FYI: 2,100 families in danger of losing their homes.

The millionaire businessman living in a $5 million Palm Beach Gardens
home; a couple's county-subsidized 3-bedroom. 2-bath slice of
suburbia; a Fort Pierce widow struggling to keep her hurricane-damaged
house: pre-foreclosure notices have landed on all their doorsteps.
More than $106 million in home loans collapsed in Palm Beach. Martin
and St. Lucie counties in the first quarter of this year alone.
according to a Palm Beach Post analysis of data collected by
RealeSTAT.com. a local commercial firm that gathers foreclosure and
default records. A little more than $68 million in mortgages defaulted
in the first quarter of 2005.
"We know the whale is coming. we just don't know how big the whale
is. a spokesman for the Center for Responsible
Lending. a Washington nonprofit that tracks lending practices.
What is known is that. rich and poor alike. South Florida homeowners
are on a collision course with the fast-money mortgages and loose
state regulation that injected extra risk into a region ripe for
exploitation.
As the state's red-hot real estate market grew hotter. thousands of
new brokers and brokerages obtained licenses to operate in Florida.
That coincided with the availability of new types of loans. which gave
far too many middle-income buyers who couldn't afford it a shot at
living in a half million-dollar home.
managing member of U.S. Loans
Mortgage LLC. a Chicago-based mortgage broker doing business in
Florida and other states.
"I think the reason we are going to see so many foreclosures. so many
more than we have ever had in the past. is because a broker or loan
originator has gotten people into these crazy kinds of loans." said
Steven Schneider. president of the Florida Association of Mortgage
Brokers.
These "exotic" loans. as they've come to be known. include newer
adjustable-rate mortgages. also known as option ARMs. which start a
borrower at one rate and can adjust upward with time. Interest-only
loans allow borrowers to lower their monthly bills by paying only
interest in the early years of the loan. In both cases. the terms of
the loans change. That can spell disaster. particularly in a market
facing both declining real estate values and rising interest rates.
The analysis of RealeSTAT.com data showed that roughly half of the
defaulted loans had some form of adjustable rate feature. More than
$65 million in defaulted home loans carried interest rates of at least
10 percent.
a sub-prime loan is made to a high-risk market of borrowers
that includes those with lower credit ratings. But not all of these
borrowers had poor credit. National research by mortgage giant Freddie
Mac found that approximately three of every 10 people with a sub-prime
home loan had good enough credit to qualify for a less pricey
mortgage. raising concerns that even people with good credit are being
steered into unnecessarily costly deals.
The Florida Attorney General's Office issued a consumer alert in
February warning people about unscrupulous lenders. It noted another
national comparison: In the early 1990s. only one of 20 mortgage loans
was a high-interest sub-prime loan. By 2004. one out of five was in
that category.
Far from the rock-bottom interest rates of recent years. many local
loans started off with hefty double-digit rates. which are now
creeping upward.
One couple in Greenacres did not realize until they were before a
judge that they might have gotten a better deal. They were able to
work out an agreement with the lender while they caught up on back
payments.
"When we went to the foreclosure hearing. the lawyer asked us if this
was our first house." recalled the 30-something homeowner. who asked
not to be identified because she is embarrassed.
'You should never have been put into
that mortgage.' " The couple had taken out a $212.000 adjustable-rate
mortgage that starts at 7.8 percent. and goes up from there. They had
taken a second mortgage. known as a "piggyback loan" because it is on
top of another loan. to make the down payment.
A St. Andrews Country Club home fell into foreclosure only 60 days
after its owner took out a $1.9 million loan.
845.74 monthly payment proved too much for him.
A Lake Worth couple slipped into default one month after refinancing
at an 11.99 percent interest rate.

noting that the number had more than doubled in five years.000 people a month were taking the exam."
Kevin Clancy's American Funding Group has been in Martin County since
1991. But in the past five years. he's gotten plenty of new neighbors.
Of 76 licensed brokerages in Martin County. In Palm Beach County. only 143 of 702 mortgage broker businesses.
lenders and branches were here before 2000. In St. Lucie County. How long will they stay? "Five or six years ago. there was a raft of
new companies offering 125-percent financing. and I would say to my
colleagues. these companies are not going to be around in a couple of
years. whose company does not sell mortgages. "And
basically. The wave of brokers also has strained the state's system for licensing
and overseeing mortgage operations. There were just 11 state workers
handling licensing for brokers and brokerages in 2001. Today. there
are 15. That's a 36 percent increase - but license applications grew
297 percent in the same period.
And there are fewer state workers handling examinations of brokerages
than in 2001. even though consumer complaints over mortgage lending.
which can trigger examinations. have risen for four straight years.
"I won't tell you there are no dishonest brokers." said Schneider. But
no one wants rules tightened more than the industry. he adds. "There
just doesn't seem to be enough manpower" at the state level to monitor
continuing education. which can help teach brokers to match the right
person to the right loan.
too many brokers have been too helpful. a former South Florida mortgage broker convicted of felony
charges after tweaking home-loan rules in favor of buyers. "I spoke at
the Mortgage Bankers Association. and one gentleman said to me. 'You
are so focused as a loan officer to help a customer out. or get them
into a new home. and what you are not thinking about is what happens
when the loan goes bad.' "
If there is a bright spot among the mortgage defaults. it is that the
market is still strong enough for some to sell their homes and pay off
their debt - before a formal court judgment takes the roof from over
their heads.
That's what one borrower did after losing his home of 14 years to a 13
percent interest refinancing. But it's been scant comfort. "Yes. I got
a few thousand from it. but how long can that last?" asked the West
Palm Beach man.
Interesting article. but it's funny to me how the blame is placed on
the mortgage brokers. Many of these borrowers are irresponsible or
greedy.
I know of a person with children who keeps buying way
more house that she should. In order to buy the first one she accepted
a higher than market interest rate. After almost going through
foreclosure but finally selling it and making some money. she's bought
a much more expensive home with an interest only loan.