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VOL. 125 | NO. 96 | Tuesday, May 18, 2010

Changing Tide

Residential foreclosures show signs of slowing

By Eric Smith

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The foreclosure crisis took an interesting twist in the past year.

No longer was the problem relegated only to blighted communities like Frayser, Raleigh and Hickory Hill.

Although those areas were still severely afflicted by loan defaults and vacant homes, the biggest foreclosure headlines of the previous 12 months centered on some of the area’s most ambitious projects and most prominent properties.

Nowhere has foreclosure been more of an eye-opening issue than the Memphis skyline, where the owners of four recognizable skyscrapers – One Commerce Square, The Horizon, the Goodwyn Condominiums and the Exchange Building – defaulted on loans and lost their properties.

Foreclosure then swept east into Midtown, hitting established buildings like the Towery Building and, more notably, the dozens of properties at Poplar Avenue and Cleveland Street slated for a major redevelopment.

Moving into the outer reaches of Shelby County, foreclosure struck large multifamily complexes like the Wyndridge Apartments and the Preserve at Southwind Apartments, setting a tone for new owners to buy distressed properties at rock-bottom prices.

The rise of foreclosure in the commercial sector doesn’t mean the residential side isn’t still having problems, but the latest numbers show the situation has perhaps peaked.

Shelby County saw 5,671 foreclosures during the past 12 months (May 2009 through April 2010), down exactly one foreclosure from 5,670 the previous period (May 2008 through April 2009), according to real estate information company Chandler Reports, www.chandlerreports.com.

The most recent data, however, mark a 7.9 percent decline from 6,154 foreclosures the prior period (May 2007 through April 2008), proof that the worst of the crisis appears to be in the rearview mirror.

The area with the highest incidence of foreclosure during the past 12 months was Frayser’s 38127 ZIP code, which had 474.

It was followed by Raleigh’s 38128 (453), Southeast Shelby County’s 38125 (319), Hickory Hill South’s 38141 (315) and Oakhaven/Parkway Village’s 38018 (311).

Of the top five, three ZIP codes (Frayser, Southeast Shelby County and Oakhaven) all saw declines of around 10 percent.

Steve Lockwood is executive director of the Frayser Community Development Corp., which helps residents deal with a variety of economic issues.

He said the most recent report – highlighted by declines in his community and others – is a welcome sign, but it doesn’t give the whole picture.

“The HUD (Housing and Urban Development) foreclosures hitting the market have gone down, but it’s hard for me to tell whether that’s just timing and the banks are bringing all of their foreclosures to the market,” Lockwood said. “The other thing we’ve seen is that some banks, in this very low-value market, are declining to foreclose.”

Lockwood said it’s possible for homeowners to be a year behind on their mortgage, but if the house is worth $14,000, the banks “don’t see any point in foreclosing on it.”

That scenario alone skews the numbers.

“The truth is, it’s hard for me to judge,” Lockwood said. “There may be more foreclosures looming where people are behind and the banks for tactical reasons aren’t bothered to foreclose.”

One of Lockwood’s housing counselors, Charia Jackson, has found success with a program called “Making Home Affordable,” designed to mitigate foreclosure.

Jackson has been placing clients in the program since the federal government launched it in early 2009.

The program gives borrowers who are at-risk for default a chance to modify or refinance their loans, and it also rewards them by paying down their principal $1,000 a year for five years.

And even though the process of moving from one step of the program to the next can be cumbersome and time-consuming, Jackson said, it is making a difference.

“It has been successful overall,” she said. “It’s a really good program and I’m glad they came up with it.”

Jackson said her clientele numbers in the first quarter of this year showed a slight decrease from Q1 2009. But many people are coming in at the last minute despite efforts to let them know that the sooner a problem loan is addressed, the more likely there can be a workout.

“We try to reach them, but I do get those calls where they have a sale date already set,” Jackson said. “But I’m willing to work with them as long as the servicers are willing to work with me.”

Rhonda Rucker, housing counselor at The Works Inc., said the number of people coming into her agency has “slowed down considerably,” but the number of lenders willing to do workouts or loan modifications has increased.

Rucker’s clientele today differs greatly from a year or two ago, when so many borrowers were saddled with adjustable-rate mortgages. Instead, unemployment or general “mismanagement of money,” she said, are the biggest reasons homeowners default.

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

PROPERTY SALES 57 280 1,209
MORTGAGES 55 244 916
BUILDING PERMITS 158 699 2,751