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Floridians abuse high-risk mortgages, don't show up for rehab

Floridians were major abusers of high-risk mortgages, which we scarfed up like Scarface's Tony Montana on a cocaine binge.

But when it comes to government-sponsored rehab — the Obama administration's Making Home Affordable program — Floridians just aren't showing up as planned.

If you'll recall, the program's aim is that homeowners pay no more than 31 percent of their incomes toward monthly mortgage payments, including taxes and insurance.

To enroll, you have to be current on your mortgage and prove a "hardship." Hardships can include family illness, pay cuts and outright unemployment. After a three- or four-month trial period, during which the bank checks if the homeowner can actually afford the lower payment, the modified mortgage becomes more or less permanent.

How has it worked? Pretty well. Except in Florida.

As of the end of October, banks have offered 920,000 U.S. homeowners trial modifications. About 651,000 have accepted so far. About 3.2 million are eligible nationwide.

About 82,600 Florida home owners are engaged in trial modifications. That is second only to the 134,600 homeowners in California. In two other housing-boom-turned-housing-bust states, Arizona and Nevada, enrollees numbered 34,400 and 17,500 respectively.

But here's the number that matters most: Our 82,600 government assistance cases represent just 12 percent of the total number of Florida homes in foreclosure or pre-foreclosure.

California's performance was superior. Its Making Home Affordable enrollees amounted to 19 percent of troubled homeowners. In Arizona, it was 22 percent. In Nevada, it was 18 percent.

The government was at a loss to explain Florida's disproportionately poor enrollment. The best it could do was speculate about the gobs of investment homes in the state.

That makes sense. Our proximity to population centers like New York and Chicago, combined with our bargain home prices, made us a magnet for speculative home purchases.

There's less incentive for such gamblers, especially if they placed no down payment on their 100-percent-financed mortgages, to seize a government life jacket. Better to let the bad investment sink beneath the waves.

I consider Making Home Affordable a success. It's for people who haven't landed in foreclosure but fear that's their destination. If all goes well — still a big if — it should keep hundreds of thousands of homes off the foreclosure and short-sale listings.

But let's not fool ourselves: This is a massive, hugely expensive, long-term subsidy for home­owners who in many cases bought too much house during a period of exuberance.

It's also subject to abuse similar to the "liar loans" that helped topple the housing market. Even at the risk of federal penalties, some Tampa Bay homeowners will understate their incomes to make it appear their mortgage is less affordable.

At the height of the building boom, Steven Krystofiak, president of the Mortgage Brokers Association for Responsible Lending, told the Federal Reserve that in a sample of 100 stated-income mortgages, 60 percent of people had fudged their incomes by more than 50 percent.

Have Floridians shed their slippery skins and become Honest Abes since 2006? I'm sure some have. Some.

James Thorner can be reached at jthorner@sptimes.com or (813) 226-3313.

Foreclosures by the numbers

New foreclosure filings were down a bit from September, but the flow of distressed properties showed no sign of ceasing in October. Here's the latest load of foreclosure cases that passed through the courts last month:

Pinellas: 1,681

Pasco: 925

Hillsborough: 3,049

Hernando: 561

Total Tampa Bay: 6,216

Source: RealtyTrac

Floridians abuse high-risk mortgages, don't show up for rehab 11/12/09 [Last modified: Friday, November 13, 2009 8:38am]
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