Michigan Mortgage Defaults Climb Out West

The number of Michigan mortgage foreclosures processed by Ottawa County in 2006 is more than double the number foreclosed three years ago, and more than 12 times the number of foreclosure filings in the county 10 years ago.

And 2007 is shaping up to top last year’s record.

The foreclosed home mortgages are put up for auction each Thursday at 10 a.m. at the county building in Grand Haven.

“This morning, we had a record number of foreclosures (for one week) in Ottawa County,” Steven Cotton, a county Sheriff’s Department civil deputy who serves the foreclosure notices across the county, said Thursday. “We had 26 sales. Part of that was (an unsold) condo development in Ferrysburg.”

Mortgage foreclosures in Ottawa County totaled 540 last year, up from 333 in 2005 and 262 in 2004. There were only 43 such foreclosures in 1996, 58 in 1997, 98 in 1998, and just over 100 in each of 1999 and 2000. Foreclosures rose to 165 in 2001, and to 265 in 2002, before leveling off to 245 in 2003.

The first four months of 2007 saw 245 mortgage foreclosures in this Michigan housing market county, which would calculate out to a record 735 for the year.

Still, that pales in comparison to Detroit, which MSN.com called “the foreclosure capital of the U.S.” in a recent story. The site reported that “more than 10,000 homes in metro Detroit entered some stage of foreclosure in the third quarter (of 2006), a 42 percent jump from the previous quarter and a 121 percent jump from the same time last year, according to foreclosures listings and RealtyTrac, a data provider in Irvine, Calif.”

Ottawa County Register of Deeds Gary Scholten said it used to be generally middle-income families that had their mortgages foreclosed, mainly because it used to be hard for lower-income people even to get a home purchase loan. Not anymore.

Scholten said part of the problem is that commission-driven lenders push through loans that often would not have been approved in the past. Struggling homeowners often find themselves with loans with higher amounts than what the house is worth or could be sold for in today’s down market.

“It gets real tough for them,” Cotton said. “The vast majority of the foreclosures that we see have more money owed on them than the property is worth.”

There’s really many reasons why mortgages end up in foreclosure, experts say.

“What I’ve learned, is that if there are a hundred foreclosures, there are a hundred stories … somebody has cancer, somebody just died, or obviously job loss, and some of them are just poor money managers,” Cotton said. “But really, the vast majority of them have got some very difficult life situations that have come up and they’ve just kind of gotten in over their heads.

And I think the big upturn in what we’ve seen is the result of the kind of mortgages that are out there — these zero-interest, [bad credit mortgages] where everybody’s natural inclination is to get the biggest house they can get with the best deal that they can, and they figure out exactly what they can afford and they’ll go for that. And then the rules change.”

The Bloomberg financial news source reported April 25 that there were almost 437,500 foreclosure filings in U.S. during the first quarter of this year, and more than half are defaults on subprime loans.

In his State of Ottawa County report in February, county Administrator Al Vandenberg said financial troubles like foreclosures are a part of the reason for an increase in criminal acts the past few years.

“2005 saw an increase of 5,000 cases filed in district court, more than 2,349 over the previous high of 2002, driven in large part by mortgage foreclosures, tenant evictions and credit card company suits for nonpayment,” he reported.

Scholten believes banks would still rather work with the defaulting homeowner on catching up with missed payments, or somehow mortgage refinance, than kick them out and have to incur costs in marketing the property — often at a loss.

“If they can keep the owner in it, I would think they would want to do that,” he said.

Scholten said people need to be aware of scam artists who call up foreclosed homeowners and offer help — help that could result in putting the homeowner into worse financial shape.Cotton said they typically see only third-party buyers of foreclosed mortgages about 6-10 times a year.

A third-party buyer of a foreclosed mortgage loan can lose the property if the original owner works out their troubles with the bank — but the homeowner would have to pay the third party what they put into it, plus any interest, Scholten said.

Without a third-party sale, the bank retains ownership of the property. The people can continue to live in the home until the redemption period of six months — 12 months if the parcel is over 3 acres — ends. After that, the bank puts the property on the market.

Foreclosures cannot be used in figuring assessments of neighboring properties, Scholten said.

Another way to lose your home or business property is to be delinquent on paying the property tax bill.

Michigan is a property tax foreclosure state. That means, in Ottawa County, if real property taxes returned delinquent on March 1 remain unpaid, they are forfeited to the county treasurer the following March 1. The property owner or other interested parties have one year to redeem the property by paying the forfeited delinquent taxes — plus all penalties, interest and costs that are assessed.

If they’re not paid in full, the property is foreclosed on March 31 by court action.

On April 2, nine properties were foreclosed by the Ottawa County treasurer for unpaid taxes for tax years 2004 and prior. The delinquent property taxes can no longer be redeemed and the title will be transferred to the county treasurer, and will be auctioned in July.

Tax foreclosures trump mortgage foreclosures in terms of who ends up with the property, Scholten said.

SOURCE: The Grand Haven Tribune