Upside down: Foreclosures cut a wide path of destruction across the Piedmont Triad

by Jordan Green


Neglected properties across the Triad, including in the Colfax area, the Kernersville area and Greensboro´s Lindley Park neighborhood that sit on the market after foreclosure are sometimes blighted by fallen tree limbs, overgrown grass, vandalized mailboxes and broken glass. (photos by Jordan Green)

Room U-19 of the Guilford County Courthouse where Assistant Clerk Terri Lawson hears foreclosure cases three times a week might be the most somber in the building.

Unlike the new courtrooms on the first floor where the lion’s share of misdemeanors are funneled, or the chambers upstairs where small claims and family cases are heard, even the superior court rooms where assault cases are appealed, there’s no murmur of chatter in U-19. During the intervals between testimonies when Lawson reviews case files, there might be a stray cough or the hum of air conditioning. Everyone — homeowners contending with the imminent loss of a house, landlords who can no longer keep up with payments, lawyers acting on behalf of the financial entities that own the debt and, sometimes, a lawyer for the debtor — is here for the same grim business.

The foreclosure hearing room is heavy with a suffocating air of inevitability, if not finality.

Last Tuesday, Ken Mann approached the bench after Lawson called his name. Dressed in a black sport jacket with silver hair, he spoke in a quiet, matter-of-fact voice, his shoulder slumped slightly, as if resigned to his fate. He took the oath and answered Lawson’s questions: Yes, he and his wife currently resided at the property and, yes, it was their primary residence.

“It’s been a nightmare,” Mann said. “This has been going on for two years.”

He told Lawson that he had been making monthly trial payments at a reduced amount, but Chase Home Finance had sent the last of six payments back because a loan modification agreement had expired. Mann explained that he hadn’t known that he had been required to reapply for the loan modification. Now, he was in the process of requesting another loan modification to get his monthly payments down to an amount he could afford and he was looking to buy some time before the court pulls the trigger on the sale of his house. To add to his troubles, Mann explained that he has paid a lawyer in Los Angeles $3,000 to negotiate with the loan company on his behalf.

Lawson told Mann he was likely being defrauded, that the lawyer was probably not legally allowed to do business in North Carolina, and that he should file a report with the Justice Department.

No one was there to represent the loan company. The clerk told Ken Mann she was extending the sale date by one month, to May 26, and she wished him good luck.

‘Something we thought we would never have to go through’

More than two years into the great recession, foreclosures continue to cut a wide path of destruction through the Piedmont Triad region of North Carolina, like many other areas of the United States. Like a slow-motion tsunami, foreclosures uproot and tear apart families, undermine the stability of communities, drain away millions of dollars of wealth and strain public budgets.

The rolling foreclosure crisis hasn’t dis criminated in Forsyth and Guilford counties.

Houses going under because homeowners can’t keep up with loan payments aren’t limited to a small number of foreclosure neighborhoods or a certain type of neighborhood.

They’re everywhere: New subdivisions still under construction near Brown Summit and Whitsett; long distressed, inner-city communities like East Winston and Ole Asheboro; and old-money enclaves like Country Club in Winston-Salem. The crisis has touched exclusive white communities and highly segregated black neighborhoods; areas that are predominantly made up of homeowners and those that are saturated with renters. Median household incomes in Census tracts hit by foreclosures this year range from $12,962 to $97,500. Almost half involve loans that originated in the latter half of the last decade.

There’s a handsome brick house with dormer windows, a foreclosure, sitting on the market in Greensboro’s Lindley Park neighborhood with glass broken out of the storm door. Its upstairs floor is buckled because of flooding from the master bathroom, and a stagnant pool of water in the backyard is draining into the basement.

A real-estate listing for a ranch house on Murrayhill Road tells its own story. With a tax value of $110,300, it’s listing for $80,000. The description reads, “This home is ideal for entertaining with outdoor living and large den with fireplace. Third BR has been converted to dining room. Covered porch and multi-level deck.

Condition of above-ground pool is unknown, but was reportedly used last year.”

