Columbus, OH (PRWEB) April 23, 2007
In response to the record number of home foreclosures filed in Massachusetts during 2006, state legislators and housing experts are eagerly seeking new reforms in existing legislation that would seek to provide homeowners with more options when faced with an impending foreclosure.
Many attribute this sudden spike in foreclosures to the proliferation of sub-prime and adjustable rate mortgages, which provide loans to borrowers with bad credit and little money to put towards a down payment. During the housing market surge that peaked roughly three years ago, lenders were eager to capitalize on the demand for real estate by pushing sub-prime mortgages at astonishingly low initial costs.
While these loans typically run at a fixed interest rate for the first year after instatement, they are then subject to a period of "adjustment", when the rate can fluctuate wildly and without limits, making it nearly impossible for homeowners to keep up with their monthly payments. Consequently, homeowners around the state have been served with foreclosure notices urging them to pay up or surrender their house to repossession. Roughly 50% of homes going into foreclosure during the past year have been attributed to sub-prime mortgage borrowing.
Earlier this week, the Boston Herald reported that the Massachusetts Joint Committee on Housing met to discuss options to slow the trend and give homeowners a chance to avoid a credit-ruining foreclosure. While many of the bill items proposed dealt with registering employees of lenders and mortgage brokers, most of the focus was on providing homeowners with assistance in paying off their bills. These included a proposal for creating a 30 to 60 day waiting period after a notice of foreclosure is received, during which the homeowner can attempt to raise the money to settle the debt without the threat of late payments and fees, which in the past have made it nearly impossible for homeowners to catch up once behind in payments.
This period also gives homeowners an adequate chance to sell off their property for a reasonable price, if raising the money themselves is not an option. Homebuyers and foreclosure victims can often come to mutually beneficial terms on sales; the buyer can purchase the property for below its actual value, while the owner still makes enough money to pay off the debt owed. In many cases, homeowners even end up walking away with a little extra money to start over.
The Herald and other sources report that legislators are also considering a proposal to require lenders to obtain court approval before going ahead with foreclosure proceedings. Many feel that this measure, already employed by many other states, would at least provide more opportunity for homeowners to find a way out of foreclosure.
Other suggestions involved creating an Emergency Loan Fund for borrowers who sign up with foreclosure prevention agencies, and allocating significant funds to launch a Foreclosure Education campaign designed to alert homeowners to the dangers of sub-prime borrowing and predatory lending practices.
The Committee will continue reviewing the measures proposed through next week and is expected to come to an agreement in the near future on a bill to put before the state house and senate.
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