Friday, July 6, 2007

Mortgages - foreclosures, fraud, and also Madison County

The Anderson Herald-Bulletin has now two articles on local foreclosures and the local real estate market.

The first article has the headline Facing foreclosure in Madison County.

As companies started investing more and more money into businesses that offer subprime home loans, more and more people started getting loans they could not afford to pay back. Now these people are stuck deciding if they should pay for the mortgage or pay for food.

In 2006, the Madison County Sheriff’s Civil Department sold 1,082 homes through sheriff sales. This year will be similar to last year....
The Herald-Bulletin had the good sense to interview Larry Robbins for the article. While one anecdote does not make a trend, it does call for asking more questions about 2005's bankruptcy reform.
Larry Robbins, an Anderson bankruptcy lawyer, said he thought that the mortgage foreclosures have led to some bankruptcies, but there are fewer people filing for bankruptcy because of the law that passed in 2005 that made penalties for bankruptcy stronger.
The headline for the second article is Subprime time: Falling housing market exposes problems. That article quotes our local Chapter 7 bankruptcy trustee:

Randall Woodruff, bankruptcy trustee for Madison County, serves on a panel of bankruptcy trustees for the southern district of Indiana. He said subprime lending has been a main culprit in the massive foreclosure rate sweeping Anderson and other Central Indiana communities.

“If you are in foreclosure, there aren’t many ways to get out of that problem other than to file for bankruptcy,” said Woodruff, who sees every bankruptcy filed in Madison County. “Whether it’s subprime lending, my gut instinct is that it certainly is one of the problems. The fact that we have so many folks buying homes that they really can’t afford and obtaining mortgages that are going to adjust is clearly one of the main causes of bankruptcies.”

I can only criticize the series for not explaining the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy. An absurdly simplistic explanation is that a Chapter 7 debtor has an insufficient income to fund a plan while a Chapter 13 debtor does have sufficient income.

We all want to own a home. What we may not to do is educate ourselves on mortgages and interest rates - all those tedious details lying between us and our dream home. For those who fail to give those tedious details their proper attention, foreclosure and bankruptcy may be in their future.

For those wanting to keep track of these issues, I suggest bookmarking or adding to your RSS feeds The Mortgage Fraud blog.