Vermont Foreclosure Jump 23%

Vermont Foreclosure & Real Estate News

By Bruce Edwards Staff Writer

Vermont recorded 1,209 foreclosures in 2007, a jump of nearly 23 percent from the previous year when 937 foreclosures were recorded, according to state and local data.

Chittenden County, the state's most populous county, had 179 foreclosures last year, the highest in the state followed by Rutland County with 163, according to the Department of Banking, Insurance, Securities and Health Care Administration.

Foreclosure data includes both residential and commercial property.

The nation's continuing home mortgage crisis began with defaults on subprime mortgages — loans made to credit-challenged borrowers. While Vermont avoided the subprime debacle, foreclosures started to increase in 2006 when there were 937 foreclosures.

BISHCA compiled data for 2007. Foreclosure data for 2006 was collected by the Court Administrators Office, which receives data from all counties except Chittenden and Franklin counties. For 2006, BISHCA collected data for Chittenden County. Upon request, Franklin Superior Court provided data for this article.

Despite the jump in foreclosures, Vermont continues to have one of the lowest foreclosure rates in the country.

"Overall our foreclosures were still very low compared to national trends but that probably also relates to that we in Vermont actually ranked first as far as our share of prime loans," said Diane Little, executive director of the Vermont Mortgage Bankers Association.

Little said what that means is that the state had a higher percentage of prime loans that are made to higher credit standards.

She said while foreclosures have yet to hit bottom the state isn't likely to experience any "significant increases," especially with lower interest rates giving home owners the opportunity to refinance.

At the end of the third quarter last year, Vermont had just 1 percent of the 68,210 mortgages being serviced in foreclosure, according to the most recent report of the Washington-based Mortgage Bankers Association. That's below the national average of 1.69 percent.

From his perspective, Bethel bankruptcy lawyer Ray Obuchowski said the rise in foreclosures has its roots in the economy.

"You can see it just in the cost of living," Obuchowski said. "I mean all you have to do is look out your window to the gas pump."

He said for many Vermonters there isn't enough income to meet expenses.

For those who took out home equity loans to pay off their debts, Obuchowski said they now find themselves unable to make loan payments, especially when those home equity loans came with adjustable interest rates.

Someone filing a Chapter 13 bankruptcy can restructure their past debts, including past due mortgage payments, over a three to five year period. Obuchowski added the caveat that the debtor must continue to keep current with their mortgage payments going forward.

He also said the bankruptcy court has no authority to adjust the interest rate or otherwise write down or modify the terms of the existing mortgage.

Burlington lawyer Josh Lobe knows all about foreclosures from the other side. Lobe, who represents out-of-state banks and mortgage lenders in foreclosure proceedings, said the primary culprit driving foreclosures is the real estate market and declining property values.

"I think it's a function of a soft real estate market," Lobe said. "People can't bail themselves out with home equity and home equity loans or a sale of the property as long as the real state market is going down rather than up."

Add to that, he said, are the usual factors that lead to financial stress and foreclosure including illness, divorce and poor money management. "I think may be that hasn't changed so much but what has changed is the real estate market has gone from going up to going down," Lobe said.

Lobe also doesn't see the number of foreclosures abating until the real estate market turns around.

The caseload in his office has gone up 36 percent in each of the past two years and he expects a similar increase this year.

Lobe offered this bit of advice for homeowners who fall behind on their mortgage payments: Contact the mortgage lender before it's too late.

"They all have workout departments and they're all willing to talk to you," he said. "The bank wants to work out your loan. They don't want to take your house."

Obuchowski, however, said based on his clients' experience mortgage companies aren't always that willing to help out those who have fallen behind.

"They try to work it out with their mortgage company and either get no response or get told they've got to pay the whole sum in an outrageous one lump sum and they can't do it," he said.



2007 and 2006 foreclosures county-by-county:

Addison – 58, 49

Bennington – 65, 54

Caledonia – 50, 42

Chittenden – 179,158

Essex – 22, 15

Franklin – 132, 80 *

Grand Isle – 14, 14

Lamoille – 61, 59

Orange – 64, 40

Orleans – 46, 37

Rutland – 163, 114

Washington – 113, 78

Windham – 85, 87

Windsor – 157, 110 *Data for 2006 provided by Franklin Superior Court.

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