July 13, 2008
When Tony and Mary Garrett bought an old bungalow in East Durham seven years ago, they were greeted with scores of warnings about fixing up a home in a neighborhood plagued by crime.
There were few cautions, though, about their subprime loan with interest rates that would balloon to the point that their dream of homeownership almost burst.
"We went into this with our eyes wide shut, so to speak," Tony Garrett said. "Every mortgage package should have red flags beside something that is going to hurt you."
The Garretts worried they might have to surrender their home to a mortgage company mired in the subprime lending crisis. But thanks to the advice of a church elder and a refinancing orchestrated by the Durham Regional Community Development Group, the couple staved off foreclosure.
The Garretts’ success story brought joyful tidings beyond their one household.
Had they been forced to walk away from their home, a neighborhood railing against crime and urban blight might have had one more abandoned property in its midst. As devastating as foreclosure can be for one family, it also can tear at the fabric of a neighborhood, a community, an entire region.
In Durham, a city where taxpayers, community development groups and nonprofits have invested much time and money into reinvigorating neighborhoods in decline, no one wants to see the added layer of problems a mortgage crisis might bring.
The Community Reinvestment Association of North Carolina, a Durham-based organization that has pushed for state and federal regulatory change while fighting predatory lending practices, recently released an extensive analysis of foreclosures in the Bull City.
"We chose Durham because it is our own backyard," said Adam Rust, one of the researchers and authors of the study "Empty Houses and Broken Dreams." "I would say Durham is probably not the worst case around. There certainly are more foreclosure actions going on in Wake County, but we haven’t done enough study to talk about what’s going on there. Orange County seems to be immune."
As home foreclosures hit record levels across the country, the Triangle real estate market is feeling the pinch more and more.
Foreclosure filings in the Triangle began rising in 2006 and increased 14.6 percent last year to a total of 7,388.
In the first six months of 2007, 3,578 foreclosure filings took place in Wake, Durham, Orange and Johnston counties. That number rose to nearly 4,000 for the first six months of this year.
Even with the Federal Reserve promising new regulations in the coming week for mortgage lending, housing experts, both nationally and locally, say foreclosure numbers will keep rising for the foreseeable future.
While California, Florida, Nevada and Arizona continue to be the hardest-hit states, Triangle housing advocates and counselors are hearing more hardscrabble stories that don’t always end as happily as the Garretts’.
"It is becoming a depressing job," said Angella Coleman, a housing counselor at the nonprofit Durham Affordable Housing Coalition. "I’m trying to keep hope alive, but I’m waving my flag here: ‘Help me. Help me.’ "
Foreclosure’s ripple effect
Some lenders are more willing than others to modify a loan to avoid foreclosure. In some cases, the lenders only have access to insurance to cover losses when there is foreclosure. Others are restricted by investors who don’t want to lose returns.
A Granville County woman battling cancer came in for help recently because she got behind on her mortgage payments while getting treatment.
A Chatham County woman on disability leave sought assistance after falling one month behind on her housing payments.
"There’s an immediate impact to the household that experiences foreclosure," said Rust. "But also there are collateral victims."
Renters can be evicted with little notice.
When the city or county takes a home, property taxes don’t come in at that time.
In some neighborhoods, homes might be sold at distressed sales prices or sit vacant for months and fall into disrepair.
"When homes are boarded up, they become invitations for the setting of crime," Rust said. "All kinds of things can happen."
Foreclosures in Durham, Rust says, are not limited to the lower-income neighborhoods. In the first 10 months of last year, 73 of Durham’s 123 neighborhoods had a home enter default or foreclosure.
In Milan Woods, a suburban neighborhood filled with police officers, construction workers, nurses and other professionals with a median household income of $53,000, nine of 230 homes were either in foreclosure or default at that time.
Foreclosures also were reported in the Watts-Hillandale neighborhood near Duke University, Hope Valley Farms North, Woodcroft and Duke Park.
The city’s black population has been hit the hardest, with African-Americans living in 78 percent of the homes in foreclosure or default, Rust said.
One in six households in the foreclosure process is owned by someone older than 55.
East Durham, where the Garretts live, is a neighborhood where most of the homes are not owner-occupied. But of those that are, most of the owners are older than 55, the association’s report found.
Neighbors have come together in recent years to fight urban blight and crime. Police did a rough count of the neighborhood recently and reported that 599 of the 3,424 houses were abandoned or vacant.
Ray Eurquhart, a 60-year-old homeowner in Southside, a neighborhood just south of the Durham Bulls Athletic Park, has fought for years against the problems that come with boarded-up houses.
"We’re fighting the gang-bangers," Eurquhart said. "We’re fighting the slumlords. The infrastructure over here is terrible."
Although the Southside neighborhood has the greatest density of foreclosures with 11 in 0.09 square miles, based on the association’s report, it is the paucity of owner-occupied homes that bothers Eurquhart more. If properties were kept up better and abandoned houses refurbished and put back on the market, higher rents could be charged and the neighborhood revitalized.
"We could save the kids from the gang-bangers, get the girls and women off the streets," Eurquhart said. "That’s what we’re trying to do to save this neighborhood."
Under the radar
While vacant homes and For Sale signs often indicate foreclosures, it is not always evident that a problem exists.
Melissa Rooney, an active member of the Fairfield neighborhood, was surprised to hear that 10 percent of the 360 homes were reported to be in foreclosure last year.
"I live in an upper middle-class neighborhood," Rooney said. "It’s certainly under the radar over here. People tend to keep things to themselves."
Housing analysts and advocates say neighborhoods that are open about foreclosure are better equipped to stave off long-term problems.
A study by the Woodstock Institute shows that foreclosures routinely decrease property values of surrounding homes. After studying neighborhoods in Chicago, researchers estimated a 0.9 percent devaluation for houses within an eighth of a mile of a foreclosed property.
"It has a terrible impact on the surrounding residents," said Lorisa Seibel, a community organizer at the Durham Affordable Housing Coalition. "When a house is lost to foreclosure, it seems to sit vacant for a long time. First the grass grows, then it falls into disrepair. … It used to be concentrated in lower-income neighborhoods where people weren’t getting good loans or weren’t able to pay back their loans. Now, you’re also seeing more middle-income neighborhoods."
This summer, unlike last, the Garrett house at 303 N. Driver St. is filled with hope.
Sunday dinners draw lots of family. Grandchildren are in and out throughout the week.
Neighbors know the contractor and his wife are there for the long haul.
"This," Tony Garrett said, "is stability."
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