Heart-rending scenes can be witnessed in the foreclosure hearing room at the Guilford County Courthouse week after week.

In late March, Richard and Cheryl Champion held twin boys on their laps at the defendants’ table as Lawson told them she had no choice but to sign the order to sell their house in the Colony Park neighborhood of Jamestown. Court records indicate the couple made their last monthly payment of $636 in March 2010 on a $106,229 loan originated in 2001. They had traveled all the way from West Virginia for the hearing.

Lawson told them she was sorry they came so far just to find out that their house was going to be put on the auction block.

“It’s something I hate that happened,” Richard Champion responded. “We’re just trying to go about it the best way we can.”

He asked Lawson what he should do with his key. She said in response that the house would probably be padlocked, but he could relinquish it to the attorney for the substitute trustee if he wanted. Champion turned to the lawyer, who wore an expression of profound discomfort, and dropped the key in his hand.

Outside the hearing room the couple pulled the twins’ jackets on and prepared for the drive back to West Virginia.

“I lost my job,” a stunned Richard Champion told a reporter. “That’s all I can say.”

´I´ve already been destroyed once. this would be the final nail in the coffin. it would probably destroy the marriage. we´ve been on pins and needles for the last four years with all this happening.´

Later during the same hearing, Lawson heard Deborah and Jay Perper’s case. They said they had submitted an application for a loan modification, but as Deborah Perper put it, “We’ve never been accepted nor denied.”

“This has been nothing but a major disaster,” Jay Perper said. “It’s been one of the worst nightmares that I’ve been through.”

They said their interactions with the lender after they fell behind on payments have been plagued by misinformation and lack of cooperation.

Lawson has heard so many testimonials from borrowers charging lenders with acting in bad faith that she has a stock speech. And she would tell Mann the same thing when he came before her the following week.

“I don’t think the banks realized how many foreclosures were going to come down the pike,” Lawson said. “It’s not just sub-prime. It’s job loss. It’s the whole economy. They’re short-staffed like everybody else.”

Lawson granted the Perpers a continuance, but said if they had to come back she would likely have to approve the order of sale.

“It’s just been embarrassing to me,” Deborah Perper told Lawson. “This is something we never thought we would have to go through.”


The average loss in property wealth when a house is foreclosed in Guilford and Forsyth counties, as calculated through a sample of 48 cases reviewed by YES! Weekly, is about $30,000, or 34 cents on the dollar.


There are people who lost their homes because they were steered into mortgages with exploding interest rates that they never could have afforded in the first place. There are elderly people who end up in foreclosure because the housing market is depressed and they can’t find buyers. Ken Mann and his wife, Melinda, don’t fit in either category.

For Ken Mann, everything began to unravel when he lost his business in the middle of the last decade.

He went into business in 1993, remanufacturing compressors that were sold to service contractors like Johnson Controls and then used by area textile mills.

“I started that business with one person, a filing cabinet and a phone,” Mann said. “Within four years, I had built a million-dollar business.”

He and his wife bought their house in 1994 for $132,500, and it is now valued at $160,000 for tax purposes. There’s no outward sign of distress or indication that the clock is ticking down on a foreclosure sale.

The Mann’s house is located in a west Greensboro neighborhood aptly named the Thicket. The modest ranch houses on the two roads in give little indication of the tranquil community of serpentine streets and appealing cul-de-sacs supplied with tidy looking two-story clapboard houses. The Mann’s place is typical in its decorative touches: a Green Bay Packer banner in the yard, a yellow ribbon affixed to the front door, a couple shiny glass decoration balls and a hummingbird feeder posted not far from the curb.

The first hint of trouble came in about 2004 when most of the textile mills went out of business. Ken Mann found himself stuck with $85,000 in unpaid receivables. In early 2006, he had to declare bankruptcy.

“I had enough money in the bank to live for awhile,” Mann said. “You might have $80,000, but you go through it fast. I was cutting down my lifestyle. I had nice cars. I was trying to make car payments.”

