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Foreclosures are on the rise in Douglas County and the rest of Oregon, though the foreclosure rate in this region is still below the national average and has not kept housing prices from continuing their climb.
However, a study by the U.S. Congress Joint Economic Committee suggests Oregon has yet to hit the high watermark for foreclosures, as more homeowners’ adjustable-rate mortgages will begin resetting over the next two years.
According to data provided by RealtyTrac, a mortgage-research company that tracks foreclosures for investors and real-estate professionals, Oregon ranks No. 22 in the nation in percentage of homeowners in foreclosure in 2007, at 10,746. Filings increased 12.25 percent from 2006.
Nationally, foreclosure filings increased 75 percent in 2007 from the previous year. The states hit hardest are Nevada, Florida and Michigan.
RealtyTrac also provides data by county, showing 237 foreclosure filings in Douglas County in 2007, an increase of 51 percent. Roseburg received the brunt of the filings with 111.
“I guarantee none of these people (took) a pre-purchase class before they got into their subprime loan,” said Rebekah Bassett, programs specialist at the nonprofit Umpqua Community Development Corp.
Subprime loans are available to people with spotty credit histories or a low income level that prevents them from borrowing a loan with a fixed interest rate.
One common type of subprime loan is an adjustable-rate mortgage, which may entice borrowers with a low “teaser rate” of interest for the first two years.
When rates readjust, borrowers often find their monthly mortgage payments have increased by 25 to 40 percent, according to the Oregon Department of Consumer and Business Services.
“They’re going to have a difficult time refinancing,” and that’s going to be a problem, said Ronnie Burt, single-family housing manager at UCDC.
<b>SAVING YOUR HOME</b>
If a borrower isn’t prepared for the rate readjustment, he or she can fall behind in monthly payments and incur a loan default, the first stage of foreclosure. When that happens, Bassett said a borrower’s best strategy is to communicate with the loan lender and work on a repayment plan as quickly as possible.
“The bank doesn’t want your house,” she said. “You have to be able to work with them, and they’ll work with you.”
UCDC provides free post-purchase counseling for homeowners facing financial trouble. Oftentimes a foreclosure filing follows a job layoff or divorce, Bassett said. However, it’s not unusual for Bassett to notice a high number of defaults in a short amount of time, like the 20 made public in three weeks recently, and for UCDC to not receive a single phone call from a distressed homeowner.
“And those people’s houses are all set to go to sale (auction) in May, so they have time,” Bassett said.
Homeowners can stop their house from ending up on the auction block by catching up on payments, setting up a repayment plan, or by refinancing.
Burt and Bassett anticipate seeing more default notices in the near future. An October 2007 study by the Congress Joint Economic Committee shows there are approximately 88,400 subprime mortgages in Oregon, and more than 12,000 are expected to default over the next two years.
“Hopefully, consumers will be more savvy about what type of loans they get into,” said Berri Leslie, manager of the mortgage-lending program at the Oregon Department of Consumer and Business Services.
According to the Mortgage Bankers Association, 2.93 percent of borrowers with subprime loans in Oregon were in some stage of foreclosure during the third quarter of 2007, compared to 1.6 percent during the same quarter in 2006.
However, a study by the U.S. Congress Joint Economic Committee suggests Oregon has yet to hit the high watermark for foreclosures, as more homeowners’ adjustable-rate mortgages will begin resetting over the next two years.
According to data provided by RealtyTrac, a mortgage-research company that tracks foreclosures for investors and real-estate professionals, Oregon ranks No. 22 in the nation in percentage of homeowners in foreclosure in 2007, at 10,746. Filings increased 12.25 percent from 2006.
Nationally, foreclosure filings increased 75 percent in 2007 from the previous year. The states hit hardest are Nevada, Florida and Michigan.
RealtyTrac also provides data by county, showing 237 foreclosure filings in Douglas County in 2007, an increase of 51 percent. Roseburg received the brunt of the filings with 111.
