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VOL. 123 | NO. 49 | Tuesday, March 11, 2008

When Grown Men Cry: Feb. Foreclosures Cause For Further Suffering In Local Market

By Eric Smith

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"Most of these people - nine out of 10 - are in denial that they are going to end up losing their house or that they're in much worse shape than they realize. It is heartbreaking to see grown men cry, and we've seen that."

Beanie Self
Executive director, Southeast Memphis Community Development Corp.

Despite a wealth of news about the growing foreclosure epidemic in Memphis and Shelby County, many at-risk homeowners don't believe they're in jeopardy of losing their homes.

They don't understand that the interest rate on their adjustable-rate mortgages (ARM) has reset or will soon, and they're definitely not prepared for a monthly payment that's poised to balloon beyond their means.

Whether the blame lies in predatory lending or consumer ignorance or something beyond the homeowner's control, such as a medical condition, the foreclosure problem grows worse each day.

Beanie Self, executive director of the Southeast Memphis Community Development Corp., often meets these homeowners when it's too late - when foreclosure is a foregone conclusion.

"Most of these people - nine out of 10 - are in denial that they are going to end up losing their house or that they're in much worse shape than they realize," Self said. "It is heartbreaking to see grown men cry, and we've seen that."


Shedding tears

The heartbreak continued in February with another 517 residential foreclosures in Shelby County, according to the most recent data from real estate information company Chandler Reports, www.chandlerreports.com.

Foreclosures on single-family homes totaled 467, followed by 17 PUD-detached homes and eight condominiums. That's up from the 415 residential foreclosures in February 2007, but down from the 635 in January 2008.

The worst area for foreclosures again was the Frayser ZIP code of 38127, which had a county-high 53 in February. Frayser was followed by Raleigh's 38128 ZIP with 36 foreclosures, and then Westwood's 38109 ZIP and Oakhaven/Parkway Village's 38118 ZIP with 34 foreclosures each.

ARMs were the chief culprit, ranking as the top mortgage type with 126 foreclosures in the month. These loans continue to wreak havoc because of the large number of borrowers who were placed in subprime products over the last three years.


The vagaries of life

The subprime lending practice prevalent in 2004 and 2005 allowed consumers with less-than-stellar credit to buy a home, often one that was more expensive than they should have been in. Once their interest rates adjusted and the resultant monthly payment increased, many borrowers were unable to pay their mortgages.

Fault has been placed on buyers who weren't aware of the terms of the loans and predatory lenders who aggressively sought unknowing, first-time homebuyers. In many cases the borrowers succumbed to circumstances beyond their control, such as failing health.

Unable to work out the loans with their mortgage companies - or sometimes not knowing that option was available - thousands of local homeowners went into default and were foreclosed.

Memphis became an epicenter of foreclosures, routinely placing near the top of national lists ranking foreclosures per capita, according to Irvine, Calif.-based RealtyTrac Inc.

But the problem does go deeper than ARMs. Conventional, fixed-rate mortgages accounted for 103 foreclosures in February.


'The final straw'

Self's neighborhood, the 38125 ZIP code of Southeast Shelby County, had 29 foreclosures in the month, not quite the highest total but a devastating trend there nonetheless. And like other CDCs in high-foreclosure neighborhoods, the counselor in Self's office is inundated with new cases.

Self said her counselor, Mable Hudson, has been working seven days a week. She spends on average 10-20 hours with each homeowner, poring through household budgets and trying to find ways to save money and put it toward the mortgage. She works with mortgage companies on workout plans.

When Hudson was out of town recently, Self said the office received 50 messages for her in three days, evidence of a problem that's not only not going away but getting worse. And it's taking a toll on everyone from the victims to the counselors, from the affected neighborhoods to the industries involved.

"It is intense. It is an emotional roller coaster," Self said. "I'm not even doing it and I'm affected, and everybody in the office is because you hear these stories. It's like social work. I can see how you could burn out quickly."

Increasing awareness is imperative, Self said, but other salves are needed, such as rescue funds and accurate property assessments that don't destroy equity.

"A lot of these people are in situations they cannot afford," she said. "We sure as heck don't need an increase in taxes and appraisals - that will be the final straw."

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 41 41 17,762
MORTGAGES 70 70 23,138
FORECLOSURE NOTICES 1 1 4,519
BUILDING PERMITS 163 163 42,320
BANKRUPTCIES 50 50 16,741
BUSINESS LICENSES 14 14 5,795
UTILITY CONNECTIONS 113 113 25,287
MARRIAGE LICENSES 18 18 5,399

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