Published: June 27, 2007 11:34 pm         

Enid experts finding fault in the fraud

Bankers and real estate agents in Enid still are baffled over a news story that states Enid is ranked second in the nation in potential mortgage fraud.

A national research organization ranked Enid second among what it calls “potential breeding grounds” of mortgage fraud involving subprime loans, according to a copyrighted story in the Daily Oklahoman.

Subprime loans are offered at an interest rate higher than the prime rate to people who do not qualify for prime rate loans. They often are people turned away by traditional lenders due to low credit ratings.

Bob Emery, senior vice president of Security National Bank, said he doubts the accuracy of the research done by Mortgage Asset Research Institute, of Reston, Va., because it involves a small sampling.

Defaulting on loans is not as common in Enid as the research would indicate, he and other bankers and real estate experts said.

Sharon Helterbrand, of Bank of Oklahoma, said BOK has the largest mortgage division in the state, and the foreclosure rate in Enid is low. Helterbrand said there are some mortgage brokers in town who may do subprime loans, but subprime loans cannot be made through a bank. BOK does, though, make bond loans, which will go up to 103 percent of the value of the home, she said. The criteria is strict. Customers must have good credit, she said, and if they have collections, those accounts must be paid.

“We’re very particular. We don’t just give it to anyone. The foreclosure rate on that program is very low because of the way we underwrite them,” she said.

One problem pointed out by the Mortgage Asset Research Institute report could be the number of online loans, and that may have skewed the research, Helterbrand said. She keeps track each month of mortgage closures among banks, lending groups and online loans.

“It’s more than you think (online loans). It usually involves extra fees, and you’re not sure what you are getting into,” she said. “I tell my customers that 50 percent of your credit score is your mortgage loan. You must make it on time.”

The Oklahoman story cited figures by Mortgage Asset Research Institute, a research arm of Mortgage Bankers Association. The report was based on an index of early payment defaults, loans 90 days late within 90 days of the loan origination, meaning borrowers never made a payment.

Enid also ranked high in potential fraud with prime loans, according to the report. Local real estate agents said loans here show nothing alarming.

Garfield County Sheriff’s Office set 157 foreclosure sales in 2006, but some were recalled for various reasons, including bankruptcy or loan payment. Through Wednesday, there were 64 foreclosure sales set this year.

In 2005, there were 155 foreclosure sales, all for non-payment.

Todd Humphrey, of Humphrey Abstract, doesn’t think the figures in the report are even close.

“I don’t know how they get statistics or mortgages that are delinquent, but not in foreclosure yet. With privacy laws the way they are, I don’t know where they would find that information,” Humphrey said.

In Humphrey’s experience, the majority of foreclosures are caused by divorce. Two incomes will pay a mortgage, he said, but if a divorce occurs, then one party gets the house and doesn’t make enough to pay for it. Sixty to 70 percent of the foreclosures he works are that way, he said.

“In the time I’ve been doing this, there were two instances I can remember when property went into foreclosure right after 90 days to 120 days. In both cases, both in the last two or three years, we hadn’t issued the title insurance yet,” he said.

Humphrey said he does a huge volume of out-of-town lenders. He also estimates half of the closings he performs in his office originated out of town. Humphrey said being an out-of-town company doesn’t mean the company is not legitimate. Many military families use national mortgage companies because they move often, but he cautioned using Internet sources because not all of them are good companies.

“In the ’80s, before the oil bust, people went to local banks, and 90 percent of all loans originated in Garfield County. Then we had the oil bust. We lost the savings and loans, and now with the prevalence of the Internet, people can do anything,” he said.