Real Estate News From America’s Sell Your House Fast Team 

WASHINGTON (Reuters) - A few changes to the U.S. bankruptcy code could save many troubled homeowners from foreclosure as a mortgage crisis takes hold in the next two years, bankruptcy lawyers and an economist told lawmakers on Tuesday.

The members of the U.S. House of Representatives Judiciary Committee who heard the testimony are mulling legislation that would let bankruptcy judges erase billions of dollars in mortgage debt.

“Residential mortgage loan defaults and foreclosures are surging and without significant policy changes will continue to do so through 2008 and into 2009,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, who broadly endorsed the plan.

Two million homeowners will have their property seized between this year and next, Zandi said, and the bankruptcy reform plan is needed to confront that crisis.

The proposal, backed by consumer groups but opposed by the lending industry, would give bankruptcy judges new authority to modify mortgage terms for homeowners deemed to be insolvent. It would let bankruptcy judges extend the life of a home loan, change the interest rate or simply mark down the loan amount.

Judges currently have that broad authority to modify other types of debt, including money owed on credit cards or auto payments, but not home loans.

CRITICS SAY RATES WOULD RISE

Congressional critics of the plan say giving bankruptcy judges the power to tinker with home loans will scare off investors who otherwise might invest in the mortgage market.

“All lenders abhor risk and uncertainly. This is injecting uncertainty,” said Rep. Tom Feeney, a Republican from Florida.

“I am worried about the long-term economic consequences.”

But supporters of the plan say it could save 600,000 Americans from foreclosure.

Yet David Kittle, chairman-elect of the Mortgage Bankers Association, said the bill would also force mortgage lenders to raise their rates in order to cover the additional risk of a bankruptcy judge scratching the terms of a loan.

Lending industry sources say that they are already doing what they can to reach troubled borrowers and help restructure their loans before they sink into foreclosure.

But terms on only 1 percent of shaky subprime home loans were changed in the first nine months of the year, according to Moody’s Investors Service.

Subprime loans are those offered to borrowers despite shaky credit and are among those seeing the highest losses.

SUPPORTERS: ACT NOW OR REGRET IT

Several lawmakers and witnesses said a new policy is needed to confront today’s crisis of failing loans.

“You either do this sooner or you do it later,” said William Brewer, Jr., a North Carolina bankruptcy lawyer. “If I am right, you will come back here next spring and this fire I am talking about will be burning out of control.”

Rep. John Conyers, chairman of the Judiciary Committee, said Tuesday that he hopes to see the legislation pass his panel as early as next week.

“I’ve got to deliver the bacon on this right away,” the Michigan Democrat said. “There will be no delay or procrastination from our end at all.”

The bankruptcy legislation has already passed a subcommittee, but Tuesday’s hearing was meant to encourage more support from lawmakers on the committee, a Conyers spokeswoman said.

Earlier this month, 16 conservative Democrats in the House asked party leaders to hold off on the planned bankruptcy reform.

Sell Your House Fast

Real Estate News From America’s Sell Your House Fast Team 

WASHINGTON COUNTY - When Donald Shumaker II refinanced his home in 2004, he knew the interest rate would stay the same for three years, after which it would become adjustable.

But he didn’t expect what happened.

“I was paying $910 a month,” he said, standing on the porch of his home east of Hagerstown.

In one month, the rate went from 7 1/4 percent to 10 1/4 percent, or $1,375 a month.

“Then, they sent me another letter, and my mortgage went up to $1,540,” Schumaker said.

It was much more than he could afford.

“I’d have to have three jobs and no time with my family,” he said.

Last Tuesday, less than 24 hours before his home was to be sold in a foreclosure auction on the steps of the Washington County Courthouse, Shumaker’s attorney filed on his behalf for bankruptcy protection.

“I guess it’s my only option,” Shumaker said. “I’m just going to have to go under, and that’s a sad thing to say.”

He isn’t alone, judging by the number of foreclosure notices carpeting the back pages of The Herald-Mail newspapers the past several months.

In the past 12 months, a total of 516 foreclosure notices have been filed at the courthouse. By comparison, 294 were filed during the same period in 2005 through 2006.

“I’m seeing a significant increase. I’ve never seen it this bad. I’ve been doing it over 30 years,” said William O’Brien, a Martinsburg, W.Va., attorney who handles such cases in West Virginia and Maryland. The number of resulting bankruptcies is “going completely crazy,” he said.