Around that time he lost $40,000 when the bank took possession of an investment property.

“It was some shady stuff that Bank of America did,” Mann said. “I had paid off this townhouse that we lived in when my kids were just babies. I took out a second mortgage on it to try to save my business. We had a water leak. There was about $18,000 to $19,000 worth of water damage. I told the bank what was going on. I told them: As soon as we get this thing fixed, I would pay off the second mortgage. It took two months to fix the dad-gum house. I went over and there was some kind of weird padlock on it.”

Mann said that when he lost his business, he called the loan company to get his monthly payments reduced, and instead they raised his payments. He said he obtained two or three loan modifications, but in one instance the final check was returned to him and he was told that the agreement had expired.

He has gone back to work, taking a job with a refrigeration company that pays about what he made 25 years ago. A promising opportunity slipped from his grasp because Mann doesn’t have a college degree.

“When all this came about, I was going to get another job,” he said. “It paid $65,000- $75,000 a year. It wasn’t as much as I had been used to making, but it was pretty good. They got to the question about the college education, and I couldn’t go any further. It didn’t matter that I had owned my own business; it’s company policy. He hated to do it because he wanted to hire me.”

Last Thursday, Ken Mann received yet another loan modification in the mail. Chase was asking him to pay $990 per month. That’s about $130 less than the original monthly payment, but about $400 more than what the couple can afford on Ken’s current salary. He doesn’t understand why the bank wouldn’t agree to extend their 15-year loan over 30 years so that the monthly payments can be reduced to a manageable amount — say $550. After all, why would the bank want to take possession of a house that is unlikely to sell in this market?


Foreclosures have not discriminated in their distribution across the landcape of North Carolina´s Piedmont Triad, affecting inner-city, suburban, poor and affluent neighborhoods.

“I just don’t understand what their thinking is,” he said. “Or if they’re thinking. You know they’ve got all the paperwork.”

Tom Kelly, a spokesman for JPMorgan Chase & Co., said the trial payment offered by the lender is more than $500 less than their original payment and 31 percent of the Manns’ gross household income, following government program guidelines. He added that the bank agreed to extend the repayment period for the loan by six years. Ken said his the monthly payment actually comprises more than 40 percent of his take-home pay, and his paycheck is the family’s sole source of income.

The Manns have tied up more than $100,000 in equity in their house — more than they cur rently owe on it. Because the housing market is so slow, Ken Mann said he wouldn’t expect to get anything back from the bank in a foreclosure sale.

“I’ve already been destroyed once,” he said.

“This would be the final nail in the coffin. It would probably destroy the marriage. We’ve been on pins and needles for the last four years with all this happening.”

Monthly home sales in February, as reported by the US Census Bureau, were the slowest since the government started counting in 1963.

The housing market in the Southeast is nowhere near as bad as in the Midwest and Northeast where population losses have compounded the problem. Yet, as an indication of how sluggish the market is in Guilford and Forsyth counties, the average foreclosed home is currently assessed at $118,807 for tax purposes, but is selling at auction for $88,746. That’s a markdown of 33.9 percent.

“There’s an ecosystem in the housing mar ket,” said G. Duncan, a Triad-area real estate investor who buys distressed properties, often with the intention of salvaging them so that the original homeowner or a family member can re-purchase them. “You have builders that build more than we need. Developers tear down and develop more land than we need to use. The Triad is one of the worst areas for urban sprawl. The banks would try to loan money any which way they could. The builder, he can sell his house right next to the one that is being foreclosed because he puts together the whole package. He can help you get a loan. He can sell you a house that doesn’t need to have the carpet replaced. Who do you think has the most information — the buyer or the builder? The buyer is holding their hand with eyes closed.”

Across the state, North Carolina saw a steady rise in foreclosures from the mid-2000s through the present, with the most dramatic increase in 2009. Last year, 67,844 people in North Carolina lost their homes to foreclosure, and the first two months of this year indicate that 2011 is on course to set a new record.

Every market, like every house, is unique.

