Foreclosures were up 5 percent nationally month to month.

Pennsylvania’s foreclosure rate of one filing per every 1,362 homes was well below the national average of 1 for every 452 homes and has the state ranked No. 32 out of 50. But foreclosures were up 26 percent compared to October 2007.

New Jersey was ranked eighth nationally with a foreclosure filing rate of one out of every 410 homes, a nearly 75 percent increase from October 2007.

“We’ve seen sharp declines in new foreclosure filings after legislation mandating delays to the foreclosure process was signed into law in several states — most notably in California, where overall foreclosure activity was down by double-digit percentage points for the second straight month in October, and where default filings were 44 percent below October 2007 levels,” RealtyTrac CEO James J. Saccacio said. “Despite this, October marks the 34th consecutive month where U.S. foreclosure activity has increased compared to the prior year.

In Philadelphia and its Pennsylvania suburbs, the filing rate was one out of every 1,453 homes in October. In the South Jersey counties of Burlington, Camden and Gloucester, the rate was one out of every 1,035 homes.

Nationally, foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 279,561 U.S. properties during the month, a 25 percent increase from October 2007.

“While the intention behind this legislation — to prevent more foreclosures — is admirable, without a more integrated approach that includes significant loan modifications, the net effect may be merely delaying inevitable foreclosures. And in the meantime, the apparent slowing of foreclosure activity understates the severity of the foreclosure problem in these states.”

Nevada posted the nation’s highest state foreclosure rate for the 22nd consecutive month in October, with one in every 74 housing units receiving a foreclosure filing during the month — more than six times the national average. That represented an increase of 11 percent from the previous month and nearly 119 percent from October 2007.

One in every 157 Florida housing units received a foreclosure filing in October, the nation’s third highest state foreclosure rate, which was an increase of 13 percent from the previous month and was up nearly 80 percent from October 2007.

With one in every 149 housing units receiving a foreclosure filing in October, Arizona registered the second highest state foreclosure rate, which represented an increase of nearly 35 percent from the previous month and was up 176 percent from October 2007.

Other states with foreclosure rates ranking among the top 10 were California, Colorado, Georgia, Michigan, New Jersey, Illinois and Ohio.

Las Vegas documented the highest metropolitan foreclosure rate among the 230 metro areas tracked in the report, with one in every 62 housing units receiving a foreclosure filing in October — more than seven times the national average. California and Florida were each home to four of the top 10 metro areas for foreclosure rates.

How Ohio Is Tackling the Foreclosure Crisis

While the federal government has so far resisted large-scale efforts to prevent home foreclosures, several states have jumped headlong into the crisis. Among the most ambitious efforts is taking place in Foreclosures Ohio, where foreclosure filings climbed about 30 percent from 2005 to 2007. Under the recently launched initiative, the state has enlisted more than 1,300 lawyers—from state agencies and the private sector—to help struggling homeowners avoid foreclosure by reaching agreements with lenders or, if need be, through litigation. Ohio Attorney General Marc Dann, one of the architects of the plan, spoke with U.S. News. Excerpts:

How significant is the foreclosure problem in Ohio?
It’s immense. One in 58 households [is] facing foreclosure. That’s one per neighborhood.

What will the lawyers do?
The lawyers will work with the borrowers to see if there are defenses to the actual foreclosure, whether there was fraud or unsuitability in the creation of the mortgage to begin with, and then to assist in two other ways: either to help litigate the case or to help structure a settlement.

Why did you decide to address the mortgage problem by creating this team of lawyers?
The first thing we talked about was whether we could create mediation programs in the courts by asking the judges to encourage or force the servicers to at least sit down and talk to borrowers about an arrangement. But what we concluded was that there is a real inequality, because to file a mortgage foreclosure you have to be a lawyer. And homeowners—particularly those that are in default on their mortgage note—don’t have lawyers. They are at a real disadvantage in negotiating. So it was not good enough just to have mediation, but both parties in the mediation need to be represented by lawyers.

