Wayne County ranks worst in the nation for foreclosures
Defaults soaring in state
detnews.com
DETROIT -- Katherine Ben-Ami closed on 11 homes a minute Wednesday.
If she were the world's fastest real estate agent, that would be good news, but the sad fact is Ben-Ami is an attorney for the Wayne County Sheriff's Office, and in 35 minutes she supervised the auction of 379 foreclosed Wayne County homes.
"Wednesday's always been a big day," she said, "but not this big."
For hundreds of people each week, Michigan's sputtering economy literally hits home.
After recording more than 9,000 foreclosures in 2005, Wayne County ended January with 3,364 homes in active foreclosure, the highest of any county in the nation by more than 1,000, according to statistics compiled by Foreclosure.com of Boca Raton, Fla.
While Wayne County is ground zero, foreclosures are rising throughout Metro Detroit and Michigan. Active foreclosures in Oakland and Macomb counties and the entire state have doubled in the past two years.
The numbers illustrate one of cruelest side effects of the region's economic troubles. Every repossessed home is a broken American dream for families, who lose not only money and a home, but also give up years of happy memories and hopes for a solid future.
The burgeoning foreclosure rate also takes a toll on the larger community.
Lenders, stuck with the homes, lose up to $50,000 per house as they clear them out at below-market prices. That can lower property values in neighborhoods, pushing more homeowners to move out, and eventually hurt property tax collections for local governments.
"Foreclosure depresses an area in a variety of ways," said LaSalle Bank chief economist Carl Tannenbaum.
And these days, southeast Michigan has plenty to be depressed about.
Taken together, Wayne, Oakland and Macomb counties account for more than half of the state's 8,284 active foreclosures. By itself, Wayne records 40 percent of the state total.
"This is the worst I've ever seen," said Gary Meyers, a foreclosure specialist with Venturi Realty of Salt Lake City, who made his first trip to the Wayne County courthouse Wednesday. "I've been all over the U.S., and the most I've ever seen in a day is 30."
Job loss, overtime cutbacks and the state's moribund economy explain part of this trend.
Flat property values, a rise in risky loans and aggressive mortgage lending also play a role, experts say. But these problems alone don't explain why Wayne County homes are being foreclosed at a rate more than four times the pace in Oakland County, and more than seven times the rate seen in Macomb County.
Real estate and mortgage experts say much of Wayne's problem is caused by defaults in Detroit. The city suffers from high taxes and insurance, as well as many fee-laden, high-interest sub-prime mortgages. In addition, predatory lenders arrange mortgages for buyers who can't really afford them, while scammers engage in outright fraud when they take the mortgage money and run, leaving hapless buyers to lose their home.
"You want to buy my house?" asked the owner of a home on West Grand Boulevard during Wednesday's auction.
A few missed payments, a sub-prime refinancing and back taxes cost him his home.
The well-dressed, middle-aged General Motors Corp. line worker once owned the home free and clear. During a separation from his wife, he took out a 30-year mortgage but fell behind in the payments. He refinanced to a sub-prime loan charging 13 percent interest. But he had fallen behind on taxes, too, and now owes more than $64,000 to the lender, including $16,000 for taxes. Although he's declared bankruptcy, the home was excluded.
"My monthly payment went from $500 to $2,200 because of the negative escrow account," he said, asking that his name be kept out of the newspaper. He's selling the house, which he says is worth more than he owes on it.
"I've never tried to deny paying them," he said. "All of a sudden they want their money, and they're taking my house."
The first and most obvious reason so many homeowners are missing their mortgage payments would seem to be unemployment. Michigan posted one of the highest annual unemployment rates in the nation last year, and it's expected to keep edging up in 2006. But while disappearing paychecks are a factor, so are the shrinking paychecks brought about by cuts in overtime or total hours worked, experts say. Divorce or prolonged illness often lead to foreclosures.
"It's really three things: loss of income, reduction in income or substantial medical expenses," says Stuart Gold, a Southfield bankruptcy attorney.
Gold estimates that he sees 10 new clients a week, most of them rushing to forestall foreclosure.
"We've been in practice in southeast Michigan for over 20 years, and I think this is the worst I've ever seen it," he said. "It just seems to be increasing every month."
But just as much of a factor as job loss is the increase in loans for which homeowners borrowed up to 100 percent or more of the purchase price, or siphoned all the equity out of a property to pay off debts or get cash.
Then there are adjustable-rate loans, which ratchet up the monthly payment right behind interest rates, pushing a once-affordable mortgage payment out of reach.
These loans require little, if any, down payment and feature temporarily low interest rates help buyers get into a home they couldn't afford with a conventional loan.
"Many people are biting off more than they can chew," said Bettina Pearch, a counselor with Greenpath Debt Solutions in Allen Park. "I see a lot of people who are living for the mortgage. There's a lot of creative financing out there that is not really in the client's best interest."
Overly affordable loans leave buyers stuck if something breaks around the home or in their budget, whether it's a furnace, a roof, a medical emergency or a layoff.
Buyers often stretch finances to get into a home with a low- or no-down mortgage or a loan with initially low payments, and often don't have savings to fall back on. With little or no equity in the property, they can't borrow against the home for repairs or extra cash and can't refinance to put some breathing room in the budget.
Even selling the property is out of the question, since the owner would need to pay thousands of dollars in real estate sales commissions and closing costs just to get out from under the mortgage.
Budget counselors, lawyers, Realtors and lenders say they see many unprepared homeowners who don't realize just what they're getting into when they buy a house.
Many get tripped up by real estate taxes and homeowners insurance bills, often because lenders or brokers haven't explained the financial details. Under Michigan law, for example, the taxable value of a home is capped for homeowners, but the property is reassessed to reflect the market value when the home is sold.
Buyers who based their budget on those old, lower taxes are shocked when the newly adjusted bill shows up, often months after they've moved in.
Often, the lender demands a lump sum payment of a few thousand dollars for the tax escrow account, and raises the monthly escrow payment. If the buyer can't catch up, the lender pays the tax and moves to foreclose.
"Brokers are really trying to get people into homes," Pearch said. "Not everybody is destined to be a homeowner, nor should they be a homeowner."
Even with so many foreclosed homes, few actually sell at auction; most end up going back to the lender. In most cases, explained Ben-Ami of the Sheriff's Office, the homes are worth no more than what's due to the bank. At Wednesday's auction, three of the 379 houses brought bids -- all for just $1 over the amount owed.
"Last week, we sold one property to an outside bidder," Ben-Ami said. "When they find out what the people owe, they're shocked."
With the auction ended, she helped bundle the foot-high stacks of legal forms to be officially filed.
She would return Thursday to watch as another 148 homes went to foreclosure. |
