried selling the house, but because she financed the entire value of the home, along with closing costs, she owed more than the property was worth, and the bank foreclosed.

Some areas at higher risk

The Houston Chronicle analyzed 11 years of data from The Woodlands-based Foreclosure Information & Listing Service and surveyed hundreds of records related to foreclosures in 2004.

Many of the neighborhoods with the highest foreclosure rates last year were in an area that in the late 1980s was dubbed the "foreclosure rainbow."

Neighborhoods dotting this wide arc, stretching from Bush Intercontinental Airport to Missouri City, were ravaged by foreclosures during Houston's worst real estate depression ever, with totals that far exceed the current foreclosure rates.

Experts said certain neighborhoods are still magnets for foreclosures because their low prices continue to attract first-time homeowners who are stretching to make the payments. Some whose income just barely covers the monthly payments are surprised when they are faced with all the costs associated with a home.

"They've never had a home, so part of it is, 'Wow, there is a yard I have to mow; I need furniture to fill up a 2,000-square-foot house; and now I need a new car like all my neighbors,' " Lucco said.

And developers historically have built new subdivisions in these Beltway 8 areas, which have kept downward pressure on home prices in established neighborhoods.

The data also show a growing number of foreclosures on mobile homes in Montgomery County. Several neighborhoods saw about a third of the homes foreclosed on in the past three years.

In addition to the usual reasons cited for rising foreclosures, lawsuits filed by mobile-home owners have added accusations of fraud connected with the home sales in a handful of developments.

Some experts are less concerned about last year's foreclosure numbers because low interest rates have fueled a demand for homes.

"Its impact on values or the psychology of the marketplace has been almost nonexistent," said Mike Inselmann, president of the housing consulting firm Metrostudy.

That's little comfort for Eryson Salazar, who nearly lost his Pearland home to foreclosure last year.

Two years after buying a brand-new, 3,000-square-foot house in the South Hampton subdivision, Salazar lost his job in telecommunications, and his partner moved out of the home.

He reached an agreement with his lender so he could sell the house before it went into foreclosure.

But because the loan amount was equal to the property's value, he made no money on the sale. And months of not paying his bills destroyed his credit.

"It was a nightmare of an experience," said Salazar, 28, who now lives in an efficiency apartment in the Montrose area. "I couldn't get a loan if I begged someone."

Houston attorney Sharon Michaels said a foreclosure can remain on a credit report for up to 10 years, making it "very difficult to buy another house."

Plus, a foreclosure can cause insurance premiums to rise, as those rates often are determined by a person's credit score.

High numbers in Texas

Houston isn't alone. Texas leads the nation in home foreclosures, according to the Foreclosure Economic Advisory Council, a nonprofit group supported by Foreclosure.com of Boca Raton, Fla.

"Employment is good, population growth is strong, but we tend to have a higher proportion of first-time homebuyers and low- to moderate-income homebuyers," Marla Webb, a senior adviser at the council, said of Texas.

However, the Mortgage Bankers Association, which looks at rates versus sheer numbers, said foreclosures in Texas are just slightly above the national average.

In the state, 5.2 of every 1,000 mortgages entered foreclosure through the end of the first quarter of 2005, compared with 4.2 of every 1,000 mortgages nationally.

Housing analysts also said the increase in foreclosures could simply reflect the rising number of new borrowers in this rapidly growing area. Last year, Houston-area homebuyers purchased more than 90,000 new and used homes, compared with about 70,000 in 2000, according to Metrostudy.

Plus, the number of foreclosures has not reached the levels of the late 1980s when the oil business soured. More than 30,000 people lost their homes in 1987.

"In relative terms, I don't think it's that big," Inselmann said.

A number of banks declined to comment about what's driving foreclosures in the Houston area, as did the Texas Mortgage Bankers Association. The association said it is awaiting the results of a state study of the foreclosure levels in six Texas counties that are home to big cities.

This year, legislators passed a measure, written by Rep. Norma Chavez, D-El Paso, and sponsored by Sen. Rodney Ellis, D-Houston, authorizing a study on residential foreclosures in Harris and five other counties.

