The news about the nation’s home mortgage crisis continues to be sobering. Nationally one in every 33 mortgages is in foreclosure. Mississippi is better than the national average with one in every 50 mortgages in foreclosure. But in the fourth quarter of 2007, Mississippi had the highest loan delinquency rate in the country with 11.07% of loans with installments past due, nearly double the national average of 6.31%.
“Right now the numbers are still not too pretty,” said Mississippi Banking Commissioner John Allison. “We’re trying to encourage companies to get in touch with their people before they get into foreclosure to rework the loans. We are trying to be proactive on that.”
Allison said there are many different kinds of ways to prevent foreclosure. There are national programs like the public-private partnership program Hope Now. Approximately 503,000 households in the U.S. received help in the first quarter of the year from the program that involves loan modifications where a lender agrees to reduce interest rates or make other changes to home loans to help borrowers prevent foreclosure.
The Hope Now program has helped approximately 1.38 million homeowners since July 2007. The program doesn’t receive government subsidies. NeighborhoodWorks is another program designed to prevent foreclosures.
Some states have also gotten involved in trying to stem the tide of mortgage foreclosures by issuing bonds to provide low interest rate financing for borrowers in danger of losing their home. Gov. Haley Barbour is reportedly looking into what the State of Mississippi might be able to do.
“The Governor’s Office is certainly cognizant of the situation,” Allison said. “They have been looking at what some of the other states are doing to see if something of that nature can transpire in Mississippi. It is bad for the economy to have that kind of stuff going on. Whatever the governor can do within his powers to alleviate it, I think he is going to do that.”
A home is usually the largest investment American families have, representing 60% of their equity. But the issue is important not just for individuals, but the entire economy.
“Foreclosures are not good for individuals, the real estate market or the economy,” Allison said. “Lenders aren’t in the real estate business. The longer they keep property, the lower costs go. A lot of foreclosed property is not good for anybody.”
Overall housing prices in the U.S. in February dropped at the fastest rate ever, an average of 12.7% over February 2007. The nation’s 20 largest metro areas have declined for six straight months. One brighter part of the picture is that Mississippi hasn’t seen the double-digit drops in property values being seen in some of the areas of the country that had the highest appreciation in prices prior to the decline.
“In Mississippi we have not had as significant drops in real estate values as in some of the other states,” Allison said. “But there are a good number of pieces of property on the market. It is certainly a buyers’ market. But people in Mississippi are not taking the haircuts that are being seen in some parts of the U.S.”
In some cases, home values may be down over what they were a year previously. But they could still be higher than what was paid for the property when it was purchased. So it may not be a real loss.
Not every financial institution is seeing higher rates of problem loans.
“Our delinquency rate today versus a year ago is lower,” said Bill Edwards, president of mortgage division of BancorpSouth, Tupelo. “Our core book of business has been the same type of business we have done all these years. We haven’t done subprime lending, putting people into houses that they couldn’t afford. So our delinquency rates have stayed flat or improved over the past 12 to 24 months. We are not seeing the spike in delinquencies.”
Talk early, talk often
Edwards advises people who might be having problems meeting their note to start early talking to the bank before things go too far towards foreclosure.
“You need to keep in communication with your lender,” he said. “We want to keep people in their houses. I was at a national meeting last week and one of the things people said is that when people get delinquent, they often quit talking to their creditors. They just give up and think there aren’t options. There are options. There are things we can do to keep them in their houses.”
Mel Campbell, spokesperson for Regions Bank, agrees about the importance of communication.
“We understand that when people face a situation like this that they might be reluctant or embarrassed to talk about it,” Campbell said. “But the quicker we know about a potential problem, the quicker we can start working on a solution. If customers need help, there are many options — from repayment, to term modifications and more. But the most important thing is to begin working on a solution sooner than later.”
Regions has been proactive in reaching out to its customers. The bank has a policy in place to contact customers with ARMs six months in advance of the reset to discuss the change and their options.
“Everyone benefits when we work together with a customer to get through these situations — the customer, the bank and the community,” Campbell said.
Hancock Bank, headquartered in Gulfport, is taking the initiative to be proactive about the situation. Hancock Bank recently announced a new mortgage division initiative to help homebuyers avoid mortgage pitfalls including adjustable rate mortgages (ARMs). The new online option available at www.hancockmortgage.com is designed to make the mortgage loan process easier and financially safer.
Dan Zoble, Hancock Bank senior vice president and mortgage division manager, said Hancock Bank is the first Gulf South financial institution to offer this level of web-based mortgage functionality.
“Using the web-based information and tools, the client is able to connect with experts who can carefully analyze the homebuyer’s needs while expediting mortgage loan approval,” Zoble said. “For homeowners struggling with previous loan terms, Hancock Bank mortgage counselors can help assess current loan conditions, refinancing options and qualifying limits. Homebuyers who use this feature when applying for their loan can often be approved in minutes, instead of days or weeks.”
Zoble said while the bank would like to help everyone, it’s also important to make sure the homebuyer does not become over-extended on the home loan. Most homebuyers should opt for fixed-rate mortgages to avoid the uncertainties that go along with variable rate products.
“Nationally, the housing market has seen a record rate of mortgage foreclosures mainly as a result of sub-prime loans,” he said. “A sub-prime adjustable rate loan typically carries a higher initial rate and will almost always jump up considerably at the first change date. Many Americans who gambled on these loan products found them selves financially overextended. The variable rates skyrocketed and quickly made their homes unaffordable. Some of these folks were victims of bad advice and many are victims of their own poor judgment. Either way they would have been better served by talking with a Hancock Bank mortgage loan officer.”
The recent drop in long-term mortgage rates can been seen as an opportunity to buy new homes. And Zoble said many existing homeowners are looking at refinancing solutions, especially at fixed rates.
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.