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05/27/2007
Crushing SalesMore home owners are struggling to make house payments
Shannon Lichty in front of her home West 11th Street in Traverse City. Lichty is trying to sell her house to avoid foreclosure. TRAVERSE CITY — Dawn and Scott Hentschel came within a sliver of losing their home after Scott, a construction worker, was laid off two months earlier than usual last fall. The couple saw a legal notice in the newspaper and then a note in the mail that said their bank planned to foreclose on the two-bedroom, ranch-style house they bought two years ago. "I was horrified,” Dawn said. "We have three kids. Where are you going to go next? I don't want my kids to be homeless.” Last year saw a crush of local foreclosures, and the rate is even greater this year. Grand Traverse County recorded 179 sheriff's deed sales in 2006, more than any other year this decade. This year, there have already been 108 through May 11. It's not just local. In the fourth quarter of 2006, 44 states saw an increase in the foreclosure rate, according to the Mortgage Bankers Association headquartered in Washington, D.C. Michigan was the third highest, with 2.39 percent of mortgages being foreclosed, twice the national rate of 1.19 percent. Only Ohio and Indiana were higher. In a typical foreclosure a homeowner receives notices from the bank for missing payments, before the bank places a foreclosure notice in the newspaper. The sheriff's department then includes the property in one of its regular foreclosure sales. After the sale, the owner has a set period of around six months to redeem the property by arranging an agreement with the high bidder or the bank. "What's different now is they're not getting redeemed,” Grand Traverse County Register of Deeds Peggy Haines said. "Most are going back to the bank. It used to be the majority would be redeemed.” That makes the Hentschels' story so far happier than many, despite difficulties they still face. They eventually negotiated a payment plan with the lender. Yet they're still scrimping to keep up the mortgage payment that is now almost $300 per month more than it used to be, on top of their other bills. And now Dawn is laid off from a job at a furniture store. "My son wanted to do karate. I can't even afford to sign him up for baseball,” she said. "My 15-year-old daughter, I can't afford to let her do driver's training. Getting in trouble Detective Sgt. Chris Barsheff has dealt with foreclosures as part of his duties for the Grand Traverse Sheriff's Department for four years. At first, he'd see eight to 10 cases per month. "I just did 11 or 12 in two weeks,” he said. There are many reasons for the increase, including the economy, lay-offs, or the overtaxing of home equity for medical bills and other emergencies. Another is the prevalence of subprime mortgages. Subprime loans have been popular for many people with less-than-stellar credit. The low rates often seemed attractive but were adjusted upward after two or three years, raising the monthly home loan payments. Borrowers also are more likely to seek a loan for 100 percent of a home's price rather than save up for a down payment. "In the era we live in, everyone expects a zero-down program,” said Dave Durbin, president of Bay Mortgage in Traverse City. That leaves little or no equity for the homeowner to borrow against to help keep the home. "Zero-down programs are excellent programs if they're drawn up responsibly,” Durbin said, adding that they were originally designed for people with high credit scores and are good for small business owners. Some in the housing industry say unscrupulous lenders are also partly to blame for the escalating number of foreclosure. In Leelanau County, foreclosures are currently twice the normal rate, said Ron Crummel, the county's housing coordinator. "I think there's some questionable practices by lenders in terms of lowering their standards to give loans to people who really shouldn't have loans,” he said. "The person doing the mortgage gets a big chunk of change for closing a mortgage. "But it isn't any one thing. Partly it's subprime and predatory lending, and then people are just getting overextended.” People should think ahead, but part of the responsibility also rests with the broker, Durbin said. "They can coach the borrower,” he added. Lenders are taking a cue from the crisis and "tightening up” the loans and will insist on at least a 10-percent down payment now, Durbin said. Counselors advise people to be wary when they are shopping for a home and figure all their expenses to predict if they will continue to afford it. "They might be going in with hopes that more income's coming,” Graham said. "Maybe they're getting more home than they can afford.” David Edge, assistant vice president of Northwestern Bank, said he sees more "life events” as the cause, such as divorce, medical emergencies and lay-offs. "Maybe you could afford it five years ago, but now you've got five kids and are divorced,” he said. Get help early By the time a deputy or process server tapes a note to a house telling the owners of the foreclosure, it's going to be difficult for them to save their home. "If they would contact me when they're getting notices from the bank, I can help them,” said Becky Gomez, a counselor at the Northwest Michigan Human Services Agency in Cadillac. When in a bind, people need to realize what help is available and not neglect a house payment in favor of other bills, officials said. "There is utility assistance but it's really hard to get financial assistance with your mortgage,” said Jesse Fitzgibbon, community services representative for the NMHSA in Traverse City. It's not necessarily too late to save the house when it goes up for sale, though it's harder. "I had one sale where the debtor and the attorney were working things out during the sale,” Barsheff said. "The attorney for the mortgage company canceled the sale.” That's rare, Gomez said. "With a foreclosure now on your credit record, it's very difficult to get the financing,” she said. Edge said his staff offers loss mitigation programs to everyone being foreclosed on. "The most common remedy is a payment plan; like payment plus one-third or one-quarter per month,” he said. "If they don't have the income and aren't going to have the income, that's another story.” An end in sight? Experts don't express optimism. "I think it's going to get much worse,” Fitzgibbon said. "People are still losing jobs. I don't see that it's going to get much better in the next year or so.” Edge agreed. "When people have to pay $3.50 for a gallon of gas, that's going to cut significantly into other areas,” he said. So what will all of the foreclosures leave in their wake? "I think we're going to see a lot of vacant homes,” said Lorie Selissen, a credit and housing counselor in Petoskey. People who've had a foreclosure may also be forced to live in a "lower standard of housing.” Dawn Hentschel is still concerned as her family does its best to get the crisis behind them. "We've made mistakes and we've learned from them,” she added. "But gas prices are high and jobs aren't what they used to be.”
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