Foreclosure rate on rise

Far too often these days, people's "exotic" financing is turning their dream of home ownership into the nightmare of homelessness.

On their way out the door, the owners may take their frustration out on the property, leaving behind a mess for someone else to clean up before it can be resold.

It's a trend seen across Yuma County and across the nation as the real estate bubble has burst into a flood of foreclosures.

The increasing foreclosure rate can be seen in the public notices of The Sun in the number of listings for foreclosed homes being auctioned. From January through July, there were 292 such listings, about 100 more than during the same period in 2006. In July alone, there were 57 listings, more than double the number in July 2006 when there were an estimated 25.

"You have people who are trying to support their families and suddenly find themselves homeless," said Vicki Bardo, president of the Yuma Association of Realtors. "There's a huge frustration level. It's a terrible situation we're in right now."

It's a result of the number of people in the last few years who turned to nontraditional loans to buy a house, said Derek Egeberg, a mortgage adviser with First Magnus Home Loans.

In 2002, he said, 72 percent of home loans nationwide "were the plain vanilla variety," with the buyer qualifying for a regular loan by demonstrating he or she could afford the mortgage payments.

In 2006, 40 percent of all loans were "a hodge podge of nonconforming loans," he said. People might have gotten a subprime loan, paying a higher interest rate because they were considered a higher risk. Or they got adjusted rate mortgages that started with low initial interest rates that would increase after a couple of years.

"There was a big effort to get people into houses where they didn't belong," he said.

That is all catching up to people, Bardo said. For example, the payment on a $200,000 loan might increase from $898 a month to $1,330 a month with an ARM.

"Plus APS (Arizona Public Service electricity rate) has gone up," she said. "You throw in credit card debt like a big screen TV and they don't have the added income to make the higher payments."

Another problem coming up, she said, is that the huge inflation of home values has come to a halt. With the tighter mortgage market, people may not be able to get refinanced, they can't afford the higher payments and they can't sell the house at a break-even price. So they walk away.

In some cases, people will still treat the house with respect even when they can't make the mortgage payments, Bardo said.

Those are the rare cases.

"Some just are not taken care of," Bardo said of the abandoned houses. "Some of them are trashed. Some take everything, including the kitchen sink. They leave their trash. They punch holes in the walls. They leave their pets behind and they tear the place apart, too. Most of the houses are pretty dirty and unsavory. Often it looks like it's been left uncleaned a long time."

Or kids will break into an empty house and commit their own mischief.

Bardo remembers one house from a few years ago where the swimming pool was half full of trash, it had turned green and huge goldfish were swimming in it. A couple of houses were meth labs that presented their own challenges to clean up. In another case, the woman took all the light fixtures because she thought the government was spying on her.

"You get some pretty interesting stories," Bardo said. "It's all happening more and more with the increase in foreclosures."

It's not a pretty sight for the Realtor selected to try to get the house resold.

"Someone has to clean it up," she said. "You weigh cosmetics versus safety. You've got to do the kitchen sink. You need bathrooms that work. You need to make sure mold isn't an issue and it can be with leaking pipes. You go back and forth with the lender on what can be done."

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IF YOU CAN'T MAKE THE PAYMENTS

"The minute you can't make the payment, you need to talk to your lender," advised Vicki Bardo, president of the Yuma Association of Realtors. "Once you get behind, the mortgage company won't take a partial payment. When you wait until the foreclosure is filed, the lender just wants you out. It is their money."

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Joyce Lobeck can be reached at jlobeck@yumasun.com or 539-6853.