Homeowners Risk Chart

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Portland Tribune Thursday, October 16, 2008

Mortgage: Poorer areas are harder hit ■ From page 1 we’re failing on all cylinders,” said Portland real estate economist Jerry Johnson. Portland took longer than most cities to emerge from the last recession and didn’t get as overbuilt as other markets, Johnson said. But Portland home prices kept rising during the last recession, he noted. If banks and besieged homeowners try to dump too many discounted properties, he said, “you could swamp the market and kill the guys who are OK.” Home prices are sliding in large swaths of the metro area, especially in overbuilt sectors such as Portland’s condo market and suburban Happy Valley. In early October, in the 97086 ZIP code that includes Happy Valley, there were 247 homeowners facing foreclosure on top of 95 homes seized by banks, according to VisionCore, a division of First American CoreLogic.

Short sales drive down prices Many overburdened homeowners, anxious to avoid foreclosures that soil their credit ratings, are resorting to “short sales,” in which they sell quickly for less than their home loan if the lender agrees to accept the lower amount. Banks also are auctioning off seized homes to investors looking for sweet deals. Dumping all those distressed properties on the market, sometimes at fire-sale prices, is depressing home values for neighboring residences. In a half-block stretch of Liebe Street southeast of Holgate Boulevard and 118th Avenue, four homes went into foreclosure in recent months. Investor Mark Bordcosh snapped up one of them, a three-bedroom townhouse appraised at $217,000, and offered it in an auction, a miniForeclosure with mum bid of forum $137,500. “I’m basically Oregon’s presumed next attorney gener- getting the al, John Kroger, house at a disalong with state count and I’m lawmakers and selling it at a community leaders, will host a town hall discount,” he said. for people facing All parts of foreclosure or who think they were vic- the city are seetimized by deceping some foretive lending pracclosures, tices. though they are The event, called less common on There’s No Place the west side Like Home, takes and close-in place 9 a.m. to 2 p.m. Saturday, Nov. east-side neighborhoods, ac22, at Portland cording to ViCommunity College’s Cascade sionCore. Portcampus, Moriarty land workingAuditorium, at the class neighborcorner of North hoods, especialKillingsworth Street ly in North and North Albina Portland and Avenue. the outer east side, are getting more than their share, as residents lose jobs or get burned by escalating interest rates on subprime loans. Main Street doesn’t necessarily have the highest proportion of foreclosures. But it is representative of the outer east side — meaning it is seeing plenty of angst and misery.

Adversity is magnified Southeast Main east of 144th Avenue, dotted with modest onestory homes and towering firs, has long been known as an affordable place to buy a home. But it’s no longer affordable to many

TRIBUNE PHOTO: L.E. BASKOW

Karen Rider (foreground), an agent for a trustee sale officer, conducts an auction of foreclosed homes on the Multnomah County Courthouse steps just inside the building. longtime residents. Mark Myer, 57, who lost his computer tech job after his company was sold, doesn’t expect any of the $700 billion Wall Street bailout approved by Congress Oct. 3 will trickle down to his end of the food chain. “The people that are stomping on the individuals are the ones that got bailed out,” Myer said. “If they share and start helping out some people, fine. History shows they’ll just turn around and stomp on us again.” Myer landed part-time work, but said employers have been reluctant to hire him now that there’s a foreclosure on his record. That’s despite 22 years’ service in the Navy. Judy Myer stopped taking medicines a year ago for her anxiety attacks, high blood pressure and cholesterol. After two heart attacks, two back surgeries and anxiety problems, she’s not in good shape to work outside the home. “I don’t know what’s going to happen. It’s just scary,” she said. “We’ll never be able to go out and have dinner and a movie.” Her son, Steve, an automotive technician, was denied workers’ compensation benefits after his 2006 on-the-job injury. The injury was deemed connected to a preexisting condition. He qualified for short-term disability payments, but that only covered 60 percent of his salary. It wasn’t enough to make full mortgage payments and pay his $10,000 hospital bill. When his home lender demanded full payments on his mortgage, Steve threw up his hands. “I pretty much said, ‘Come and get it, there’s nothing I can do.’ ” he said. The lender backed down and offered him a payment plan, Steve said. He was able to save the house for now, but said he’s still tapped financially. A few doors down from the Myers, Trinidad Monje’s former Main Street home sits vacant, months after going into foreclosure. Judy Myer said it’s been languishing on the market at least

Changes to bankruptcy code sought

COURTESY OF VISIONCORE, A DIVISION OF FIRST AMERICAN CORELOGIC

Orange and yellow signs show homes that were in foreclosure proceedings in early October. Green signs show properties seized by lenders. To view properties in foreclosure near your home, go to www.realquest.com. Fill in your address in the search box near the top of the screen.

