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15 March 2007 ANND Communication: HRI Legal Resource and Assistance Center Subject: Communities in Crisis: Pushed Beyond the Economic Limit Dear Colleagues, Commodities investment guru Jim Rogers projects "Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history" (Top investor sees U.S. property crash, Reuters UK, 15 March 2007). The following are details on the U.S. subprime mortgage market that encompasses widespread accusations of fraudAppraisal fraud: your home at risk: Appraisers say they're being pressured by lenders to inflate their estimates of home values, CNNMoney, 2 June 2005 -- Financial Crimes to the Public: FBI 2005 Report - Mortgage Fraud). Details on U.S. subprime mortgage loan market, Reuters 14 March 2007: -- Subprime loans grew to 13.6 percent of the total mortgage market last year from 2.4 percent in 2000, according to the Mortgage Bankers Association. The Federal Reserve Board says U.S. households owed $9.7 trillion on home mortgages at the end of last year. -- There are roughly 13 million subprime loans in the market today, the MBA says. -- In the fourth quarter of 2006, lenders began foreclosure proceedings on 0.54 percent of all mortgages, the highest rate on records dating back 37 years, according to the MBA. Two percent of subprime mortgages entered foreclosure, the highest in three years. -- 13.33 percent of subprime loan payments were delinquent in the last three months of 2006, according to the MBA. That's the highest level since 14.39 percent in the third quarter of 2002. -- Another 100 mortgage lenders who dabbled in the subprime sector are likely to drop out this year, the MBA says. -- 1.5 million homeowners will face foreclosure this year, according to research firm RealtyTrac. That would be a 20 percent to 25 percent increase over last year. -- MBA estimates that between $1 trillion and $1.5 trillion in adjustable-rate mortgages face an interest rate reset that will sharply raise their cost this year. -- One in five subprime mortgages in 2005 and 2006 will end in foreclosure, according to the Center for Responsible Lending, a consumer advocacy group. About 2 million homeowners are delinquent on their loans. For these people, many of whom were unsophisticated buyers lured into loans with no real understanding of the risks, the meltdown is far more than a case study in economics. It is a mounting financial calamity that will end with them losing their homes. -- Mortgage lenders can't claim that no one told them so, USA Today, 15 March 2007. The Mortgage Bankers Association reported this week that the share of mortgages entering the foreclosure process in the last quarter of 2006 was at its highest level since the group began keeping track 37 years ago. Borrowers with subprime loans have been hardest hit, but all major loan types have been affected, as the housing market weakens amid upward adjustments in monthly payments on many mortgages. Responding to the mortgage bankers’ grim report, Senator Christopher Dodd, chairman of the Banking Committee and a presidential hopeful, broached the possibility of federal help for struggling homeowners. The most plausible relief measures — detailed in a new report by the Center for American Progress, a liberal research and advocacy group — involve federal boosts to existing state and local programs. Those include counseling to help strapped families plan for rising monthly payments and renegotiate their loans, legal aid and short-term loans for eligible borrowers. One study shows that a federal grant of $25 million could replicate proven local programs in other areas now experiencing spikes in foreclosures.-- Homeowners at Risk, New York Times, 15 march 2007. In the context of predatory loans (National Housing Institute) based on hyperinflated valuations, recently there has been a move to transition senior citizens into reverse mortgages (National Consumer Law Center). In the light of this national mortgage banking crisis, senate and congressional action is needed to to address all variables that will impact the consumer level during this systemic transition. One appeal is for an immediate reversion of property assessments to the previous tax period. Calculating the scope of this systemic transition Members of Congress have denounced what they say are abusive practices by some lenders that target the poor, minorities and the elderly. -- HUD says subprime punishment on the way, Modesto Bee, 15 March 2007. Humanitarian Resource Institute called for regulatory action against predatory lending in 2002-2003: Conventional loans to low-income buyers leapt 75 percent between 1993 and 1998. Minority buyers increased at a pronounced rate, with blacks seeing 95 percent growth and Hispanics 78 percent. This growth in lower-income and minority homebuyers helped fuel the ascent of the subprime mortgage market, which grew at an eye-popping 880 percent. -- Predatory Lending: A Special Issue, Shutting the Door on Abusive Mortgage Practices: Bridges, 2001, The Federal Reserve of St Louis. Looking forward to your feedback. Stephen M. Apatow President, Director of Research and Development, Humanitarian University Consortium Center Telephone: (203) 668-0282 Email: s.m.apatow@humanitarian.net Internet: www.humanitarian.net Back to Communities in Crisis: Pushed Beyond the Economic Limit Copyright © 1994-2007 Humanitarian Resource Institute.
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