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Tough Laws Won’t Stop N.C. Foreclosure Rates Rising
North Carolina has some of the toughest mortgage laws in the country but even with these and the additional laws enacted last year foreclosure rates are estimated to soar. It is estimated that as many as 60,000 foreclosures could be commenced in North Carolina in 2008 a rise of an additional 10 to 20%.
A predatory lending law was passed by the General Assembly in North Carolina in 1999. The law barred lenders of subprime loans from demanding unreasonably high points and fees. The law also stopped lenders from forcing borrowers to make balloon payments or for penalising borrowers for paying the loan off early. This law was hailed as a fantastic example to set to the rest of the country. Last year the law was expanded to include loans that had an interest rate above a certain level but that were too low to be covered by the 1999 law.
These laws do appear to have had some success with North Carolina foreclosure rate actually falling from mid 2005 to mid 2007. During this same period rates in Nevada, Florida and California actually tripled or more than tripled.
Even though they have these laws in place North Carolina foreclosure rate is set to rise. These foreclosures will not be just low income borrowers but fast growing areas of defaulters are middle income households who took out bigger mortgages than they could really afford.
Louis Mack a housing counsellor for a non profit group in Cabarrus County has told of people who have emptied out their 401(k) plans and who now use their credit cards to make house payments. Ms Mack’s organisation Prosperity Unlimited saw a 100% rise in the number of new clients facing mortgage delinquency or foreclosure in the last 3 months of 2007 over the same period the year before (80 up from 40).
Ms Mack is quoted as saying “The majority of people have mortgages they should not have gotten into. They bought more house than they could afford.”
It has been suggested when the legislature reconvenes they set aside more money for more foreclosure councillors.
Another group facing problems with their mortgage repayments in North Carolina are not covered under the 2007 law. These are the people who bought the popular 2 -28 mortgage loans. These people pay a low or “teaser” rate for two years after which the rate adjusts back up to a higher rate. Many of these people are finding once their loan is reset they cannot make the new higher repayments.
Mark Pearce a deputy state banking commissioner proposed that the Legislature could temporarily give more time to borrowers to challenge foreclosures in court, especially if the loans involved were certain sorts of subprime or non-traditional types of loans. He stated that foreclosures generally happen fast before a county of clerk court. Allowing borrowers additional time to appeal to a Superior Court judge owing to the loan provider doing something unethical could slow the foreclosure process.
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Great article.
A little scary that there are this many foreclosures in the pipeline! The teaser loans you mention have definitely been a big problem for many homeowners.
The sub-prime mortgages have also been very problematic.
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