I’ve been thinking lately. Maybe not always a good sign, but I’ve come up with some harebrained incredible ideas for solving or at least mitigating the foreclosure crisis in this country.

1. Have lenders agree to work with buyers who are behind on payments but are trying to still live in the home i.e. not flippers etc who put zero down and can just walk away. Work with them how? Cancel fees for a set period of time as they try to catch up on payments. Allow them to refinance to fixed rates with low or no closing costs. Offer interest only payments for a small period of time like 3 or 6 months and then go back to normal payments.

2. Offer subsidies/tax breaks to towns or commercial/philanthropic organizations to buy up property in low income areas, especially the hardest hit urban areas like Dorchester, some parts of JP, Haverhill, Lowell, etc., and work with residents who want to own a home but cannot afford more of a monthly payment that what their rent currently is. This would provide jobs to many - rehabbing that doesn’t require a permit could be done by potential owners to reduce their monthly payment for example. Offer lease to own options as well. If towns did not have enough money to buy up these properties, civic minded individuals or organizations could improve the areas while making money at the same time, especially with tax break incentives.

3. Public plea for help. Just like with Katrina, this is a crisis that is affecting many people and causing many to become homeless. People are generous, but if they don’t know how to help they won’t help. Bush’s HOPE NOW program is a start but as with most things is bureaucratic and not especially efficient. A well run nonprofit headed by a retired CEO or former president/governor etc. could collect donations and offers for assistance and distribute them equitably. Churches and social groups like Kiwanis/Rotary/Elks etc would surely respond if they were approached directly to help those in their own communities.

Do you have thoughts about this? Feel free to comment and tell me my ideas or worthless, great, or somewhere in between. Also, please give this some thought and maybe add a few of your own.

Are you in trouble with your mortgage payments? You are not alone. I found an informative article over at Yahoo! Finance that provides more discouraging detail about the foreclosure crisis that is facing this country and has not abated yet.

Of note - 1 in every 483 homeowners across the country have received some sort of foreclosure notice. There are basically three types of these notices - default notice (owners are very late on payments), auction sale notice, and bank repossession. About half of the current foreclosure proceedings will be taken care of via sale or payment by the owner, but many will be repossessed or sold at auction.

The hardest hit areas? 9 of the top 10 cities/towns are in California and Florida, with Nevada, Arizona, and Michigan also dealing with this severe problem. Why is this happening? Alan Zibel, the author of the article mentioned above, sums it up very well,

“The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. Many can’t find buyers or owe more than their home is worth and can’t get refinanced into an affordable loan.”

How can we solve this problem? Apparently not with President Bush’s Hope Now coalition. Critics say that this plan falls far short of helping with the problem. I will say that one of the major problems is that not enough consumers have reached out for help. If you are a struggling owner, feel free to visit this page to learn about some available resources.

Are you a first time buyer? Have you not bought in a long time? Do you have questions about how you can save money in this buyer’s market? Well my goodness do we have something special for you.

Join us at Countrywide’s Peabody branch on 202 Newbury St. on Route 1 south on May 20th. I promise you won’t be disappointed. The program starts at 7pm and will run until 9 or so. You can reserve a seat by calling 978-536-1313. This free program is sure to be valuable to you if you are thinking about buying a home in the next 6-12 months or just want some questions answered.

What will be covered? How to buy foreclosures, negotiating tips in this market, determining how much to offer, how to buy with little or no money down, problems to avoid when buying, home inspection tips, and information for veterans on VA loans. If you have any questions, feel free to attend and pick our brains.

A real estate attorney, a member of the buyer broker hall of fame, and loan consultants with experience in home repair/rehab loans, credit repair, and government loans will all be presenting. Hope to see you there!

Shouldn’t we blame REALTORS® for this mess that we currently find ourselves in? A recent study asking consumers how they felt about real estate agents came to some interesting conclusions. When asked about REALTORS® in general, people were mostly wishy-washy - some were in favor, some were not, most were unsure how they felt. But when asked about their particular REALTOR®, about 80% of respondents stated they would work with their agent again. What gives? The majority of business for most agents comes from repeat clients, referrals, and word-of-mouth. Agents should have a long-term interest in the area in which they work, since a few unhappy clients could potentially put them out of business.

