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VOL. 123 | NO. 101 | Thursday, May 22, 2008

Foreclosures Up 40.1% Since Last Year

By Eric Smith

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All the prevention programs, housing counseling and lender outreach aimed toward at-risk homeowners haven’t kept the local foreclosure problem from worsening.

In April, residential foreclosures rose 40.1 percent in Shelby County from the same month a year ago, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

The county recorded 608 residential foreclosures in April, compared to 434 in April 2007. And the latest month’s total represented an 11.6 percent increase from the 545 residential foreclosures in March 2008.

The situation appears to be heating up along with the imminent Memphis summer – and it shows no signs of stopping soon.

“Conventional wisdom is that it’s going to be tough for another year and a half, just because of the lending patterns,” said Steve Lockwood, executive director of the Frayser Community Development Corp. “There’s nothing mystical about it – these bad adjustable and fairly risky loans were made, and they’re going to be resetting at least for a year from now.”

Leading the way

Lockwood should know. The 38127 ZIP code of Frayser again led Shelby County in foreclosures with 53. It was followed by the 38109 ZIP of Westwood with 50 and the 38128 ZIP of Raleigh with 48. Those communities all were up from the previous month, and from the same month a year ago.

Of the county’s 608 residential foreclosures, 546 came from single-family homes, 12 came from condominiums, 12 came from planned unit development-detached homes, nine came from zero-lot-line homes and the rest from other types of properties.

Also, adjustable-rate mortgages (ARMs) led all mortgage types, accounting for 141 foreclosures. ARMs were followed by conventional fixed-rate mortgages (110), two mortgages taken at sale (82) and Federal Housing Administration fixed-rate mortgages (68).

Extremely popular in 2004-2005, ARMs featured a low teaser interest rate and corresponding low monthly payment, but the interest rates reset to much higher figures, meaning borrowers often can no longer afford the new monthly payments. ARMs have been the chief culprit in the skyrocketing foreclosure rate.

Despite the continued escalation of foreclosures in the county, however, Lockwood has seen some progress, at least in terms of inflated loans being lightened by lenders. In fact, the Frayser CDC’s success rate has improved, albeit with a caveat.

“Success is a pretty broad term,” Lockwood said. “It doesn’t always mean people get to stay in their house. But at least they may be allowed to do a short sale or they may be allowed to do a deed in lieu – something short of foreclosure – as well as making the loan affordable so they can live there.

“With all of those types of successes, if you put them together, our rates are improving.”

No end in sight

Like Lockwood in Frayser, Beanie Self has seen the foreclosure problem wreak havoc on the community where she works. As executive director of the Southeast Memphis Community Development Corp., Self works in one of the worst areas of town for foreclosures.

The Southeast Memphis ZIP of 38125 saw 39 foreclosures in April, up from 36 in March and from 24 in April 2007.

“Our office is still getting a steady increase in requests for help with foreclosure intervention, trying to work out modifications,” Self said. “We have not seen a letup at all, and I don’t think it’s going to let up for at least three quarters.”

Fortunately, Self and Dr. Phyllis Betts, director of the Center for Community Building and Neighborhood Action, are among the many Memphis advocates taking action.

The two were in Washington this week to bring the local fight to the nation’s capital. Betts spoke Wednesday at a House Oversight and Government Reform subcommittee hearing called “Neighborhoods: The Blameless Victims of the Subprime Mortgage Crisis,” hosted by U.S. Rep. Dennis Kucinich, D-Ohio.

The duo planned to ask for, among other things, more funding from the U.S. Housing and Urban Development’s Community Development Block Grant program, which the city could use for affordable housing projects and other community developments – in other words, something to combat a foreclosure problem that’s not going away anytime soon.

“It’s incredibly important that we try to tap into that because it’s not earmarked for specific funds like home funds or other kinds of things,” Self said. “It will help in stabilizing these distressed neighborhoods.”

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 133 1,342
MORTGAGES 0 131 1,047
FORECLOSURE NOTICES 0 19 170
BUILDING PERMITS 0 305 3,056
BANKRUPTCIES 20 118 736
BUSINESS LICENSES 27 53 329
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0