Mortgage losses mounting
More area homeowners at risk as foreclosure proceedings double
L.E. BASKOW / Portland Tribune
Karen Rider (foreground), an agent for a trustee sale officer, conducts an auction of foreclosed homes on the Multnomah County Courthouse steps just inside the building.
Uncle Sam is bailing out Wall Street wheeler-dealers who invested in home loans, but there’s no relief in sight for the homeowners on Main Street.
On Southeast Main east of 144th Avenue, stretching from outer Southeast Portland into Gresham, 14 homeowners have been hit with foreclosure filings in the past year, plus scores more in nearby blocks.
• Judy Myer pawned her wedding ring and stopped taking prescribed medicines in a futile bid to save her Southeast Main Street home of 18 years, after husband Mark Myer lost his job and his unemployment benefits expired.
• Judy’s son, Steve, who lives down the street, got socked with foreclosure after his 7-year-old daughter required heart surgery. Steve took out a second mortgage to cover the medical bills, then fell behind on house payments after suffering an on-the-job injury.
• Across the street from the Myers, Ron Zitzewitz just got a six-month notice to vacate his mother’s home — one month after she died. Zitzewitz, 51, isn’t old enough to assume his mother’s reversible mortgage, and can’t refinance the loan because he’s permanently disabled.
Portland is no real-estate basket case like Las Vegas or Phoenix. But the national foreclosure crisis that initially spared Portland has arrived here in a big way, bringing more human suffering and dampening housing prices.
Foreclosure forum
Oregon’s presumed next attorney general, John Kroger, along with state lawmakers and community leaders, will host a town hall for people facing foreclosure or who think they were victimized by deceptive lending practices.
The event, called There’s No Place Like Home, takes place 9 a.m. to 2 p.m. Saturday, Nov. 22, at Portland Community College’s Cascade campus, Moriarty Auditorium, at the corner of North Killingsworth Street and North Albina Avenue.
The number of Multnomah County residents in jeopardy of losing their homes has nearly doubled in the last year, based on the number immersed in foreclosure proceedings. Over the spring and summer, 300 Multnomah County homeowners a month got slapped with foreclosure notices — topping the peak levels reached in the last recession of 2001-02.
In August 2007, the Portland area had an enviable 332nd-highest foreclosure rating among the nation’s 383 metropolitan areas. But by August 2008, Portland jumped to 254th-highest, according to First American CoreLogic, which provides real estate data services.
“There’s a shakeout right now, and we’re failing on all cylinders,” said Portland real estate economist Jerry Johnson.
Portland took longer than most cities to emerge from the last recession and didn’t get as overbuilt as other markets, Johnson said.
But Portland home prices kept rising during the last recession, he noted. If banks and besieged homeowners try to dump too many discounted properties, he said, “you could swamp the market and kill the guys who are OK.”
Home prices are sliding in large swaths of the metro area, especially in overbuilt sectors such as Portland’s condo market and suburban Happy Valley. In early October, in the 97086 ZIP code that includes Happy Valley, there were 247 homeowners facing foreclosure on top of 95 homes seized by banks, according to VisionCore, a division of First American CoreLogic.
Short sales drive down prices
Many overburdened homeowners, anxious to avoid foreclosures that soil their credit ratings, are resorting to “short sales,” in which they sell quickly for less than their home loan if the lender agrees to accept the lower amount. Banks also are auctioning off seized homes to investors looking for sweet deals.
Dumping all those distressed properties on the market, sometimes at fire-sale prices, is depressing home values for neighboring residences.
In a half-block stretch of Liebe Street southeast of Holgate Boulevard and 118th Avenue, four homes went into foreclosure in recent months. Investor Mark Bordcosh snapped up one of them, a three-bedroom townhouse appraised at $217,000, and offered it in an auction, with a minimum bid of $137,500.
“I’m basically getting the house at a discount and I’m selling it at a discount,” he said.
All parts of the city are seeing some foreclosures, though they are less common on the west side and close-in east-side neighborhoods, according to VisionCore. Portland working-class neighborhoods, especially in North Portland and the outer east side, are getting more than their share, as residents lose jobs or get burned by escalating interest rates on subprime loans.
Main Street doesn’t necessarily have the highest proportion of foreclosures. But it is representative of the outer east side — meaning it is seeing plenty of angst and misery.
Adversity is magnified
Southeast Main east of 144th Avenue, dotted with modest one-story homes and towering firs, has long been known as an affordable place to buy a home. But it’s no longer affordable to many longtime residents.
Mark Myer, 57, who lost his computer tech job after his company was sold, doesn’t expect any of the $700 billion Wall Street bailout approved by Congress Oct. 3 will trickle down to his end of the food chain.
“The people that are stomping on the individuals are the ones that got bailed out,” Myer said. “If they share and start helping out some people, fine. History shows they’ll just turn around and stomp on us again.”
Myer landed part-time work, but said employers have been reluctant to hire him now that there’s a foreclosure on his record. That’s despite 22 years’ service in the Navy.
Judy Myer stopped taking medicines a year ago for her anxiety attacks, high blood pressure and cholesterol. After two heart attacks, two back surgeries and anxiety problems, she’s not in good shape to work outside the home.
“I don’t know what’s going to happen. It’s just scary,” she said. “We’ll never be able to go out and have dinner and a movie.”
Her son, Steve, an automotive technician, was denied workers’ compensation benefits after his 2006 on-the-job injury. The injury was deemed connected to a pre-existing condition. He qualified for short-term disability payments, but that only covered 60 percent of his salary. It wasn’t enough to make full mortgage payments and pay his $10,000 hospital bill.
When his home lender demanded full payments on his mortgage, Steve threw up his hands. “I pretty much said, ‘Come and get it, there’s nothing I can do.’ ” he said.
The lender backed down and offered him a payment plan, Steve said. He was able to save the house for now, but said he’s still tapped financially.
A few doors down from the Myers, Trinidad Monje’s former Main Street home sits vacant, months after going into foreclosure. Judy Myer said it’s been languishing on the market at least two years.
Down Main Street near 148th Avenue, Maxsim “Max” Lysack said he was forced into foreclosure after his roommate died. He wound up doing a short sale — selling the home for less than his mortgage — in a deal worked out with the lender.
“I buy it for $285,000, and I sell it for $250,000,” Lysack said.
Ron Zitzewitz has lived on Main Street off and on since childhood. He doesn’t earn much from disability payments and income from a knife-sharpening business, and moved in with his mother.
Under her reverse mortgage, the lender takes a greater stake in the home’s equity each month, in lieu of mortgage payments. Zitzewitz can’t qualify for a new loan to refinance the $160,000 his mother owed.
The house should be worth about $225,000, he said. But Zitzewitz doubts he can sell it for anything close to that because the market is so sour.
Zitzewitz got married a few months ago, but so far his wife has been unable to find work.
“We’re going to have to find somewhere else to live.”
stevelaw@portlandtribune.com
See a map of foreclosures here.
See a chart of homeowners at risk here.
Check the RealQuest interactive map here.
Changes to bankruptcy code sought
Once Wall Street powerhouse Lehman Brothers gets to bankruptcy court, a judge will have the power to relieve some of its debts.
If an affluent Portland family declares bankruptcy, a judge can reduce the mortgage payments on their Oceanside vacation home.
But if a bankrupt single mother with a two-year-old Hyundai wants relief on her mortgage or car loan, forget it.
The U.S. bankruptcy code forbids judges to restructure loans on someone’s primary residence or car, if they’ve held the car less than 910 days.
Portland consumer advocate Angela Martin says it’s time to change this unequal treatment.
Letting an impartial bankruptcy judge rework troubled mortgages could keep many people in their homes, said Martin, who works on predatory lending issues for Our Oregon, a union-backed advocacy group.
“This is a piece that wouldn’t cost the taxpayers a dime,” Martin said. “It’s the same privilege offered to an owner of a luxury yacht.”
Banks might lose some profits, she said. But they would keep getting payments from their borrowers instead of being stuck with costly foreclosed homes. Property values wouldn’t plunge so much, Martin said.
Bankruptcy judges once had the legal authority to restructure home and car loans, said Keith Karnes, a Salem attorney. But Congress added an exception for car loans in the 2005 bankruptcy law overhaul, he said. The exception for a primary residence was added more than two decades earlier.
Bankruptcy judges can rework debts on “every other piece of collateral in the world,” Karnes said. “The consumer who has a car or a house really gets saddled with the worst of this.”
Democratic congressional leaders sought to restore the residential and auto provisions during negotiations over the recent Wall Street bailout. But the Bush administration adamantly opposed the idea, saying it was unfair to allow a rewrite of home loans after they’re issued, and that it could drive up lending costs and make it harder for people to get loans.
Coming months could be grim for stressed homeowners
The future looks bleak for distressed Portland homeowners, despite the looming $700 billion bailout of Wall Street investment firms.
Thousands of Portland-area homeowners with risky mortgages face big interest-rate spikes in coming months.
Area home values are slipping, and unemployment is rising.
Home lenders are in disarray, wary of issuing new loans that could help people refinance risky mortgages.
“We’re going to be hit within the next 12 months,” said Cheryl Roberts, executive
director of North Portland’s African American Alliance for Homeownership. The nonprofit group, federally certified to help people rework troubled mortgages, is adding a third foreclosure counselor to address an expected upsurge in demand.
Tom Cusack, a retired federal housing official who writes the Oregon Housing Blog, calculates that 17,600 Oregon homeowners have adjustable-rate subprime mortgages and other risky loans that will reset to much-higher interest rates in the next 12 months.
Interest rates for subprime and other risky loans typically are pegged to the London Interbank Offered Rate or LIBOR, which has rocketed in recent weeks.
“It’s going to be brutal,” said Steve Emory, senior loan officer at Pacific Residential Mortgage in Lake Oswego. “Most of those people will not be able to refinance out of those loans.”
Portland has a high concentration of homeowners with interest-only mortgages, and negative-amortization loans that permit homeowners to add to their loan each month. Last year, Portland-area residents registered the 33rd-highest use of interest-only loans among 333 U.S. metro areas, and 42nd-highest use of negative amortization loans, according to First American CoreLogic. Many loan programs that might have helped folks replace those risky mortgages don’t exist any more, Emory said.
Two new Federal Housing Administration programs designed to help at-risk homeowners have flopped, said David Feathers, a mortgage broker with Oswego Mortgage in Lake Oswego.
In one of the programs, distressed homeowners aren’t eligible for refinancing if they were delinquent paying their Target credit card or similar bills.
“That’s not reality,” he said, because homeowners are likely to experience problems paying their credit card bills if they’re behind on paying their mortgage.