A major problem, several attorneys and a local mortgage broker agreed, is that, like Shumaker, many borrowers don’t know what is in the loan agreements they sign.

Those agreements are “18 to 20 pages long, typically … but nobody reads that stuff,” said a local mortgage broker, who didn’t want to be identified.

On the dotted line

Shumaker, 35, bought the 634 Antietam Drive house on a half-acre lot in 2000 for $76,500.

A year or so later, tornado-like winds knocked trees down onto the roof. Insurance paid for the damage, and Shumaker, who does asphalt paving for a local contractor, decided to borrow more money to remodel the inside and to put in a driveway on either side of the house and a sidewalk.

He returned to the Hagerstown company that held the first mortgage and increased the loan to about $156,000, according to deed records at the courthouse. That, Shumaker recalls, increased his monthly payments from $714 to $910.

Over the next few years, records show, the loan was sold as an investment from one lender to another and another across the country.

Early in 2004, Shumaker called one of the lenders who had been filling his mailbox with refinancing offers. The California-based company sent a representative to the house.

Sitting in his living room last week, Shumaker said the man told him the interest rate would be fixed at 7.25 percent for three years, then would go to an adjustable rate.

“He said when that happened, it was tied to some index … it would go about a quarter of a percent up or a quarter of a percent down,” he said.

Shumaker accepted the 19-page agreement.

The principal was $151,000.

Rate increase

For the next three years, Shumaker said, he sent off $910 every month. Late this past spring, he said, he received a letter from another lender, one that apparently had bought his loan.

Shumaker said the letter informed him that the next month, his interest rate would jump to 10.25 percent, increasing his monthly payment to $1,375.19.

Stunned, Shumaker said, he called the company, EMC Mortgage Corp., which is based in Texas, but failed to convince the company to lower the payment.

He made the first month’s payment, but he said he was late the next month and had to pay a total of $1,443.95, which included a late fee.

“I called them. I said, ‘I don’t want to lose my house,’” he said.

He said he asked that the payment be dropped back to $910 and that he pay over a longer period. The company’s representatives refused.

By then, he said, he was late paying again. He said EMC’s only offer was to give him a couple of weeks more to get the payments current, plus pay late fees. It was about $4,000 in all - impossible for him to raise so quickly, Shumaker said.

Asked this week about what happened, EMC had no immediate comment.

Debbie Krznarich, vice president of communications, said Tuesday she would check into Shumaker’s case and she or someone else would call a reporter back. No one did and she did not return other calls on Friday.

Spelled out

According to deed records at the courthouse, Shumaker should have known what he was getting himself into.

On Feb. 27, 2004, he signed or initialed all 19 pages of the document to refinance his mortgage with the California-based lender.

The document specifies that over the next 30 years, Shumaker would pay $912.29 a month the first three years and that, beginning April 1, 2007, the interest rate would become adjustable. It could change on that date and every six months after that.

Beginning in April 2007, the document says, the rate would be based on the London Interbank Offered Rate. The “LIBOR,” commonly used in adjustable rate mortgages, is an interest rate at which banks offer to lend money to each other.

The rate charged Shumaker would be the sum of that LIBOR plus 6.99 percent, the document says.

On April 1, it says, Shumaker’s interest rate “will not be greater than 10.250 % or less than 7.2500 %.”

It was increased to 10.25 percent.

Then, the document says, the interest rate can rise or fall as much as 1.5 percent every six months. “My interest rate will never be greater than 14.2500 % or less than 7.2500 %,” a page initialed by Shumaker says.

When Shumaker was shown a copy of the document last Thursday, he was almost disbelieving.

Then, he was hurt. And then, he got angry.

“They bring over a stack of papers,” he said. “It’s so hard for a person to take and read down through every single page. And I don’t read so well and I can’t comprehend what I read so fast …

“The guy’s here in the house. And he wants you to sign or initial every page, and your hands are getting numb, the dinner’s getting cold and you just want to get him out of the house …

“He didn’t tell me it could go up like that.”

A ‘crisis’ situation

According to Maryland’s consumer protection agency, it appears the lender did nothing wrong because the loan document is clear.

There is no violation “if it’s clearly disclosed that this is what the rate was going to be and he signed off on that,” said a spokeswoman for the state Attorney General’s Consumer Protection Division.

The loan’s terms are similar to others that have so many Marylanders and homebuyers across the country in financial trouble, officials said.

