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Foreclosure pain spreads
(St. Louis Post-Dispatch (KRT) Via Acquire Media NewsEdge) Jul. 27--Some people call mortgage foreclosure a silent crisis.
One that starts with unpaid bills and escalates to a sale on the courthouse steps.
One that leaves behind an empty house, and a family without a home.
One that, to look around, you might not even know is happening.
But it is, to 20 more families every day all over metropolitan St. Louis.
And it is expected to get worse.
St. Louis hasn't seen the scale of foreclosures that have stricken Nevada or Florida. Nor quite the despair of Detroit and parts of Ohio. Yet foreclosures are here, and they're happening all over the region, decimating working-class neighborhoods in north St. Louis County, stalling redevelopment in south St. Louis and spreading fast in the manicured cul-de-sacs of St. Peters.
In the first six months of the year, banks began foreclosure on nearly 5,000 St. Louis-area mortgages. That's more than twice as many as in the same period last year, according to Post-Dispatch analysis of data from RealtyTrac, which follows foreclosure activity.
Many of those people will lose their homes, which will fall into the hands of banks or investors who will try to sell them in the weakest housing market in years. Many will sit empty.
It's a trend made worse by a wave of risky lending undertaken by banks and mortgage brokers a few years ago. That's when subprime loans to people with poor credit or little loan-paying history proliferated. Today, almost 13 percent of Missouri home loans are considered subprime, according to the Mortgage Bankers Association.
And one-fifth of those loans -- roughly 10,000 in the St. Louis area -- are at least 30 days behind on payments. That number is expected to grow as thousands more see their adjustable-rate mortgages reset, triggering overnight spikes in their monthly bills.
Combine that with a stagnant economy and rising costs for many essentials, and experts such as Chris Krehmeyer, president of Beyond Housing, a St. Louis-based housing group, warn that the tide of foreclosures is about to grow even faster.
More and more loans are resetting upward, said Krehmeyer, whose group is one of several in the area counseling homeowners with risky mortgages. His position gives him a front-row view of how people cope: They juggle bills, put off other expenses, maybe skip a payment.
"But 90 to 120 days later," he said, "the jig is up."
'I DON'T BUY CLOTHES'
That's just about where Rochelle Adams stood when she sought help recently.
Two and a half years ago, she bought her first home, a two-bedroom just outside Florissant, for $125,400.
It was "exhilarating," Adams said, to have a place of her own, even though she worried at the time about paying the mortgage. She said she thought about backing out, but her lender put on the hard sell, even threatened to sue her, Adams said.
"Had I known then what I know now," she said, "I would have continued to rent."
Still, for two years, she made the payments, $930 a month, with the income from her job as a state social worker and a part-time job on the side. Then, in December, her mortgage reset. That $930 became $1,200, and her part-time job ended.
Since then it has reset again, down to $1,100. But things are tight.
"I'm still current," Adams said. "But that's because I don't buy clothes. I don't have cable. No cell phone."
Recently, she took out a title loan on her car to pay the mortgage. She's determined to stay out of foreclosure, to save her credit. But soon, she said, she may have to sell her house.
Adams was one of about 130 people who came to an "anti-foreclosure fair" held recently at an elementary school in north St. Louis. They signed up for counseling with Acorn Housing, which is helping homeowners restructure risky mortgages.
The key, they heard from counselor Pat Sivels, is to get help early, before the rates explode; and to work with lenders, through an independent counselor, to restructure into a more affordable fixed-rate loan.
Sivels has been a counselor for nine years, and foreclosures, she said, are nothing new. What's new is the sheer number of them.
"We've never had them at this level," she said. "I used to get maybe four or five people a month in my office. Now that's a day."
The problem, counselors say, is that too few people seek help, and many of those who do are beyond it. Of the hundreds who come through Catholic Charities Housing Resource Center, maybe one-third are able to stay in their homes, said agency director Karen Wallensak. The rest don't have the income or the time to work something out before the bank takes over. And the other outs that have helped people stave off foreclosure in the past -- selling the house or refinancing their loan -- are made much harder by the weak housing and tight credit markets.
"The market has taken away the traditional escape routes," Wallensak said. "Not only are sales slow, but values have dropped to the point where people can't get out from under their loans. It's just a real bad situation."
