Arizona foreclosures fall for 3rd month in a row

The number of foreclosure filings reported in Arizona fell for the third month in a row in November — even as the mortgage crunch continued to squeeze borrowers.

A total of 5,767 filings — including default notices, auction sale notices and bank repossessions — were recorded statewide last month, a report by research firm RealtyTrac shows. That’s a 9 percent dip from October and 35 percent fall from August.

Foreclosures spiked in August because investors who hoped to make millions of dollars by flipping houses found themselves in deep financial trouble, said Stan Lund, president of the Arizona Association of Mortgage Brokers.

“Investors flooded the market in 2005 and bought everything in sight,” Lund said.

Many bought multiple homes with two-year adjustable mortgages, he said. Those loans are now maturing, and they owe more than the homes are worth.

“They couldn’t sell them,” he said. “They couldn’t rent them out. So they just gave them back to the banks.”

Lund added that he expects foreclosures to stabilize next year now that the investors are gone and lenders are more willing to work with borrowers.

“I don’t think the (next) wave is going to be as big or as bad,” he said.

But, experts say, the foreclosure threat is far from over for many borrowers facing interest rate resets in 2008.

Monthly payments can jump hundreds of dollars when introductory rates end. And refinancing isn’t an option for borrowers who owe more than their homes are worth.

Arizona’s foreclosure filings in November marked a 90 percent increase from a year ago, according to RealtyTrac.

Nationwide, filings were up nearly 68 percent from last year but were down 10 percent from October — the first double-digit monthly decline since April 2006. Arizona ranked No. 8 nationally for foreclosure rates.

Scottsdale real estate agent Frank Dickens said he also expects fewer foreclosures next year. Lenders will be more willing to work with borrowers because they don’t want big home inventories, Dickens said.

But people need to watch out for fraud schemes, he said.

“The next wave that people are really going to have to be careful of is the opportunists out there saying we can cure all your problems,” he said.

Lenders are also accepting sale prices for homes that fall short of what borrowers owe, known as a short sale, said Kathy Rhubottom, vice president of O’Dowd & Associates Mortgage. There’s competition for short sales despite the slow market, Rhubottom said.

“I think the lenders are kind of probably overwhelmed,” she said.