The Mortgage Mess Part 1

Thousands of Tennesseans face the real danger of losing their homes and you or someone you know could be one of them.

Some 50-thousand tennessee properties have been listed for foreclosure this year according to industry tracker "realtytrac"...

Many due to home mortgages people can no longer afford.

It seems the buying boom of a few years ago -- has gone bust.

Fox 17's Sky Arnold show us why in our special report "The Mortgage Mess."


Few things are as complicated as closing on a mortgage.

And what you don't understand, can hurt you.

Just listen to Charles Walker's story.

Charles Walker/Homeowner: "You basically just called the mortgage company and they approved you over the telephone."

Charles says getting his mortage two years ago was much easier than fixing up the place.

But what he didn't realize...The fine print of the deal held a surprise.

Like many americans Charles signed an adjustable rate mortgage that starts with a lower interest rate and then rises after two years.

Charles says he never realized the change would raise his mortgage by 500-dollars a month.

Charles Walker/Homeowner: "I didn't believe it could go up that much so my first thought was...I'm gonna look at the note and see if that's really possible. I would seriously consider selling my home if my payment was that much."

Sky Arnold/Reporter "It's not uncommon and the worst part is... many owners who don't sell risk losing their homes. Just look at this neighborhood for example...each pin represents an address that's recently been on the foreclosure list during the same week. Taken together these pins point to a problem."

But who's to blame?

Some say its homeowners who snapped up deals requiring little to no down payment to get into a house .. at low initial rates. Plus, those homeowners may have qualified for much more house than they can afford.

Another part of the answer may lie with companies offering adjustable rate loans:

Cathy Cowan/Freeman Webb Mortgage: "These companies started really pushing these loans because they were higher rate loans and they could make more money."

Cathy cowan is the president of freeman webb mortgage.

She says the lure of money encouraged some lenders to aggressively push what's called subprime lending, or basically giving people loans they wouldn't normally qualify for.

That includes adjustable rate and interest-only loans.

Greg Gonzales/Commissioner: "Subprime lending mortgage lending is not inherently bad in my opinion it's allowed certain borrowers to become homeowners who 10 to 15 years ago would not have the chance."

Tennessee Commissioner of Financial Institutions Greg Gonzales says the problem comes when people don't know what they're getting into.


Because the mortgage process itself is so complicated.

Greg Gonzales/Commissioner: "I don't think in many respects the consumer disclosures we have today are appropriate. Anyone that's gone through the process of receiving disclosures realizes it's very difficult to understand."

Whatever the cause...Foreclosures are effecting new loans.

Last august wall street put a halt to the subprime lending spree and today cathy says the mortgage industry itself is moving back to more traditional loans.

Cathy Cowan/Freeman Webb Mortgage: "It's going back to doing business the way we did 10 and 15 years ago, that's all it is. Yes, you need a down payment, You need to save your money have a down payment."

Even Charles Walker is seeing the difference.

He's trying to refinance his house to a fixed rate loan:

Charles Walker Homeowner: "They simply are requiring more documentation I do not remember having to go through all this to get this loan."

He doesn't mind though, as long as his next loan doesn't come with surprises.

Tomorrow night .. a place where the american dream dies in a matter of seconds:

Foreclosed homes on the auction block.
We'll see how the mortgage mess is affecting local families .. and how one woman is fighting to keep her home.The Mortgage Mess Part 1