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Foreclosures are increasing in the Fredericksburg area, but the rate of increase is below the national average. Date published: 6/29/2006 By CATHY JETT By CATHY JETT Worried Fredericksburg-area homeowners may start calling Ken Scruggs if the Federal Reserve raises rates today. The manager of Chancellor Mortgage Funding LLC in Fredericksburg said people with adjustable-rate mortgages, or ARMs, are getting anxious to lock in a fixed-interest rate. "We're seeing people coming in now out of fear," he said. "They'd rather refinance now than take a chance that [interest rates] will reach 9 [percent] or 10 percent in a few years." An increase of just a few percentage points can make a huge difference in mortgage payments. A monthly payment of $1,500 on a $500,000 ARM, for example, doubles to $3,000 when interest rates climb from 3 to 6 percent. "There are not a lot of people who can come up with $3,000 a month," Scruggs said. Most Fredericksburg-area residents who have ARMs have been able to cope with the Federal Reserve's steady increases in interest rates because the region's vibrant economy and low unemployment rate help cushion the impact, he and other financial experts say. But some residents are struggling to hold onto their houses. The number of foreclosures in the Fredericksburg region has climbed from 19 in the first quarter of 2005 to 80 during the same time period this year, according to RealtyTrac, a leading online marketplace for foreclosure properties. In foreclosure, a homeowner who cannot make mortgage payments loses the house to the mortgage holder. The property may then be sold. Stafford and Spotsylvania counties, which include Fredericksburg figures in RealtyTrac's report, had the most foreclosures locally. The number jumped from 10 in the first quarter of 2005 to 36 in the first quarter of 2006 in Spotsylvania, and from 3 to 29 during the same time frames in Stafford. Those also are among the fastest-growing counties in Virginia and the country, which means that more people have been taking out mortgages on houses, second homes and investment properties, pointed out Mike Fratantoni, senior economist for the Mortgage Bankers Association, a trade group based in Washington. The handful of foreclosures that Ron Davis, president and CEO of Virginia Heartland Bank, has seen, for example, involved people who had bought property with the intent to sell, but got stuck with unanticipated mortgage payments when the real estate boom started to stall.
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