This Wouldn’t Happen In Mark Taylor’s Georgia

Yes, yes, I know a lot of you will read this and have that response. Still, this is not good news for Georgia.

Hundreds of Georgians lost their homes Tuesday.

The houses, taken from debt-laden homeowners, were sold to bidders on courthouse steps statewide.

The increasingly busy monthly auctions show that not all of the residential market is in decline.

Foreclosures are rising.

More than 115,000 properties across the country were in the foreclosure process in October — up 42 percent from the same month a year earlier, according to RealtyTrac, a California company that tracks foreclosures.

Foreclosures in Georgia are up a stunning 99 percent in the past year.

The state now has the nation’s third-highest rate of foreclosures: One in every 449 households. In October, that meant 6,895 properties were in the foreclosure process.

14 comments

  1. Will Hinton says:

    So the question is why Georgia is ranked so high in foreclosures? I seriously doubt that it has anything to do with which party is in control of the legislature. Is there something about laws regarding foreclosures or mortgages in GA that exacerbates the problem?

  2. Bill Simon says:

    Will,

    All of the previous homes that were closed on an “interest-only” ARM basis.

    In short, the rate of foreclosures indicates thata there were lots of people who bought homes at initial low-interest rates who did not/could not prepare themselves for what happens when the fixed-rate becomes an adjustable rate.

  3. RandyMiller says:

    Georgia for years has been one of three states where lenders can foreclose on houses in 37 days. In all fairness this deserves looking into and reconsideration by our legislature.

  4. bird says:

    Our system is way out of whack. Not only can lenders foreclose in 37 days, homes are sold on the courthouse stairs. There is no conceivable way this will get any measure of what the home is actually worth.

    For example, if someone’s home is foreclosed upon, when the mortgagor gives proper notice and waits the proper amount of time, it goes to the courthouse stairs on a designated day of the month, like a Tuesday. Then, a small pool of buyers who can afford to take lots of cash or the equivalent with them to the courthouse, bid on the property. These homes get a pittance compared to what they are actually worth.

    A homeowner should be given a greater amount of time to secure additional funding or sell the house through the usual channels, where the homeowner can realize a legitimate price for the home. The current system is broken and only benefits a small group of insiders.

    And please no one tell me that credit will be harder to come by for prospective homebuyers if the current system changes. That’s like the credit card companies saying that they can reduce interest rates if Congress tightens up the bankruptcy laws. Well, the bankruptcy laws have been tightened, and no one lowered my rate of interest. Their profits just increased.

  5. jsm says:

    Somehow I doubt that mortgage companies are jumping to foreclose on day 38, except in rare circumstances. I would think they’d rather work with a homeowner who’s had a run of bad luck but fighting to pay as soon as he can.

    Where I have trouble with mortgage companies is their unwillingness to accept anything less than the total past due balance when someone who is behind is trying to pay as they are able.

    Selling on the courthouse steps is not the first option for mortgage companies. They’d rather hose the homeowner for late fees and interest while the homeowner is scraping to catch up. However, sometimes this does lead to foreclosure and auction.

    I wonder how many home auctions were due to unpaid property taxes?

  6. I’m sure the party that overturned predatory lending protections is chomping at the bit to do something about overzealous mortgage lenders.

    In all seriousness though, this is the consequence of an ultra low rate environment combined with brokers willing to get a commission for making a loan that they then repackage and aren’t responsible for.

    Think about it, the people who make the loans by and large don’t hold the corresponding debt.

  7. pachedhouse says:

    Oh yeah, lets blame the lenders… let’s not blame the people who decided that they wanted a larger house, got in trouble because they could not afford their “conspicuous consumption” and then lost their house because of it.

    Lets not blame people for their actions anymore, lets blame the people that facilitate these actions… yeah, that’s the ticket.

    Let’s not blame people for doing something stupid, irrational, or just plain illegal… lets blame peer pressure, or drugs, or ADHD. Easy way out.

    It’s called personal responsibility and common sense. Two things that have obviously been lost in most places.

  8. atlantaman says:

    One of the advantages of non-judicial foreclosure is that Georgia has some of the lowest rates in the country. It’s the free market at work, if you make it easier for the mortgage companies to evict the non-payers then they can pass the savings on. If we make the mortgage company give the non-payers some more free months in the house, then the rest of the mortgage payers in Georgia will have to pay a higher rate.

    Hardcore is right in that the lenders are too willing to make loans to people who shouldn’t be buying a home. That coupled with the amount of people getting second mortgages to finance credit card debt and depreciating assets like televisions and jet skis. Essentially, throught refinancing credit card debt, you’ve got people paying interest-only (without ever paying down principle) loans on meals they’ve had at the Outback Steakhouse (food is the ultimate depreciating asset as the by-product is worthless other then as fertilizer).