"In 2004, Texas led the nation in home foreclosures ... yet no one seems to have a good answer as to the reason for these alarming statistics," Ellis said.

The study, which is due Sept. 1, 2006, will seek the underlying cause of the rising rate of foreclosure and look for solutions.

Bank of America did talk about how it deals with borrowers who have fallen behind. The bank will work with borrowers to set up payment plans.

"We want to help them stay in their homes," spokeswoman Julie Davis said.

Another reason cited for the high numbers in Texas is that it is a "nonjudicial foreclosure state," which essentially means a lender isn't required to go through the courts to foreclose on a property.

The foreclosure process here takes an average of 27 days, compared with New York, for example, where more than a year can go by before a foreclosure is resolved, said Rick Sharga of Irvine, Calif.-based RealtyTrac, which tracks mortgage delinquencies.

The growing numbers in Houston show no signs of slowing. In the first seven months of this year, 4,258 homes were foreclosed on in Harris County, up about 16 percent from the same period last year, according to the Foreclosure Information & Listing Service.

Nontraditional lending

Mark Cady, a regional vice president at Market Street Mortgage in Houston, said aggressive lending programs have soared in recent years, putting more consumers at risk of defaulting on their loans.

Loan programs for those who have little saved for a down payment, or want to minimize their monthly payment, have spread through the mortgage industry.

Zero-down payment, interest-only and other forms of adjustable-rate programs have been rampant across the U.S.

Nationally, about 34 percent of loans made last year had adjustable rates, according to the Mortgage Bankers Association. These types of loans often carry low starter, or so-called "teaser," rates that often expire after a few years.

They've allowed borrowers to buy bigger, more expensive homes they normally wouldn't be able to afford. But when rates go up, monthly mortgage payments can jump significantly.

"That's what's going to hurt us now," Cady said. "And I think the foreclosure problem is going to get worse."

Locally, 7.8 percent of the home loans in 2004 were interest-only, compared with 30.9 percent nationwide, according to Loan Performance, a San Francisco research firm.

Lenders are also targeting buyers who might not have been able to qualify for a home in the past. Wells Fargo Home Mortgage in Houston is offering loan programs tailored to first-time homebuyers with "nontraditional credit histories."

But it's not just new borrowers at risk.

For Tina English, a dissolving marriage was a factor.

After English's husband moved out of their Spring Branch-area home last year, neither spouse made the mortgage payments, which already were past due.

Months later, the bank foreclosed on the three-bedroom, ranch-style home in the Shadow Oaks neighborhood.

English is now living in an apartment near the Medical Center with her dog and cat while she goes through a divorce. "It kind of chips away at your dignity or self-pride," said English, 43. ''It makes you not want to walk out your front door."

Purva Patel contributed to this report.

This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
http://www.chron.com/cs/CDA/ssistory.mpl/metropolitan/3327329

 
< Prev   Next >
Search HOBB.org

Reckless Endangerment
BY: GRETCHEN MORGENSON
and JOSHUA ROSNER

Outsized Ambition, Greed and
Corruption Led to
Economic Armageddon


Amazon
Barnes & Noble

NPR Special Report
Part I Listen Now
Perry Home - No Warranty 
Part II Listen Now
Texas Favors Builders

Washington Post
The housing bubble, in four chapters
BusinessWeek Special Reports
Bonfire of the Builders
Homebuilders helped fuel the housing crisis
Housing: That Sinking Feeling

Consumer Affairs Builder Complaints

IS YOUR STATE NEXT?
As Goes Texas So Goes the Nation
Knowledge and Financial Responsibility are still Optional for Texas Home Builders

OUTSTANDING FOX4 REPORT
TRCC from Bad to Worse
Case of the Crooked House

TRCC AN ARRESTING EXPERIENCE
The Pat and Bob Egert Building & TRCC Experience 

Build it right the first time
An interview with Janet Ahmad

Bad Binding Arbitration Experience?
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
or call 1-210-402-6800

top of page

© 2024 HomeOwners for Better Building
Joomla! is Free Software released under the GNU/GPL License.