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Foreclosures don’t always mean loss of home, geography professors’ research shows

Housing foreclosures may have dropped from the front-page news, but Americans are still losing their homes.

Hammel

Dr. Dan Hammel, professor in the Department of Geography and Planning, who’s researching several aspects of national foreclosure trends, said that the situation remains volatile: “Are we still in a foreclosure crisis? Yes, because some of the root causes and practices that led to the crisis are ongoing.” He noted that continuing high unemployment is one trend helping to drive the crisis.

Despite fewer subprime loans, he said job loss can still leave homeowners vulnerable. He added, “There are signs, though, that banks held off on foreclosures they could have initiated — in part because they were alarmed at the crisis, and in part to get their legal houses in order. I expect that the number of foreclosures will continue to be high.”

To understand the dynamics of foreclosures in Lucas County, he and Dr. Sujata Shetty, assistant professor in the Department of Geography and Planning, took advantage of the fact that Ohio has a judicial foreclosure process: The process goes through the courts, thus generating large amounts of information.

After collecting a statistically significant sampling of foreclosure filings from 2004 through 2008, they followed the items through online court dockets. What they found was surprising.

“In 2004, slightly more than half of all filings ended up with sheriff’s sales and loss of a home, but those numbers subsequently went down significantly. Although there were more filings, fewer led to foreclosure,” Hammel said.

“We also examined how long the foreclosure process took and found it sped up slightly. There’s evidence, in fact, that government overall has kept up with the process far better than the financial sector has. What a city and county do not want is a large quantity of houses sitting in limbo. At least foreclosure clarifies that the bank owns the property, and the city or county can proceed with the issues of taxes and upkeep.”

Shetty

Hammel and Shetty also wanted to determine if there were differences in the way the process moved based on the homeowner’s economic status. Although it was clear that more foreclosures happen in moderate-income neighborhoods than in their middle-class counterparts, “filing the foreclosure seems to be the great leveler,” Hammel said. “It’s odd; once the process starts, you would think that people of higher income would have access to more resources like hiring a lawyer to slow the process, but it seems to move just as rapidly for middle-class people as for moderate- or lower-income people.

“Although foreclosures are overwhelmingly concentrated in moderate-income neighborhoods, even the likelihood of the process going all the way to a sheriff’s sale is statistically the same in middle- and moderate-income areas.”

One reason might be access to legal aid via ABLE (Advocates for Basic Legal Equality) and the Toledo Fair Housing Center — two services available to local clients — as well as other legal aid providers. As well, Lucas County has since 2008 employed a foreclosure magistrate, an official with the authority to impel sometimes-balky lenders and third-party loan servicers into mediation with homeowners prior to foreclosed homes being lost.

“Even before the magistrate, though, we saw a decline in the number of cases going through to sheriff’s sales,” Hammel said. “That was likely tied to homeowners having an actual income; in that case, there was a better chance of settlement prior to the sheriff’s sale. Also, foreclosure education in the early stages of the process is critical; oftentimes it comes too late, when earlier intervention could have resulted in a better outcome.”

For the future of their research, the two faculty members want to find out what happens to people after foreclosure.

“I’ve only seen one such study that traces where people have gone after their homes were lost through foreclosure,” Hammel said. “My guess for Toledo is that given the state of the local economy, a lot of people just left. We want to use our original sample and find enough people to conduct interviews; we’d like to talk with people who managed to stay in their homes despite a foreclosure filing, as well as those who lost their homes.”

He noted the difficulty of finding such people and their likely reluctance to discuss a painful episode. Foreclosure, he added, still carries a stigma.

“I’d like to say that things are getting better. To a certain extent, our ability to handle foreclosures makes the process faster, so people can move on. People in the process who can be extricated with relative ease have been extricated, but those who have lost jobs and have no resources, owe more on their homes than their market value — yeah, their cases remain difficult.”

The paper by Hammel and Shetty was accepted for publication in the journal Housing Policy Debate, in a special issue on foreclosures.

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