Foreclosures in Chattanooga

This article appeared in yesterday's Chattanooga Times Free Press.

Area home foreclosures rise in summer

Tuesday, November 3, 2009
By: Dave Flessner

Home foreclosures continued to rise this summer in the Chattanooga area, according to a new report.

But RealtyTrac Inc., the online real estate reporting company, estimates the number of local default notices and bank repossessions in the third quarter of 2009 was still only about one-half the national rate.

One of every 235 homes in the Chattanooga metropolitan area entered the foreclosure process from July through September, RealtyTrac estimates.

In Georgia, one of every 119 homes had a loan default or bank repossession notice in the July-September period, RealtyTrac reported, but the Peach State ranked seventh among the states in the number of homes entering the foreclosure process.

The number of foreclosures in metro Chattanooga during the third quarter — 971 — was up by more than 12 percent from a year ago. But Chattanooga’s foreclosure rate was still in the bottom half of the metro areas included in the RealtyTrac study and less than one-fifth the rate of foreclosures among the top 10 foreclosure cities in California, Nevada and Florida.

"We never had that big upswing in prices that many other areas did in the past, and that turned out to be a blessing for us in Chattanooga," said Nickie Schwartzkopf, a broker and Realtor with RE/MAX Properties and president of the Chattanooga Association of Realtors. "Home buyers here didn’t get as many of the loans that were questionable."

The 10 worst cities for foreclosures this summer were all in California, Florida and Nevada.

As the jobless rate nears 10 percent in metro Chattanooga, the 2-year-old downturn is likely to push the number of local foreclosures still higher, Mrs. Schwartzkopf said.

"We have not bottomed out yet," she said. "Over the past year, some of the lenders held back on some of the foreclosures and allowed people to try to restructure their loans. But now it’s coming to the point for a lot of people that it is going to involve more foreclosures."

Jill McLean, a BB&T loan officer and president of the Chattanooga Mortgage Bankers Association, said there are currently more than 400 homes in the city of Chattanooga awaiting foreclosure.

"We’re still in an unprecedented time, but I hope we’ve hit — or soon will hit — the bottom," said Ms. McLean, who has worked as a mortgage lender for the past two decades.

Randy Durham, a broker for Keller Williams Realty and president-elect of the Chattanooga Association of Realtors, said foreclosures in the area are "as high as I’ve ever seen it."

"That does tend to hurt the average home seller because of the competition with these foreclosed homes on the market," he said.

Last month, 7 percent of the homes in the Realtors’ Multiple Listing Service were in foreclosure and another 1.7 percent were so-called "short sales," where those facing foreclosure agreed to a quick sale at below what’s owed on the mortgage to avoid a foreclosure, Mr. Durham said.

RealtyTrac Chief Executive James Saccacio said substandard mortgages made to credit-challenged buyers created much of the initial flurry of foreclosures. But the weakening economy and adjustable interest rates on some mortgages — rates that made the mortgage payments skyrocket in some cases — are combining to now generate most of the property foreclosures, he said.

"While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option Adjustable Rate Mortgages are spreading the foreclosure flood to more metro areas in 2009," he said.