Sunday, May 11, 2008; Posted: 09:31 AM
Windows with views of empty rooms. Weeds sprouting through once well-manicured lawns. Small, bright orange stickers on front doors, the tell-tale sign that the houses have been abandoned.
They are increasingly familiar sights to Wilson, whose upscale neighborhood was among the hardest-hit in a record year for foreclosures.
Lenders filed 2,528 suits seeking to foreclose on mortgages they held on more than 2,400 different Manatee County homes last year, according to a Bradenton Herald analysis of court filings. The numbers are different because some properties had second or third mortgages that lenders also sought to foreclose.
Of those homes, 33 were in the Stoneybrook neighborhood. Just on Wilson's street, Stone Harbour Loop, 16 foreclosure actions were filed last year -- one out of every 11 houses.
In the first three months of 2008, seven more were filed, increasing the ratio to one in every eight houses.
Wilson's home also is in jeopardy.
The 43-year-old Chicago native, who moved to Florida eight years ago, has found himself fighting to save his property. He's angered by the aggressive lending and poor oversight that have landed thousands of families in the same predicament.
"It's just terrible what they're doing to people here," Wilson says. "They're killing America and they don't even know what they're doing."
After surging property values peaked in 2006, homeowners in Florida saw their equity plunge. Many who used no-money-down and adjustable-rate financing to buy their home found themselves upside down, owing far more on their home than it was worth.
More than 245,000 of the nation's 1.3 million foreclosure filings last year were in Florida, second only to California, according to Foreclosures.com.
That flood has touched every corner of Manatee's housing market, from beachfront condos on Longboat Key to mobile homes in Myakka City.
The situation continues to worsen throughout the nation.
National home prices have already dropped 15 percent since their peak in 2006. And Yale University economist Robert Shiller, pioneer of the Standard & Poor's/Case-Shiller home-price index, has predicted that national housing prices likely will plummet below the 30 percent drop encountered during the Great Depression.
In Manatee County, Palmetto and the central part of Bradenton had the most suits, as well as the most foreclosures in 2007. But there also were high concentrations in newer subdivisions in East Manatee, Ellenton and Parrish.
The neighborhoods with the highest numbers of foreclosure filings in 2007 were Bayshore Gardens, Covered Bridge Estates, River Plantation, Summerfield Village and Stoneybrook. Those neighborhoods accounted for one out of every 14 foreclosure actions filed in the courts, the Herald's analysis found.
Of the borrowers facing foreclosure last year, 45 percent did not live in the property the lender sought to foreclose. While some of those absentee owners live as far away as Germany and the United Kingdom, most were from Manatee and Sarasota counties.
The fallout from foreclosures has manifested itself throughout Manatee County's economy and infrastructure. A recent study estimates that the local economy has taken a $686 million hit.
The adverse effects of the mortgage meltdown continue to grow. Among them:
--Foreclosures have overwhelmed the court system, resulting in backlogs for all civil cases. The two Manatee County judges who handle foreclosure proceedings estimate their caseload has increased from an average of 19 cases a week to 59 and growing. "It's never been like this," one of them said. "I haven't seen any signs that it's getting better."
--The growing number of foreclosed properties is further distressing the real estate market, depressing property values by as much as 30 percent in some neighborhoods, according to the Manatee County Property Appraiser's Office.
--Some condo and homeowner associations, facing higher delinquencies and legal costs associated with foreclosures, are raising fees and/or cutting services to cover budget shortfalls.
--Many homeowners in or facing foreclosure are walking away, leaving behind empty homes, creating eyesores and magnets for illegal activity.
The foreclosure fallout is "going to hurt more than just the people directly involved in this," predicts D. Turner Matthews, a Bradenton attorney who has represented borrowers facing foreclosure. "It's such a huge thing that it goes beyond anybody's ability to fix."
Bank-owned property sales -- one indicator of foreclosures -- soared from 157 in 2005 to 810 last year, a 416 percent increase, according to the Manatee County Property Appraiser's Office. Officials with the appraiser's office project the number of bank sales will climb to 1,080 this year.
How did this come to pass?
Experts cite a variety of factors for the foreclosure crisis -- ranging from borrowers who, fueled by easy credit, stretched to live beyond their means, to predatory lenders who locked unwary buyers into loans with interest rates that started well above prime and routinely adjusted ever higher.