What legal footing might you have to mount defenses against foreclosures Ohio?
With these complex mortgage products—the adjustable rates, the no-document loans that were out there—there are all types of things in the generation of loans that give rise to defenses. And with the fact that these loans then started to become sold seven, eight, nine, 10 times in the process, there are even legitimate legal issues as to whether or not the person filing the foreclosure has the legal right to file a foreclosure because they don’t have ownership of the mortgage note.

In Ohio, documents related to real estate have to be in writing; it’s called the statute of fraud. We just convinced a court of appeals—the 10th District Court of Appeals in Franklin County, Ohio—to find that you can’t bring a foreclosure action if you don’t have paper that proves that you own the house.

What percentage of home foreclosures do you think you might be able to prevent?
I think the vast majority of them. It would be in the best interest of the servicer and the borrower to try to find some accommodation.

What percentage of struggling Ohio homeowners could mount a credible defense against foreclosure?
I think in probably 25 percent to 50 percent of the cases. If you look at the foreclosures Ohio, I use the following rules of thumb. About half of them are related to some form of financial catastrophe—a medical problem, loss of a job. Of the remaining half, about 25 percent are mortgages that involved outright fraud, where the buyer, the seller, the appraiser—everybody was cut in. So it’s that last 25 percent where people got in over their heads through buying a house that they simply couldn’t afford, or they got loans that they didn’t understand the terms of.

But these contracts are between the borrower and the lender. Why should the government of Ohio be legally challenging them?
The fact is that the evidence is mounting that these wholesalers—and mortgage brokers who supplied them—targeted working-class, middle-class, unsophisticated consumers for generating these loans. So the fact is that there was a conscious effort to find people who wouldn’t be able to negotiate the contract at arm’s length. If a mortgage professional says, “Look, your payment is $500. I know this says it goes up in a year—don’t worry, we’ll come back and refinance you,” I think it’s very reasonable to think that it is not entirely the homeowner’s fault that the mortgage goes into default.

How has progress been so far?
It’s been actually kind of rewarding. My uncle is a retired transactional lawyer, and he said, “I’ve been negotiating with banks my whole life. I am so excited about getting to do this.” So he signed up, went to the training. My aunt is happy because it gets him out of the house. Here is a guy that was representing big Fortune 500 companies negotiating with their banks. All of a sudden, that playing field is about to get leveled.

What do you think of the federal government’s response to the housing crisis?
The federal government has made about nine or 10 false starts. And most of the products and things that they have come up with are things that just weren’t very meaningful, particularly to working-class, middle-class homeowners. And so we had to do something unique, and I think this is an unprecedented mobilization of lawyers.

Philadelphia devises program to stem foreclosures

Philadelphia judges, advocates for borrowers, and attorneys for lenders have developed a pilot program they hope will slash the number of mortgage-foreclosure sales in the city.

A key component is a timeline requiring mortgage companies to respond more quickly to proposals made by housing counselors on behalf of borrowers in default on their mortgage payments.

Details of the plan, called the “mortgage foreclosure diversion program,” were hammered out at three City Hall meetings over the last nine days and are scheduled for release tomorrow.

“We’re expecting good things to come out of this,” Common Pleas Court President Judge C. Darnell Jones II said today. “It’s extraordinary,” Jones said of the effort all parties put into the plan. The court oversees foreclosure proceedings in the city.

Regularly scheduled sheriff’s sales of investor-owned and vacant properties will resume next month after a one-month hiatus.

For owner-occupied properties, a “conciliation conference” between the borrower, an advocate for the borrower, and an advocate for the lender will take place 45 days after the foreclosure filing.

Under the plan, foreclosed properties occupied by the owners – representing 80 percent of foreclosures – will be diverted to a different track from vacant and investor-owned properties. The procedure will apply to all mortgages, not just subprime loans, which are at the heart of the national spike in foreclosures.

