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Reminder Assistant Editor AGAWAM Holidays or not, the national housing crisis has hit home for many property owners in Massachusetts this winter. Sub prime lenders, adjustable rate mortgages and owners' inability to refinance have been catalysts for the housing market's fallout and a growing number of foreclosures and bankruptcies. According to ForeclosuresMass., Corps, the number of foreclosure filings in Hampden County has increased by over 42 percent from 2006. Approximately half a dozen homes in Agawam are on the housing market currently, purely to avoid foreclosure through short sales. Attorney Michael Werman of Reynolds & Werman, LLC in Agawam said it is the primary goal of his practice to aid homeowners in avoiding foreclosures or bankruptcy. He said his offices have seen a steady increase in short sale filings over the past 18 months from three and four per week to 18 and 20. Werman attributes the housing crisis and Massachusetts' increasing foreclosure statistics to the once large number of sub prime lenders who approved two-year adjustable rate mortgages to anyone who applied. He explained what was once a mortgage at six percent interest for the homeowner now becomes nine percent after two years. Werman said owners were once assured they would be able to refinance after the two years but are no longer able to do so because of declining property values. "People were buying these huge houses they couldn't afford," he said. "They were getting caught up in the storm and thinking the [housing] boom wouldn't stop and [their] equity would grow. They thought [their home] was an investment and they would buy new cars, clothes and food off the house's equity." Werman said he advises all of his clients to address their financial concerns promptly with their lender in order to work out payment options. "We have people who come to us who haven't made a [mortgage] payment in 18 months," he explained. "If you don't take measures right away that's when it becomes a problem." Werman said he works with his clients, their lenders and real estate agencies once it becomes apparent that the homeowner cannot afford their house. He explained that there is a growing trend for short sales because it allows the owner to set the timeline and if sold the defaulted loan will not appear on their credit history. Michael Robie, broker and owner of Premier Realtors in East Longmeadow, said price is the number one factor for buyers today. He explained that he encourages those on the path to foreclosure to put their house on the market as soon as possible because "if [the house is] sold during the short sale usually the shortfall is forgiven." Werman said once the home is put up for short sale the property is marketed at an "aggressive asking price." He explained that he recommends the price of the home to drop $10 - 15 thousand every 10 - 14 business days in order to generate interest. "We want the homeowner to walk away without any debt," he said. He added this is the ultimate goal of short sales. Werman and Robie stressed the importance of prospective or current homeowners to obtain a fixed rate mortgage to avoid increases in their interest rates and monthly mortgage payments. Matthew Chmiel, branch manager of SB Mortgage Group Inc., in Agawam, said borrower education is the most critical component when obtaining a mortgage in order to prevent foreclosures and turn the overall market around. He attributed much of the housing crisis to adjustable rate mortgages and pay option arm mortgages granted to those who would not experience a pay increase upon completion of the first two years of the loan. Chmiel said it was irresponsible on the part of lenders to grant those on fixed incomes with adjustable loans because unlike those with flexible incomes they cannot afford to supplement the increasing interest. Chmiel said many first time homebuyers were being duped by lenders into believing they could afford far more for their money through adjustable rate mortgages. He added that his best advice to his clients is "don't overbuy. Only buy what you can afford from traditional lending. Cash is still king in protecting your credit. Add up [your] total annual income and don't spend more than 40 percent of it." Chmiel said people need to take a more levelheaded approach when buying a home, especially those who are weekly wage earners. While there are currently an increasing number of short sales in Agawam, Chmiel said he is forecasting a stabilization for the region and for the country within the next year as a result of the termination of sub prime lenders. "The silver lining is what the market is going through right now [where] we're getting rid of a lot of uneducated brokers," adding that these lenders wrote mortgages for people who would eventually be unable to afford them. Chmiel said his determination as well as that of other employees at his branch for increased borrower education should also yield greater results to combat the foreclosure boom. | ||||||
