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American Dream Becomes Nightmare As Millions Face Foreclosure
Washington (AFP) March 25, 2007 The dream of home ownership could turn into a living nightmare for millions of Americans in the next couple of years as home foreclosures are expected to skyrocket. Alarmed lawmakers, such as Republican Senator Richard Shelby of Alabama, say the recent spike in home repossessions is just "the tip of the iceberg." The fizz came out of the US housing boom last year after several years of stellar growth, fueled in part by a speculative binge, but also by sales of "exotic mortgages" including adjustable rate mortgages (ARMs). Consumer advocates say such loans are costing many working class families an "ARM and a leg," and that buyers were often unaware ARMs can start out with a low "teaser" interest rate that fast kicks into a much higher rate. Pressure is mounting on Congress to rein in unscrupulous lenders. "Predatory practices need to end immediately and solutions must be designed to help the millions of distressed Americans who have mortgages they cannot afford," said Kirsten Keefe, a consumer lawyer and the executive director of Americans for Fairness in Lending. Democratic presidential contender Senator Chris Dodd says the emerging "crisis" could see over two million Americans lose their homes to foreclosure in the next few years. Such grim predictions are backed by some industry analysts. Over 500,000 mortgages, or 1.19 percent of all loans, were in foreclosure at the end of the fourth quarter 2006, according to the Mortgage Bankers Association which reported over 43 million loans in total outstanding at the end of last year. A main focus has been "subprime" loans, or mortgages marketed to people with poor credit histories, now seeing the worst problems. Jennie Haliburton, a 77-year-old widow, told a congressional hearing chaired by Dodd on Thursday that she took out an ARM loan with Countrywide Financial Corporation, one of the US' biggest mortgage lenders, without realizing her monthly repayments would leap from an initial 700 dollars to 1,100 dollars. Federal banking regulators have also told Congress they are worried about rising foreclosures, especially in the subprime sector. Mortgage executives promised Congress they would tighten up their standards, but cautioned against tighter regulation. Top Federal Reserve officials have tried to soothe fears about the housing downturn and the National Association of Realtors (NAR) reported a surprise 3.9 percent rise in February existing home sales Friday. But, as the sum of delinquent mortgage loans has swelled to around 150 billion dollars' worth, some like Democratic senator Robert Menendez believe the country could be on the cusp of a foreclosure "tsunami." Pessimists seeking evidence of a gathering storm do not have to look far. Several mortgage lenders, who mainly sold subprime loans, including People's Choice Home Loan, Inc., Ownit Mortgage Solutions Inc., and ResMae Mortgage Corp, have filed for bankruptcy in recent months. British banking giant HSBC has set aside over 10 billion dollars to guard against sour home loans, and H and R Block announced over 15 million dollars in mortgage-related losses earlier this month. Aside from rising consumer complaints, such as those voiced by Keefe and Haliburton, concern is also increasing that major Wall Street banks could see their profits dented by the mortgage market. A spokeswoman for Dodd said the senator is mulling whether to back legislation to improve lending standards and media reports suggest House lawmakers are moving to author a bill to check industry excesses. Speculators "flipped" houses to make a quick profit during the boom, but the NAR report showed prices in some regions have fallen. As a result, some speculators could owe more to a mortgage firm than they might be able to sell their properties for. The wealthy are also feeling the squeeze and being forced to offer sales "carrots," such as a new Porsche, golf membership or free plasma televisions in a bid to sell million dollar mansions. Some analysts argue, however, that it is not all doom and gloom. Standard mortgage rates have fallen to near historic lows, according to the NAR which said rates on a 30-year conventional fixed rate mortgage had dropped to 6.16 percent in the last week, down from an average of 6.29 percent in February.
Source: Agence France-Presse Related Links Americans for Fairness in Lending The Economy The Economy
Business At Davos Sees Greenbacks In Climate Change
Davos, Switzerland (AFP) Jan 28, 2007When US Republican Senator Saxby Chambliss mentioned his doubts about climate change during a debate at the World Economic Forum last Friday, gasps emerged from the business-minded audience. "Whether it's something that we need to be totally alarmed about, or nature taking its course, I don't know," said the sceptical senator from Georgia. |
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