Tumbling home values boost mortgage defaults
'We have never seen this many foreclosures'
Jason Markusoff -Calgary Herald - Thursday, February 12, 2009
Mortgage broker Adnerys Armstrong, who specializes in high-risk borrowers, says she's taking extra time to warn customers of the dangers of foreclosure, as the global financial crisis has made banks more wary of lending risks.
More Calgarians are defaulting on mortgages and losing their homes in a toxic stew of rising job losses, falling house prices, the credit crunch and ill-timed investments.
Up-to-date statistics on foreclosures are hard to come by, but the number of Albertans who have fallen at least three months behind in mortgage payments has jumped to 1,771 from 649 in 11/2 years.
Since November, lenders have begun 949 foreclosure proceedings at Calgary's courthouse--more than in the six months before that, according to court data collected by Foreclosures Canada Information Systems, an investment company. And increasingly, those proceedings aren't ending in the borrower's favour because their property value has eroded, says company founder Wade Fenner.
"They're going to throw in the key or walk away," Fenner said.
The most prominent foreclosure law firm in Calgary said business roughly doubled from 2007 to 2008, and that growth hasn't shown signs of relenting.
"Foreclosure rates are rising at a disturbing rate," said Harold Vickers of Vickers and Associates.
"We've been a firm that has been doing foreclosures for 25 years, and we have never seen this many foreclosures."
It used to be that courts, banks and mortgage lenders only had to close in on a handful of disaster cases: bad divorces, addicts, marijuana grow operations and people who otherwise fell apart. In good times, many could get emergency financing by borrowing against the steadily increasing value in their homes.
But now values are eroding.Foreclosures are claiming Calgarians who've invested in multiple homes or only had one, with good credit and with bad, Vickers said.
In a growing number of cases, Vickers finds borrowers who owe more than their home is worth.
And here's a recession-time twist: at a time when layoffs stalk offices throughout Calgary, his company has had to boost staff by more than 30 per cent to handle the bigger workload.
The Calgary Real Estate Board lists about 125 condos and single-family houses for court-ordered sale, according to estimates by Mike Fotiou of First Place Realty. In his blog, he noted the Multiple Listing Service had only eight last March, including some grow ops.
Current foreclosure listings are as diverse as the market itself: inner-city condos, old bungalows, three-year old houses in new neighbourhoods, and mil-lion-dollar properties. There are 13 foreclosures in one condo complex alone.
Some Calgarians facing foreclosure have stumbled dangerously behind in mortgage payments after getting laid off, said Adnerys Armstrong, a mortgage broker who specializes in high-risk borrowers.
Or in many cases, clients borrowed to purchase a second or third home to flip for easy profit, as many did before the market dipped in 2008. When that sale didn't come, they were stuck with multiple mortgages and a shrinking pool of collateral.
"Throughout all the excitement, I think most people weren't thinking, because of the price of oil," she said.
With her pool of would-be homebuyers shrinking, Armstrong said she's taking extra time to warn customers about the dangers of foreclosures, as the global market meltdown and U.S. housing crisis have made banks more wary of risk.
Often, bad decisions mix with bad circumstances. Armstrong tells the story of one client who got sick just as the market did.
In late 2007, months after the market had peaked, the woman and her pensioner mother added to the debt on their Calgary home to finance a second one in the northwest. As they rented the main floor to a friend for less than the mortgage's cost, they renovated the basement and listed the home.After six months, nobody bought. Worse, the woman fell ill and missed work for three months and has fallen more than two months behind on her own home and one month behind on the investment property.
Armstrong is trying to find them help, but since both homes are shedding value, "neither residence or both combined are going to get them out of trouble."
Dianne Brown used to see a smattering of foreclosures, and now they make up about 15 per cent of her business.
"It started picking up a year and a half ago, and accelerated dramatically in the past eight months," she said.
Although some agents hype foreclosures as elusive bargains--many bear the "handyman's special" tag in listings --Brown cautions the court and lenders still have to get a fair price to recoup debt, and apply extensive conditions, limiting the liability.
Vickers said his caseload shows no signs of growing thinner, although he said lenders are trying hard to work with homeowners to stave off the emotion-wrought process of foreclosure.
"Lenders aren't wolves trying to take people's property," he said.