Exacerbating the situation was the investing market for sub-prime loans, which carried much higher percentage rates than prime loans, and were treated as commodities to be traded among hedge funds, financial institutions and private investors.
Speculators betting on the continuation of Florida's housing boom also contributed to the foreclosure problem.
The Bradenton Herald's analysis of court documents showed that nearly half of individuals facing foreclosure last year did not live on the property and had likely purchased the homes as investment properties.
A total of 207 borrowers had two or more foreclosure suits filed against them last year. Those individuals accounted for 486 foreclosure suits -19 percent of the 2,528 cases the Herald examined.
Fighting to save their home
Trapped between the investment furor and profitable loan deals were people like Wilson.
He and his wife closed on their $522,500 home in December 2005. Five months later, they were sued for foreclosure and are still fighting to save their home.
Initially, Wilson says, he and his wife were told the payments on the 2,200-square-foot home on a large lot with a pool would be $2,500 a month, including taxes and insurance.
Instead, when Wilson and his wife got to the closing table, they learned their payments would be about $700 more, he says.
The couple's paperwork stated they'd be paying 11.35 percent interest on $102,000 of the home and 8.7 percent on the balance.
The initial combined payments were $3,276 a month, according to the couple's closing documents.
And those payments would have gradually ballooned to as high as $4,400 a month.
Wilson, who is not currently making payments on the loan, acknowledges that the couple should have looked at the loan documents more carefully.
"I didn't read the papers," Wilson said.
Wilson thought of walking away from the deal at the closing after finding out the payments would be higher than originally thought, but didn't want to lose his deposit and wanted to make purchasing the home work.
Now, Wilson, who is unemployed after trying unsuccessfully to start an athletic apparel business called Slammin' Gear last year, and his wife, an inventory manager with a national retailer, are caught between two lenders. Their original mortgage issuer, Fremont Investment and Loan, has sued for foreclosure. But as is common, Fremont -- a subprime lender -- sold the original loan to a sub-lender, Litton Loan.
In March 2007, the FDIC ordered Fremont to stop making risky loans.
This past March, the FDIC declared Fremont was undercapitalized and ordered it to raise money or find a buyer by May 26.
On May 5, the Massachusetts Appeals Court upheld an injunction to force Fremont to halt foreclosures in the state in order to allow authorities to review individual mortgages.
The company announced Friday it was selling its mortgage servicing rights to Litton Loan and may file for bankruptcy protection.
Fremont had no comment on Wilson's situation, company spokesman Daniel Hilley said.
Wilson is trying to renegotiate the loan with Litton, while staving off a foreclosure sale of his home. The couple at one point filed for bankruptcy in hopes it would buy them more time. They withdrew the petition because they were convinced they could save the home without resorting to bankruptcy.
Attorneys for Litton Loan sent Wilson a letter stating their intent to work with the couple on repayment of the mortgage, but Fremont, the primary lender, still wants its money.
Wilson says he'd be glad to oblige.
"I'm not trying to weasel out of anything. If I owe you $530,000 I'm going to pay it," says Wilson. "Make this loan work with $2,500 (payments) like you initially said. And everyone walks away a winner. If you can't do that, let us out."
Borrowers didn't walk away
Situations like Wilson's are common to Carol Ciarniello, executive director of the non-profit Center for Financial Independence in Bradenton, which provides debt and home-buying counseling.
"Some people feel very pressured," Ciarniello says. "They're there at the closing table or refinancing, and if they realize they can't do it or think they made a mistake, they feel like they have to go through with it. They just go ahead and do it rather than stepping back and saying, 'No, I can't do that.' I always try to tell people in our (first-time homebuyer) classes, 'You can walk away.' "
Ciarniello also has had clients say they were lied to by mortgage brokers.
One of her clients got to the closing and discovered the loan terms were for an adjustable-rate mortgage, rather than fixed, as had been promised, Ciarniello says.
"They called the mortgage broker and the broker said, 'No, it's exactly what we talked about,' " Ciarniello recalls. "So they believed him and they signed. Well, it adjusts, and it adjusts every six months."
Peter Minarich, vice president of CTX Mortgage in Bradenton, acknowledges that there were no doubt some unscrupulous mortgage brokers who took advantage of borrowers.
But he doesn't think they deserve all of the blame.
