This is the third in a three-part series on rising foreclosures in the Flathead Valley.
The face of foreclosure is changing in the Flathead, where even the rich are in danger of losing their homes.
For the last year, foreclosure talk has focused on the subprime-mortgage mess that brought inflated real estate markets crashing and the economy to its knees. But, in reality, those predatory loans affected a small percentage of homeowners here and nationwide.
“It was all about subprime,” local real estate professional Cal Scott said of the early conversations. “That situation has changed.”
Now, the baton is being passed. Many of the homeowners with those exaggerated, unreasonable loans have already been put to the street. Taking their place in the foreclosure line are people with once-good credit who could lose their houses because they have lost their jobs and are falling behind on their payments.
As unemployment remains high, leaving many without any opportunity for work, a second wave of foreclosures is building, economic observers say.
“Since last fall, we have seen elements combine to hurt the middle class here in a way they’ve never been hurt before,” Scott said. “Without some relief, I’m afraid it will continue.”
There were 459 notices of trustee sale filed in Flathead County in just the first six months of this year – just 18 shy of last year’s total. The notice is the first step in a three-month long process that can eventually lead to a foreclosure sale or auction, and a strong indicator of the number of people struggling locally with their mortgages.
A search through public records at the Flathead County Clerk and Recorder’s Office proves the foreclosure threat isn’t limited to one neighborhood or socioeconomic group.
Developers, counting on the housing boom to continue only to see the bottom fall out of the market, have defaulted on massive loans. In the exclusive neighborhoods of Iron Horse in Whitefish or Eagle Bend in Bigfork, million-dollar homes have gone into default. Hundreds more are scattered throughout the valley, from Evergreen to Flathead Lake.
That follows reports from local social service workers who say the people entering their offices in search of help are unfamiliar faces.
“These are people who have never needed to apply for assistance before,” Lil Dupree, an administrator at Community Action Partnership of Northwest Montana (formerly Northwest Montana Human Resources), said.
CAP offers foreclosure counseling services, helping people navigate the process and work with their lenders to save their home. Since January, the nonprofit has added three housing counselors to meet the rising need.
“We’re talking about our friends and neighbors who have been laid off at CFAC (Columbia Falls Aluminum Company) or Plum Creek or used to build homes,” Dupree said. “People who had savings and have had to use those and now have nowhere to go.”
These are often long-time residents of the valley, Dupree added: A recent survey of the people who use CAP’s services showed less than 5 percent had lived here for less than two years. The survey responders ranked more or better jobs as the region’s most pressing need, followed by affordable housing.
That comes as no surprise to Scott, who calls the scarcity of work and affordable housing options in the valley “deplorable.” Scott, a former president for the Northwest Montana Association of Realtors, is a vocal affordable housing advocate who offers home ownership classes and foreclosure mitigation counseling – often at little or no cost.
Scott says the groundwork for the current struggles started last summer. First gas prices spiked, drastically increasing the cost of commuting in a valley where people often work and live in separate cities.
Then, several major credit companies crunched by growing national troubles started lowering credit limits and raising interest rates. As a result, Scott said many locals say their credit scores fell. At the same time, lenders began raising their threshold for making loans.
“The two collided and many people were driven below a point where they weren’t able to get financing, including refinancing their homes into the lower rates that became prevalent then,” he said.
By the holiday season, when the local unemployment rate climbed into the double digits amid large-scale layoffs at many of the valley’s major employers, Scott was receiving more desperate phone calls then ever before.
“When you combine all that’s happened nationally and locally, it’s like pounding a nail into a board – with every hardship you’re pounding the average family deeper,” Scott said. He estimates he’s talked to about 200 people afraid of losing their homes since the start of 2009.
But by the time people often call on Scott, CAP or other resources it’s often too late in the process. Shame and pride can play a role in the delay. Other times, it’s ignorance on where or how to seek help or denial.
“It’s human nature, I think, to wait or want to stick your head in the sand,” Dupree said, “Its much easier to help them, though, if they come in earlier; instead of the week before the sheriff’s sale.”
As soon as homeowners know they’re going to miss a mortgage payment, local agencies encourage them to get on the phone, notifying their lender and seeking foreclosure counseling.
In cases where people go all the way to foreclosure, their clients face a new challenge: putting any roof over their head.
Homeless shelters like A Ray of Hope and Samaritan House say they’ve seen some families affected by foreclosure. However, a more common solution, housing counselors say, is doubling up with other family members, crowding into a house together.
While rental prices have come down somewhat in recent months, the upfront costs of renting – first and last month’s rent along with a deposit – often make this option untenable. Demand for subsidized housing rentals far outpaces the supply; several complexes carry waiting lists that are months long.
When all other options fail, families are packing up and leaving the valley.
“If you’ve lost your job and lost your home, what else is keeping you here?” Dupree said.
The negative effects in other cities, hit harder and earlier by the foreclosure crisis, offer plenty of reasons to proactively address the growing situation here: Borrowers get to keep their houses; lenders save the huge cost of repossessing and reselling a distressed property; and neighborhoods avoid the contagion of declining real estate values.
“It’s imperative we as a community address the issue,” Scott said.
Until then, many here will be left clinging to their dream of homeownership – even as it grows harder to hang on.