Central Virginia foreclosures up, though rate slowed in late 2008

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In a nearly 30-year career, foreclosed subdivisions never made it to Mike Torrence’s auction block until recently.

Now he’s preparing for the second time in less than a year to sell a subdivision where the developers failed to make their payments.

“I think it’s clearly a sign of the economic times,” Torrence said. “In the middle of a housing slump when a developer can’t move his houses and lots, you still have to pay the debts.”

Last year his firm, Torrence, Reed and Forehand Auctions, sold Jason Anthony Manor, an upscale Forest subdivision. It now has been hired to auction Leesville Road Estates in the Evington area on March 27. Though about 50 lots and homes in that subdivision have sold, more than 60 acres of undeveloped tracts are for sale due to default.

The foreclosure trouble that is hitting some developers also continues to kick more owners out of their homes in Central Virginia than in years past.

While the region still has fewer foreclosures than many other areas, a group of nonprofit and local government officials are working to help the hardest-hit portions of Lynchburg.

The News & Advance recently examined records filed in circuit courts in Lynchburg city and the counties of Amherst, Appomattox, Bedford and Campbell on foreclosure auctions taking place from Sept. 1, 2008 through Jan. 31, 2009.

The records reveal that foreclosure is still more prevalent than it was in 2007. However, they also show that late in 2008 the foreclosure rate slowed compared to earlier in the year.

From September through January, 86 homes were lost to foreclosure, about a 10 percent increase from the 78 foreclosures in the same period a year earlier.

Previous research on foreclosures from January through August 2008 showed that foreclosures occurred at a pace of about 25 per month in that period, but only about 17 per month from September through January.

Back in 2007 the pace of foreclosures dropped toward the end of the year, but not as sharply as in 2008.

The data shows that subprime loans and adjustable rate mortgages continue to play a significant role in the region’s foreclosures. From September through January, at least 25 of the loans that ended in foreclosure had interest rates higher than 8 percent.

Another 25 of the loans were adjustable rate mortgages, for which the interest rate typically rises after a few years. On average, the interest rate on these loans had its first adjustment about eight months before ending in foreclosure.

Compared to other areas of the nation, the Lynchburg area has been spared the worst of foreclosure problems. Nationwide, the number of foreclosures in 2008 was 81 percent higher than in 2007.

However, a group of local government and nonprofit leaders see some areas of the region that have been hit heavily. They are now leading an effort to funnel money into two Lynchburg neighborhoods with high foreclosure rates.

On Tuesday, the Region 2000 Local Government Council and Lynchburg’s Community Development department plan to ask City Council to apply for a $1.59 million state grant to help rehabilitate and sell homes in the Early Street and Diamond Hill neighborhoods.

According to a recent study by Region 2000, at least 8.5 percent of the homes in those areas are foreclosed and vacant.

Gary Christie, executive director of the Local Government Council, said that the grant from the Virginia Department of Housing and Community Development would be used to buy and renovate foreclosed homes in those neighborhoods.

According to Region 2000’s proposal to City Council, a group of nonprofits would buy 15 foreclosed homes, renovate 13 and rebuild two.

Most of the homes would be resold, although some would be rented as housing for the disabled.

The city would have to match the grant with $72,000. Also, the Community Development department is asking City Council to put up $150,000 of HOME money — federal dollars that are used for low-income housing projects — for each of the next two years in the selected neighborhoods.

Christie said that the redevelopment project is important for these neighborhoods to not experience further decay. If foreclosed homes remain vacant for long periods of time, “you run the risk of vandalism, and you run the risk to continued deterioration in the neighborhood,” Christie said.

“These programs are designed so that that kind of deterioration is stopped and turned around when we put homebuyers back into these homes,” Christie said.