Since late 2005, many people have signed loans, giving them a two-year fixed rate followed by a 28-year adjustable rate, said Joe Rooney, deputy commissioner of the Division of Financial Regulation, which regulates lenders for the state Department of Labor, Licensing and Regulation.

For many, that adjustable rate is about to hit, Rooney said.

“This is a crisis now and it’s also a pending crisis,” he said.

That is why a state task force has recommended legislation that would attempt to improve the situation and head off further crisis, said Rooney, who was on the task force.

Its recommendations have not been made public yet.

But Rooney said they “attempt to close some of the issues that have caused borrowers to receive products they shouldn’t have received, increase disclosure to borrowers, step up education programs on these products and, at the same time, encourage lenders to step up to the plate … and try to refinance (customers) … out of these products into good products.”

Taking a step

Friday a week ago, it was becoming clear to Donald Shumaker what he would have to do.

He had tried to refinance with another lender, but was refused. He thought about trying to sell the house, but realized the market is so depressed, he couldn’t get near what he owed. He had stopped trying to make payments to EMC because the debt was snowballing. And now, he had two letters - one addressed to “occupant” - from lawyers saying that, unless he paid up, his house would be sold at auction.

Sale notices were published in the newspaper. The auction was to begin Wednesday, Oct. 24, at 11:48 a.m.

Still, at his home, Shumaker tried to keep things normal. He talked about how he still hoped someone would buy the loan, and let him keep paying the $910.

“I’d be happy,” he said.

By Monday, time was running out.

“More or less, they give me no choice,” Shumaker said before going to meet with Hagerstown attorney Alex Bognar, who specializes in bankruptcy proceedings.

Tuesday afternoon, Bognar filed papers with U.S. Bankruptcy Court in Greenbelt, Md., seeking bankruptcy protection for Shumaker.

The act of filing freezes the foreclosure action - there would be no auction of Shumaker’s house Wednesday - and it clears Shumaker of most debts, including the mortgage, Bognar said. A hearing will be held in which Shumaker’s assets will be totaled, so that some may be sold to help pay off creditors.

For perhaps a few months, while the lender petitions again to sell the house at a foreclosure sale, Shumaker can continue to live there, Bognar said.

But there are downsides.

Shumaker said he knows that the bankruptcy will give him a poor credit rating and that if he goes to buy another vehicle or needs a loan, the interest rate likely will be high.

He knows he’ll have to pack up soon and leave the neighbors who have become his friends.

But wherever he goes, he said, he’ll take with him a lesson.

“If I ever make a decision to try to buy a house again,” he said grimly, “I’m going to have a friend who knows what he’s reading, to look at the papers first. I’m going to be sure of what I’m signing.”

Sell your house fast

Real Estate News From America’s Sell Your House Fast Team 

Based on our mail, the financial squeeze that’s left millions of Americans falling behind on their mortgage payments doesn’t seem to be letting up. For some, that presents a stark choice: is it better to lose your house to foreclosure of file for bankruptcy protection?

What is better on your credit report - foreclosure or bankruptcy?

– D.F., Address withheld

Neither option is going to be easy. Generally, a foreclosure will remain on your credit report for 7 years, while a bankruptcy remains for 10 years. But that doesn’t mean foreclosure is necessarily the better option, according to Ray Hooper, Education and Housing Director for the Consumer Credit Counseling Service of Greater Dallas, a non-profit agency that tries to help people facing foreclosure keep their homes.

“A foreclosure is very serious to mortgage lenders,” said Hooper. “They’re going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include the house.”

Before you accept that foreclosure is a foregone conclusion, consider trying to avoid it. If you’re having trouble making payments, or even behind by a month or two, contact your lender before the process goes any further. Even if you’ve gotten an official “notice of default,” saying you’re several months behind, you still have time before the formal foreclosure process begins.

The first question you need to decide is whether you want to keep your house or give it up. If you want to keep it, you need to try to work out a plan to get back on track. This involves either making up for the missed payments – which you can do all at once or try to spread out – or coming up with a new plan. One option is to have the loan modified – at a lower interest rate, for example. Or you can ask for “forbearance,” which basically means the lender suspends payments until you can get back on your feet. If you’re in over your head and bought too much house, though, these options probably aren’t going to help.

So you may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If you’re mortgage is bigger than your house is worth, your looking at what’s called a “short sale” and you’ll owe money to the lender even after the house is sold. In some cases, lenders will let you off the hook for that amount rather than go through the expense of foreclosing. (But you may not be completely off the hook: you may owe taxes on that amount.)

