How Many Go All The Way?
The
Atlanta Journal Constitution reports from Georgia. "The jump in the number of people whose home mortgages are foreclosed on and its potential impact on struggling families and local economies is news. The headlines are especially big in Georgia, which now has the nation's third-highest rate of foreclosure."
"But of the thousands of Georgians each month who land in the line to the courthouse steps, many manage to slip out of the queue. The question that is not often asked or answered is: How many go all the way?"
"There's no central repository for the data that would answer that question definitively, but estimates hover at less than half."
"The number matters. Foreclosures take homeowners' biggest investments and taint their credit ratings; they cost lenders time and money. If foreclosures are truly epidemic, they also threaten the real estate market and the economy. They undermine a community's home values and eat away at buying power that underpins the economy."
"More than 7,000 properties were listed in Georgia for foreclosure in November, up 60 percent from a year earlier, according to RealtyTrac. Some say the increase in foreclosures is far less grievous, Equity Depot of Alpharetta says it is closer to a 15 percent increase, but everyone agrees that foreclosures are rising."
"But those numbers represent homeowners who enter foreclosure, not those who lose their homes. 'To my knowledge, there is not any national or even state system of tracking the filings that actually go to sale,' said Marty Stone, vice president of foreclosure operations at Atlanta-based McCalla Raymer, which represents national lenders. 'But I think that it can be no more than 40 to 50 percent.'"
"McCalla Raymer's number carries a lot of weight: The firm handles more than half the foreclosures in metro Atlanta, Stone said."
"Some lawyers say the percentage of properties actually sold is lower, a few say it is closer to 20 percent or 25 percent. None put the number as high as one-half, although it might occasionally spike that high."
"Philip A. Hasty of Atlanta law firm Shapiro and Swertfeger said the percentage of listed properties handled by his firm that were sold has swung from a low of 30 percent in November 2005 to a high of 53 percent in June. 'I'd say it averages somewhere between one-third and 40 percent that make it all the way through to a sale,' he said."
"The rising pool of foreclosed homes costs lenders money in lost payments, in lawyers' fees and in lower sales prices in what is increasingly a buyers' market. So they are more willing to dicker with struggling homeowners."
"That means the percentage of houses that go all the way through to a foreclosure sale is probably decreasing, even though the total number is going up, Hasty said."
"If 40 percent of those filings ended in sales, that would mean 2,822 families lost their homes."
"On the road to foreclosure, there are several possible exits. Among them are filing for bankruptcy, which stops the process and protects homeownership; coming up with the overdue mortgage payments, or paying off the mortgage. Another route is working out a payment plan meant to gradually get the borrower back in the lender's good graces."
"With foreclosures mounting, lenders are increasingly willing to make such deals, said Hasty."
"Among reasons for the growing number of foreclosures is that home mortgages have become a lot easier to get. Not only are terms more generous, as with interest-only and adjustable-rate loans, for example, but qualifications for buyers are less stringent. Lenders often have not required savings or down payments. They have made a record number of 'subprime' loans to borrowers with spotty credit histories."
"'Subprime lenders are selling the most dangerous loans to the most vulnerable borrowers,' said Michael Calhoun, president of the Center for Responsible Lending, a Durham, N.C.-based nonprofit research and advocacy group. 'About 80 percent of all subprime loans are adjustable-rate mortgages.'"
"Borrowers in those circumstances tend to be less able to negotiate deals or find ways to get up to date on delinquent payments, so they account for many of the properties that do go all the way through the process. A study by the Center for Responsible Lending shows that the rate of foreclosures for subprime loans is roughly 10 times as high as for the rest of the market, Calhoun said."
"Based on the center's survey, a prediction is possible for the subprime loans of the past two years, he said. 'One out of three will ultimately lose their home.'"
"There Is A Tsunami Coming": Colorado
The
Denver Post reports from Colorado. "A crew of nine movers swarms over a Lakewood townhome, quickly clearing out three floors and piling the contents in the alley. Luke Beuthel, a field inspector with a property management company called Mercury Alliance, opens drawers in the kitchen one by one, snapping digital photos to show they are empty."
"Nearby, locksmith Bill Grasmick hurries to replace a deadbolt on the front door. In under an hour, the house is emptied and physical control gained by Wells Fargo, holder of the delinquent mortgage. 'There is no packing involved,' says mover Art Fields. 'This is one-way: easy and quick.'"
"For most of 2006, Colorado has had the highest foreclosure rate in the country, a grim tally of mortgage defaults behind which lie thousands of stories of personal heartache. But money can be made even from misery, and this year, profits from foreclosures have soared."
