Last month, the Mortgage Bankers Association (www.mbaa.org) released data showing that home foreclosures have now spread to borrowers with good credit. A record 12 percent of mortgage holders are behind with payments, according to the MBA and the volume of loans now seriously delinquent and headed for foreclosure total one million. The foreclosure wave isn’t expected to crest until the end of 2010 when the bulk of low teaser rate adjustable mortgages reset, suggesting that the percentage of homeowners with good credit headed into foreclosure is set to dramatically increase.
For some homeowners, the proverbial handwriting is on the wall. For others there is still time to minimize the all-important impact on their credit ratings.
“The realization that a mortgage increase is too much in this market downturn should be the tipping point. Unfortunately, many homeowners miss the opportunity to take some pre-foreclosure housing decisions to prevent a one year credit blip from becoming a 10 year slog back from a total credit meltdown,” according to John Selindh, Vice President-Marketing, Camden Property Trust.
Camden Property Trust (www.camdenliving.com) -- one of the country’s largest owners of apartments -- is helping homeowners who are close to the edge or who may have a recent foreclosure on their record find quality housing by giving local community managers the power to approve applications which, in the past, might not have passed the company’s criteria. Applicants with a foreclosure and negative credit on their record in the prior 12 months qualify for this program but they cannot have collections for utility bills or a prior apartment eviction on their credit reports. They must also pass a background check.
The REIT rolled out its Mortgage Foreclosure Forgiveness program in Tampa, Fla., several months ago and it was so well received it has since been expanded to the entire state. Now, Camden is making a similar program available to prospective residents of its luxury communities on both coasts.
“Basically we are working with people who have been forced out of their homes by forgiving that foreclosure and providing access to an apartment home that they can afford and might not otherwise be able to qualify for,” said Selindh. “We’ve found that many of these people were good renters before they were enticed over to home ownership by artificially low teaser mortgages, and we are betting that when they get an opportunity to put themselves back on a more affordable track, they’ll be good renters again.”
Some of the people who are capitalizing on Camden’s offer have already gone to great lengths to keep their record clean by managing credit cards and other debt so that it didn’t get out of hand. Their good credit enables them to move in to one of Camden’s affordable apartment communities without having to make the traditional large deposit required of those with foreclosure or serious credit issues.
“We know that there is not a lot of cash around so we are trying to work with these people to help them move in,” added Selindh. “The really unfortunate ones are those who put off the decisions to restructure their loan or ownership, and used all of their savings and credit to try and stave off the inevitable foreclosure. Obviously with those kind of devastated credit records, it is difficult to find any housing right now.”
Camden is particularly trying to get the word out on Foreclosure Forgiveness to homeowners in Florida, California, Nevada and Arizona, markets which have seen the highest default rates on even fixed rate mortgages. “We believe that these markets will see a tremendous uptick in foreclosure in coming months,” said Selindh, “but there is still time for those facing foreclosure to avoid a total meltdown. We are among a number of companies who are trying to provide a softer landing.”
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