Losing Their Home N.M. foreclosures up, but still lower than national numbers

Colleen Heild

Jul. 27, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- William T. Matlock's home of 43 years was headed for auction on the courthouse steps.

The modest two-bedroom in the Kirtland addition had been paid off years ago. But then came the medical bills, and a new mortgage appeared to be the way out.

But this was an adjustable rate mortgage, and Matlock and his wife, Rosie, unexpectedly saw their monthly house payments climb from $700 to $800.

Soon they faced an impossible task -- how to pay what had become a $1,100 mortgage payment on a fixed monthly retirement income of $1,204.

The Matlocks found free legal help. And now, after months of negotiations, they can live in their home without making house payments at all. A week before their house was to be sold at public auction, they secured a reverse mortgage to pay off the lender.

Others caught up in the national foreclosure surge will not be so lucky.

While New Mexico is better off than many parts of the country, the Center for Responsible Lending predicts that at least 3,130 New Mexican homeowners who obtained mortgages since 2005 will lose their homes through foreclosure.

The number of New Mexico properties with foreclosure actions were up 60 percent in the second quarter of 2008 compared with the same time period in 2007, according to RealtyTrac, a California company that tracks foreclosure filings nationally.

That's still half the increase reported nationally.

In New Mexico, more than 2,400 foreclosure actions -- which include notices of defaults, auctions and bank repossessions -- were filed from January to June of this year, RealtyTrac found. Experts say about half of the households who default on their mortgage payments usually end up resolving their problems and heading off foreclosure.

The uptick here has been noticed.

Judge Ted Baca, chief of the civil division in Bernalillo County District Court, reported an increase of about 50 foreclosure cases a month during the first six months of 2008.

Baca said he and other judges have lamented that many New Mexico homeowners lose their homes without ever appearing in court to defend themselves.

"It's complicated enough that they certainly could use the assistance of an attorney, and attorneys could do them some good," he said. "But if they can't afford their mortgage payment, they're not going to be able to afford an attorney."

Officials in Valencia and Sandoval counties have also felt the impact in recent months.

"It's outrageous," said Crystal Bradford, lead worker at the Sandoval County district clerk's office. "It keeps us moving."

Many in the industry are quick to point out that New Mexico is in much better shape than other states.

Glenn Wertheim, president and CEO of Charter Bank, said the foreclosure trend in New Mexico "is something to keep an eye on, and we certainly are," but added that the state "certainly isn't trending up in a steep angle." "If you're starting from a very low level, then those percentages can sound alarming," but they are nothing like numbers being reported in other states, he said.

Wertheim said a governor's task force he served on last year found that New Mexico was among those states with the least amount of subprime lending. It had relatively few high-risk adjustable rate mortgages and a much lower level of investor activity, he said.

Jim Folkman of the Home Builders Association of Central New Mexico said the state has been fairly insulated from the mortgage crisis.

Even now, he said, "the foreclosure rate is not so high that it could ever even come close to the supply (of homes) we need."

Speculators

Several real estate experts say they're seeing more foreclosures involving out-of-state investors who bought properties on speculation during an overheated market a few years ago.

Others, like Alicia Roeker, office director of ACORN Housing Corp. in Albuquerque, said more than half the clients she counsels are victims of predatory lending.

"You see somebody come in and they had no idea what kind of loan they had to begin with," she said.

"Some people just didn't take the time to ask the right questions because they really wanted the house. A lot of them, though, have just completely been taken advantage of. Their mortgages are going up, not down."

She reported one mortgage broker, now out of business, to the state Attorney General's Office after five or six clients said they "were taken in" by that company.

Though New Mexico's job growth is higher than in other areas of the country, some financial counselors here cite tough economic times.

One counselor at the Spain and Eubank office of Consumer Credit Counseling Services "felt unemployment has been the largest contributor," said Bonnie Ziegelman, manager of branch counseling for the agency in New Mexico.

"The rising cost of gas, and groceries and everything else figures into this because a lot of people were just barely making it, especially the older people. Sometimes, it's just easier to get behind on the mortgages, which don't scream as loud, as to get behind on the other bills that do."

She said the average age of clients seeking help to avoid foreclosure is 45.

Even though New Mexico home prices are stable, Wertheim said there may be more foreclosures because loan programs have tightened up and homeowners are having more difficulty getting new financing.

"Customers just don't have the financial options that they did a couple of years ago," he added.

Steered into signing

United South Broadway Corporation offers housing-related services to low- and moderateincome New Mexicans. Its clients have included people with a $750,000 Santa Fe home but who had so little income they qualify for services.

Others were taking out payday loans to meet their monthly house payment.

The majority of clients at United South Broadway Corp. are -- like the Matlocks -- steered into signing for an adjustable rate mortgage by being told they could refinance when the rates automatically reset to higher levels, said executive director Diana Dorn-Jones.

"They thought they were entering into a simple mortgage agreement that had 30-year fixed rates," she said. "Instead they were put into this lending product by an unscrupulous lender."

She faults lending practices of some in the subprime mortgage industry, which typically catered to borrowers with impaired credit.

The Center for Responsible Lending, a nonprofit based in Durham, N.C., has estimated that 23.4 percent of New Mexico loans that originated in 2005 and 2006 were subprime. Of those, the projected foreclosure rate is more than 17 percent.

The 2005 and 2006 time period was selected because that's when such lending was at its height, said Kathleen Day, a spokeswoman for the center.

The Mortgage Bankers Association had far lower numbers for New Mexico in a fourth quarter 2007 report -- showing 9 percent of outstanding mortgages as subprime.

Lt. Gov. Diane Denish hoped the issue of predatory lending could be placed on the agenda for the upcoming special session in August, but she and Gov. Bill Richardson have agreed that the matter is so "complex that it deserves to be considered during the 60-day legislative session next year," said her chief of staff Josh Rosen.

Representation

Matlock, at age 81, has been a handyman by trade. He started working for 5 cents an hour at the age of 9 in an Arkansas saw mill. He can't read and can't write -- except for his name.

But he and his wife, after receiving a foreclosure notice in early 2007, persevered. They sought help from an attorney from the Senior Citizens Law Center who also put them in touch with Dorn-Jones' organization.

In the past, her agency would typically call lenders and try to work it out when clients had problems paying their mortgage. "We were quite successful," she added.

"Now that's not happening with the mortgage market crisis. It's very difficult to work with lenders," Dorn-Jones said.

Thanks to a special legislative appropriation in 2007, United South Broadway Corp. is hiring additional legal staff to help ensure that homeowners exhaust their legal remedies and "make sure any foreclosure proceedings are done legitimately," she said.

Legal representation is important, Dorn-Jones said, because the lending industry "has created this onerous system that the average person cannot navigate."

G over n ment-secu red reverse mortgages, in which the loan isn't paid off until the homeowners die or leave the house, can be a solution for eligible senior citizens facing foreclosure.

But there is a downside, particularly in lower-income areas where home ownership has been effective in stabilizing families financially, Dorn-Jones said.

"Now (the Matlocks) can't pass that house to future generations." Foreclosure activity

NEW MEXICO

1,150

April-June 2008

719

April-June 2007

60

percent increase

NATIONWIDE

739,714

April-June 2008

334,171

April-June 2007

121

percent increase

Newstex ID: KRTB-0010-26955749