And so many of those houses end up at auction.
FRUITLESS AUCTIONS
On a Thursday morning last month, in the marble gloom of the lobby of the Civil Courts building in downtown St. Louis, a woman holding a clipboard and a stack of folders speed-read through legal notices from a podium. A couple of bored investors chatted about the lousy real estate market. Courtgoers wandered through. This is the final step in a foreclosure.
At 9 a.m. that day, 15 homes went on auction. At 9:30, two. At 10, another. And at 10:30, nine more. This scene plays out almost every weekday in the courthouse downtown. It's a similar scene in Clayton and in St. Charles. Hundreds of homes a week.
Few sell.
Typically, the banks seek what they're owed, which is usually more than a buyer will pay. One auctioneer estimated that, of the 600 to 800 homes she handles each month, 10 percent get bought at the courthouse. The rest become property of the bank, which puts them on the open market, and they sit, waiting for a buyer.
In the neighborhoods hardest hit by foreclosure, there may be several of these vacant homes on each block. They don't look much different than others in the neighborhood -- maybe the grass is long, maybe there's a "No Trespassing" sign taped in the window. But they're empty.
That emptiness has an impact. A study by the Fannie Mae Foundation found that each foreclosure depresses the resale value of its neighbors by 1 percent. In January, the Center for Responsible Lending estimated this would affect nearly 600,000 St. Louis-area homes, costing them, on average, $1,582 apiece.
There's a physical impact, too. Foreclosed-upon houses are much more likely to have code violations, St. Louis County officials say. High grass. Graffiti. Break-ins.
"Remember the broken window theory? It's true," said Kelly Kress, interim director of the Dutchtown South Community Corp. "If no one is giving the impression that they care, then no one cares."
In Kress' part of town, south St. Louis, many of the foreclosures have been vacant for a while, owned by investors and rehabbers who saw the growth in nearby Benton Park and Tower Grove South and thought it would extend further. And that highlights another fact about the local foreclosure situation: It has different origins, and impacts, in different parts of the region.
VANISHING SAFETY NETS
On the city's South Side, many of the foreclosed homes were owned by investors who got overextended when the market fell. In north St. Louis County, where towns such as Riverview and Jennings have seen about one-tenth of all homes go through foreclosure since 2005, the problems are most severe in communities that had high rates of subprime lending.
Often, experts say, longtime homeowners find themselves in trouble with bad refinance deals they signed in the subprime heyday.
In St. Charles County, where boom towns such as O'Fallon and St. Peters have seen a spike in recent months, counselors say some families got stretched too thin buying a house. As long as things went smoothly, they could make the payments, said Dottie Kastigar, with the Community Council of St. Charles County, but a job loss or health problem snowballed towards foreclosure.
"One thing pushes them over the edge," she said. "The finances are just too tight, and the safety net doesn't exist."
Wherever it happens, the effects are similar: Empty houses, lower real estate values and families moving in the wrong direction, as Kastigar put it, "from homeownership to homelessness."
The impact on the broader economy has been well-documented -- tighter credit standards, a glut of unsold homes, banks taking billions in losses -- but the long-term impact on neighborhoods where foreclosures are spiking is still being sorted out. What will happen in places that have been rebounding? Who will buy the thousands of homes flooding the real estate market? Where will homeowners wind up?
The answers may hinge on what happens to people such as Jerome Fellows.
He's a truck driver and father of two who came to a clinic last month looking for a way to save his house in Florissant. He bought it four years ago for $145,000 and was paying $960 a month. But now his interest rate has gone up and he pays $1,400, he said. Pile on insurance and taxes and utilities and it's more than he can afford, but he's trying to stay put at least until his son graduates from high school next year.
Fellows has tried to refinance several times, he said, but hasn't been able to yet. After he talked with some counselors and made an appointment to visit Beyond Housing, he still wasn't feeling overly optimistic. He wasn't ready to give up, either.
"All I can do is try," he said.
Jaimi Dowdell of the Post-Dispatch contributed to this report.
tlogan@post-dispatch.com -- 314-340-8291
To see more of the St. Louis Post-Dispatch, or to subscribe to the newspaper, go to http://www.stltoday.com.
Copyright (c) 2008, St. Louis Post-Dispatch
Distributed by McClatchy-Tribune Information Services.
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