You can also try something called a “deed in lieu of foreclosure” – which basically means you turn over your house to the lender and walk away without owing anything. But you’ll need to work this out with the lender: you can’t just leave the keys in the mailbox.

While it’s possible to work out one of these solutions with your lender on your own, you may have better luck with the help of someone who specializes in the process. A good attorney who knows real estate law can help, but you may not be able to afford that. A credit counselor (from an accredited, non-profit agency, not the slime balls who spam you with bogus promises of making your debts “go away”) is another option. Lenders are more likely to go along if a competent third party is there to help smooth the process.

If all else fails, you may have to consider allowing foreclosure to proceed – or filing for bankruptcy. But like most aspect of personal finance, there’s no “one-size-fits-all” guidelines for which is the least bad alternative. There are different ways to file for bankruptcy, and not all of your debts have to be included (for more, see the next page.) So even if faced with bankruptcy, you’ll need advice from someone - either a good credit counselor or a bankruptcy attorney - who can walk you through the choices you’ll face.

How many years apart can you file bankruptcy in Georgia?
–D.D., Address withheld

While it’s not an easy option, bankruptcy is becoming more common. Some 391,000 individuals turned to the bankruptcy courts for help getting out from under debt during the first half of this year, according to the American Bankruptcy Institute. That’s up nearly 50 percent from the first half of 2006. While that’s down from levels seen before changes in the law in 2005 made it harder to file, the ABI said the number of filings is expected to continue to increase.

“Continued pressure on housing markets, combined with high consumer debt burdens, will lead more households to consider bankruptcy as an option to their financial problems,” the group said in a recent press release.

While the bankruptcy process in the U.S. is governed by federal laws and handled by a system of federal bankruptcy courts, state laws regarding consumer debts and the disposition of property also come into play. There are also different types of bankruptcy filings. No matter which course you take, the filing stays on your credit record for 10 years. That makes it very difficult to get any type of loan during that period; the loan will be more expensive if you can get one.

The two most common forms of personal bankruptcy are called Chapter 7 and Chapter 11. (About 60 percent of those who file for bankruptcy use Chapter 7, most of the rest use Chapter 13.) Under a Chapter 7 filling, you get to keep certain property (this is where state laws vary), but the rest is turned over to a court-appointed trustee who sells your stuff or gives it to lenders to satisfy your debts. Under a Chapter 13 filing, you pay back your debts under a plan worked out by the court. The trustee collects payments, pays off your debts and makes sure you stick to the plan.

If you own a business, you may want to consider a Chapter 11 filing. This let’s you stay in business, as long as the court and the people you owe money to approve of the plan to pay off your debts. If the court decides a trustee needs to be appointed, the trustee takes control of your business and its assets.

Not all debts can be wiped clean – even if you ask for a “discharge.” The list includes alimony and child support, taxes, court fines and most student loans. New debts, taken on after the discharge, aren’t included. And if the judge finds out you’ve lied or committed fraud, your discharge can be denied.

You can also choose which debts you want to have discharged while you keep paying off others. You might want to work out a payment plan so you can keep your car, for example. To do this, you have to sign a “reaffirmation agreement,” which says that you promise to pay off that debt. If you don’t pay it back, the creditor can send it to a collection agency like any other debt.

If you’ve filed a Chapter 7 bankruptcy and gotten a discharge, you’ve got to wait 8 years before you can do it again. There are different limits on filing for Chapter 13, depending on whether you’re trying to get debts discharged.

Whatever you decide to do, you’ll probably want some help. (You can do this alone, but we don’t recommend it. Start with a good credit counselor or bankruptcy attorney. Get references, ask lots of questions, and don’t sign anything until you’re sure you understand fully what it says.

Sell your house fast

Real Estate News From America’s Sell Your House Fast Team 

TRENTON, N.J. (AP) _ Thousands of real estate listings held by the now-bankrupt discount brokerage Foxtons can be sold to other companies, a federal judge has ruled.

The decision issued Friday clears the way for Rahway-based Maplewood Homes to buy more than 3,400 New Jersey listings for $100,000, while Brooklyn, N.Y.-based Fillmore Real Estate is spending $110,000 for hundreds of more listings in New York.

West Long Branch-based Foxtons recently filed for bankruptcy, citing its slumping business due to the downturn in the housing market. When it sough to sell the listings, more than 30 homeowners asked the bankruptcy court to void their contracts so they could sign agreements with other real estate agents.

