Foreclosures impact region

Mississippi Foreclosure & Real Estate News

 

By EMMA JAMES

The fallout nationally from the collapse of the subprime mortgage loan market is being felt in Mississippi and the Pine Belt, officials say.

Mississippi already leads the nation in mortgage delinquencies and ranks the fourth highest in foreclosure inventory, according to the Mortgage Bankers Association.

There are 45 properties under foreclosure on the Hattiesburg market, Coldwell Banker real estate agent Chip Grenn said. He believes more than half of those properties are on the market because of subprime loans.

The loans, designed to help people with spotty credit, offer fixed low interest rates for two years and an adjustable rate for the rest of the term, usually 28 years. The adjustable rate is usually higher than the initial rate.

In some cases, the lender will also lend the homebuyer the down payment in the form of a second mortgage.

The market has collapsed nationwide because so many borrowers have been unable to make the higher interest payments.

"There were so many subprime loans made in the past three or four years," Grenn said. "Now foreclosures are being made, and seeing as the market is not as robust as it once was, we're seeing the fallout."

In a market that averages 200 home sales per month, Grenn said, 45 foreclosed homes on the market is significant but not cause for alarm.

"When you look at the big picture, foreclosures make up about 10 percent of the Hattiesburg market," he said.

Jackson law firm Shapiro and Massey handles about 200 foreclosures a month statewide, including the Hattiesburg area. While foreclosures can happen for any number of reasons, including health and unforeseen bills, managing partner J. Gary Massey said many of the foreclosures his office handles deal with subprime adjustable-rate mortgages.

"Every six months the interest increases, so the mortgage payments increase," Massey said. "Most cap at 1.5 or 2 percent, so if you have a $500 mortgage payment, it'll go up to $510, then $547, then $555 until at some point you just can't pay anymore."

About 20 percent of Mississippi's subprime loans are delinquent and 7.2 percent of them are in the foreclosure process, according to the Mortgage Bankers Association.

Katrina still a factor

But subprime loans are only a piece of the larger picture in Mississippi, said Jay Brinkmann, vice president of research and economics for the Mortgage Bankers Association, citing the economic devastation caused by Hurricane Katrina as another factor.

"Anytime you have any kind of economic issue it translates into delinquent loans and foreclosures," he said.

Almost two years after the storm, Katrina's impact is still visible but not as much of a factor in foreclosures, Brinkmann said. Loans 90 days delinquent before Katrina averaged about 4,000, but jumped to 18,000 in December 2005, a few months after the hurricane. That number has dropped to about 6,000 loans held in forebearance currently, he said.

"Katrina is not as big of an issue as it was a year ago," Brinkmann said. "We look at the numbers we had before the storm, and see how what we have now is comparable to those numbers."

Brinkmann and Quentin Whitwell, executive director of the Mortgage Bankers Association of Mississippi, said they believe that the current foreclosure rate in the state is no higher now than it has been historically.

"Foreclosure is a multi-faceted issue that has many causes," Whitwell said. "Mississippi historically has had a trend of high foreclosure rates."

Although subprime loans served as a vehicle to get many lower income people into the housing market, some of those simply don't have the means to continue paying their mortgage note once their interest rate goes up.

This further widens the gap between high- and low-income customers, Whitwell said.

"I hope that no one would be prejudiced against a low-income customer, but the statistics also bear out the risk," Whitwell said. "If you have a lower income, you will have a higher interest rate. That's the nature of the beast."

Education important

Reducing the number of foreclosures in the state, Whitwell said, will depend heavily on education.

"Education is the simplest way to ensure that people don't borrow trouble and when they go to purchase a home, will have a strong advantage," he said.

The best strategy to prevent foreclosure, Massey said, is to be proactive and address the issue from the start.

"So many people get in trouble, clam up and ignore the problem hoping it'll just go away," he said. "If they try to get help from their lender at the onset, to get better payments, they can market their dollars and cents to make their mortgage more viable."

Grenn doubts that the high rate of foreclosures will slow any time soon.

"I gather that we've not even scratched the surface," he said. "I don't see the foreclosure rate dropping for several years." 

 

For more information on Mississippi foreclosures and related news, please see our Mississippi Foreclosure home page.

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