By Evelyn Carmen

No one will deny that the housing crisis has played a central role in the financial and credit turmoil now spread across the country, with many homeowners saddled with mortgages they cannot pay. Many economists are now debating the merits of President Barack Obama’s plan to help stem the wave of foreclosures. But for the past several years, the District of Columbia’s regulator for the financial services industry, the Department of Insurance, Securities and Banking (DISB), has been monitoring the steady increase in the number of home foreclosures in the city and has been working vigilantly to address this increase during fiscal 2008 and 2009. 

In the District of Columbia, the home foreclosure rate has always been among the lowest in the country.  In fiscal year 2004, there were 76 actual foreclosures, followed by 159 in 2005, 117 in 2006, and 282 in fiscal year 2007. As the impact of non-traditional mortgage products— such as adjustable rate mortgage loans and interest only products—has taken hold, and our economy has continued to falter, more and more residents have found themselves facing foreclosure.  In fiscal year 2008, the District of Columbia experienced 995 foreclosures.  That is more than three times the previous year’s number and it appears that this will be the trend for the upcoming year.   

What can be done?
In addition to sponsoring a 2007 study of subprime lending in the District that helped identify the reasons for the increase, DISB has taken the following steps to address this issue in an effort to save District home owners from foreclosure.

Regular monitoring
DISB has been monitoring foreclosures in the District with monthly foreclosure reports that track current results and compare the findings to recent history to uncover additional trends. On a quarterly basis, the agency compares the District’s seriously delinquent mortgage loans (90 days past due plus those in foreclosure) to the rest of the country to develop any additional information that may prove useful. 

Consumer Complaints
Through the use of these reports and monitoring consumer complaints regarding foreclosure, DISB was able to put several mitigation strategies in place. 

Strategies Developed
First, DISB issued guidance to District lenders and brokers on the proper use of marketing techniques for non-traditional mortgage loan products and subprime loans.

DISB has worked with the Council of the District of Columbia to ensure that proper disclosures are being used in the mortgage loan process, through the implementation of the Mortgage Disclosure Act of 2008, and with the Department of Housing and Community Development to coordinate District foreclosure efforts. 

The Foreclosure Mitigation Kit
In addition, the agency has created a Foreclosure Mitigation Kit, which is designed to guide residents facing foreclosure through the process of saving their homes. The kit provides foreclosure mitigation advice from DISB, in addition to valuable information provided by experts in the field.  The kit has been very helpful in assisting District residents and has proven to be of value to other homeowners facing foreclosure, regardless of where they might reside.

Evelyn Carmen is a Policy Analyst in DISB’s Banking Bureau.