More homeowners face losing house

South Sound homeowners are falling behind in their mortgage payments at a faster rate than last year, but the problem is not nearly as serious as it is in other parts of the nation.

“We’re bucking the trends nationally,” said Dennis Rose, president of the Washington Association of Realtors. “The Pacific Northwest has been an island unto itself. The economy is good.”

Regardless, records maintained by the Thurston County Auditor’s Office show that some county residents are feeling the pinch of keeping up with their mortgage payments.

• So far this year — through Wednesday of last week — 438 mortgage holders in Thurston County had been notified that their houses could be put up for auction because of past-due monthly payments. That’s up about 53 percent from the same point in 2006, when there were 286 cases.

• The 438 notices of trustee sales issued through Wednesday exceeded the 435 issued in the county for all of 2006. The notices make the foreclosure process official and give homeowners 90 days to make back payments, including property taxes and fees, to save the home from going to auction.

Still, statewide data from the Mortgage Bankers Association show that homeowners in Washington have done far better than those nationwide in keeping up with their mortgage payments. The national association does not keep foreclosure records by county.

The mortgage bankers’ data show that:

• Washington ranked 47th nationally in delinquency rates as a percentage of residential properties at the end of June, one of the lowest rates in the country.

• Mortgages past due in the state represented 2.62 percent of all mortgages, compared with 5.06 percent for the nation at the end of June.

In recent months, homeowners increasingly have fallen behind on payments as interest rates on adjustable-rate mortgages rose and the housing market slowed, making it more difficult to sell their homes.

As a result, lenders have eliminated the liberal terms of a few years ago, when buyers could qualify for a home loan with no money down.

The housing boom of two years ago was fueled in part by “exotic” financing arrangements that lured financially marginal buyers with no money down or low-interest rates that would be adjusted upward after a few years.

“Some folks who maybe shouldn’t have been buying were buying,” said Blake Knoblauch of Greene Realty Group.

“You might have started at a really low rate, say 2 percent, and after the first adjustment, it could go to 5 percent,” said Dan Yerrington, president and chief executive of South Sound Bank. “Suddenly, you’re underwater. You had stars in your eyes because you had a nice house you never thought you could afford, and you were right.”

Rising Puget Sound area home prices are another reason more owners are overextended financially, real-estate agents said.

Median Thurston County home prices have climbed nearly 37 percent from $199,000 at the beginning of 2005 to $271,990 last month, according to the Olympic Multiple Listing Service.

Rising home prices force buyers to use more of their incomes to pay their mortgages, said Realtor Hugh Stewart, an owner of the Bellevue company foreclosuregroup.com, which tracks mortgage delinquencies. That trend, coupled with the more liberal lending practices of a few years ago, have combined to increase delinquencies, he said.

“Back in the day, you needed to have three months of payments in the bank to get a loan,” Stewart said. “Today, if you don’t have that and you chip a tooth, all of a sudden you’re taking money from your mortgage payment to get it fixed.”

Regardless, the state and South Sound stack up well against the nation when it comes to delinquencies and foreclosures.

“As a percentage of households, foreclosures are minuscule,” said Kathy Gersch, another owner of foreclosuregroup.com. The 438 notices of trustee sales this year, for example, are about 0.5 percent of the county’s 89,061 households recorded in the 2005 U.S. Census.

“The sky is not falling in Thurston County,” Stewart said. “Our situation wouldn’t make anybody’s national news if the rest of the country were following Thurston County.”

South Sound has escaped a worse foreclosure problem because of its relatively healthy economy, said Thurston First Bank president and chief executive officer Mike Edwards, the former state banking commissioner.

He cited a Forbes magazine survey in April that ranked Olympia as the nation’s 10th-best business climate because of strong growth in jobs and population. “For the houses we get built, we have underlying corresponding jobs,” Edwards said. “Most of our buyers are in affordable positions, and we are less likely to have jobs withdrawn from our market.”

Thurston County’s unemployment rate in August was 4.3 percent, better than the statewide 4.6 percent.

The healthy job growth helps keep foreclosure rates in South Sound under control, Rose said. Often homes get sold because of high demand before a bank must take them back after an auction.

“Our low foreclosure numbers reflect the ability to sell homes,” Rose said.

The homes that banks must repossess often get sold to investors who either rent them or remodel them for resale at a profit, Knoblauch said.

Jim Szymanski is business editor for The Olympian. He can be reached at 360-357-0748 or jszymanski@theolympian.com.