Billionaire Says Rates Help Government Foreclosures Program

Billionaire Eli Broad, founder of home building company KB Home, has called for further lowering of rates to help achieve the goals of the government foreclosures homes program.

Broad said that mortgage rates lower than 4 percent will entice all kinds of homebuyers and real estate investors to buy homes and reduce large inventories of foreclosure properties across the U.S.

While being interviewed at the Milken Institute Global Conference in California, Broad said the government foreclosures program need to implement extra remedies in places battered by hundreds of thousands of foreclosed homes.

According to foreclosure monitoring enterprise RealtyTrac, most foreclosures in the first quarter are located in just four states – California, Nevada, Florida and Arizona. All the cities in RealtyTrac’s listing of the 25 metro areas with the biggest rates of foreclosure in the U.S. are located in these 4 states. Over 803,000 housing units nationwide received notices of default, notices of trustee sale or notices of private lender or government foreclosures in the first quarter.

Broad suggested that lenders offer lower mortgage rates in places with the highest number of abandoned or vacant properties per total of area housing units or in neighborhoods battered by specified foreclosure rates or rates of vacant housing units.

Broad reiterated that unless vacant and abandoned houses are occupied, they create breeding grounds for further deterioration.

The interest rate for a fixed-rate 30 year home loan decreased from 4.82 percent to 4.8 percent in the third week of April, according to mortgage lender Freddie Mac.

Meanwhile, Broad said there will be more acquisitions and mergers in the home construction industry after Michigan builder Pulte Homes agreed this month to take over Texas-based Centex Corp. The Pulte-Centex merger is expected to create the nation’s largest home building company.

Broad said the times indicate the need to consolidate assets. The losses suffered by home builders as continued private lender and government foreclosures push down home prices and limit sales of new homes compel home builders to find ways to mitigate losses and maximize assets.

In addition, President Obama’s government foreclosures program have been expanded to cover second mortgages and to require lenders to explore options under the Hope for Homeowners initiative which was launched under the Bush administration in 2008.

Under Obama’s enhanced government foreclosures program, the rate on second mortgage loans will be cut down to 1 percent for loans where monthly payments include principal and interest payments and to 2 percent for interest-only mortgage loans.

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