“I guarantee none of these people (took) a pre-purchase class before they got into their subprime loan,” said Rebekah Bassett, programs specialist at the nonprofit Umpqua Community Development Corp.
Subprime loans are available to people with spotty credit histories or a low income level that prevents them from borrowing a loan with a fixed interest rate.
One common type of subprime loan is an adjustable-rate mortgage, which may entice borrowers with a low “teaser rate” of interest for the first two years.
When rates readjust, borrowers often find their monthly mortgage payments have increased by 25 to 40 percent, according to the Oregon Department of Consumer and Business Services.
“They’re going to have a difficult time refinancing,” and that’s going to be a problem, said Ronnie Burt, single-family housing manager at UCDC.
<b>SAVING YOUR HOME</b>
If a borrower isn’t prepared for the rate readjustment, he or she can fall behind in monthly payments and incur a loan default, the first stage of foreclosure. When that happens, Bassett said a borrower’s best strategy is to communicate with the loan lender and work on a repayment plan as quickly as possible.
“The bank doesn’t want your house,” she said. “You have to be able to work with them, and they’ll work with you.”
UCDC provides free post-purchase counseling for homeowners facing financial trouble. Oftentimes a foreclosure filing follows a job layoff or divorce, Bassett said. However, it’s not unusual for Bassett to notice a high number of defaults in a short amount of time, like the 20 made public in three weeks recently, and for UCDC to not receive a single phone call from a distressed homeowner.
“And those people’s houses are all set to go to sale (auction) in May, so they have time,” Bassett said.
Homeowners can stop their house from ending up on the auction block by catching up on payments, setting up a repayment plan, or by refinancing.
Burt and Bassett anticipate seeing more default notices in the near future. An October 2007 study by the Congress Joint Economic Committee shows there are approximately 88,400 subprime mortgages in Oregon, and more than 12,000 are expected to default over the next two years.
“Hopefully, consumers will be more savvy about what type of loans they get into,” said Berri Leslie, manager of the mortgage-lending program at the Oregon Department of Consumer and Business Services.
According to the Mortgage Bankers Association, 2.93 percent of borrowers with subprime loans in Oregon were in some stage of foreclosure during the third quarter of 2007, compared to 1.6 percent during the same quarter in 2006.
<b>SUBPRIME TO DEFAULT </b>
A notice of foreclosure can be an embarrassing and stressful situation, so it came as no surprise to The News-Review when attempts to speak to homeowners in foreclosure were rebuffed. Those who agreed to be interviewed did so on the condition that they not be identified.
Two years ago, Christina, 26, and her husband purchased a $192,000 home in west Roseburg with two subprime loans, set up as interest-only payments for the first 10 years. Based on their income, they did not qualify for a single mortgage and allowed their broker to “state” their income — inflate it on the loan applications.
“I just really wanted the house,” Christina said.
They soon fell six months behind on the first mortgage and were in the hole for more than $6,000.
Now caught up, after a loan from a parent, they face more trouble as they have fallen behind on their second mortgage. And Christina’s husband was laid off from work in December. With the two loans together, they owe $1,350 a month.
Christina quit paying her monthly credit card bills a year ago, which has likely wrecked her initial plan of refinancing her home. When she contacted her lender to modify her payment plan on her second mortgage, she was told they didn’t make enough money.
In eight years, the principal on both of her loans kicks in.
“You have a mortgage and you get laid off, then what do you do?” Christina said.
<b>STAYING ON BUDGET</b>
Credit counselors at UCDC suggest homeowners should always live within their means. That includes buying an affordable home with monthly payments that are within about 30 percent of income.
According to data provided by the Mortgage Bankers Association, the highest default rate recorded in Oregon between 1979 and 2007 was just above 6 percent. That happened in 1982.
At UCDC, credit counselors fear the current number of subprime loans out there could push default rates beyond that historical number.