Guilford and Forsyth counties have fared worse through the foreclosure crisis than Cumberland or Durham counties, but better than the two largest cities of Charlotte and Raleigh and better than the tourism centers of Wilmington on the coast and Asheville in the mountains.

Mecklenburg took a significant hit in 2009; foreclosures dropped last year but the county appears to be on track for another major increase this year. Wake, Durham and Buncombe counties appear to be over the hump. Guilford County saw a record 4,101 foreclosures last year, but appears to be stabilizing. Forsyth County also saw a record number of foreclosures last year, but recorded filings in recent months suggest the problem is only worsening.

“We’re going to see more foreclosures this year than ever before,” Duncan said. “That’s

what the statistics say. It picks up speed. You have the foreclosure, which depresses the market, which causes more foreclosures. You have the banks that have decided they’re not going to lend to anyone. You might be trying to sell your house to move into a retirement home, but you’re stuck in a house with declining value. Let’s say you get a job offer in New York, but you can’t find anybody to buy your house. You might rent in New York, but you can’t keep up with your mortgage payment in Greensboro, so you’re at risk of foreclosure.”

Pieces of the dream

The residential real estate industry has always contained a sophisticated edifice of interdependent roles: Big banks that finance business loans so that builders can throw up new houses; mortgage brokers who work with homebuyers to arrange financing; web developers that package listings on the internet; sales agents at all levels, from new to existing stock, luxury to slum housing; investors who rehabilitate dilapidated housing and all the specialized craftspeople they might need.

The foreclosure crisis has spawned new and curious niches in the industry.

There’s a guy named Marty Hopkins who logs every foreclosure in Guilford and Forsyth counties to track them from filing to sale, and sells the information on subscription to real estate agents, landlords looking to add to their inventory and families in the market for their first home.

There’s Merrill Mabe in Stokes County, whose line of work is called “preservation/ trash-out.” He’s the first to show up at a foreclosed house after the sale has been finalized, working either for the banks or real estate investors depending on who takes possession.

“We’ll locate the property, take pictures, drill a lock out, tell ’em if there’s still people living there,” he said, describing the first stage of his work.

“A normal deal — $800 or $900 takes care of it,” he added. “If the carpet’s pulled out, there’s leaks in the roof or the pipes have been pulled out, we’ll let them know about the expense up front.”

Real estate investors are a burgeoning segment of the industry. They typically buy low and require a significant profit margin to compensate for the risk.

“When you buy a foreclosed property you don’t get to look inside,” said Angus Reid, with Magpie Properties. “You don’t get to see if there’s flood damage, and you don’t know how much it’s going to cost to repair it. You have to hedge on the side of being very con servative.

You might look at the outside and say, ‘This sold for less than $30,000 of tax value, but there might be $25,000 in repairs that need to be made.’” The Triad Real Estate Investors Association, with a membership of about 140 people, holds weekly lunch meetings — Tuesdays at Logan’s Roadhouse in Greensboro and Thursdays at Lone Star Steakhouse in Winston-Salem. A competing Piedmont Triad Real Estate Investors Association also organizes local members in the industry.

On a recent Thursday, about 20 people gathered around a row of tables at Lone Star Steakhouse in Winston-Salem. There were investors, along with specialists who repair flooring, fireplaces and chimneys. There was a guy who designs glossy brochures displaying before-andafter pictures.

In this business, some investors share leads or combine financing. Some resell their properties while others end up renting to tenants.

One guy at the lunch meeting announced that all of his properties were rented and he would be happy to refer prospective tenants to his colleagues.

Tony Robinson, a retired Army chief warrant officer, facilitated the meeting. He gave a pep talk and briefed members on the provisions of the Homeowner and Homebuyer Protection Action, a bill signed into law last year by Gov. Beverly Perdue. He called up Skip Matheny, who markets his business as “renovating ugly duckling fixers to move-in ready swans,” to give a presentation on social media.

Counter to expectation, many real estate investors are eager to share expertise with those interested in getting involved in the business. Robinson cautioned a slow and methodical approach.