I’m sure some agents were only seeing $$$ signs over the past decade, hoping and helping their clients and customers buy properties they could not afford. This is not true for the vast majority of agents, though.

I will place some blame on lenders, especially the big players. Their major concern is writing as many mortgages as possible so they can turn around and sell them. Nothing wrong with that in our capitalist economy, but lenders failed to think long-term and have reaped the seeds of their sowing.

Some blame must also go to global capital providers (those around the world with the big bucks like governments, megabusinesses, sovereign wealth funds, etc.) because all they were looking for was juicy returns on investment - a portfolio of risky loans returns a lot more than T-bills or any other ’safe’ investment. The bottom line for them is greed, and they must be taken to task for it. Will that happen? Their investment losses are probably their only punishment.

The biggest amount of blame must be put on the rating agencies. These companies, like Moody’s and Standard and Poor’s, are responsible for assigning a level of risk to a product. Because so many rely on their rating and only buy/sell AAA rated products, the ratings agencies are ultimately culpable for this mess. Instead of rating subprime loans at a level they should have, like BBB (much riskier than AAA), they decided en masse to rate these loans AAA. After all, the agencies make the most money by rating products AAA (many companies have risk policies that prohibit them from owning lower-rated investments) so that others may comfortably buy and sell the AAA products on the open market.

The ratings agencies are not non-profits, so clearly it is in their best interest to rate highly, as they make more money that way. There should have been more transparency, guidelines, and oversight regarding these companies. Since we cannot change the past, we must make an effort to make sure that this happens in the near future.

How can you help? Write your congressperson expressing your displeasure of the ratings agencies and suggest that they have more government oversight, stricter guidelines as to what really qualifies as AAA, and more clarity in reporting how and why each product receives the rating it does. If this happens, maybe we can prevent another mess like the subprime one from occurring in the future.

Current statistics of homeowners show four types. Those that borrowed at subprime make up 9% of owners. Those who borrowed at prime make up 50%. FHA/VA mortgagees make up 6%, while the remaining 35% of owners own their homes free and clear. So what, right? The flip side of this picture is more telling. Foreclosure statistics show that owners who were approved for subprime loans - they may have paid no money down, did not have income verified, or did not have a sufficient credit score to qualify for a normal, prime loan, among other reasons - comprise 53% of current foreclosures. Prime borrowers make up 33% of this category, while FHA/VA borrowers account for 14% of foreclosures at the moment. Take a minute to let this sink in - one tenth of all homeowners are subprime owners, but they make up more than half of all foreclosures.

The first subprime loans were made in 2000, and none have been made since August of 2007. Roughly 1/5 of all borrowers who have subprime loans are currently late (in default) on their mortgage payments, as opposed to approximately 3% of prime borrowers. The fact that there are no subprime loans being originated right now is a good start, but we will be feeling the effects of this crisis for years. I will examine in my next post who really should be blamed and will try to provide some ways we can fix this problem. For the record, we at Buyer’s Choice Realty encourage all our clients to meet with a lawyer and their lender so they may endeavor to understand the terms of their loan and verify that they can meet their payments.

The Mortgage Banker’s Association (here’s a link to the Mass. chapter) announced today that the percentage of homeowners receiving foreclosure notices has reached a record high of 0.65%, up from 0.58% in the first quarter. You can find one of the many articles about the MBA’s release here. What’s more astounding than these disturbing numbers is the fact that the delinquency rate, those who are behind on mortgage payments but have not yet started the foreclosure process, is at its highest rate in 5 years - 5.12% of all loans are currently delinquent. This is a huge amount of money that has not been paid, and it is just one of the numerous causes of new lending restrictions.

The chief economist for the MBA, Doug Duncan, states that the huge job losses in midwest states like Ohio, Indiana, and Michigan from auto industry and other manufacturing job cutbacks. In fact, according to Duncan, the problem shows itself the most in Ohio, where the number of mortgages that are in foreclosure or are more than 90 days late is more than twice the national average.

What else accounts for this growing problem? Warm weather states. Florida and California have seen flocks of prospectors buy up property and develop areas during the housing boom. Now that the boom has gone bust, those same prospecting investors are out of cash and are unable to keep up on mortgage payments. Nevada and Arizona also have seen these same problems in recent months.

Most experts predict that foreclosures and defaults will continue to increase in the short term. More explanation on further reasons for this later.