According to RealtyTrac.com, its November 2006 U.S. Foreclosure Market Report showed that 120,334 properties nationwide entered some stage of foreclosure during the month. That's an increase of 4 percent from the previous month and an increase of 68 percent from November 2005.

The report also showed a national foreclosure rate of one new foreclosure filing for every 961 U.S. households, the highest monthly foreclosure rate reported so far this year.

Worse, the Mortgage Bankers Association delinquency survey released in November showed that more homeowners are falling behind in their monthly payments, particularly those with "subprime credit histories and scores when they applied for their loans," writes Ken Harney for Realty Times. "Roughly one of every 20 homeowners with a mortgage -- 4.7 percent -- was at least 30 days late during the third quarter, according to the Mortgage Bankers Association's national delinquency survey released last week. The survey examined payment performances on over 42.6 million active home mortgages." That means that "one of every eight borrowers with subprime credit histories was late during the same quarter. Subprime borrowers who took out adjustable rate mortgages were even more likely to be behind -- one in every seven were delinquent last quarter."

Those figures have alarmed the National Association of Realtors which says it is concerned over the rising rate of defaults and foreclosures occurring in many areas around the country. The probable culprit, reasons the NAR, is lack of understanding over the risks of taking out “exotic” mortgages.

In a conference call yesterday with the Center for Responsible Lending and the Leadership Conference on Civil Rights, NAR President Pat Vredevoogd Combs urged consumers to make sure they understand the risks and rewards of all types of mortgages before they make a decision on a loan. She also advised consumers to consult with a Realtor and to participate in mortgage education programs sponsored by Realtors before they buy a home.

“We are committed to helping people buy -- and keep -- the home of their dreams, and an educated consumer really can make the best decision,” said Combs, of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt. “Realtors help Americans achieve the dream of homeownership. We work to ensure that homebuyers have access to the proper information so they can fulfill their homeownership goals.”

Foreclosures are not only a disaster for families but also for communities, says NAR. Problematic loans are often made in concentrated areas, and high foreclosure rates of single-family homes can seriously threaten a neighborhood’s stability and a community’s well being. “Foreclosures can lead to high vacancy rates, which in turn, can cause all homes in the neighborhood to lose value,” said Combs.

Says Ralph Roberts, author of Flipping Houses For Dummies, Wiley & Sons, in 2006, points out there were over 1 million homes foreclosed, and currently, there are over 6 million families that are on the way to foreclosure or in foreclosure. That means they are over 60 days behind in their loans. That's actually three payments behind.

"There are a lot of reasons why more homes are in foreclosure," he says. "The economy has slowed but homeowners have used their homes as ATMs for way too long, and the ARMS are increasing risks tremendously. We've also had taxes go up so if homeowners are short in their escrow there's more money going toward the shortfall. ARMs are adjusting, the Federal Reserve affects credit cards and ARMs, not fixed-rate loans that are already in place, so I've seen payments go up as much as 10 percent a year. One lady I know had a $900 payment go up to $1600, that's 700 more than she qualified for. It's almost a fraud to put people into these ARMs to qualify them."

He suggests, "People in foreclosure don't know where to turn. Not all have good options but sometimes they can sell, renegotiate, go into bankruptcy, and there are options. As Realtors we need to work on short sales (where the lender will take less than the principal amount due to declining value.) We need to start embracing foreclosure as a niche and learn as much as we can. It's a growing market.

Last year, NAR partnered with CRL in jointly issuing two consumer education brochures on nontraditional and traditional mortgages. Last month, NAR and CRL released a new brochure designed to help families avoid predatory lending. Consumers can read all three brochures online here. The National Association of Realtors, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Published: December 20, 2006

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