"There are lawyers who initiate foreclosures, property managers who oversee troubled homes, service providers who maintain them and listing agents and auctioneers who sell them. There are also investors who buy and flip the foreclosed properties and Realtors who specialize in 'short sales,' or selling a home before it is lost in foreclosure."
"This Lakewood eviction generates about $1,000 for Field's moving crew and the locksmith. The property management firm won't get paid until it sells the house, but then it will reap 2.2 percent of the home's resale price, roughly $3,600. Others will take bites of the foreclosure profits as well. About 1 percent, or $1,650, will go to Premiere Asset Services, Wells Fargo's property management arm. The Realtor who provides a buyer will get about 2.8 percent, or $4,620."
"Tom Di Mercurio, owner of Denver- based Mercury Alliance, makes no apologies for his line of work. 'There is an entire cottage industry around the foreclosure business,' said Di Mercurio, who has managed thousands of lender-owned properties in a 35-year career. Mercury Alliance's business is up 150 percent this year, he said."
"The work is time-consuming and the margins slimmer than conventional real estate sales. Watching over empty homes for months isn't easy work."
"Di Mercurio said he has seen it all: Homes abandoned with unfinished meals on the table; a home swept clean and the key and an apology note placed neatly on the table; most frequently, homes left in utter disrepair."
"Some angry former owners have stripped properties of appliances, cabinets, even light fixtures. More vindictive owners have been known to plug drains with concrete and turn on the water. Vandals and vagrants will target abandoned homes."
"But with more than 18,000 foreclosures expected this year - a record for the metro area, servicing foreclosures is where the action is in real estate these days. The sooner foreclosed homes are resold and occupied by people who will care for them, the better for nearby home owners and for the metro area's ailing real estate market, Di Mercurio said."
"Metro Denver has the largest concentration of third-party REO property managers of any city, a legacy of a real estate downturn, and a wave of foreclosures, that accompanied the oil bust of the late 1980s. The current foreclosure epidemic traces more to overbuilding and aggressive lending than to fundamental economic problems, but the industry spawned by the earlier deluge of defaults is coming on strong."
"'We are hiring like crazy. We expect to get busier in 2007,' said David McCarthy, president and chief executive of Integrated Asset Services, one of the country's largest independent REO property managers. The firm of 116 workers has hired 42 people this year and plans to add another 30 in the first quarter of 2007. The number of foreclosed homes it has sold has jumped from about 3,000 last year to 4,000 this year."
"Head counts are up about 25 percent at Fidelity National Asset Management Solutions, another big REO property management firm, president Chad Neel said. Fidelity Solutions sells about 1,000 foreclosed properties a month, a pace about 40 percent ahead of last year, he said."
"'I am turning away business,' Neel said. 'Every client we have says there is a tsunami coming.'"
"When REO property managers can't sell a home, they call on auctioneers like Dallas-based Hudson & Marshall. Co-owner David Webb was in Denver just before Thanksgiving, auctioning 90 homes in a ballroom sale. Webb plans to be back in late February with another batch of homes."
"As more foreclosures flood the market and the inventory of unsold homes rises, auctions will increasingly become an important way to match buyers and sellers. 'They are telling us Colorado is very heavily hit and we will be active here for the next year and a half,' Webb said."
Filings Up Almost 700% In Birmingham
The
Birmingham News reports from Alabama. "In a cramped hotel ballroom on an early December night, an auction company employee revved up bidders considering offers on 10 homes lost by owners who couldn't keep up payments. Auctions like the one staged by Texas-based Hudson & Marshall are becoming more common in Birmingham, where foreclosure filings spiked nearly 700 percent in September, and across Alabama, which saw an expansion in foreclosure activity that outpaced every other state in November."
"Some industry experts say mortgage defaults in Alabama could continue to climb as strapped homeowners wrestle with climbing interest rates and bankruptcy laws offer fewer protections."
"'I don't think the foreclosure problem has even come to a head yet,' Birmingham bankruptcy lawyer Matthew Dunaway said. 'It's still building. Over the next five years we'll see how bad those mortgage products are and the bad decisions that people made.'"
"Foreclosure activity in Alabama, from the first notice of default to sale at auction, increased nearly 466 percent in November compared to the same month a year ago. That was the fastest rate of growth in the nation, according to RealtyTrac. The 690 homes that were in some stage of foreclosure in November represented a 33 percent increase from October."
