Foreclosure!
5,600 Brevard residents are on the brink of losing their homes
March 11, 2007
BY DONNA BALANCIA
and SCOTT BLAKE
A wave of home mortgage foreclosures is sweeping across Brevard County -- signaling a disastrous end to the local housing boom for those who could lose their homes.
More than 200 local mortgages have been foreclosed on in each of the last four months, and thousands more are in danger of being foreclosed, records show.
Many of the cases stem from homebuyers -- both residents and investors -- getting sucked into risky loans, with limited options to refinance or sell because of the recent decline in local property values.
Other buyers simply were overeager to get into the market when property values were surging, and underestimated the costs involved, a situation worsened by increases in homeowners' insurance premiums and property taxes since then, experts say.
Many of the foreclosures and homes vulnerable to foreclosure are in Palm Bay and Viera -- two areas of Brevard County that have had the highest volumes of new-home construction in recent years.
The trend is part of a rise in foreclosures nationwide, and especially in Florida, which ranked second in the nation in 2006 in foreclosures behind California.
In Brevard County, there were 982 foreclosures from November through February, more than double the 377 foreclosures during the same four-month period a year earlier, according to data provided by Brevard County Clerk of Courts Scott Ellis. The figures include some commercial foreclosures, but the vast majority are residential.
In addition, there are more than 5,600 local properties where the owners are at least two months behind in mortgage payments, according to RealtyTrac.com, a Web site that tracks such data.
"I think most of these cases are people who live in their homes and who bought into the market in the last couple of years," Ellis said.
The increase in foreclosures could be the start of a trend -- one that could get worse if the economy weakens, experts said.
"We're starting to see the beginning of the increase in foreclosures now," said Gene Collins, the former president of the Melbourne Area Association of Realtors and a Realtor who has handled foreclosure sales for banks and others.
If there is a marked downturn in the economy, "this could be seen as the tip of the iceberg," said David Brown, Bank of America professor at the University of Florida's Department of Finance, Insurance and Real Estate.
Experts said consumers, lenders and others in the real estate business share the blame, as they pursued windfalls during an unprecedented surge in housing values on the Space Coast from 2003 through 2005.
"There are a variety of factors here," said Steve Srein, founder of People's First Financial Services of Melbourne. "The first thing is people are not changing their lifestyles to pay for the loans they took on their homes. We've adapted to what I call 'The Easy Society,' in that we made it easy for people to get into houses with submarginal credit. Since they had submarginal credit, that puts them in the sub-prime category, ripe for a product like the exotic mortgage or the junk loan, or optional adjustable-rate mortgage."
"The problem today is that the people were pushed into loans they really couldn't afford," Srein said. "The real estate people and the mortgage brokers are saying the borrowers knew what they were doing. But, really, it's the optional (adjustable-rate mortgages) that are the big culprit behind the whole problem."
Mike Brown Sr., chief executive officer of Harbor Federal Savings Bank, said rising foreclosures probably are not all that surprising, considering some of the companies that have lent money for home purchases.
He cited practices by some mortgage companies that may "have been making more aggressive loans with teasers, options and other things."
What is worrisome about the rise in foreclosures is that it's not tied to a general downturn in the economy, David Brown said.
"You're getting a high level of defaults that are not associated with an economic downturn, people losing their jobs, things like that," he said. "It's probably troubling that there are these large number of defaults in this kind of environment."
Srein said the desire to own a home overpowered realistic thinking in many first-time homebuyers and second-time homebuyers -- those looking to move into something roomier.
"These people weren't prepared for what they were getting into," Srein said. "They weren't ready for phenomenal real estate tax increases and phenomenal homeowners' (insurance) increases. So if you take that element, and combine it with a person that isn't willing to make changes in their finances, you have defaults. If your habit is spending on lavish trips or spending on clothes, you need to cap the spending to keep your house. It's the wants versus the needs."
The other factor is that, in recent years, housing prices have soared in Florida overall, Srein said, "and the salaries have not."
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