GROUND ZERO for the housing crisis in the western United States is in central California, Phoenix, Arizona, and Las Vegas, Nevada. These three places, more than anywhere else in the country, have felt the backlash of the past decade’s extensive predatory lending and mortgage fraud.
Today the housing crisis in the Western states has become critical for reason other then out right fraud. Currently many inner-city neighborhoods are lined with vacant homes, not only because of foreclosures but because their prices have sunk to rock bottom so the banks and investors have snapped them up, only to hold onto them for future profit. Many of them operate from offices around the world, sending proxies to participate in live auctions and bid for the real estate on their behalf such as in auction.com.
The artificially inflated market, due to investors keeping a vast number of homes off the market, is especially booming in central California, Phoenix, and Las Vegas. Between May and August of this year, housing prices rose as much as 20% in Phoenix. Therefore, despite the thousands of vacant houses that sit in these areas, most people who need a home to live in are forced to build new homes in outlying areas.
Riverside, California July 16, 2012 A foreclosure auction held by Auction.com. Investors from around the world snap up homes in cities hit hard by the foreclosure and mortgage crisis as they believe prices have bottomed out and now is the time to purchase.
In central California, cities like Fresno have also dealing with the issue of “dual tracking,” where lenders initiate foreclosure sale proceedings, usually without the homeowner’s knowledge, even as the homeowner is still pursuing a loan modification. According to John Shore, the Executive Director at Community Housing Council of Fresno, this often occurs because of a miscommunication: one bank employee pursues the loan while another pursues the sale, unaware of one another’s efforts.
On October 2, the servicing standards included in the National Mortgage Settlement went into effect, including a provision to restrict dual tracking. Companies in the settlement were given 180 days to reform their dual tracking procedures, a period during which complaints about dual tracking actually increased.
Another problematic, if unanticipated, consequence of the housing crisis has appeared in central California in the form of mosquito-infested swimming pools. Many of the area’s foreclosed homes have swimming pools that, when neglected, fill up with rainwater and offer mosquitoes a ripe breading ground. As a result, entire neighborhoods have been infested — this year, 45 mosquito samples from Fresno County tested positive for West Nile virus.
Fresno County’s Mosquito and Vector Control District, which has come across thousands of filthy backyard pools, has tried to remedy the problem by dropping hundreds of small fish into the water. The fish eat the mosquito eggs, thereby cutting the mosquito population. The tactic has proven effective, but the Control District has still reported 26 cases of West Nile infection in California this year, in addition to two deaths.
In Phoenix, the housing crisis is evident by an abundance of vacant neighborhoods, which extend out of the city in all directions. Neighborhoods sprung up in Phoenix’s surrounding suburbs during the past decade, eating up farmland in small, outlying towns like Buckeye. But it all stopped in 2008, leaving gated communities to exist as ghost towns with roads, streetlights and electrical lines, but no homes. As weeds grow between the cracks of cement sidewalks and tumbleweeds roll over the empty lots, people like Lee Graham, who is 38 years-old, unemployed, and homeless, scavenge the ruins for anything of worth. Since neighborhood development stopped five years ago, what was meant to be an expansive, middle-class neighborhood has turned into a no-mans land. The communities are either half-empty or completely empty, and the empty homes are not for sale. The owners are waiting, somewhere else, for values to rise.
Buckeye, Arizona July 20, 2012 38 yrs old unemployed and homeless, Le Graham scavenges a neighborhood development that stopped 5 years ago when the housing crisis first hit.
In Las Vegas, meanwhile, communities like these are no longer the norm. The city, once infamous for its foreclosures, has very few today as a result of new state legislation. Passed in October, Nevada’s Assembly Bill 284 requires lenders seeking to foreclose to record a notarized affidavit, which would require them to prove their right to exercise the power of sale. The law has slowed banks from initiating foreclosures: according to a spokesman for ForeclosureRadar.com, only 116 notices of default were filed in the first three weeks of October, compared to 3,649 filings in September.
The new law was largely crafted in response to the robo-signing scandal that surfaced last year. Now, servicers of mortgage loans will be fined $5,000 if robo-signing fraud is detected. The new law protects homeowners from improper foreclosures, said Nevada Attorney General Catherine Cortez Masto, and protects the integrity of the homeownership system.
The legislation does, however, have a down side: many homeowners have simply stopped paying their mortgages, because they no longer fear foreclosures. Some have skipped payments for months.
Still, the law has forced banks and lenders in Nevada to reconsider their loan modification practices. According to Margarita Rebollal, the Executive Director at Community Services of Nevada, some banks and lenders are cutting the principle of homes in half to save the mortgage. Rebollal said that she recently saw a home, originally mortgaged with a principle of $324k, refinanced at a principle of $158k by the same lender. Because of the new law, lenders have little choice other than renegotiation.
Modesto, California July 9, 2012 According to RealtyTrac, an online service that markets foreclosed properties, Modesto had the nation’s third-highest home foreclosure rate during the third quarter of 2010, just behind Las Vegas, Nevada, and Cape Coral/Fort Meyers, Florida.
The law has also cut the number of available homes on the market, which means that contractors are working hard to meet any and all new demands for housing. But the markup price on a newly constructed home is extremely low, and many sellers will break even or just barely make a profit.
“Halting foreclosures for legal reasons doesn’t fix the underlying problem — underwater houses and people losing their jobs or other life events that require a sale or walk-away,” states broker Frank Nason of Residential Resources.
Foreclosure filings in Las Vegas’s Clark County topped 6,000 in July, August and September of 2011, but retreated into the 4,000-5,000 range this year, according to ForeclosureRadar. Still, the U.S. west struggles with its housing market. Unemployment has fallen, but families are generally relying on less income. Even today, many cannot cover their monthly mortgage payment.
Lake Eisinore, California July 16, 2012 New homes under construction and homes for sale. As investors and banks hold on to homes, many of those homes sitting vacant.
IF YOU ARE IN FORECLOSURE ASSISTANCE IN YOUR AREA: please – locate a HUD organization in your area that can help.
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?weblistaction=summary
Photographs and Text by: Anthony Suau
Photo Editing: Mark Rykoff
