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States Taking the Lead to Limit Home Foreclosures
Over the past couple of months, states across the country have been moving quickly to limit the damage from the breaking wave of defaults and foreclosures among subprime borrowers who are struggling with or facing bigger monthly payments when their adjustable rate loans reset at higher interest rates.
For instance, even before President George W. Bush on Dec. 6 announced a groundbreaking agreement with major lenders to temporarily freeze sub-prime interest rates that are set to rise, California Gov. Arnold Schwarzenegger unveiled a similar deal. Both initiatives are limited to borrowers who are current on their monthly payments but might not be able to afford their loans when they move to higher interest rates.
Other states addressing the issue:
- In Michigan , the attorney general sent letters to 30,000 home owners who were one to three months behind on their payments, inviting them to attend a forum to meet with their lenders and discuss ways to avoid foreclosure.
- Illinois has set up Home Owner Outreach Days on which residents can meet with lenders and attend workshops about foreclosure prevention and scams. More than 200 people attended each of the first three of these events, and several more were scheduled.
- Iowa is one of at least six states (along with Colorado , Connecticut , Indiana , Massachusetts and New Jersey ) that have set up foreclosure hotlines. These enable borrowers to reach counselors who can then talk to lenders on their behalf about loan modifications.
Nevada , Florida and Ohio posted the highest foreclosure rates in November, according to RealtyTrac, a foreclosure tracking database. Default notices, auction sale notices and bank repossessions declined 10% in November from the previous month, RealtyTrac reported, although they were up 68% from a year earlier.
States Take Revenue Hit
States are increasingly concerned about the impact of the housing market slowdown on their revenue collection.
According to the National Conference of State Legislatures' annual State Budget Update, the stalled housing market is pinching state revenues in several ways.
Arizona, Illinois and Maryland are among at least 13 states blaming skimpier sales tax returns on the decline of the housing sector. Declining home sales have left states with less sales tax revenue because most people who buy homes also purchase new appliances and carpeting and spend big money on home-improvements.
Minnesota, New Hampshire and New Jersey are among at least a dozen states reporting declines in their real-estate transfer or recording taxes.
Florida, which is particularly dependent on sales tax revenue since it does not have a state income tax, reported that the housing sector has directly or indirectly affected all major revenue sources.
Both Arizona and California told NCSL the dip in the housing sector also affected personal income taxes. And Nevada is looking at an 18% drop in real property transfer tax revenue.
For more information, e-mail Carlos Gutierrez at NAHB, or call him at 800-368-5242 x8279.
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