During all of 2009, four completed foreclosures occurred, where a borrower has exhausted all remedies and the house - either a primary residence or second home - was put up for sale by the mortgage lender, according to town records. But that total was bested in the first two months of 2010, when five completed foreclosures were recorded. Two more were entered during the first two weeks of March, bringing the total this year to seven, nearly double the number for all of last year.
By way of comparison, there were only two completed foreclosures in 2008, and the last one before that was one in 2005.
"It's heartbreaking," Spence said. "It's to the point where we don't even want to open our mail. It's depressing."
Foreclosure - the legal process by which and lender or mortgagee obtains a termination of a borrower's right to hold a mortgage because of non-payment - has been one of the most visible faces of the worst recession the country has struggled through since the 1930s. The collapse of Wall Street equities and several prominent investment firms such as Bear Stearns and Lehman Brothers was spurred on to a large degree by falling values in home prices and so-called "sub-prime" mortgages that offered initially generous terms but soon.
demanded monthly payments beyond the means of the
borrowers. Vermont was initially spared the worst ravages of the downward spiral in home mortgages because there were fewer sub-prime mortgages underwritten by the state's banks. But recent data statewide is showing that the foreclosure trend is on an upswing here as well.According to the banking division of BISHCA - the state's Department of Banking, Insurance, Securities and Healthcare Administration - there were 1,928 foreclosures filed in the state in 2009 compared to 1,639 in 2008. In 2009, 140 of those were in Bennington County; in 2008, 91. So far in 2010, there have been 146 foreclosures reported to the state, with 14 in Bennington County, but the state data for 2010 only includes the month of January so far. The state doesn't break out foreclosures by town.
What's clearly driving the upward trend in foreclosures is the economy, said Thomas Candon, the deputy commissioner for the banking and securities divisions of BISHCA. About 62 percent of foreclosures in the state are due to loss of income or the loss of a job. Unexpected medical costs, followed by divorces, are the next two leading reasons. The subprime lending mess still is not as big a factor here as it has been in other parts of the country, he said.
"I think we're going to see the same level if not somewhat more of an increase," Candon said of likely trends in foreclosures over the coming months. "The economy and unemployment will continue to be a burden."
What may also be prompting increased numbers of completed foreclosures is that after a period of time when there have been many efforts undertaken with foreclosure modification programs, those are coming to an end. Additionally, for a time mortgage services couldn't keep up with all the delinquencies. There was a certain amount of confusion at that level but that is being straightened out now, he said, and the effect could be a jump in foreclosure numbers in the near future.
Nationwide, the rate of increases in foreclosures may moderating, but the market is far from healthy by historical standards.
Last year, more than 2.8 million households were threatened with foreclosure last year, according to RealtyTrac,Inc. a foreclosure listings firm based in California. This year the number is expected to exceed 3 million. Still, the number of households behind on payments by more than 30 days did shrink slightly in the fourth quarter of 2009 compared to the preceding July through September period, it said; an encouraging sign.
The sharp upward jump in foreclosures in Manchester has not, as of yet, been replicated in neighboring towns, but the warning signs are there. So far this year in Dorset, there's been only one complaint filed so far, but that's only the starting point of a foreclosure proceeding.
During all of last year there were 10, said Town Clerk Sandra Pinsonault. There were 3 complaints in 2008, but none of those led to completed foreclosures.
In Arlington, there's been one complaint so far; last year there were a total of 16 and three of them went the full route to a completed foreclosure, said Town Clerk Robin Wilcox. In 2008 there were 7 complaints and 2 went all the way to completion and a public sale, she said.
The uptick in foreclosure activity seems linked to the state of the general economy, she said.
"We've definitely seen more complaints, there's no doubt about that," she said.
In Winhall, Town Clerk Beth Jenks said complaints have been filed, but not since 2008 has there been a foreclosed property. That year there were two, a house and a property parcel she said.
The number of complaints has, however been on the rise in the last three months, she said. The market in Winhall is a little different, given the number of second homes owned by part-time residents. It also has one of the highest grand lists in the state.
A foreclosure usually starts with a formal complaint being filed by the lender or mortgage holder, and that can come as quickly as a borrower being 30 days behind on a payment schedule, said attorney Michael Nawrath of Manchester.
For a "typical" standard mortgage, the borrower would then have another 30 days to get out of arrears, but if that passed and the payments not brought up to date then the bank or the mortgage holder can file a complaint, which is served on the borrower. The bank or mortgage holder could demand full payment and effectively "call" the loan, he said.
Typically, the borrower, now the defendant in the foreclosure complaint, gets 20 days to answer the original complaint. If that period passes, the plaintiff, or mortgage holder, can file what's known as a "summary judgment" to obtain payment, he said.
"Anytime up until the Court actually enters judgment in favor of the foreclosing mortgagee (the lender) the borrower can come in and pay the amount owed and they have redeemed the property from foreclosure," he said. "That would be the end of the foreclosure."
If the borrower can come up with the cash to hold off the creditors, it's back to square one, he said.
Even though it would appear that a property could move to foreclosure within three or four months, in reality the process usually takes longer. Nine months to a year is more typical, he said. A bankruptcy filing can complicate matters, for instance.. If the dwelling being foreclosed on is a person's primary residence, there are more protections built into the process, he said.
At the foreclosure sale itself, the bank, if it is the mortgage holder, usually only wants to recover what it has risked in terms of the mortgage note. If a property fetches more than that, other lienholders get in line in order of priority to get what they think is their due, Nawrath said.
Sometimes those who are on the receiving end of a foreclosure complaint can settle it by selling their property, if they can find a buyer. But in today's saturated real estate environment, that's not always easy, said attorney Kevin O'Toole of Dorset.
"People used to solve foreclosures by selling the houses but now they can't do that," he said. "I'm not an oracle; I don't think it's getting much worse but I don't think it's getting better for awhile."
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