Mortgage meltdown: Isle properties, loans and practices impacted
Some mortgage brokers interviewed mentioned homeowners defaulting on payments, homes being foreclosed upon or auctioned and a large supply of such properties on the market. However, they could not cite precise numbers of foreclosures or whether they were increasing or decreasing.
As of press time Tuesday, RealtyTrac, a nationwide online database of foreclosure listings, indicated Hawaii County had 11 pre-foreclosure properties, 58 properties up for auction, 10 bank-owned properties, 116 for-sale-by-owner properties and 690 resale homes.
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At least twice a week, Botelho spends a lot of time negotiating with the lenders, often translating the verbiage for homeowners who were unable or unwilling to adequately inform themselves about the mortgage contracts into which they entered.
However, Botelho has seen lenders removing some nontraditional, exotic lending products like interest-only payments, balloon payments or adjustable rates from their portfolio, thus decreasing the once enormous pool of products for brokers. She is seeing more 30-year fixed rate and Federal Housing Administration loans.
Marcelle Loren, Island Mortgage president and mortgage broker of 31 years, disagreed that there was limited product. She said some brokers, usually those with less experience, have limited access. That is why, Loren added, it is important for people to ask mortgage brokers about how many lenders they work with on a regular basis and if any of them account for the majority of their business. She advised borrowers to inquire about mortgage brokers' experience and references, as well as to shop around because there may be something that better fits their profile.
Business has remained the same at Island Mortgage, Loren said. Daily the company helps people get out of the subprime mortgages, refinance and restructure. It also assists with filing disputes on credit reports, of which many use consumer scores rather than mortgage scores.
Even as once-soaring home prices sink, homeowners tap out built-up equity and foreclosures elsewhere on the island increase, Loren said it is a buyer's market in real estate for some, particularly those that are more flexible and have been waiting for at least the past two years.
Several area mortgage brokers spoke Tuesday of lenders ending 100 percent financing plans, requiring better credit scores and demanding substantial proof of the borrower's income. There also was mention of banks citing "long-term opportunities" and choosing to solely rely upon their loan officers.
Doug Emmons, GMAC Mortgage Kona Branch manager and certified loan officer, said there are stringent, more rigorous rules for first-time buyers and homeowners hoping to refinance. Despite production lowering, GMAC Mortgage Kona Branch gets about six phone calls daily from homeowners trying to save themselves from going into foreclosure. They often purchased their properties with 100 percent financing or 10 percent down, missed payments, now have no equity and owe more than the value of their home.
"These are difficult times," Emmons said. "Because of the stringent underwriting programs, they cannot qualify for refinancing. Oftentimes all I can suggest is that they continue making payments until more liberal programs are offered, the market turns -- or just walk away."
The surge in foreclosures is frequently attributed to the exotic mortgages that attracted marginal buyers during the past few years. Brokers and bankers, who crafted ways for these people to purchase homes, also are blamed for the mortgage meltdown. However, Botelho thinks the alarming issues in the housing market are an extension of the weakening economy. One common reason why homeowners get into the foreclosure predicament is job loss. With the loss of income, she said they can no longer afford to pay their mortgage.
In the past six months, Botelho has heard anecdotally that several of her colleagues went out of business. She said some may have been too greedy, used questionable practices or had too much overhead. Loren and Emmons also named companies that are no longer in operation, are inching toward bankruptcy or have been purchased.
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