Bulletin E-Edition:
Default notices continue to pile up
By Andrew Moore / The Bulletin
Published: October 02. 2008 4:00AM PST
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With three months left in the year, Deschutes County is on pace to nearly triple the number of notices of default filed in 2007.
Through Sept. 30, the Deschutes County Clerk’s Office recorded 1,308 notices of default, a document which initiates foreclosure proceedings. In 2007, 590 notices of default were filed all year.
A notice of default doesn’t always portend a foreclosure. Homeowners can catch up on their payments or sell the home before it goes to foreclosure.
The Clerk’s Office does not track foreclosures, and the number of homes actually foreclosed upon historically has been less than 10 percent, but the rate is rising, according to local real estate professionals and other analyses.
The city of Bend’s Quarterly Financial Outlook released Monday reported 130 foreclosed homes for sale in the county in August, with a total of 139 foreclosed homes sold in the county since the start of the year.
The report cited data complied by Battleground, Wash.-based real estate analysis company Real Estats Inc.
RealtyTrac.com, an Irvine, Calif.-based company that tracks foreclosed properties, listed 390 bank-owned properties for sale in Deschutes County as of Wednesday.
As the mortgage crisis continues to roil the nation’s financial markets, its impact is growing locally. It remains to be seen if the federal government’s mortgage rescue program, passed with much fanfare in July, and the current market bailout bill working its way through Congress will cushion the economic blow to Main Street.
The mortgage rescue plan, called Hope for Homeowners, allows qualifying homeowners who are “upside down” on their mortgage on a primary residence to refinance their homes with a new, 30-year fixed rate mortgage insured by the Federal Housing Administration. The caveat is the original lender must first agree to forgive no more than 10 percent of the original loan value. A homeowner is upside down when he owes more than the house is worth.
Help comes too late
For Tumalo resident Robert Austin, a homebuilder with 39 years in the trade, it’s too little, too late.
On Tuesday, a notice of default was filed against a 20-acre Tumalo property he built a home on two years ago. He and his wife intended to move into the house. But first, Austin had to sell his existing property, on a neighboring 20 acres.
After more than two years on the market, nobody has bought it, and Austin could no longer keep up payments on the two homes. “We did everything we could do,” he said. “We made payments as long as we could and then couldn’t make payments anymore. Times have been real (bad).”
Austin has two other homes he built for sale. If neither sells, he’s likely headed for bankruptcy, he said. “I’ve built for 39 years and I’ve never been in a default position, and to be in this position is frankly just unbelievable to us,” Austin said.
According to RealtyTrac, Deschutes County ranked first in the state for foreclosure activity in August, the most recent data available, with one notice of default filed for every 345 housing units. That’s a 20 percent increase from June, when the county also ranked first in the state for foreclosure activity, with one notice of default filed for every 414 housing units.
Nationally, RealtyTrac said foreclosure proceedings were pending for one in every 416 U.S. households in August. Nevada had the most homes in foreclosure proceedings (one in every 91 households), followed by California (one in every 130 households) and Arizona (one in every 182 households), according to RealtyTrac. Oregon ranked 22nd (one in every 857 households).
With so much foreclosure activity, it’s bound to affect property values for homeowners current on their mortgages, said Bend real estate appraiser Scott Buckles.
As part of the appraisal process — which is required for mortgage refinancing or home sales — Buckles and other appraisers find out what similar homes in the neighborhood have sold for as part of the process of establishing value. If there is a similar home in the neighborhood that has sold for a deflated price due to a short sale or foreclosure, Buckles said he’s inclined to omit it from his calculations.
But when sales of distressed homes become predominant in a neighborhood, an appraiser has to take those values into account, he said. “If you think your house is worth $500,000, but four similar houses sell for $350,000 in a foreclosure process, then those become the predominant value indicator in the neighborhood, so it’s going to bring home values down,” Buckles said.
What’s next?
He doesn’t think Bend’s real estate market has reached that point, but he’s worried it’s coming. He said he used to do upwards of 600 appraisals a year. Now, he’s down to eight or 10 a month, he said, and those are coming from the somewhat steady stream of divorces and deaths. Were it not for those, he said he’d have to fold up shop.
“What’s happened, from the top of Awbrey Butte to the double-wides in Plainview, these people who bought overvalued property then took out a (home equity) line of credit then saw their values drop 20 to 25 percent and they are upside down, and no one is going to refinance that because they don’t have enough equity,” Buckles said. “I don’t think the refinancing boom is coming back, even if rates drop to 3 percent, because no one has equity. It’s really distressing … I’m looking for something else to do.”
Tom Greene, the president of the Central Oregon Association of Realtors, said there is good news for homeowners threatened with foreclosures in that banks and lenders are taking short-sale offers more seriously and are getting easier to work with.
A short sale is an agreement between a lender and a homeowner allowing a homeowner to sell the property for less than the amount owed. The bank takes a loss on the loan but avoids taking ownership of the property should the property be foreclosed upon.
Green said short sales are up in the region — currently running at about 10 percent of listings — and home prices, at least at the lower end, have seemed to stabilize. Sales through the summer declined, though, which be partly blames on stricter lending guidelines.
“Given the state of the economy … it really doesn’t surprise me to see (the surge in notices of default),” Greene said. “I hate to think of it being that high, but it doesn’t surprise me.”
Andrew Moore can be reached at 541-617-7820 or amoore@bendbulletin.com.
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