Regulation and Borrower Negotiation Will Impact Foreclosure Filings, says Professor Sherry Jarrell

1.7.2011 Article, Faculty News, General

Triad sets record for foreclosure filings in 2010

Reposted from Winston-Salem Journal | by Richard Craver

North Carolina and most of the Triad set a record for foreclosure filings in 2010, a state agency reported Thursday.

Whether the trend continues in 2011 will depend primarily on how many jobs — particularly full-time ones — are created in the region and the state, analysts said.

There were 67,854 foreclosures in North Carolina in 2010, an increase of 7 percent over 2009. Forsyth County had a record 2,396 foreclosure filings last year, up 6 percent, according to the N.C. Administrative Office of the Courts.

"A great deal of what we saw last year, and what we're likely to see this year, will be driven by the state of the labor market," said John Quinterno, a principal with South by North Strategies Ltd., a research company in Chapel Hill that specializes in economic and social policy.

"Unemployment remains high and the length of need for unemployment benefits continue to grow."

The jobless rate in the Triad rose to 10.2 percent in November from 9.5 percent in October, the N.C. Employment Security Commission reported Tuesday. The rate does not include the hundreds of Dell Inc. employees who were let go when the plant closed Nov. 19.

The average stay on initial unemployment assistance for North Carolinians is 18.2 weeks, the commission said. Nationally, 42 percent of unemployed Americans have been out work at least 27 weeks, according to the U.S. Bureau of Labor Statistics.
"All that puts more pressure on homeowners who have managed to keep current on their mortgage despite the loss of a job or jobs," Quinterno said.

Of the 14 counties in the Triad and Northwest North Carolina, just two — Alleghany and Rockingham — did not set a record in 2010.
Although Forsyth has seen a 29 percent increase in foreclosure filings since 2006, some counties in Northwest N.C. have had filings that at least doubled. For example, filings have risen in Watauga County from 107 in 2006 to 356 in 2010, along with going from 75 in 2006 to 160 in 2010 in Ashe County.

Forsyth had a 13 percent decline in the number of filings in the fourth quarter compared with the fourth quarter of 2009. There also was an 11 percent decline statewide.

That decrease, however, likely came from a temporary moratorium on foreclosure starts by major banks and lenders in the fourth quarter, said Daren Blomquist, a spokesman for, which tracks foreclosures nationally.
"North Carolina will have more than a 30 percent increase in completed foreclosures in 2010 compared with 2009," Blomquist said. "I don't believe foreclosures are necessarily going to get a lot worse in 2011, but they're not likely to get much better."
Blomquist predicts it will be the end of 2012 before there will be a consistent trend of declining foreclosures in the United States.
"North Carolina may see that trend come a few months earlier," he said.

Sherry Jarrell, an economics and finance professor at Wake Forest University Schools of Business, said that other factors are the willingness of the borrower "to get in there and renegotiate with the lender, and how supportive the regulatory environment is to the lender that seeks to avoid foreclosure."

Will Corbett, director of the N.C. Home Foreclosure Prevention Project, cautioned that a foreclosure filing does not automatically mean a loss of home.

"The AOC data includes foreclosures on commercial real estate and second homes," Corbett said. "Filings will likely remain at an elevated level until the overall economy improves."

Corbett said that the project has helped more than 5,000 homeowners avoid foreclosure.

"We are optimistic that the extension of our program with other programs, such as the foreclosure prevention fund of the N.C. Housing Finance Agency, can help a significant number of homeowners avoid foreclosure in 2011," Corbett said.
Another factor will be home values, particularly for homeowners who are "under water" — owing more on their home than it is worth, said Tim Dale, the mortgage-lending manager for BB&T Corp.

"Hopefully the foreclosures will level off as the economy improves, hiring increases and home values stabilize," Dale said. "We are active with our loan-mitigation efforts."

Even as some banks have resumed their foreclosure activity, they are more likely to pursue loan-modification efforts, said Glenn Cobb, the chief staff executive of the Winston-Salem Regional Association of Realtors.

"We are very encouraged with the efforts of most banks to understand that working through troubled loans is much more preferential than the foreclosure process," Cobb said. "Hopefully, we will see positive ramifications throughout the housing sector going forward."