Foreclosure pipeline tightens

The foreclosure landscape is slowly improving in the region and beyond as total foreclosures and mortgage delinquencies steadily trend downward.

Santa Ana, Calif.-based real estate data tracking firm CoreLogic (NYSE: CLGX) last month reported falling foreclosures in Springfield follow the nationwide trend. In the city, the September foreclosure rate was 0.95 percent, down from 1.3 percent the same month a year ago.

Marita Thomas, senior vice president and residential lending manager for Empire Bank, said the bank’s portfolio comprises about 3,000 mortgages and foreclosure volumes are currently only one per month – about half the rate two years ago.

Thomas said the work Empire’s loan servicing center and loan agencies have done, along with favorable laws in Missouri, have helped to improve the overall real estate market. “There are options out there to avoid foreclosure,” she said. “Foreclosure is always the last option.”

Missouri’s rebound
According to CoreLogic, the foreclosure rate in Missouri was 1.22 percent in September, the most recent data available, down from 1.52 percent. In the U.S., the foreclosure rate settled at 3.25 percent, below the 3.52 percent rate in September 2011.

The 90-day delinquency rate, a precursor of foreclosures, also has fallen – to 3.17 percent in the city, 4.14 percent in Missouri and 6.69 percent nationwide. Thomas said Missouri might be rebounding quicker from the mortgage crisis than some states, in part, because its foreclosure process moves faster than in more heavily regulated states such as California, where the process can take years to complete.  

Walt Nelson, associate professor of finance and general business at Missouri State University and a licensed real estate broker since 1975, said Missouri statutes simply require a published notice of foreclosure sale. Other states – where homeowners in foreclosure proceedings have to appear before a judge – have foreclosure backlogs that are slowing recovery, he said. “A lot of these markets got hammered real bad when the bubble went boom, so now it is just a question of how quickly can (foreclosures) be processed,” Nelson said.

Citing data from San Francisco-based real estate tracker Trulia, Nelson said the Springfield real estate market appears to be recovering more quickly. A Dec. 5 Trulia report shows 333 of 2,049 homes in Springfield, or roughly 16 percent, were in the preforeclosure, auction or bank-owned stages of the foreclosure process, while the hardest hit areas of the country reported at least one-third of their available homes at some stage in the process within the last 18 months, he said.

Blurred lines
While the landscape might be improving, one local business owner said many homeowners are still struggling to avoid foreclosures.

John Wiley of Crane-based Foreclosure Law LLC said many of his clients are still fighting with national mortgage companies to avoid foreclosure and stay in their homes.

“In 2006, we began to have concerns about some of the things law firms were willing to do for banks. It seemed like they were willing to blur some lines between bank, lawyer and trustee that previously had a little more separation,” Wiley said. “I frankly didn’t realize at that time what was beginning to happen.

“In 2010, we realized there was a real problem with the foreclosure process, so we began working with homeowners all over the state,” said Wiley, who ran renewable energy firm American Green Holdings until 2008, when the market slowed and he shut its doors.

What was happening, according to Nelson and Wiley, was a bust in the housing market predicated on loose lending practices.

“Countrywide and some of these other big conglomerates would bundle loans into billion-dollar chunks. In some cases, they would do that multiple times in a year, and they would sell those off to investors,” Wiley said. “They left the investors without having done the paperwork that they were clearly supposed to do.”

Wiley speculates insurance bets on bad loans led to many of his firm’s clients receiving bad advice and suffering unnecessary foreclosures.

“This idea that they want to work with people is a fraud,” Wiley said of national mortgage holders such as Freddie Mac or Fannie Mae.

Investors such as Fannie Mae and Freddie Mac, Thomas said, routinely purchase Empire’s home loans, but Empire’s loan-servicing division services those loans locally, working with borrowers if they get behind.

She said homeowners facing financial difficulties are often eligible for a forbearance plan or a reduced payment plan to avoid foreclosures.

Wiley, who operates a satellite office in St. Louis, said a bank’s willingness to work with people to prevent a foreclosure varies greatly.

“It does seem like during the last four or five months we have more banks that have started the thawing process and are being reasonable,” Wiley said, noting he’s handled more than 350 cases since starting his business two years ago and adds more than a dozen a month.

Nelson said the issues between banks and investors have led to a more stringent national lending environment.

“The lenders are frightened now because they’ve tightened up their underwriting standards because they don’t want mortgages shoved down their throat because they went into default,” Nelson said.