Citizens Times BY: Don Davies July 13. 2014
Five years after the Great Recession, fewer homeowners are falling behind on mortgages and losing their houses. Buncombe County is down to 248 foreclosure filings so far this year, from the peak of 1,376 in 2010. But Tom Luzon is still worried.
A shrinking but still sizable shadow inventory of homes that are headed toward foreclosure haunts the improving real estate market. These properties seized by banks typically sell for a reduced price, depressing appraised values for their neighbors.
“The foreclosure crisis touches all of us,” said Luzon, who heads the Mortgage Protection Program for Western North Carolina. “You might say ‘I don’t have a mortgage on my house. I own it free and clear.’ What happens to your free-and-clear house when your neighbor to the right gets foreclosed? And the one to the left. Your equity goes down the tubes.”
In June, there were 27 sales of real estate owned by banks, also known as REOs, in Buncombe County, or about 7.6 percent of the total sales. As of last week, Buncombe has 81 out of 2,040 homes listed for sale marked as a foreclosure, REO or a short sale, in which seller and bank agree to sell the property for less than the mortgage amount.
“That’s about 3.9 percent, down from about 5.3 percent in February, so we’re seeing a more manageable inventory,” said Don Davies, a real estate broker and an analyst who runs RealSearch.
In North Carolina, foreclosures represented only 0.7 percent of the total inventory of homes. North Carolina saw 24,907 foreclosures completed for the past 12 months through May, compared to 28,159 for the previous 12 months in 2013. Serious delinquencies were about 3.6 percent of all mortgages, according to CoreLogic, a national real estate research firm.
Crisis continues for some
While national, state and local data show that foreclosures are down dramatically, the crisis that peaked in 2010 still isn’t over, as far as Luzon is concerned.
He still sees a steady stream of clients coming into the offices of OnTrack Counseling and Financial Education, applying for the Mortgage Protection Program assistance in last-ditch efforts to keep from losing their homes.
The Mortgage Protection Program administered across WNC has helped some 660 families stay in their homes, offering some $13 million in assistance to pay their mortgages while they retrain for new jobs.
The U.S. Treasury gave North Carolina the funds out of repayments from banks receiving bailouts through the Troubled Assets Recovery Program.
Luzon worries the number of foreclosure filings doesn’t always match with the REO sales in any timely manner. Technically, borrowers are delinquent when they miss a single payment on their mortgage and face foreclosure once they are 90 days behind.
The Federal Reserve Bank of New York has estimated that 55 percent of all active foreclosures are now more than two years delinquent. But faced with losing money on a foreclosure, banks may delay that process for a number of reasons.
Moving slow
“When unfortunate circumstances hit a family and they want to stay in their home, we’ll work with them until they can catch up. We may even do a modification to the mortgage as far as the term or the interest rate,” said Dana Stonestreet, president and CEO of HomeTrust Bank, the area’s largest community bank with the highest share of mortgages. “In that case, we don’t move fast.”
“But there’s the other track when someone abandons the house, and they mail you the keys. Often they tear the place up and rip out the cabinets, so we’re into substantial repair,” Stonestreet said. In those cases, the bank will move more quickly through the foreclosure and REO sale.
Asheville’s housing market has been much stronger than in other cities where HomeTrust has mortgage loans, such as Lexington, Shelby, Eden and Tryon.
“We have a stable and positive housing market in the Asheville metro area of Buncombe, Haywood, Henderson and Madison counties where the REO inventory has largely been worked through. But there does continue to be a small amount of hangover,” Stonestreet said.
Bank of America, one of the nation’s largest banks servicing billions of dollars in mortgage loans, has been a main culprit in the slowdown for foreclosure, according to Kenny Potts, a broker with Town and Mountain Realty. He’s worked with clients who waited for months and even years to do a short sale, where the bank must agree that the house can be sold for less than the mortgage value.
Potts sees a steadily improving market with less danger from the shadow inventory of REOs still in the banks’ pipelines. Realtors who specialize in REO sales in recent years are finally catching a breather.
“The problem I see is not necessarily a lot of people having short sales or foreclosures, but the aftermath. You could have homes depreciating in value because of all the REOs and short sales that occurred in their area,” Potts said.
Davies, the broker and analyst, knows firsthand the damage that foreclosures can do to other property owners. He’s trying to sell a home in Mills River, and has neighbors up the street who ran into financial difficulties. The neighboring house had been priced at more than $250,000, but the bank wound up selling it for a dramatically reduced $170,000.
“They just ruined the property values of all their neighbors,” Davies said. “Two or three foreclosures in a neighborhood will lower the appraised values of other homes until someone comes in and starts buying at the market value again.”
But an improving job market and healthier housing market are paying dividends for most people.
“Our delinquencies are down in the past 12 months,” said Laura Presnell, HomeTrust’s loss mitigation manager. “We’re seeing less people who are struggling. They’re beginning new jobs and we’ve had several customers who’ve gone through OnTrack and were approved for the Mortgage Protection Program fund. While they were going through their hardship, they were able to stay in their homes.”
While the worst of the recession and its aftermath may be receding, more homeowners are only a paycheck or two away from financial difficulty, even disaster. Luzon points to the recent shutdown at Stanley Furniture, Graham County’s largest employer, with 400 workers out of a paycheck. Some of those furniture workers may fall behind on mortgages and run the risk of foreclosure.
“Where’s the end?” Luzon said. “Nobody has a crystal ball, but we’re likely to see problems until the average wage earner can afford an average priced home.”
FORECLOSURES BY THE NUMBERS
55
percent of all active foreclosures nationally are more than 2 years delinquent
1,111
average number of days in serious delinquency
157,000
foreclosures reported to credit bureaus in the last quarter of 2013
500,000
real estate parcels owned by bank or REO properties, of which only 10 percent are on the market
Continued inside
MORE BY THE NUMBERS
509
average number of days from foreclosure to property sale
21
percent of active foreclosures are vacant
10 million
the number of U.S. houses with underwater or upside down mortgages, or one in every five mortgages.
138,785
North Carolina homes have negative equity, with another 66,496 near negative equity
788,074
population of the OnTrack service area in WNC, or about 8.26 percent of state total
644
foreclosures in WNC for the first quarter of 2014, or 7 percent of state total.
SOURCE: OnTrack Counseling and Financial Education
