Valencia county news-bulletin county for…
(Editor’s note: the legal notice section of the News-Bulletin recently carried 41 foreclosure or foreclosure sale notices on one day. This article, the first in a two-part series, looks at what’s behind the foreclosure rate and factors that influence it. A sidebar looks at steps homeowners can take to deal with the prospect of foreclosure. on Saturday, part 2 in the series examines personal bankruptcy, which often goes hand-in-hand with foreclosure.) The word strikes fear in any homeowner living on the financial edge, struggling to make the mortgage payment. For more than 700 families this past year in Valencia County, that fear became reality as lenders repossessed their homes. And it’s far from over. “We’re being told the number of foreclosures is trending downward, but we need to watch the next six months,” says Los Lunas mortgage banker Dee Tomlinson. “I think another wave of foreclosures is coming.” Valencia County foreclosures peaked in December 2009 at 121, spiked in February at 95 and again in may at 70, according to RealtyTrac, an investor-oriented real estate trends service. in June, there were 45, fifth most in the state behind Bernalillo, Sandoval, Santa Fe and Doña Ana counties. The 732 foreclosures in the past 12 months represent 3.8 percent of the approximately 19,000 owner-occupied homes in Valencia County. the statewide rate is 3 percent. As of June 30, there were 292 properties in pre-foreclosure, 36 at auction, and 44 bank-owned for sale, according to another tracking service, foreclosures.net. And the New Mexico Mortgage Bankers Association reports more than 8 percent of New Mexicans are 90 days or more behind on their mortgages. that puts more than 1,500 county homes on the verge of foreclosure. “I’m in close communication with Realtors and appraisers all over the county,” Tomlinson said. “They tell me they’re seeing an increase in appraisals for foreclosures and short sales, and the Realtors aren’t making many sales because it’s difficult to qualify buyers. Home sales have come to a standstill.” Behind the Numbers What’s behind the foreclosure numbers in Valencia County? Contrary to perceptions, the vast majority of homeowners caught in foreclosure are not deadbeats or people who got in over their heads, according to Tomlinson and local bankruptcy lawyer Laura Boyett. In most cases, they say, the problem is a reduction in income from a lost job, reduced hours, unexpected expenses or other uncontrollable events. “People can’t control their hours being cut,” Boyett said. “People can’t control their health care costs. People can’t control the terms of their credit cards. People can’t control unexpected events. “When a person’s income and bills are about equal, like it is for a lot of people in Valencia County, they’re not in control at all. It only takes one unexpected event to get them in trouble.” “Incomes are diminishing throughout the county,” Tomlinson said. “Many people just aren’t making the same amount of money they were, and mostly it’s not through any fault of their own.” There are other factors, such as divorce, they said, but they all come back to a change in financial status. Not much Help Exacerbating the problem, they agreed, is that lenders aren’t providing much help. In particular, they said, the federal mortgage modification program touted by President Obama isn’t doing much. Part of the reason, Tomlinson and Boyett agreed, is a Catch-22 in which homeowners must be delinquent to qualify for the program. “You can’t get a modification if you’re current,” Boyett said. “You have to be behind on your payments.” So you should quit making payments for a couple of months? “Sounds right, but it’s not,” said Tomlinson. “It is an extremely complicated process. You needs tons of documentation, and without fail, the lenders lose or say they didn’t receive one or more pieces. so you have to send them again, sometimes two or three times. Then maybe they’ll require something else. Now, by the time they have everything they need, the homeowner is four or five months behind and it’s been so long the lender wants new numbers and documents. “Nobody’s getting a mortgage modification as far as I can tell,” she said. Boyett said she has heard that same story over and over, and urges anyone seeking a loan modification to call the lender every day and fax all their documentation every other day. Boyett believes lenders have incentives to move slowly on mortgage modifications, incentives such as more “bailout” money by keeping bad loans on the books as long as possible. And if it comes to foreclosure, lenders get tax breaks on their losses. “At the end of the day, it’s all about money,” she said. Tomlinson tells of an employee of a financial institution whose hours were cut. the individual was having trouble paying the mortgage, held by the employer. “Even the institution the employee worked for, that held the mortgage, wouldn’t work with the employee,” she said. “That’s how bad it is out there.” And most Valencia County mortgages aren’t held by Valencia County lenders. while a local lender might originate the mortgage, it is sold with others to larger investment firms so they can recoup their money. most mortgages are held out of state. “That’s true,” said Tomlinson. “They don’t have ties to the community, so there’s not a lot of incentive to help the community. It’s all about the money.” With loan modification and refinancing limited, Tomlinson said, homeowners’ best hope is a short sale or deed-in-lieu-of-foreclosure. A short sale is for those who owe more on the home than it’s worth because of declining values. With the lender’s concurrence, the homeowner can sell the house at its current value without being obligated for the difference between sale price and mortgage balance. Some lenders accept short sales because they don’t want the house and they’d rather get the market value while avoiding foreclosure costs.
