America’s acute foreclosure crisis has mellowed, but the home mortgage industry is nowhere near a full recovery. Its symptoms are changing – and the patient may get worse before it gets better. From Washington, Elizabeth Wynne Johnson reports on signs that a new foreclosure wave is brewing in Colorado and in most parts of the country.
It’s been called the “shadow inventory.” In Colorado, the foreclosure rate is down, but mortgage delinquencies are up. Statewide, almost six percent of loans are at least 30 to 90 days past due. According to the latest survey by the Mortgage Bankers Association, the numbers of foreclosures are shrinking while delinquencies are up in almost every state, which makes for an ominous backlog.
VASQUEZ: I’ve seen some cases in which foreclosure action hasn’t been filed with the borrower having been delinquent 8-9 months.
Jose Vasquez is supervising attorney in the consumer law unit of Colorado Legal Services.
He says ten years ago, a delinquent mortgage debtor wouldn’t get past three months without triggering a foreclosure.
VASQUEZ: Our foreclosure rates will probably increase because of all these delays with processing loan modifications.
Foreclosure attorney Carolina Lombardi practices in Miami, the Ground Zero of the American mortgage crisis.
LOMBARDI: I definitely think there’s going to be a second wave of foreclosures.
The era of predatory lending has been eclipsed by the era of predatory foreclosure practices. When banks and loan servicers couldn’t locate the paperwork to foreclose, some used forged and fraudulent documents to proceed. Now the courts and state attorneys general are involved. So for a while, many lenders simply stopped filing foreclosures. But according to Lombardi, banks and loan servicers are starting to gear up again.
LOMBARDI: They’re re-filing cases. They’re filing new cases that they’d held off on. And in addition, Fannie Mae has started new initiative where they’re now going to dual-track cases, whereby people who are trying to get their mortgage modified are also going to be in foreclosure proceedings in court.
As Managing Director for Regulatory Policy in Washington, the last thing Jeff Lischer wants to see is another foreclosure wave. He works for the National Association of Realtors. But even he says it’s not so much a matter of whether the next wave of foreclosures will hit… as wondering how much it’ll hurt.
LISCHER: Whether it’s one or two million more, or seven or eight million more – which would be really a very bad situation – we just don’t know.
From the vantage point of a legal aid office in Maryland, attorney Vicki Taitano sees a new wave of foreclosures that could hardly hit at a worse time. Down the line, Taitano expects a surge in bankruptcies. And a nation of people trading aspirational home-ownership for hopeless debt-ownership.
TAITANO: And so – are they going to be able to pay for college for their children, …to buy cars and new houses and all of that? It doesn’t really look like it. They’re kind of out of the economy for a while, it seems to me.
(Female voice) “Welcome to the Homeowner’s HOPE Hotline. Please press 1 for English…”
This telephone hotline – a partnership with the federal government – points to one-on-one help for distressed homeowners who might be saved by a loan modification.
VASQUEZ: What I’m seeing is, a lot of individuals now are more informed – and then there’s a lot of folks that are misinformed.
Colorado legal services attorney Jose Vasquez says borrowers more than ever need HUD-approved counselors and affordable lawyers to help them deal with their mortgage companies. Maybe even more so in the event of a fresh wave of foreclosures. But it’s only getting harder to access their services.
Congress eliminated the $88 million line item for mortgage counseling for the 2011 fiscal year.
Elizabeth Wynne Johnson, Capitol News Connection.