News - Local News

POSTED: Friday, Oct. 24, 2008

Whatcom County foreclosures drop, but not homeowner distress

The pace of home foreclosures in Whatcom County showed a big drop in September, but the rotunda of the Whatcom County Courthouse is still a busy place at 10 a.m. every Friday when foreclosure auctions take place.

Potential bidders, real estate agents and a few glum owners of homes in foreclosure cluster just outside County Council chambers and strain to hear the auctioneers above the commotion around the nearby security screening line, where people empty their pockets before heading for the upper floors of the courthouse.

For most properties, the auctions are a formality.

During the auction on Friday, Oct. 24, auctioneer Greg Rustand rattled off the required legal language for each property and asked if anyone wanted to bid.

"If anyone's interested, step forward and show me your ID and all your money," Rustand said.

You can't whip out a credit card at a foreclosure auction. Bidders must present cash or, more typically, a cashier's check or similar ironclad document on the spot to get a property.

In nearly every case, nobody in the cluster of about 20 onlookers made a peep in response to Rustand's entreaty. Rustand pronounced the bidding closed, and the real estate became the property of the mortgage lender. The lender's "bid" was the remaining principal and interest due on the loan.

Many properties that had been listed for sale at the auction were pulled back at the last minute with no explanation. In some cases, a borrower can scrape up some money to stave off default. In other cases, the bank postpones the sale in hope that the borrower might still manage to do that. And in an increasing number of cases, banks are working with homeowners and real estate agents to arrange either modified loans with lower payments, or "short sales" to a new buyer.

In a short sale, the property is sold to the new buyer for less than the money owed on the mortgage. The bank loses money on the loan, but avoids the expense involved in owning the home and arranging a sale later. The borrower gets nothing, but doesn't have a foreclosure on his or her credit report.

Linda Zemler, short sale and foreclosure specialist at RE/MAX Whatcom County Inc., is a regular spectator at the Friday auctions. She is working with property owners trying to arrange short sales, and she wants to make sure none of those properties go on the auction block by mistake.

She wasn't surprised to learn that the pace of foreclosure activity dropped in September, based on the most recent numbers from RealtyTrac, a private company that gathers foreclosure data nationwide. The data also showed a September slowdown in foreclosures across the state and the nation.

Zemler doesn't think that means the financial crisis is easing. She sees mortgage lenders becoming more willing to work with borrowers on either modified loan terms or short sales, but she also sees more borrowers running into trouble as monthly payments rise on adjustable-rate loans.

"We're going to see more people in default, but we have more solutions," Zemler said. "Defaults are still going to grow. You've still got rates adjusting."

Zemler said she hardly ever sees any real bidding drama at the auction.

"Mostly these are lookers," she said. "It's a real long shot to get a home here."

At the most recent auction, Doug Swanson's long shot came in. He said he'd been watching a four-bedroom home in the 3700 block of Woodlake Road in Bellingham, and at one point had offered the bank $50,000 more than the outstanding $329,500 loan on the place.

The bank didn't respond to the offer, Swanson said, so he showed up at the auction and got the home for a bid of $329,501. He handed Rustand a cashier's check for that amount that he had prepared beforehand. That's a lot of money, but it was $49,999 less than he had been prepared to pay.

Swanson, a real estate agent, is looking forward to moving into his new home.

"I've been trying to buy this house for six months," he said.