By Starrla Cray
In 2008, the housing crisis hit home for Wright, Meeker, Carver, and McLeod counties and while the outlook for 2009 is still uncertain, local officials are hoping the worst is coming to an end.
With a total of 956 foreclosed property filings in 2008 (2.05 percent of all housing units), Wright County had the highest foreclosure rate of all 87 Minnesota counties, according to a report from www.realtytrac.com.
“So far in 2009, we’ve done 217,” Wright County Recorder/Registrar Larry Unger said.
The county data, which has been recorded through the end of March 2009, shows that at the current rate, about 865 properties will have a foreclosure filing by the end of the year.
“It’s a little bit lower,” Unger said. “It’s hopefully leveling off a little. We’ll see what happens.”
Troy Olson, a housing services coordinator for Wright County Community Action, said the organization has noticed a significant increase in foreclosure-related activity in the area.
“Staffing levels have increased to meet this increased demand for services, Olson said. “The number of households served through the first quarter of 2009 grew over 120 percent from the same period in 2008.”
In general, counties in the Twin Cities area saw the highest foreclosure rates in 2008, RealtyTrac reported. Hennepin County had 8,924, the most foreclosure filings in the state.
In Carver County, 306 properties had foreclosure filings. The numbers in McLeod and Meeker counties were much lower, with 18 and 12 filings, respectively.
Although the foreclosure rates in Meeker and McLeod counties were lower than some, foreclosures can have a widespread effect, commented Mike Seaberg, executive vice president of First National Bank of Cokato.
“The feeling, the spirit, the attitude, and the mood of people has changed,” Seaberg said. “It’s certainly a different time.”
Although First National Bank of Cokato hasn’t been directly affected, the foreclosures in the area impact what the bank is able to give people for home-equity loans, he said.
“Many times, homes are valued at less than the owner thought,” Seaberg said. “What seems to be selling in town is the foreclosed houses,” he added, which lowers home values.
“Even though you’re not dealing with foreclosures, it still has an impact on all of us,” he said. “We’ve all maybe changed our purchasing habits a little bit. Not only us, but I think the whole nation.”
Scott Wakefield, president of First Minnesota Bank in Mayer, said his bank hasn’t had any recent foreclosures either.
“A lot of the issues are not bank-related,” he said, adding that mortgage brokers, not small community banks, are the ones partially responsible for the majority of the foreclosures.
These brokers borrowed money to people using Alt. A loans, better known as “liar loans,s” which require little or no verification of income. These loans totaled $386 billion in 2006, up 28 percent from 2005, a March 2007 CNN Money article stated.
“They were basically free-wheeling to do whatever they wanted,” he said. “It was all based on greed.”
Wakefield said it’s analogous to a college application that asks students to tell their grades, instead of proving them with a transcript.
“You can see where that would cause a problem,” he said.
Lakeland Construction Finance LLC of Eagan, for example, had been a large residential-construction lender, but the company defaulted on more than $400 million in bank loans, the Star Tribune reported in an article from March, “Minnesota’s housing wastelands.” Near Watertown and Dassel, as well as other areas of the state, housing projects have been left unfinished as a result.
The number of foreclosures from small community banks, however, is relatively small, Wakefield said.
“We stuck to the fundamentals we were taught from day one in the banking industry,” Wakefield said. “Most of us shook our heads when this was going on.”
Although federally unregulated specialty lenders, such as Lakeland, should not have made the loans, they are not the only ones at fault, Wakefield said.
“A little bit of the blame has to go to the people,” he said. “A gun was not held to their heads.” Many people may have based their decision on the recommendation of their loan officers, Wakefield said, but some of it is “just common sense.”
Interest-only loans are also a bad idea, Wakefield said, because years later, the homebuyers will still owe just as much as the day they purchased the property.
“If a deal sounds too good to be true, like the old saying goes, it probably is,” Wakefield said.
Many of the mistakes have already been made, and the only thing left to do now is move forward, Wakefield said.
“Grin it, bear it, take a tough pill, and move on,” he said, adding that people can take solace in knowing that this situation won’t happen again.
Although Wakefield has seen the terrible impact foreclosures can have on families, he said one positive aspect is that people’s attitudes have changed.
“It’s a life-learning experience,” he said. “We’ll all be fine on the other side.”
Another positive is lower-priced housing for buyers, Wakefield said, with some homes selling for less than half of their previous value.
“People who are investing in real estate are getting a really good deal right now,” Wakefield said.
Olson, of Wright County Community Action, encourages people who are struggling with their mortgage payment to get help as soon as possible.
Call Wright County Community Action for more information at (320) 963-6500 or go to the web site, www.wccaweb.com.
Carver County also offers free counseling services. Call (953) 448-7715 extension 3, or visit www.countyadvisor.org.
The US Housing and Urban Development Center, at www.hud.gov, can also provide resources and local contacts.