More than 50 percent fewer Clark County homes entered foreclosure in May, according to a Wednesday report, as new regulations and a national lawsuit forced mortgage lenders to negotiate with delinquent borrowers.
At least that's the theory of a local housing expert, who says short sales — in which the mortgage holder accepts a selling price that is less than the outstanding debt on the property — are fast becoming a preferable option to foreclosure.
The shift played out with a 54 percent decline in Clark County foreclosures in May, which dropped to a total of 151 from 329 foreclosures in the same month last year, according to California-based RealtyTrac Inc. Countywide foreclosures also declined for the 15th consecutive month, down from 170 homes in foreclosure in April.
"At the same time, we're seeing the percentage of successful short sales going up," said Kevin Gillette, executive director of the Community Housing Resource Center in Vancouver, which offers mortgage counseling to troubled homeowners, among other programs.
Gillette credits a new state law for slowing Clark County's rate of foreclosure, which turned in the fourth-highest rate of foreclosure out of the state's 39 counties in May, a decline from the third-highest the previous month.
"I think the mediation law is working," Gillette said, explaining that the law went into effect in July 2011, essentially forcing mortgage lenders to work with underwater and delinquent homeowners.
"It stops them from waiting it out and offering no resolution," he said. Some homeowners, he added, are finding the news isn't all bad.
Gillette has also seen evidence that a $25 billion national foreclosure settlement is helping clear the path for mortgage lenders to work with buyers to modify mortgages.
That February deal, negotiated by state attorneys general from
49 states, translated to $648 million for Washington's troubled homeowners, including money for mortgage counseling and to help the nation's top five lenders modify house payments. It also included money earmarked for checks to be written directly to some foreclosure victims.
Gillette also is seeing some foreclosure victims succeed in buying new houses, after having spent two to three years working to improve their individual and household credit scores.
"The hit to your credit score is exactly the same whether you've been through a short sale or a foreclosure," he said. "But I think a short sale will look better when you present your case and try to get back in the system."