Alaskans seek counseling for foreclosure problems

Posted: Tuesday, February 05, 2008

ANCHORAGE - Alaskans have not been spared the financial problems spurred by risky home loans, according to a group that provides counseling to people delinquent on their mortgages.

Foreclosure counseling nearly doubled last year, said Janice Jones, with the Anchorage-based Consumer Credit Counseling Service of Alaska.

Conventional wisdom has been that Alaska largely escaped the subprime loan meltdown, but that's not true, Jones said.

In the Lower 48, hundreds of thousands have defaulted on loans, bringing down lending institutions that offered risky loans.

Anchorage and the Matanuska-Susitna Borough, while not nearly as bad off, have experienced a sharp increase in foreclosures.

Jones said most of the people coming to her office for help are in trouble because of a "subprime" loan. They cannot afford ballooning interest rates on high-interest rate mortgages, she said.

One client's monthly payment jumped from $450 to $3,000.

Defaults could affect the economy. People who default on loans generally do not have much money to spend. Vacant properties can depress neighborhood values, according to a congressional report published last fall by the Joint Economic Committee, titled "The Subprime Lending Crisis."

Using data from the national Mortgage Bankers Association, the report estimated that Alaskans had acquired 13,580 subprime loans by the second quarter of 2007, and 1,010 of them would default by the end of 2009.

Jones said the Anchorage economy could be harmed but some economists and real estate professionals said damage does not appear to be as bad as in some Lower 48 cities.

"I don't doubt that foreclosures are growing" said Neal Fried, an economist for the Alaska Department of Labor and Workforce Development. He said statistics show that Alaska had much fewer subprime loan offerings than the Lower 48 and the local housing market appears to be stable, despite a slowdown in sales.

However, cooling of the Anchorage housing market already has had consequences for the economy, Fried said. The construction industry is expected to lose 500 jobs this year, mainly due to a steep drop in recent residential construction.

Lenders filed foreclosure notices on 627 residential properties in Anchorage and the Mat-Su in the final quarter of 2007. That's two to three times the amount filed in any previous quarter of the year, according to RealtyTrac, a California-based firm that tracks foreclosures nationally.

At the Consumer Credit Counseling office, the households that sought counseling due to a delinquent mortgage or foreclosure also increased sharply in the final quarter of 2007.

Overall, the number of visits related to a delinquent loan nearly doubled from 2006 to 2007 from 277 to 402, with most of the increase in the final part of 2007, Jones said.

"Our counselors are hammered. You feel guilty taking a vacation day," she said.

Another Anchorage-based nonprofit also is handling more calls from people delinquent on a loan or facing foreclosure.

"Just this month, I worked with five people. I don't think I worked with five last year," said Barb Worley, lending director for Anchorage Neighborhood Housing Services, in late January.

The demand for counseling at Consumer Credit Counseling is so overwhelming that the nonprofit expects to run out of grant money soon from its biggest funder, the U.S. Department of Housing and Urban Development.

The nonprofit likely will receive another federal grant soon, due to a recent appropriation signed by President Bush.

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