DECEMBER 22, 2011 ISSUE
High Country Foreclosure Filings Fall 25 % This Year
Experts Claim Drop is ‘Artificial’, Cases Backlogged
“
I think [the banks] believed the market would have improved significantly by now, and it’s just not happening.
” —Carl Jenkins of Northwestern Regional Housing AuthorityForeclosure filings in N.C. have quadrupled over the past decade but dropped 25 percent this year through November. What sounds encouraging may not be. Bank and real estate experts attribute the drop in filings to a lengthened foreclosure process that is currently backlogged.
According to statistics from the N.C. Administrative Office of the Courts, the number of filed foreclosures quadrupled in North Carolina from 1998 with 15,293 to 2010 with 66,283—the record high month of that 14-year period being October 2010 with 7,411 filed foreclosures. Filings dropped 25 percent in 2011 through November.
For the High Country, the storyline has been much the same—a steady increase year to year with a dramatic spike from ’08-’10, and a substantial decline during 2011. Since 2006, 1,321 foreclosures in Watauga County; 679 in Ashe County; and 558 in Ashe County were filed. High Country foreclosure filings dropped 25 percent this year through November.
Daren Blomquist, director of marketing communications with RealtyTrac, a website that tracks properties repossessed by the foreclosing lender, said he was seeing a similar trend nationwide. He attributed a small percentage of the decrease in this year’s figures to lenders being “more open” to loan modifications, lower monthly payments and short sales but added that the majority of the dip is misleading.
“A large part of the drop is artificial. It’s not reflecting that the market is improving. It’s reflecting that the lenders are not able to process foreclosures as quickly,” Blomquist said.
From the day a foreclosure is filed, RealtyTrac tracks the days it takes for a property to foreclose. Blomquist said the nation’s average in the third quarter of this year—from filing to foreclosure—is 336 days as compared to 140 days three years ago. North Carolina’s current average, he said, is about 183 days. (Bob Kucab, director of the N.C. Housing Finance Agency mentioned that North Carolina has more tools than other states for addressing the foreclosure crisis, including the N.C. Foreclosure Prevention Fund, which is a partnership between the N.C. Commissioner of Banks, N.C. Attorney General and N.C. Housing Finance Agency.)
Bob Davis, vice president of the American Bankers Association, said once the foreclosure backlog clears, expect more foreclosures, though he cited high loan modification figures in 2011 (through October) from a HOPE NOW national report: 1.9 million filings; 702,000 foreclosure sales; and 3.1 million loan modifications.
Since the economy collapsed in 2008, most banks’ attitudes towards foreclosures, Davis said, haven’t changed because most banks weren’t involved in the subprime mortgage crisis.
“It’s not about an individual transaction,” Davis said, adding that community banks want returning customers for auto, mortgage and education loans, investment advice and checking and savings accounts.
Exact Foreclosure Figures Unknown
In the past month, two high profile properties have foreclosed in the High Country—the multi-million dollar tracts at The Lodges at Eagles Nest in Avery County and the old Appalachian Twin Theatre in downtown Boone. These auctions have warranted much attention because of the history and monetary values of the estates, but since 2007, more than 2,500 Ashe, Avery and Watauga properties began the foreclosure process with little notice.
The exact number of High Country foreclosures seems to be unknown. The N.C. Administrative Office of the Courts compiles the number of filings, which begins the foreclosure process, but the courts don’t tally actual foreclosures. While local clerk of court staff estimate that 90 to 99 percent of their filings result in foreclosures, bank and real estate experts suggest that 50 to 75 percent is more accurate.
Whatever the correct figure, it’s obvious the numbers aren’t good. James Dorman, owner of Castle Rock Realty in Banner Elk and real estate agent for 45 years, stated that he has multi-million dollar properties available for under $1 million and said wealthier people had the option to lose their second or third homes to foreclosure.
“No one is exempt from this economy we have now,” Dorman said. “I’m 70 years old and I’ve never seen anything like this in my lifetime. Neither has anyone else.”
Avery County Clerk of Court Lisa Daniels noticed seasonal residents tangled in the foreclosure process at the beginning, but she has seen permanent residents at their wit’s end for the past two years because of the lack of jobs.
Those close to the foreclosure process generally agree that the U.S. has encountered two waves of foreclosures, and currently we are in the second wave, which is attributed to unemployment. At the beginning of the recession, homeowners defaulted on their mortgage payments because the adjustable interest rate skyrocketed after the two- or three-year introductory rate.
“The expectation was that after the two- or three-year period lapsed, homeowners would have more value to their house and could refinance, and there wouldn’t be any problem,” said Kucab of the N.C. Housing Financing Agency.
Not the case, he concluded, because property values declined, homeowners couldn’t refinance and ultimately they foreclosed.
‘Before The Bank Runs Away With The House’
The Northwestern Regional Housing Authority (NRHA), among other services, helps clients negotiate with banks to prevent foreclosures in seven counties. Three years ago, the NRHA’s Watauga office had one part-time housing counselor; now it has four full-time counselors. This year, Carl Jenkins of NRHA said the nonprofit has more than 500 new clients and has received phone calls from nearly 2,000 more concerned homeowners.
Jenkins said lenders’ attitudes “ebb and flow” with the current of “background politics.” Each day, Jenkins and other counselors at NRHA spend hours on the phone with banks.
“When they have more control, banks are less willing to help. When they lose control, they look proactive at the issues, [though] most big banks are willing to talk with people,” Jenkins said. “I think they believed the market would have improved significantly by now, and it’s just not happening.”
One of the many phone calls Jenkins and his staff have received since the recession started came from Irene Brown, now 61, who had a loan with Bank of New York Mellon that was serviced by Litton Loan Service, which no longer operates under that name.
In summer 2009, Brown received a knock on her home, situated near an entrance to the old Ginn Laurelmor development. The sheriff and a representative from Litton Loan Servicing told Brown she had four weeks to pack her things and move.
“I was not behind [on payments]. It was no way my fault. I lost family property, and it was devastating,” Brown said. “Not a darned thing I could do about. I didn’t have money for a lawyer.”
Her case is highly unusual, Jenkins said. The promissory note was in her father and brother’s name; the deed was in her name. In ’06, the father died, and the brother passed away in ’07. The whole time, Brown hadn’t missed a payment. Depending on the interest rate, she was paying anywhere between $600 and $800 a month. At the end of ’08, the adjustable interest rate was going to increase, so to refinance and put the note in her name, Brown contacted Litton, which upon verifying the death certificates stopped accepting payments and sent a foreclosure notice to an address that didn’t exist.
“The ultimate kicker for why nothing happened in her case was that the note was in her father and brother’s name, who both passed away, and the deed was in her name,” Jenkins said, adding that had the foreclosure notice been sent to her address, Brown and her husband, who is a veteran, could have easily negotiated a U.S. Dept. of Veteran Affairs loan.
“Sometimes the bank makes a mistake that can’t be fixed in the last minute,” Jenkins said. “You have to catch them [early] and give them time to review the foreclosure process before the bank runs away with the house.”
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