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.
Tags: broker, debt, Foreclosures, house, housing market
