Lancaster County home foreclosures
After bottoming out in 2011, foreclosure filings in Lancaster County rose 39.2 percent last year, as banks moved to address their backlogs.
Still, while the 1,065 foreclosures here in 2012 are significantly above the 765 recorded by the county Office of Prothonotary in 2011, they're well short of the 2010 peak of 1,334.
The trend in Lancaster County also was evident in Pennsylvania, as foreclosures in the state were up 28 percent from 2011 to 2012, according to RealtyTrac.com.
While unemployment, divorce and medical expenses are the major factors causing people to default on their mortgages and lose their homes, some situations are resolved short of foreclosure, through loan modifications, for example.
The leader of a local nonprofit that offers mortgage counseling said demand is still high for its services, although the need is not as urgent as it was during the worst of the housing crisis.
Mitchell Sommers, an attorney with offices in Lancaster and Ephrata, said it was "inevitable" that foreclosures would climb here.
MAP: 2012 foreclosures in Lancaster County
After the fallout from the robo-signing scandal — in which lenders were found to have improperly initiated foreclosures — some major banks temporarily halted foreclosure filings in the fall of 2010.
But by 2012, lenders were taking action against a new crop of homeowners, Sommers said, some of whom had tried loan modification and failed.
There are programs available to help people avoid foreclosure — including the federal Home Affordable Modification Program, known as HAMP — but "they're kind of a moving target," he said.
"Different programs do different things," said Sommers, who helps people facing foreclosure. And there's a "real range of quality" on what kind of assistance a homeowner will get, depending on who answers the phone, he said.
Sommers said he comes into the picture at various points in the process.
It could be a case where someone is beginning to struggle financially, or when foreclosure is just around the corner. He said the three major reasons people face foreclosure — "kind of a holy trinity," Sommers called them — are job loss, divorce and illness.
Even a homeowner on the verge of foreclosure can get into a loan modification program, Sommers said.
That could include lowering the mortgage interest rate; recapitalization, which means taking any arrearage "and shoving it onto the back end of the loan"; or reducing the principal of the loan (which doesn't happen often enough), he said.
Also, the arrearage can be spread out, making it easier to pay back, Sommers said.
Bankruptcy is an option, too, if loan modification isn't working, he said. It can help "buy yourself some time," Sommers said.
Still, he said, "people will do almost anything to avoid the 'B' word."
One of Sommers' former clients, an East Hempfield Township man who asked that his name not be used, fell behind on his mortgage payments when he lost his well-paying, white-collar job.
He said he attempted loan modification with his lender, but the bank kept losing his documents. The man's house was foreclosed on and he ended up filing for bankruptcy.
In the meantime, he found a new job and is gradually rebuilding his credit, he said. He and his family rent a house now through a lease/purchase arrangement.
From the beginning, the crisis wouldn't have been as bad if homeowners at risk of foreclosure had been allowed to reduce their mortgage to what the house is worth, said Sommers, the attorney.
Banks would then be forced to acknowledge that equity had gone down, Sommers said, and the situation would reflect "what realistically is happening in the market."
Jason Burkholder, an agent with Weichert, Realtors-Engle & Hambright, specializes in short sales — a transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan — but also assists buyers in purchasing foreclosed properties.
Short sales are one way to avoid foreclosure, he said, but he's also seeing more deeds in lieu of foreclosure in Lancaster County. That's when the borrower, or homeowner, transfers the property to the mortgage lender, Burkholder said.
For example, a deed in lieu of foreclosure may happen if a short sale falls through and the bank decides it's cheaper to do this than go into foreclosure, he said.
"Banks don't like foreclosure because of the costs" associated with it, Burkholder said.
He also said the 2011 foreclosure figures here were "abnormally low," while the 2012 total was "more in line with the historical par."
Tabor Community Services, the biggest nonprofit provider of mortgage counseling services in Lancaster County, will probably counsel 300 people this fiscal year, said President Bob Thomas.
In 2007-08, the number was 242. Two years later, in the midst of the housing crisis, it was 585, he said.
Tabor was able to get additional money to help with the huge demand, but that dried up in the middle of 2011, Thomas said.
Where Tabor once had 2.5 mortgage counselor positions, that dropped to one person one day a week, he said.
Some money has been restored, so as of last July, the agency now has one full-time counselor, Thomas said.
In the four fiscal years from 2007-08 to 2010-11, Tabor saw 1,801 clients in its mortgage counseling program, he said, and 95 percent of them were able to avoid foreclosure.
Thomas believes the 2012 foreclosure total in Lancaster County would've been lower if Tabor had been able to reach more people in fiscal year 2011-12, when its funding was cut.
As for the current situation, "there's no question demand is not as great" as it was a few years ago, he said, but it's still enough to keep Tabor's mortgage counselor quite busy.
