Problem cases - foreclosures

The above map, from realtytrac.com shows where homeowners are under the most duress. From the September report:

With one in every 91 households receiving a foreclosure filing in August, Nevada continued to document the nation’s highest state foreclosure rate for the 20th consecutive month. Foreclosure filings were reported on 11,706 Nevada properties, a 16 percent increase from the previous month and an 89 percent increase from August 2007.

California continued to document the nation’s second highest state foreclosure rate, with one in every 130 households receiving a foreclosure filing in August, and Arizona registered the third highest state foreclosure rate, with one in every 182 households receiving a foreclosure filing during the month.

Other states with foreclosure rates ranking among the top 10 were Florida, Michigan, Georgia, Ohio, Colorado, Illinois and Indiana. Michigan, Georgia, Ohio and Colorado all reported annual decreases in foreclosure activity.

California accounts for one-third of U.S. foreclosure activity
Foreclosure filings were reported on 101,724 California properties in August, one-third of the national total and the most of any state. The state’s foreclosure activity increased more than 40 percent from the previous month and more than 75 percent from August 2007.

Florida posted the second highest total in August, with foreclosure filings reported on 44,000 properties during the month — a 4 percent decrease from the previous month but still up nearly 30 percent from August 2007. One in every 194 Florida properties received a foreclosure filing in August, the nation’s fourth highest state foreclosure rate.

Foreclosure filings were reported on 14,333 Arizona properties in August, the nation’s third highest state total. Arizona foreclosure activity was up 7 percent from the previous month and nearly 63 percent from August 2007.

California, Florida and Arizona together accounted for more than half of the nation’s foreclosure activity.

Despite a nearly 13 percent annual decrease in foreclosure activity, Michigan documented the nation’s fourth highest state foreclosure total in August, with foreclosure filings reported on 13,605 properties during the month.

Other states with total properties with foreclosure filings among the 10 highest were Nevada, Ohio, Texas, Illinois, Georgia and New Jersey.

TK: This sobering coverage from Florida indicates the problem may get worse before it gets better.

The relentless slide of home prices in Lee County has left almost half of recent buyers owing more on their mortgages than the home is worth — a sure-fire recipe for a new wave of foreclosures, experts say.

Worst off are those who bought homes in 2006, just as the housing boom was ending: 78.5 percent of those now have home values less than the original loan amount, according to second-quarter statistics compiled by real estate data provider Zillow.com.

Among people who bought within the past five years, 46 percent are underwater on their mortgage in Lee, compared with 29 percent nationwide, according to Zillow.com.

The result of homeowners being “underwater” is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.

“We are so upside down,” said Michelle Nacua of Lehigh Acres. Nacua and her husband, Lani, bought their house in 2004 for $112,000. They refinanced twice and now owe $161,000, far more than the $114,000 the three-bedroom, two-bath house is assessed for by the county Property Appraiser’s Office. “It is our fault, but I hate it.”

Falling values have contributed to the sharp pullback in mortgage lending. Since the record high of $322,300 for the median Realtor-assisted sale of an existing single-family home in December 2005, the price has fallen 54 percent to $146,900 in August, according to the Florida Association of Realtors.

Even those who have been dutifully paying their mortgages are faced with the fear of foreclosures.

“The third wave is coming from people who are underwater who are suffering disruptions to income,” said Chris Lafakis, Florida analyst for Moody’s Economy.com.

“That includes losing your job or repairing your car or a death in the family. It’s a combination of declining home prices and a weakening job market.”

Lee County’s unemployment rate in August was 9 percent, up from 5.3 percent a year earlier.

The first two waves of foreclosures here consisted of investors who tried to flip for a profit and got caught in a declining market, followed by people with adjustable rate mortgages that reset to unaffordable levels, he said.

Fort Myers attorney Kevin Jursinski agreed.

“My clients are not subprime buyers; they’re people who’ve invested and can’t afford to pay,” said Jursinski.

For example, he said, “If I have a house I paid $400,000 for a few years ago with a $350,000 mortgage and I can buy a (bank-owned foreclosure) for $300,000 or $250,000, I’m going to do that,” he said. “I’m gone. Why would I want to stay in a house where I’ve lost my equity and much, much more?”

It’s not a risk-free process to dump your house, Jursinski noted: Your credit will take a hit and the bank could come after you for a deficiency judgment to get the full amount of the mortgage — although Florida laws favor the debtor.

He’d like to see some of the $700 billion bailout package passed by Congress two weeks ago used to subsidize lenders so they can reduce the debt of those homeowners.

But David Hall, president of Fort Myers-based First Community Bank of Southwest Florida, said the bailout is intended mainly to let the government purchase large bundles of no-money-down mortgages gone bad and owned by large financial houses on Wall Street.

“I just don’t see a lot of this money trickling down into Lee County, into the small communities around the country,” he said.