"The first wave of three-year and five-year adjustable-rate mortgages was due to reset in September, RealtyTracs Rick Sharga said. 'Not coincidentally, that's when we saw a large spike in foreclosures.'"
"In September, 354 homes in Jefferson County were in some stage of foreclosure, up 669 percent from September 2005, when only 46 homes were in some stage of default, according to RealtyTrac. In Shelby County 18 homes were in foreclosure in September, up from three a year earlier."
"In a recent survey by the Association of Community Organizations for Reform Now, Birmingham tied with Detroit for ninth place on a list of metro areas at risk for what the group called 'rate adjustment shock' for consumers with adjustable-rate mortgages due to be reset at higher interest rates this year."
"Some Birmingham lawyers say a 2005 bankruptcy law, which makes it harder for homeowners to delay foreclosure, also is fueling the rise."
"Dunaway said many of his clients have been in their homes for only about four or five years. They put little or no money down or they drained their equity with a second mortgage. The homes being lost aren't all in economically struggling areas, either, he said. 'Many of my Chapter 13 foreclosure cases are in Greystone and in Hoover, homes valued at $500,000 or even $1 million,' he said."
"The real estate boom that came to a halt this year plays a role in the number of mortgages in default. Home values were rising and home prices were climbing. Once a home went on the market, people expected to receive multiple offers."
"Many homeowners were so convinced the market would stay strong that they took out second mortgages to pay off credit cards or take vacations. Then suddenly they found themselves saddled, in a slow market, with a high mortgage payment on a home that isn't worth as much as it once was. 'At some point the music stops and some people don't have chairs,' Dunaway said."
"The selection of homes at auctions like the one held earlier this month in Hoover continues to broaden. Vestavia Hills resident Mitchell Baldwin, who owns 38 rental properties, is a regular at the auctions and says more higher-end homes are ending up on the auction block and more people are showing up to bid on them."
"Baldwin, who was at the auction at the Hoover hotel, watched quietly as bidders offered nearly full value for the homes on the block. A two-bedroom, one-bath house on 42nd Street in Birmingham with an asking price of $55,900 sold for $40,000. A home on Northwest Third Street with an asking price of $89,000 sold for $79,500. 'You've got to do your due diligence,' he said."
"Baldwin said he believes the buyers weren't experienced bidders and got caught up in the excitement of an auction, with the company's hawkers hounding them to make a bid amid the auctioneer's quickfire cadence. Baldwin made a few bids, but he left without a new property."
"'You have to stick to your guns on how much you're going to pay for a house,' he said. 'Sometimes the best deals are the ones you don't get.'"
Record Defaults In Victoria, Australia
The
Herald Sun reports from Australia. "More than 50 Victorian homeowners a week are being dragged before the courts for falling behind on their loan repayments. The figure has hit an all-time high in the five months to November, with experts warning it will get worse with crippling post-Christmas debt."
"The number of Victorians being pushed out of their homes because they can't pay mortgages has tripled since 2000-2001, according to court statistics. Unscrupulous lenders were hitting people in financial difficulty who used equity in their homes to refinance, the Consumer Action Law Centre's Carolyn Bond said."
"Some did not fully consider a client's ability to repay the loan and burdened them with high fees. Some people defaulted within months, she said. With personal debt running at $30 billion nationally, a major crisis could come after the Christmas credit card bills arrived, she said."
"Victorian Supreme Court figures released to the Sunday Herald Sun showed a steady increase in lenders taking court action against clients. In 2000-2001 lenders lodged 897 writs to oust home buyers, which was 2.5 applications per day. That jumped to 7.3 per day, or a total of 2689, in the 2005-2006 financial year. In the five months to November, 1112 writs were lodged, increasing the daily rate to 7.5."
"The head of the Australian Bankers' Association, David Bell, blamed non-bank lenders, which launched 70 per cent of the default legal action while lending only to 5 per cent of the market."
"Victorian Council of Social Service chief executive Cath Smith said housing affordability had doubled to six times the average annual wage in the past 10 years. Foreclosures particularly affected the outer suburbs, where the past three interest rate hikes and petrol prices were driving people to the edge, she said."
Mortgage Risk Up On Honolulu
The
Star Bulletin reports from Hawaii. "While mortgage risk is in decline nationwide, Honolulu is bucking the trend with a 29 percent increase in risk in October from a year earlier, according to a report released yesterday by a consumer Web site. Mortgage risk measures the likelihood that homeowners in a given area will not make mortgage payments on time."
