Mortgage defaults expected to persist in Southcentral

WASILLA — Observers in the Matanuska-Susitna Borough and in Anchorage report scores of home foreclosures that began late last year and aren’t expected to taper off soon.

Before last winter, Realtor Uli Johnson was handling one or two foreclosures a year as broker at Wasilla’s Double Eagle Real Estate.

Right now, she’s dealing with 14.

“As of 10 days ago, we had 600 foreclosures in the state; another 300 are in the pipeline,” Johnson said. “And we expect another 300 before the end of the year.”

The Mat-Su accounts for about a quarter of those foreclosures, and Anchorage about half, she said.

One factor behind the national spike in foreclosures: a glut of high-risk lending practices, such as sub-prime loans or low down payments, that put buyers with poor credit histories in homes they can’t afford.

That leaves little room in case of a disaster — a layoff, medical bills — and less room for recovery.

“People were walking in with no money down, picking up these overpriced homes and some of them have lost their jobs, and divorces are happening,” said Roberto Garcia, broker/owner of A Team Investments LLC in Wasilla. “Suddenly they find themselves not being able to handle the mortgage.”

Cooling housing markets also tie in, with the housing booms of several years back giving way to sluggish sales, particularly in higher-end homes. Buyers end up with mortgages worth more than their homes.

LOCAL LINKS

Local housing markets do appear to be linked to some foreclosures, said Rick Ullstrom, a foreclosure attorney at the Anchorage law firm of Routh & Crabtree.

“In good times, with prices holding steady or going up, it’s easy before you go into foreclosure to find a buyer for property,” Ullstrom said. “When prices are going down, you’re going to have more trouble.”

Appraisals coming in below the purchase price is “not an epidemic, but it’s just something that’s started to pop up a little,” said Rod Jackson, Alaska area manager for Wells Fargo Home Mortgage in Anchorage.

“We’ve had a very, very aggressive market over the last few years,” Jackson said. “We’re getting to what’s more of a normal, stable market. I don’t think it’s anything glaring anyone needs to worry about.”

Observers say they expect the elevated numbers of foreclosures to continue through this year and maybe next.

POTENTIAL FOR DEALS

The trend makes for potentially sweet deals for savvy buyers and busy — though complicated — days for the real estate community.

For real estate agents, many working for big mortgage companies such as Fanny Mae or Outside banks, foreclosed homes bring rafts of paperwork and tasks: evictions, changing the keys, winterization, appraisals and basic disclosure duties such as checking for meth labs.

Angry former homeowners sometimes leave a wake of garbage and destruction when they go, kicked out of homes they bought but lost.

The evictions are the worst part of his job, Garcia said.

“People take it really personally;” he said. “They take the dishwasher and the stoves and the bathroom fixtures. They’re pretty mad. It’s pretty rough, especially when it’s a first-time buyer.”

Amanda Salmon, a Realtor at Century 21 North Homes Realty in Wasilla, found “trash and bones” in the yard of one of the foreclosed homes she’s getting ready to sell.

Johnson, too, describes damage from departing, disgruntled residents.

“In one house I think they locked the dogs in for two weeks, so you opened the door and you about fell over,” she said. “Rotten food. Cabinets torn off the walls, holes in the walls. Sometimes you look at a house, you come home, and you need to take a shower.”

For the buyer, a foreclosed home may come cheaper than a conventional purchase. But it comes with no guarantees, because there is no eager seller willing to negotiate, just a lender or mortgage servicing company trying to recoup costs and move on.

“Generally, it’s up to the buyer to beware. They need to be more aware,” Salmon said. “The buyer needs to identify concerns: roof, plumbing, heating. Inspection is very important. They have to be prepared to pick up projects.”

REALTOR, LENDER TIPS

Realtors and lenders offer myriad tips to help stave off foreclosure.

Nearly half the people entering foreclosure never contact their lender to work out some kind of solution, according to information provided by Wells Fargo spokesman David Kennedy. The Mortgage Bankers Association reports that on a national basis, mortgage lenders helped three out of four borrowers in the foreclosure process avoid a forced property sale and stay in their homes, Kennedy said.

Wells Fargo will work with homeowners on customized repayment plans to modify loans to re-amortize interest payments, or allow a “short sale” in which the customer sells the home to pay off the mortgage, even if the proceeds are less than the total.

Garcia advises his clients to buy a home only if they have three monthly payments in the bank.

Bottom line, the agents said: Don’t let yourself be talked into more house than you can afford.

“It’s just as bad to put somebody in a property they can’t handle as to never get them there,” Salmon said. “I’d rather be a renter than have a foreclosure under my belt.”

By ZAZ HOLLANDER, The Anchorage Daily News

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