TOPEKA – A sharp increase in the number of Kansans faced with losing their homes to foreclosures is prompting concern among some state officials, including Kansas Attorney General Paul Morrison.
Statistics compiled by one private firm, RealtyTrac, showed total foreclosures filings in Kansas through August rising nearly 29 percent from the same period last year. The growth follows a nationwide increase that has seen the percentages of mortgages entering foreclosure reach a record level.
In addition, data from the Mortgage Bankers Association showed the state’s initial foreclosure filings near an all-time high during the first three months of 2007. The spike leveled off only slightly during the second quarter, which ended June 30, the latest quarter for which statistics are available.
To combat the problem, Morrison announced the formation of a 15-member task force last week to study why homeowners are falling behind in their payments. The group is being asked to make recommendations on how to stem the tide, which has hurt those at low-and-middle income levels the most.
Morrison appointed state Banking Commissioner Tom Thull, a former Democratic state representative from North Newton, to lead the panel, which will also look at whether mortgage fraud and predatory lending are contributing to the foreclosure problem.
“We’ve been hearing rumbles on this issue for quite awhile now all across the nation,” Morrison spokeswoman Ashley Anstaett said. “We’re just trying to be pro-active and see if there’s something that we can do to keep people in their homes.”
A growth in new foreclosures could be an indication of how high the foreclosure rate will be in the coming months, according to one expert, economist Kelly Edmiston. Foreclosures can be in different stages of the process over a period of several months.
Although concentrated in the state’s most urban areas – the Kansas City area, Wichita and Topeka – such growth could potentially pinch the state’s economy and its budget revenues. However, state officials say they aren’t sure how much of an effect there could be.
Thull said it’s clear that individually, at least some Kansans are suffering because they obtained loans targeted toward riskier borrowers.
“We know there is a problem because we know there are Kansans who utilized some of the subprime mortgages,” Thull said.
Mild by comparison
The state’s jump in delinquencies pales in comparison to the hardest hit areas of the country, where rates have more than doubled in some cases, said Daren Blomquist, a spokesman for RealtyTrac, which runs a subscription service for foreclosure information.
Michigan, Indiana, Ohio and Nevada posted the highest rates for new foreclosures in the second quarter of 2007, according to the Mortgage Bankers Association.
“It is mild compared to some other spots,” Blomquist said of Kansas.
In addition, the problem also appears to be mostly localized in the state’s largest urban areas, rather than a statewide issue.
In August, three counties accounted for 76 percent of the total foreclosure filings in the state, according to RealtyTrac, led by Wyandotte County with 143. Wyandotte also recorded the highest rate of foreclosures, one in every 465 households or nearly six times the state average and 1.1 times the national average.
By contrast, Ellis and Finney counties recorded zero foreclosures in August while Reno County had three and Saline and Neosho counties had one apiece. Data was not available for Franklin and Labette counties.
‘Over their heads’
Blomquist said that data showing a concentration of foreclosures in urban areas is partially a function of how much data his company collects. He said his firm doesn’t track many of the state’s smaller counties.
However, he said one of the reasons more Kansas counties aren’t being hit by a foreclosure crunch is because the problem is centered in areas of the nation that had much hotter real estate markets or have experienced severe economic struggles.
In the first quarter of 2007, however, Kansas had a foreclosure rate slightly above the national average and ranked 17th nationally. The state’s foreclosure rate ranked 37th in the nation during August, according to RealtyTrac.
The jump in new foreclosures in the first quarter suggests the issue isn’t going away anytime soon, said Edmiston, who works at the Federal Reserve Bank of Kansas City. He said his comments represent his personal views in responding to questions from Harris News Service.
Across the country, the problem appears to be the result of a combination of circumstances, which have hit homeowners with low-to-moderate incomes the hardest, Edmiston said.
In recent years, lenders have provided more mortgages to borrowers with less than stellar credit, which carry less generous terms than prime mortgages. Statistics show homebuyers with subprime mortgages are statistically more likely to face foreclosures.
At the same time, particularly in hotter, urban and suburban markets, homes have increased faster in price than household incomes have risen.
Many homeowners sought out loans with adjustable rates so their monthly payments could be lower, particularly with initial “teaser” rates. But those rates later increased and the loans were often structured so that the payments would increase drastically over time, in some cases more than doubling, according to Edmiston.
In years past, homeowners might have been able to stay afloat by refinancing to a lower rate, Edmiston said, but a cooling housing market has made it difficult for those in trouble to sell or obtain better borrowing terms, causing more to fall behind.
A key element of the problem is the inability of some individuals to afford a home without taking on ever-growing amounts of debt, he said.
“I definitely think a significant part of this story is a lack of affordable housing,” Edmiston said.
Morrison indicated in a recent news release that he hopes his task force will be able to suggest changes to deal with the problem of foreclosures. It’s unclear, however, how involved legislators plan to get involved in dealing with the delinquencies.
Rep. Clark Shultz, R-Lindsborg, leads the House committee that deals with insurance and financial institutions. He said there’s been some talk of increasing licensing and training requirements for mortgage brokers, in response to the problem.
But many of the foreclosures appear to be the result of riskier borrowers with subprime mortgages “getting in over their heads,” he said.
“I don’t know what legislatively you do about that,” Shultz said.
By Chris Green, Harris News Service