Foreclosures leveling off

On Feb. 2, people gathered in a courtroom at the Charleston County courthouse to learn about and possibly bid on foreclosed properties. The sales are held twice a month.

The number of Charleston-area homeowners who fell into foreclosure leveled off toward the end of 2009, a welcome sign after two years of steady, troubling increases.

Still, the rate remains near its peak, and outside economic forces -- a lingering housing slump and a tough job market -- don't point to relief anytime soon.

"I don't think you can say the crisis is over by any means," said Debbie Kidd of Family Services Inc., a North Charleston agency that is helping nearly 800 homeowners negotiate with lenders for lower mortgage payments.

Lenders began foreclosing on 1,196 properties in Charleston, Berkeley and Dorchester counties during the last three months of 2009, according to a

Post and Courier analysis. That was slightly below the number recorded during the two previous quarters.

The figures could have been much worse. In May, the state Supreme Court put in place rules prohibiting lenders from filing foreclosure proceedings against homeowners before checking to see if the borrowers qualify for the federal Home Affordability Modification Program.

That screening process could delay cases by months, or could allow a homeowner to avoid foreclosure completely.

The program has lowered mortgage payments for roughly 1.3 million homeowners across the country. But not all lenders are participating in it, and the help doesn't apply to houses not occupied by the owner, such as rental properties or vacation homes.

Foreclosure counselors at Family Services help homeowners ask their lenders to agree to lower monthly payments through a loan modification. Many of the agency's clients either have lost their jobs or have seen their incomes reduced, Kidd said.

For the moment, employers are hesitant to create jobs, and the nationwide unemployment rate is expected to remain near 10 percent through most of the year. This could prolong the region's foreclosure problem, said Steven Slifer of NumberNomics, a Charleston-based economic consulting firm.

Without "some serious job creation soon, I think it's going to get worse before it gets better," said Slifer, a former chief U.S. economist for Lehman Brothers until he retired from Wall Street in 2003.

Hiring, he predicted, will pick up when the broader economic uncertainty settles down and consumers become comfortable spending again, which could take some time.

"We've been burnt over the last couple of years. We've lost 15 percent of our wealth, we're worried about our jobs," Slifer said.

Meanwhile, the economic hardship felt by foreclosed homes lingers even after the owners leave their neighborhoods.

Violent crime rises, municipal costs increase and nearby homes often lose some of their value, said Kidd, referring to data from a handful of studies.

When banks take possession of the properties and put them back on the market, they typically lower the asking price to sell them quickly. That places a burden on other sellers in the area. A recent Zillow.com survey of big cities shows that foreclosed properties sold with an average discount of 28 percent compared with owner-occupied homes.

And foreclosed properties are making up a greater portion of homes listed for sale. A recent Standard and Poor's Financial Services analysis forecasts a new wave of those properties coming onto the market, estimating that about 1.75 million properties are in financial trouble but haven't made it through the foreclosure process yet.

Those extra homes would make competition even tougher for existing homeowners to compete against lenders' low prices and incentives.

Fannie Mae, the country's largest mortgage finance company, sweetened the deal recently, offering to pay closing costs for qualified buyers who purchase its foreclosed properties before May 1.

Reach Katy Stech at kstech@postandcourier.com or 937-5549.