Philadelphia Suspends Foreclosures

[J]

Reuters link

Philadelphia suspends sales of foreclosed homes
Fri Mar 28, 2008 5:52pm EDT

PHILADELPHIA (Reuters) - Authorities in Philadelphia will suspend foreclosure sales of homes whose owners have fallen behind on adjustable-rate subprime loan payments -- potential relief for tens of thousands of struggling debtors.

Sheriff John Green said on Friday he would halt sales of foreclosed properties in April and would seek a court order extending a moratorium for an unspecified period.

His action follows a nonbinding resolution passed unanimously by the Philadelphia City Council on Thursday calling on Green to stop the sales to give borrowers more time to seek a settlement that would prevent them from losing their homes.

Philadelphia becomes the first U.S. city to halt foreclosure sales in the current crisis, although Cleveland and Baltimore are considering similar measures, said ACORN, an advocacy group for low-income families.

The group said 45,470 subprime foreclosures are expected in Pennsylvania between the third quarter of 2007 and the end of 2009.

Green, the sheriff of Philadelphia city and county, is trying to identify and track homeowners with weak credit histories who took out the loans with initially low repayments but who are no longer able to afford them because their rates have adjusted sharply higher.

Such loans are expected to lead to a flood of foreclosures throughout the United States this year, and have led to severe losses among financial firms trading in securities backed by the mortgages. ACORN estimates 2.2 million mortgage loans will go into foreclosure in 2008 due to the subprime crisis.

"Given the severity and complexity of mortgage foreclosures, a moratorium will allow for more time to identify and help distressed home owners," Green said in a statement.

The resolution said 3,206 "high-cost" mortgage loans made in 2006 are likely to enter foreclosure in Philadelphia, representing losses totaling $345 million to homeowners, lenders, and local government, as well as falling home values.

Lenders would take about $158 million in losses; homeowners $23 million; and local government $62 million if the foreclosures go ahead, the council's resolution said.

A spokesman for ACORN called on lenders to work with Philadelphia on the policy to help find a solution and avoid a lengthy moratorium.

Home prices in the Philadelphia region appreciated at a 2.04 percent rate in the fourth quarter of 2007, down from 6.74 percent at the end of 2006 and 14.3 percent in 2005, according to quarterly reports from the Office of Federal Housing Enterprise Oversight.

Across the nation, home prices fell 3 percent in January from a year earlier, the federal agency said.

In defense of its action, the council also said foreclosures increase violent crime in affected neighborhoods, hurt property values and reduce city tax revenue.

Yajaira Rivera, a mother of four, said she took out a $106,000 mortgage on her Philadelphia home with GMAC in February 2005 and expected to pay $920 a month. Instead, she was presented with an initial payment demand of $1,235, which increased to $1,671 before she negotiated a lower payment.

She still cannot make the payments, so her home is scheduled to be sold by the sheriff on May 6, meaning the April moratorium will not cover her unless it is extended.

"The reality is that it has only bought us a window of 30 days," she said.

Local and national branches of the Mortgage Bankers Association did not immediately return phone calls seeking comment on the Philadelphia plan.

(Editing by Daniel Trotta and Dan Grebler)

So no foreclosure sales in April, with plans to extend the moratorium for an indefinite length of time. This is not going to end well. While some homeowners will get a temporary relief, there will be long term damage and unintended consequences. Like what happens when the moratorium expires and all the homes get dumped on the market at the same time, or if the moratorium holds and mortgage companies decide to place a large cost premium for doing business in Philly.

[Darth Wong]

The banks should punish Philadelphia for this. This kind of "protect the fucktards" mentality is nothing but trouble.

[HemlockGrey]

The banks should punish Philadelphia for this. This kind of "protect the fucktards" mentality is nothing but trouble.

Considering the debilitated and diseased nature of the Philadelphia economy the city is probably doing this to protect its tax base rather than the homeowners themselves. A massive wave of foreclosures would badly hurt a city which isn't doing too well in the first place.

[Sea Skimmer]

You funny enough last night when I was coming home from the city I heard about fifty fucking repetitive radio adds for Sheriff’s foreclosure and seized property auctions, I’ll be glad if those are gone for a while.

The banks should punish Philadelphia for this. This kind of "protect the fucktards" mentality is nothing but trouble.

Yeah, the long it takes these foreclosures to hit the market, the longer it will take the housing market to bottom out, delaying its eventual recovery which is bad for everyone. However this might well help at least a handful of buyers’ save what they have, and I doubt banks are in any extra big hurry to eat the losses they will take.

[Admiral Valdemar]

It reminds me of when Hawaii tried to curb rising fuel costs by implementing price limits. You can't control the free market that way, it's like trying to rig the laws of physics.

Artificial tampering inevitably ends in tears.

[SirNitram]

Housing payments in Philadelphia will end in 5, 4, 3..

[irishmick79]

It will be interesting to see how this impacts the election. Isn't a freeze on foreclosures supposed to be one of Hillary's big economic recovery ideas? With PA's primary coming up on the 22nd, this has the potential to absolutely crush her rhetoric on the economy if and when it doesn't work out.