Peninsula suffers double-digit increases in home foreclosures
By Tom Callis, Peninsula Daily News
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According to RealtyTrac, which provides foreclosure information, 31 homeowners have received a notice of trustee sale meaning that their homes would be auctioned off within 90 days unless they can make the delinquent payments or file for bankruptcy in Clallam County from January through August.
From January through August 2007, 17 homes received a notice of trustee sale in Clallam County.
That is an increase of nearly 46 percent.
In 2007, a total of 28 homes received a notice of trustee sale in Clallam County.
Eight homes received a notice of trustee sale in Clallam County in 2006.
Kathy Miller, recorder for the Clallam County Auditor's Office, said she began to notice a sharp increase in foreclosure filings last summer.
"This isn't the good ol' days," she said.
In Jefferson County, 51 home owners received a notice of trustee sale this year through August.
From January through August 2007, 40 homes received a notice of trustee sale in Jefferson County.
That is an increase of about 22 percent compared to the same time last year.
A total of 73 homes in 2007 received a notice of trustee sale in Jefferson County.
In 2006, 66 homes received a notice of trustee sale in Jefferson County.
Jefferson County Auditor Donna Eldridge said that she easily expects that the number of notice of trustee sales will this year will surpass the total from 2007.
"If the trend holds, we could see an increase," she said.
Terry Roth, a private auctioneer in Clallam County, said about 20 percent of homes that are foreclosed are bought during the auctions that take place at the Clallam County Courthouse in Port Angeles.
The rest go back into the hands of the mortgage lender.
Roth said everyone on the economic scale is being affected.
In June, he said he posted a piece of property for foreclosure with a $4,300 per month monthly mortgage payment.
This year he has also posted a piece of property for foreclosure in Sequim assessed at $880,000.
A home in Port Townsend went back to the loan beneficiary for $607,500 in July.
According to RealtyTrac, Washington state with 2,024 notice of trustee filings in August ranked 21st on its list of state's with the highest level of foreclosures.
The top three states, in terms of number of foreclosures, are Nevada, California and Arizona.
Not all subprime
Most of the mortgage crisis that has affected the nation has been blamed on banks providing irresponsible loans to those with bad credit from about five years ago in hopes that a rising housing market of that time would allow them to come out on top.
Roger Kelso, First Federal senior vice president, said that's only part of the problem.
Both people with good and bad credit, were given bad deals while trying to take advantage of the rising housing market of the time.
Kelso said that historically, the definition of a subprime borrower is someone with a credit score as low as 580.
To make up for the low credit score, the lender would provide a loan to value ratio of 80 percent, meaning they are given a loan amount that is 80 percent of the value of the home, he said.
"In the old days, which weren't that long ago, it was a very sound way to make loans to people with less than stellar credit," Kelso said.
Kelso said this form of lending was successful, though there may still have been a higher level of default compared with borrowers with better credit.
"But that was not because of putting borrower in a product with no hope to support," Kelso said.
Then came the mortgage boom of the early 2000s.
'Exotic products'
With a rising housing market, Kelso said lenders began offering "exotic products" that would allow a borrowers to get homes they otherwise could not afford, or did not have the credit to attain whether or not their credit ratings were low.
These loan packages typically included adjustable rates that would increase over time.
The selling point to the borrower, Kelso said, was that property values would continue to rise, allowing the borrower to refinance and continue to pay the loan off.
"You're a good customer, but now you've got yourself into a product with a great deal of personal risk for you," Kelso said.
"Rather than not counseling, and saying you can't afford this, they say we know your income and property values will rise, let's give you a product with lower payments, and adjust the payments later on so we can get caught up."
The problem has been, Kelso said, that if property values had not gone up as expected, a borrower would be stuck with mortgage payments that may have increased three-fold within a few years.
Karen McCormick, First Federal president and CEO, said this occurred in 2007, when the housing market began to decline.
"It was not because you were a subprime borrower," Kelso said.
"It's because they gave you the wrong product.
"They were not interested in your needs."
Bites banks
In the end, Lynda Smith, Kitsap Bank credit administrator, said those lending practices came back to bite the financial institutions that practiced them.
"I think [Washington Mutual] is a good example of that," she said.
"Anybody aggressive in residential home loans are going to be caught up in having a high number of foreclosures."
But, Smith said, banks such as First Federal and Kitsap that have not made those kinds of loans are also affected.
Smith said this is due to foreclosures driving the housing market and property values down.
"We're all intertwined," she said.
Foreclosure hits home
Michael Castle, 62, of Port Angeles lost his home to foreclosure last month and recommends that when signing a mortgage:
"If you are never going to get that information, it means they screwed 'ya," he said.
"They are going to get their money and run. They know the loan is not going to fly in the long run."
"They can't force you to use their people," he said.
"Don't allow yourself to be forced into anything when it comes to your house," he said.
"It's something that you find out too late," he said.
Castle said he and his wife, Rebecca were able to meet the mortgage payments until February.
The home went to auction on Aug. 22. It did not sell, and therefore went back to Ocwen financial corporation as the beneficiary.
Castle, Rebecca and 20-year-old son Michael were told to vacate their $210,000 home by Sept. 12.
Castle said his wife works as a home health nurse in Olympia and will likely have a place to stay at Providence Hospital.
He is unable to work due to a back injury, he said.
"If I have to sleep in my van by the side of the road, I will," Castle said with a laugh.
"I can laugh at it now, because what else can you do?"
Two-year recovery
Kelso said questionable forms of lending had stopped as of summer 2007, due to the negative effects on both the lender and the borrower.
At that point, it was too late.
"It snowballed," Kelso said.
"It got too big before they even tried to put the brakes on."
Just as with economic cycle, it's going to take time, Kelso said.
The consensus among the lending industry, Kelso said, is that a balance will be reached in 2009 or 2010.
In the meantime, Smith said high foreclosure rates are to be expected.
Kelo said a "degree of normalcy" will return when there is a return of appreciation of property values and an upward migration of home ownership.
"These kind of lending practices, if we are lucky, will be gone for good," he said.
"They did more harm than good."
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Reporter Tom Callis can be reached at 360-417-3532 or tom.callis@peninsuladailynews.com.
BANKRUPTCY FILINGS ON the North Olympic Peninsula have risen substantially this year.
According to the United States Bankruptcy Court in Seattle, 89 bankruptcies occurred this year in Clallam County through June which is an increase of about 24 percent over the same time period last year.
A total of 68 bankruptcies were filed in Clallam County from January to June 2007.
The court said that 43 bankruptcies have occurred this year in Jefferson County through June which is an increase of 42 percent over the same time period last year.
A total of 25 bankruptcies were filed in Jefferson County from January to June 2007.
Last modified: September 27. 2008 9:00PM