Sunday, May 10, 2009

More Oregon loans about to reset

From the Register Guard:

The Willamette Valley was a hot spot for subprime mortgages four years ago — much to the enduring misery of valley homeowners, according to an investigation published Wednesday.

Many of the nation’s top 25 subprime lenders were highly active in Lane County until the market meltdown in late 2007.

The firms — most now defunct or sold to avoid bankruptcy — include Washington Mutual, Countrywide Financial Corp., New Century Financial Corp. and First Franklin Corp., according to the analysis by the Center for Public Integrity, an investigative reporting group funded by charitable foundations.

“It means a lot of families are going to go into foreclosure,” Sen. Jeff Merkley said Wednesday. “They may be able to afford the payments quite handily when the payments are at 6 percent (interest) but when the payments (change) to 10 percent, they can’t. There’s just no way they’re going to be able to make those payments.

Merkley, D-Ore., has a long-standing interest in the lending industry. He said he was asked by Senate Banking Committee Chairman Chris Dodd Wednesday to conduct hearings on predatory mortgage practices in the coming months.

The incentives for brokers in those years were all wrong, Merkley said.

Some brokers “immediately present themselves in a way to win your trust,” he said. “They’re going to be your financial advisor and they’re going to help you find the best loan and you believe them.

“But you simply don’t know — and that’s why I consider this a terrible, terrible scam — that they were being paid off-balance-sheet by the lender to steer you into the exactly the opposite — not one that’s good for you, but one that’s terrible for you but very good for the investor.”

Oregonians not only took out a lot of straight, subprime high interest loans. Oregon also ranked near the top for exotic pick-a-payment loans and negative amortization loans in which the amount the borrower owes may actually grow, instead of shrinking, as time passes.

In 2003, less than 2 percent of the home loans made in Oregon matched that description, according to First American CoreLogic. By 2006, the proportion had soared to more than 20 percent.

“The reset date on those loans is coming due now. Over the next 12 to 24 months, the bulk of these loans will have their first major reset,” said Angela Martin, spokesman for the Portland-based political group Our Oregon. “That’s where we’re going to see Oregon — and the Willamette Valley in particular — continue to struggle with very high home foreclosures. It’s a mess.”