North Carolina Faces More Foreclosures Despite Stringent Laws

February 11th, 2008

Having one of the most stringent mortgage laws has helped North Carolina face the onslaught of this foreclosure crisis.

However, foreclosure rates seem on the rise despite new enactments included in these laws to make the already strict measures more binding. This has affected from low and middle income families.

Many in trouble are using their credit cards to avoid defaulting. Louise Mack, runs Prosperity Unlimited, a not-for-profit group involved in helping people caught up in mortgage crisis. In his experience, people avail mortgages more than what they can actually afford and later have no choice but to run into such crisis.

In 1999, the General Assembly approved what is called a Predatory Law, which is believed to be a model for all of the country. Predatory law bans companies from issuing high interest loans for people with faulty credit records and thus lenders cannot levy high charges to such customers. The law also ensures that borrowers are not penalized for clearing loans early. In 2007, this law was extended even to those loans which had interest rates higher than benchmark figures.

Mark Pearce, a state deputy banking commissioner says that these laws have helped keep the foreclosure crisis cases in check, but nevertheless statistics show an increase of 9.4%, thanks to high default rates in the sub-prime lending market which has created ripples in the global financial field. This obviously adversely affected North Carolina too.

Officials are getting together to formulate plans to keep the situation in control. Bill Bost, general counsel for the North Carolina Association of Mortgage Professionals while being sympathetic towards all those in trouble, says that any change in the current laws would affect the flow of capital into North Carolina.

Though North Carolina is faring much better, 60,000 families facing such a risk are facing terrible problems.

Foreclosures could be delayed for various reasons - upon unethical practices by the lenders, or decisions being challenged in higher courts thus, borrowers appealing for more time to pay up.

Many borrowers under “2-28” schemes have borrowed more than they can actually afford. After a two-year low interest rate, the interest rates are reset at much higher levels throwing such borrower’s finances in complete disarray. However, hindering financial institutions from selling their products for home finance could also have other repercussions not visible today.

In all, this only goes to prove that homeowners should decide the kind of money they can actually spend to own their own homes and how far can they go to keep it form foreclosing.