"Honolulu, which ranked the 100th lowest in mortgage risk out of 379 metropolitan statistical areas surveyed, was among the 172 regions where the index rose, said Michael T. Ela. Honolulu's risk index was 1.56 in October as opposed to 1.21 the previous year, indicating that volatility has increased, Ela said."
"'The market risk in Honolulu is trending up. It's not a huge risk at this time, but it's notable,' Ela said. 'Consumers and investors may want to keep their eye on this market because the upward shift is an indicator that the market is turning.'"
"The report assessed the risk for thousands of Honolulu properties and averaged them to get a blended rate for the region, Ela said."
"The company looks at several components such as the volume of sales transactions, the number of foreclosures, flipping activity, appreciation and depreciation rates, property histories and other factors such as proximity to freeways and landfills or ocean views and golf courses, he said."
"Honolulu-based real estate analyst and appraiser Stephany Sofos said statistics aside, she already has seen anecdotal evidence that Oahu is on a downward cycle. 'If you read between the lines of that report, it means that we are about to start a downward cycle,' Sofos said. 'There are more pre-foreclosures going into effect and mortgage brokers are starting to see a lot more people trying to refinance out of their adjustable-rate mortgages.'"
"While Honolulu's home values are up year over year, in many local regions prices have dropped, Sofos said. 'I'm seen prices come down anywhere from 10 to 30 percent in Waianae,' she said. 'When primary and ancillary markets start dropping, that is a sign that most others will soon follow suit.'"
"There are many signs that Oahu's market is in transition, said John Riggins, owner of John Riggins Real Estate. 'We are in the process of seeing a market correction,' Riggins said. 'It's normal. After every run-up since World War II, we have seen market adjustments of approximately 10 to 15 percent off the high sales price.'"
"Greater volatility in the marketplace also impacts financial markets because it causes investors and lenders to become more cautious, Ela said. 'Several factors are at play here, one of which is that lenders are more cautious now than they were a year ago,' Ela said. 'In areas where risk is rising, it could become more difficult to get a loan or at least one with terms that are as attractive as they were in the past.'"
"In Honolulu, more buyers are being asked to prequalify for loans, Sofos said. Buyers also are likely to see more lenders asking for higher interest rates and/or larger down payments, Ela said."
"'Buyers should be more alert to local market risk conditions before buying a home. It will save them money down the line,' Ela said. On the other hand, sellers have to make sure that they list properties 'in range' of what a changing market will bear, he said."
"'Properties that are priced too high in a volatile market will sit for longer periods,' Ela said."
"Payment Shock" In New Hampshire
The
Concord Monitor reports from New Hampshire. "The number of people in Merrimack County losing their homes to foreclosure has gone up nearly 60 percent in the past year. According to credit and mortgage counselors, homeowners who signed up in recent years for adjustable-rate and interest-only mortgages, hoping to refinance when their rates increased, are having a hard time making their payments."
"The sluggish real estate market had made it harder for homeowners to draw equity from their property or sell to recover debt. 'Some people are apparently experiencing, for lack of a better word, payment shock,' said Dean Christon, executive director of the New Hampshire Housing Finance Authority."
"Last year, there were 56 foreclosures in Merrimack County. So far this year, there have been 89, an increase of 58.9 percent. In Concord, that number went from six foreclosures in 2005 to 16 this year."
"Forty of this year's foreclosures were on homes financed with adjustable rate mortgages that started in 2002 or later, Register of Deeds Kathi Guay said. 'Those people that got a great interest rate to begin with, now that the interest rates have changed, have run into a problem,' she said."
"Kerry York, executive director of Consumer Credit Counseling Service of New Hampshire and Vermont, said the increase in foreclosures can be attributed to many factors, not just the type of mortgage. Many of the people serviced by his agency have reached their limit on several credit cards and are facing high interest rates on those, York said. The cost of gas and home heating fuel is going up. And then their mortgage rate adjusts and their payments get bigger."
"'What was a problem six or eight months ago is now a huge problem,' he said. 'Income doesn't go up - not at that rate.'"
"James Kenney runs a website aimed at people who want to invest in foreclosed properties. He said the market for them is good. 'Since there have been so many foreclosures lately, the banks aren't really in the business of real estate, so they want to get rid of the properties quickly,' he said."
"According to his records, 418 foreclosures were posted in October, an increase of 214 percent over October 2005."
"As Is" Not What It Was
A
foreclosure report from the Virginia Pilot. "When Branson Barry saw the gated house off the Chesapeake Bay, he figured he could splash on a new coat of paint, lay new carpets and resell it for a profit. So he bought the foreclosed house in July for $592,000, as is. But the house is not what it was."