However, the bankruptcy court judge ruled that Foxtons customers who signed a three- or six-month contract will now be customers of Century 21 Atlantic Reality _ which has agreed to market the New Jersey homes for Maplewood _ or Fillmore Real Estate, with the same contract terms.

Foxtons was founded in 1999 on the principle that consumers should not pay a 6 percent commission. Instead, its agents were paid salaries and customers were charged 2 percent.

The company was sold in 2004 and, eventually, commissions were raised to motivate agents to show Foxtons’ homes. A private-equity firm then bought the company in May.

Sell Your House Fast  

Real Estate News From America’s Sell Your House Fast Team 

By Patrick Rucker

WASHINGTON (Reuters) - U.S. bankruptcy judges could erase billions of dollars in mortgage debt for troubled homeowners under legislation to be debated on Wednesday.

The proposal, backed by consumer groups but opposed by the lending industry, would give bankruptcy judges new authority to modify mortgage terms for homeowners deemed to be insolvent.

Under the plan, bankruptcy judges could extend the life of a home loan, change the interest rate or simply mark down the loan amount. Judges currently have that broad authority to modify other types of debt, including money owed on credit cards or auto payments.

“This bill will just treat a homeowner’s mortgage debt like any other debt secured by anything from a washer and dryer to a car,” said Rep. Brad Miller, a North Carolina Democrat who is sponsoring the legislation.

Proponents of the reform say their plan can help control a growing wave of foreclosures as borrowers — particularly subprime borrowers with damaged credit — see their mortgage rates increase in coming months.

In one scenario envisioned by Merrill Lynch, a quarter of subprime loans will end in default, wiping out $146 billion of wealth as home values decline in coming years.

But sources in the lending industry say giving troubled borrowers a new way to cast off their debts will increase loan losses and so raise the cost of borrowing for other would-be homeowners.

“One reason interest rates are so low and that the American homeowner can borrow so much money is because their loans are backed by assets. The house is collateral,” said Kurt Pfotenhauer, top lobbyist for the Mortgage Bankers Association. “If you bring the value of that collateral into question, you will raise the costs of borrowing.”

Consumer groups argue that national home values are already slipping and that consumers and lenders will pay a much higher price if foreclosures increase unabated.

While regulators and lawmakers have beseeched the mortgage industry to modify troubled subprime credits, few are doing so. Terms on only 1 percent of shaky subprime home loans were changed in the first nine months of the year, according to Moody’s Investors Service.

“This solution only applies to borrowers who have no other alternative, to those who have filed bankruptcy,” said Ellen Harnick, a policy expert with the Center for Responsible Lending, which supports the Miller plan. “In that case, what is better for the lender? To have the borrower go into foreclosure or find another solution?”

On Wednesday, the House Judiciary Committee is to vote on the Miller plan. If the measure passes, as expected, it will go to the full U.S. House of Representatives and eventually be reconciled with any similar measure to pass the Senate, which is also in Democratic hands.

While lenders have roundly spoken against the Miller plan, the MBA’s Pfotenhauer said there could be room to compromise if the bankruptcy relief were limited to homeowners who bought during the dizzying height of the recent housing boom and are now in severe distress.

“Narrowing the scope of the bill to (borrowers of) the immediate past would be one logical thing that one might do,” he said.

Miller agreed, saying “It’s conceivable that this could sunset. That is a frequent compromise on legislation that stirs this kind of opposition.”

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WASHINGTON - About 2 million subprime borrowers will lose their homes to foreclosure through 2009, costing them $71 billion in housing wealth, a congressional report said.

Subprime foreclosure rates will increase as housing prices stagnate or decline, and the effects of the subprime crisis may spill over to the broader economy, according to a report by the Joint Economic Committee released yesterday.

“State by state, the economic costs from the subprime debacle are shockingly high,” Senator Charles Schumer, the New York Democrat who heads the committee, said at a news conference. “From New York to California, we are headed for billions in lost wealth, property values, and tax revenues.”

The report spotlights the foreclosure threat facing borrowers with poor credit as interest rates on adjustable loans reset to higher levels. US home foreclosures doubled in September from a year earlier as subprime borrowers struggled to meet payments, according to RealtyTrac Inc. There were 223,538 foreclosure filings last month, the Irvine, Calif.-based research company said.

