In North Carolina, mortgage woes soar through many a roof

By Ryan Hutchins

The mortgage meltdown spreading through Hampton Roads and the rest of the country seems to have reached the Outer Banks and neighboring communities in force.

The eight counties that make up the mostly coastal northeastern corner of North Carolina had a twelvefold increase in foreclosure filings over last year.

The properties being taken back by lenders range from the behemoth seaside getaways worth millions to modest single-family homes along the barrier islands' interior and rural communities to the west.

The business of reselling homes that have been foreclosed on has spiked so much that Richard Hess, a vice president for sales at Sun Realty in the Outer Banks, is no longer the only agent handling the properties of two mortgage giants.

He still handles most of Freddie Mac and Fannie Mae's

foreclosed properties in the area. "These w acky mortgages are part of it," he said.

The number of foreclosed properties in this region, at least 160 in the first half of the year, is small when compared to more populated areas, but the percentage increase in filings here is through the roof, according to RealtyTrac Inc., a company that monitors foreclosure activity.

Hampton Roads, for example, had 1,000 foreclosure filings, or an increase of about 170 percent.

In the first half of 2007, there were 24 foreclosure filings in Bertie, Camden, Chowan, Currituck, Dare, Hertford, Pasquotank and Perquimans counties. This year, there were 308. That's a 1,183 percent increase.

While Pasquotank County - home to Elizabeth City - has seen the greatest increase, jumping from one filing to 67, Dare and Currituck counties accounted for more than half of the area's filings this year.

Many Outer Banks homes at stake are far from low-cost. Many have assessed values between $250,000 and $500,000. Some enter into seven digits.

One bank-owned property in Duck is on the auction block, and the opening bid on the 5,951-square-foot home is nearly $2.3 million, according to RealtyTrac's Web site. It lists hundreds of pricey, banked-owned and pre-foreclosure properties all over the barrier islands - from Corolla to Hatteras.

Some local real estate agents and lenders say most foreclosed properties are primary homes. Others say it's about half and half between primary residences and second homes.

Occupancy rates along the Outer Banks are up 4 percent this summer, according to Carolyn McCormick, managing director of the Outer Banks Visitors Bureau. There aren't numbers available for rental properties only, but McCormick said the homes remain popular.

One loan officer who has worked in the Outer Banks says rentals are part of the foreclosure filings.

"There's probably an even mix now of rentals and year-round properties," said Ronnie Roach, a Southern Shores resident who until several weeks ago was a loan officer for Wells Fargo bank.

Roach, who said he was once working with a colleague to develop a Web site to track local foreclosure filings, said many rental companies, seeing negative returns, have walked away from properties.

He said many homeowners have just struggled to make payments and end up 90 days behind. That's when the bank files foreclosure papers and the court holds a hearing. If the homeowner isn't able to sell the home, the property is auctioned on the courthouse steps, Roach said.

"You could owe a million dollars, but the house is only worth $750,000," he said. "You're out of luck."

On Hatteras Island, many of the filings aren't leading to foreclosure, according to Tom Hranicka, the sales manager for Outer Beaches Realty.

"Relatively few properties are in trouble on Hatteras Island," he said.

About five of more than 480 homes for sale on the island are owned by a bank, Hranicka said.

In addition, he said, the level of foreclosure filings on

the Outer Banks is less significant than elsewhere in the country, but the increase is significant.

The Outer Banks saw a flurry of building activity that peaked around 2005, according to Duke Geraghty, the legislative chairman of the Outer Banks Home Builders Association.

That is when subprime loans were at their peak, said Dan Green, a loan officer who writes the blog themortgagereports.com.

Lenders loosened their criteria a little at a time during the early part of the decade, he said. Several years ago, when some of the loans stopped performing well, the lenders realized they had gone too far and began to tighten up on who was qualified to receive a loan.

People who were qualified several years ago no longer are, said Green, who works out of Chicago and Cincinnati. And if they need to remortgage, there will be few options on the table.

"There just isn't money available for people to correct the mistakes they made," he said.

Geraghty said some of the people he has worked with through his construction company were able to get homes through subprime loans, but now that construction has dropped dramatically in the area, they don't have the income they did before.

"They're the ones having trouble making payments and getting foreclosed on."

Ryan Hutchins, (252) 441-1627, ryan.hutchins@pilotonline.com