Homeowners at risk The number of Multnomah County homeowners getting slapped with “notices of default” on their mortgages has almost doubled in the last year, and is topping levels seen during the 2001-02 recession. Such notices are a required step before a lender seizes the home via foreclosure and sells it. Figures show average monthly default notices for each quarter. 350 300

232

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306 200 150

129

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2002

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2008 TRIBUNE GRAPHIC: PETE VOGEL

Source: Multnomah County

two years. Down Main Street near 148th Avenue, Maxsim “Max” Lysack said he was forced into foreclosure after his roommate died. He wound up doing a short sale — selling the home for less than his mortgage — in a deal worked out with the lender. “I buy it for $285,000, and I sell it for $250,000,” Lysack said. Ron Zitzewitz has lived on

Q3 Q4 Q1 Q2

2007

Main Street off and on since childhood. He doesn’t earn much from disability payments and income from a knife-sharpening business, and moved in with his mother. Under her reverse mortgage, the lender takes a greater stake in the home’s equity each month, in lieu of mortgage payments. Zitzewitz can’t qualify for a new loan to refinance the $160,000 his mother owed.

The house should be worth about $225,000, he said. But Zitzewitz doubts he can sell it for anything close to that because the market is so sour. Zitzewitz got married a few months ago, but so far his wife has been unable to find work. “We’re going to have to find somewhere else to live.” [email protected]

Coming months could be grim for stressed homeowners The future looks bleak for distressed Portland homeowners, despite the looming $700 billion bailout of Wall Street investment firms. Thousands of Portland-area homeowners with risky mortgages face big interestrate spikes in coming months. Area home values are slipping, and unemployment is rising. Home lenders are in disarray, wary of issuing new loans that could help people refinance risky mortgages. “We’re going to be hit within the next 12 months,” said Cheryl Roberts, executive director of North Portland’s African American Alliance for Homeownership. The

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nonprofit group, federally certified to help people rework troubled mortgages, is adding a third foreclosure counselor to address an expected upsurge in demand. Tom Cusack, a retired federal housing official who writes the Oregon Housing Blog, calculates that 17,600 Oregon homeowners have adjustable-rate subprime mortgages and other risky loans that will reset to much-higher interest rates in the next 12 months. Interest rates for subprime and other risky loans typically are pegged to the London Interbank Offered Rate or LIBOR, which has rocketed in recent weeks.

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“It’s going to be brutal,” said Steve Emory, senior loan officer at Pacific Residential Mortgage in Lake Oswego. “Most of those people will not be able to refinance out of those loans.” Portland has a high concentration of homeowners with interest-only mortgages, and negative-amortization loans that permit homeowners to add to their loan each month. Last year, Portland-area residents registered the 33rd-highest use of interest-only loans among 333 U.S. metro areas, and 42nd-highest use of negative amortization loans, according to First American CoreLogic. Many loan programs that might have helped folks re-

place those risky mortgages don’t exist any more, Emory said. Two new Federal Housing Administration programs designed to help at-risk homeowners have flopped, said David Feathers, a mortgage broker with Oswego Mortgage in Lake Oswego. In one of the programs, distressed homeowners aren’t eligible for refinancing if they were delinquent paying their Target credit card or similar bills. “That’s not reality,” he said, because homeowners are likely to experience problems paying their credit card bills if they’re behind on paying their mortgage. — Steve Law

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Once Wall Street powerhouse Lehman Brothers gets to bankruptcy court, a judge will have the power to relieve some of its debts. If an affluent Portland family declares bankruptcy, a judge can reduce the mortgage payments on their Oceanside vacation home. But if a bankrupt single mother with a two-year-old Hyundai wants relief on her mortgage or car loan, forget it. The U.S. bankruptcy code forbids judges to restructure loans on someone’s primary residence or car, if they’ve held the car less than 910 days. Portland consumer advocate Angela Martin says it’s time to change this unequal treatment. Letting an impartial bankruptcy judge rework troubled mortgages could keep many people in their homes, said Martin, who works on predatory lending issues for Our Oregon, a union-backed advocacy group. “This is a piece that wouldn’t cost the taxpayers a dime,” Martin said. “It’s the same privilege offered to an owner of a luxury yacht.” Banks might lose some profits, she said. But they would keep getting payments from their borrowers instead of being stuck with costly foreclosed homes. Property values wouldn’t plunge so much, Martin said. Bankruptcy judges once had the legal authority to restructure home and car loans, said Keith Karnes, a Salem attorney. But Congress added an exception for car loans in the 2005 bankruptcy law overhaul, he said. The exception for a primary residence was added more than two decades earlier. Bankruptcy judges can rework debts on “every other piece of collateral in the world,” Karnes said. “The consumer who has a car or a house really gets saddled with the worst of this.” Democratic congressional leaders sought to restore the residential and auto provisions during negotiations over the recent Wall Street bailout. But the Bush administration adamantly opposed the idea, saying it was unfair to allow a rewrite of home loans after they’re issued, and that it could drive up lending costs and make it harder for people to get loans. — Steve Law

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