Housing problem expands in state

First in an occasional series

The number of foreclosures in Virginia doubled during the first 11 months of 2008, compared with all of 2007.

Data analyzed by the Richmond Times-Dispatch show 27,938 foreclosures statewide in the 2008 period for all property types, including single-family homes, businesses, condominiums and lots, an increase of 99.2 percent. In 2007 in Virginia, the total was 14,022.

The Richmond area was hit with 2,248 foreclosures last year through November, an increase of 84.1 percent.

Nationally, an estimated 2.2 million homes were in foreclosure in 2008.

Just as many homes, if not more, are at risk this year, and industry experts say the problem isn't likely to subside until 2010.

Residential foreclosures cut across all income levels and house styles and prices: A foreclosure is a boarded-up house for $26,900 near Armstrong High School in Richmond. Or it's a new $1.9 million mansion in the Rivergate neighborhood in eastern Goochland County.

Both were foreclosed and repossessed last year by lenders.

The city of Richmond, with 599 foreclosures in the first 11 months of 2008, recorded the most in the region of 20 localities, followed by Chesterfield County with 466 foreclosures and Henrico County with 428, according to Times-Dispatch data.

The Highland Park area of North Richmond and East End neighborhoods were the hardest hit, each with nearly 140 foreclosures in the past two years.

Some homeowners in nearby Bellevue, populated with large, old homes, also lost their homes: seven in Bellevue North and three in Bellevue South.

The area near the Virginia Museum of Fine Arts west of the Boulevard was not immune, either. Four houses were foreclosed there. Eleven were foreclosed in the Fan District.

In Chesterfield, a high concentration was in a low-income area just south of the city limits.

But also affected was an area in the state Route 288 corridor south of the Powhite Parkway with houses a few years old that sold for $300,000 to $400,000.

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Virginia has fared better than most states in its mortgage delinquency and foreclosure rates. Still, areas such as Northern Virginia are among the nation's hardest hit.

Prince William County -- with the highest number in the state -- recorded 7,672 foreclosures through November, more than three times as many as in the Richmond area.

Loudoun County saw nearly as many foreclosures as the Richmond region, with a total of 2,073.

Also stung are more rural areas such as Caroline County.

From January through November, 217 properties were foreclosed in the county, up from 102 for all of 2007.

Sharon Carter, Caroline's commissioner of the revenue, said most foreclosures there are in new subdivisions along the Interstate 95 corridor.

"It's not one builder or any one reason," Carter said.

Nor is it second homes. Most second homes are in older neighborhoods, which are stable, Carter said.

The county is facing the same economic downturn as the rest of the country, she said.

The Lake Land'or subdivision in Caroline -- a gated community with hundreds of homes on nearly 2,000 acres -- had 65 foreclosures in the past two years, the most in the county. Lake Caroline subdivision followed with 27 foreclosures.

Jennifer Rathbun, a real estate agent who lives in Lake Land'or, said the community is made up mostly of families. Some may have bought bigger homes than they should have, she said.

Caroline is a growing area between Richmond and Fredericksburg. Builders may have been overly optimistic in assessing how fast the area would grow, housing experts say.

Other rural areas of the Richmond region saw large percentage increases as well.

In King William County, for example, the number of foreclosures rose to 29 through November 2008, up from 10 in all of 2007 -- a 2.9-fold increase.

New Kent County saw a 4.2-fold jump with a total of 21 foreclosures in 2008.

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"Foreclosures are not all low-income -- that is the misconception," said Brian Liggan, co-owner of Virginia Capital Realty in Richmond, which deals exclusively in selling repossessed properties for lenders.

"We have them all over the West End," Liggan said. His company has 122 houses for sale on the Central Virginia Regional Multiple Listing Service.

Lenders aggressively lower prices if properties don't sell within designated time periods, Liggan said. "It's a price-driven market. Everything sells once the price gets right."

