Out of the Foreclosure Pan, into the Fire
By Foreclosure-Fighter staff writer
Nothing puts a damper on a good housing market quite like a vicious, destructive foreclosure crisis. Nothing, that is, except a wildfire. The blazes that recently blew through southern California were unlike past fires in that they came at a time when the housing market was already seriously depressed. And now, some fear, that depression will worsen.
Estimates put the number of houses destroyed by the blazes at slightly more than 2,000. Though the Realty Times reports that the state has adequate emergency housing for all the families displaced by the fire, many victims face problems beyond where to live in the short term.
One of those problems is foreclosure: what happens to the families whose homes were already in foreclosure when the fire took them?
SignOnSanDiego.com reports that the Center for Housing and Urban Development (HUD) has declared a 90-day moratorium on foreclosure proceedings for the areas affected by fire. According to sources, such a move is possible when a presidential declaration of emergency has been made in a certain community.
The moratorium will apply to both homes already in foreclosure and to those nearing default, but will only be available to mortgage loans backed by the Federal Housing Administration (FHA). Unfortunately, reports estimate that only 3% of home loans meet these criteria. Still, the offer will be welcome for those who would have otherwise been making payments on damaged, unlivable properties.
In addition to the moratorium, SignOn reports, the FHA will be offering other relief options for disaster victims, including FHA-backed mortgages for those who wish to refinance and FHA loans that include damage costs.
These efforts may prove essential.
When wildfires swept California in 2003, the booming real estate market hiccupped only briefly before continuing to march steadily forward. Increasing property values coupled with buyer optimism meant that the fire's destruction was quickly forgotten, in terms of home buying.
But this time, many are worried that the already sluggish housing market will slow down even more as a result of the latest blazes, according to the L.A. Times. Some experts apparently argue that buyers won't be interested in properties whose neighbors are charred remains.
Others, though, reportedly speculate that the recent fires will actually help strengthen real estate activity. Displaced families will need homes, and they're likely to rent somewhere while having their primary residence rebuilt, sources say.
And laws are in place to prevent people from profiting excessively from the disaster situation.
According to reports, landlords who increase rent by more than 10% during crisis periods can face serious legal punishment, including heavy fines and jail time. The law also applies to the vendors of essentials like food, water, and supplies.
Overall, officials expect California to recover more quickly from the fires than from the foreclosure crisis. About 2,000 families were displaced by the flames, compared with more than 24,000 by foreclosure this summer alone. Clearly, both tragedies require aggressive repair efforts.