"After the previous owner moved out last week, Barry found the house had been gutted of everything, including the bathroom sink. Now Barry has filed a police report. He alleges that the former owner, Chauncey Hannibal caused $40,000 to $50,000 in damage and is waiting for police to decide whether to file charges."
"A police detective will determine what property belonged to whom before warrants are issued, said police spokeswoman Margie Long."
"The three-bedroom house at the corner of Shore Drive and Beech Street was not a fixer-upper. It was built for Hannibal in 1996. Then Hannibal ran into financial trouble, filed for bankruptcy twice in three years, and could not pay up. Two liens on the house had to be cleared before Barry could take possession. Once that was done, he had to evict Hannibal. In November, a judge ordered Hannibal out in 10 days, four months after the house was sold."
"Barry thinks that's when Hannibal ripped out the marble floor and the granite counter tops. 'He literally took everything but the kitchen sink,' Barry said."
"The security keypad was taken. Light fixtures that hid security cameras at the gate were missing. And so was the gate. 'The doorbell should come with the house,' Barry said."
"Inside, air vent filters, in-wall speakers, an intercom system and gas wood for the downstairs fireplace were gone. The spot where a ceiling fan used to be looked as if it had been ripped down in haste, wires and all. Upstairs, the floor of the master bathroom resembled a quarry pit, crumbled, cracked and bare. Scraped chunks of marble left exposed white tile around the tub."
"Hannibal could not be reached for comment. His phone number, listed in a 2006 bankruptcy petition, has been changed."
Leads Change In Race To The Bottom
From a
press release. "RealtyTrac today released its November 2006 U.S. Foreclosure Market Report, which shows that 120,334 properties nationwide entered some stage of foreclosure during the month, an increase of 4 percent from the previous month and an increase of 68 percent from November 2005. The report also shows a national foreclosure rate of one new foreclosure filing for every 961 U.S. households, the highest monthly foreclosure rate reported so far this year."
"'Defaults, auctions and bank repossessions all trended higher in November, bringing the year-to-date foreclosure total to almost 1.2 million, up 43 percent from the same 11-month period of 2005,' said James Saccacio. 'With home price appreciation slowing, and even declining in some areas of the country, homebuyers who stretched themselves financially to purchase a property don't have much equity to work with if they experience even a small bump in their mortgage rate or disruption in their income.'"
"After eight consecutive months with Colorado posting the nation's highest foreclosure rate, Nevada's foreclosure rate jumped to the top spot thanks to a 12 percent increase in foreclosure activity from the previous month. Nevada reported 2,506 properties entering some stage of foreclosure during the month, nearly triple the number reported in November 2005."
"For the fourth month in a row, Greeley, Colo., posted the highest foreclosure rate among the nation's 200-plus largest metropolitan areas. The Greeley metro area (Weld County) documented 428 properties entering some stage of foreclosure, an increase of 13 percent from the previous month and a foreclosure rate of one new foreclosure filing for every 155 households -- more than six times the national average."
"With one new foreclosure filing for every 439 households, Georgia documented the nation's third highest state foreclosure rate for the second month in a row. The state reported 7,056 properties entering some stage of foreclosure, a 2 percent increase from the previous month and a nearly 60 percent increase from November 2005."
"Other states with foreclosure rates among the nation's 10 highest were Ohio, Texas, Michigan, California, New Jersey, Indiana and Tennessee."
"California reports highest number of foreclosures for third straight month. More than 19,000 California properties entered some stage of foreclosure during November, the most of any state for the third straight month and an increase of more than 19 percent from the previous month. California foreclosure activity has more than tripled from a year ago."
"With one new foreclosure filing for every 250 households, Riverside/San Bernardino, Calif., documented the nation's third highest MSA foreclosure rate in November. The two-county metro area reported 4,747 properties entering some stage of foreclosure during the month, an increase of more than 57 percent from the previous month and 3.8 times the national average."
"Texas foreclosure activity jumped more than 40 percent in November after posting a decline in October. The increase pushed the state's foreclosure total to 13,664, the second highest total of any state."
"Florida reported the third highest foreclosure total in November. The state reported 9,362 properties entering some stage of foreclosure, up more than 5 percent from November 2005."
"Massive Increase In Filings": Massachusetts
"A
provider of Massachusetts foreclosure data released its November 2006 report today, revealing that foreclosure filings in Massachusetts are shattering previous records. The report shows that 2,188 foreclosures were initiated statewide during the month of October 2006, 111% more than October 2005 and 219% above 2004 levels."
