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Post Investment Strategies for Homeownership: Foreclosure Prevention

Post Investment Strategies for Homeownership: Foreclosure Prevention. Cathy Hinko Metropolitan Housing Coalition P.O. Box 4533 Louisville, KY 502 584-6858 cathy@metropolitanhousing.org. Where did they go? The Decline of Middle-Income Neighborhoods.

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Post Investment Strategies for Homeownership: Foreclosure Prevention

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  1. Post Investment Strategies for Homeownership:Foreclosure Prevention Cathy Hinko Metropolitan Housing Coalition P.O. Box 4533 Louisville, KY 502 584-6858 cathy@metropolitanhousing.org

  2. Where did they go? The Decline of Middle-Income Neighborhoods • Middle income neighborhoods declined from 58% of all metro neighborhoods in 1970 to 41% in 2000 • In 2000, 37% of lower-income families lived in middle-income neighborhoods, down from 55% in 1970 • Repeated trend in suburban neighborhood • Careful selection is imperative

  3. Housing as an Asset • Weakening neighborhoods • Weakening housing market • Reliance on substantial appreciation • Reliance on increase in income • Rising interest rates • ARM adjustments

  4. Foreclosures in Louisville Metro 1996 - 2004

  5. Rise in Foreclosures Why the rise in foreclosures?The National Picture Dramatic rise in sub-prime lending More households with higher cost burdens More families have higher debt and inadequate savings

  6. Recommendations • Collect the data 6 month study of court records Interviews those in foreclosure Why did they choose the financial products? Kentucky Housing Corporation Making Connections- Louisville

  7. Recommendations • Protect consumers from new lending practices that are predatory • Protect investment of IDA by stringent refinance limitations • Approve loan elements

  8. Recommendations • Consumer Education- When? Prior to loan commitment Prior to closing At closing At the time of default/foreclosure • Consumer Education- What?

  9. Why increased risk? • New products in the last 10 years- Internet mortgages, the bundling of credit risks, lower down payment, new loan products, LTV of over 100%, cash out • No community experience • No regulation- predatory lending laws weak • Focus on fragile neighborhoods

  10. Findings of Louisville Research • 80% of foreclosures were refinanced loans • Over 50% were loans less that 2 years old • 78% of loans were less than 4 years old • Interest Rate was about 3% higher than prime • 25% had pre-payment penalty • 5% had balloon payment term

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