Bringing down homes
Foreclosures in Minot have multiplied since the 2012 flood, and numbers continue to climb.
The Ward County Sheriff’s Office reports eight foreclosure sales from its auctions in 2011, 25 in 2012 and 23 this year as of Oct. 30, with more auctions pending.
Flood-damaged homes often don’t sell when auctioned at sheriff’s sales because the value typically isn’t enough to cover what’s left on the mortgage, said Connie Lord, a Minot Realtor with Century 21. The properties then end up on the market with Realtors such as Lord, who handles many of the sales of post-foreclosure properties in Minot.
“Pre-flood, we only saw two a year. Now post-flood, I have gotten 30 in the last year and close to that this year,” she said. “I have investors just waiting to buy these when they come on the market. In four to seven days, I have offers on them.”
Lenders will sell houses at a discount to get them off their inventory rather than risk not being able to sell later, she said.
The Minot City Council will vote Monday whether to buy a foreclosed property from the North Dakota Housing Finance Agency. The house is in the flood control footprint. The Housing Finance Agency is asking $82,400, which is the pre-flood assessed value. The city has been paying pre-flood assessed value plus a 15 percent market adjustment on voluntary property acquisitions in the flood control footprint.
The Department of Veterans Affairs has completed foreclosure on 22 flooded properties in Minot, said Julie Albertson, a Realtor with Brokers 12 who is handling the properties for the department.
“It’s significant in that, prior to the flood, there were basically no VA foreclosures,” she said.
In many cases, borrowers had recently acquired their properties and hadn’t built up much equity before flood damage knocked their home values down well below what they owed. Albertson said certain owners were able to work with the VA and find buyers, sometimes going through a short sale, to avoid a completed foreclosure.
Judy Hoskin, Realtor with Watne Realty, said many flooded properties are only beginning to come into foreclosure. She said the number of calls from lenders is starting to increase, and the types of houses involved vary from the abandoned to the rehabilitated.
Lord also expects many additional foreclosures to take place over the next couple of years. She noted that the judicial foreclosure process used in North Dakota takes time, but also lenders often move slowly in hope of avoiding foreclosure action.
“A lot of banks are trying to work with people, doing short sales, and there’s a lot of options to get out of foreclosure,” Lord said. “Banks are trying harder to work with homeowners.”
Russ Cross, senior vice president and regional director for Wells Fargo Home Mortgage in Des Moines, Iowa, said Wells Fargo sent representatives to Minot immediately after the flood to assist its mortgage holders. They helped borrowers to pursue flood insurance claims and stopped late payment fees or credit reporting in some cases. Wells Fargo also coordinates credit counseling from organizations approved by the Department of Housing and Urban Development if borrowers need that help.
Cross said the bank worked with about 150 Minot customers post-flood. He said he is unaware of any foreclosures that might have occurred but added Wells Fargo currently has no Minot properties in its foreclosure inventory. The bank’s foreclosure rate for the second quarter of this year in North Dakota was only 0.5 percent of its total mortgages.
“We have gotten really good at connecting with borrowers who are facing payment challenges. We will begin our efforts to connect with them at three days past due,” Cross said. “We are able to connect with about 80 percent of our delinquent borrowers. When we connect with those borrowers, roughly 70 percent of the time, we are able to identify a solution or come up with a solution that avoids a foreclosure sale.
“We are continually looking for new and different ways to grab their attention and help them understand that there are options to a foreclosure sale and that we want to help them,” he said.
Sometimes homeowners will turn over properties in a process called deed in lieu rather than go through foreclosure.
“Regardless of how we end up with the property, we are sensitive to its condition and that property’s impact on the rest of the neighborhood,” Cross said. Wells Fargo has a program to maintain and repair vacant properties in its inventory.
“We started this practice 2-1/2 years ago because we learned we are more likely to sell the home to an owner-occupied buyer as opposed to an investor. We are more likely to sell it at or above market value and we tend to sell it more quickly,” Cross said.
Susan Anderson, loan service manager for Gate City Bank, Fargo, said Gate City has resolved all its mortgages related to flooded homes in Minot. The vast majority were sold or taken care of through procedures other than foreclosures, Anderson said, noting that North Dakotans are conscientious when it comes to paying their debts.
“We didn’t have a high percentage of foreclosures at all,” she said.
Anderson said Gate City’s foreclosure rate also may be lower than average because the bank stepped in right away to work with its borrowers to prevent delinquency.
North Dakota has one of the lowest foreclosure rates in the country, according to RealtyTrac.
Statistics from the Mortgage Bankers Association put North Dakota’s foreclosure rate for the first half of 2013 at 0.88 percent of all mortgages. That’s down slightly from a rate of about 1 percent over the past few years and a six-year high of 1.18 percent in the first quarter of 2010. The decline can result from a decrease in foreclosures statewide or from a situation in which the number of new mortgages is growing faster than a rising number of foreclosures.
The Ward County Treasurer’s Office reported that it is not experiencing an increase in unpaid taxes. The 2 percent delinquency rate is consistent with the delinquency rate pre-flood, said Treasurer Collette Scharpe, who noted that lenders may be keeping taxes current on their delinquent mortgages.
North Dakota law requires lenders give borrowers at least 30 days notice of intent to foreclose before bringing action in court. If the borrower cannot be located, the lender must publish a notice of intent to foreclose. Under federal consumer protection rules set to take effect in January, the notice period will be extended to three months. Also, the new rules say a foreclosure proceeding can not start if a borrower has submitted a complete application for a loan modification or other alternative to foreclosure that is pending review.
The borrower has the right to present arguments once the lender files for foreclosure in court. If the judge orders foreclosure, a date would be set for a sheriff’s auction, which must be properly advertised and published. Throughout the process of pre-foreclosure, the borrower can make payment and end the proceedings.
Even after a house is auctioned, the borrower has 60 days to redeem the property before the winning bidder is awarded a certificate of sale. The redemption price must cover the mortgage owed plus eligible lender costs associated with the proceedings.