“We believe there’s a land of abundance out there,” he said, as the lunch meeting was breaking up. “There’s more than any one individual could possibly capitalize on.”

Many real estate investors see themselves as salvaging the value of depressed properties and rue the parasitic image created by some unethical operators among their ranks.

´You can’t blame the traumacare nurse for the emergency… When I come in, all I’m trying to do is stave off death. Nine out of 10 times, it’s foreclosures.´

“You can’t blame the trauma-care nurse for the emergency,” Duncan said. “When I come in, all I’m trying to do is stave off death. Nine out of 10 times, it’s foreclosures.”


Each foreclosed house has its own story, which is tied variously to the circumstances of its former occupants, the inclinations and capabilities of its new owner and the demand of the marketplace. In some instances, real estate investors quickly find tenants. It’s not uncommon to find houses in foreclosure last fall that are already occupied by tenants. In one southern Forsyth subdivision, a tenant received a foreclosure notice and more or less recruited a new landlord to buy the house so she wouldn’t have to leave. One woman who declined to be named has already purchased a house outside of Rural Hall that was picked up by an investor in a foreclosure sale last July.

Other properties languish on the market in conditions from deteriorating to worse.

“Sometimes you go out to these foreclosures, and there’s all kinds of trash,” Mabe said. “Sometimes it’s all cleaned up, like they took care of it before they left. Sometimes we go in to one and the people have just got up and walked out the door. They just took their clothes and nothing else. There’s not a whole lot like that.”

Matheny bought a house in High Point in which the previous occupants appeared to have busted out the pipes with a hammer, allowing raw sewage to pour into the crawlspace.

One realtor, who asked that his name not be used for fear that his comments would offend the banks, said, “There are strategic foreclosures, financial foreclosures, kick-inthe-wall foreclosures. That means the person gets mad at the bank. They’ll know they’ll be foreclosed, so they’ll wreck this house.”

Mabe said property values have continued to fall over the past six months to a year.

“That’s not good,” he said. “That’s not good for nobody. For any homeowner that lives in the neighborhood where people’s refusing to spend money on a property just because it’s in foreclosure, it drags everybody’s value down.”

A foreclosed home that’s not presentable is  unlikely to find a buyer, but the fact that many properties are overgrown with weeds indicates that the prospects were pretty dim to begin with. As yet another dismal indicator, Mabe hasn’t received a new work order in weeks.

“Nobody’s really buying anything right now,” he said, “and that might be why they’re not spending any money for us to go in and clean everything up.”

In a subdivision near Colfax, two of Marlin Cleaf’s neighbors took turns mowing the grass after the owner abandoned it months in advance of the bank’s repossession, motivated by the desire to keep would-be vandals from recognizing that the house was empty.

Whether foreclosures show up as blight or remain a hidden cancer, the communities left behind pay a price.

“For most people, their home represents the greatest asset that they have,” Greensboro City Manager Rashad Young said. “If people start losing value in that, that really changes the nature — it’s almost like changing the laws of reality in terms of what you expect. That really is sort of a worst-case scenario. Even the thought of something like that is pretty scary.

“Even those that are well maintained and look good, because that sale of the house at what might be a fire-sale rate by the lender is going to impact the home values in the neighborhood,” he added. “Foreclosures, even in well-maintained scenarios in what you might consider a buyer’s paradise might be a risk to the neighborhood.”

Upside down

The average house in Forsyth and Guilford counties loses $30,061 in value each time a foreclosure sale is consummated. Consider that a total of 6,497 foreclosures were filed in the two counties last year. If even one in five of those houses were saved — and sometimes people avert foreclosures through personal bankruptcy or loan modifications — that still represents a drain-off of $156.2 million in personal wealth across the region.

On average, foreclosures in the two counties involve a loss of 38 cents for every dollar of assessed tax value. Tax collectors think of this in terms of sales ratio, which is the inversion of the calculation.

The sales ratio is obtained by dividing average tax value by average sales value. Counties across the state that are revaluating property values are facing something unprecedented in recent memory. Property almost always appreciates as a rule, but now most market values are well below assessed tax valuation.

