Janesville43°

Foreclosure fever: Area sees major uptick in filings

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Mike DuPre'
January 7, 2008
— The number of foreclosures in Rock and Walworth counties has risen steeply over the last two years, indicating that the subprime mortgage mess afflicting most of the country has at least brushed southern Wisconsin.

The number of foreclosure filings jumped almost 36 percent from 2004 through 2007 in Rock County. In 2004, the Rock County Clerk of Courts Office recorded 590 foreclosure filings; last year, 801 foreclosures were filed with the clerk’s office.


In Walworth County, the number skyrocketed 84 percent from 279 in 2004 to 514 last year.


The filing of a foreclosure starts a months-long process that typically results in the house that was being purchased being sold at sheriff’s auction. The lender who issued the mortgage loan usually winds up buying the property at auction.


Rock County Clerk of Courts Eldred Mielke and two lawyers who handle foreclosure cases lay most of the blame on subprime mortgages, so-called because initial interest rates are below the prime rate but escalate to well above it when the mortgages’ rates automatically adjust.


The prime rate is a benchmark interest rate that banks charge each other and their most credit-worthy customers.


House buyers who took out subprime mortgages usually could not afford the higher monthly payments required by conventional mortgages at higher interest rates.


“You can’t attribute it all to one thing, but I think the major factor is subprime lending,” said Janesville attorney Vicki Schleisner. “Most of the clients who walk through my door asked key questions like, ‘What will it cost a month?’ But they don’t think to ask what will it cost me a month in two or three years.”


Schleisner cited two examples: a monthly mortgage payment that started at less than $600 a month but mushroomed to $1,500 monthly in three years and an interest rate that started below 8 percent but could rise to almost 18 percent over the course of a few years.


Less than scrupulous lenders, she said, often focus on a mortgage’s initial rates and payments rather the eventual and/or total cost.


“It cuts both ways,” Janesville attorney Jim Fowler said. “I suspect a lot of people didn’t fully appreciate the implications of a floating interest rate. They assumed their (houses’) value would continue to appreciate and they would be able to refinance.”


The other factor, Fowler said, is “the overall economic malaise that seems to affect people at the margins.”


Many people probably thought they could sell their homes at increased prices before their mortgage interest rates started escalating, Mielke added.


But in October 2007, the average sale price of a Rock County home had declined about 1 percent from October 2006, and sales continued to slide.


The average sale price in October was $139,406, down from the $141,058 average in October 2006, according to the South Central Wisconsin Multiple Listing Service.


In 2006, 2,158 houses were sold in Rock County through October, while 1,976 were sold during the first 10 months of last year, according to the listing service.


Dan Kruse, president of Rock-Green Realtors Association and an agent with Century 21 Affiliated of Rock County, looked at the brighter side of the picture.


While foreclosures are rising here, they still are not on the magnitude of other regions in the United States, Kruse said.


And while the average sale price last year was down slightly from 2006, it was up from 2005, and the median sale price—the price at which half of sales are above and half below—continues to climb, Kruse said.


“Even with the foreclosure market growing in our area, the market trends are still good, and values are holding strong,” he said.



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