Foreclosure data shows insulation in southwest Missouri

Foreclosure is a reality for many Americans in this economy, but statistics indicate that the trend has not hit the Show-Me State as hard as it has warmer-climate states such as Arizona, California and Nevada.

According to Realtytrac.com, which tracks nationwide foreclosure rates, one out of every 804 Missouri homes – 3,337 – is now in foreclosure. By comparison, in Arizona, one in 178, or 15,485 homes, are in foreclosure.

On RealtyTrac’s 2010 report of the top major metropolitan areas for foreclosures, all but one of the top 20 cities are in California, Nevada and Florida. The exception is Boise, Idaho, which is in the 20th spot. For Missouri, Kansas City and St. Louis ranked No. 74 and No. 94, respectively.

“We are fortunate not to have a lot of foreclosures in southwest Missouri,” said Scott Mitchell, a 27-year banking veteran and senior vice president at Regions Bank’s Battlefield Road location.

The hardest-hit areas, Mitchell said, are those where property values plummeted amid the recession, sometimes to the tune of 20 percent to 40 percent.

While national headlines have shown homeowners in some areas walking away from their homes, Mitchell said the foreclosures he’s seen have been due to homeowners not being able to pay instead of simply being unwilling to do so.

Still, he’s not ruling out the idea that the walk-away trend has reared its head in the Ozarks.

“I’ve talked to a couple of builders who are building homes as executive rentals,” he said. “They’re building these homes for the people who have walked away from a $2,500 house payment and greatly devalued property, but still want to maintain their lifestyle.”

And while national headlines also have painted banks as villains forcing people out of their homes, Mitchell said banks don’t really want to own real estate.

“We’ll do everything we can possibly do and will always typically work with the homeowner until it reaches the courthouse steps,” he said.

That may be because foreclosed property doesn’t come with much of a profit margin.

Keran Lemons, senior vice president and loan manager with Arvest Bank, said that during 30 years in the banking sector, he’s only seen an institution profit once on a foreclosure.

According to Federal Deposit Insurance Corp. call reports, Arkansas-based Arvest reported nearly $11.5 million worth of loans for residential properties in foreclosure in fourth-quarter 2010.

Though Lemons declined to disclose local volumes, the bank has seen some local foreclosures. Among them, in December, Arvest took possession of more than 1,300 acres of foreclosed property known as Terrell Creek Ranch for $7.5 million following an auction in Christian County, according to past Springfield Business Journal coverage.  

The foreclosure maze
Mitchell said most people, especially those who never had problems paying their bills until the recession, do not understand the foreclosure process. “Most people don’t understand that if their mortgage is due on the first, it is delinquent on the second,” Mitchell said. “We have what we call a grace period – 15 days without late fees – but it is actually late the day after the payment is due.”

Mitchell said collection calls will not typically begin until the 16th day, but if a homeowner is going to have problems paying, that is the time to start working with the bank.

“The worst thing they can do is dodge the collection calls,” Mitchell said.

Mitchell said if a homeowner goes more than one payment past due, the incidence of resolving the delinquency declines.

“If the homeowner gets two payments past due, the odds of catching up drops and there’s around a 75 percent chance we’ll end up in foreclosure,” he said.

Before the situation reaches that point, banks might offer loan modifications to give borrowers time to correct their default.

“The payment plans we offer is tailored to the specific circumstance,” Lemons added. “It may be an interest-only modification or recasting the payments.”

In fact, both Mitchell and Lemons said foreclosure is typically a measure of last resort.

“Ninety days is typically when it starts, but it may be more judged by the communication we’re having with the homeowner,” Lemons said. “If communication ceases, our number of options are minimized.”

Mitchell didn’t disclose Regions Bank’s local foreclosure volume, but an FDIC call report shows the Alabama-based bank had $723.7 million of loans secured by residential properties in foreclosure during fourth-quarter 2010.

The aftermath
While costs for foreclosure can vary greatly, Lemons estimated that they range between $2,000 and $5,000, which may be passed to the borrower.

Unless the bank has agreed upon a deed in lieu of foreclosure, in which the bank agrees to take the property back and not pursue legal collection action against the homeowner, the property owner is generally on the hook for the unpaid balance of the loan, as well as fees incurred up until the time of the foreclosure.

“They are liable for the balance we haven’t collected,” Lemons added. “The bank only wants the money back they’ve loaned, and a bank will typically always try to collect that money.”

Lemons used this example: A borrower owes $100,000 and accrues $10,000 in unpaid interest.

The bank assesses $10,000 in fees, which brings the balance owed to $120,000. If the home is sold at auction for $90,000, the borrower is still responsible for $30,000. Mitchell said the exception to pursuing collections from borrowers after foreclosure is if they are not gainfully employed or are considered “judgment-proof” and own no other attachable assets.

“If they are on Social Security or (Veterans Affairs) benefits, we cannot garnish,” Mitchell said.

If the bank bids on the property and owns it, additional expenses are accrued once the house is foreclosed, but the borrower is only responsible for fees up to the foreclosure.  

“We have to secure the property against theft and weather, turn off the utilities, have an appraisal, do repairs and hire a Realtor to go out and sell it,” said Mitchell, who estimated that Regions loses money on at least 75 percent of its foreclosures.

“We’re not in the business to sell property and would rather avoid getting to this step,” he added.[[In-content Ad]]