Feeling the Florida Home Loan Squeeze: Palm Beach Foreclosures Double National Average

It’s not an ideal time to be a home owners in Palm Beach, Martin or St. Lucie counties. The latest numbers reveal that foreclosure filings sky-rocketed in those areas last month, due to rising Florida home loan costs and increasing insurance rates.

In Palm Beach County, filings of homes entering some phase of foreclosure went from 849 in June 2005 to 920 last month, an increase of 8 percent, a RealtyTrac report shows. In Martin and St. Lucie, the number of homes entering the foreclosure process rose at a higher percentage rate, but significantly fewer homes were involved.

There was one new foreclosure filing for every 605 homes in Palm Beach County - more than twice the national average.

“Although housing prices are softening, the increase in interest rates is making it much harder to cover monthly housing costs,” said Lucy Duni, an analyst with TrueCredit.com.

At least Florida home loan rates have eased slightly, hopefully preventing more of an outbreak of mortgage defaulting.

Fortunately, Palm Beach and neighboring counties seem to be an exception. Statewide, foreclosures are receding from record filings last year. Last month, 8,605 Florida properties reported foreclosure activity, down from 9,778 in June 2005, a 12 percent decrease. The state now ranks third in the nation (from a previous high of number-one in 2005).

Danger of adjustable rate Florida home loans

So, what’s behind this troubling trend? Half of all Florida home loans last year had adjustable rates, said analyst Jack McCabe, president of McCabe Consulting in Boca Raton. So-called “exotic” mortgages with no interest, optional monthly payments and flexible rates lured buyers into believing they could afford to own a piece of paradise in South Florida’s strong real estate market.

As those rates begin to reset, monthly payments balloon. An exotic Florida home mortgage loan of this nature becomes dangers, as debt builds.

“In our area, a lot of people are maxed out in terms of overall debt,” said Jim Sahnger, vice president of Palm Beach Financial Network in Sewall’s Point. “I don’t know if it’s adjustable-rate mortgages that are creating issues as much as it is the people who tend to overspend their means.”

Palm Beach County also is notorious for overzealous homeowner associations, Sahnger said, and a lot of liens filed on homes could be their aggressive handiwork. For instance, some associations will take action against an owner who is late paying special assessment.

“In some cases, I have seen up to 35 percent of some properties being foreclosed on by the homeowner association,” Sahnger said. “Many of them have pretty short fuses.”

There is ne bright spot: Florida real estate is so alluring and its economy so resilient that “the market is still healthy enough to absorb these properties (in foreclosure) before they go to auction,” RealtyTrac’s Sharga said.

Specifically in the Palm Beach housing market, things have looked better. But the outlook isn’t all negative, as many experts see values returning to a healthy state soon.