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Experts say indications show new wave to hit metro Toledo

By JON CHAVEZ
BLADE BUSINESS WRITER

Housing-Foreclosures
Jon Modene, a foreclosure specialist at ReMax Masters in Perrysburg, said his company sometimes uses the Homepath moniker on signs to denote a property repossessed by Fannie Mae, like this house on East Fifth Street in Perrysburg.

There was a time a few years ago that one could drive through any metro Toledo neighborhood and see multiple “foreclosure” signs, but such signs are now disappearing.
Jon Modene, a foreclosure specialist at ReMax Masters in Perrysburg wishes that was because of fewer foreclosures, but the real reason is more practical.
“When you put out a foreclosure sign these days, it’s an invitation that says ‘Come vandalize me.’ ” Mr. Modene said.

Despite a few slightly positive statistics and anecdotes of improving sales, local real estate agents and national data tracking firms say that five years into the nation’s housing crisis the Toledo area’s foreclosure problem remains as bad as ever.

Through March, according to the Lucas County Clerk of Courts office, there had been 276 foreclosure cases filed, an increase of 6 percent over the first quarter of 2011.
February data from RealtyTrac Inc., a national firm that tracks foreclosures, revealed 986 foreclosure or foreclosure-related cases in metro Toledo, a 13 percent increase over the first two months of 2011.

The picture looks slightly better in Wood County, which has seen numerous foreclosure cases in its Perrysburg subdivisions. Foreclosure cases there decreased by 6 percent through the first three months to 127 cases, according to Cindy Hofner, the county clerk of courts. But the court’s work load hasn’t gotten any lighter. “It is slowing a bit as far as new cases, but we are still dealing with foreclosures from several years ago. We’re doing a lot of postjudgments from previous years, so the work is still there,” she said.

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“I think we are slightly improving. But I don’t know that we’ve hit rock bottom yet,” said Glennis Przymierski, a foreclosure specialist with the Danberry Realtors.

“I think there’s still a lot of them in the pipeline that we haven’t seen and which won’t come onto the market until maybe after the election. There could be political reasons why we maybe aren’t seeing them yet,” she said. “I know that at the end of last year from September on people kept saying the floodgates were going to open, but it hasn’t happened.”

Judy Scheinbach, an agent with Sulphur Springs Realty who handles foreclosures, also has an uneasy feeling about the foreclosure situation.

“I’m hoping that it’s easing up but there just seems to be so many of them in every neighborhood,” she said.

Ms. Scheinbach said buyers are coming into the market and taking some — but not many — foreclosed properties. And investors are scooping up distressed properties with the intention of turning them into rental properties.

But the lack of jobs that is fueling the steady stream of foreclosures doesn’t seem to be getting better.

“You start to hear news that jobs are picking up and I think people are feeling that jobs are getting better, but I don’t know that that’s affecting foreclosures,” she said.

Ms. Scheinbach said she still sees many Toledo area homes on the brink of foreclosure, victims of a toxic mix of owners with unrealistic sales price expectations, pressure from lenders who refuse to accept short sales (sales that fall short of what is owed), and frustration by real estate agents trying to bring the two sides together.

“I think there’s a lot of homes in limbo right now that people are trying to sell for more than they can get and eventually they are going to end up in foreclosure,” Ms. Scheinbach said. “I don’t see it going away anytime quick.”

Daren Blomquist, a vice president with RealtyTrac of Irvine, Calif., said there’s another worry lurking for Toledo’s real estate industry: the so-called shadow inventory.

The shadow inventory refers to homes that are somewhere in the foreclosure pipeline but have not gone to foreclosure proceedings.

Owners of those homes are either 90 days delinquent on their payments, have received a lis pendens (notice of a suit pending), or a formal notice of default or foreclosure.

Indications are that metro Toledo is about to experience a large increase in foreclosures soon, according to RealtyTrac’s data, Mr. Blomquist said.

“I don’t know if I’d use the word ‘explode,’ but there’s certainly a backlog waiting to happen later this year,” he said.

Pattern of increase

RealtyTrac recorded decreases in foreclosure-related activity — 90-day delinquencies, lis pendens, and notices of default or foreclosure — in 13 of the 14 months in Toledo from October, 2010, to November, 2011. “But starting in December, 2011, we saw an increase and now we’ve seen three straight months of pretty significant increases in those default notices,” Mr. Blomquist said.

The pattern of increase also is occurring across Ohio, Mr. Blomquist said.

“In Ohio in February we saw the first year-over-year increase in activity after 15 months of decreases,” he said. Foreclosure or foreclosure-related filings in Ohio totaled 9,445 in February, an increase of 9.8 percent from a year earlier.

Mr. Modene, who in 2008 was optimistic the wave of foreclosures was winding down, now refuses to make any predictions. “I can’t call the market anymore,” he said.