Tax Director Ben Chavis said the last time Guilford County went through a revaluation, in 2004, tax values were about 80 percent of market values. Guilford County’s sales ratio is currently 103 percent. Forsyth County’s is 105 percent.

“I’ve been in this business 27 years,” Chavis said. “You’ve never seen a county lose tax base from a real property standpoint. The tax base has always been appreciating as long as I’ve been in this business.”

Guilford County has witnessed 21,871 foreclosures since its last tax revaluation in 2004 and will revaluate next year. Forsyth County, which is on a four-year schedule, has seen 3,025 foreclosures since it last revaluated in 2009.

Local governments are already feeling the affects of the housing depression on revenue. The city of Greensboro is anticipating 0 percent growth in property tax base in the next fiscal year.

During a recent community budget meeting, Starmount Forest resident Bob Skenes told Greensboro City Manager Rashad Young what he already knew.

“Next year’s going to be worst than you think,” Skenes said. “I’m an economist by trade, and the storm is coming.”

A shrinking tax base has obvious implications.

“Carteret County down on the coast lost $4 billion of their real estate base,” Forsyth County Tax Director Pete Rodda said. “They went from $18 billion to $14 billion. You know they’re going to have to make some pretty substantial adjustments.”

County and municipal governments that end up with a shrunken tax base will have to choose between accepting reduced revenues and defunding services or raising their tax rates to maintain neutral revenue.

“Any conversation that begins with ‘tax increase’ is going to be a hard one to have,” Young said. “If that’s the option on the table, then we’re going to have to have a tough conversation.”

Raising the tax rate, even if the actual amount of the bill remains roughly the same, won’t be politically palatable. Yet elected officials might find that they have equally difficult time selling the public on cuts to public safety, summer recreational programs, street maintenance and financing for new libraries and parks.

Shrinking public budgets might be part of a new normal involving an interlocking malaise of high unemployment, halting private investment and depressed home values.

“I think it’s just going to be another challenge for us,” Young said. “We haven’t seen valuations grow as a result of new development and new tax base. We’re projecting zero growth. It’s really going to be difficult for us in an already unpleasant and challenging time.”

Juicing the homebuilding industry

Most economists concur that the solution to the housing crisis is job creation. The financial crisis of 2008, which threw the nation into double-digit unemployment, is generally blamed on an unsustainable bubble in the housing market. So it might be considered something of an irony that one job-creation proposal North Carolina lawmakers are considering is subsidizing the building industry by offering a tax break to new homebuyers.

The New Home Purchase Stimulus, filed last month, would allow families that purchase or contract for the construction of a new house to qualify for a tax credit of up to $10,000 spread over five installments. The bill sets an aggregate cost for all tax credits at $100 million.

Among the bill’s cosponsors are Sen. Don Vaughan and Rep. Maggie Jeffus, both Democrats from Guilford County.

The NC Homebuilders Association proposed the legislation, arguing that the economy will continue to suffer “until housing recovers.”

The industry association cites a study by Michael Walden, a professor of economics at NC State University, indicating that the tax credit would create a total economic impact of $966 million and create 16,199 jobs.

The association’s legislative report implicitly acknowledges the glut in the market, alluding to conflicting needs among different segments of its membership.

“In order to have any realistic chance of passage, the proposal had to create the maximum number of jobs for the $100 million that the General Assembly is being asked to allocate to fund the tax credit proposal,” the report states. “Thus, the starting date for homes to qualify for the credit had to be prospective. We understand that this does not help those builders who continue to hold inventory, but it was unavoidable.”

Walden said he takes a neutral stance on the bill, noting that the legislation “is designed to help people in the construction industry to motivate people to buy new homes.”

He acknowledged that a stimulus for new homebuilding would not help communities destabilized by vacancies created by a high number of foreclosed houses sitting empty on the market.

“The con to that is it presents more supply and more competition for the existing homes that are already out there,” he said. “So that would clearly be a negative.”