The Group That May Push the Foreclosure Rate Sky High
- May 30, 2008
The rising U.S. foreclosure rate has prompted an outbreak of proposed bills and programs from Congress and local lawmakers to help families save their homes–but according to Bloomberg, the average American family isn’t in nearly as much as trouble as the country’s military families.
Foreclosures in towns with high populations of U.S. soldiers are growing rapidly–at a pace almost four times the national average, according to Irvine, Calif.-based RealtyTrac Inc.
For many of the same reasons the rest of the country is struggling with foreclosure issues: Lured by the promise of low rates and simple terms, military families signed up for subprime mortgages several years ago, sidestepping safer alternatives like Veterans
Administration loans, which dropped the lowest amount in 12 years.
And according to some officials, it’s caused the worst military housing crisis in history.
"We’ve never faced a situation like this, not in the
Vietnam War, World War II or the Korean War, where so many
military are in danger of losing their homes,” said Paul Sullivan, who serves as executive director for Washington-based advocacy group Veterans Common Sense.
In towns and cities within 10 miles of military facilities, foreclosure filings rose by a roughly 217 percent on average from January
through April, compared to 2007.
By comparison, the national foreclosure rate was 59 percent during the same time period.
Take a moment to let those numbers sink in: We’re talking about a 217 percent foreclosure filing increase for one specific group of people–that is huge.
Affected areas include:
- Norfolk, Va.–which contains the Navy’s largest base, and Woodbridge, Va., which is next to Quantico, the Marine base. Woodbridge foreclosures grew by 414 percent.
- Columbia, S.C., which saw the biggest increase. Columbia houses Fort Jackson, which is a large Afghanistan and Iraq combat training facility.
- Cities around Norfolk’s base and the Oceanside, Calif. Camp Pendleton Marine Corps Base, where foreclosures have tripled, according to RealtyTrac.
- Foreclosures also more than doubled in Havelock, N.C., home to Marine Corps Air Station Cherry Point.
Much has been written about the too-loose underwriting practices and questionable conduct that pushed so many homeowners into subprime loans.
But research suggests military families in particular may have been targeted for subprime loans, according to Bloomberg, because they move around often and are sometimes sent overseas–which, combined with their low pay, often meant they had poor credit ratings. Which means it’s probably not going to be easy for them to refinance.
The foreclosure numbers for military families are absolutely appalling–no matter what your feelings are about the U.S. military (they run strong these days on both sides of the coin), it’s just not a good housing market move to have all these homes flooding the market in concentrated areas.
We’re trying to shrink the foreclosure rate; this group is in serious danger of seeing additional defaults and foreclosures–and that could hurt more than just the communities surrounding the country’s biggest military bases.
But what’s the next step?
Rep. Bob Filner, D.-Calif., just introduced two bills to reduce restrictions on home-loan guarantee programs that are administered by the Department of Veterans
Affairs. The move could help veterans–many of which live in Filner’s district, according to the San Diego Union Tribune.
HR 4884, one of the bills, would end refinancing equity requirements–veterans currently have to have 10 percent equity in their home to refinance through the VA (good luck getting that in California these days). The bill also would cut standard funding fees to 1 percent.
Filner’s other proposed bill, HR 4883, would prohibit anyone foreclosing on a property that a service member owner for a full year after the service member completed military service.
Clearly something needs to be done; is this the best solution? What do you think we should be doing to curb military foreclosures, to help both at-risk families and the housing market?