The Center for Responsible Lending estimates 2.2 million American households have lost or will lose their homes as monthly payments rise on high-risk mortgages in the next few years. Realtors are concerned about the rise in the number of default notices nationwide and want to help families avoid foreclosure and keep their home.
Nontraditional and other new types of mortgages that opened doors to homeownership or refinancing just a few years ago might soon be showing some borrowers the door, as interest rates reset, payments adjust and monthly payments become unaffordable for families at greatest risk. The National Association of Realtors and the Silicon Valley Association of Realtors, the local trade association with over 4,000 Realtors and affiliates engaged in the real estate business on the Peninsula and in the South Bay, want to help families maintain homeownership.
"Foreclosures threaten the very communities that Realtors work to build," said National Association of Realtors President Pat V. Combs. "Realtors care as much about keeping families in their homes as we do about helping them find the home of their dreams, which is why NAR has partnered with the Center for Responsible Lending and NeighborWorks America to give our Realtor members tools to help clients and customers at risk and educate homeowners about their options if they're facing foreclosure."
In recent years, people with imperfect credit or minimal cash reserves who may have previously been unable to qualify for a mortgage were able to become homeowners because lenders began offering new types of mortgage products in the subprime market. Many of these new mortgages kept initial payments down by offering a very low 'teaser rate,' interest-only period, or the option to pay varying amounts each month. When the initial period ends, the monthly payment increases, often by a significant amount. Compounding the problem, subprime borrowers are often the people least able to afford these large increases, given their limited cash flow and past credit problems.
"We estimate that families will lose as much as $164 billion in home equity due to foreclosures in the subprime mortgage market," said Mike Calhoun, president of the Center for Responsible Lending. "Government agencies, lenders, nonprofit organizations, Realtors and homeowners must all work together to minimize foreclosures and foster responsible lending practices to help ensure the stability of these families, their communities, and the entire mortgage financing system."
The National Association of Realtors, in partnership with the Center for Responsible Lending and NeighborWorks America, has introduced a new brochure entitled "Learn How to Avoid Foreclosure and Keep Your Home," the fifth mortgage-related brochure in the national Realtor group's consumer education series. Visit http://www.realtor.org/home_buyers_and_sellers/protect_your_home.html
The new brochure illustrates examples of mortgages that can put certain borrowers in danger, cautions consumers about predatory lending practices, identifies housing counseling organizations and other resources, and suggests steps homeowners should take as soon as they think they might not be able to make a monthly mortgage payment. Homeowners in this situation may have more options than they think they have, including:
Forbearance - Lenders may let a borrower pay less than the full amount of the mortgage, or skip a few payments, if there is a reasonable plan to become current on the loan.
Reinstatement - A homeowner may be able to make a payment that covers all of the previous late payments, usually at the end of a forbearance period.
Repayment plan - Lenders may allow a borrower who has fallen behind to make additional payments each month until the amount past due is paid.
Loan modification - Lenders will sometimes change the terms of a mortgage to help homeowners avoid foreclosure.
"It is SILVAR's goal to help families achieve the American dream of owning a home and maintaining homeownership," Silicon Valley Association of Realtors President Mark Burns said. "We urge homeowners to assess their situation and if they feel they might be falling behind on payments, they should take action immediately."
In addition to the mortgage-related brochure, Burns urges homeowners to call the Homeownership Preservation Foundation at 888-995-HOPE to speak to a counselor about their financial situation. Financial counselors are available, free of charge, to address their financial situation and understand their options.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.