The Foreclosure Report

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.'"

posted by Ben Jones @ 8:41 AM