It’s a roller-coaster ride in the Curry County home sale and foreclosure market these days, local real estate officials are saying.
At one end of the ride, non-judicial mortgage defaults plummeted 64 percent in July in the county over last month – and 67 percent in the year-to-year period. That translates to four notices in July compared to 11 in June, said John Helmick, CEO of Eugene-based Gorilla Capital, one of the nation’s leading purchasers of homes sold at foreclosure auctions.
A non-judicial foreclosure is one that doesn’t involve the courts and, under a Senate bill passed this April, requires lending institutions to provide homeowners counseling and mediation before foreclosing on a house.
As of August 30, there were 59 homes in Curry County for sale in foreclosure proceedings, and another 49 are scheduled to be auctioned, according to foreclosurelistings.com.
In the 19 Oregon counties in which Gorilla operates, there were 428 notices of default recorded in July, down from 1,138 in June. And there was a 38 percent year-to-year decrease compared to the 694 notices of default filed in July 2011.
A notice of default is the official beginning of the foreclosure process.
From there, the lender typically files suit to get the money owed – called a judicial foreclosure process. The lender then usually gets a judgement for the full amount of the debt and if the home sells for less than that – which is what happens most often when a house is “under water” – the homeowner owes the difference.
The judgment – the balance owed – can be sold and the new owner can garnish the wages and accounts and lien property of the former homeowner.
Whether the new legislation is good or bad depends on who one asks.
“For the consumer? Yes, it’s good,” said Bryan Little, president of Curry County Title in Gold Beach. “For the bank? No. It’s much more difficult to do a nonjudicial foreclosure now with the new rules. The homeowner counseling, mediation – it’s expensive. And the bank has to pay for all that.”
That can force more foreclosures into court, Helmick said.
“By modifying the foreclosure statutes, the legislature has begun a process that will ultimately cause thousands of Oregonians to be subject to judgment liens (for the difference in the settlement) rather than to have the underwater portion of their mortgage forgiven,” Helmick said. “If you are only looking at the non-judicial foreclosures, you’re only getting half of the story. Due to the new law, judicial foreclosures have risen sharply.”
Ally Leavitt, marketing manager of Gorilla, said those shouldn’t affect the courts too badly.
“It will not be such a huge stress or a burden courts can’t handle them,” she said. “The bigger issue is, it puts Oregon homeowners in court, and the money judgment remains against the homeowner. The judgment can be sold and the owner of the judgment can garnish the wages and accounts and lien property of the former homeowner.
“Thus, by modifying the foreclosure statutes, the legislature has begun a process that will ultimately cause thousands of Oregonians to be subject to judgment liens rather than to have the underwater portion of their mortgage forgiven.
That can hurt consumers, Little said.
“If you buy a house for $300,000 and sell it for $100,000, the bank can pursue you for the (difference),” Little said. “And a judgement will follow you anywhere; they put it on your credit report.”
Brookings First American Title recorder Sharon Stratton hasn’t seen that – yet.
She said she believes the new legislation has not only helped those who really need it, but that lending institutions and homeowners have been able to come to agreement and keep the matter out of court.
“It’s a good thing that’s helping people who really need to be helped – the people in dire straits,” Stratton said. “The banks now have to come out and give them an option.” I haven’t seen that much going to judicial.”
Little said it’s too soon to see if the legislation will work the way it was intended.
“If those properties all have to go into the judicial system, it’ll clog up the system,” he said. “If I was a consumer and knew my bank was doing a judicial foreclosure, it’d scare me. You go to judicial and they can take your house and get a judgement against you. It’s very rare that a judge will allow that, but it does happen.”
Curry County has fared a little better than other counties in the state, said Nieca Wright, president of the Curry County Board of Realtors.
“Curry County is a little less inundated with foreclosures because we’re a retirement community,” she said. “People buy outright.”
That, despite the fact there is little work and cost-cutting is going on at all levels of government and personal spending.
Yet sales are starting to pick up throughout the area, with homes selling for an average of $249,000, Wright said.
“Sellers are expecting more buyers to look because the interest rates are so low and prices have gone down,” she said. “Everyone seems pretty busy showing properties and writing offers. It’s a little more hopeful.
“But buyers are picky; they want the best they can get with the money they have available,” she added. “It’s harder to bring them together.”
And the market hasn’t quite hit bottom yet, industry officials agree. More foreclosures could be on the horizon.
“We’re supposed to get another influx of them; we’re not sure why,” Wright said, adding that lending agencies often hang onto properties rather than flood the market and make existing home values fall.
Wright says realtors are hearing from those in banking and financing industries that the market could see more foreclosed homes hit the market “pretty soon.”
What that means, however, Wright doesn’t know.
“We’ve been hearing it for three or four months,” she said. “Hopefully it isn’t true.”
Stratton has her fingers crossed as well, especially since initial closings have picked up “immensely,” she said.
“It’s doing really well,” she said, adding that she doesn’t know if another inventory of foreclosed homes is ready to hit the market.
“I think there’s been a bit better turn in the economy in the county. It’s still in sad shape, but it’s getting better.”