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Long Island Talks News 12 Long IslandAugust 23, 2007 7:00 PM - 08:00 PM LAUREN SIVAN, co-anchor: Well tonight, facing foreclosure here on Long Island. Filings have nearly doubled nationwide in the last year. We're going to talk about the numbers here on the Island and what you can do to avoid this mortgage mess. Plus, we want to hear from you, of course Long Island, so go ahead and give us a call now, 516-393-1800 is our number. You can talk to our experts here live on the air. LONG ISLAND TALKS starts right now. Hello, and welcome to LONG ISLAND TALKS, this is the only show where you can weigh in. I'm Lauren Sivan. Lea Tyrell is off tonight. Well, more and more people cannot pay the mortgage bill and that's driving up the foreclosure rate through the roof. The number of foreclosure filings in July jumped 90 percent over the same time last year, and that's almost one household out of every 700. And while refinancing used to be an option to lowering your monthly payment, experts say not anymore. Ms. PEARL KAMER (LIA Chief Economist): It's more difficult to refinance if you have an adjustable rate mortgage because lending standards have been tightened. So today, you can't get a no documentation loan--that is a loan without documenting your income. The other problem that occurred is that many of these loans were interest-only loans; you didn't have to pay the principal, at least initially. And what happened was not only did the interest rate double, but the principal came through, and these borrowers just did not have the financial wherewithal for their payments, hence the increase in foreclosures. SIVAN: All right, so are you worried about keeping up with your mortgage bills? Do you have a question for us? Go ahead and give us a call; 516-393-1800 is our number. We'll be taking your calls on the air; we'll also be reading through your emails. Go ahead and email us, litalks@news12.com. Joining me tonight--Lynn Law, she's the director of education and counseling for the Long Island Housing Partnership. Also with us--Bob Moulton; he's founder and CEO of Americana Mortgage Group. Welcome to you both tonight. Ms. LYNN LAW (Director, Long Island Housing Partnership): Thank you. Mr. BOB MOULTON (CEO, Americana Mortgage Group): Thank you, Lauren. SIVAN: All right, so these--these--this is all over the news, this is all over the headlines. Lynn, what are you telling folks that are now nervous about a possible foreclosure? Ms. LAW: Well, they certainly can consider refinancing, but they have to have the ability to pay this mortgage. Unfortunately, the loans that have been originated in the last couple of years that are resulting in these foreclosures, were written without regard for the borrower's ability to the mortgage. Or if they were interest-only, the payments now shooting up as it adjusts. So certainly, we'll talk to them, and ask the numbers and find out if it works. There's also a national hotline that we can refer them to... SIVAN: OK. Ms. LAW: ...which is 1-888-995-HOPE. SIVAN: And we'll--we'll go ahead and put that up on our web site as well. Ms. LAW: That'd be a great idea. These are trained counselors who are there 24/7 and they work even with the subprime lenders to try to do a workout to avoid foreclosure. Because sometimes if the ability to repay a loan is not there, they can work maybe to put some of the payments at the back of the loan or-- SIVAN: There are some options. Ms. LAW: There are a few options. It's very difficult. SIVAN: All right. Well Bob, I mean I would assume that mortgage lenders want you to be able to pay back your mortgage too. They don't want to see you go into foreclosure. Why were there so many high rate--high interest loans in the subprime loans handed out? Mr. MOULTON: There was a big frenzy in the first half of this decade, and more people wanted to get into houses that they couldn't afford. Houses was (sic) escalating and it was a great investment. Houses were going up 10 percent a year from 2000 to 2005. So in traditional finance house lending, we always had someone who could borrow three times their income. However, when they saw their peer group buying houses of greater value, other homeowners wanted to get into those houses of greater value. This secondary market created these products and soon you had people buying houses six times their income. So someone that was making $50,000 a year was taking out a mortgage of $300,000. And frequently, these mortgages were stated income, where the payments would increase year to year. So it might start at $1800 and the following year it would be $2400, and the understanding was that after two to three years refinance because the house would be worth so much more. However, no one forecasted that the houses were going to go down in value. SIVAN: Right, you have lagging home sales now, you have a decrease in home value, then that's why we're here. Mr. MOULTON: Exactly right. That's why we're here tonight, because the houses did go down in value. There's not enough equity for these people to refinance, so it's a Catch-22 and it's--it's not a very good situation right now. SIVAN: And it's not good not only for these homeowners, but these mortgage lenders. We're