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VOL. 127 | NO. 12 | Thursday, January 19, 2012

Multiple Reasons Behind Drop in Foreclosures

By Andy Meek

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This time last year, Corky Neale was forecasting that the Memphis area had already hit its peak – for the time being – when it comes to foreclosure activity.

A look at the numbers for 2011 shows Neale, research director of the RISE (Responsibility, Initiative, Solutions, Empowerment) Foundation, was pretty much on target.

From 2010 to 2011, the number of foreclosures in Shelby County dropped about 14 percent, from 4,633 in 2010 to 3,994 in 2011, according to real estate information company Chandler Reports, www.chandlerreports.com.

There’s no question the area’s foreclosure numbers are down. The reasons why, however, are many – and they’re equally important, whether the arrow points north or south.

Some banks are moving more slowly in processing paperwork. Some borrowers are hanging on, avoiding a foreclosure auction by pursuing mortgage modifications. For others, well, if banks make fewer loans, that’s fewer loans going bad.

“I represent a lot of clients who are facing foreclosure, so I base my thoughts primarily on the volume of calls I’m getting,” said Memphis attorney Webb Brewer. “I had noticed I was getting fewer there for a while, although now around the first of the year it’s started to pick back up.”

Of about 30 Shelby County ZIP codes, only eight saw increases in the number of foreclosures between 2010 and 2011: 38002 (Arlington), 38017 (Collierville), 38103 (Downtown), 38115 (Hickory Hill), 38119 (Quince/Ridgeway), 38120 (River Oaks), 38135 (Bartlett) and 38138 (Germantown).

When it comes to foreclosure notices – the first warning that a home is in danger of being seized by a bank or lender – that pattern was about the same. Increases in foreclosure notices from 2010 to 2011 were evident in seven ZIP codes: 38133 (Bartlett), 38126 (South Memphis), 38120 (River Oaks), 38119 (Quince/Ridgeway), 38118 (Oakhaven/Parkway Village), 38107 (North Memphis) and 38053 (Millington).

It’s too soon to say whether that trend will hold for the near future. Brewer said one of the most common traits he sees in clients that come to him because of a foreclosure-related problem relates to loan modifications, short sales or some similar type of relief.

He’s also one of the local attorneys pursuing a federal predatory lending and foreclosure-related lawsuit on behalf of Memphis and Shelby County governments against Wells Fargo & Co. That suit is still in the preliminary stages.

“Everything I read on the national level still indicates there are a lot of foreclosures in the pipeline that are likely to get filed,” Brewer said. “I guess the biggest thing I see substantively is almost every one of these clients that seeks me out, they’re in a situation where they’ve sought a loan modification or a short sale or some sort of relief of that type and foreclosure might have gotten started in the middle of that.

“I think there’s a whole lot of that going on, and it continues to be a problem where there’s kind of a dual track of people trying to get some sort of relief either through modification or short sale and not being able to get a definitive resolution to that and getting into foreclosure at the same time.”

Shelby County’s nearly 4,000 foreclosures in 2011 included properties owned an average of about 8 years before the foreclosure. The 2011 total included almost 1,055 conventional fixed-rate mortgages and 434 conventional adjustable-rate mortgages, among foreclosures for which a loan type was known.

The biggest percentage drop in foreclosures was seen in the University of Memphis area’s 38111 ZIP code: 290 foreclosures in 2010 falling to 171 in 2011 (a 41 percent drop).

The Raleigh neighborhood is traditionally a hotbed of foreclosed property in Memphis, but in 2011, foreclosures in that 38128 ZIP code sank 14 percent, from 349 in 2010 to 300 in 2011.

Federal efforts are one question mark that could go a long way toward determining what the local foreclosure picture will look like as 2012 unfolds. An expanded federal program known by the acronym HARP – Home Affordable Refinancing Program – will get going around March or so, for example.

That program is intended to provide a way for homeowners currently trapped in underwater mortgages to try to refinance those loans.

Homeowners owing more than their house is worth is one contributing factor to foreclosure, and one area banker who declined to be named told The Daily News refinance activity should pick up steam soon because of HARP.

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

PROPERTY SALES 124 481 17,865
MORTGAGES 127 530 20,565
BUILDING PERMITS 195 891 36,836
BANKRUPTCIES 52 262 11,426