Foreclosures will not budge, and neither will some homeowners

| Print |  Email
The Latest
Wednesday, October 20, 2010

By Jacq Lacy

As the number of foreclosures plateaus, more homeowners are sinking their heels into their properties, refusing to vacate repossessed properties. Some do not make a mortgage payment for more than two years yet refuse to budge according to real estate insiders. This is contributing to the bogged down state of the housing market and further muddying the far-from-cleaned-up mortgage mess.


Above: Mortgages in foreclosure and in delinquency in Oregon since 2005.  Source: MBA
Below: Total foreclosure activity last 12 months in Oregon.  Source: RealtyTrac
Real estate broker Margot Murphy, who deals in bank-owned properties, says she has seen an increase in the amount of people willing to risk foreclosure, repossession and eviction. 

Nine of Murphy’s 20 repossessed properties, currently on her desk, remain occupied.

The eviction process can take anywhere from six to eight months and by then the tenants usually leave before the court issues a lock-out, Murphy said. 

“The tenants are choosing to remain on the property. They are not afraid to face eviction,” Murphy said.

John Helmick, CEO of Gorilla Capital, a Eugene-based company that buys and sells the most foreclosed homes of any company in Oregon, sees a related trend. In February Helmick sold three homeowners their previously foreclosed homes with new lower mortgage rates. The owner never left his living room throughout the foreclosure process, Helmick said. Before this year, Helmick had never seen anything like it.

Helmick calls it an innovative refinance strategy. The family of a house in Marion County never moved out. Gorilla Capital bought the house at auction and within 24 hours sold it back to the homeowner for 56% of the original mortgage.

At least those homes sold. Many more are stuck in limbo as banks try to verify faulty foreclosure documentation, dragging out the process and further clogging the market.

State foreclosure prevention has also helped stabilize the number of foreclosures, said Darren Blomquist, a spokesman for RealtyTrac, a California-based real estate company that monitors foreclosures. But that does not change the number of people who choose to forego their credit rating because their homes are worth less than they owe on their mortgages.

As of the end of September, the U.S Department of Treasury's Hardest Hit Fund designated approximately $220.7 million to assist Oregon homeowners facing foreclosure. In addition, Oregon Housing and Community Services (OHCS) received a total of $31.4 million through the Neighborhood Stabilization Program (NSP) as of last week. Since 2008, NSP money has rebuilt foreclosed homes in 46 cities in Oregon for low and middle-income families. Also, 173 zero interest, $30-40,000 loans have been made to homebuyers across the state through NSP down payment assistance.

“NSP2 money is going like free beer at the fair,” Rich Malloy, NSP coordinator for OHCS, said.

Some homeowners who do not qualify for loan modification programs or cannot cash in on the opportunities offered by OHCS choose strategic default and walk away from the house. Others walk away from the mortgage, but not the house. Although hundreds of thousands of people across the nation take advantage of federal loan modification programs, Blomquist and Helmick continue to witness more people strategically allowing their homes to go to foreclosure.

When Gorilla Capital began buying foreclosure properties in 2002-2006, every house was a dump, Helmick said. The money was in the remodel. Now, the company buys homes refinanced in 2006-2007, at the peak of the market.

“In Bend and Medford prices are so far below that it’s not realistic to negotiate with a bank,” Helmick said. “They’re choosing to walk away from the mortgage of the house. Usually the house is vacant and pristine.”

Murphy would rather see a vacant pristine home than one occupied by someone who stopped paying the bills. Her clients will have to pay for an eviction lawyer in order to purchase the house she tries to sell them. In these cases, the homeowners have become squatters in their own abodes.

One bank asked Murphy to offer $500 to tenants to vacate a house in two weeks. She says the request was unrealistically low. After all, it took another bank months to deal with a similar situation in Tigard, and the bank ended up paying $10,000 dollars for the former owner to vacate a Bull Mountain property worth approximately $1 million in its glory days, Murphy says.

Murphy has a newly repossessed house in Portland on her desk that she has yet to visit.

“I can only hope the house will be vacant,”  she says.

Jacq Lacy is an associate writer for Oregon Business.

 

More Articles

Efficiency Boost

June 2015
Friday, May 22, 2015
BY JOE CORTRIGHT

How conservation stimulates the local economy.


Read more...

Modern design defines new Portland indoor market

The Latest
Thursday, June 25, 2015
thumbSnøhetta JBPM exterior www mir noBY KIM MOORE | RESEARCH EDITOR

An international architecture firm known for its design of the National September 11 Memorial Museum Pavilion in New York unveiled its plan this week for a modern indoor/outdoor food market at the foot of the Morrison Bridge in downtown Portland.


Read more...

Photo Log: The 2015 100 Best Green Workplaces in Oregon

The Latest
Wednesday, May 27, 2015
greenthumbPHOTOS BY JASON E. KAPLAN

Oregon Business celebrated the 100 Best Green Workplaces with an awards luncheon yesterday at the Nines Hotel in downtown Portland.


Read more...

Change at the pump?

The Latest
Tuesday, May 26, 2015
001thumbBY JASON E. KAPLAN | STAFF PHOTOGRAPHER

New Jersey and Oregon are the only two states in the U.S. that ban self serve gas stations. But these two holdouts may be ready to give up the game. New Jersey is considering legislation that would lift the state's ban on pumping your own gas. Oregon is considering smaller scale changes.


Read more...

6 things to know about the Amtrak Cascades route

The Latest
Friday, May 22, 2015
thumb3BY JACOB PALMER | DIGITAL NEWS EDITOR

The recent tragedy in Philadelphia has called attention to Amtrak and the nation's woefully underfunded rail service. Here are six facts about the Amtrak Cascades corridor between Eugene and Vancouver B.C. 


Read more...

No Boundaries

June 2015
Friday, May 22, 2015
BY AMY MILSHTEIN

Floor plans embrace the great wide open.


Read more...

Downtime with John Helmick

June 2015
Tuesday, May 26, 2015
BY JACOB PALMER

Live, Work, Play: CEO of Gorilla Capital.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS