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August 22, 2007

Indiana foreclosures remain high

Hoosier State is in top 10 for foreclosures in July

By Arthur E. Foulkes

TERRE HAUTE — Indiana continues to be among the worst states in the nation for home foreclosures, according to data released by RealtyTrac, a California-based firm specializing in foreclosed properties.

The Hoosier state was in the top 10 in foreclosures in July, RealtyTrac reported. One house in 609 in Indiana was in foreclosure, compared with one in 693 for the nation as a whole, the firm reported.

Foreclosure is a means of satisfying claims against a mortgager who fails to pay, usually by sale of the property.

Terre Haute has a number of homes in foreclosure but the local housing market has been less affected by the recent meltdown in real estate prices, local observers say.

The downturn “hasn’t affected us as much as people who were sitting on the housing bubble,” said Justin Woodruff, president of Sycamore Lending Group Inc., a Terre Haute-based mortgage originator. Home prices in the Terre Haute area did not soar in the past five years as they did in many other parts of the country, he said.

“We’ve been in a buyer’s market for quite a few years,” said Charlie Bryan, associate broker at Crossroads Realty Group in Terre Haute. While much of the nation experienced the housing boom, Terre Haute remained in a pocket that was largely unaffected, he said.

There are presently 1,302 homes for sale through real estate brokers in Vigo, Sullivan, Clay, Vermillion and Parke counties, Bryan said. While that number is down compared with some years, the market remains relatively slow right now, he said.

“You just see ‘for sale’ signs on every corner,” said Virgil Butts, owner of Butts Auction Realty in Brazil. The Brazil-area housing market is definitely in a slowdown, he said. Homes that once could be fixed up and resold quickly are now sitting empty for six months or longer, Butts said.

The high number of home foreclosures in Indiana and nationwide follows years of expansion in the subprime mortgage lending business, experts say. Subprime mortgages are typically sold to people with little or no credit, often with little money down.

Subprime mortgages made up 50 percent of the foreclosures in the first quarter of 2007, RealtyTrac estimates.

“The subprime business in my opinion has collapsed,” Woodruff said. Investors who until recently were willing to buy bundles of subprime mortgages on the secondary market no longer want them, he said.

The recent decline of the subprime mortgage business also may be evident in the number of local companies that specialized in subprime lending in the Terre Haute area that have apparently gone out of business. At least six of the mortgage brokerages listed in the 2006-2007 Terre Haute area telephone book have disconnected telephone numbers.

Part of the breakdown in the subprime market can be tied to lending standards that were used to approve subprime loans, local experts said.

Until five or more years ago, home buyers needed to put 10 to 20 percent down to buy a house, Bryan said. More recently, borrowers have been able to get mortgages with as little as zero percent down, he said.

Additionally, some mortgage lenders were writing mortgages for people whose monthly house payments would equal as much as half their income, Bryan said. When someone’s debt ratio is that high, he said, “it’s a lot easier to get in a jam.”

Other reasons cited for the rise in foreclosures include adjustable rate mortgages that have adjusted upward and increasing property taxes, according to local and national observers.

One Terre Haute real estate broker said one of his clients saw his property tax bill climb from $2,600 to $3,500 since January. Increasing property taxes also might be making people less eager to buy right now, the broker said.

Mortgage lenders, burned by the recent foreclosure wave, are making their lending standards more strict, Woodruff said. That, and news such as the financial difficulties of companies such as Countrywide Financial Corp., the nation’s biggest home-mortgage lender, have made less-than-prime mortgages less easy to come by, he said.

The foreclosure story may be less bleak in Illinois, which ranked 15th in foreclosures in the nation, according to RealtyTrac’s latest figures. There were 5,530 foreclosures in Illinois in July, but 4,652 of those were in the Chicago area, meaning the Wabash Valley counties in Illinois may not be experiencing as much trouble.

“We’re not feeling any effect from [the rise in foreclosures],” said Jennifer Crumrin, broker-owner of Courthouse Realty in Marshall, Ill. “We’ve been real busy,” she said.

Outside of the subprime market, the real estate business is fairly steady even in Terre Haute, especially in sales of newly constructed homes, local experts say.

While it may be a buyer’s market, there is still plenty of money available for prime lending, said Richard Conley, owner of Richard Conley Appraisal in Terre Haute. “We are still seeing regular sales,” he said.

Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.

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