Nearly 4,800 subprime loans made to Bay Area borrowers in 2006 are likely to fall into foreclosure in the next couple of years, costing homeowners, cities and lenders as much as $1.5 billion, according to an advocacy group for lower-income families.

Such scary statistics are prompting more cities to call upon lenders to modify problem loans and curtail what are termed predatory practices.

At the same news conference where local officials with the Association of Community Organizations for Reform Now (ACORN) released its foreclosure study Tuesday, San Francisco Supervisor Tom Ammiano introduced a nonbinding resolution urging the country’s 25 largest subprime lenders and loan servicers to agree to a three-month suspension on foreclosures of owner-occupied homes in San Francisco.

The resolution also asks federal regulators to eliminate prepayment penalties on subprime mortgages and to prohibit lenders from making mortgages that become unaffordable after interest rate resets. Subprime loans are typically made to those with damaged credit and usually carry higher interest rates and other fees.

The resolution is expected to go before the Board of Supervisors within a few weeks.

“Education is not enough - we need to do something about the practices as well,” said San Francisco Assessor Phil Ting, whose office has seen a threefold rise in foreclosure sales since last year.

ACORN’s study captures only a slice of the foreclosures on the horizon, because it covers only those subprime loans made last year.

San Francisco’s foreclosure rate remains well below those of other areas such as eastern Contra Costa County and parts of Oakland. But Liz Wolff, ACORN research director, pointed out that the interest rates on many subprime loans taken out in 2005 and 2006 will not reset until next year or 2009 - and almost certainly soar higher.

“We’re just at the beginning of this mess,” Wolff said.

Using lender and federal home loan data and nonprofit research on foreclosures, Wolff found 617 homes in San Francisco and San Mateo counties with high-cost loans made in 2006 that are in danger of repossession, amounting to $210 million in costs to the homeowners, lenders and investors and local government and in lower home values for neighbors.

In Santa Clara County, the group said 1,124 high-cost loans are likely to go into foreclosure, amounting to $370 million; and in Alameda and Contra Counties, 3,021 loans are at risk, amounting to about $875 million.

The figures rely in part on the assumption that foreclosed properties will remain empty, fall into disrepair and attract crime - depressing property tax revenues and requiring additional police.

Giselle Quezada, 54, hopes her home in San Francisco’s Ocean View neighborhood doesn’t become one of those.

She recently refinanced the home she has owned for 28 years in order to pay down debt and help her son and daughter buy a home together. Although the loan was sold to her as fixed, Quezada said it quickly became an adjustable rate, forcing her payments from $600 a month to $1,900 a month. Now, the telephone technician lives check to check.

Pointing to a map of ACORN’s research showing the hardest hit areas in San Francisco - Ocean View, Bayview, Visitacion Valley, Excelsior - Quezada said she believed lenders and mortgage brokers targeted the area’s most vulnerable borrowers.

“Something needs to be done,” she said. “These are the people of the working class who want the chance, the opportunity… for the American dream.”

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/24/BUSHSUPF7.DTL&hw=real+estate&sn=007&sc=364