Subprime foreclosures will total about 2 million between 2007 and 2009 if housing prices drop 20 percent over those three years, the report projected. About 1.3 million of the nation’s 7.4 million subprime borrowers will face foreclosure between the third quarter this year and the fourth quarter of 2009, the report said.

Subprime loans represented 14 percent of all outstanding US mortgages as of the second quarter of 2007, the report said.

The 2 million foreclosure projection Schumer cited is “very inflated,” said Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association, a Washington-based industry group. He estimated there would be about 1.2 million foreclosures on subprime adjustable-rate mortgages between 2007 and 2009. Housing prices nationally are not likely to decline by 20 percent, as the report estimates, Brinkmann said. “If you start with an unreasonable assumption, you get an unreasonable conclusion,” he said.

Schumer urged mortgage lenders to help borrowers avoid foreclosure by helping them change the terms of their loans. He also called for more funding to housing nonprofits to help troubled borrowers negotiate with their lenders to refinance or change the terms of their loans. 

We Buy Houses

Lenders initiated foreclosure proceedings against a record number of California homes in the third quarter ended Sept. 30, real estate research company DataQuick Information Systems reported today.

The company reported 72,571 notices of default from July through September, a 34.5 percent rise compared to the second quarter and a 166.6 rise compared to third-quarter 2006.

The previous record default level of 61,541 was set in first-quarter 1996, compared with a low of 12,417 in third-quarter 2004. An average of 34,781 notices of default have been filed quarterly since 1992.

Default notices, which are recorded at county offices, are the first step in a foreclosure process. The number of default notices set records for 39 of the state’s 58 counties, according to DataQuick.

Mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties, on a loan-by-loan basis, the company reported, while the likelihood of default was reportedly highest in Merced, San Joaquin and Riverside counties.

“We know now, in emerging detail, that a lot of these loans shouldn’t have been made,” said Marshall Prentice, DataQuick president, in a statement. “The issue is whether the real estate market and the economy will digest these over the next year or two, or if housing market distress will bring the economy to its knees.

“Right now, most California neighborhoods do not have much of a foreclosure problem. But where there is a problem, it’s getting nasty,” he stated.

Half of the default activity in California is confined to 293 ZIP codes that are mostly in the Inland Empire and Central Valley, according to the report. Collectively, home prices for those ZIP codes had increased 34 percent year-over-year in first-quarter 2005, peaking in third-quarter 2006 at $399,000, the company reported.

The third-quarter 2007 median price of $352,250 represents an 11.7 percent drop from that peak.

For the other 1,172 ZIP codes tracked by DataQuick, year-over-year price appreciation peaked in second-quarter 2004 at 25 percent, and the third-quarter median of $575,000 was 2.5 percent below the prior quarter’s peak.

Most of the loans that went into default in the third quarter were originated from July 2005 to September 2006, DataQuick reported, with a median age of 18 months. Loan originations peaked in August 2005. The share of adjustable-rate mortgages for primary purchase home loans peaked at 77.8 percent in May 2005 and has since fallen, the company also reported.

The report noted that individual residences can be financed with multiple loans, and the 72,751 third-quarter default notices were recorded on 68,746 residences.

For primary mortgages statewide, homeowners were a median five months behind on payments when their homes entered the default process, and borrowers owed a median $10,914 on a median $344,000 mortgage, DataQuick reported.

Homeowners were a median eight months behind on their payments for lines of credit and borrowers owed a median $3,355 on a median $66,351 credit line, according to the report, though the company reported that it could not determine from public records the amount of the credit line actually in use.

DataQuick cited San Joaquin County’s 95330 ZIP code, Riverside County’s 92571 ZIP code and Sacramento’s 95832 ZIP code as those with the biggest foreclosure problem in the state, and also noted that ZIP code-level data can “fluctuate severely.”

An estimated 45.9 percent of homeowners in default avoid foreclosure by bringing payments current, refinancing or selling the home and paying what they owe, according to the report — that compares with 80.9 percent a year ago, DataQuick reported.

“The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes ‘work-outs’ difficult,” according to the report.

The total number of homes actually lost to foreclosure in the third quarter reached 24,209 in the third quarter, which is the highest level since DataQuick began keeping statistics in 1988. That number was up 38.7 percent from the previous quarter and up 604.8 percent compared to third-quarter 2006.

The peak of the prior foreclosure cycle was 15,418 in third-quarter 1996, with a low of 637 in second-quarter of 2005.

Foreclosure properties in the 293 hardest-hit ZIP codes resold for 11 percent less than nonforeclosure homes, DataQuick reported, and foreclosure resales in the rest of the state “were near or at the price levels of other sold properties.”

