Custom Search

Sunday, March 04, 2007

Mortgage Lenders Are Going Under Too!

Please click onto the comments for the post.

posted by Bob at Sunday, March 04, 2007

5 Comments:

Blogger Bob said...

Mortgage lenders are going under, too
Officials fear West Side house is just first of many that will complicate default crisis
BY JENNIFER BJORHUS
Pioneer Press

CRAIG BORCK, Pioneer Press
A vacant house at 66 E. Stevens St., St. Paul, is scheduled to be torn down by the city by mid-March.It's bad enough when homeowners and landlords sink, losing houses in foreclosure. For city planners and neighbors alike, derelict empty dwellings are "top of the scale in terms of bad," as one St. Paul official put it.

But what happens when the mortgage lender, too, goes under?

In a ground-level skirmish likely occurring in city halls across the country as subprime mortgage lenders crash and burn, St. Paul city officials and bankrupt ResMae Mortgage Corp. in Brea, Calif., have been wrestling over a foreclosed home that the city has plans to demolish.

Though it's just one house, city officials worry the lender's inaction is a portent of things to come as subprime mortgage lenders struggle with mounting defaults.

After all, ResMae is one of more than 20 subprime lenders that have shut down, cut back or been acquired in recent months as more homeowners default on subprime mortgages and investors enforce buy-back provisions on the loans.

The house, a rental at 66 E. Stevens St. on St. Paul's West Side, was condemned in May and has been sitting empty since. The owner, identified in property records as a Jefyne Bates, of Plymouth, lost the rental home in foreclosure last June. The house, built in 1911, and the $138,000 mortgage went back to ResMae Mortgage in a sheriff's sale. (Bates could not be found.)

Then ResMae Mortgage itself tanked. ResMae Mortgage is a large subprime mortgage lender that made riskier, higher-interest-rate loans to people with blemished credit. The California-based lender declared bankruptcy in February after investment bank Merrill Lynch & Co., a major purchaser of ResMae loans, asked ResMae to repurchase $308 million worth of problematic loans allegedly hit by early payment defaults. ResMae has disputed the buyback.

Nationally, late payments on securitized subprime loans reached nearly 14 percent of total dollar volume in the fourth quarter of 2006, according to research firm First American LoanPerformance, the highest rate since it started keeping records in 1999. For Minnesota, late payments on securitized subprime loans reached a sizable 23 percent, putting it among the worst-performing states in the country, according to First American LoanPerformance records.

As for ResMae, Credit Suisse Group has agreed to buy ResMae's assets, pending bankruptcy approval, and has supposedly taken over its loan servicing.

But apparently not fast enough. And so Wall Street's subprime tremors are now Steve Magner's problem.

Magner runs St. Paul's vacant-building program. He juggles some 900 homes that are officially vacant, meaning they're empty and neighbors have complained to the city about them. A good number are foreclosures. Magner's list has grown from about 800 in August, and from 400 two years ago. The list would be longer, but his staff of three inspectors — he's in the process of adding three more — hasn't been able to catch up with all the complaints.

Magner said that as far as he knows, the house at 66 E. Stevens St. is his first casualty of a fallen subprime mortgage lender. He expects many more such orphans as the shakeout continues, and he said he doesn't know how many other homes ResMae might own in the Twin Cities.

To be sure, even financially sound lenders often do too little to fix and resell rundown homes on his vacant registry, Magner said. Still, having lenders fail can only complicate matters, he said.

"I think it's going to delay all the action on it (the vacant houses)," Magner said.

That's what worries the St. Paul City Council.

"There's going to be more orphans. This is the beginning," said Marcia Moermond, the St. Paul City Council's legislative hearing officer. "I think we have the prospect of more large-scale property abandonment."

According to Magner and Moermond, the city has been negotiating with ResMae Mortgage since last summer to fix 66 E. Stevens St. and get it up to the city's building codes, or risk demolition. The house, which had long ago been cut into a duplex, had become a nuisance with its rotting wood, plumbing problems and broken windows, Moermond said.

ResMae hired a Twin Cities ReMax real estate agent to market it. But after asking for more time to find a buyer, ResMae stopped communicating, Magner said, and missed a Feb. 7 deadline.

ResMae's ReMax agent didn't return phone messages left by the Pioneer Press. Magner said he suspects that ResMae stopped paying her, and so action stopped.

A ResMae representative who spoke with the Pioneer Press confirmed it regained the house after a foreclosure. The company rejected two recent offers on the house, and records indicate that ResMae's bottom line was a $140,000 price tag with no concessions, the representative said. The mortgage loan is still considered active, she said, and was transferred with other loans Feb. 15 to Salt Lake City-based Select Portfolio Servicing Inc. Select Portfolio Servicing is a leading subprime mortgage loan servicer owned by Credit Suisse.

Pioneer Press calls to Select Portfolio Servicing weren't returned.

With no word from ResMae or Credit Suisse, the city had planned to demolish the orphan house by mid-March, Magner said. It's one of about 30 derelict houses the city tears down each year. This is not a case of eminent domain, the controversial practice in which the city acquires property. In this case, the city is simply tearing down the structure "for public safety," Moermond said.

On Friday, the city agreed to delay demolition after the Neighborhood Development Alliance Inc., NEDA, on St. Paul's West Side expressed interest in buying the house. The group doesn't have the $150,000 it estimates it needs to fix the house, but it plans to offer $5,000 and a letter to the lender for a charitable deduction for the balance of the value. It's unclear whether that will succeed.

"At one time it was a beautiful house," said Gail Merriam, NEDA's real estate development manager. "It has three stained-glass windows. It's just been neglected."

Jennifer Bjorhus can be reached at jbjorhus@pioneerpress.com or 651-228-2146.

UNEASY STREET

To read past stories from this occasional series, go to www.twincities.com.

10:17 AM  
Anonymous Anonymous said...

I am surprised Wally (Renovations Inc.) isn't involved, but that could be because Steve Magner don't have enough control on the price tag of that home being that its a mortgage co. and not just the private home owner he can threaten. The house from the photo doesn't appear to be that bad of a home compared to some people having to live under a bridge, it looks like another messed up issue from the wonderful city of St.Paul and their officials.

Nancy

10:26 AM  
Anonymous Anonymous said...

It's companies. It's incomplete and mean something else by saying Mortgage Company's.

I'll assume that you're tired from reading all of the fine print and legalese from your succesful- ur, ongoing lawsuits.

So have the lawyers handed you your lunch yet?

10:52 AM  
Blogger Bob said...

10:52, thank you, I was meaning to change the title earlier and it slipped my mind.

As for the Lawyers. I don't talk to any lawyers. I assume from the information I have already posted here that they are really busy cleaning the City's clock in depositions still.

And those cowardly City Council people are still hiding from depositions. I thought they were proud of their work, why not brag about it in court?

11:09 AM  
Anonymous Anonymous said...

Actually the lawsuits have been quite sucessful from what I hear from someone very close to them. We'll see who get thier lunch handed to them!

3:07 PM  

Post a Comment

<< Home