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Flood of foreclosures creates new business

The ailing housing industry has sparked a boom for businesses centered on foreclosures.

By James Thorner, Times Staff Writer
Published December 16, 2007

Housed in a black glass tower in Tampa's West Shore business district, Mortgage Contracting Services specializes in the nitty gritty of home repossession.

For about $15 an hour, employees are paid to handle such messy tasks as "eviction scheduling and completion," "boarding and reglazing broken windows" and "debris removal."

"We've been growing exponentially," said marketing director Kerry Wilcox, who touts the number of employees at 175. "But our CEO doesn't want publicity. Doing foreclosures doesn't make people very happy with you."

A whole Foreclosures-R-Us industry has popped up, like wildflowers on the grave of a dead housing market, to service the Tampa Bay area's real estate meltdown.

Some companies are devoted to finalizing foreclosures with a minimum of fuss. Others specialize in foreclosure avoidance. Still others treat foreclosures as a buying opportunity for investors sniffing out good deals.

"People consider us henchmen for the lending industry, but that's not fair at all," said Tampa foreclosure lawyer Mike Echeverria.

Echeverria is an old hand at real estate cycles that tend to work in reverse for him. During the housing boom that ended in early 2006, Echeverria was lying low and laying off employees.

But in the past year, he has doubled his work force, many of whom serve as debt collectors for clients that include the nation's top 20 mortgage lenders. His bustling call center off Veterans Expressway services foreclosure cases in English and Spanish.

"We went through an unbelievable cycle of real estate growth. There were no foreclosures for us," Echeverria said. "But we hung on. I knew things would change. I'm a realist."

Today's reality: More than 9,000 homes in the Tampa Bay area entered the foreclosure pipeline in the three months ending Sept. 30. Not all will end up confiscated by the bank - a majority are owned by people three months or more behind on their mortgage payments - but managing the cases absorbs the attention of hundreds locally.

For Realtors, whose tune has changed the past two years from Roll Out the Barrel to How Dry I Am, foreclosures are not just a grim reality but a budding opportunity.

Quick-witted Realtors are specializing in short sales - avoiding foreclosure by selling distressed properties at discounts with a bank's permission.

James Tuten of St. Petersburg's FSI Realty sums up his work in two words: stalling foreclosures. Two years ago, he made a living as a home investor. But that sideline has slowed to a trickle. Today he juggles about 25 short sales at a time.

His clients include fellow investors who got in too late or too deep. But he also sees plenty of people who have lived 15 years in the same house but pulled cash out of their homes in 2005 and 2006 expecting appreciation to continue. Now they're over-mortgaged with little hope of selling for anything close to what they owe.

"Mr. and Mrs. Homeowner took a nice refinance opportunity that turned out not so nice," Tuten said. "Almost all of them, if they didn't refinance, they'd still be in their houses."

To persuade a bank to accept a short sale, Tuten needs to establish that the homeowner can't afford the payment and the home's market value has tanked. Though the bank loses money, it's generally happy to avoid adding more repossessed homes to its balance sheet. For buyers, often bottom-feeding investors, short-sale homes can be a bargain.

"Unfortunately, one family's hardship can become another family's good situation," Tuten said.

Across the bay in Tampa, Mike Stoppa, Brian Smith and Judy Hunter incorporated this year as Genesis Property Solutions.

Stoppa is a former investor burned by foreclosure himself. Smith is a laid-off airline pilot. Hunter is a Realtor. The triumvirate formed a company they said uses Christian principles to help people out of foreclosure jams.

"God lets us bless ourselves financially while helping people," Stoppa said.

Stoppa comes clean from the start: You don't need to hire him. You can negotiate with banks and lawyers yourself. If you go with him, he charges a $299 processing fee but gets a $3,000 to $5,000 commission from the bank if he resolves a foreclosure with a short sale.

Business is booming. In addition to the trio, the company has hired four processors and needs 10 more. Each processor is working 10 to 20 cases at once.

"We do no marketing whatsoever. All of our business in referral," Stoppa said. "Last month, we had to stop taking on new files."

Banks struggle to catch up with this dark side of the business. After laying off much of their mortgage departments, lenders like Countrywide and Wells Fargo needed to restaff their "loss mitigation" departments quickly.

"People we talk to at Wells Fargo have 1,000files on their desks," Stoppa said.

When will it all end? That's a big question for businesses springing up to service a down market that they admit is transitory.

Echeverria, the lawyer, predicts a busy 2008 but worries about hiring too many people and renting too much office space.

"You can get overexuberant with the present conditions," he said. "But you have to realize it's not a long-term proposition."

[Last modified December 14, 2007, 21:27:37]