Delinquent debtors bail, leave partial developments

In 2007, John Buechner bought into what he thought would be a dream retirement home in a condominium complex off Mountain Creek Road.

Instead, Mr. Buechner and the other 27 buyers at the Village at Greenway have found themselves surrounded by unfinished condominiums and empty lots. Although he says he is happy with his own home and his neighbors, Mr. Buechner and others in the stalled complex say they are eager for the other 49 planned units — and a neighboring 100-lot subdivision that has only cleared lots and dirt streets — to be finished and occupied.

“The people here are great, but we obviously hope that the rest of the project can get back on track,” Mr. Buechner said.

The Village at Greenway, a 76-unit project begun two years ago, was one of a record number of properties faced with foreclosure in Chattanooga during 2007. Last year, Hamilton County Register of Deeds records indicate home foreclosures rose by nearly 11 percent to a record high of more than 1,000 houses.

The local increase was not as dramatic as in many markets, however. Nationwide, the number of properties entering the foreclosure process in 2007 jumped by 75 percent from the prior year, according to RealtyTrac, an online marketplace for foreclosure properties. In some hard-hit markets such as Stockton, Calif., foreclosures nearly tripled in 2007 compared with the previous year, RealtyTrac reported.

But the slowdown in home sales has hit home in Chattanooga with several projects stalled by financing or foreclosure problems. Sales at two downtown condominium projects — the Clark Centre at Main and Market streets and the Battery Place Condominiums near the University of Tennessee at Chattanooga — stalled late last year, and each face lawsuits in Hamilton County Chancery Court from condo buyers upset that the projects didn’t provide all that was promised.

The Clark Centre was forced into an involuntary bankruptcy in December.

An auction is scheduled for March 22 to help sell the rest of the unsold units in the Battery Place development, auctioneer Henry Glascock said.

“The market has certainly slowed, and some of the inflated prices are coming down,” said Mr. Glascock, who also appraises real estate. “But there are still buyers in the market.”

But with more sellers than buyers, another condo development next to the Village of Greenway — Wellstone Creekside — had its development loan yanked out last year by the lender and site work halted, said developer Rusty Criminger of Wellstone Communities. The lender, which Mr. Criminger declined to name, decided it had too many outstanding loans on its books.

“The public doesn’t need failed housing projects,” Mr. Criminger said. “All the banks are taking such a hit. It’s not just subprime loans but banks that were faced with reduced limits on how much their portfolios could make.”

The Village of Greenway’s foreclosure didn’t help matters, Mr. Criminger said. But he has recently signed on with a new lender and anticipates finishing site work within months, with construction of the project’s 100 condos starting in July.

BANKS GET CREATIVE

Chattanooga’s condo slowdown comes at a time when the Bush administration and six of the nation’s largest lenders are stepping up efforts to combat foreclosures. The administration on Tuesday launched Project Lifeline, an initiative in which the lenders will urge homeowners with loans that have been delinquent by 90 days to contact the banks. The lenders will delay the foreclosure process for 30 days to attempt to reach a solution with the homeowners.

“We want homeowners facing foreclosure to take the urgently required first step and reach out to their servicer, or housing counselor, and get started on a recovery plan,” Floyd Robinson, Bank of America Consumer Real Estate and Insurance Services group president, said in a statement.

Bank of America and the other five participants represent about half of the nation’s mortgages. Project Lifeline will be offered to homeowners with conventional mortgages, who were excluded last year from the Hope Now Alliance that offered foreclosure relief to people with subprime loans.

“How much long-term help it provides depends on how many concessions the lenders are able to make,” said Tina Christein, a local mortgage broker and president-elect of the Tennessee Association of Mortgage Brokers.

Locally, First Volunteer Bank, which provided some of the construction financing for the Battery Place condos, is offering special loan incentives to qualified buyers at the March auction, Mr. Glascock said.

“Lenders are being more innovative,” he said. “Flippers aren’t able to turn properties for quick profits like they did in the past. But home values haven’t been hit that hard in Chattanooga.”

One real estate agent said she blames the mortgage crunch and foreclosure fallout on lending practices in recent years.

“In all honesty, banks were willing to give money and were not concerned about how they (clients) could pay it back,” said Teresa Boyer, broker-owner of Best Realty GMAC. “People got in over their heads and couldn’t make payments.”

The 30-day foreclosure moratorium should help many homeowners, Ms. Boyer said, but not those with 100 percent loans and bad credit. Those people likely will have to use the 30-day grace period to find a Realtor to sell their home, she said.

Once calculations are complete, Chattanooga area home sales in 2007 should total about 7,450, the third-best year on record, according to a Chattanooga Times Free Press compilation of monthly sales data from last year. According to the Chattanooga Association of Realtors, 2006 had a record 8,407 sales.

BY THE NUMBERS

10.6 — Percentage increase in foreclosures in Hamilton County in 2007

75 — Percentage jump nationwide in properties entering foreclosure in 2007

11.4 — Percentage decline in home sales by local Realtors in 2007 compared with prior year

1,001 — Total home foreclosures in Hamilton County in 2007

Sources: Hamilton County Register of Deeds, Chattanooga Association of Realtors, RealtyTrac Inc.