Sandra Gorski and Deirdre Thomas, Columbus homeowners who have gone through divorce, job loss and various medical ailments, represent two faces of Bartholomew County’s foreclosure problem — a rising trend after a welcome lull in 2011.
Gorski, 47, facing a $185,770 foreclosure judgment in county court, jousted with her lender for at least four years after making her last recorded mortgage payment in fall 2008.
Now, after many months of phone calls, correspondence and court wrangling with her lender’s mortgage servicing arm, it looks as if Gorski will avoid losing her Lawton Avenue home at a sheriff’s auction that was to take place Tuesday. Instead, she has agreed to a new 30-year loan at 2 percent interest under the federal Home Affordable Modification Program, known as HAMP. She’ll pay $619 per month as her reworked mortgage, down from $1,184 a month under her old loan.
Thomas, 53, who is unemployed and suffers from disc pain in her back, might not be as fortunate.
She hasn’t made a $650 monthly payment since spring and owes about $80,000 on her mortgage with Wells Fargo Bank. The lender has initiated foreclosure proceedings to take back the house in the Northbrook subdivision. Thomas, who has run through her 401(k) savings to pay bills since losing a job in the mortgage department of Irwin Union Bank three years ago, doubts she can scrape together enough cash to save the property she bought a dozen years ago for $101,000.=
“I was counting on faith that God would open some doors,” Thomas said. “I guess the doors he’s opening aren’t in Columbus.”
Thomas now hopes to land a full-time job in Greenwood and said she might have to resign herself to losing the house and instead renting a small apartment 35 miles away.
The two women aren’t alone.
Scheduled sheriff’s sales of homes in Bartholomew County have increased 33 percent so far this year as lenders try to shed foreclosed properties from their books, find fresh buyers and bring the properties back into commerce as the Bartholomew County housing market improves.
The Sheriff’s Department reports that 317 foreclosure auctions have been scheduled for January through December this year, up from 238 a year earlier. The auctions peaked in 2010 with a total of 401, scheduled in the midst of the recession.
Not all scheduled sheriff’s auctions actually take place. Sometimes borrowers and banks strike an 11th-hour deal that leads to the forced sale being canceled. That’s the case with Gorski’s auction, which was set for 10 a.m. Tuesday, but now has been canceled.
Outlook not so bleak
Bankers and real estate professionals in Columbus argue that the recent rise in volume of sheriff’s auctions doesn’t mean the county’s housing market is about to face a period of renewed decline. In fact, the data might suggest something of a bright spot, they say.
In September, the most recent month for which sales data is available, the median price of all homes sold in Bartholomew County was $143,400, up 10.4 percent from a year earlier, the Indiana Association of Realtors reports. Home sales for the first nine months rose 6.1 percent here, and the inventory of available properties shrunk 7.9 percent by Sept. 30 compared to a year earlier, which puts more upward pressure on prices.
From another perspective, more sheriff’s sales could illustrate that big national mortgage lenders, once hesitant to aggressively seize homes from past-due borrowers via legal proceedings, are more optimistic about being able to foreclose and resell the property to new, credit-worthy buyers.
“There was this shadow inventory of homes sitting on banks’ desks, and they were reluctant to push things through” for fear no one would buy the homes, said local builder Lisa Conner, a co-owner of Joli Development. The sheriff’s sales being scheduled aren’t all new foreclosures; many are older cases being renewed, she said.
Other observers agree.
“Banks have delayed foreclosure proceedings in some instances to keep someone in the house with the lights on so the property didn’t deteriorate,” said Tim Scheidt, a Columbus real estate appraiser and manager of Don R. Scheidt & Co. Real Estate Services locally.
“Big banks sold their mortgages downstream to loan servicers, and eventually they were saddled with thousands of bad loans to work out,” said Anne Hittler, a mortgage lending officer at MainSource Bank in Columbus. Add problems with incomplete paperwork, confusion over loan documentation or limited manpower at some banks, and long legal delays can occur.
“You’re just a case number, and you’re on hold until your number comes up.” Hittler said.
Scheidt said 10 months of data this year show that when agents have sold foreclosed properties, repossessed homes or orchestrated short sales (deals in which a bank accepts less than appraised value to settle a mortgage loan), the sales price has edged higher compared with 2010. The median price of such deals two years ago was $50,000, he said, but it’s up to $62,700 so far this year.
Hittler also said homeowners with good credit standing who happen to live in neighborhoods where foreclosures and sheriff’s sales have occurred too frequently get hit with declining property values. A few appraisals in Columbus are being hurt by low comparables linked to sheriff’s sales when appraisers run the numbers on a traditional sale nearby.
“Occasionally, that drives down the sales price for other homeowners, even those with good financial standing,” Hittler said.
Back under the gun
Other borrowers remain shackled by severe economic stress, especially if they’ve been out of work a long time.
Gorski was unemployed at least two years until recently landing a job in retail that requires her to drive to an Indianapolis call center to work.
Thomas has had two or three temporary jobs since 2009, but only for a few weeks or months at a time. She’s convinced that a poor credit rating has blocked her from winning full-time work.
