Making Foreclosures Part Of The Solution
SUSAN STAMBERG, host:
As Marilyn mentioned, the housing market is still struggling and some economists say prices won't start to recover for another three years. Even Fed Chairman Ben Bernanke said this past week that the market may be worse than most analysts had thought, which is leading to some fresh calls for government intervention around foreclosures.
NPR's Chris Arnold reports.
CHRIS ARNOLD: This summer, in many cities around the country, foreclosure auctions are just about as common as, say, kids buying ice cream.
(Soundbite of ice cream truck music)
ARNOLD: what is that, an ice cream truck?
Unidentified Man #1: Yup.
ARNOLD: On a wooded street in Boston's Dorchester neighborhood, a Good Humor truck rolls by as a foreclosure sale gets underway on the front porch of the house.
Ms. MARY SCIMEMI (Auctioneer, Bay State Auctions): Okay. Everybody, I'm Mary Scimemi from Bay State Auctions, legal notice mortgage sale and real estate...
ARNOLD: The scene is definitely a bit strange. There are no kids running up to the truck. Just a bunch of 50-year-old men, and some smoking cigarettes, who've shown up for the auction. It's an older house and its not in the nicest part of town. But it's in decent-looking shape. It has new front doors. Also, it's a duplex. So if you're a landlord, it has two units that you can rent out.
Ms. SCIMEMI: I got a bid of 194. anybody at 196?
Unidentified Man #2: Two hundred.
Ms. SCIMEMI: I got a bid of 200.
ARNOLD: Soon the auctioneer starts slapping her pen against her clipboard.
Ms. SCIMEMI: Got a bid of 210, looking for 211. Two-ten, going once. Twice, three times. Sold for $210,000. Thank you, guys.
ARNOLD: Now, investing in foreclosed properties might seem like profiting off of someone else's misfortune. But...
Mr. RICK SHARGA (Senior Vice President, RealtyTrac): Investors in today's market can be a big part of the solution.
ARNOLD: Rick Sharga is a vice president with RealtyTrac, which gathers data on foreclosures. He says much of the buying is being done by small-time investors with cash. He says it's hard to get bank loans right now. So he'd like to see the government help these investors to qualify for loans.
Mr. SHARGA: We have a huge problem, in that we have an excess of distressed inventory that really needs to be cleared out. And an investor, who has reasonable access to capital, could very easily wind up buying multiple properties over the course of a single year, rehabilitating those properties and turning them into stable renting units.
ARNOLD: Sharga says there are a couple of million homes heading towards foreclosure sales right now. And four million more homeowners who are seriously delinquent on their mortgages. And that brings up the other way that people still are trying to tackle this problem - preventing more of those foreclosures from happening in the first place.
So far the efforts to do that by the government and by the banks have been plagued with problems.
Professor CHRIS MAYER (Economist; Senior Vice Dean, Business School, Columbia University): I'm still frustrated that there are policy steps we can take to help the housing market that we haven't done.
ARNOLD: Chris Mayer is an economist at Columbia University. One thing that he's pushing for right now is for the government to allow millions of Americans to refinance into today's super-low interest rates, regardless of their credit score or how much their house is worth.
Chris Arnold, NPR News, Boston.
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