Record foreclosures in the Charlottesville area?

Seth Rosen has an interesting article in this morning’s Daily Progress tackling the rise in foreclosures in the Charlottesville/Central Virginia area. 

There is plenty of culpability to go around – lenders, appraisers (HT: Property Grunt) Realtors and, don’t forget – the buyers.

I wrote a story a couple of months ago looking at the impact the subprime market will have on the Charlottesville market, as well as here. (even more on subprime)

During the first three months of 2007, there were 128 notices of foreclosure filed with The Daily Progress, a 27 percent increase over the same period in 2006.

Doug Duncan, chief economist for the Mortgage Bankers Association of America, said in 2003:

“(The foreclosure rate) reflects expansion of mortgage markets. Borrowers today who never would have obtained a loan now have a loan. The risk parameters have been expanded and there are more delinquencies,” Duncan said.

Michael Martin, a local loan officer, says in today’s DP:

“There’s a lot of people out there who are in homes that really should never have been given a loan,” Martin said. “And it’s the people who are most vulnerable that have been taken advantage of. There’s a whole vulture system out there that preys on these people.”

Per Google, the fear of foreclosure seems to be fairly consistent over the years.

Cvillenews beat me to the story this morning.

One thing I would like to see is this – any lender or Realtor making comments about the state of the market should also state what percentage of their business these Pay-option-ARM loans, Interest-Only ARMs (good products when used appropriately), etc. comprise.

My disclosure: One Option-ARM (not my advice). Approximately 20% Interest-Only to buyers who fully understood the risks, and the rest cash and fixed-rate loans.

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  1. TrvlnMn May 28, 2007 at 10:05

    I never could understand why someone would choose an adjustable rate mortgage over a fixed rate. Even if it means “more house” to me it just seemed like bad business. That was my opinion even when the housing boom was in full swing.

  2. Dave Phillips May 28, 2007 at 10:33

    Jim, you are correct in bringing light to this issue, but as normal, Cville is better off than the rest of the country. We have a bunch of really good local lenders and the default rate is better here than many parts of the country. VA is in good shape compared to other states. I’ve talked to my counterparts across the country and have heard default rates above 40%! That’s 40% of all mortgages! If the economy wasn’t decent, we’d see a lot more problems.

    I’d be interested to know how many of the 3400+ properties currently for sale in our area are on the market because the owners can not afford to live there anymore.

  3. william steiner May 28, 2007 at 14:36

    The fact is that many of the borrowers were told one thing or another but the brokers ( Loan officers) didn’t cover the details. The mortgage business has a responsibilty to the borrower and the lender to make sure everyone understands how the process works. Options programs and Arm programs like a 2/28 or the 4-Option payment plan mortgage are great when used correctly. People who think paying the minmium is the new way of paying a mortgage will feel the pain down the road. Mortgage programs need to be handled respectfully for both lender and borrower.

    William H. Steiner
    Senior Loan Officer
    1st metropolitan mortgage

  4. JR Jackson May 30, 2007 at 14:18

    At some point, some accountability needs to rest with the borrower/homebuyer. People have become so focused on monthly payments as a singular gauge of affordability that they make all kinds of bad financial decisions.
    There has been a lot of blame placed on financial institutions’ doorsteps for allowing this mindset to flourish, whether it be there 7-year or longer car loans or option ARMs with aggressive upfront teasers. But I’d argue that many borrowers ARE well aware of the risks associated with negative amortization and simply choose to ignore/accept them in order to take advantage of an artificially low payment — the thought being that they’ll be able to refinance at the end of the teaser period or they’ll be earning higher incomes after a given period of time and thus able to afford the resets. Of course now that HPA is nonexistent, the former option is not necessarily available on favorable terms and the latter is always a crapshoot in any environment.
    Sure, there are brokers out there who gloss over details or worse. But people tend to hear what they want to hear, and they’re not going to let some event 2 years down the road stop them from buying the home of their dreams.