BY LOUISA MURZYN, Times of Northwest Indiana Correspondent
Home foreclosures are eating away at the nation's heartland and the American Dream but don't expect Pamela Stalling to turn into Chicken Little.
"When we talk about the mechanisms of getting people into homes, that's not the issue," said the executive director of the Consumer Credit Counseling Service of Northwest Indiana.
"The reality is we need jobs to keep people in these homes. And they need to be educated on making wise decisions about if they can afford it now or years down the line."
At about 75 percent, Indiana has one of the highest homeownership rates. Yet it also has the second-highest foreclosure inventory rate.
Experts agree local economic problems and manufacturing-related job losses contribute significantly. Indiana, Ohio and Michigan, hit hard by cutbacks and plant closings, account for 20 percent of the nation's foreclosures.
Since 2003, Indiana has lost more jobs proportionately than any other state in the country and many of those affected were homeowners, said Tom Dinwiddie, of the Indiana Bankers Association.
Peter Novak, of the Greater Northwest Indiana Association of Realtors, agrees with Dinwiddie that low rates of appreciation on real estate values coupled with affordable housing and high loan-to-value loan ratios also are major factors.
Indiana ranked 44th in the most recent measure of one-year price growth by the Office of Federal Housing Enterprise Oversight. Hoosiers also use more down payment assistance programs, which reduce or eliminate cash down payments.
"If you buy a house and sell it, you won't be able to put much into a new house," Dinwiddie said. "If you have economic problems and little equity to fall back on, it all feeds on itself."
Dinwiddie said adjustable rate mortgages and property taxes don't appear to be major factors, but Novak disagrees.
Homes foreclosed on and sold in the Multiple Listing Service jumped substantially in 2006 in Lake and Porter counties and select older urban neighborhoods, Novak said.
"To me that corresponds to the timing of the reassessment and when people were getting their tax bills," he said. "It's too much of a coincidence to say it didn't have a negative impact."
The fallout of yearslong subprime lending is occurring locally and nationally, Novak said. Analysts estimate nearly 2 million adjustable rate mortgages will reset to higher rates in the next year or so. Borrowers were lured by initially low teaser rates.
"I don't have local statistics to prove that, but it's common sense," Novak said. "Anyone with good credit who could afford a fixed rate and traditional financing would have done so.
"An adjustable rate is cheaper the first years so homeowners hope their personal outlook will be better in the future and unfortunately that's hardly true. Lots of time they're in the same situation and probably worse."
Dinwiddie said it's wrong to assign blame. "We're a victim of success. Policymakers want to increase home ownership, but at some point you have to wonder if it makes any sense."
Novak agrees. "There's a fine line putting someone into a home they can afford," he said.
Stalling said it's imperative for struggling homeowners to know help is available. Both say prevention through home buyer education classes is critical. "It's absolutely important," Novak said.
"The issue is we know there's a problem and no jobs, so in the meantime what do we do?" Stalling asked. "When you're informed, you're a better consumer and can live a higher quality life instead of just going through the motions."
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