hearing about bankruptcy across the board. Mr. MOULTON: Correct. No one makes money when homeowners don't make their mortgage payments. It's not good for the lender; it's not good for the homeowner. So a lot of times the lender will try to work that situation out with the homeowner. So if there are homeowners that are in that situation, they should contact their lender... SIVAN: Right. Mr. MOULTON: ...immediately and see what kind of workout program they can do. SIVAN: Oh, I know a lot of homeowners don't do that; they don't contact someone immediately. They kind of let these mortgage payments build up and build up, and then they're really out of luck. So you're advice I'm sure is to let your lender know as soon as possible that you might have trouble. Ms. LAW: As soon as you're missing the first payment. Pick up the phone, call the customer service number, let them know you have a problem. Ask for the work out department, and see if they'll work with you. You're right, they--the lenders don't want the loans to foreclose. They don't want to be left with a portfolio at homes (sic) with mortgages that are not in repayment. So they'll try to work; if it's possible, they'll try to work with you. SIVAN: What about these predatory lenders, you know, the--the ones that go after maybe elderly folks, maybe sign them up for a mortgage that they're never going to be able to pay? How should the government go--go about kind of nailing these guys? Mr. MOULTON: Well, I--I think you've already seen a contraction on those lenders already. A lot of the--and this would be in your--your subprime category. 2 percent of the loans in this country are subprime. In that small piece of... SIVAN: It's a small percent. Mr. MOULTON: ...business is making a lot of noise for the whole industry... SIVAN: Right. Mr. MOULTON: ...and it's not good for the industry; it's not good for the mortgage professional to make a living in this industry. But for that 2 percent of predatory lending that had been taking care of--of the elderly, they are pretty much out of the business right now. A lot of those subprime lenders are not able to write new loans because they don't get funding anymore, so we're seeing a cleanup in the industry, in--in the--we're seeing a big cleanup and those people not being in the business anymore, which is good for the mortgage industry. SIVAN: All right, let's hear from one of our callers. Elizabeth is on the line from Rocky Pointe. Elizabeth? ELIZABETH (Caller): How are you? SIVAN: Hi, there. What do you have to say about this? ELIZABETH: Well, wouldn't--you know I'm a property investor; I own some real estate here in Florida and Long Island. And you know I was one of those people that had the no-doc loans. And my question is, wouldn't it be easier or better for the banks just to continue with these no-doc or low-doc loans instead of having all these houses you know that they have to take back? SIVAN: She's talking about the no documentation loans, right? Mr. MOULTON: Well--well, the problem is that on those no-doc loans, those are the highest percentage of foreclosures and delinquencies that the banks are--are seeing... SIVAN: Really. Mr. MOULTON: ...so what--what we saw in the early 1990s when real estate prices went high very quickly in the late 1980s. In the early 1990s is the contraction in lending standards, and lending standards got a lot stricter in the early 90s. We're seeing that happen again right now. This might be a short term period, it might continue for another 18 months, but on those no-doc loans they're going to continue to be more restrictive as for higher credit scores as for (unintelligible due to mumbling of speaker) documentation. And when this process gets cleaned up, you may see the no-doc loan again, you may see the state income loan again. SIVAN: All right, let's take another call now. Paulette from Farmingville wants to weigh in. Paulette? PAULETTE (Caller): Hi. SIVAN: Hi, go ahead. PAULETTE: OK, my story is we bought our house seven years ago. First, we rented it and we rented it from a young man that owns about 14 homes, I found out after we got hurt by him. He also owns his own mortgage company, and I found out later that all this was established over drinks. And he opened up his mortgage company, obtained his lawyers and everything, and I can remember our closing--we just lost our home a month ago. We're in foreclosure now and I'm 55 years old; I don't need this. I feel that--well anyway, they opened up this mortgage company--our closing I remember it like it was yesterday. Nothing was ever mentioned about balloon rate mortgages or anything and when I saw the stack of papers we had to sign, our lawyer said to us which was their... SIVAN: Right. PAULETTE: ...lawyer also, this was supposed to be cheaper for us. He said this is what you're paying me to do. Well, our mortgage went from $2200 to $5200... SIVAN: Wow. PAULETTE: ...in less than six months. SIVAN: Paulette, you know what, unfortunately she--she's not alone. PAULETTE: Unless the government steps in and stops it... SIVAN: That's right. PAULETTE: ...this is going to keep happening. SIVAN: This is happening to millions of people across the country-- PAULETTE: They fly by night-- SIVAN: How is this allowed