Home > Delinquent Mortgage loans and foreclosures are up in South Dakota
Delinquent Mortgage loans and foreclosures are up in South Dakota
By: Bob Smith In South Dakota as in most other states in the country, both delinquent mortgage loans and foreclosures have gone up since the year 2005. A delinquent mortgage loan is one which is 30 days or more past due.
The first nine months of reporting for 2006 showed a record 230 properties in foreclosure in some stage along the way. That is more than the foreclosures for the entire previous year. In 2005, the entire year's residential property foreclosure proceedings included 197.
Lutheran Social Services credit counselor Lorri Halverson blames looser lending practices which allow high-risk customers access to financing. These changes in procedure which have allowed more homeowners to be able to get mortgages have the opposite effect of allowing more people to fall into foreclosure proceedings.
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For example, several years ago, subprime loans in South Dakota and other states increased significantly. They are high profit loans for mortgage brokers and there is no particular incentive to rate borrower's ability to repay the loans. In fact, the opposite is true. Brokers receive higher commissions and even price points for providing this high cost loans. Once the loan is completed, they bundle and sell these subprime mortgages with other having higher quality.
A popular subprime loan was the variable interest loan which held a low initial interest rate for a period of two to three years, then the interest rate is allowed to float, indexed to one of several factors chosen by the lender.
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After 3 years, these variable interest rate loans are at the end of the grace period for the interest rates. The cost of some of these loans has risen dramatically. For a householder who is stretched to meet the existing payment, an increase of $50 to $75 can be enough to send him spiraling downward into foreclosure.
Because these loans are not aged, there is virtually no equity built-up in the house and since housing prices are stagnant, the homeowner cannot refinance or tap into the equity and is thus virtually forced into foreclosure. Even if a refinancing of the original loan is allowed it usually doesn't decrease the balance, instead adds points, commissions and loan fees to the price of the loan and applies it to the end of the period.
Slightly over two and one half percent of South Dakota loans are in default, which means they have past due installment. That figure is also an increase from the same period during 2005. |