The D.C. Council’s consumer affairs and public services committee is scheduled to consider a bill that provides protections for city residents with homes in foreclosure.
“The bill itself focuses on foreclosure rescue scams,” committee counsel Helder Gil said. “There’s a growing number of anecdotal stories about people being scammed out of their home through these things.”
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Gil is referring to companies that “equity strip” — the process of offering homeowners who cannot make their payments cash well below the value of the house. These homeowners, facing foreclosure and struggling to make payments, often accept much less than the listed value of the home, which the buyer can then sell for a profit. D.C. Council Chairman Vincent Gray has introduced the bill, which every City Council member, except Marion Barry of Ward 8, co-sponsored.
The council’s consideration of the bill comes as the number of foreclosures across the country has risen due to increasing interest rates and declining home prices.
Foreclosures have been concentrated in the subprime mortgage market, mortgages given to people with poor credit.
News that New Century Financial Corp. will no longer issue subprime mortgages complicates the situation.
An increase in subprime foreclosures could hit hard in the District, where about 5 percent of all mortgages are subprime.
These homeowners are concentrated in Wards 5, 7 and 8, areas where a housing collapse could have steep consequences.
The news that New Century Financial Corp. will no longer issue subprime mortgages also complicates the situation.
This could make it more difficult for people looking to purchase a home to get a mortgage, as the company in 2004 originated one-quarter of all subprime mortgages in the District.
In addition, the Mortgage Bankers Association announced Tuesday the late payment rate for mortgages rose to a record-high 4.95 percent at the end of last year, up sharply from the third quarter.
Delinquencies in the fixed subprime market, which rose to 13.3 percent and 14.4 percent for subprime mortgages with adjustable rates, drove the late payment rate.
This news, and slow growth in retails sales sent the market down Tuesday following three straight sessions of gains.
