tampabay.com

Foregone foreclosures

If you can’t make the mortgage payment, you can’t keep the house. And it cuts across the financial spectrum.

By SCOTT BARANCIK
Published October 1, 2006


They are an unlikely trio.

One is the former Clearwater home of singer Lisa Marie Presley, a nine-bedroom waterfront mansion snatched up by speculators in November for $4.3-million. Another is a tiny Tampa home that cost an investor $46,000 last year.

The third, built on a Land O’Lakes golf course in 2004, was sold to a Tampa Bay area couple for $302,700.

Though they have little in common, the properties may share a single fate: foreclosure. Mortgage lenders sued each of their owners in August for nonpayment. If not resolved, the homes could be auctioned off at a local courthouse.

“We see a little bit of everything, from little shacks to million-dollar homes,” said Luis Bayron, foreclosure manager for Hillsborough County’s circuit-court clerk. “There’s no discrimination when it comes to property values.”

It had to end someday. The housing mania that gripped America and the bay area for several years would begin to subside.

Otherwise sane Americans who had bought overpriced homes they couldn’t possibly afford would realize the fuse on their deceptively cheap loans was burning short.

Those who had expected to resell before the interest rate on their mortgage began to climb — for a stupendous profit, of course — might find themselves seated before their bank’s loan officer, weeping.

For some in the bay area, unfortunately, that day has arrived. In August, mortgage lenders filed foreclosure lawsuits against 860 property owners across Pinellas, Hillsborough and Pasco counties — a 44 percent increase over August 2005, according to statistics gathered by the clerks of the local circuit courts.

Using a somewhat different methodology, RealtyTrac of Irvine, Calif., recently reported that foreclosures in Florida and the United States rose 62 percent and 53 percent, respectively, from August to August. Florida’s foreclosure rate was the country’s third worst.

Kraig Braeuning , regional vice president of an Orlando company that tracks foreclosure suits, said he expects the bay area’s situation to grow worse.


“It’s going to be a tsunami in the next year or two,” he said.

Who’s hurting?

Though it may be a while before this foreclosure wave crests, lawsuits filed in August offer an early glimpse at who is suffering locally and why.

At the county level, Pasco had the highest foreclosure rate in August: one in every 1,027 households was sued during the month, compared to one in 1,405 in Hillsborough and one in 1,514 in Pinellas.

From August 2005 to August 2006, however, filings grew fastest in Pinellas.

According to foreclosure data provided by Braeuning’s company, Information Resource Service of Florida, and household income statistics compiled by ESRI, a maker of mapping software, foreclosure lawsuits grew 48 percent in Pinellas, 46 percent in Hillsborough and 33 percent in Pasco.

Few neighborhoods were spared. In Pinellas, for example, 44 of the 45 ZIP codes with more than 2,500 households each saw at least one foreclosure in August. The county’s 10th-wealthiest ZIP code, Oldsmar’s 34677, had the second-worst foreclosure rate. Low-income neighborhoods tended to be hardest hit, however.

Hillsborough’s poorest ZIP code, 33605, in and around Ybor City, had the county’s worst foreclosure rate. Its residents were 20 times more likely to be sued in August than the residents of ZIP 33625, west of Carrollwood, where the median household income is three times as high.

Although most of August’s foreclosure defendants lived in their homes at the time, a substantial minority — 40.5 percent —  were investors. It’s testimony to the housing market’s recent fervor that so many people thought they could profit as a speculator or landlord.

In November, investors in an unnamed trust paid $4.3-million for a 2.3-acre Clearwater estate once owned by Lisa Marie Presley and, later, by actor Kirstie Alley. The investors hoped to flip it for a quick profit. In April, however, the trust stopped paying the $12,146 monthly bill on its $3.4-million mortgage, and the lender sued.

Jerry Marino, the trust’s representative, said the suit was filed in error. But rather than fight, he said, his lawyer suggested simply selling the home and using the proceeds to pay off the debt. The so-called Home of the Stars, now advertised at www.1100osceola.com , has been on the market 200 days. Asking price: $6-million.

“It’s not a big deal,” Marino said. “We can pay ’em.”

Tampa investor Leigh Fiske has had a rough time, too. In the past year, lenders have tried to foreclose on 10 homes he owns, nine of them in Tampa. Fiske could not be reached for comment.

More typical, perhaps, is the saga of Brian Solomon. In 2003, the direct-mail executive began building a 3,000-square-foot home for his then-fiancee and her two teenage children in Plantation Palms, a golf-course community in the Pasco city of Land O’Lakes. Since the home was completed, however, little has gone right.

The closing on the $302,700 home fell apart when Solomon’s lender arrived to say it wanted a 30 percent down payment, not 20 percent.

The developer came through with its own loan, Solomon said, but the couple defaulted after a series of promising job changes went south, leading to a 2005 foreclosure suit.

Filing for Chapter 13 bankruptcy protection bought Solomon some time, which he used to refinance the defaulted loan. But the monthly payment on the new, higher-interest mortgage was nearly 50 percent bigger than the old, and the couple again defaulted.

Solomon figured his only way out was to sell the home for a large profit. Since putting it on the market in March, he has gradually lowered the asking price from $475,000 to $435,000, and recently added cash incentives of $4,000 to the eventual buyer and $5,000 to the buyer’s agent. Still, no bites.

“There’s about 10 other houses for sale on my street,” said Solomon, 38.

Recently, things started looking up. Solomon’s lender, perhaps reluctant to acquire a hard-to-sell home, offered to refinance his defaulted loan at a lower interest rate. Solomon was thrilled.

Then he learned his homeowners insurer was dropping him — and that the annual premium, he said, would more than triple under the state’s insurer of last resort, Citizens Property Insurance. No insurance, no refinance.

“We’ll get through it,” he said. “I’m not really concerned.”

Borrower beware?

Though an estimated two-thirds of recent U.S. borrowers have chosen fixed-rate loans, about 51 percent of the August foreclosure cases in the bay area involved adjustable-rate mortgages, according to Information Resource Service data.

Banking veterans would not be surprised. Adjustable loans begin with low-interest “teaser” rates that last anywhere from a month to several years. Though such loans may appear deceptively cheap at the outset, and though they may help some borrowers qualify for a larger loan than under a fixed rate, so-called ARMs tend to be riskier.

Having said that, fixed-rate borrowers sued for foreclosure in August were the ones paying the higher rates. The median fixed interest rate — half of  borrowers paid less, and half paid more — was 8.2 percent.

More than one in six fixed-rate borrowers was paying at least 10 percent interest, and the highest paid 16.9 percent.

Among adjustable-rate borrowers, the median interest rate was 6.8 percent, the top rate was 13 percent, and fewer than one in nine borrowers paid 10 percent or more.

Four lenders accounted for more than 40 percent of August’s foreclosures. Deutsche Bank made 16 percent of the loans, U.S. Bank accounted for 10 percent, Wells Fargo 9 percent and HSBC about 6 percent.

“The banks got aggressive these last three or four years, giving people these low ARMs,” said Information

Resource Service’s Braeuning. “There’s going to be a huge wave of foreclosures.”

 

Times staff researcher John Martin contributed to this report. Scott Barancik can be reached at barancik@sptimes.com or
(727) 893-8751.