RealtyTrac, another company that provides foreclosure data, reported this month that California had the third-highest foreclosure rate in September among all states, with one foreclosure filing for every 253 households — up 246.2 percent compared to September 2006.

We Buy Houses

Fed by declining prices, slow sales and a credit crunch, foreclosures. rose to their highest levels statewide in 20 years from July to September, according to a real estate information report released today.A total of 72,571 notices of default, the first stage of the foreclosure process, were filed during the third quarter, up 34.5 percent during the previous quarter, and up 166.6 percent in third-quarter 2006, according to DataQuick Information Systems.

Of those in default, fewer than half — 45.9 percent, staved off foreclosure by bringing their payments current, refinancing, or selling the home. A year ago it was 80.9 percent.

East Bay defaults were high:

Families and neighborhoods nationwide will lose more than $100 billion in real estate value and states will be out more than $917 million in property tax revenue by 2009 due to an escalation in foreclosures, a new congressional report has found.

Released by the Joint Economic Committee, the report estimates these losses will occur because 2 million homeowners with subprime mortgages will enter foreclosure by the end of next year. Sen. Charles Schumer (D-N.Y.), who heads the committee, also outlined several proposals to mitigate the problem that he has been pushing for weeks.

In New York State, $9.4 billion in property value will disappear, while property tax revenues would decline by $102 million, according to the study. Though the report does not break down the impact by county, Schumer said Long Islanders would be greatly affected.

“It’s crystal clear that the scope of the financial damage caused by skyrocketing foreclosures extends far beyond the affected homeowners, infecting entire neighborhoods on Long Island by depreciating property values,” Schumer said. “To ensure that Nassau and Suffolk neighborhood retain their value and that homeowners, who already pay some of the nation’s highest property taxes, aren’t further financially strained … my plan will regulate this renegade industry in an attempt to mitigate its detrimental effect on our neighborhoods.”

About $71 billion in housing wealth nationwide and $5.1 billion in New York State would be lost by those facing foreclosure. But the neighbors of those facing foreclosure would collectively see a decline of an additional $32 billion in housing value nationwide and $4.3 billion in the state.

Among the measures Schumer advocates are increasing funding to foreclosure prevention counselors, encouraging lenders to modify terms or refinance those struggling to pay, increasing the Federal Housing Administration’s ability to refinance subprime mortgages and amending the bankruptcy code to allow judges to modify loans.

Not everyone, however, agrees with the report. Jay Brinkmann, financial economist with the Mortgage Bankers Association, said he disagrees with the report’s premise that home values will decline 20 percent and that 2 million homeowners will face foreclosure. He estimates the figure is closer to 1.1 to 1.2 million. The declines in home values will also be centered in areas with large numbers of subprime loans.

“If you have foreclosures clustered in an area, it certainly will reduce home values and property taxes,” Brinkmann said. “But it’s probably not as high as what they are saying.”

The report also overlooks the economic impact of having families lose their homes, said Pat McPherron, an economist with Moody’s economy.com.

We Buy Houses

ROCHESTER HILLS, Mich. (AP) — At 14, Joan Cyman hauled wood and clutched a hammer with her father to build a deck on the back of their house.

It was one of many projects to turn the already attractive four-bedroom, three bathroom suburban house into a home. She was 12 in 1976 when they left a rough neighborhood in Detroit to be among the first families on the cul-de-sac in the gleaming new subdivision.

“It was like a family home,” she said. “I felt like it was left to me and should have stayed there the rest of my life.”

It didn’t.

At 41, Cyman is 145 miles north in rural Roscommon County, trying to put her life back together after losing her home to foreclosure in 2006. Now a long-vacant eyesore with a patchy, overgrown lawn and torn auction sign in front, the Rochester Hills residence has a buyer, a businessman whose sideline buying foreclosed homes has picked up as the housing market has tanked.

“It does present a lot of opportunities,” said Mike Smitha, 52, a local investor who is waiting to close on the property.

“You have to look at it as a business. It’s simple economics: Buy as cheaply as you can, maximize the money it’s going to take to repair and sell it for as much as the market will bear.”

The home was one of 700 seeking new life in a recent auction in Michigan, which had the fourth highest foreclosure rate in the nation in September, according to Irvine, Calif.-based RealtyTrac Inc. Automotive industry cutbacks in the state have led to the nation’s highest unemployment rate as well as a declining population.

