On Monday, Master-in-Equity Judge Gordon Cooper will take his seat in the Spartanburg County Judicial Center to preside over the public sale of 156 homes whose owners could not pay their mortgages.
For the people who’ve received foreclosure papers, the event will be the final legal step of a months-long process that ends their participation in the American dream of homeownership.
Cooper said it’s not an easy thing to do. Spartanburg County has the third-highest foreclosure rate in the state.
“It’s terrible to see it and it wasn’t their fault,” Cooper said. “But it’s part of the job and I have to do it.”
At the sale, high bidders will pay a 5 percent deposit, and leave the courtroom as the new owners of the homes where families have welcomed new babies, observed holidays and celebrated family achievements.
Last year, banks and other lending institutions filed 2,188 home foreclosures in Spartanburg County, up from 1,997 the year before.
Court officials expect equal or higher filings for 2008. During the first six weeks of this year, 281 mortgage foreclosures were registered with the Clerk of Courts Office. The office receives an average of 10 filings a day.
Spartanburg County’s foreclosure problems are just a small sample of the mortgage crisis that’s affecting homeowners all over the United States and other parts of the world.
No price range of homes has been immune. The average price of a home in Spartanburg County is $110,700. Nationally, it’s $185,200.
The highest rates of foreclosures in the state occur in Spartanburg, Charleston and Lexington counties. Neighboring Greenville County is one of the lowest.
Realtytrac, a private company that records trends in the real estate industry, reported in January that 1 percent of the nation’s households are in some stage of foreclosure.
There are many causes, but chief among them are sub-prime mortgages that began with low interest rates and in two or three years exploded to twice or three times what they were in the beginning.
The increase puts monthly mortgage payments out of reach for families who initially paid them with ease. Overnight, $500 monthly payments are $1,500.
Other causes are plant shutdowns, cutbacks in the work force and eager buyers’ use of sub-prime mortgages to purchase more house than they could afford.
Add medical bills, credit card debt and escalating gasoline prices and the mix is in place for foreclosure when mortgage rates are adjusted upward.
Mortgage experts say the historically strong real estate market of the early 2000s, when houses in almost all price ranges sold quickly, often to sub-prime buyers, helped fuel the crisis.
Sub-prime buyers know their interest rate will increase. But most purchasers who opt for this kind of loan are strapped with a poor credit rating that precludes their getting approved for a conventional loan.
Cooper said many of these new homeowners plan to be out of the house in a couple of years before the payment increase.
He said only about 30 percent of the people whose mortgages have been foreclosed show up at the hearings such as the one scheduled for next week.
Less than 5 percent take action to put a hold on the process such as catching up on payments, making arrangements with their bank or filing for bankruptcy.
Cooper said most of the foreclosures are on owner-occupied property.
“Very few of the foreclosures are investor-owned,” he said.
The 8-by-10-foot wall in the large, underground vault where thick, three-inch binders hold the foreclosures at the Judicial Center is bulging. Clerks say finding a place to put them is a problem.
One clerk said the workload to record the filings is triple what it was just a couple of years ago.
“From what I see coming in the door,” Cooper said, “I don’t expect anything changing throughout this year or into 2009. If anything, (foreclosures are) increasing.”
“The sub-primes are more like Countrywide,” Cooper said. “It’s not the local banks.”
Countrywide is the nation’s largest mortgage company and one of the largest in the sub-prime business.
The New York Times reported in August that almost one in four sub-prime loans that Countrywide services was delinquent, up from 15 percent in the same period the year before. Ten percent of Countrywide’s loans were past due for 90 days or more. The number was nearly twice what it was the previous year.
John Poole, president of Carolina Alliance bank in Spartanburg, said mortgage brokers look no farther than one loan with customers.
“People in that segment of the business book the mortgage because it keeps the bills paid,” Poole said. “We’re interested in a long-term relationship; savings account, checking account and the mortgage.”
Poole said most banks will work with people who have questionable credit to help them get back on their feet so they can qualify for a conventional mortgage.
For some customers, Poole said, that means putting off a home purchase until the person can afford it, typically one to two years.
“People pay me to give them good advice and sometimes, I say ‘no,'” he said. “It’s better to know on the front end than to find out (with a foreclosure) later. If I make a loan and three years later it goes bad, then I become part of the problem.”
Poole said buyers with limited income should investigate possible purchase plans through the housing authority, city assistance for certain neighborhoods, and even Habitat for Humanity, for ways to buy that are less likely to end in foreclosure proceedings.
Foreclosed homes that sit vacant in neighborhoods for long periods and show signs of deterioration suppress appraisal values of nearby properties.
The value decline can hurt a buyer’s mortgage chances on property around it.
“All mortgage transactions are based on appraisal values,” Poole said. “I had nothing to do with it, but it’s going to keep me from making the mortgage because I can’t get the right appraisal.”
Considering the U. S. Census Bureau’s reported 118,000 housing units in Spartanburg County, the roughly 2.5 percent that went to foreclosure last year seems small unless you were one of the homeowners who ended up in Cooper’s courtroom.
“Then it feels like 100 percent,” Poole said.