County’s foreclosures down 65 percent

Industry settlement could open floodgates, pushing rates back up

By Cami Joner, Columbian retail & real estate reporter

Published:

 

Clark County foreclosures

For February

2012: 134

2011: 384

2010 : 255

2009: 388

2008 : 259

Source: RealtyTrac Inc.

More information

Homeowners who want to find out whether or not they are eligible for mortgage or foreclosure relief as a result of the $25 billion industry settlement can contact the Washington State Attorney General’s office at 800-551-4636 or visit http://www.atg.wa.gov/Default.aspx.

Information is also available at: http://www.nationalmortgagesettlement.com.

Clark County’s number of foreclosures continued to fall for the 10th month in a row in February, according to a report issued Thursday.

In Clark County, year-over-year foreclosure rates decreased each month between May 2011 and February, when 134 homes were in some stage of foreclosure. The number was down 65 percent compared to the same month last year, reports RealtyTrac, which tracks foreclosure rates nationwide, and down about 20 percent from January, when 169 homes were in some stage of foreclosure.

Yet experts warn the descent could be fleeting as a national mortgage industry settlement has begun to clear away obstacles to the foreclosure process. National and state experts say lenders are finally prepared to remove long-delinquent properties from the books now that the legal framework for foreclosures as has been established by a $25 billion settlement with the nation’s five largest mortgage servicers.

“The settlement is helping clear the path for lenders to proceed with confidence,” said Daren Blomquist, vice president of California-based RealtyTrac Inc.

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 modify house payments. It also included money earmarked for checks to be written directly to some foreclosure victims.

Blomquist expects foreclosures to increase in Clark County and in Washington, following a course set by other states that, like Clark County, saw a dramatic decline in foreclosures. Fore

closures have now begun to rise in most of those states.

Blomquist said the increase followed a lull caused by the late-2010 debacle over bank “robo-signing,” in which major banks were accused of mishandling foreclosures with rubber-stamp signing.

“The decreases we saw in 2011 were so sharp and dramatic that they didn’t appear to be a natural thing,” Blomquist said.

The county’s rate of foreclosure in February dropped from the state’s third-worst to seventh-worst out of Washington’s 39 counties, according to RealtyTrac. Washington had the 35th highest foreclosure rating in the nation, with one in every 1,475 homes in foreclosure in February. Oregon ranked No. 20, with one in 956 households in some stage of foreclosure.

The good news for now is that fewer Clark County residents are losing their homes, said Glenn Crellin, associate director of housing research at the University of Washington’s Runstad Center.

However, Crellin cautioned the local pool of houses listed for sale could become flooded at some point when banks begin to market a backlog of foreclosed houses that have already been repossessed, properties called real-estate owned houses or REOs.

Crellin, whose center has focused on tracking bank-owned real estate, said banks brought in about 20,000 REO properties statewide in 2011. He said another 77,000 mortgages statewide are in some stage of delinquency.

“That would imply that we have almost four years worth of inventory across the state that has got to make its way through the snake,” Crellin said. He estimated it will take one year to sell off the statewide inventory of homes in foreclosure.

Flood the market

Those vacant properties in Clark County often stand in clusters in newer subdivisions and dot the landscape here and there in older neighborhoods.

Crellin said lenders are mindful of the potential affect on the market but need to reduce the inventory. He expects the pace of foreclosures to pick up speed through 2012.

“The lending institutions just have to get this stuff off of their books,” Crellin said.

At the same time, selling the houses at reduced prices will continue to put downward pressure on the values of surrounding homes, he said.

“If they dump too many (houses) on the marketplace at once, that could affect everybody’s properties, and it could put additional homeowners underwater,” Crellin said. Loans are “underwater” if the borrower owes more on a mortgage than the home’s market value.

That was something settlement negotiators tried to avoid, said David Huey, Washington’s assistant attorney general.

“Everything we did in that agreement was directed at making the marketplace better,” said Huey, who was on the executive team that negotiated the landmark settlement with the nation’s five largest mortgage servicers: Bank of America JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, formerly GMAC.

In particular, a portion of the $25 billion is earmarked for anti-blight efforts, including programs that would partner local governments with nonprofit housing groups to redevelop neighborhoods.

“If a particular neighborhood has been hit with a lot of foreclosures and abandoned homes, they can develop a program to get rid of those houses in a way that doesn’t affect the neighborhood,” Huey said.

State officials estimate it could take months to dole out portions of the settlement to recipients who lost houses to foreclosure or are falling behind.

Editor's note: This story has been modified to reflect a correction. In Clark County, year-over-year foreclosure rates decreased each month between May 2011 and February.