Florida Home Mortgage Loan Foreclosures Continue to Climb; Agencies Fight Back

As an office manager of a non-profit credit counseling firm in Pensacola, Terry Daniell helps people repair credit and avoid Florida mortgage foreclosure.

“Primarily, more and more people are coming in, and the first thing out of their mouths is, ‘How do I save my home?’” Daniell said.

With the Florida housing market mired in a slump and besieged by sky-high insurance and property tax rates, the number of homeowners threatened with foreclosure is rising.

For those clients who face foreclosure, Daniell answers their question with a direct and simple strategy: Do whatever it takes to keep your home.

“It’s very hard for people to not pay their credit cards, but saving the home is the most important thing,” Daniell said. “You can push credit card payments to a later date, and bad credit can be overcome.”

Loss of your home actually accelerates credit collapse and financial decline.

In spite of the efforts of Daniell’s Consumer Credit Counseling Service of Northwest Florida, mortgage foreclosures in Florida and the Panhandle are showing a disturbing upward trend.

In Escambia County, during the first quarter of 2006, there were eight residential foreclosures with owed Florida home loan values totaling $437,500.

By comparison, there were 23 residential forecloses in Escambia the first quarter of 2007. The owed-loan value was $2.95 million.

In Santa Rosa County, the increase in foreclosures is minimal.

For the first quarter of 2006, there were five residential foreclosures with a owed-loan value of $285,000. For the first quarter of this year, there were eight residential foreclosures with an owed-loan value of $1,094,000.

“Both the increased number of foreclosures and the increased dollar volume are significant,” said Al Muller, president and co-owner of Pensacola-based Metro Market Trends. “In my opinion, we are at the very beginning of this surge in foreclosure activity.”

Muller said Metro Market Trends, which tracks market data throughout the state, is seeing foreclosure numbers in other Florida and Alabama counties that are more alarming than in the North Florida housing market.

Flagler County, for example, went from one foreclosure in the first quarter of 2006 to 31 in the first quarter of this year.

And neighboring Baldwin County, Ala., has seen an increase from 23 in the first three months of last year to 102 for the same period in 2007.

Driving this surge in Florida home loan foreclosures are several financial factors associated with the local and national housing markets.

At the heart of the problem is falling home prices, exacerbated by home insurance and property tax issues, and a worrisome rise in the number of defaults in the “sub-prime” lending market.

Sub-prime, or bad credit Florida home loans, are those made to borrowers who do not qualify for more favorable conventional mortgage rates because of problems with their credit history.

This stew of troublesome money issues is creating scenarios where many owners who obtained sub-prime, no-money-down Florida mortgages have zero dollars invested in the property.

And if their property’s value has declined significantly, as many have in Pensacola recently, their equity is essentially nil.

“As this housing decline continues, there are just more and more permutations that fall out of it,” Muller said.

“What’s really different here, what’s being lost in all this, is that people being foreclosed on today are not in the same kind of financial crisis as 10 or 15 years ago,” he said.

“Back then, people had to put down 10 percent and also paid closing costs. Housing prices typically went up 2 to 3 percent a year. And when a person lost his job, and the house, they would lose $10,000 and closing costs.”

The combination of easy Florida mortgage money and falling prices makes it much easier and less costly for someone to consider foreclosure.

“Today, if a home is worthless, people will just walk away from it,” Muller said.

If someone servicing a mortgage on a “worthless” home is suddenly hit with a $150 to $200 a month “readjustment” of their sub-prime or adjustable-rate mortgage, or their property taxes and insurance spike up, it can push them over the financial edge.

Despite the bad rap sub-prime loans have been getting of late, the market for this kind of mortgage loan is still active, viable and necessary, many say. Small business owner Jeff Vaughn of DeFuniak Springs can attest.

Vaughn, 32, bought property in 1993 after getting a conventional loan at the early age of 18. During the next 15 years, Vaughn said his credit suffered, and he had several financial setbacks.

But he managed to hang on to his property. Last year, Vaughn found himself in a position to retrieve a large amount of its equity by turning to Pensacola-based Legacy Lending for a sub-prime loan.

“My credit scores have already made improvement by leaps and bounds,” said Vaughn.

While Vaughn is a big believer in the efficacies of the sub-prime loan market, he stresses that people should be aware of the risks before going down that path.

He cites the large “prepayment penalties” sometimes attached to sub-prime loans by a Florida mortgage lender, as well as the higher interest rates and scheduled interest rate “adjustments” in non-fixed rate loans.

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