Home foreclosures have soared across the Phoenix area and Arizona in recent months, another fallout from the recession and mounting job losses in the past year.
Between 1,000 and 1,500 foreclosures have been recorded monthly in Maricopa County this year, said Carole Jones, owner of Foreclosure Solution Services in Fountain Hills, which tracks the trend. Jones works with homeowners and mortgage lenders to establish a re-payment plan, allowing homeowners to keep their homes. The number of clients has been steadily increasing, she said. “The reasons are varied,” Jones said. “A lot were out of work, but I can’t say that’s the exclusive problem.”
Consumers who have other mounting debts also have been pinched. “They need to realize that their unsecured debt has to wait,” she said. “Mortgage companies can take away your house. Credit card companies can’t.”
Jones operates across the Valley, but says foreclosures tend to be higher in the southwest Valley.
Mary Wendel, owner of M.K. Associates in Phoenix, assists property trustees in the foreclosure process. The company handles the legwork for attorneys and title companies. She estimates that foreclosures rose 27 percent in the Valley from 2000 to 2001 because of a weak economy and massive job layoffs by large companies such as Motorola and Honeywell, which are two of the region’s largest employers. “I hate when everyone blames Sept. 11 because the economy was taking a turn before that, but we have had an increase in business,” Wendel said. She said over-funded mortgages are hurting borrowers. “We’re finally seeing 125 percent mortgages go belly-up,” she said. “They want to sell or refinance their homes but they can’t because they owe more than their homes are worth.”
These loans were popular a few years ago and enabled people to borrow more than 100 percent of their homes’ values.
Each lender has its own guidelines regarding foreclosures. “Obviously no one is going to file foreclosure for missing one payment,” Wendel said.
By the time a home is auctioned, the homeowner could have lived there for five months to one year without making any payments, Wendel said. Compass Bank, which started in the Valley three years ago, hasn’t seen a dramatic increase in foreclosures. But Compass president Rich Vogel said banks are more conservative lenders than some of the alternatives that advertise on apartment doors and through the mail. It’s not as bad as the recession in the early 1990s, he said. The Mortgage Bankers Association of America shows Arizona and the nation’s foreclosure rates are rising. During the fourth quarter of 2001, which is the latest data available, Arizona’s rate for loans that entered foreclosure during the fourth quarter was 0.72 percent, compared with a national rate of 1.04 percent. Among conventional loans alone, foreclosures were at 0.54 percent in Arizona, while the national average was 0.76 percent, both increases of several “basis points,” an incremental increase the industry uses.
Federal Housing Authority loans rose 22 basis points to 1.25 percent in Arizona. The national average increased to 2.17 percent. Two-thirds of the FHA borrowers are first-time home buyers who qualify under more liberal underwriting guidelines, which can lead to riskier borrowers.
Doug Duncan, MBA’s chief economist before Sept. 11 that foreclosure rates would continue to rise because of the falling economy and rising unemployment.
