Report says foreclosures declining, but some disagree
Published 1:40 pm, Monday, July 8, 2013
Foreclosure rates in Fairfield County are declining, but that comes as no comfort to the homeowners who have engaged in short sales as a way to avoid the shame of having the bank take possession of their houses.
Such homeowners are unable to pay their mortgages, forcing them to work out a deal with the lender.
One of them, a Shelton man who had to leave his job less than a year ago because of an injury, is in the process of selling his house through a short sale and is working with mortgage holder Bank of America to make it happen.
"What can you do? The mortgage was tight," he said.
Under a short sale, the lien-holder agrees to accept less than the amount owed on the property and release the lien. It is typically the last step that a homeowner can take to avoid foreclosure.
The Shelton home owner signed documents to sell the house to a cash buyer a month ago, followed by an addendum two weeks ago, and now he is awaiting approval from the bank.
"It should happen. It's frustrating for everyone," said Peele, referring to the time involved. You have to have a lot of patience." The sale price of the house is about $90,000 less than what was paid for it in 2005.
Peele, who has 26 years in the business, said he has handled many similar deals since the recession and has learned to deal with the red tape and road blocks.
Bank of America is working to expedite the short-sale process across the country, spokesman Rick Simon said in an email.
"We have introduced new technology, streamlined processes and offered special programs that create additional incentives for customers to pursue short sales ahead of foreclosure, which has promoted increased short-sale activity," he said. "Foreclosure is a very expensive process and the worst outcome for everyone -- the borrower, servicer, investor and community. It has long been Bank of America's last resort. Our policy and practice is to first exhaust home retention solutions, then to encourage transition options, such as short sale or deed-in-lieu of foreclosure."
Foreclosure rates in the Bridgeport-Stamford-Norwalk region fell to 4.30 percent in April, compared with 4.98 percent in the same period in 2012, according to the most recent data released by CoreLogic, a property analytics provider.
But the county's is well above the national foreclosure rate of 2.65 percent, CoreLogic said.
While delinquency on payments also fell in the region, foreclosures are still occurring, the effects of which are being felt by Roger Norum, an agent who works mostly with Higgins Group's rental clients.
"The rental market is very hot now," Norum said. "Last week, I had a fellow come up and say he was looking for a rental because his house is in foreclosure."
Many landlords are reticent to rent to people who have lost their homes, he said. They "still want to see a good credit report."
`Weight off shoulders'
Foreclosures are tied to the current loan and the value of a home, and when the recession hit five years ago many people lost their jobs, forcing them to find work in other areas of the country.
Attorney Morris Barocas, managing member of The Barocas Law Firm in New Canaan, has handled many short sales since the economic crash but still feels compassion for his clients who endure the trauma of the process.
"I feel terrible for people going through it, but when they get through it, it's like a weight taken off their shoulders," Barocas said. "Usually, they bought the property at the wrong time, and their financial situation changed drastically -- a divorce or job loss."
A homeowner can delay a foreclosure while a short sale is underway, Barocas said. "I've had a short sale on the market for two years. When it's a cash buyer, we can put it together more easily. I've had as many as 10 in my hopper at one time. Now, it's four or five. I'm seeing less calls for short sales, which is a sign that foreclosures are dropping."
"I have 80 percent of the market share in foreclosures in the county, and I've seen a 50 percent decrease in bank-owned property in the last 12 months. Banks are looking to do short sales rather than foreclose," he said, noting bank investors have the final say in the process. "The bank is not the owner of the note. It's the servicer. The investors call the shots. It could be a 401(k) or a hedge fund."
There might be help coming from Congress to help homeowners avoid the trauma of a foreclosure. The Regulation of Mortgage Servicing Act, proposed by U.S. Rep. Rosa DeLauro, D-Conn., would establish national standards to ensure that homeowners have access to information they need and are given opportunities to avoid foreclosure.
`Still At risk'
"I continue to hear from those who are in danger of losing their homes and yet cannot get anyone from their lenders or mortgage servicers to answer their questions," DeLauro said in a statement. "I introduced this legislation first in 2012. Unfortunately, between a tough economy and problems with servicers, many homeowners -- particularly in Connecticut -- are still struggling and at risk of losing their homes."
