Widening the Focus on Foreclosures

By Jonathan Higuera
April 30, 2008 06:40 PM

Two years after the business press feasted on the escalating home prices storyline, the hottest housing story now is tracking foreclosure rates.

It’s a testimony to the enduring principle that what goes up must come down, and for reporters, the mounting foreclosures provide multiple entry points for stories.

Whether it’s covering the devastating impact that foreclosures are having on neighborhoods, schools or even municipal revenues, reporters should think broadly about what it all means and what can be done to mitigate the damage.

The individual stories are always important but the clusters of where the foreclosures are occurring is giving enterprising reporters good material, said one reporter enmeshed in the foreclosure issue.

Aldo Svaldi, a business reporter for The Denver Post and co-author of an award-winning series on foreclosures in a Denver neighborhood, recommends reading through at least 20 foreclosure filings or more just to see if you can identify trends.

“Digging through 20 of them will tell you when the loans were made and how they were structured,” he said. “It may not tell you the exact reason for the foreclosure but you can see why some people are in a negative equity position.”

The actual filings can be found with the Public Trustees, who oversee the foreclosure process, or the county assessor’s office, depending on the state.

It’s also important to understand how foreclosure works. In most states, it is a three-step process: the homeowner is given notice of the lender’s intent to foreclose. This is often referred to as the default notice. The homeowner then receives a notice of the sale date followed by the actual sale. At any point in the process, a homeowner can find a way to thwart foreclosure proceedings. But so many are underwater, which means they owe more on the house than they can get by selling it, it’s become increasingly difficult. It doesn’t help that banks have clamped down on refinance terms, taking away yet another option for homeowners.

The situation was reflected in the latest quarterly numbers from RealtyTrac, the California-based firm that tracks foreclosure rates by state and county.

It found that foreclosure filings in the first quarter of 2008 were up more than 110 percent compared to the same period a year ago.

It’s also important to understand the methodology that firms are using to count foreclosures.

In the case of RealtyTrac, the firm counts each of the three steps as part of its foreclosure rate.

State officials in Colorado felt that the methodology was distorting the state’s foreclosure rate, which at one point had been the country’s highest. Now the state’s Division of Housing maintains its own foreclosure database and only counts a foreclosure when the repossessed house is actually sold.

Anthony Sanders, a finance professor at Arizona State University’s W.P. Carey School of Business, said reporters would do well to drill down into the geographic dispersal of foreclosures. The foreclosure process that goes all the way to repossession and sale is usually concentrated in low-income areas and new home developments that had an abundance of starter homes and subprime lending, he contends.

The foreclosure story is also leading to other types of stories, including pets being abandoned, besieged homeowners mailing in their keys to lenders and walking away as well as controversial property valuations, both commercial and residential. Reporters would also be ahead of the game if they looked at who benefits the most from a foreclosure, the lender, investors or speculators.

And the ubiquitous scam story is still out there.

“We’re seeing homeowners who are in foreclosure proceedings but are still collecting rent from tenants,” Svaldi said. “We’re also still seeing some bait-and-switch tactics from mortgage lenders.”

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism