SITTING EMPTY: Foreclosures, like this home in Frayser, decreased in October compared with the same month a year ago, but for the year they remain higher than 2007’s pace. The foreclosure rate is up 8.9 percent compared with last year. -- PHOTO BY ERIC SMITH

October was the epitome of one step forward, two steps back on the foreclosure front in Shelby County. While residential foreclosures decreased compared to the same month a year ago, they were up from the previous month. Also, the year-to-date figures remain high, and the toll that foreclosures are taking on home values in the area remains strong.

The good news is the 491 residential foreclosures in October marked a 2.6 percent dropoff from the 504 foreclosures in October 2007, according to real estate information company Chandler Reports, www.chandlerreports.com. The bad news is it represented an 8.9 percent jump from the 451 foreclosures in September.

Moreover, Shelby County has registered 5,328 foreclosures year to date through Oct. 31, an 8.6 percent increase from 4,906 in the same period of 2007.

Granted, the year’s foreclosure numbers are up, but Rhonda Rucker, housing counselor with The Works Inc., said the problem isn’t as widespread as it once was in her neighborhood of South Memphis, perhaps a sign that the overall situation is coming under control.

“It’s slowing down for me,” Rucker said. “I’m getting them here and there, but the mad rush is over.”

Closer look

The mad rush might be over and help in the form of federal aid for at-risk homeowners might be on the way, but the numbers remain excessive and eye-opening.

A closer look at October reveals that among the 491 foreclosures, 453 of them were on single-family homes, 12 were on Planned Unit Development detached homes and eight were on condominiums.

The top ZIP codes for foreclosures were the usual suspects. Frayser’s 38127 led all submarkets with 45 foreclosures. It was followed by Oakhaven/Parkway Village’s 38118 with 43 foreclosures, Southeast Memphis’ 38125 with 35; Raleigh’s 38128 with 33; and Westwood’s 38109 with 32.

Steve Lockwood, executive director of the Frayser Community Development Corp., was disappointed the Frayser area led the way yet again, and that it actually saw a slight increase year-over-year from October 2007, but he noted the numbers have begun to plateau somewhat.

“What we think, on the larger scale, is going on in Frayser is that we’re at least holding steady and that we’ve got the same number this year as last year,” Lockwood said. “There’s a lifecycle, and we can only have so many foreclosures here. We’ve lost homeowners, but we think it’s going to abate here. That’s still what we think is going on.”

More than subprime

Another trend of note from the most recent Chandler Reports data is the average number of years owned for foreclosed homes in 2008 was 7.7 years, a number that undermines the notion of subprime borrowers from the heyday of the mid-2000s being at the center of the mess.

Instead, it speaks to the overall economic downturn, noted Rucker, whose clientele isn’t comprised only of adjustable-rate mortgage borrowers or victims of predatory lending. Sometimes it’s just a matter of overwhelming debt coupled with a disappearing or diminishing income that leads to foreclosure.

“I’ve got people that have been in their homes for 15 years, 12 years,” Rucker said. “A lot of it is mismanagement of their income, and then a lot of it is job loss and layoffs.”

Of the 5,328 foreclosures in Shelby County through October, 44 percent – or 2,368 – already have been resold. The reselling of foreclosed homes on the surface is a good thing, since the homes aren’t sitting idle in some bank’s portfolio and therefore are less likely to become blighted.

But the resold homes were deeded, on average, at $31,000 less than the original purchase amount. That has a lasting effect on the surrounding homes for up to 450 feet, Lockwood said, and when there are two foreclosed homes in the area, it doubles the impact.

“It’s going to be a long, hard haul in righting the real estate market,” Lockwood said.

Long road ahead

A further sign the problem isn’t going anywhere can be found in the leading mortgage types for foreclosure in October. Conventional adjustable-rate mortgages and conventional fixed-rate mortgages tied for the lead with 94 foreclosures apiece in Shelby County last month.

They were followed by two mortgages taken at time of sale with 66; FHA fixed-rate mortgages with 56; and Veterans Administration fixed-rate mortgages with 15.

The notion that conventional fixed-rate mortgages are to blame as much as adjustable-rate mortgages speaks to the changing nature of foreclosures today. In other words, it’s not just subprime borrowers whose rates are resetting who are in jeopardy.

For Rucker, that means working to repair homeowners’ credit. While many Memphians have averted foreclosure – thanks to CDCs like The Works – they still pile up dings on their credit reports for delinquent bills, a trend that could lead to another foreclosure wave.

“People are now scrambling,” Rucker said. “The ones that do not have ARMs but are just trying to get interest rates reduced or try to refinance for a better interest rate, they’re the ones scrambling right now to get their credit scores together so they can refi.”

As Lockwood said, even as subprime lenders vanished, foreclosure and all its ramifications are firmly entrenched.

“Even if there’s not a lot of bad new loans being made,” Lockwood said, “we’re going to be dealing with the consequences of this thing for years to come.”

Chandler Reports is a division of The Daily News Publishing Co.