Virginia foreclosures skyrocket

RICHMOND—The number of foreclosures in Virginia doubled during the first 11 months of 2008, compared with all of 2007.

Data analyzed by the Richmond Times-Dispatch show 27,938 foreclosures statewide in the 2008 period for all property types, including single-family homes, businesses, condominiums and lots. In 2007 in Virginia, the total was 14,022, an increase of 99.2 percent. 

Nationally, an estimated 2.2 million homes in the U.S. were in foreclosure in 2008.

Just as many homes, if not more, are at risk this year, and industry experts say the problem isn’t likely to subside until 2010.

Residential foreclosures cut across all income levels and house styles and prices: A foreclosure is a boarded-up house for $26,900 in a modest area. Or it’s a new $1.9 million mansion in a more expensive one. Both were foreclosed and repossessed last year by lenders in the state.

Virginia has fared better than most states in its mortgage delinquency and foreclosure rates. Still, areas such as Northern Virginia are among the nation’s hardest hit.

Prince William County — with the highest number in the state — recorded 7,672 foreclosures through November, more than three times as many as in the Richmond area. Loudoun County saw nearly as many foreclosures as the Richmond region, with a total of 2,073. Also stung are more rural areas such as Caroline County.

Caroline is a growing area between Richmond and Fredericksburg. Builders may have been overly optimistic in assessing how fast the area would grow, housing experts say.

“Foreclosures are not all low-income — that is the misconception,” said Brian Liggan, co-owner of Virginia Capital Realty in Richmond, which deals exclusively in selling repossessed properties for lenders.

Lenders aggressively lower prices if properties don’t sell within designated time periods, Liggan said. “It’s a price-driven market. Everything sells once the price gets right.”
The biggest price jumps, hence the most foreclosures in Virginia, are in the northern part of the state. Yet even areas with relatively low foreclosure problems such as the Richmond region have pockets of housing with a high concentration of foreclosures, according to the report. In Henrico, foreclosures increased more than 1.8 times more in the first 11 months of 2008 than in all of 2007. The county recorded 428 foreclosures in 2008.

Areas with large numbers of foreclosures in general have the most subprime loans, according to the Fed report. In 2000, about 750,000 subprime mortgages were made in the U.S., according to the Fed. In 2005, the number increased to 2.2 million.

“Subprime loans are an important part of the foreclosure wave, because even though they comprise only 12 percent of all mortgages, they make up over half of all foreclosures,” the Fed report noted.

What’s more, most people facing foreclosures have been in their houses less than three years, according to data from Housing Opportunities Made Equal of Virginia Inc.

“Many couldn’t afford these loans in the first place,” said Connie Chamberlin, president and chief executive officer of HOME.
Foreclosures are the hidden tragedy, she said. People who lose their houses go into emotional hiding, she said. “The impact on the family is unbelievably hard. They don’t want their neighbors to know what happened to them.”

Although lenders have clamped down on lending requirements, virtually eliminating risky loans, the bad loans are still making their way through the system.
Jay Brinkmann, chief economist for the Mortgage Bankers Association, said foreclosures were expected to subside this year, but the recession kicked in.

“The effects of job losses and general economic deterioration make the 2009 outlook worse,” he said, “particularly if mortgage problems become more widespread.”

Carol Hazard is a staff writer at the Richmond Times-Dispatch. Special Projects Editor Randy Jessee contributed to this report.

Frequently Asked Questions

● When should I call my loan servicer?

Contact your loan servicer as soon as you know you will have difficulty meeting your mortgage payments. Don’t wait until your interest rate resets or you are behind in your payments.

● When do I actually get foreclosed on?

When the loan is 72 days delinquent and there is no contact with the borrower, the loan is recommended for foreclosure and referred to an attorney to start foreclosure.

● What is a repayment plan?

A plan that allows you to become current and catch up on missed payments.

● A sign on a utility pole in my neighborhood offered help. Should I call the number?

Beware of scams! Solutions that sound too simple or too good to be true usually are.

Source: Virginia Foreclosure Prevention Task Force

The Foreclosure Process

Foreclosures in Virginia can move through the system swiftly — typically in four months:

First late-charge notice: Issued on the 17th day of delinquency. Collections and other letters are sent between the 18th and 37th days. On chronic accounts, collections begin as early as the 10th day of delinquency.

On or about the 37th day: A Housing and Urban Development letter or a breach of contract letter is issued. The HUD letter gives the borrower seven business days to respond. The breach letter provides a 30-day reinstatement period.

At 62 days: When three payments are past due, a loan is assigned for a possible workout. Over the next 10 days, aggressive efforts are made to contact the borrower.

At 72 days: After no contact with the borrower, the loan is recommended for foreclosure and referred to an attorney to start foreclosure.

Once an attorney opens the file: It takes about 45 days to arrive at a foreclosure sale date. The attorney will send out a 30-day notice providing the borrower with a final warning of the foreclosure. The notice is sent to any other lien holders, homeowner associations and the Internal Revenue Service.

Subprime loans in Virginia: The lender/attorney must provide an additional 30 days if the customer contacts them to work out payments.

On foreclosure sale day: Loans are about 117 days delinquent, four months late, or 147 days if the loan is subprime.

Source: Virginia Foreclosure Prevention Task Force