Foreclosure scourge spreads into Oregon

Oregon Foreclosure News

by Ryan Frank

The first sign of trouble at the home on Portland's Southeast Johnston Drive snakes out of the siding at the front door: a twisted electrical wire that used to power the doorbell.

Inside, the kitchen faucet is now just a hole in the sink. The fridge, dishwasher and cabinet hardware? Gone. Gone. Gone.

 

The stone-front house in a well-kempt subdivision sold for $523,000 at the peak of the housing boom. Now, it sits vacant, stripped and mired in a nasty foreclosure.

The house provides an extreme example of what Oregon homeowners, banks and neighbors face in a rising tide of foreclosures.

Foreclosures have spread through California, Florida and other states for more than a year. But the national housing decline is just now moving to its next ugly phase in Oregon: A glut of unsold houses, falling prices and vacant foreclosed homes that drive down values for neighboring homes.

More than 2,800 homeowners defaulted on their mortgage in Clark, Clackamas, Multnomah and Washington counties in the third quarter of 2008, according to county records. That's more than 30 defaults a day. In the once fast-growing Deschutes County, 520 people defaulted, up from a low of 51 in the second quarter of 2006.

Across the five counties, defaults were up 107 percent from the same quarter in 2007.

The number of new defaults was still less than 1 percent of all housing units in the counties. But by comparison, Oregon's foreclosures in this downturn are likely to rise to the highest levels since the 1980s recession.

"It's coming out of the woodwork," said Brenda Hereth, a principal broker at Coldwell Banker Barbara Sue Seal Properties in Beaverton. "We're really at the beginning of it."

Oregon's mortgage delinquencies fell to tiny numbers in the 2004-2006 housing boom. Homeowners were flush with equity, thanks to ever-rising prices. Anyone who lost a job or charged too much on their credit card could sell or refinance to escape trouble.

That's not the case this year. Job losses pile up and prices slide. People who maxed out their mortgage debt with no down payment loans or home equity lines of credit have dwindling options. A growing number of them find they owe more than their house is worth.

Hereth, who only sells homes foreclosed by banks, saw her sales peak during the last recession at 112 in 2004. This year, she expects to close 150 deals. Every home she's listing was sold or refinanced in the last 2 1/2 years.

"Everybody who bought a house in the last two years probably overpaid," she said.

The couple who owned the Johnston Drive home bought it from the builder in September 2006, about the worst time possible.

The month before, the region ended 22 straight months of double-digit price growth.

To buy the five-bedroom home, the couple got a $418,000 adjustable-rate mortgage from Countrywide with a minimum monthly payment of $1,384 to start. The mortgage offered payments that covered no principal and only part of the interest. If they took that option, the couple could have seen their principal grow each month. The couple also got a $52,300 home equity line of credit from Countrywide the same day they bought the home, Multnomah County records show.

The couple stopped paying the mortgage in December 2007 and defaulted in April, owing $436,151, according to county records.

Real estate broker Roger Erickson of 20/20 Properties Inc. in Gresham is selling the home for the lender. He doesn't know for sure who stripped the home but has his suspicions.

Celene Cross, who lives across the street, woke one morning to find the lights that bookended the garage gone. She later saw the home's then-residents pulling trees out of the front yard with ropes.

On a tour this week, Erickson showed off the upstairs and flipped a light switch. The room stayed dark. He looked up to the ceiling to see only electrical wires.

"Oh, no light," he said, laughing. "I chuckle about this stuff but it's not funny. It's fairly common and it costs the banks a lot of money."

By Erickson's count, the house is missing 29 door knobs, 28 light fixtures, 10 floor registers, eight faucets or shower heads and one air conditioner.

"This is what we call a clean strip job," Erickson said. "They didn't beat in the doors. They didn't put holes in the Sheetrock. They just took things they thought had value."

Erickson estimated $20,000 in damage. He's listing it for $369,900. That's 29 percent less than the previous owners paid, because of the damage and declining home prices.

Cross, the neighbor, doesn't fret about the foreclosure across the street or another on the next street up. She motioned to the yard across the street and said, "We just thought if it got too overgrown we would just go over and mow it.

"You know, the whole country is dealing with this."

In fact, so is Cross.

The 41-year-old speech pathologist and her husband, an anesthesiologist, moved to Portland from a town near Chico, Calif., last year. They bought their California home in 2005. "A really bad time," she said.

Prices have since fallen, and their house is worth less. "About $100,0000," she said.

Cross said they got an offer last November but needed their lender's OK because the price was less than they owed -- a deal known as a short sale. The bank still hasn't decided whether to accept the offer, Cross said.

"They stopped sending us any notices on payments," Cross said. "Not sure why they won't approve the short sale. But not sure why they won't foreclose on the house."

 

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