    After the people refinance their credit card debt they manage to max their cards out again (very few have the discipline not to repeat their previous mistake) and then have a second mortgage with maxed out cards.

    Simon is also right in that they are getting these people who shouldn’t be buying a home into ARM’s with low introductory rates that rise as interest rates go up.

    Should our hearts bleed for someone who had to have a set of matching jet skis for their 4 x 4 and now is on the verge of losing their house due to a couple of great weekends on Lake Lanier?

    That being said, it drives me nuts the finance companies continue to allow brokers to sell loans to obvious at-risk clients. I’m not one for more regulation, but I think the industry has some responsibility for the foreclosure problem.

  9. Decaturguy says:

    You think that this Republican legislature is going to increase the amount of time a lender can foreclose on a property? Ha, ha, ha, ha, ha, ha, ha, ha ha!

  10. atlantaman says:

    I think what you are missing is that the amount of time a lender has to foreclose on a property is not relevant to their own profits per se. They have a business model that includes bad debt, carrying costs of a pre-foreclosure homes with no income, etc.

    If the Government changes the rules of the game and forces mortgage companies to increase the time they allow people to stay in homes without paying – then the mortgage companies will have to change their business models and adjust the interest rates accordingly.

    In essence the rest of the Georgia mortgage payers would be subsidizing the extra free months the non-payers would be receiving.

    Or do you really think the mortgage companies would decide to screw their shareholders instead? If they actually did take profit from shareholders to subsidize the non-payers then the shareholders would sell the stock and buy another company that respected the need to earn a profit.

    It’s the free market and knee jerk actions will always produce a negative reaction somewhere down the line.

  11. bird says:

    A 99% jump in foreclosures is indicative of an institutional problem. Of course many people make bad decisions and some foreclosures are necessary. But this is larger than a few bad apples.

    Atlantaman, do you have a link to a study comparing mortgage rates among states. I doubt that Georgia is lower, but I am more than willing to look at the evidence.

  12. This is hardly scientific, but I plugged in refinance values into a quote generator on E-loan using Georgia and California and on some of the loans, the APR for Georgia was slightly lower.

    Pachedhouse, of course people have to be responsible for their actions, but there is also a point that you draw the line on what the average borrower understands and what kind of guidance they need from regulators before they make a decision.

    Case in point, both Republicans and Democrats have encouraged more and more people to purchase their own home. That means more first time home buyers and more people who don’t have a sophisticated understanding of how financing works entering into this market.

    I get offers in the mail for ultra low teaser rates that look too good to be true. Could I refinance every month and never pay more than 1% interest? I don’t think so, but you wouldn’t know from the offers.

    As I’ve stated previously, the person who sells you your loan generally has very little interest (financial or otherwise) that you keep up with the loan once you sign your name on the closing docs. That’s because your loan in most cases (and especially if your credit is subpar) is repackaged by the lender and sold to someone as part of their interest bearing portfolio. Again, in most cases the servicing rights for your loan are also sold to another company.

    The lender has little incentive to look out for you, they only care that you sign up for the loan which generates the highest commission for you, more often than not a riskier loan (such as a 3 year ARM compared to a 30 year fixed) generates a higher profit.

    So we’ve established that the lender doesn’t care, now what about the person that actually holds your debt. Well, he doesn’t really care either because in Georgia it’s easy to kick you out and sell it to someone else.

    So, if the person who brokers your loan doesn’t have any incentive to protect you and neither does the person who actually owns your loan, then I would submit that it is the government’s responsibility to step in and do something to protect the consumer. I imagine that many of the people being foreclosed on fit a certain credit profile and are taking advantage of very high risk loans. Guess who ends up subsidizing this behavior eventually. If you guessed the average Georgian who actually does pay their mortgage then you are correct. The increased risk the mortgage companies take on are passed on to their other consumers.

    Because I’d prefer not to subsidize the poor decisions of other Georgians, and I’d also like them not to buy a home that they will one day lose, I’d be in favor of the state putting tighter regulations in place on sub-prime loans.

    Long comment already, but my proposal would be to offer renters a savings credit that they can use to build up a downpayment, so that when they choose to buy a house they will not have to finance as much of the price (or could use the savings to pay for the closing costs) and therefor would not need to seek out as many sub prime loans. Anything we can do to encourage and promote responsible home purchases that don’t end up on the auction block is a good thing.

  13. ColinATL says:

    What’s interesting to me is that unlike other areas of the country where folks are totally leveraged by over-valued homes (e.g., Washington, DC), Georgia home values aren’t considered to be that over-valued. Our bubble didn’t inflate like everyone else’s did.

    So why are our foreclosures so high? Isn’t our economy generally considered to be back on track? Seriously, what’s the underlying factor that’s making Georgia such a foreclosure mecca?

    Is it just the 37-day foreclosure rule?

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