Meanwhile, Gorski’s foreclosure case heated up again this fall when a revised 30-year mortgage offer arrived from her loan servicer, Ocwen Financial Corp., based in Atlanta.
Her original lender, Deutsche Bank, first filed suit Nov. 25, 2008, but the case dragged on for two years until she was offered (and then failed to follow through on) an earlier revised deal to end foreclosure and start a new loan at a reduced interest rate. At the time, Gorski contended the workout plan was filled with unexpected and exorbitant title search and assorted legal fees. She didn’t mail in expected monthly mortgage payments as she had been asked to do, and the revised loan fell off the table.
Still, Deutsche Bank and Ocwen didn’t press the issue to a conclusion in county court and Gorski continued to live in her Lawton Avenue home.
Then, in early October this year, Gorski received a 14-page loan packet from Ocwen, a company that oversees billions of dollars in troubled home loans for major banks around the nation.
In the past week, only a few days before the scheduled sheriff’s sale in which Gorski would have lost her 104-year-old house, she made her first $619-per-month payment on the latest revamped 30-year mortgage offer from Ocwen. Gorski’s sheriff’s sale date has been canceled, though she must remain on-time with payments and come up with a $50,000-plus balloon payment in five years to avoid problems later.
Gorski worries about being able to make that future balloon payment. She has two daughters at Ball State University, another daughter working for the U.S. government overseas and two sons living at home, one of whom has a fiance living with him.
“I’ve burned through all my savings at this point, and I’d have to save nearly $1,000 extra a month over the next five years to make that balloon payment,” Gorski said. “Everyone in this economy is financially pinched. Once you’re down, things can just continue to snowball. No wonder people are living on the streets.
“(The banks) put you in a situation where you really have no choice,” she added. “I hope we can just make it through Christmas, and then I’ll worry about what next year brings.”
Find bright side
For her part, Thomas waits to see what’s going to happen next with her past-due home loan. She anticipates a knock on her front door at any time with someone delivering notice of a sheriff’s sale date.
“I’ve raised two children in this house as a single mom, and this is the nicest house I’ve ever had,” Thomas said last week, fighting back tears. “I don’t want to lose it.”
The flip side of foreclosure is that sometimes independent buyers — investors, landlords seeking new rentals or builders willing to rehab homes — buy properties for a modest price at sheriff’s auctions, repair them and resell the homes for a profit or rent them at market rates.
Banks taking back properties from borrowers who haven’t paid their bills are happy to find third-party buyers. The last thing a lender wants is to carry a repossessed home on its books and have to pay for maintenance or upkeep.
Builder and real estate broker Jeff Finke of Columbus said opportunities to buy and successfully redo troubled properties have increased as the Bartholomew County housing market regains steam.
Since the recession hit in 2008, Finke has been doing as many as 12 to 18 rehabs a year, many of them picked up through foreclosure sales. He operates a traditional real estate sales office and does home redevelopment through a companion company called Turnkey Home Solutions.
“You have to get a good price because you could have $10,000 or more of hidden costs or unknowns” once repairs begin, Finke said, adding that a new roof alone can cost $7,000.
His latest project started with the May purchase at sheriff’s auction of a farmhouse on more than five acres for roughly $102,000. After five months of landscaping,
various repairs and installation of three-quarter-inch oak flooring, plus a modern kitchen with new cabinets and granite countertops, Finke is reselling the property near Rock Creek Elementary for a list price of $269,900.
“There are only a handful of properties in that price range for sale in the county on more than five acres,” he said.
It isn’t always easy to turn someone else’s foreclosed home into a builder’s profits. First, sheriff’s sales require cash on the barrelhead to buy. That means builders diving in must have a stockpile of cash to fund their purchases and follow-up repairs. They also need a large enough bankroll to absorb losses, if a property turns into a money pit with hidden flaws that soak up money. But sometimes it all works out fine.
In late September, home builder Conner, co-owner of Joli Development, said she bought a Johnson County home for her 24-year-old daughter, Katelyn, who works in global logistics at Cummins. She paid $66,000 for the home off Interstate 65 and has started fixing it up.
Conner’s daughter will go from renting a $700 per month apartment in Greenwood to paying a mortgage of $301 per month.
“I couldn’t commit to buying a new car, but I had no problem buying a house,” Katelyn Conner said.
“I actually worked on flipping my first house when I was 17 as project manager. We bought an old, beat-up property for $5,000, put $23,000 of repairs into it and resold it for $85,000. It was really rough; there was a tree growing in the middle of it,” the young woman said.
Brad Grayson of Columbus, who runs a property management company and heads the Bartholomew County Landlord Association, also has been a buyer at sheriff’s sales. But he said he sees the human toll that foreclosure takes on people, not just the dollars-and-cents equation of buying and selling.
“This isn’t just houses. This is people, families, kids, uprooted lives,” he said. “If the banks would just calm down and work with these people, more homeowners could keep their houses. Instead, they just grind through the system. So many times (foreclosures) are just folders on some guy’s desk in a faraway city.”