|
RealtyTrac, a leading source for foreclosure statistics reported that in 2009 there were a total of 3235 foreclosure filings in the District. And in 2009 there were a total of 622 foreclosure sales. Across the country in December 2009, there were a total of 349, 519 foreclosure filings, default notices, foreclosure auctions, and bank repossessions. RealtyTrac also reported that this was actually an 7% decrease over the previous quarter but still up 15% from the previous year. Capitol Hill as region has also experienced a significant increase in foreclosures, however individual numbers are still relatively low.
Foreclosure is a legal process whereby a lender takes back real property after a borrower has defaulted on the loan obligation. This process can begin as soon as 30 days from the time of default. In DC almost all foreclosures are non-judicial which means that there is no need to get a judgment of foreclosure. In DC most mortgages and deeds of trust contain a power of sale clause. This clause will usually set out the time period for notice and may include the time, place of the sale, and provisions for advertising. If the document does not contain these provisions, the lender will have to get a court order specifying the sale terms.
The lender must give the debtor notice of its intention to seek foreclosure via certified mail to the debtor a minimum of thirty days before the sale date. The notice must be recorded with the recorder of deeds. Typically the sale will take place in the office of the auctioneer.
The impact to the debtor’s credit and future ability to purchase a home is significant. You can expect your credit score to fall 200 to 300 points and generally you will be unable to get FHA financing for three years and a conventional loan for five years.
Available Options
One way to avoid foreclosure is through a short sale which is when the value of the property is less than the amount owed to the lender and the lender agrees to write off the difference. Why would a lender agree to a short sale? It’s in their interest because they want to avoid spending time and money to foreclose, evict borrowers, and resell properties.
In this current marketplace it is no secret that most lenders are carrying more foreclosed properties on their books than they would like. This puts the short sale seller in a better position. If you are considering this option you will need to use a real estate agent or attorney experienced with short sales because part of the process may require convincing the bank that the debtor is in financial distress and unable to continue to make payments on the loan. This may include writing a hardship letter to the lender and submitting other documentation. Your credit will also be adversely affected and your credit score can go down significantly with a short sale.
Bankruptcy protection under Chapter 13 of the Bankruptcy code can also give a debtor extra time under the provision which allows for a payment plan for all creditors. Such a plan will organize and prioritize creditors so that secured creditors such as a mortgage holder can be paid ahead of unsecured creditors.
Other options available if you are 30 days behind on your mortgage payments include a temporary loan modification which you or your attorney can negotiate with your lender. This agreement would lower your monthly payments and interest. You will need to document your hardship and not have damaged your credit to point where the lender can argue that you can no longer afford your home.
How has Capitol Hill as a region fared in the current foreclosure crisis? In the last six months from June 1, 2009 to Dec 17, 2009 there were a total of 23 fee simple homes in foreclosure listed in the MLS. Eight are active, five are under contract, and nine have been sold. The number is up from a total of nine properties from the earlier two quarters of this year and about double the number from one year ago.
Interestingly short sales have actually declined on the Hill. The MLS shows only 10 current short sale properties versus 14 in the last two quarters. There were 15 listed for this same period last year. There are relatively few condos on Capitol Hill and the MLS shows only 5 foreclosures up from 2 last year and 4 short sales versus 0 last year.
Why is the Capitol Hill number so low? Cameron Shosh, a realtor at Prudential Carruthers, states that “Capitol Hill is a pretty strong neighborhood.” He points out that people who move to the Hill stay on the Hill, the good schools, relatively low price points, and the proximity to the city. Shosh stated that he did not “see the foreclosure numbers affecting property value on the Hill at all.” |
