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Forestalling Foreclosures
by W. David Patton, Ph.D., CPPA Director
The housing crisis has swept across the country and Utah is included
in seeing a significant increase in foreclosures this year, but some innovative
programs are attempting to curb the increase in foreclosures by helping
residents understand their options and open discussions with lenders. In Utah, one in every 274 households
received a foreclosure filing during the first quarter of 2008. This was better than the national average of
one in 194 households. The worst hit
states were Nevada (1 in 54), California (1 in 78), Arizona (1 in 95), Florida
(1 in 97), and Colorado (1 in 110).
Particularly hard hit were the metropolitan areas of Stockton,
California where one in 30 households received foreclosure filings during the
quarter, Riverside/San Bernardino, CA (1 in 38) and Las Vegas (1 in 44).[1] A Congressional Report estimates the impact
of the subprime foreclosure crisis to be an 11 percent drop in home prices and
a $2.6 trillion loss in home wealth by the end of 2009.[2]
To decrease the rate of foreclosures, some communities have
initiated programs to help citizens cope with their mortgage situations and
open dialogue with their mortgage lenders.
The City of Philadelphia has instituted the Residential Mortgage
Foreclosure Division Pilot Program and placed a moratorium on the sale of
owner-occupied foreclosed properties, counsels with homeowners to determine if
they are eligible for public housing assistance programs and requires lenders to
meet with homeowners in an effort to allow homeowners to keep their homes. The City has invested $2 million into a
public education initiative to inform citizens of the program through public
service announcements, individual contact as their homes are identified as
being in danger of foreclosure, free counseling services, and a hotline. The State of Ohio initiated the Opportunity
Loan Refinance Program in 2007 to assist homeowners in refinancing
high-interest mortgages or increasing adjustable rate mortgages to affordable
30-year mortgages. Like the
Philadelphia program, participants are required to receive HUD approved
counseling prior to receiving the state sponsored loan.[3]
Foreclosure relief programs such as those on Pennsylvania
and Ohio may only delay the loss of a home in some cases, but could provide
homeowners with the added measure to keep their homes under a more affordable
financing plan. Whether these programs
can stem the financial crisis in the housing market remains to be seen, but there
may be significant advantages to individual home owners. The real advantages to these programs are
they encourage financial counseling for many who may have had little if any
financial training before buying such a substantial investment as a home, and
they get the borrower and lender together to find a solution to the homeowner
who doesn’t want to lose their home and the lender who doesn’t want to take
over the burden of selling another house.
[2] Joint
Economic Committee, State-by-State Figures: Foreclosures and Housing Wealth
Losses, April 10, 2008
[PRINTER FRIENDLY VERSION]
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