"'2006 has been a very unhappy year for thousands of Massachusetts homeowners, we are seeing a massive increase in foreclosure filings,' said Jeremy Shapiro, president of ForeclosuresMass.com. 'By October 31st of 2006 every county in Massachusetts already had more foreclosure filings than the entire 2005 calendar year.'"
"October 2006 saw over 70 foreclosure filings per day (including weekends and holidays) and nearly 110 every business day. 11,493 foreclosures were filed for the entire year in 2005. So, with 2 months to go in the year we have already eclipsed 2005 totals by 3,640."
Ohio Defaults Head To Federal Court
The
Plain Dealer reports from Ohio. "Lawyers who do not want to wait for their foreclosure cases to wend through a swamped Cuyahoga County Common Pleas Court have jumped to an express lane in federal court. Seizing on a long-established but previously little-used option, lawyers have filed more than 350 foreclosures this year in U.S. District Court, up from eight in 2003."
"Now, all the lawyers have to do is direct prospective buyers of confiscated homes to sales that have attracted no interest."
"For a foreclosure to get into federal court, the debt must total at least $75,000 and the parties must be from at least two different states. In the modern mortgage market, out-of-state lenders are common. Most of the foreclosures are uncontested and sail through in three to six months, which is important to lawyers who are graded by lenders according to speed."
"'It is an attempt to find creative solutions on our part,' lawyer Kevin Williams said. 'We're just trying to do a good job for clients.'"
"The federal court can move faster because its foreclosure volume is much lighter than the county's backlog, which totaled 11,398 as of Oct. 6, according to the CSU study. The federal court also requires that all cases, motions and other documents be filed electronically, eliminating paper work. The federal court charges $350 to file a foreclosure; the county court fee is $475."
"While some foreclosure lawyers have found their way to federal court, buyers looking for bargain-priced homes have yet to follow. County foreclosure sales fill the Justice Center auditorium on Monday mornings. But auctions held at 12:30 p.m. the same day at the nearby federal courthouse draw only attorneys who reclaim property for mortgage holders."
"At the federal auction last week, eight properties sold in 15 minutes. In each case, the only bidder was Cleveland lawyer Cliff Babcock, standing in for Manley Deas Kochalski. He faced no competition for property in Cleveland, Bedford, Maple Heights, Oakwood and Warrensville Heights."
"Lenders' lawyers bid about the minimum, two-thirds of appraised value, but no money changes hands because the companies would be paying themselves. The lawyers would love to be outbid. 'It's an opportunity,' said Mark Dottore, one of 18 'master commissioners' who auction land for the court after having it appraised.'"
As Loans Reset, Georgia Defaults Double
The
Atlanta Journal Constitution reports from Florida. "Hundreds of Georgians lost their homes Tuesday. The houses, taken from debt-laden homeowners, were sold to bidders on courthouse steps statewide. Foreclosures in Georgia are up a stunning 99 percent in the past year."
"The state now has the nation's third-highest rate of foreclosures: One in every 449 households. In October, that meant 6,895 properties were in the foreclosure process."
"The taking of homes has always been brisk here because state laws are written for speed. Georgia is one of three states in which lenders can foreclose on houses in as few as 37 days. Foreclosures ramped up in recent months as once-low introductory interest rates on adjustable mortgages edged up, making monthly payments unaffordable for some homeowners."
"'We really haven't had any letup," said Ralph Goldberg, a Decatur attorney whose clients include many distressed homeowners. 'We know, toward the end of the month, people are going to be coming in. The Friday and Monday before [monthly] Foreclosure Day are always busy.'"
"The danger for the overall economy is that a rising pool of foreclosures will overflow into other segments of an already troubled real estate market. Most critically, foreclosures add to the number of homes for sale. They offer bargains to buyers, but dampen the prices other sellers might get."
"The surge of foreclosures is, in some ways, the backwash of the five-year housing wave that began washing out last year. Homeownership, construction and sales reached unprecedented levels, partly because lenders tried so hard to get people into houses. By standards of the past, many first-time purchasers were marginally qualified, with modest incomes and little in savings."
"But with creative mortgage arrangements, the buyers often were able at least to start off paying interest rates dramatically below market levels. They often avoided a down payment entirely. Atlanta has been among the nation's leaders in the percentage of borrowers taking adjustable rate or interest-only mortgages."
"'They get qualified at the teaser rate,' said attorney William J. Brennan Jr., director of the Home Defense Program Atlanta Legal Aid Society. 'Of course, they can't afford to pay when the rate goes up.'"
