By ALIYA FELDMAN
Leader staff writer
Tired of having a landlord, Blake Barnes bought a house without concern that it could lead him to financial ruin.
Barnes bought a three-bedroom house in Cabot in 2005, when real estate was booming and mortgages were easy to get. No one at the real estate or mortgage agencies dissuaded Barnes, who was 21, from buying.
“I put down $200 for a $79,900 house,” he said, after aking one mortgage at 6.5 percent and another at 10 percent. “It was the only way they said they could get the house for me,” he said about taking out two mortgages. “I had an excellent credit rating and got the house for almost nothing down.” He initially paid $640, which he kept up until his monthly bills increased.
“My payments went up to $688, with utilities, truck payments and insurance, I got into a little bit of trouble. Payments started to slip,” he said.
After two years in the house, he is facing foreclosure.
Marshall Crawford of Neighbor-hood Works, a nonprofit created by Congress, said trillions of dollars in mortgages will reset by year’s end so homeowners who have been able to pay their mortgage bills until now may be at risk of missing house payments. “When you look at statistics for Arkansas, subprime rates are up and they will reset by the end of the year. Lenders focused here and were aggressive,” Crawford said.
Neighborhood Works provides funding and program training for organizations in Arkansas that help people facing foreclosure.
The state’s realtors are supporting government action to offset the loan crisis.
“Arkansas ranks 17th in the nation in foreclosure rates, so some home-owners in the Natural State may be relieved to know that help might be on the way,” said Ethan Nobles of Arkansas Realtors Association.
The real estate boom inspired mortgage financers like Countrywide Financial, the largest U.S. mortgage lender, to increase the number of subprime mortgages given to people considered high risk.
People with good credit are also defaulting on their mortgages according to the Mortgage Bankers Association (MBA).
More than 5 percent of loans across the country were delinquent, up from last year. Delinquent loans do not include homes in foreclosure. MBA reports loans in foreclosure made up 1.4 percent of all outstanding loans this month.
With home sales down, real estate agents are wondering what will attract buyers. “In many instances, sellers will find themselves competing for buyers with other homes that are similar to the ones they own,” Nobles said.
On Aug. 31, the Federal Housing Administration presented a plan that Nobles said the National Association of Realtors “advocated a good number of changes outlined in the plan for the better part of the year.”
FHA claims the plan, called FHASecure, should help 240,000 homeowners avoid foreclosure.
Realtytrac, an online company that lists nationwide foreclosures, has 650,000 houses listed in foreclosure or pre-foreclosure proceedings.
Families who qualify for the FHA plan must have strong credit histories and must have been making mortgage payments on time before their mortgages reset.
They must also have 3 percent cash or equity in the home, be employed and make enough money to make future mortgage payments. Homeowners who face foreclosure are also at risk of predatory lenders who promise to save them from losing their homes if they sign the titles to their homes over.
“With the foreclosure rate running at a record-setting pace, I can understand why many homeowners are willing to do anything or sign anything to keep from losing their homes,” Attorney General Dustin McDaniel said. “At the same time, though, they should read the fine print, get advice from trustworthy professionals, and consider all their options before refinancing.”
McDaniel recommends reading loan documents to understand what the lender can do if payments are not made, working with the lender and contacting a financial counselor.
“I think I got in a hurry,” Barnes said about purchasing his home. “Look at all your options. Just because you think you can afford it, it doesn’t leave room for error,” he said.
The Family Service Agency offers free help to Arkansans in financial trouble. Visit their Webpage at www.helpingfamilies.org or call 1-800-255-2227.
To find out about the FHA Secure program, call the Arkansas HUD office at 501-324-5931. Victims of foreclosure-recovery scams can contact the Public Protection Department of the Attorney General’s Office by calling 1-800-482-8982.