“Every time I think it’s letting up I’m wrong. So now I say that until jobs come back in the city of Toledo — good-paying manufacturing jobs — you’re just dancing on the grave,” said Mr. Modene, who has stopped using “foreclosed” signs and now uses a “HomePath” moniker, which is indicative of a home repossessed by Fannie Mae, or nothing at all.

Rod Culler, a foreclosure specialist with Welles Bowen Realtors, believes the situation “is certainly not nearly as bad as it was” when foreclosures were peaking in 2008 and 2009.

“I feel we have bottomed, and there are more alternatives to foreclosure that the banks are now offering, like short sales and deeds-in-lieu of foreclosure. Everyone is working to keep the owner in possession of the house,” Mr. Culler said.

Mr. Culler said the number of foreclosed property or real estate owned bank assets is shrinking. “It’s certainly not expanding the way it was and … I’m seeing a lot that has changed from five years ago. Five years ago we were just entering the foreclosure nightmare,” he said.

There is evidence to back up Mr. Culler’s instincts.

According to Securities and Exchange Commission filings by three of the top mortgage lending banks in the area, the amount of nonperforming mortgage loans is decreasing.

For 2011, Fifth Third Bank reported that its nonperforming and delinquent residential loans totaled $134 million, down from $152 million in 2010 and less than half of the $279 million reported at the housing crisis peak in 2009.

Huntington Bancshares reported its nonperforming residential mortgages totaled $68 million in 2011, up from $45 million in 2010 but down significantly from the $362 million it reported in 2009.

And PNC Bank reported nonperforming residential mortgages of $685 million in 2011, down from $764 million in 2010 and down from the peak of $955 million in 2009.

Also, total foreclosures in Lucas County reached their peak of 4,160 in 2009, but now are on pace to hit just more than 3,000 cases by year’s end — assuming no major increases.

That assumption is worrying both Gerald Meyer of DiSalle Real Estate and Jeff Bockrath of ReMax Preferred Associates.

“There may be fewer foreclosures coming through at this time, but I think this has more to do with the robo-signing problem of earlier,” Mr. Meyer said. “Last year the banks were pushing [foreclosures] through without proper paperwork and that stopped. So just because it has slowed it doesn’t mean there’s fewer out there. In fact, as I understand it, there’s a real backlog out there.”

Mr. Bockrath agreed. “The way the situation is now is there’s kind of a second round of foreclosures that will be hitting the market within the next six to 12 months,” he said. “The banks held up some foreclosures for the latest federal program and now in last 30 days they’ve started to let some of those foreclosures go through. I think it will be at least another three to five years before the situation gets better.”

Actions bogged down

Mr. Blomquist of RealtyTrac said in 2009 the government’s goal was to prevent as many foreclosures as possible, and so it created the Home Affordable Modification Program that allowed homeowners to modify their mortgages to help forestall foreclosure.

Then in 2010, the so-called robo-signing problem emerged, where some banks were found to be automatically approving loan modifications without ever examining loans or a property, calling a halt to many foreclosure proceedings until each situation could be scrutinized more carefully.

“With more intense scrutiny on the lenders and how they were processing foreclosure, that bogged down the process, and we’ve seen the average time it takes to foreclose on a property go way up, especially in states like Ohio that use a judicial system for the process,” Mr. Blomquist said.

“Those foreclosures under normal circumstances that would have happened in 2010 or 2011 are now going to go through 2012 and possibly even into 2013,” Mr. Blomquist added. “The time it took to foreclose on a property in 2007 in Ohio was 271 days. As of 2011, it’s now 486 days.”

While the foreclosure process drags out, it has severely damaged the nation’s housing markets, including metro Toledo’s.

The first casualty has been prices, which have been dropping steadily for the most part since 2008.

According to CoreLogic Inc., a real estate data firm in Santa Ana, Calif., metro Toledo home prices declined by 8.8 percent in January, the most recent data available, compared to the same month a year earlier.

Home prices have so skewed the nation’s housing markets that CoreLogic began separating out foreclosures to show what normal sales look like when distressed properties are not included.

For example, in January when distressed sales are excluded, home prices in metro Toledo fell by just 0.5 percent.

However, real estate agents say it is tough to separate out the damage foreclosures cause because foreclosures affect all housing.

“The longer they sit there, then they get vandalized, and then they’re really worth nothing,” Ms. Scheinbach said. “You get calls from neighbors saying, ‘The grass is growing long, it needs to be mowed.’ But what are you going to do?”

Better times ahead?

Local agents disagree about when the Toledo foreclosure situation will abate.

Mr. Culler thinks the situation will improve in 18 months, Mr. Bockrath, three to five years, while Ms. Przymierski fears that conditions are in place for it to go “on and on.”

However, all agree that the jobs market is closely tied to the housing market, and when the former turns around, so will the latter.

