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N.C. regulators are looking for new ways to help more homeowners as the foreclosure crisis spreads, hitting another unwelcome record last month.
Statewide, foreclosure filings rose 43 percent in August, compared with a year ago, according to Observer analysis of court data compiled by the state. Filings, which mark the start of foreclosures, rose above 6,500 for the first time last month.
Mecklenburg County saw an 80 percent increase, to 1,316, the second highest number on record for the county.
The foreclosure problem that tipped the nation into recession began with subprime loans, often made to home buyers with sketchy credit and with payments they couldn't afford. The recession has pushed N.C. unemployment to double-digit levels, putting more people at risk for falling behind on payments. In addition, home values have fallen, making it harder for people to sell houses they can no longer afford.
As a result, more prime borrowers – people who had good credit – are facing the threat of foreclosure.
“We've got to do more to reach those people,” said Mark Pearce, N.C. deputy commissioner of banks.
Pearce oversees a program that helps connect homeowners facing foreclosure with counselors. In its first 10 months, the program has reached 5,632 people statewide and linked them with foreclosure-prevention counselors. So far, that's helped 1,790, or more than 30 percent, avoid foreclosure, Pearce said. In Mecklenburg, 218 home owners contacted have avoided foreclosure.
But that program, conceived more than a year ago, is only for people who have subprime loans. Pearce and his colleagues are looking for ways to expand their early subprime success to a bigger pool.
Starting Oct. 1, homeowners could get help from another source. A new state law, backed by Attorney General Roy Cooper, will allow clerks of court presiding over foreclosure hearings to require lenders to give detailed explanations of efforts to help delinquent homeowners. The clerks also will be able to grant a delay of up to 60 days to allow more time.
The pain of foreclosure spreads well beyond the family losing a home. Foreclosures drive down the prices of surrounding homes and sometimes a whole neighborhood.
Pearce's existing state outreach is part of another state law, effective since last November, that requires lenders to send preforeclosure notices to homeowners and the state banking commission. That's how the commission identifies troubled borrowers to contact for counseling. The law delayed foreclosure proceedings, leading to a big decline in filings from November through February.
Filings also slowed as lenders and mortgage servicers enacted foreclosure moratoriums.
In March, filings began rising again, hit a record in April, leveled off a little and last month jumped again. Some homeowners will work out payment plans after the filings. Some won't and will end up in a foreclosure sale.
Final foreclosures are not reliably tracked at the state level. In Mecklenburg, they fell for a few months as filings were delayed. In June, the county's final foreclosure sales began rising again.
“It's a big concern I have: What kind of solutions there are with the unemployment so high,” Pearce said. “If people can't pay, they can't pay.” Database editor Ted Mellnik contributed.