Homeowners must meet with a housing counselor at least five days before the conference to complete a proposal to deal with the mortgage default.

Philadelphia Sheriff John D. Green stayed April’s foreclosure sales after City Council passed a resolution March 27 calling for a moratorium.

On July 1, sheriff’s sales of owner-occupied properties that could not be saved by the conciliation process are expected to resume. If homeowners do not respond to notices or do not appear at their scheduled conciliation conferences, the lender may proceed with the foreclosures.

A sticking point between advocates for lenders and advocates for homeowners remains whether there should be an affordability standard for resolving a default.

There would have been exceptions to that – for example, if the lender could show that excessive credit card debt was the reason the borrower could not afford the mortgage, said Ian Phillips, Pennsylvania legislative director for the Association of Organizations for Reform Now, an advocacy group known as ACORN. The advocates still hope to win a standard.

Advocates for borrowers proposed a standard 45 percent ratio of debt payments to monthly income, so that defaulted borrowers receive the same deal no matter who represents them or who supervises their conciliation meeting.

Michael T. McKeever of Goldbeck, McCafferty & McKeever, a Philadelphia law firm that represents lenders in foreclosure proceedings, said lenders could not agree to the affordability standard.

“At this point, it’s not something that lenders can do freely,” he said, “because of their fiduciary duty to investors on the loan.”

Data Show – Foreclosures Up 15 Percent In First Quarter

It was against the backdrop of a flat housing market, a spike in borrowers trapped in never-ending cycles of debt and foreclosure snatching away more homes than ever that Memphis Area Legal Services dug in for a fight. It was a fight the group won.

Earlier this year, MALS hammered out a settlement agreement that closed the book on a series of companion lawsuits it brought against a variety of entities – appraisers, brokers, closing agents and more. As part of that settlement, the identities of those people aren’t being disclosed.

The rest of the settlement’s value comes from the savings in restructured mortgages that MALS helped negotiate.

“There were some 30-odd defendants in the litigation,” said Webb Brewer, a lawyer for MALS who represents homeowners in overcoming mortgage-related problems. “We alleged that there was some very purposeful targeting of racial minorities for exploitative loans. We alleged that a group of lenders, real estate agents, appraisers, closing agents and others conspired to basically defraud people and entrap them in what I call exploitative mortgages.”

But the reason MALS extracted a settlement worth about $3 million from them is that they facilitated dozens of homeowners – a total of 17 plaintiffs – in getting stuck in mortgages they ultimately couldn’t afford and shouldn’t have been granted in the first place. About $1.3 million of the settlement was actual cash for the victims.

While the homeowners in the case no doubt appreciated that victory, recent first quarter data for 2008 makes clear that more local homeowners are in a similar financial situation. Specifically, the number of local homeowners in danger of seeing their piece of the American Dream sold at a foreclosure auction is on the rise.

The number of Shelby County homes actually sold at foreclosure auctions was up 17.6 percent in Q1 2008, going from 1,653 sales in 2007 to 1,944 in the same period this year.

The count of first-run foreclosure notices is higher than the number of foreclosure sales because not every property that enters foreclosure proceedings actually is sold at auction.

The total of first-run foreclosure notices, which are an early indicator of homes in danger of being foreclosed, climbed 15 percent in Q1 2008 compared to Q1 2007, according to The Daily News Online, www.memphisdailynews.com. The number of first-run notices grew from 2,972 in Q1 2007 to 3,417 in the same period this year.

Foreclosures are multiplying the fastest in the North Memphis ZIP code of 38107, which saw the highest percentage jump in Q1 foreclosure notices (43.4 percent), going from 76 in Q1 2007 to 109 in the same period this year.

Whitehaven’s 40.7 percent jump in Q1 foreclosure notices (from 135 in Q1 2007 to 190 in Q1 2008) came in third
behind Cordova’s 38018 ZIP, which is fast becoming a hotspot of suburban foreclosure activity.

