On Wednesday, the Neighborhood Assistance Corporation of America (NACA), a nonprofit devoted to helping people who have been the victim of predatory lending, announced a $1 billion program that will refinance strapped borrowers out of adjustable mortgages with soaring rates into low fixed-rate 30-year loans.
Here in our local Eugene market, things are quite stable compared to the national market. We have seen some leveling, but this has just lead to a return to a balanced market, favoring the buyers.
- What do you think about the Federal Government or even these non-profit groups stepping in to attempt to prevent a large portion of these foreclosures by refinancing them with 30 -year fixed loans?
They say they have a 60% failure rate, but what that statement is overlooking is that that means there is a 40% success rate. A lot better than the odds sales people like ourselves are used to facing.
- How do you regulate a situation like this though? How do you make sure the limited funds make it where they need to go without prioritizing based on factors that would violate the Fair Housing Act.
Borrowers who enter the NACA program will be able to refinance out of their loan into a 30-year fixed mortgage at a rate that is 1 percentage point below what would be available through a for-profit bank.
Currently NACA is offering loans with a 5.62 percent interest rate.
Citigroup and Bank of America have pledged the combined $1 billion to fund the program, which NACA hopes will help as many as 10,000 homeowners at risk of default.
The delinquency rate among borrowers with poor credit has risen to 13.3 percent, according to First American LoanPerformance. That's the highest level since the company started tracking delinquencies in that group a decade ago.
For all borrowers, delinquency rates have risen nearly 50 percent in the past two years to a recent 2.87 percent, according to Equifax Inc. and Moody's Economy.com. Historically, more than half of all borrowers who become delinquent on their mortgage eventually enter foreclosure with their bank.
"There are hundreds of billions of dollars worth of problem loans out there," says Zach Schiller, research director at Policy Matters Ohio. "We have much larger problems than can be dealt with by these programs."
If you're looking for a safe market to invest in, Eugene is still seeing steady growth. We have leveled off on our appreciation growth rate, but this has helped to normalize our market leaving some lower priced inventory affordable to the local buyers. (Eugene is not traditionally a high wage city to live in, therefore we need to preserve some inventory from outside investors, for the first time buyers.)
Comments(4)