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County processed more than 4,000 filings for foreclosures

Monday, December 01, 2003

By Jeffrey Cohan, Pittsburgh Post-Gazette

An Allegheny County record will be broken this morning, but it's no cause for celebration.

The 9 a.m. sheriff's sale will culminate the busiest year on record for mortgage foreclosures and tax-lien sales. For the first time ever, the sheriff's office has processed more than 4,000 filings from creditors who want to seize real estate from debtors.

Already, creditors have filed more than 400 properties for the January sale, setting a pace that could push the county above the 5,000 mark in 2004.

"Where is it going to stop?" said Marty Madigan, who has the grim task of managing the monthly auctions of property for the sheriff's office.

The number of foreclosures and tax lien sales have risen every year since 1997, producing figures that are far worse than anything the county saw during the era of steel mill closures. In fact, this year's record of 4,337 is more than three times the total from any year in the 1980s.

If it's any consolation, the county's numbers reflect a national trend. When the percentage of residential mortgages in foreclosure reached 1.2 percent this year, it was the highest mark recorded in the United States since the Mortgage Bankers Association of America started keeping track in 1972.

Determining the cause of the upswing in foreclosures is difficult.

According to Madigan, divorce is the most common cause of foreclosure, since many homeowners need two incomes to make their mortgage payments. But divorce doesn't explain why the county surpassed the 4,000 mark for the first time this year.

It is more likely that the culprits include sub-prime lending, high unemployment and tax increases.

Sub-prime lenders offer mortgages to people with credit problems, but at higher-than-average interest rates.

Consumer advocates use the term "predatory lenders" to describe mortgage companies that combine sub-prime loans with unscrupulous tactics, such as keeping homeowners uninformed about how much they owe and when payment is due and rushing to foreclose instead of granting forebearance.

Manchester homeowner Sherry Speaks, a victim of exactly those tactics, saw her house listed for sheriff's sale three times this year. Each time, she managed to escape from foreclosure by filing for bankruptcy.

"It's been a nightmare," said Speaks, 43.

Shortly after she bought her house in 1999, Speaks' loan was sold to Utah-based Fairbanks Capital Corp., the nation's largest servicer of sub-prime mortgages. The company earlier this month agreed to a $40 million settlement after the Federal Trade Commission charged that the firm had engaged in variety of deceptive and illegal practices.

"I was so angry and so mad at Fairbanks, I was not going to let them win," Speaks said.

Housing advocates in Allegheny County fear that predatory lenders, such as Fairbanks, are driving up the number of foreclosures.

"There has been an increase in predatory lending in the area and predatory lending leads to an increase in sheriff's sales," said LouAnn Ross, executive director of Downtown-based Neighborhood Housing Services.

In the world of sub-prime mortgages, however, the borrower often bears some or all of the blame for a foreclosure.

"A lot of people think they can borrow their way out of debt," said Linda Harvan, mortgage coordinator for Action Housing Inc., another nonprofit group.

"They just aren't financially savvy," she said. "At some point, it just blows up in their faces."

Generally speaking, foreclosures are relatively few in number when the housing market is strong. In Allegheny County, the housing market has been stable, at worst, this year. But that has been offset by an increase in unemployment, another precursor of foreclosures.

The county's unemployment rate in September stood at 4.4 percent, better than the 4.8 percent rate of September 2002 but higher than the rates for the Septembers in 1999, 2000 and 2001.

"The economy is a little rough right now, as everyone knows," Ross said.

Property tax increases might also figure into the surge in foreclosures.

In many cases, the countywide reassessments in 2001 and 2002 overvalued homes in poor neighborhoods, leading to tax increases for those who could least afford them.

"A lot of people are losing their homes because of the whole tax situation," Harvan said.

Homeowners can lose their houses because of liens for unpaid taxes. Of the 4,377 sheriff's sales filed this year, more than 1,000 have been tax lien sales rather than foreclosures.

The county and city of Pittsburgh have sold such liens to private firms, which have engaged in aggressive collection efforts and have obtained numerous properties through sheriff's sales.

Various programs are in place, though, to help the record number of people who are in danger of losing their homes.

Last month, a coalition of 25 local neighborhood organizations, mortgage underwriter Fannie Mae and three local banks rolled out a $1 million program to refinance sub-prime loans in the Pittsburgh area at lower rates.

In addition, the state offers assistance to beleaguered borrowers through the Homeowners' Emergency Mortgage Assistance Program, which was created in 1983 in response to a spate of steel mill closures. Through the program, homeowners can receive state loans to make delinquent mortgage payments.

But despite these programs and others like them, there will be plenty of activity this morning in the Gold Room of the Allegheny County Courthouse, where a record-breaking sheriff's sale will take place.

Jeffrey Cohan can be reached at jcohan@post-gazette.com or 412-263-3573.

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