"You can throw the sword at the lender for giving them a loan that resets to a much higher interest rate after two or three years," Minarich said. "You can throw the sword at the homeowner for taking out the loan. Or, you can throw the sword at the mortgage broker for not explaining it better and trying to get them an FHA loan."
Ciarniello has tried to discourage clients in the past from using adjustable-rate mortgages to buy more home than they could afford. In some cases, the client bought the home anyway and is now in foreclosure, she said.
"I think a lot of people got caught up in the, 'I can get in now. I can get a house. I can pay this payment,' " she says. "All they looked at was the initial payment and not what could happen and what is happening."
Opportunity knocks for some
Amid the rubble of foreclosure, some are beginning to find gems.
On a recent Saturday, a bus loaded with 25 potential homebuyers departed from the SuperTarget on University Parkway.
This "foreclosure tour" was the first of its kind in the area and a bizarre twist on the current housing crisis.
All eight homes on the tour throughout the eastern portion of Manatee County were being offered for sale by the banks for more than $100,000 below what they sold for just two years ago.
One of the homes, in the Inlets at Riverdale off State Road 64, was being offered for $439,900 -- a $265,000 reduction from what it sold for in 2006.
One of those shopping was Brian Huygens, a supervisor for a Sarasota construction company who was looking at homes as possible investments.
Even though the homes were deeply discounted, Huygens thinks prices will fall even lower.
"You can definitely get them lower than what they're offering," he said. "Whether the banks are really ready to start dealing, I don't know."
River Plantation in Parrish is another of the hardest-hit neighborhoods, with 28 foreclosure suits -- including 15 of them actually foreclosed on and the owners forced to move out .
Carlos Serra and his wife have been renting a home in River Plantation for the past year.
Like Wilson, Serra can quickly rattle off an inventory of homes that have been foreclosed on or abandoned by owners in their neighborhood.
"We've noticed nobody moves in at all," Serra says. "That one's a foreclosure, that one on the corner is a foreclosure. And it just goes on and on. The majority of the people in here are renters. If those renters move out, then the investors who bought these homes will be out of luck. It's kind of sad that people are trapped in these homes now that they can't sell."
Just around the corner from Serra's home, the belongings of an evicted renter litter a home's driveway, almost in defiance of the neighboring well-manicured lawns and kept-up homes.
Still a few more doors down, a large yellow "for sale" sign prominently occupies a foreclosed home's front window. The home shows no signs of occupancy and the weeds have started to grow unchecked.
Serra and his wife wanted to buy the home they are renting, but the owner refused to come down in his asking price of $290,000, Serra says. Serra was willing to pay $225,000.
Serra had considered buying a foreclosure, but instead is having a new home built in nearby Lakeside Preserve for $220,000.
The depressed market meant that it was cheaper for him to start from scratch, he said.
"It's cheaper to build than to buy," Serra said of the couple's future home with a lake view. "I was trying to capitalize on the foreclosures. We were shopping. But a better deal came out from a builder."
Leslie McHugh and her husband, Sean, bought their 2,200-square-foot home on 123rd Place East in River Plantation about a month ago for $195,000. It boasts tile floors and a spacious living area.
It was a steal, considering the previous owners had purchased the home for $358,000 less than three years ago, according to Manatee County property records.
Still, Leslie McHugh realizes that can cut both ways, depending on how long it takes stability to return to the neighborhood.
"At this point, it hasn't affected us because we got a great deal," she says. "But I guess when we go to sell our house, they factor in your neighbors' homes to determine the value. I kind of feel we're at the bottom of how bad it's going to be."
As far as Wilson is concerned, it couldn't get much worse.
"If I had it to do all over again, I wouldn't be here," Wilson says. "It makes me sad because this is a great place for my kids."
Coming tomorrow Find an interactive map showing 2007 local foreclosures by neighborhood and
ZIP code; plus, take a closer look at the top
15 lenders.
--Explore a database of all 2007 foreclosures in Manatee County.
--Readers can submit their own stories and share their thoughts.
--Watch video interviews of Manatee residents discussing their plights.
COMING TOMORROW
Take a closer look at some local people affected by foreclosure.
--Tips from attorneys on ways to avoid foreclosure, plus a glossary of terms, 4A
--How did we crunch
To see more of The Bradenton Herald or to subscribe to the newspaper, go to http://www.bradenton.com. Copyright (c) 2008, The Bradenton Herald, Fla. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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