the national Mortgage Bankers Association says lenders lose 20 to 60 cents on the dollar in a foreclosure. Tomlinson said lenders will impose conditions before they’ll accept a short sale, including the owner making an effort to sell, refinance or modify the mortgage. the lender will also set a minimum they’ll accept, which still might be an impossible price in a declining market. In a deed-in-lieu solution, the homeowner saves the lender time and expense by voluntarily turning the home back for what’s owed on it. Some lenders will accept this because it saves them money, but Tomlinson said they will only accept the deed after the homeowner has made an attempt to sell or refinance the property. “The problem with a short sale or deed-in-lieu is that it still impacts your credit the same as a foreclosure,” Tomlinson said, meaning it will be at least three years before you can get any consumer loan. You might also be liable for any difference between the amount you owe and the price the home gets when sold, especially if your contract has a “deficiencies” clause. And even if the lender forgives the deficiency, there could be an additional problem, Boyett said. You might receive an IRS Form 1099 for the difference, showing that money as a gift on which you’ll be required to pay taxes. On the other side is the homeowner who has a lot of equity in the house and suddenly can’t make the payments. “Don’t expect any help from your lender,” Tomlinson said. “They’ve already made a bundle on the interest you’ve paid over the years, and they have the opportunity to get the house back with less owed on it than it’s worth, and make another bundle.” And unlike the situation where you might have to pay the difference if you owe more than the sale nets, if the home sells for more than you owed on it, the lender gets the excess, not you. “People with a lot of equity need to do everything they can to sell the house,” Tomlinson said, “even if they have to sell below market value.” More and more homeowners who are “upside down” or “under water” on their homes — owing more than they’re worth — are simply walking away and leaving them to the lender, who still has to go through foreclosure. Tomlinson and Boyett both advise clients not to walk away, mainly because the homeowner might be able to stay in the home at least until it is sold at auction — which takes several months — or longer in an informal “squatter” situation in which the lender ignores the continued occupation of the house by the former owner. Most foreclosed homes sold at foreclosure sales are purchased by the lender — about 99 percent of them, according to Charles Griego, manager of Heritage Title in Los Lunas, who serves as the court-appointed special master for many foreclosure sales in Valencia County — those “on the east steps of the courthouse” sales seen in the newspaper legal notices. Griego said he doesn’t have a feel for the foreclosure picture here “because I only see it after it’s all over,” but once a foreclosure proceeding has been started, few homes are redeemed by the owner and “most go to sale.” “The mortgage holder has the right to bid up to the amount owed,” Griego said, “and they almost always do. there are rarely any bidders other than the mortgage holder.” Wait for It Once the mortgage holder has purchased the house, Tomlinson and Boyett said the former homeowner probably won’t be evicted until the lender is ready to dispose of the property. It’s not like you might have seen in the movies or on TV, Boyett said. “They don’t file for foreclosure and throw you out the next day,” she said. “They don’t set your possessions out on the street. they can’t touch your possessions, because they aren’t involved in the foreclosure. Foreclosure is simply a process to transfer ownership.” Most lenders prefer to have someone living in the house rather than it sitting vacant where it could be vandalized, looted or damaged. And they don’t want to rent it and take on all the headaches of being a landlord. So often they’ll just turn a blind eye to the previous owner staying in the house as a squatter if it’s to the lender’s advantage. “I know families that are still in their home two years after foreclosure,” Boyett said. “That’s why I advise people not to walk away. Where are they going to go? Might as well stay and see what happens. even if the lender tells you to leave, you get at least 30 days.” The flood of foreclosed homes and the decline in home values should mean plenty of bargains, but don’t count on being able to take advantage unless you have a lot of money, Tomlinson said. “We’ll see lots of low-priced homes on the market,” she said, “but we’ll probably see them purchased by investors, because regular people can’t qualify.” Besides new minimum down payment requirements, Tomlinson said a potential buyer needs a minimum credit score of 620 to qualify for an FHA loan, higher for conventional loans, while 25 percent of the people in Valencia County have a credit score of 599 or less. “Fully one-fourth of our people can’t access any credit,” she said. With few qualified buyers, times are tough for Tomlinson, a mortgage banker for 16 years at the 78-year-old firm of Wallick and Volk. “I’m struggling just as hard as anyone else right now,” she said. As a result, she said she’s spending most of her time doing home ownership and credit counseling. “I’m not even charging for that,” Tomlinson said. “There’s so many people who need it, but not many who can afford it.” She said anyone who needs counseling can call her at 505-440-7536. Wallick and Volk is located in Mondel Plaza in Los Lunas. Co ntact Dana Bowley Valencia County News-Bulletin: County foreclosure trend far-reaching
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