Are service members perceived as a higher foreclosure risk? - Military Money, Navy Money, navy pay, pay charts - Navy Times

Are service members perceived as a higher foreclosure risk?

Family advocates are concerned that recent reports about home foreclosure rates in areas with a substantial military presence will hurt service members who try to buy houses this summer.

“It casts aspersions on the character of military personnel,” said Jessica Perdew, who recently stepped down as deputy government relations director for the National Military Family Association.

“When they go to close a loan, if this becomes a common belief, it eventually has to affect the interest rate and other fees” charged to military families, Perdew said. “These people are paying their bills. To paint them as being more likely to default on their mortgage is just wrong.”

Perdew said she was concerned about a brief item that appeared in a financial newsletter sent May 28 to investment professionals by the CFA Institute, an investment management and research association.

Titled “Military families face higher foreclosure rate,” the news synopsis, which drew from and linked to a much longer May 27 news report by Bloomberg.com, said military families “are losing their homes at a rate almost four times faster than the national average.”

However, that’s not quite what the Bloomberg article stated. It said foreclosures in some U.S. towns near military installations are increasing at a pace almost four times the national average, based on data compiled by RealtyTrac Inc., a research firm in Irvine, Calif.

Rick Sharga, RealtyTrac’s vice president for marketing, said his company cannot tell how many of the foreclosures actually involve military families.

“There may be foreclosures in towns close to military bases, but that doesn’t mean they are military,” Sharga said.

RealtyTrac provided data on additional locations requested by Military Times, which showed that it is difficult, if not impossible, to draw conclusions about foreclosures specifically among military homeowners.

For example, foreclosures in Virginia were up by an average of 396 percent, but rose less steeply in Norfolk, Va., by about 155 percent, and nearby Virginia Beach, Va., by about 243 percent.

The greater Norfolk area has one of the largest concentrations of military personnel in the nation — but service members still account for less than 5 percent of the area’s population.

And in El Paso, Texas, home of more than 17,000 soldiers at Fort Bliss in a metropolitan area with a population of nearly 750,000, the foreclosure rate actually dropped by 31 percent from the previous year.

In many areas where the military community comprises a larger slice of the local area’s population, RealtyTrac does not have reliable data, such as Fort Riley, Kan.; Whiteman Air Force Base, Mo.; Gulfport and Biloxi, Miss.; Fort Drum, N.Y.; and Beaufort Marine Corps Air Station, S.C.

That’s because the company has not hired anyone in those areas to research the data, and they do not have control over the quality of whatever other data might be available, said Daren Blomquist, marketing communications manager for RealtyTrac.

But the RealtyTrac data for Hinesville, Ga., home of Fort Stewart, tracks with the experience of Army Maj. Diogo Tavares, who was amid a household goods move when he talked to Military Times on June 11. The data indicates foreclosures have increased by about 6 percent over the past year in his area, compared to a 30 percent increase statewide in Georgia.

“In Hinesville, the market is not bad,” said Tavares, who also is a part-time real estate agent. “My friend sold his house in five days. There’s a high turnover here, and people are always looking for houses.”

His house in Pooler, a bit farther from the post, has been on the market for about a month. He said he and his wife hope it will soon sell because of new industry in the area that is only a five-minute drive away.

They’ve bought a house near his new duty station at Fort Leonard Wood, Mo., and said they had no problem qualifying for a loan even though they haven’t sold their current house.

“We’ve saved so many months of mortgage payments, so we have a cushion,” he said, adding that he and his wife also have an excellent credit rating.

Tavares said he hasn’t seen other service members getting into trouble making their house payments, but said, “If the military does have a higher foreclosure rate, I think it would be not because they have bad loans, but because they move so much.”

And in many markets, it is harder to sell now, he said.

But he said he disagrees with the idea that service members have higher foreclosure rates than the general population. “I have not heard personally” of that, Tavares said.

But could the perception that military families have a higher foreclosure rate — true or not — affect what they might have to pay for home loans?

Possibly, experts said.

The National Consumer Law Center says a common mortgage tool called yield-spread premiums means mortgage brokers are paid more if they increase the terms of a loan, with higher rates or other expensive features, above the amount borrowers might otherwise qualify. Brokers can make such decisions independently of the homeowner’s potential risk on a mortgage — and may not always make clear that such a fee is being charged.

Showing bias against any demographic group, including the military, is illegal, said Ellie Monty, executive vice president of Moving Station, which includes Military Moving Station.

“But we know that in the trenches, that there are practices, however wrong they may be, that get folded into different fees that a naïve consumer might not be aware of,” Monty said.

Such “junk fees” are how some people in the industry make money, she said, which is why buyers need someone to help them scrutinize these fees.

Military Moving Station helps service members buy and sell homes at no charge by putting them in touch with Realtors and lenders who meet the company’s ethics requirements.

She said, anecdotally, Military Moving Station counselors are fielding more questions from service members concerned about the possibility of foreclosure.

“The military is a microcosm of a general trend ... we’re seeing what everyone else is seeing,” Monty said. “The need increases for folks to understand how to protect their investment.”

One way to do that is to obtain mortgages through the Veterans Affairs Department’s home-loan guaranty program, which generally does not require down payments.

About 2.3 million home loans currently in effect were bought through the program. More than 90 percent of VA-backed loans are given without a down payment, VA officials said.

Officials said VA counselors have helped about 74,000 veterans, active-duty members and survivors keep their homes since 2000. April data shows that foreclosures on VA-backed loans are down by half from 2003.

More details are available from VA online.