Foreclosed property numbers double over four years
Hubbard County home foreclosures have risen 100 percent since 2005.
That's a number that concerns county recorder Nicole Lueth.
And it's a number that doesn't need to keep rising, Lueth and two Park Rapids lenders agree.
"The last thing we want is property back, believe me," said Mark Hewitt, CEO of Northwoods Bank. "We're not in the real estate business, we're in the lending business. We definitely work very hard with people trying to establish whether there's a plan or way that can make those mortgage payments.
"If it's a temporary setback, those are easy to work through," he said. "The biggest problem is that people don't come in. They bury their head in the sand, ignore it and hope it'll go away. "
To date, Lueth's office has seen 43 sheriff's certificates. That's how the recorder's office tracks foreclosures. A sheriff's certificate authorizes a foreclosure auction sale.
"Once they get three months behind in payments the banks generally will start foreclosure action, either by advertisement or foreclosure by action (through the courts)," Lueth said.
"Once that happens they determine a date for the sheriff to sell the property on a certain date," she said. "When that happens a document comes to my office saying it has been sold, to whom, and how much.
"It also says what the redemption period is," Lueth said. "It's generally six months on a residential property. If the lender determines that the property has been vacated and they prove that, the judge will generally reduce that (redemption period) to five weeks."
The 43 sheriff's certificates compares to 33 in 2007, 36 in 2006 and 20 in 2005.
"The numbers are kind of misleading because even though we might only have 30 or 40 of them this year, it's still a 100 percent increase for our county from a few years ago so it is concerning," Lueth said.
She sees almost no redemptions by the homeowners, "three or four a year, maybe."
Generally the homeowners are in too deep by the time foreclosure proceedings have begun.
Federal legislation, effective Aug. 1, requires lenders to work with homeowners in an effort to stall or reverse the foreclosure process. And that's what mystifies Hewitt, Lueth and Vickie Stewart, a real estate lending officer for Citizens National Bank in Park Rapids.
"We'll definitely work with them," Stewart said. "I think that's the advantage with a local bank. The customers should feel comfortable coming in and talking to a local bank because there are ways to work out of it most of the time."
When banks begin foreclosure proceedings, homeowners get a packet in the mail advising them about financial counseling, rights under the laws and hotlines to call for help getting their budgets under control.
"From what I've read about those hotlines, it seems like it's good information and it's good help and it's confusing to me why people don't take more action," Lueth said. "I'm guessing it's just too overwhelming."
Because most courts in Minnesota don't segregate foreclosure proceedings from other civil case filings, it's hard to get an area-wide picture of the total number of foreclosures in the region.
Numerous foreclosure Web sites have sprung up to track available properties, and those sites may be the best indicator of how many exist.
People interested in purchasing a foreclosed property can click on the links on each site and usually be directed to the seller, typically a real estate agent, bank or other party listing the property, to get additional information.
But because each site tracks foreclosures differently, the actual number of foreclosed properties varies from site to site.
"I suppose it depends at what point in the process they're considering it a foreclosed property," Lueth said of the conflicting numbers.
"This process can take two years," she said. Some of the properties listed may be in the pre-foreclosure stage, some may be in an auction, some might be listed only after the redemption period has ended and some may be FSBO (for sale by owner.)
"It's kind of a convoluted process," she said. "It's not clear what you're looking at" when the Web site's listings don't define what each site considers to be a "foreclosed property."
"My personal opinion of why we've seen some of these (foreclosures) is because the banks may have been giving out some loans they shouldn't have been," Lueth said.
Stewart said Citizens Bank hasn't tightened up its lending practices because it hasn't experienced anywhere near the level of problems reported nationally.
Hewitt said Northwoods pays more attention to appraisals, but said generally mortgage companies have given all lenders a bad reputation.
"We've always required verification of income and counseled on the ability to pay and tried to discourage people from over-extending and not getting into high payment, debt-to payment ratios," he said.
But the slowdown in real estate sales has complicated the appraisal process, he said. Appraisers rely on comparable sales to determine property values.
Comparable sales that occurred six months ago may not be a reliable indicator of a volatile market, he said.
Lueth said the bottom dropped out of the real estate market about three to four years ago.
"We have had a couple developers where things looked great in 2005 and 2006 and then they stopped selling," she said. "So they put in the money to survey and chopped up a big tract of land and for awhile they were getting $60,000 a lot and today they can't get rid of them for $10,000 a lot."
But Lueth said other factors have figured into the rising number of foreclosures.
"We have an awful lot of average joes (hurt by the economy) and whether or not they have an unexpected divorce or medical expenses, we don't know," she said.