Financial distress behind continued foreclosure rise

by Jordan Green

Nathaniel Gibson stood in the street conversing with a friend as dusk crept over their south Greensboro neighborhood. He gestured emphatically as he retreated across Bear Creek Road to his home and pleaded for empathy.

“Pray for me,” he said. “I might go off.”

“Don’t go off,” the neighbor urged him.

Gibson, 48, faces eviction from the house he inherited from his uncle less than a year ago. He suffered a stroke and was hospitalized for five days in January. Faced with mounting medical bills, he found himself behind on mortgage payments and faced foreclosure. To salvage the situation he sold the house to a mortgage specialist with the agreement that he could stay there, pay rent and have the option of buying back his home within two years. Formerly a floor technology manager with Rand L Cleaning Services, Gibson has been out of work since Sept. 19.

He fell behind in his rent payments and his lawyer has recently warned him that he could be thrown out of the house this month. What would happen to Gibson after that is hard for him to imagine.

“I can’t sleep at night from worrying,” he said. “I suffer from depression. I’m angry and upset. Wouldn’t you be upset if you were in my place?”

Gibson holds the dubious honor of standing at the vanguard of a growing phenomenon of dislocation in Guilford County and other urban areas of North Carolina where home foreclosures have seen a steady increases. Buyers specializing in purchasing houses for resale from homeowners facing financial difficulties note the recent surge in foreclosures, and placards fastened to telephone poles around Greensboro advertising, “We buy houses; Fast cash!” attest to the healthy market for distressed real estate. Assistant Clerk of Court Wanda Locklear, who presides over most of the foreclosure hearings in the county, recently confirmed that foreclosure actions remain on the rise.

As reported by YES! Weekly in September, foreclosure claims filed in Guilford County Court more than doubled from 1998 to 2005, reaching a record-breaking 2,764 in the last year. That number is likely to be topped again by the end of 2006. Two thousand, four hundred and forty-five foreclosure claims had been filed as of Oct. 27 – a rate of 13 for every day the court was open for business. If the current pace continues, about 2,975 foreclosure cases will be filed in the county by the end of the year.

A review of special proceedings cases showed that at least nine foreclosure claims were filed on Nov. 3, 23 on Nov. 2 and 12 on Oct. 31. Homeowners whose mortgages went into default were scattered throughout Greensboro and High Point. Some of the foreclosures struck in modest townhouse developments near the bustling shopping areas of West Wendover Avenue, and others targeted properties tucked away in well-kept exclusive communities such as one across the highway from the Cardinal Country Club northwest of Greensboro. Few of those facing foreclosures returned phone calls for this story; two declined to comment and asked that their names not be printed, one citing the potential damage to his reputation as a businessman.

Branch Banking & Trust Co. of Winston-Salem brought the largest number of foreclosure claims for the three-day period reviewed by YES! Weekly, followed by San Francisco-based Wells Fargo Bank, Minneapolis-based US Bank and JP Morgan Chase Bank.

The uptick of home foreclosures has put banks with a stake in mortgage lending in an awkward spot.

“When a lender like Chase makes the loan our preference is to have the loan repaid,” said Tom Kelly, a Chicago-based spokesman for JP Morgan Chase. “Both the borrower and lender lose when a home is foreclosed. You have a number of months where you’re not getting paid, you have the cost of legal fees, you have to hire a property broker. Our goal and our ultimate preference is that we want people to pay us back. If they can’t afford the house that they’ve got then foreclosure is sometimes the outcome. It’s not fun to deal with somebody that can’t make a payment.”

Kelly said mortgage delinquencies and foreclosures are up across the nation. Two years ago, interest rates were at an all-time low – 2004 was the only year since 1998 that the number of foreclosure claims dropped in Guilford County – making it an attractive time to purchase a first home or refinance an old one.

“It could be that people have adjustable rate mortgages and those interest rates have adjusted up, and the borrower may not be able to afford them anymore,” Kelly said.

Some recent economic indicators have painted a heartening picture of the national economy – a development the Bush administration trumpeted on Nov. 3 in a futile attempt to shore up support for Republican congressional candidates. The White House announced that 92,000 jobs were added across the nation in October. Real wages reportedly increased 2.4 percent over the past 12 months, and the economy as a whole grew 2.9 percent over roughly the same period. Despite the good news, the growing number of home foreclosures tells a contrary story of financial distress in households covering a wide span of income brackets.

For Gibson, health problems and limited literacy may have conspired to wrest the house he inherited from his uncle from his possession. When John Henry Gibson died of prostate cancer at the age of 77 in June 2005, he bequeathed a dollar to each of his seven children, and the rest of his property to his nephew.

Nathaniel Gibson’s good fortune was not destined to last. He sold the house in February and by June had found himself on the receiving end of a summary ejectment complaint from his new landlord for failure to pay his rent. Gibson has filed a lawsuit of his own in an effort to hang on to the house. A Guilford County superior court judge filed a preliminary injunction stipulating that the new owner cannot draw additional funds from a line of credit established by taking out a second mortgage on the house, and the new owner cannot default on payments. Meanwhile, the landlord has acknowledged in writing receiving rent payments for only five months since February and Gibson’s tenancy remains in jeopardy until he reconciles the difference.

Court documents state that Gibson has “limited mental ability,” that he is “not fully able to read and write” and “suffers from depression and other mental disorders.” On one occasion he expressed the belief that the superior court judge and his own lawyer were conspiring to take away his home.

Losing a house is often the end of the line, said bank spokesman Kelly, and rarely the result of careless neglect.

“Often people go into foreclosure because they’ve lost a job, they’ve gotten a divorce – their income is affected dramatically,” he said. “Somebody may have taken out a first mortgage and a second mortgage. For people to lose their house generally that means that their financial situation is tough. You might skip the braces, but the house payment is generally the first payment you make. People usually do whatever they can to make their house payment.”

On Nov. 9 Gibson was asking a visitor for a $10 emergency grant and inquiring about the possibility of food aid.

“I ain’t got nowhere to go,” he said. “I ain’t working. I can’t borrow no more money.”

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