January 18, 2007 issue

North Carolina Home Foreclosures at All-Time High

Story by Kathleen McFadden

The number of home foreclosures in North Carolina jumped to an all-time high in 2006 to 45,512—a 6 percent increase over 2005 and almost triple the 16,630 filings in 1998 according to recently released information by the NC Administrative Office of the Courts.

In Watauga County, the increase was more than double the state average at 12.6 percent. In 2006, 107 properties were foreclosed, compared to 95 in 2005.

But Watauga County’s foreclosure statistics haven’t followed the same upward trend as the state numbers. The 2006 total is 11.5 percent lower than the 1998 filings. Here’s the number breakdown:

• 1998: 121—higher than the 2006 number

• 1999: 48

• 2000: 43

• 2001: 85

• 2002: 85

• 2003: 107—the same as the 2006 number

• 2004: 94

• 2005: 95

• 2006: 107

Similarly, Avery County has posted nonlinear data since 1998. While the increase from 2005 to 2006 was even higher than Watauga’s at 19.5 percent, the numbers are considerably lower, with 41 foreclosures in 2005 and 49 in 2006. Avery has shown a 58 percent increase over the 1998 foreclosure total, but that doesn’t tell the whole story. The year 2003 was a bad one with 208 foreclosures. In other years, foreclosure numbers bounced up and down in no discernible pattern:

• 1998: 31

• 1999: 14

• 2000: 22

• 2001: 37

• 2002: 56

• 2003: 208

• 2004: 69

• 2005: 41

• 2006: 49

Experts identify the primary reasons for foreclosures as divorce, unemployment, a death in the family, abuse of drugs or alcohol, local economic conditions and illness of the homeowner.

But according to the NC Justice Center, a consumer-advocacy group, predatory mortgage lending practices have played a significant role in the increase in home foreclosures in North Carolina, with lenders originating billions of dollars in adjustable rate mortgage loans that are preset to jump by five to eight interest points approximately two years after the loans are closed.

So-called nontraditional, alternative or exotic loan products have come under the scrutiny of the NC Commissioner of Banks. These terms refer to mortgages that allow borrowers to defer payment of principal or interest for a period of time that offer an initially lower monthly payment compared to a traditional mortgage but require a higher payment in later years. The NC Commissioner of Banks is concerned that some borrowers may not fully understand the risks of these products.

The NC Commissioner of Banks regulates more than 1,600 mortgage lenders and brokers and more than 15,000 mortgage loan officers and has proposed guidance for mortgage lenders and brokers related to underwriting standards, loan terms, documentation, introductory interest rates and risk management. The NC Commissioner of Banks is accepting comments on the proposed guidance through Monday, January 29. Click to www.nccob.org/NCCOB/Mortgage/Nontraditional+Mortgage+Guidance.htm to read the proposed guidance.