But in terms of sales – homes that actually complete the foreclosure process – 38018’s percentage jump outpaced every other area for which a ZIP code was listed. The ZIP saw a 56.8 percent spike in foreclosure sales, up from 44 in Q1 2007 to 69 during the same period this year. Again, Cordova’s other ZIP, 38016, grew at a slower pace – a 15.4 percent jump from 55 to 65.

First quarter foreclosure notices were up 42.6 in 38018, going from 94 notices in Q1 2007 to 134 in Q1 2008. Cordova’s northern ZIP, 38016, grew at a more moderate 16.2 percent from 117 to 136.

In the first quarter, 1,687 residential properties were sold at foreclosure auction, according to real estate information company Chandler Reports, www.chandlerreports.com. That’s up about 11 percent from the 1,522 residential foreclosures in Q1 2007.

Single-family homes, which dominate the category, grew from 1,488 in Q1 2007 to 1,641 in the most-recent quarter, a 10.3 percent increase.

First quarter foreclosures on condominiums – which, along with single-family homes, duplexes and other residences are included in the residential category – inched up from 24 foreclosures in Q1 2007 to 26 during the same period this year.

Of the residences that were foreclosed, the types of mortgage products included 414 conventional adjustable-rate mortgages – commonly known as ARMs – that were foreclosed in Q1 2008, according to Chandler Reports. That’s up from 371 in Q1 2007.

And 308 conventional fixed-rate mortgages on residential properties were foreclosed in Q1 2008, compared to 259 in Q1 2007.

A count of residential foreclosures for instances in which borrowers take out two mortgages at the time of purchase jumped from 162 in Q1 2007 to 231 in Q1 2008. That practice is usually a way for buyers to finance 100 percent of the sale price of the home.

Sometimes, the loans slightly exceed 100 percent of the sale price, allowing the buyers’ closing costs to be financed over the period of the loan.

Foreclosures Are Forcing Renters Out

If you are a renter, you may think you are safe from the risks of foreclosure. Think again.  Tenants are feeling the pinch of increased foreclosures among their landlords, resulting in unexpected evictions.

Even though she never paid her rent late, she was forced to leave and has no idea where her rent money went. She said that she didn’t believe her money was going towards the owner’s mortgage, because  the condominium she was renting was being foreclosed upon.

Ashleigh Cheney used to rent in Orlando’s Regency Park. She planned to live there for at least a year, but sadly, she didn’t make it two months before she was being forced out.  “She said,  ‘You don’t have to worry about it,’  and I said,  ‘I have a six-year-old son. I am worried’,” said Cheney, recalling a conversation with her property manager.

Ashleigh isn’t alone. People all over town are learning that their rental is being foreclosed upon.

In many cases, renters are also losing their security deposit, pet deposit and other upfront expenses.

Realtor Karen Urbanite says people are getting surprised by evictions all the time. “Don’t panic and don’t stress.  Just pay your payments to the Clerk of the Courts. At least do that,” said Urbanite.

Neither the bank, nor the property owner, has to inform renters that their home is in foreclosure, and the bank does not have to let you stay in the house once the ball is rolling. Renters usually find out when they are asked to vacate, and they usually get only a few weeks’ notice.

In 2007, a bill passed the Florida House of Representatives that would give renters up to six months to move in the event their property owner was being foreclosed upon, but it has yet to become law.  Lenders are fighting the proposal, saying it would forces them to become landlords.

For Ashleigh, there is a happy ending.  She just sighed mortgage papers  of her own and is leaving renting behind.  Ironically, she is buying a house that’s in foreclosure.

Urbanite says if you rent from an apartment complex, you don’t have to worry about foreclosures.  But if you choose to rent a home or condominium, do your research. Check on the landlord to determine if he or she is solvent, if mortgage payments up to date and have the property taxes been paid.

You can find all of this information by searching  your county’s property tax collector’s records.

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