Comment: What a great time to buy!
Jason Markusoff -Calgary Herald - Thursday, February 12, 2009
Mortgage broker Adnerys Armstrong, who specializes in high-risk borrowers, says she's taking extra time to warn customers of the dangers of foreclosure, as the global financial crisis has made banks more wary of lending risks.
More Calgarians are defaulting on mortgages and losing their homes in a toxic stew of rising job losses, falling house prices, the credit crunch and ill-timed investments.
Up-to-date statistics on foreclosures are hard to come by, but the number of Albertans who have fallen at least three months behind in mortgage payments has jumped to 1,771 from 649 in 11/2 years.
Since November, lenders have begun 949 foreclosure proceedings at Calgary's courthouse--more than in the six months before that, according to court data collected by Foreclosures Canada Information Systems, an investment company. And increasingly, those proceedings aren't ending in the borrower's favour because their property value has eroded, says company founder Wade Fenner.
"They're going to throw in the key or walk away," Fenner said.
The most prominent foreclosure law firm in Calgary said business roughly doubled from 2007 to 2008, and that growth hasn't shown signs of relenting.
"Foreclosure rates are rising at a disturbing rate," said Harold Vickers of Vickers and Associates.
"We've been a firm that has been doing foreclosures for 25 years, and we have never seen this many foreclosures."
It used to be that courts, banks and mortgage lenders only had to close in on a handful of disaster cases: bad divorces, addicts, marijuana grow operations and people who otherwise fell apart. In good times, many could get emergency financing by borrowing against the steadily increasing value in their homes.
But now values are eroding.Foreclosures are claiming Calgarians who've invested in multiple homes or only had one, with good credit and with bad, Vickers said.
In a growing number of cases, Vickers finds borrowers who owe more than their home is worth.
And here's a recession-time twist: at a time when layoffs stalk offices throughout Calgary, his company has had to boost staff by more than 30 per cent to handle the bigger workload.
The Calgary Real Estate Board lists about 125 condos and single-family houses for court-ordered sale, according to estimates by Mike Fotiou of First Place Realty. In his blog, he noted the Multiple Listing Service had only eight last March, including some grow ops.
Current foreclosure listings are as diverse as the market itself: inner-city condos, old bungalows, three-year old houses in new neighbourhoods, and mil-lion-dollar properties. There are 13 foreclosures in one condo complex alone.
Some Calgarians facing foreclosure have stumbled dangerously behind in mortgage payments after getting laid off, said Adnerys Armstrong, a mortgage broker who specializes in high-risk borrowers.
Or in many cases, clients borrowed to purchase a second or third home to flip for easy profit, as many did before the market dipped in 2008. When that sale didn't come, they were stuck with multiple mortgages and a shrinking pool of collateral.
"Throughout all the excitement, I think most people weren't thinking, because of the price of oil," she said.
With her pool of would-be homebuyers shrinking, Armstrong said she's taking extra time to warn customers about the dangers of foreclosures, as the global market meltdown and U.S. housing crisis have made banks more wary of risk.
Often, bad decisions mix with bad circumstances. Armstrong tells the story of one client who got sick just as the market did.
In late 2007, months after the market had peaked, the woman and her pensioner mother added to the debt on their Calgary home to finance a second one in the northwest. As they rented the main floor to a friend for less than the mortgage's cost, they renovated the basement and listed the home.After six months, nobody bought. Worse, the woman fell ill and missed work for three months and has fallen more than two months behind on her own home and one month behind on the investment property.
Armstrong is trying to find them help, but since both homes are shedding value, "neither residence or both combined are going to get them out of trouble."
Dianne Brown used to see a smattering of foreclosures, and now they make up about 15 per cent of her business.
"It started picking up a year and a half ago, and accelerated dramatically in the past eight months," she said.
Although some agents hype foreclosures as elusive bargains--many bear the "handyman's special" tag in listings --Brown cautions the court and lenders still have to get a fair price to recoup debt, and apply extensive conditions, limiting the liability.
Vickers said his caseload shows no signs of growing thinner, although he said lenders are trying hard to work with homeowners to stave off the emotion-wrought process of foreclosure.
"Lenders aren't wolves trying to take people's property," he said.
Comment: What a great time to buy!
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