Monday, February 27, 2006

Shocking Rate Of Foreclosure In Michigan

Foreclosure news from Michigan. "The number of homes undergoing foreclosure in Michigan doubled from February 2004 to February 2006. Homes in Michigan are going into foreclosure at a rate that is two-and-a-half times the national rate."

"Katherine Ben-Ami closed on 11 homes a minute Wednesday. If she were the world's fastest real estate agent, that would be good news, but the sad fact is Ben-Ami is an attorney for the Wayne County Sheriff's Office, and in 35 minutes she supervised the auction of 379 foreclosed Wayne County homes. 'Wednesday's always been a big day,' she said, 'but not this big.'"

"For hundreds of people each week, Michigan's sputtering economy literally hits home. After recording more than 9,000 foreclosures in 2005, Wayne County ended January with 3,364 homes in active foreclosure, the highest of any county in the nation by more than 1,000."

"While Wayne County is ground zero, foreclosures are rising throughout Metro Detroit and Michigan. Active foreclosures in Oakland and Macomb counties and the entire state have doubled in the past two years. Lenders, stuck with the homes, lose up to $50,000 per house as they clear them out at below-market prices. That can lower property values in neighborhoods, pushing more homeowners to move out, and eventually hurt property tax collections for local governments."

"'Foreclosure depresses an area in a variety of ways,' said LaSalle Bank chief economist Carl Tannenbaum."

"Taken together, Wayne, Oakland and Macomb counties account for more than half of the state's 8,284 active foreclosures. By itself, Wayne records 40 percent of the state total. 'This is the worst I've ever seen,' said Gary Meyers, a foreclosure specialist who made his first trip to the Wayne County courthouse Wednesday. 'I've been all over the U.S., and the most I've ever seen in a day is 30.'"

"Real estate and mortgage experts say much of Wayne's problem is caused by defaults in Detroit. The city suffers from high taxes and insurance, as well as many fee-laden, high-interest sub-prime mortgages."

"Even with so many foreclosed homes, few actually sell at auction; most end up going back to the lender. In most cases, explained Ben-Ami of the Sheriff's Office, the homes are worth no more than what's due to the bank. At Wednesday's auction, three of the 379 houses brought bids, all for just $1 over the amount owed."

"'Last week, we sold one property to an outside bidder,' Ben-Ami said. 'When they find out what the people owe, they're shocked.' With the auction ended, she helped bundle the foot-high stacks of legal forms to be officially filed. She would return Thursday to watch as another 148 homes went to foreclosure."


At 2:54 PM, Blogger peterbob said...

I don't understand why the auctioned homes aren't selling. Don't the homes sell for what the highest bidder offers? I thought that the purpose is to sell the home, and if a balance is still due, go after the person who owns the mortgage.

At 3:02 PM, Blogger DCBubbleHead said...

ben (and peterbob)-

this is something that baffles me, too. what happens when a foreclosed home goes to auction from a creditor standpoint?

i'm guessing that the home gets sold to satisfy the senior claim on the property, but what happens to the junior claims. also, what is the order of seniority? federal, then state, then local, then first mortgage, 2nd mortgage, HELOC?

At 9:32 PM, Blogger MrIncomeStream said...

quick answer: Banks take it in the shorts

At 9:37 PM, Blogger MrIncomeStream said...

"I don't understand why the auctioned homes aren't selling. Don't the homes sell for what the highest bidder offers? I thought that the purpose is to sell the home, and if a balance is still due, go after the person who owns the mortgage."

No they are auctioned off for what is owed plus back payments and fee's. In california unless the new bk laws have changed it. You typically just wind up with a foreclosure and eviction on your credit report. I've just recently started hearing about this 1099 thing.

At 12:56 PM, Blogger jimbot said...

Don't know about other states, but in Florida, properties are auctioned off with a starting bid equal to loan amount plus lender fees and penalties. Bidders can obviously bid more if they want the property.

Winning bids are subject to higher priority mortgages and liens.

So, for example, if the 2nd mortgage brings the foreclosure, you buy it subject to the first.

If the first brings the foreclosure, if there is a 2nd, they will show up and bid to make sure they get their money.

Obviously when properties start having more owed on them than they are worth, the 2nds will starting letting them go (happened in FL in early 90's).


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