“The first flood of foreclosures came with buyers who had first and second mortgages and their adjustable rates went up,” Ms. Przymierski said. “We don’t see those adjustable rates anymore. Those dried up three or four years ago.”

The next wave, Ms. Przymiersksi said, were people who lost jobs or saw their incomes decrease.

“Now the jobs that we’ve got around here, you’re not finding the ones that pay $12 to $20 an hour anymore, the kind of jobs that are needed to keep up loan payments,” she said. “For first-time buyers, unless they have two incomes, they can’t even afford anything over $30,000 or $40,000. And if the wife gets pregnant or can’t work, that leaves just the one income.”

Mr. Modene agrees that the local economy is fueling the foreclosures, and the two are almost feeding off of each other.

“This is not the real estate career I signed up for 20 years ago,” he said. “The debris of human lives is staggering in Toledo, with empty houses and abandoned houses, damaged houses, and burned houses.

“Wages aren’t rising and that pushes people to make natural selfish decisions that they have to make for their own family. The bank and the second mortgage payment comes last. My first choices are: food, clothing, or gas in my car?” Mr. Modene said. “Until you rectify that situation, you’re not going to solve the [foreclosure] problem,” he said.

“The real estate market is now utterly controlled by the jobs market. You tell me when the jobs market will come back and I’ll tell you when the housing market comes back,” Mr. Modene said.Below are articles we think you will find informative.

Also: Read about: Bank of America rolling out foreclosure-avoidance program


Bank of America rolling out foreclosure-avoidance program

BY KENNETH R. HARNEY
WASHINGTON POST WRITERS GROUP

WASHINGTON — If you’re seriously underwater and headed to foreclosure, what would you say if the lender suddenly offered you the chance to remain in your home as a tenant for an extended period plus have your mortgage debt wiped away?

Would you say yes? Or would you instead conclude: Hey, why pay rent? It’s going to take the bank more than a year to complete the foreclosure and evict us, so why not just stay put and save some money?

One of the country’s largest banks is about to find out which choice significant numbers of distressed owners make in response to a new foreclosure-avoidance plan it calls “mortgage-to-lease.” Bank of America is sending proposals later this month to upwards of 1,000 customers in Arizona, New York, and Nevada. If the reaction is positive, the program is likely to be expanded to other states, and could become a model for the biggest players in the mortgage market — Fannie Mae and Freddie Mac.

Here’s how it works: The homeowners in the initial pilot tests all have been offered a variety of possible alternatives to foreclosure — loan modifications, forbearance on payments, short sales, and “deeds-in-lieu,” where the borrower hands the property title back to the bank and moves out. But they either have not been able to qualify or have not responded to the bank’s proposals. They’re essentially at the end of the line — there are no other standard-lender remedies available to keep them out of foreclosure. In fact, most lenders are speeding up the pace of foreclosures to get heavy loads of defaulted mortgages off their books.

In the mortgage-to-lease plan, borrowers are expected to deed back their homes to the bank and in exchange get multiyear lease terms at or slightly below the going market rent for their unit — provided they have monthly income to make the payments. There is no guarantee that at the end of three years, they will have a shot at repurchasing their home.

Bank of America officials readily acknowledge that they are unsure how many homeowners will take them up on their offer. “This is an experiment — we just don’t know,” said Dave Steckel, the bank’s home retention strategy executive. It’s entirely possible, he concedes, that some owners will simply choose to proceed to foreclosure. The plan has clear benefits for Bank of America. Because foreclosures generally trigger deeper losses to lenders than deeds-in-lieu of foreclosure, the bank gets back troubled properties at lower costs. Because it intends to sell those houses to investment groups as rentals with existing, income-qualified tenants, the bank expects to obtain overall higher returns than it would by selling them as vacant post-foreclosure units.

Leaders of some foreclosure-prevention groups had generally positive reactions to the concept.

“I’m glad to see the [lending] industry moving in this direction and away from their usual foreclosure, you’re gone, good-bye,” said Colleen Hernandez, president and chief executive of the nonprofit Homeownership Preservation Foundation. Not only might a mortgage-to-lease approach keep families in their homes, she said, but it should help local neighborhoods by cutting down on the number of vacant, deteriorating properties that create blight and depress real estate values.

Ms. Hernandez’s main concerns with mortgage-to-lease concepts — she emphasized that she has not seen Bank of America’s detailed version — is that they need to “offer an agreed-upon path back to homeownership” at the end of the lease period, and should provide counseling for borrowers in advance. Bank of America officials say their plan does not rule out repurchases but leaves it to the discretion of the investor.

David Berenbaum, chief program officer for the National Community Reinvestment Coalition, a nonprofit umbrella group, called mortgage-to-lease “a very compelling idea,” but only if the lender “has exhausted every other option” to keep people in their houses.