to happen? Thanks, Paulette. Ms. LAW: Well, I think Paulette made a couple of--she got caught up into the one thing we advised. SIVAN: It's a scam really. Ms. LAW: Take a--stay away from the one-stop shops. SIVAN: Right. Ms. LAW: I mean he was the mortgage company, he was the attorney, he was the lawyer--well he was everything. He was the seller; he was everything. You know the value here is in the value of homeownership education and although homeownership education now can prevent foreclosure for someone who's in trouble, the advice out there to those who'd like to become homeowners is seek the education from a non-profit where certified counselors can guide you through the mortgage process, can tell you what you really afford and can help you find an affordable loan-- SIVAN: And that's a free service? Ms. LAW: It is a free service at the Partnership and other established nonprofits on Long Island. SIVAN: Now, if someone like Paulette, when you--when you show up at the closing and all of a sudden something doesn't seem right here, you know you're not looking like you want to hear from your lawyers. Do you just get up and walk away at that point? Mr. MOULTON: Well, you know-- SIVAN: I mean most people don't. Mr. MOULTON: You know--you--you're sort of under pressure because you're the seller; you're the seller's attorney... SIVAN: Right. Mr. MOULTON: ...you have--you know you're the buyer, you have the buyer's attorney, you have the title to the company there. You might have some real estate. So it's a big room and everyone's sort of forced to the closing, but as Lynn had advised you should have an independent counselor, you know looking at all the mortgage papers, explaining the fine print to you, explaining to you that it's a balloon mortgage, understanding what's going to happen to that monthly payment over time. And if you don't have proper counseling, whether it's from Lynn or from a reputable mortgage firm or from an attorney, it's hard for--it's hard to get recourse at this point. SIVAN: All right, we're going to take a quick break there. The rapidly rising number of houses going into foreclosure. Here on the Island and well, why so many families are being forced to give up their home. We're still taking your calls right after this break. We'll be right back.
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(Commercial break) * * * SIVAN: Welcome back to LONG ISLAND TALKS here on News 12 Long Island, facing foreclosure on Long Island, how to avoid it, how to fight it. Once again, joining me Lynn Law--she's the director of education and counseling for the Long Island Housing Partnership. Bob Moulton's also here; he's the president of Americana Mortgage Group. Now, we have a caller on the line--Leslie--out in Amityville and Leslie has a question about foreclosure. You want to find out if a relative can buy the housing foreclosure, correct? Leslie, are you there? Maybe not. All right, we lost that call. But why--why don't we get the answer to that question anyway. Can a relative buy your house if it's in foreclosure? Mr. MOULTON: It really needs to be an arm's length transaction because-- SIVAN: What does that mean? Mr. MOULTON: In other words if--if one person in the family is buying the house from another person in the family, a bank really understands that that's just--it's just a short term fix to try to take that person out of foreclosure. So it's not advisable because that person who's buying the house from a relative is just doing that to help him of course, but that other person frequently will have his own home and have other financial obligations that they have meet. The person who he bought the house from... SIVAN: Right. Mr. MOULTON: ...will really end up making the mortgage payments, so banks are not very keen on arm's length transactions. SIVAN: Let's take another call. Let's head out to Merrick, where Kathy is on the line. Kathy? KATHY (Caller): Yes. SIVAN: Hi, what's your question? KATHY: Good evening. My question is--and I--will all the foreclosures that are going on here on Long Island--I purchased my home in 1991 for $130,000 in Merrick, a very nice neighborhood. Unfortunately, in this point in my time, every house I see no matter what town it's in they're gargantuan; they're large homes. Obviously, these homes are going for a large amount off money. These people can't afford to have 50 and 60 year mortgages, and they're buying properties they can't afford. Where is somebody going to draw the line and--and have like houses that are like median houses, trade-up houses? You--you probably would keep more people here on Long Island if there was an intermediary, but anybody who's looking for a home now on Long Island, it's a half-million dollars or more. And they're buying them because... SIVAN: Yeah. KATHY: ...they can't anywhere else. SIVAN: All right, good point from Kathy. I mean is that part of the problem? That people are buying huge homes that they just can't possibly pay off? Ms. LAW: Well, I think people are buying homes they can't afford, regardless of the size. I mean there are--certainly there's a market for every, you know, price point in every sized home. But Kathy's right, if they can't afford it they shouldn't buy that home. Unfortunately, the