When people fall on hard times, so too do their homes.

Cyman said money disputes with her husband, from whom she’s separated and divorcing, made it difficult for her to make ends meet. She fell behind on her mortgage payments, and her lender started the foreclosure process in September 2005 on a $228,650 mortgage she took out nine months earlier.

The colonial-style house at 949 Homestead Court has a purchase agreement for $136,500 — a “deal of the century” for a home whose value, once repaired, would be $250,000, said real estate agent Ron Walraven. The home that once impressed neighbors now is a handyman’s special: Walraven estimates it needs about $40,000 to update an old kitchen, repair damage caused by basement flooding and perform other major projects.

Like so many other homeowners, Cyman took advantage of lower interest rates and better terms in the housing bubble in the early part of the decade. In 2002, after the original $37,500 home mortgage established by her late father was paid off, she took out the first of three adjustable-rate mortgages to pay large bills. Two others followed, and she said she was enticed by the lower rates she was being offered.

“I did (get) caught up — everyone was doing it,” she said. “They’d call me and say, ‘I can put you in a seven-year ARM.’ The payment would go down.”

Yet her overall household debt rose. Her salary would have covered the mortgage — which she said was about $800 a month by the time of the final refinancing — but hers was the only income coming in at the time.

Cyman said she tried to work with her lender, Wells Fargo & Co., on a plan to catch up on back payments. She said the company was uncooperative and told her there was nothing it could do.

A Wells Fargo spokesman said he could not comment on Cyman’s case, but the company said in a statement it works hard to keep customers in their homes and has expanded its efforts to help them. Walraven and other industry observers say lenders overall have become more involved in preventing foreclosures as the number has skyrocketed.

“Eighteen months ago, their position was not to easily work it out like it was today — especially in Detroit, where we have a glut of properties,” Walraven said.

Dan Sugg, president of the Michigan Mortgage Lenders Association, said his industry recognizes the responsibility it shares in keeping homes out of foreclosure. Among other things, he said, it’s holding foreclosure-prevention workshops in the hardest-hit areas.

“The bottom line is (a) homeowner agreed to repayment of debt, signed the note and knew the terms of the mortgage. But we understand that situations change and that things can become more difficult. That’s why the (loan) servicers are helping the homeowners through the situation.”

For Cyman, whose father was a successful area business owner and mother a longtime member of the local school board, losing the house felt “emotional” and “degrading.” Tadeus Cyman died in 1989; his wife, Lorraine, in 1992.

“I just feel sorry for the neighbors next door that are dealing with that house right now,” said Joan Cyman, now living in a small cottage she bought many years ago and running a technical help desk at a community college. “I’ve heard it just looks terrible. They haven’t done anything to it.”

In August 2006, Walraven said he received a $200,000 cash offer for the home — still not enough to cover what Cyman owed. But that fell through when the prospective buyer had a family emergency. After another year on the market, he said, the seller decided to include it in the auction of 700 Michigan homes put on in September by Texas-based auction firm Hudson & Marshall.

Smitha said the home caught his eye before but he thought it was too expensive for its condition. When he saw it again in a Hudson & Marshall flyer and learned the firm was accepting electronic bids, he decided to “take a little stab.”

“They called back and countered,” he said. “I turned them down and figured I’d never hear anything. About four or five days before the auction, they called me back and said, ‘The lender decided to accept your offer.’”

Smitha has been involved in real estate for 30 years as a licensed broker and agent, and has been a builder for the past 12. He said he has been an investor all along, but his pace has picked up during the past couple years as the market has declined.

“It presents some risks but on the other side of the coin in presents opportunities: The best time to buy is when everyone else thinks you shouldn’t,” he said. “The best time to sell is when everyone else thinks you should buy.”

Smitha is among the more than half of auction buyers who are investors, not owner occupants. He awaits closing on it, then plans to fix it up and sell or lease it sometime next spring. Still, he said he expects to spend more than $40,000 to repair and renovate it.

That’s an even greater risk in a down market — but he sees much the same upside that Tadeus and Lorraine Cyman saw 30 years ago, including a nice neighborhood, solid school district and ample living space.

“There are literally hundreds of these houses on the market in the Detroit area,” he said. “It’s sad but obviously I didn’t create the problem. Someone has to buy these and fix them up.

“Really, what people like me do, is return a house to the market in a livable condition that prior to that most people didn’t want to walk through.”

We Buy Houses