"Most foreclosures happen on mortgages held less than five years, according to a study last year by Harvard University's Joint Center for Housing Studies."
"Goldberg said an increase in mortgage payments can be crippling. 'There are a lot of people who seem to have mortgages that are astronomically high, and they are just being eaten up,' he said. 'You look at the money they have, and you look at the mortgage, and you think, 'How did this happen?'"
"Lenders have a powerful incentive to find and qualify borrowers, whatever their income or past. The risks are eliminated for lenders that sell the loans to companies that package thousands of loans together. Those firms figure any defaults will be offset by the vast majority of loans that are profitable."
"Buyers are willing co-conspirators. Buyers often lose their homes because they have no cushion to absorb unexpected expenses. 'We see people with the same issues over and over,' Brennan said. 'There's a death in the family, or someone is losing a job, or someone gets sick.'"
"That can mean trouble even for white-collar professionals. Phillip Newman is a mechanical designer. He bought a home in Lithonia two years ago, obtaining a mortgage that required a monthly payment of $1,260. Four months later, his company was purchased and his job eliminated."
"He was out of work for five months, then found a one-year contract job. When that ended, he scrambled for three months and in July found his current position, where he makes about 25 percent less than he had as a consultant. He fell way behind in his mortgage payments and was scheduled for foreclosure in October."
"He kept talking to the mortgage company and arranged to pay a little more each month to catch up, something that the new job makes possible. 'Hope the car doesn't break down,' he said."
"One sign of how widespread foreclosures have become is the growing willingness of lenders to negotiate with delinquent homeowners, said Herb Heitman, an Atlanta bankruptcy attorney. 'Ten years ago, they never made deals.'"
"In January, the Consumer Credit Counseling Service of Greater Atlanta assisted 450 people with financial troubles, nearly all of them dealing with the threat of foreclosure. In October, the agency counseled more than 1,000, said Susan Hunt, director of the housing program."
"'I have doubled my staff, and we still haven't met the need,' she said."
"Millions of home buyers are just coping with their first big jump in mortgage rates. 'About 40 percent of the people we talk to have a mortgage with an adjustable rate,' Hunt said. 'And that is true across the board. We have people who live in Alpharetta in great big mansions. Their adjustable rate escalates, too.'"
"By Foreclosure Day, it's too late for Consumer Credit to help, Hunt said. 'Someone will call and say, 'I am on the courthouse steps, and my house is next. What can I do?,' she said. 'And we can't do anything then.'"
Hot Markets Need Only Look To Denver
The
Rocky Mountain News reports from Colorado. "It's official. A record number of real estate foreclosures have been filed in the Denver area this year. In the first 11 months of 2006, public trustees in the seven-county metro area opened 17,782 foreclosures. That's 3.85 percent higher than the record set in 1988, during the oil industry bust."
"Experts say other parts of the country that recently had hot real estate markets need only look to Denver to see what's in store for them."
"A large percentage of filings are concentrated in the 'foreclosure belts' of Adams and Weld counties, north Aurora, and northeastern Denver neighborhoods such as Montbello and Green Valley Ranch."
"Today's foreclosure crisis is increasingly taking its toll on homeowners, especially with scams and fraud on the rise. 'It's like the wild, wild West out there,' said Zach Urban, a housing counseling manager for (a) nonprofit."
"Mark A. Murphy is trying to sell his house in Aurora before the lender takes it back. He has fallen four months behind on his mortgage after losing his job. 'After being out of work for a few months, it came down to paying my bills or paying my mortgage,' Murphy said."
"When he bought his home two years ago, other comparable homes in his neighborhood were selling for $235,000, he said, about $50,000 more than he paid. The four-bedroom, three-bath home, with 1,944 square feet of finished space, is on the market for $205,000."
"Ironically, Murphy bought his home out of foreclosure. 'I believe this property has been in foreclosure four times,' Murphy said."
"Urban said he is seeing an increasing number of mortgage-fraud schemes. In some cases, people are offered more than the house is worth in exchange for a 'gift' donation. The phony buyer collects the gift and never makes a mortgage payment."
"In other cases, homeowners who think they are refinancing their mortgage really are signing quitclaim deeds, so the person becomes a renter in their own home."
"The biggest culprits in the rising mortgage tide are a flat housing market and overbuilding in certain areas, such as north Interstate 25, said Boulder lender Lou Barnes. 'Our housing market went flat in early 2001, and since then, foreclosures have been rising in the foreclosure belts about 50 percent a year,' Barnes said."
