Few foreclosures for N.O.  

The term for defaulted and seized mortgage property could read “four-closures.”

Four is the total of properties in New Orleans Fannie Mae foreclosed last year, said spokesman Alfred King.

“There’s been no jump in Fannie Mae foreclosures in the city,” King said.

The foreclosure picture in New Orleans is better than many feared and much better than the national outlook.

“My impression is home prices and mortgage interest rates are not especially high in New Orleans,” said Daren Blumquist, spokesman for RealtyTrac Inc., an Irvine, Calif.-based national real estate foreclosure database.

The more than 430,000 foreclosure filings nationally during the first quarter were 35 percent more than the roughly 318,000 in the first quarter of 2006. The surge led to a congressional investigation into predatory lending and subprime mortgages and their connection to rising default and foreclosure rates.

According to RealtyTrac, more than 50 percent of mortgages foreclosed in 2006 involved subprime loans with an interest rate at least 2 percent higher than the prime rate.

But Louisiana’s foreclosures are so far largely unaffected by the national subprime mortgage crisis.

Blumquist said Louisiana foreclosures jumped 454 percent from 341 in the first quarter of 2006 to 1,890 in the first quarter of 2007. That’s an increase of 1,549 foreclosures.

Experts explain the hefty increase in first quarter 2007 by the lengthy 2006 moratorium instituted by the Department of Housing and Urban Development for hurricane victims eligible for grant funds.

“In 2006, Louisiana saw a decrease in foreclosures because HUD continued to extend its foreclosure moratorium until the last quarter of 2006,” said Blumquist. “We didn’t begin seeing expected 2006 foreclosures until the end of the year.”

Louisiana’s 950 third-quarter foreclosures rose to more than 1,200 during the fourth quarter, indicating a steady climb through the first quarter of 2007.

Foreclosure surprises

The real post-Katrina foreclosure story hinges on pre-Katrina comparisons. For example, the first quarter of 2005 resulted in 1,155 foreclosures to New Orleans. 2007 first-quarter defaults were 63 percent higher — an increase Blumquist said was less than anticipated.

RealtyTrac recorded 65 May foreclosures in the New Orleans metro area, ranking the city No. 191 of the 230 largest metro areas in foreclosures.

Detroit posted the most foreclosures in the first quarter with one for every 51 households compared with one for every 544 households in New Orleans.

Local foreclosures this year are attributed more to bankruptcy than simple mortgage delinquency, which helps avoid laying full blame on subprime mortgage lenders.

According to Foreclosure.com, 2007 foreclosure filings in Orleans Parish include 58 simple foreclosures and 113 bankruptcies. In Jefferson Parish, 56 properties were foreclosed compared with 296 bankruptcies.

“Some frustrated people whose financial situations were destroyed by the hurricanes took the easy route of walking away from their mortgages,” said Milton Atebara, branch manager of Sunset Mortgage Co. in Metairie. “Some found themselves in serious financial trouble.”

Atebara said the New Orleans area is unique because the financial trauma experienced by many hurricane victims makes it difficult to determine the precise cause of mortgage delinquency.

“There are many reasons why people fail to pay their mortgages,” Atebara said. “To blame subprime mortgages alone would be to ignore other sources of financial difficulty.”

Lender leniency

The modest New Orleans foreclosure increase results partly from unprecedented lender leniency to borrowers who experienced hurricane damage. The forbearance arises from sound fiscal sense more so than compassion.

“To foreclose on an owner-occupied residential property creates a lot of legal work, and the cost to foreclose may exceed the property’s value,” Atebara said. “Also, to do so may be poor public relations, depending on the circumstance.”

If there is little or no equity in a damaged property, the lender may not benefit from foreclosing, particularly if no mortgage insurance was taken out on the property, Atebara said.

“Responsible lenders will attempt to work with borrowers when they begin to miss payments,” Atebara said. “They will try to counsel the borrower to see what can be done to keep the loan out of foreclosure.”

Some experts say New Orleans isn’t out of the woods yet.

In 2008, many two-year option mortgages from 2006 and two-year option loans from 2007 will be adjusted to higher interest rates.

“Since so many of these loans took effect in the past few years, we may see another jump in foreclosures in 2008,” Blumquist said.

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Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, OH  and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 425 employees.  Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.