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In a matter of hours, single mom Sonya Balser went from watching her daughter’s volleyball game, to learning her childhood home had been sold at a foreclosure auction. “It was gone,” said Balser. “I was weeping and crying,” she said. It felt like “everything and nothing at the same time.”
Balser is not alone. More than 320 families and property owners in the area lost their homes and investments to foreclosure since 2008, according to records compiled from the Rockbridge County and Buena Vista courthouses. Those affected vary widely, as do their properties. Couples, individuals, and even corporations lost their land, homes, or businesses, ranging in value from $6,000 to $1.8 million.
“It used to be rare to see [foreclosures] in this area,” said Wayne Heslep, a partner at Lexington’s Heslep and Kearney. But records show that the numbers have steadily increased from a low of 14 in 2007, to a peak of 105 in 2010. Foreclosures dipped slightly in 2011, and are now on the rise again in 2012. In the first three months of this year, the numbers have increased 15 percent compared to the last quarter of 2011.
Those who work closely with foreclosures offer a number of reasons for the upsurge in recent years:
• job loss in a bad economy
• an inability to refinance
• the structure of the loans
• homeowners going beyond their means
• illness, death, and divorce
After Army veteran Jackie Simmons was laid off from her job, her home nearly went into foreclosure. “We had lost every bit of 45 percent of our income, and we were still paying off the loans for the kids to go to college,” she said. “It was devastating.”
Attorney Eric White said foreclosures are “driven by the economy.” His firm, Samuel I. White, handled more than 50 foreclosure cases in the Rockbridge area during the past four years.
“The bottom line is this: Are people going to be able to find money to pay their mortgages?” White said.
U.S. Bureau of Labor Statistics show that unemployment doubled during the recession in Rockbridge County, peaking at 8 percent in February 2010. And as unemployment in the area increased, foreclosures rose at a significant rate. As unemployment dropped from the end of 2010 onwards, the number of foreclosures decreased, from 105 in 2010 to 85 in 2011.
But today, area foreclosures are on the rise even though unemployment has fallen to 6.2 percent (as of December 2011). And statewide, White said his firm is seeing a larger volume of foreclosures. He also added that he does not see them slowing down any time soon.
“The last thing we want to do is go into foreclosure,” said Duane Fitzgerald, vice president of Bank of Botetourt in Lexington. Going through foreclosure places an additional financial burden on the bank, he said.
But who bears the burden when the bank has sold the loan? Balser said her loan was bought and sold several times. Eventually, Freddie Mac bought the loan, said Balser.
Along with Fannie Mae, Freddie Mac buys mortgages from banks who originally give out the loans. The two entities are funded by the federal government. Fannie Mae buys loans so that lenders can make other loans to potential homeowners, according to Andrew Wilson, senior manager of corporate communications at Fannie Mae. After purchasing the loans, Fannie pools them together for investors to buy.
Throughout the entire process, the borrower continues to make payments to the bank, which then transfers the payments to the holder of the loan—often times Fannie, Freddie, or an investor who has purchased the loan from them. Wilson said that homeowners are notified when their loan changes hands, but many times borrowers need to contact their bank to find out if Fannie is in fact the owner. Or they can search the Fannie Mae website.
Over the past four years, 91 foreclosures in Rockbridge County have been held by Fannie Mae and Freddie Mac—accounting for nearly one third of all foreclosures in the area.
While he could not speak for Freddie Mac, Wilson said that when a mortgage held by Fannie Mae goes into foreclosure, Fannie Mae takes the loss. Because Fannie is government-funded, he said that in recent years the “losses have been paid by taxpayers.”
Virtually every new loan is now guaranteed by the federal government, said Shawna Cheney, attorney for Blue Ridge Legal Services.
In the past, a change in ownership of a loan was recorded in the courthouse. Cheney said that big lenders stopped recording sales of mortgages in the late 1990s and instead started using an electronic database to track the sale and purchase of loans. This made it impossible in some instances for the public to know who owned a loan, said Cheney.
The practice of purchasing mortgages became a lucrative business during the housing boom of the early 2000s, according to Cheney. The mortgages were bought and sold en masse to generate profits for those packaging the loans. Cheney said the entire process was “like a snake-pit.”
Some borrowers find themselves in the foreclosure pipeline after trying to refinance their loan. Nearly half of our area’s foreclosed homes in the past four years were financed or refinanced in 2006 and 2007.
Cheney said that she has found it difficult for clients to negotiate a loan modification with larger banks such as Bank of America and Wells Fargo. She said most of the time, her firm usually tries to slow down the process and get the best deal for her clients. But, “ultimately, [the lender] gets the house.”
Once a house goes into foreclosure, Cheney said her firm tries to help clients move on and potentially get a new place to live—either a smaller house or more often a rental unit.
Cheney attributes the difficulties many have in refinancing to lending practices and pressure from investors. She said that many think a write-down on principal is the only way to turn things around. But since this would mean investors take a hit, she stressed that they “have fought like crazy not to write down mortgage principal.”
Balser said things got complicated when she tried to modify her loan with CitiMortgage. Even though CitiMortgage’s paperwork says a borrower must continue making mortgage payments to qualify for a loan modification, Balser said a representative at the bank told her she needed to fall behind on her payments to do so.
After missing a few payments, Balser said she then filled out an application for a loan modification. But she said there were issues with documents, names, and signatures. And instead of receiving the modification, Balsar’s home went into foreclosure.
Balser said CitiMortgage never advised her of the sale—which is required by law in Virginia. She has taken legal action against the bank to regain her home of 39 years.
Cheney said she was not aware of any successful challenges to foreclosure in Virginia by proving wrongdoing by a bank or lending agency. Balser, who has hired her own attorney from Richmond, remains in her home and continues to fight to stay in it.
“I didn’t do anything wrong,” Balser said, “I work a full-time job and part-time jobs. I’m a single mom with two girls. I’m just trying to make it, day by day.”
Interview with Jackie Simmons conducted by Caitlin Doermer.
April 11, 2012
Updated April 16, 2012
Updated April 30, 2012: Attorney Shawna Cheney sent this update on a recent Virginia Supreme Court finding in favor of homeowners in a foreclosure case.
The Virginia Supreme Court said in a decision issued April 20, 2012 that lenders must comply with all terms in a contract leading up to foreclosure and nonpayment of a mortgage is not the sort of material breach precluding borrowers from seeking to enforce the terms. This decision came in a case where former homeowners challenged a foreclosure after the fact because the lender did not follow the terms of the deed of trust. The Supreme Court found in favor of the homeowners and the case has been sent down to the lower court for a decision in line with this finding.