market was a frenzy that Bob referred to and we were buying everything. Mr. MOULTON: Well, you know Long Island--when you look at the demographics of Long Island and the population's growing at 5 percent a year. Long Island is an island and it's becoming more and more difficult for first time homebuyers, and it's becoming more difficult for senior citizens. Energy costs have become very expensive over the last five years. SIVAN: We talked about that last night, right? Mr. MOULTON: Real--real estate taxes are--are going higher--there's more and more cars, there's more and more people-- SIVAN: Of an infinite amount of space. Mr. MOULTON: And it's a finite--yeah... SIVAN: Finite. Mr. MOULTON: ...of space and--and right. And so... SIVAN: Yeah. Mr. MOULTON: Overall, you know, whether the house is 2000 square feet or 5000 square feet, it's a combinations of buyers buying houses that--that they're in over their head, their champagne taste in beer pockets, we like to say... SIVAN: Right. Mr. MOULTON: ...but the cost to carry this houses need to be appreciated at the time of application, because it is very expensive. SIVAN: Let's talk a little bit about options out there if you're facing foreclosure. There are certain options that are available to seniors in particular. Ms. LAW: Yes, at the Partnership we counsel for reverse mortgages. SIVAN: Now, what is a reverse mortgage? Ms. LAW: A reverse mortgage is an--it's an FAH-based loan; seniors 62 and older can use the equity, tap into the equity in the house to pay off an existing lean and its based on their age, how much they might owe on the house, where they live. SIVAN: So that's an option. Ms. LAW: So it's definitely an option. It's not--you know it's applicable to all because if they borrowed too much out of the equity of the house, it might not work, but it's something worth considering. SIVAN: Let's take one more caller, head out to Southampton. Bob, are you there? BOB (Caller): Hi, how are you? Yes, I'm here. SIVAN: Hi. BOB: Hi. My--my--I hope I can put this in a form of a question-- SIVAN: Me too. BOB: Not--not--not just a statement... SIVAN: OK. BOB: ...but my question I guess is where is the accountability of the banks, the mortgage companies, people who got rich off this frenzy? They drove the prices houses up, because let's--let's face it a 1400 or 1500 square foot house is a house. OK, if it takes--it takes a $100,000 bills to buy one year and then $600,000 bills to buy it next year, it's deflating the value of that house really. I should say the value of the dollar bill. My point is that the--in--in Europe now the bank over there was--was bought out or I should say they--they--they wrote a check for a $100 billion. Here on Long Island, we got 7000 people out of work, the mortgage company went bust. Where is the accountability? Are we--are we going to continue bailing out mortgage companies and banks that have propagated and actually promoted the--the--the--the--this whole circumstance... SIVAN: Right. BOB: ...we have now with foreclosures with--with these tricky loans. I mean... SIVAN: That's right. The problem's-- BOB: Where is--where is the accountability for the mortgage companies and the banks? SIVAN: Great question, Bob. So are we going to see what they-- regulatory changes here for these loan companies? Are we going to see the federal government try to help bail out some of these homeowners? What can you see in the future? Mr. MOULTON: Well, the federal government has--has come out with guidelines and they've--they've come out with suggestions. They have not come out with any legislation to necessarily curtail the actions of realtors, attorneys, mortgage companies-- SIVAN: Do you think we're going to see this? Is this-- Mr. MOULTON: Well, I think what you are seeing is the reduction of the number of lenders maybe because of some of their aggressive lending... SIVAN: Practices. Mr. MOULTON: ...policies and practices and as a result of that you're seeing less lenders. So I think because of that they're--it's self-correcting itself. In terms of accountability, that's a very difficult and gray area because all people are accountable when it comes to that particular transaction. And I think that's hard to make a blanket statement, but you have to look at it on a case by case if something was done improperly. SIVAN: Would you say it's up to the homeowner and accountability-wise you need to educate yourself? Ms. LAW: Absolutely. SIVAN: You need to find out what you're getting yourself into. Ms. LAW: It's really buyer beware. If it sounds too good to be true, it probably is something that you--you don't want to buy. You have to keep asking the questions and you need to get someone to represent you who is legal counsel not referred by an other person-- SIVAN: You need an attorney at that closing? Ms. LAW: The most important part of your transaction is your attorney. This is a legal transaction besides a financial transaction. SIVAN: Great advice. If you want some more of it, we have it all on our web site. And for more information on tonight's show, you can find that as well on news12.com under numbers and links. You're watching LONG ISLAND TALKS on News 12 Long Island.
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