Foreclosures rising in Delaware

By Kate House-Layton, Delaware State News

WILMINGTON — New Castle County Executive Chris Coons just bought a new house. It’s a great experience he said, even if the paperwork is dizzying.

A Thursday mortgage foreclosure conference, however, reminded him of a day his mother told him to lie.

“Which happened because a New Castle County sheriff was pounding on our door because we were being foreclosed,” he said. “And as a 13-year-old boy, there is nothing more terrifying … losing our house after our father had gone bankrupt and abandoned us, was a low point.”

He told the conference audience this to illustrate the human element of mortgage foreclosure.

Delaware is about level in the region and the nation in its mortgage foreclosure rate. A study ranked Delaware 24th in the number of prime, or lower interest and lower rate, mortgage foreclosures in the country, and 22nd for sub-prime, or higher risk and higher interest, mortgage foreclosures.

“But we have some challenges,” said Gerry Kelly, deputy state bank commissioner for consumer affairs.”

Rising foreclosures

Since the state commissioned a study of mortgage foreclosures in Delaware last year, foreclosures continue to climb. Kent and Sussex counties have broken foreclosure records, Mr. Kelly said.

Dover Mayor Stephen R. Speed, who attended the conference, said he worked toward an increase in home ownership in Dover and helped implement programs to achieve that goal.

“When you talk about housing, it affects just about every part of everyone’s life,” he said.

Financially if a person can maintain their home, they’re a lot better off.

“Hopefully we can get the word out so that folks who are in trouble can get to the right people, get the right advice, make the right decisions and hopefully we can keep them … from going through this process,” he said.

Last year’s foreclosure study showed that 11,763 homeowners in Delaware went into foreclosure between 2000 and 2005, a 52 percent increase. Added data from 2006 brings the number to roughly 14,051 foreclosures.

New data showed that New Castle County foreclosures last year dropped six percent from 2005, but in the last 10 months, the county averaged 162 foreclosures per month, which puts the county at 1,940 foreclosures per year, an all-time high.

“Kent and Sussex Counties manifest similar worrisome trends,” the update said. “While in 2006, Kent County saw a 1.4 percent decrease in foreclosure filings from 2005, the most recent 10 months shows a large up-tick in the data.”

In the last 10 months, the study said, Kent County averaged 37 foreclosures per month, a 13.5 percent all-time high.

Sussex County increased foreclosures 9.6 percent last year, but in the last 10 months, of available data, the county averaged nearly 43 foreclosures a month.

“If this rate holds for a 12 month period, Sussex will see approximately 511 foreclosures filed, or 29 percent more than in any year on record,” the update said.

Expensive loans

Ira Goldstein, director of public policy and program assessment for The Reinvestment Fund, said the continued escalation of foreclosures is residual from Delaware’s explosive housing market that led people toward exotic mortgages. The Reinvestment Fund is the Philadelphia firm the state hired last year to perform the foreclosure study and update the numbers. The Reinvestment Fund describes itself as “a national development finance corporation with a wealth-building agenda for low- and moderate-income people and places.”

Mr. Goldstein said he was not surprised to find that Delaware residents pay lower interest rates than in other parts of the country. What was surprising was Delaware exceeded the national average with people who refinanced their mortgages.

“People who are refinancing loans, more than 25 percent of them are using expensive loans,” Mr. Goldstein said.

Both high and low-income homeowners had foreclosures, he said, and more minorities have refinanced with expensive mortgages.

Mr. Goldstein also pointed to the differences between prime and sub-prime loans. Prime loans have a much lower delinquency rate than sub-prime loans, he said. He particularly pointed to adjustable rate mortgages which have more risk, but people use to capitalize on low introductory rates.

When interest rates change, Mr. Kelly later said, it can impact a homeowner’s ability to make their payments.

“What experts in this field say is uniquely, those adjustable rate mortgages that were made in 2006 are uniquely problematic, which means that the worst is yet to come,” he said.

What some of this information means for Delaware is lenders will likely tighten their underwriting standards and access to credit.

“That might not be a bad thing,” Mr. Goldstein said.

He said it was hard to say when things would turn around in Delaware, but not before next year.

Homeowner protection

Attorney General Beau Biden said his office oversees a new law that governs the debt management and services industry in Delaware.

The new law, called The Delaware Uniform Debt Management Services Act, provides a fair and equitable process for consumers who use debt management companies, to require that these companies are licensed and strictly follow the law.

The office also monitors the debt management industry and advised that anyone who uses these agencies to compare costs and services, check to see if they’re licensed, if they’ve ever had a complaint filed against them with the Better Business Bureau and to make sure they understand any documents they sign.

Mr. Biden’s office additionally has aided in an initiative against companies who offer aid to consumers in foreclosure.

When a home is foreclosed, and money is leftover after settlement, that money belongs to the former homeowner, he said, although people don’t always know this.

He said his office has learned of a deceptive practice where companies offer to “help” recoup these funds by processing the paperwork for a fee if the former homeowner signs over their right to the residual money to the company.

Rep. Helene M. Keeley, D-Wilmington, who spearheaded last year’s foreclosure study, said June is home ownership month and everyone has to work toward some resolution for homeowners and the state must continue to fund a special DMEC fund for mortgage aid.

“The foreclosure challenge is new and what we have to continue to make sure … that home ownership is winning and not foreclosure,” she said.

Staff writer Kate House-Layton can be reached at 741-8242 or

khouse@newszap.com.

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