The tremendous increase in foreclosures in Virginia has heavily affected the real estate industry of the region. It has been found that the foreclosure rate has almost tripled in July 2008 than what it was in July last year. Half of these foreclosure homes have been arrested in Northern Virginia. In July, the highest rate of foreclosures has been found in the Prince William County where one out of every 103 households was facing foreclosures. Nearly 1,728 homes were in a foreclosed state in the Fairfax County and about 169 homes were facing foreclosure in the Loudoun County. Out of every 1,357 households in the Arlington County were facing this real estate problem.

However, the increasing rate of foreclosures has increased the home sales throughout most of these regions. The decrease in the value of homes have made a large number of buyers to buy them, which otherwise would have been impossible for them to afford. It has proved especially beneficial for the first time buyers in the Prince William County. The median price of home has come down to $214,000 from $354,450 in the Prince William County.

The median home price in the Fairfax County has declined by 17 percent having a small impact on home selling activity. The median home price in the Loudoun County has fallen by 20 percent in comparison to the figure of last year’s July. There has been a marginal increase in the home selling activity in this region. However, the development of the real estate market depends on the decrease in the rate of foreclosures.

Nationally, Virginia accounted for the 10th highest rate in its number of foreclosures. There were a total of 5,745 foreclosure filings last month. According to a real estate expert Rick Sharga, the 10th position is not that bad as compared to the severe condition in California and Florida. There has been an increase of 55 percent in foreclosures in US in the month of July this year as compared to the same period last year.

James J. Saccacio, another real estate expert has said,

“Bank repossessions . . . continued to be the fastest-growing segment of foreclosure activity in July. The sharp rise in [bank repossessions], combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale.”

Some feels that there will be an improvement in the real estate market in the coming year after the November election of this year.

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Usually, when distressed homeowners abandon a property when they are unable to keep up with mortgage payments, the lender takes over possession. The home is then rapidly disposed of through foreclosure auctions so that the losses are minimised and unpaid dues recovered.

Recently however, more and more abandoned houses are being shunned by the lenders too and foreclosure on them is being deliberately delayed. Experts are intrigued by this situation and are trying to find plausible explanations for it.

While city officials feel that lenders are avoiding taxes and upkeep, legal aid lawyers are of the view that this may be a way of hiding steep losses. The real estate industry puts it down to lenders being overwhelmed by the sheer numbers of foreclosures.

Experts however are narrowing down the cause to complex mortgages taken out during the housing boom a few years ago. Many loans taken at that time were broken down and repackaged into securities. These were then sold to investors both within the country and internationally. Quite often the investors would have little knowledge about the house itself, preferring to treat it as just one more figure.

Several large banks too invested in these securities and took on the role of trustees with no legal title of ownership.

In Kansas City, the European Deutche Bank is recorded as the lender in over 360 properties that have undergone foreclosure. John Gallagher, spokesperson for the bank, points out that it is not the responsibility of the bank to foreclose and subsequently dispose of the properties. Instead, this duty lies with the initial lender or a service company which has been hired for the purpose.

The complexity of the situation has made it very difficult to determine which party is responsible for what as regards the foreclosed property. Experts estimate that sometimes it can take several months to figure out who the real lender is …and that name may not even feature in the official court or county records!

Kim Tucker, president of the Mid-America Association of Real Estate Investors, illustrates this point saying, “Sometimes there are so many layers to go through, the house gets lost….I bought a house last summer. There was a foreclosure, and it took six months to find the owner.”

On a national level this trend of home ownership lying in limbo is not a cause for undue worry. But in regions where this is actually taking place, financial observers are concerned. They see the trend slowly spreading and fear that this will lead to official foreclosure figures not really reflecting the situation on the ground.

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Area loan officers of Southern West Virginia and Southwest Virginia declared that as the banking there was more conservative and stuck to more traditional practices, the region was able to avoid the mounting rate of foreclosures that was breaking out all over the nation.

An increase in the adjustable interest rates on subprime mortgages in 2007, left the investors who were financing new homes under that scheme, in great trouble. According to loan officer, Mike Day, who is associated with MCNB Banks, the consumers had thought that they would always be paying $400 as monthly mortgage and had thus signed up for the loans, but to their utter dismay they found the monthly mortgage rising to $650, which put sufficient strain on family budgets and ultimately led to foreclosures. Day goes on to say that, over and above all this , the price of gasoline and natural gases are also rising and thus the financial conditions were quite tough. But Day, as well as representatives of various other banks from that region remarked that in spite of all these different problems they have not noticed any marked increase in the volume of home foreclosures.

Lawrence Reed, Collection’s Manager, Bank of Tazewell County says, that they haven’t seen any increase in the rate of foreclosures as the bank follows a pretty conservative policy. He adds that, conservative products help in going through tough times. According to the director of secondary mortgage lending, First Century Bank, Hal Absher, the act of abstaining from subprime loans had once seemed a dumb move but ultimately it proved to be a pretty smart move. Absher further says that they have been conservative lenders, so they have stayed away from subprime loans and as a result they did not witness the hike in foreclosures.

The area bankers always keep one vision in mind ; that is, on the 1^st of September, 1999, the National Bank of Keystone situated in McDowell County, which happened to be one of the most big financial failures ever since the Great Depression, collapsed. Lawrence Reed remarked that this incident was an example of what could happen if banks followed unquestionable practices. He also said that whenever local banks think that some scheme for getting rich quickly is developing, they tend to fall for that and in the process somebody or the other tends to get burned. Thus following a conservative policy is definitely a foolproof measure of preventing foreclosures.

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Midland County has achieved a lower rate of foreclosures in the year 2007 as compared to year 2006!! And the credit goes to Mr. Richard Enszer, Treasurer for Midland County.

With a goal to reduce rate of foreclosure and help people retain their real estate investments, Mr. Enszer has visited the poorest of families in Midland County, primarily to understand their issues and creating awareness among them on ways to retain their “parcels” (homes).

Quoting on some statistics for the county, he stated the following points:

1. Due to bank foreclosures, 157 owners lost their properties in year 2007 as compared to 180 owners in year 2006.
2. 2007 also saw 9 more owners having to face foreclosure as they defaulted in payments for over two years. It was the same in 2006.
3. Year 2008 would see 181 property owners having to face risk of foreclosure as they have yet to pay their property taxes due in 2005. Failure on their part to make the necessary arrangements for payment would mean that these owners will have to forfeit their right to ownership!

According to Mr. Enszer, the figure 181 can be brought down considerably by calling and visiting these owners to remind and put pressure on them to pay their dues. This in a way would enable the owners to find ways and means to repay their outstandings.

“My record is seven and, if I can beat that, that would be an awesome thing to do,” he said. Mr. Enszer states that the late payers are primarily those who are poor and those who have mismanaged their credit cards and other debt. He also claims that some people are living in completely run-down properties as the owners have no funds for maintenance. Also, some properties which are auctioned by the bank are oddly shaped and new buyers cannot do much with them, in turn they are foreclosed again.

Mr. Enszer believes that convincing neighbours of such odd shaped properties to buy the same would help bring down the foreclosure rate. In his effort, he has started to send an increasing number of reminder letters to late payers, many of who eventually find ways to retain their properties, by way of borrowing from extended family, friends and non-profit organizations. He is also creating awareness among such property holders, informing them about “hardship forms”, which enable them to get an extension for up to One year. This would give them sufficient time to arrange funds.

In order to increase the success rate of his endeavour, Mr. Enszer hopes that law makers also join him in this effort.

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