As a journalist covering the foreclosure crisis from what often seems like an altitude of 36,000 feet, it's easy to miss the details.
This editor recently toured a bevy of foreclosed condos for sale in his hometown of Minneapolis. What's striking on the ground is first the sheer volume of REO being marketed in a city that has felt the impact of the housing crisis but is not at its epicenter.
In Minneapolis, the downtown building boom was miniscule compared to that in Miami. But it, too, has gone bust. And there's no better example of the fallout than a condo conversion called The Sexton, whose problems have been well documented in the local media. The Sexton's fate rests on what comes out of a cesspool of litigation and acrimony that has embroiled the construction lender, federal investigators, two developers and the association's owners. To top it off: an infestation of mortgage fraud resulted in several sales at wildly inflated prices, leading to costly foreclosures and a stigma on the building. Now, lenders won't touch The Sexton. What's on the market is advertised as "cash only."
The situation has soured dramatically. One particularly attractive unit, which originally sold for over $200,000 in 2006, is now being marketed by a major mortgage servicer with an asking price of just $79,500. I toured the unit. This is not a property where appliances and copper have been torn out of the walls. In fact, the apartment is nearly pristine, with all the new features you might expect to see in a model unit. The building's common spaces are well maintained and appealing as well. But still, at little more than a third of its original sale price, the unit hasn't found a buyer.
Gut feeling: lenders are shooting themselves in the foot by refusing to finance the sale of units in projects (or neighborhoods) that have suffered from mortgage fraud, failed development and inflated values. How long will it take a building like The Sexton to recover if no lender is willing to lend there? The absence of financing only drives down values further, pushing homeowners closer to the brink of foreclosure. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/