If passed, the bill would require mortgage servicers and lenders to improve communication with homeowners by creating a single point of contact with borrowers, according to DeLauro. It also would end the dual-track process of foreclosing while negotiating loan modifications and require third-party reviews for loan modifications and foreclosure alternatives.
Those who lost their jobs during the recession but found employment in another part of the country often were forced to sell their homes at a loss, and many did not have the financial resources to pay lenders the difference between the selling price and what they owed, said John Harding, finance professor at the University of Connecticut.
"They have almost no alternative than to default," he said, estimating that a quarter of U.S. homeowners were under water during the recession. "Not everyone who goes under water defaults."
He attributed some of the problem to questionable lending practices.
But the problem of foreclosures is beginning to dissipate, according to CoreLogic, as the economy shows signs of improvement, restoring some confidence among potential home buyers and causing home prices to rise.
Last month, Homes.com reported that 35 of the top U.S. markets showed more than a 50 percent rebound in depressed home prices attributed to the recession. That was up from 28 markets in the previous month's report.
But while the San Antonio/New Braunfels, Texas, market showed a 233.11 percent rebound, the Bridgeport/Stamford/Norwalk region showed only an 11.27 percent rebound, and New Haven/Milford showed a 7.66 percent bounce.
"The majority of the country is at more than 50 percent (rebound)," said Homes.com spokeswoman Ivette Faulkner. "The Northeast region is a little bit slower to recover. The limited rebound is reflective of the stagnant population and anemic economic growth of the area."
Much of the region's lagging performance can be attributed to the fact that the recession did not impact Connecticut home prices as much as other parts of the country, Harding said.
`People aren't migrating'
"In Fairfield County, there has been an uptick in house prices more than the rest of the state. We've moved through some of the problems," he said, but the Connecticut economy remains sluggish, partly due a slow recovery by financial services. "We haven't seen an excessive surge in employment on Wall Street. People aren't migrating to Connecticut, driving up house prices."
An attorney with a nonprofit housing organization questioned CoreLogic's findings of fewer foreclosures.
"The CoreLogic statistics are (based on) people who have had court action started against them," said Jeff Gentes, managing attorney for foreclosure prevention at the Connecticut Fair Housing Center in Hartford. "The more telling point is people 90 days or more behind on their mortgages."
He estimated that one in 11 home owners in Fairfield County fits that category, and an area real estate agent also questioned the CoreLogic numbers.
`No Marked Improvement'
"I'm not seeing what they saw," said Cheryl Scott-Daniels, owner of CSD Select Homes in Westport, and president of the 1,100-member Mid-Fairfield County Association of Realtors.
She knows of several home owners who have gone through the time-consuming short-sale process with their lenders, trying to stave off foreclosure.
"Short-sales still take forever. I haven't seen any that have gone through the process in less than six months. It takes the banks forever to respond," Scott-Daniels said.
Attorney Jonathan Hoffman, a partner in the law firm of Hoffman & Hoffman in Stamford, concurred.
"I haven't seen a marked improvement in getting things done," he said, commenting that banks often send letters to his clients, urging them to avoid participating in the state's foreclosure mediation program. "We do over 100 short sales a year. I haven't seen a slow down at all. It's been constant for the past six years."
Like Scott-Daniels, Betsy Pankulis, broker-owner of Best Realty in Danbury and president of the Northern Fairfield County Association of Realtors, continues to see homeowners trying to avoid foreclosure by working out short sales with their lenders.
But, unlike Scott-Daniels, Pankulis is seeing a decrease in foreclosure activity.
`Takes a toll"
"We've had an uptick in the economy. Banks are working more with mortgage holders to modify their mortgages," she said. "But we're in a marketplace where people are still upside down."
Banks' participation in the foreclosure mediation program occasionally leads to an agreement to modify mortgage payments, said attorney Christopher Brown, a partner in Begos Brown and Green in the Southport section of Fairfield.
Brown, who is representing 36 property owners facing foreclosure, participates in the Volunteer Attorney Program on Wednesdays at state Superior Court in Stamford and provides information at no charge involving housing and legal issues.
"The goal is to give people information at the outset," he said. "A lot of foreclosures are handled through the motion practice. In Connecticut, it happens on Mondays. It's really difficult when you're in a courtroom and people are representing themselves. More than once, I see people break down and cry. It takes a toll on everyone."