"Despite what some think, foreclosures aren't being driven 100 percent by financing, he said. He noted that the Veterans Administration has been providing zero-down loans for decades, and Federal Housing Administration-insured loans only require a 3 percent down payment."
"But it's never been easier to qualify for a loan, so many people who would have been unable to buy a home previously can now buy one, he said. Despite rising foreclosures, Barnes said there has been no move to tighten borrowing requirements because the federal government wants to encourage homeownership."
"Previously hot markets such as the West Coast, Phoenix and Las Vegas now are softening. Said Barnes: 'If the national lag in these 'bubble zones' is anything like the lag we saw after the technology crash,' he predicts other cities will see an increase in the foreclosure rate similar to Denver's."
"'I think (the metro area's record foreclosures) are very significant for the rest of the country,' he said."
Defaults "Poison The Market" In Memphis
The
Commercial Appeal reports from Tennessee. "With interest rates rising, some homeowners locally and nationally are finding it harder to make the mortgage, and their American dreams are being foreclosed and sold to the highest bidder."
"A well-manicured family cottage in Whitehaven and an Atoka mobile home sitting on an acre of land are two of the 25 foreclosed homes that will be auctioned off by Hudson & Marshall auction company Dec. 13."
"The Memphis sale is part of an auction-circuit of more than 200 foreclosed properties in Tennessee, Georgia and Alabama. Armed with personal checks and prepared to pay at least $2,500, buyers can snatch up homes for as little as $10,000. Buyers like the auctions because many of the homes sell for less than market value and Texas-based Hudson & Marshall guarantees there are no back taxes or liens."
"Lenders resort to real estate auctions to get property off of their books quickly. With the number of default mortgages more than doubling in some parts of the country, foreclosure auctions are gaining in popularity, said Hudson & Marshall principal Dave Webb."
"An online foreclosure database ranked the Memphis metropolitan area 10th in the nation in foreclosures. In October 2005, Shelby County recorded 618 properties in some stage of foreclosure. One year later, the number of foreclosures for the same five-week period nearly tripled to 1,717. Similarly, Tipton County's number of foreclosures doubled from 17 to 40 year-over-year."
"With one foreclosure for every 144 households, the Memphis area foreclosure rate is 2.5 times higher than the national average. That statistic doesn't surprise Corky Neale who works with RISE and the Memphis Debt Collaborative. 'We've traditionally had a very high foreclosure rate,' said Neale who cited divorce, job loss and illness as traditional causes."
"'But now on top of all that we've got this adjustable rate mortgages where the rates have been going up and it looks like we haven't seen the end of rate increases and so we can anticipate that we're going to have more foreclosures,' he said."
"'It cost the public tax collections, it cost the lenders. Everybody loses with a foreclosure,' he said. 'It's almost like you get a critical mass of foreclosures then you poison the market then nobody can sell.'"
REO Market Heating Up
The
Wall Street Journal has this on foreclosures. "As a weak housing market nudges the foreclosure rate higher, next year is looking promising for investors in distressed real estate. So far, the U.S. housing slump hasn't produced a bonanza for such investors, but lenders stuck with foreclosed property are becoming more inclined to slash prices or sell properties through auctions, industry experts say."
"'We're all going to have to be more creative in the next 12 to 24 months' in selling foreclosed homes, says Chad Neel. Mr. Neel's company helps lenders manage and sell foreclosed homes."
"Williams & Williams Inc., a Tulsa-based auctioneer, says its sales of foreclosed homes will nearly double this year to about 5,060. CEO Dean Williams expects another near doubling of sales in 2007."
"Dallas-based Hudson & Marshall Inc. expects its auction sales of foreclosed properties to total about 4,800 this year, up 23% from 2005. David Webb, co-owner of the auction company, believes sales will rise at least 20% in 2007."
"The auction firms say their busiest auction markets recently have included Michigan, Ohio, Indiana, Pennsylvania, Texas and Colorado. 'Word on the street is that California, Florida and Arizona will also be very active in the next 12 months,' Mr. Webb says."
"In the first half of 2006, REO properties accounted for 3.1% of all U.S. home sales, up from 2.4% two years earlier, according to a study. The study found that those homes sold at a median discount of 14% to their estimated value in the first half, compared with 12.5% two years before. The discounts reflect the gap between the actual sale price for the homes and the value estimated by a computer model, which takes into account sales of comparable homes nearby and price trends."
"It has taken a while for foreclosures to mount. The housing boom of recent years reduced foreclosure rates because most people who fell behind on their loans could refinance or quickly sell their homes for at least enough to pay off the loans."
