Chattanooga foreclosure numbers on rise again as banks resolve legal disputes

Chattanooga foreclosure numbers on rise again as banks resolve legal disputes

April 8th, 2012 by Dave Flessner in Business Around the Region

A foreclosure sign sits atop a for sale sign in front of a single-family home in Denver.

Photo by Associated Press /Times Free Press.

After a reprieve in 2011 from the previous five years of steadily rising property foreclosures, the number of Hamilton County properties lost to bad debts appears to be on the increase again.

In the first quarter of 2012, local foreclosures jumped by nearly 22 percent from the same period a year ago, according to filings with the Hamilton County Register of Deeds.

"Foreclosures in 2011 were artificially low because of some interventions and delays in processing foreclosures," said Daren Bloomquist, vice president for RealtyTrac, a leading online marketplace for foreclosure properties. "Because of that, we're going to see an uptick in 2012 as lenders catch up with some of those delayed foreclosures."

RealtyTrac projects about 1 million American homeowners will lose their properties to foreclosure this year, up from 804,000 last year.

In Hamilton County during the first three months of the year, lenders foreclosed on 308 properties, or 55 more than the same period of 2011.

Foreclosure Fallout

Such foreclosures not only cost hundreds of local families their property investments and forced them to find other housing. It also helped depress the value of other houses.

Last year, the Greater Chattanooga Association of Realtors estimated about one-third of all houses sold in Southeast Tennessee and Northwest Georgia involved foreclosed properties. Most were sold at prices below what the homes previously were worth.

"These properties are selling at distressed prices and often sell at 15 to 20 percent below the fair market value of properties in that neighborhood," said Mark Hite, president of the Greater Chattanooga Association of Realtors.

Over the past four years, the median price of homes sold by Chattanooga Realtors has dropped by more than 10 percent.

Improving Signs

But Hite noted that since the end of 2010, median sales prices in Chattanooga have tended to increase slightly or be stable in the quarterly reports prepared for the Chattanooga area by the Realtors group.

"We're in better shape in Chattanooga than many markets, but foreclosures are still going to be a part of our market for the next several years," he said.

Hite advises those trying to sell their homes to make sure they are well maintained with modern features "or you will be competing with distressed foreclosed properties that many buyers are drawn to and expect to pay far less to purchase."

But many home buyers are reluctant to buy most foreclosed properties, which may be damaged or not maintained, Hite said.

Since the housing slump began in 2007, banks and other lenders have initiated foreclosure action on 8.2 million properties across the United States, Bloomquist said. About half of those, or 4.1 million, ultimately have been foreclosed upon and the previous homeowner forced to leave.

Relief Programs

The federal government has launched several programs to help troubled homeowners stay in their houses and avoid foreclosure, including the widely touted Home Affordable Modification Program created in 2009.

"HAMP and similar programs have taken a small bite out of the elephant, but none of these programs has been a silver bullet," Bloomquist said.

Among those receiving a loan modification, 43 percent were later back in default or foreclosure, according to a study of HAMP by the Comptroller of the Currency.

RealtyTrac estimates 12.5 million homeowners are "under water" and owe more on their mortgages than their houses are worth after the decline in real estate values. Because banks didn't maintain or use proper documentation on many of the mortgages bundled and sold to other companies, many were unable to foreclose on properties last year.

Ultimately, the state attorneys general in all 50 states reached a settlement in February with five major banks. Under the agreement, the banks will pay $26 billion into a fund for counseling, loan modifications and other foreclosure relief measures.

But the settlement now allows banks to resume their actions against delinquent borrowers.

"Foreclosures are likely to go higher before they come down again, but fortunately we are beginning to see some positive signs in some markets," Bloomquist said.

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