The Next Wave
Some experts now anticipate a second wave of foreclosures in Connecticut, especially if the job market continues to languish.
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The federal government has also finally waded into the crisis. In March, the Obama administration announced a new anti-foreclosure effort aimed at helping homeowners who are unemployed or whose homes are underwater. Lenders will be required to lower monthly payments for a minimum of three months for homeowners who are receiving unemployment benefits, and are asked to “consider” reducing the principal of loans for those behind on their payments.
But banks and other lenders won’t be forced to adapt the federal measures, and they may choose the foreclosure path anyway, since it cuts losses on a property and can produce returns, however limited.
And therein, according to many interviewed for this story, lies the problem: Advocates like Neighborhood Housing Services and Connecticut Fair Housing are no match for the big banks, whose primary concern is making money on their investment, not the plight of individual homeowners.
“I don’t see a lot of hope for people staying in their homes because I don’t see many of the banks willing to make adjustments sizable enough for them to do that,” says Rosemarie Lane of Lane & Lane, a Waterbury law firm that handles real estate closings.
Adds Gentes, the sole foreclosure attorney at Connecticut Fair Housing, “I hate to say it’s us versus them, but they’re folks who are just interested in making money. What they do is a reflection of making money and that’s what they’re supposed to do—they have a duty to their shareholders.”
One bank that appears amenable to working with homeowners in distress, according to brokers and counselors, is Webster Bank, the regional commercial bank based in Waterbury. In late 2008, Webster announced a foreclosure moratorium for local homeowners and suspended foreclosure proceedings for 90 days. At the same time, it set up new programs offering lower interest rates, spread-out mortgage terms and other forms of relief. The bank says it has thus far modified $96 million in mortgage balances for some 480 homeowners, with less than 10 percent of them falling back into arrears.
“I think the reason why the program has worked so well is that we’ve been proactive—we haven’t waited for them to default but have gone into the community and offered to help,” says Nitin J. Mhatre, executive vice president for consumer lending at Webster. “It’s partly a product of our history of helping customers live their dreams, but also because it makes no sense to have properties go into foreclosure and lower the value of the housing market.”
The big question right now is whether another foreclosure wave is on the way in Connecticut, and who might be caught up in it.
“We’re definitely going to have more foreclosures,” says Denise Pappas, the longtime Waterbury realtor. “People have been losing their jobs, and there are going to be more people losing jobs, and if the banks aren’t willing to work with these people, they won’t really have a choice other than to walk away from their homes.”
The Economic Center at the University of Connecticut sees little or no job growth in the state this year or next. What’s more, according to Connecticut Fair Housing, the number of homeowners in the state who are more than 90 days late on their mortgage payments went up in the first quarter of this year. The center also notes a lag between job loss and foreclosure filings as homeowners deplete their savings.
RealtyTrac, the foreclosure database, has also been following the numbers. “We believe there are a lot of properties in distress that haven’t even hit foreclosure yet,” says Daren Blomquist, “so there’s a pent-up inventory of properties that are going to fill the foreclosure pipeline for at least the rest of this year, and at a high level.”
This time, Blomquist anticipates a broader swath of people in higher-end homes getting caught up in “what we see as a second wave of foreclosure activity” this year.
Nor will the problem be confined to residential real estate. Something that’s just beginning to be seen in the state is foreclosure filings on commercial buildings. Although data isn’t recorded on these properties, realtors and developers have noted the trend.
“We have a lot of buildings that are in ‘workouts,’” says Tom Hill of Tom Hill Realty & Investment LLC, a commercial real estate firm in Waterbury. “The banks are taking them over but are either appointing receivers to run them or are leaving them in the names of the owners because if the city finds out the banks own them, they’ll jam them for back taxes.”
R.D. Scinto Inc. is a commercial real estate development company that develops, builds, owns, manages and leases office and industrial space from Wilton to Shelton. Bob Scinto, chairman of the private company, foresees the commercial crisis spreading even in relatively stable Fairfield County.
“I think Greenwich is going to be okay because people still want to have an office in Greenwich,” Scinto says, “but when the financial markets fell apart, that really hurt Stamford, and I think there’s going to be a lot of buildings there that are going to be in trouble. And in Westport”—where a 50,000-square-foot office building was reportedly foreclosed on in March—“there’ll definitely be foreclosures.”
Before the economy turns once again to more solid footing, Jeff Gentes offers this advice to those on the edge: “Keep notes of everything that you do. Most folks will have to proceed without a lawyer, but if your mediation process isn’t going well and if you can, seek out a consumer lawyer, or housing counselors and pro-bono help. If you’re already in foreclosure, participate in the court process, and work all angles.
“As hokey as it sounds,” he adds, “the mediation process is all about the four Ps: Have a plan, have proof of what you’re doing, make lenders prove what they’re telling you, and then be patient.”