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Time To Buy Homes

Mortgage professionals encourage home buying during a difficult period for the industry and community.

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Michael Alouf, president of Herndon-based TPI Mortgage, discusses the current mortgage situation with members of the Herndon community on Thursday night, Nov. 8.

Lack of planning for adjustable rate mortgages, speculative investors, homeowners who refinanced their properties to use houses as ATM machines and personal reasons such as illness, divorce and layoffs are all factors in today’s mortgage crunch. More than 200 homes in Herndon are in foreclosure, and some estimates through 2008 place that number near 1,000 homes.

"The worst thing in the world possible for us is to have vacant houses," said Michael Alouf, president of Herndon-based TPI Mortgage. "Foreclosures are pushing down home values," said Alouf. TPI Group hosted a week of seminars to educate the public on mortgages, other loans and credit. In cooperation with area banks and the Dulles Regional Chamber of Commerce, TPI hoped the seminars could convince potential homebuyers that now is the right time to become a homeowner. Alouf said homes are available below value, super low interest rates and lenders contributing to closing costs. "Do me a favor, go tell all your friends to buy houses now," he said at a Thursday night, Nov. 8, seminar with seven community members in attendance.

Alouf said a part of the problem in today’s market is that home values have decreased and are worth less than some homeowners owe the lenders. "People buying houses solves that problem," he said. Once people start buying properties again, home values will start to increase again, said Gary Whiteleather, a real estate consultant with TPI Group. "As the inventory goes down, prices will go up," he said. How do rising home values help those residents who struggle to make their payments and are in danger of losing their homes? If values increase, it helps people refinance their loans, which can help with the monthly payments, said Alouf.

"I see the light at the end of the tunnel," said Herndon resident Shermonte Hackett, one of the attendees at last week’s seminar at TPI Group offices on Elden Street. The interest rate on her loan saw a 6 percent increase, making her monthly payments much higher.

Juanita Ryan said she felt much more educated on mortgages and questions regarding personal finances and loans. "I feel that there really is a solution," she said after the seminar.

SOLUTIONS EXIST for the homeowners feeling the mortgage crunch in their payments, according to TPI Group professionals. "Talk to your bank," said Nancy Thompson, a real estate consultant with TPI. She and Alouf told seminar participants that banks are willing to work with debtors because it is not in their interest to have those properties in foreclosure. "The bank doesn’t want your house. Maybe five years ago they did. They will work with you," said Alouf. He told the participants to call the banks and ask for a workout room or loss mitigation department, where people are in charge of working out debt related issues.

Other solutions include renting the house, making a short sale — house sold at market value instead of amount of owed, but the difference could become a tax liability — and bankruptcy. All of these options, according to Thompson, are more favorable than foreclosure. Although a home could probably not be rented for as much as is owed on the monthly payment, and other expenses are incurred — renting an apartment for yourself — the option allows the homeowner to keep the home. In a short sale, a person loses the ownership of a home. As far as bankruptcy is concerned, said Thompson, "I’d rather see you going into a bankruptcy before going into a foreclosure. Bankruptcies do come off your credit, foreclosures never do." With a foreclosure, she said, a homeowner loses the home, loses the credit rating and could still have financial liability.

Alouf said there have been about 59,000 layoffs in the mortgage industry in the past year. About 16,000 Realtors lost their jobs. Who is to blame for the situation? "It’s all our faults," he said. The borrowers wanted to become homeowners, so they accepted offers they knew were not meant for them — at times having their income altered so they can be approved for a loan. The banks were making money and the government was reveling in a situation where an industry was doing well. "Too much of a good thing is not a good thing," said Alouf. "It is everybody’s fault. No one put a gun to our heads and said, ‘You better buy this.’"

The media also played a negative role, according to Alouf. For about two-and-a-half years news outlets warned that the real estate bubble would burst, he said, creating an unsettled feeling among the investors. "They drew buyers out of the market place," said Whiteleather. Consumer confidence could go a long way, and the media could play an important role, according to Alouf, to bring people back into the home buying market.

THE TPI PROFESSIONALS also warned seminar participants to seek legal counsel before taking any action. They warned that they were not advocating any of the possible solutions, but were presenting them as options. "This is not about us making sales," said Alouf. "We live in this community and it is important to us that this community does not fail."

Thompson added that according to numbers from Northern Virginia Association of Realtors the housing prices are on the rebound in the region, having hit a low around September of 2006. "We have phenomenal growth here. In this area, we’re doing just fine folks," she said. Alouf said the region is probably about a year-and-a-half away from any visible appreciation in home values. He added that people facing payment problems have to seek counsel. He said the numbers at the seminars were low because people are nervous to have this conversation. "Not only is it OK" to have the conversation, said Alouf, "but we have to have this conversation."