(Statehouse) August 16, 2007-The first meeting of the 2007 Interim Study Committee on Mortgage Lending Practices and Home Loan Foreclosures was held today at the Statehouse. State Representative Woody Burton (R-Greenwood) along with a panel of legislators listened to public and expert testimony regarding Indiana's increasing foreclosure rate. The committee is charged with studying ways to decrease the foreclosure rate in Indiana and reduce mortgage fraud. Currently, Indiana has one of the highest foreclosure rates in the nation. At today's meeting, the panel discussed the top three probable causes for Indiana's high foreclosure rate. "Indiana and its neighboring states have seen a major loss of manufacturing jobs in the past few years," said Burton. "The Midwest consists of highly industrialized states. Without job growth in this field, an economic slump has occurred for Hoosier families." Low wages and joblessness resulting from the loss of manufacturing jobs has created a climate unfavorable to owning and/or buying a home in Indiana, which has resulted in more and more families losing their homes to foreclosures. Another factor contributing to Indiana's high foreclosure rate is the slowing home-price appreciation rates seen across the nation. "In some ways, it is not as profitable to own a home now as it was 40 years ago," he said. "The low appreciate rates have made houses more affordable, but that's not always a good thing." Sub-prime lending is also responsible for Indiana's high foreclosure rate. Sub-prime lending is a term used to describe mortgages that are given to borrowers who are below the standard of an ideal loan candidate. Sub-prime lenders target consumers with poor credit histories and unfortunate financial situations. The low and/or zero down payment offers and accessibility of sub-prime loans easily attract the target consumers. However, sub-prime mortgages are risky investments, often leading to rapidly increasing interest rates, which lead to foreclosures. Because of the serious financial risk involved with sub-prime loans, many lenders are doing away with this type of mortgage, which according to Burton, is a step in the right direction. The Interim Study Committee on Mortgage Lending Practices and Home Loan Foreclosures will continue to study this issue, along with numerous others during the summer interim period. For more information on this issue or any other, contact Representative Woody Burton at h58@in.gov or 1-800-382-9841. |