“Don’t buy above what your budget can afford and stay away from certain mortgages,” Burt said.
A notice of foreclosure can be an embarrassing and stressful situation, so it came as no surprise to The News-Review when attempts to speak to homeowners in foreclosure were rebuffed. Those who agreed to be interviewed did so on the condition that they not be identified.
Two years ago, Christina, 26, and her husband purchased a $192,000 home in west Roseburg with two subprime loans, set up as interest-only payments for the first 10 years. Based on their income, they did not qualify for a single mortgage and allowed their broker to “state” their income — inflate it on the loan applications.
“I just really wanted the house,” Christina said.
They soon fell six months behind on the first mortgage and were in the hole for more than $6,000.
Now caught up, after a loan from a parent, they face more trouble as they have fallen behind on their second mortgage. And Christina’s husband was laid off from work in December. With the two loans together, they owe $1,350 a month.
Christina quit paying her monthly credit card bills a year ago, which has likely wrecked her initial plan of refinancing her home. When she contacted her lender to modify her payment plan on her second mortgage, she was told they didn’t make enough money.
In eight years, the principal on both of her loans kicks in.
“You have a mortgage and you get laid off, then what do you do?” Christina said.
<b>STAYING ON BUDGET</b>
Credit counselors at UCDC suggest homeowners should always live within their means. That includes buying an affordable home with monthly payments that are within about 30 percent of income.
According to data provided by the Mortgage Bankers Association, the highest default rate recorded in Oregon between 1979 and 2007 was just above 6 percent. That happened in 1982.
At UCDC, credit counselors fear the current number of subprime loans out there could push default rates beyond that historical number.
“Don’t buy above what your budget can afford and stay away from certain mortgages,” Burt said.
Information, counseling available to help homeowners
There’s a wealth of information and counseling out there for homeowners facing foreclosure. The nonprofit Umpqua Community Development Corp. in Roseburg offers free post-purchase counseling and a pre-purchase class for a minimal fee. It will have two homebuyer orientations in March. An eight-hour certification class for first-time homebuyers is also available.
The class, which teaches buyers how to scrutinize the terms of a loan, can be attended on Saturdays or over two nights. More information about the organization can be found at www.umpquacdc.org.
At the Oregon Department of Consumer and Business Services — www.oregon.gov/DCBS/ — homeowners will find a Web page devoted to foreclosure.
UCDC is also a member of the Home Ownership Preservation Foundation. Distressed homeowners throughout Douglas County and surrounding counties are often directed to UCDC’s downtown office when they contact the Hope Hotline, 1-888-995-HOPE, the Home Ownership Preservation Foundation’s 24-hour counseling service for homeowners facing foreclosure.
Since 2002, the foundation has provided advice and education to more than 145,000 homeowners. Online counseling sessions can also be conducted at www.995hope.org.
Rebekah Bassett, programs specialist at UCDC, said the first notice of default — which usually arrives when a homeowner is 60 to 90 days behind on payment — is an early stage of foreclosure. Homeowners can catch up on their payments by working out a plan with their lender — it takes about six months for the home to be put up for auction after the first default.
“It can take a while. Most people think they miss a payment and they’re going to be out of their house the next day,” she said.
Bassett also said homeowners facing foreclosure or adjustable-rate mortgages resetting should focus on living necessities: Cancel cable service, Internet and quit eating out. Saving your home is the most important thing you can do, she said.
However, do not stop paying monthly credit cards bills. Bad credit will only make it that much more difficult to refinance your home.
Early this week, Congress could vote on a proposal that would give bankruptcy judges greater authority to rewrite mortgages held by distressed homeowners. And the Oregon Legislature is currently pushing a bill that would limit late penalties for subprime homeowners and expand disclosures of incentives lenders pay brokers for selling adjustable-rate mortgages with higher back-end interest rates.
• You can reach reporter Adam Pearson at 957-4213 or by e-mail at apearson@newsreview.info.
