Partners (Number 3, 2007)

Atlanta Fed Releases Video on Foreclosure Prevention

foreclosure graphic

The Atlanta Fed has produced a video advising homeowners about how to prevent foreclosure. "Foreclosure Prevention: Hope for Georgia Homeowners" features interviews with several experts as well as with homeowners who have faced foreclosure.

Produced for Georgia homeowners as part of the Fed's mission to serve its communities through financial and economic education, the 17-minute film includes credit counselors, consumer advocates and legal experts who discuss the common causes of foreclosure. They advise home buyers to educate themselves and be skeptical of aggressive sales pitches.

Heavy marketing is often used to sell complex mortgages with interest rates that increase over time. These sorts of loans are part of the reason for the surge in foreclosures in recent months, says Kenneth Wade, chief executive officer of NeighborWorks America, a national network of community development and affordable housing organizations.

Mortgages with increasing interest rates appear to be a major issue in metro Atlanta. Half of those people who call the Consumer Credit Counseling Service of Greater Atlanta with mortgage difficulties have escalating-rate loans, says Susan Hunt, director of the agency's housing program.

Most of those buyers were not aware of what they were getting into, she says. In fact, few homeowners comprehend complicated real estate finance, and virtually none completely understand the mortgage documents they sign, says Frank Alexander, professor at the Emory University School of Law.

Alexander, who specializes in real estate sales and finance, advises homeowners to take the time to seek help understanding the terms of their loans. They should be certain of their monthly expenditures—including not only the mortgage payment but also utilities, taxes and insurance.

He and the other experts in the film stressed that homeowners facing potential problems with mortgage payments should contact their lender before they miss a payment. Lenders would generally prefer a repayment arrangement rather than foreclosing, as a foreclosure typically costs a lender $30,000 to $40,000, Hunt says. Even after a foreclosure, lenders end up repurchasing the home through auction on the courthouse steps in 80 percent of cases, Alexander notes.

Michael Brown, a homeowner who had financial problems but avoided foreclosure, says in his film interview that talking with his lender and credit counselors provided great relief. "It was like taking the weight of the world off your shoulders, knowing you're going to save your home," he states.

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