IN could see new wave of foreclosures

INDIANAPOLIS (AP) - The number of Indiana mortgages that were 90 days or more overdue jumped to its highest level in more than a year in January, a statistic that has many fearing a surge of home foreclosures in 2010.

Indiana ranked 17th in the nation for foreclosures in late 2009, according to RealtyTrac Inc., a California-based foreclosure listing service. Experts fear thousands more could lose their homes this year because of long-term unemployment and a housing surplus unique to the Midwest.

One Indiana mortgage specialist believes the state is waging a losing battle against preventing foreclosures in a state where unemployment continues to hover near 10 percent.

In the first quarter of 2009, less than 25 percent of the jobless in Indiana had been unemployed for more than 27 weeks, according to a national Mortgage Bankers Association report. By the fourth quarter of 2009, however, that number was up to almost 40 percent.

People who have been unemployed for more than 27 weeks can't qualify for refinancing or mortgage assistance because they have no source of repayment, said Alan Thorup, executive director of the Indiana Mortgage Bankers Association and Greater Indianapolis Mortgage Bankers Association.

"A critical component of a consumer's ability to refinance or have their loan modified is the existence of an income stream," Thorup said. "One of the frustrations for consumers and everybody involved is that if there's no source of repayment, you're limited."

Drew Klacik, senior policy analyst at the IU Public Policy Institute, said Indiana's housing surplus is also partly to blame for the surge in delinquencies. Construction outpaced population growth in the Midwest, he said, leaving central Indiana with about 10,000 to 15,000 vacant homes.

"As the economy started to go bad and we had too many houses, we couldn't sell our way out of our housing crisis issue," Klacik said.

A surge of foreclosures could spell disaster for a housing market still struggling to recover from the recession despite federal incentives to buy and sell.

David Fredricks, program director for the Indianapolis Coalition for Neighborhood Development, said foreclosures slash home values and affect the psyche of a community. That makes it difficult to attract permanent residents and businesses,
who may be turned off by boarded-up buildings.

"It definitely deteriorates the fabric of the neighborhoods because you lose that neighborhood and community feeling. It can be a big pull-down on a community," he said.

Thorup said the key to breaking the cycle of foreclosure and delinquency lies in job creation.

"If in Indiana, we can develop job opportunities that can be filled not only by the graduating students but by the systemically unemployed, the foreclosures in the country and in Indiana could be abated somewhat, he said.

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