A historic property at 1421 Park Ave. in Richmond's Fan District, assessed at $525,200, was listed in June at the repossessed price of $499,900. The price was dropped to $439,900, then again to $424,900. A contract is pending.

Although some people get bargains, most houses are selling at market value, which was bloated a year or two ago, Liggan said.

"The market was too hot, too fast, too everything. It just never should have happened."

His company was on track last week to close 600 repossessions in 2008, an all-time high, said Liggan, who doubled his staff to 22 people to handle the closings.

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In general, areas that experienced sharp price spikes have been hit the hardest by foreclosures, according to a Federal Reserve Bank of Richmond report, "MarketWise: Riding the Foreclosure Wave."

The biggest price jumps, hence the most foreclosures in Virginia, are in the northern part of the state.

Yet even areas with relatively low foreclosure problems such as the Richmond region have pockets of housing with a high concentration of foreclosures, according to the report.

In Henrico, foreclosures increased more than 1.8 times more in the first 11 months of 2008 than in all of 2007. The county recorded 428 foreclosures in 2008.

Concentrations in the eastern part of the county included the Highland Springs area, the Glenwood Lakes subdivision off Creighton Road and the Four Mile Run neighborhood near Interstate 295 and state Route 5.

Richmond neighborhoods with some of the highest numbers are Bellemeade North near Jefferson-Davis Highway in South Richmond, Chestnut Heights just north of downtown, Oakwood east of Church Hill and Providence Park south of East Laburnum Avenue.

James D. Hester, Richmond assessor, said foreclosures are not new. However, the problem was masked by a good housing market, allowing people who got into financial trouble to quickly sell their houses.

When the market turned, borrowers were unable to bail out from their homes, leading to a rash of foreclosures, Hester said.

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Areas with large numbers of foreclosures in general have the most subprime loans, according to the Fed report.

"The highest percentage of homes in foreclosures with subprime mortgages are occurring in the Fan and inner-ring neighborhoods on the South Side across the Manchester Bridge," said Angelyque Campbell, a spokeswoman for the Richmond Fed.

Older, urban neighborhoods such as Church Hill, Barton Heights, Ginter Park and Highland Park have the highest percentage of subprime mortgages more than 90 days late, Campbell said, so they are likely to go into foreclosure.

In 2000, about 750,000 subprime mortgages were made in the U.S., according to the Fed. In 2005, the number increased to 2.2 million.

"Subprime loans are an important part of the foreclosure wave, because even though they comprise only 12 percent of all mortgages, they make up over half of all foreclosures," the Fed report noted.

What's more, most people facing foreclosures have been in their houses less than three years, according to data from Housing Opportunities Made Equal of Virginia Inc.

"Many couldn't afford these loans in the first place," said Connie Chamberlin, president and chief executive officer of HOME.

"This problem has been coming for a long time," she said.

"We know it has hit certain communities. But it is clearly widespread, affecting people of all income ranges in all parts of the community."

Foreclosures are the hidden tragedy, she said. People who lose their houses go into emotional hiding, she said. "The impact on the family is unbelievably hard. They don't want their neighbors to know what happened to them."

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Although lenders have clamped down on lending requirements, virtually eliminating risky loans, the bad loans are still making their way through the system.

"The problem is still building," Chamberlin said.

Liggan, with Virginia Capital Realty, said foreclosure activity slowed in December because some lenders imposed voluntary moratoriums to allow troubled borrowers to work out loan modifications.

"We are told activity will pick up considerably," he said. "We expect a new wave in March, April and May."

Jay Brinkmann, chief economist for the Mortgage Bankers Association, said foreclosures were expected to subside this year, but the recession kicked in.

"The effects of job losses and general economic deterioration make the 2009 outlook worse," he said, "particularly if mortgage problems become more widespread."
Contact Carol Hazard at (804) 775-8023 or .

Special Projects Editor Randy Jessee contributed to this report.