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Bainbridge foreclosures up, but still lower than rest of county

You can say foreclosures on Bainbridge Island are up at least 1,400 percent this year.

But that is largely because Bainbridge had little to no foreclosures in past.

Although the island and it’s housing market have been dramatically affected by the burst of the housing bubble and the sedate national economy, compared to the rest of Kitsap County most island homeowners have weathered the storm despite the distressing signs.

“There were people saying a few weeks ago that there were over 200 foreclosures on the island, but the truth is that that is a much lower number,“ said Jim Peek, an associate broker with Bainbridge’s John L. Scott office.

Peek has been producing a monthly snapshot of homes sales on the island to gauge the market’s activities compared to the last three years. Although the market is down almost 50 percent, foreclosures have stayed well below the national and county average.

“As a state we are very low on foreclosures compared to California, Ohio and Michigan. It is in the hundreds of homes in our area that get into a problem in the first place,” he said.

Peek has worked with Carol Blay, an escrow closer with Rainier Title in Silverdale, to ascertain just how many foreclosures have occurred on the island. According to their numbers, there have been 14 completed foreclosures this year between January and October. Last month, the same calculations showed only five foreclosures that went to auction.

The model Blay uses to estimate foreclosures tracks notices of sale or notices of foreclosure, then checks those lists against trustee deeds to see if there has been a change in ownership over a 120-day period.

The numbers crunched by Blay show 69 notices of trustee sales on Bainbridge compared to more than 960 in Kitsap County. Of those 69 notices, only 14 ended with a change in trustee deed – telling of a foreclosure’s occurrence. The rest could be short sales (selling a house to pay off the remaining loan balance), reversions to bank ownership or successfully making payments on a loan.

Blay admits the process is “time consuming,” but the numbers are promising for the Bainbridge housing market. She credits low foreclosure numbers to lenders that are willing to either work with homeowners to find financing solutions, or banks that would rather let homes sit on the market than take a loss in a foreclosure or a short-sale.

“On Bainbridge, homeowners have more equity even with declining values nationally,” Blay said. “The more equity, the more incentive there is to find some other solution short of a foreclosure.”

Other areas of the county and the country have faced a reversal in value, and it is those homeowners who are more likely to foreclose because the loans they owe no longer reflect the real value of their home.

Those numbers are supported by the Kitsap County Consolidated Housing Authority, which has seen a large influx in the amount of families facing foreclosure.

“Just from Bainbridge we get four to five calls a month,” said Marvelle Lehmeyer, head credit counselor at KCCHA. “South Kitsap has been hit harder. In Bainbridge, Kingston and Poulsbo the foreclosures aren’t that high, but Bremerton has been hit the hardest.”

The numbers are exacerbated by a greater amount of predatory loans in South Kitsap, said Lehmeyer, and the estimation that half of troubled home owners don’t seek out help or talk to their lenders, according to Freddie Mac statistics.

KCCHA, the only HUD agency on the peninsula besides an organization in Gray’s Harbor, shut down their counseling services on Monday due to financial constraints.

While some speculate on the validity of foreclosure numbers, Blay’s statistics closely mimic other Internet-based foreclosure sites.

According to Realtytrac.com, which has been cited by numerous national news outlets regarding foreclosure statistics, Bainbridge has 33 homes for auction due to foreclosure and 19 bank-owned properties (properties that could have failed to sell at auction and are currently being held by the lender). Realtytrac.com uses both data-mining and default filings to reach its statistics.

Foreclosures.com, another site claiming to accurately track national foreclosures, show 16 homes under foreclosure, and roughly 32 families in pre-foreclosure – meaning they have fallen behind in their payments and have roughly 120 days to bring their payments current.

But Brent Marmon of Pacific NW title has also been trying to determine foreclosure numbers as well and he has refrained from making any broad statements because he doesn’t believe available data can be manipulated accurately.

“I still question those numbers,” he said. “Normally I would say, let’s pull trustees’ deeds and compare and if you are within 50 you have pretty good data. But then you still can’t back it up because it doesn’t say what actually happened (to the property).

“What most people are looking at are notices of foreclosures,” Marmon said. “But they forget that the borrower can bring property current or they sell it as a short-sale.”

Matt Culp of the Bainbridge Lending Group said there are no reliable numbers regarding the amount of short sales on Bainbridge, but that the process is picking up pace.

“Basically if there is $400,000 owned on the house and someone buys it for $380,000 the bank is going to have to take a hair cut of $20,000. But often that is better than going through the process of foreclosures which is costly and time consuming.”

However, the short-sale process can be complicated when a loan payer has multiple mortgages. Usually the first lender gets priority over the second. If the mortgage holder wants to short-sell, it is doubtful that both lenders will agree if they are not getting an equal cut of the property sale returns. That make’s it unlikely that short sales are wide spread on Bainbridge.

“Short sales are rare, because you need both a buyer and a willing bank, so that complicates it... but they are becoming more common.”

Culp has been involved in two short sales, and neither have closed. Many short sales are quick affairs based on snap judgments by banks.

“You need to be ready with cashiers check or letter of credit in hand,” Culp said. “When banks accept a short-sale they are not going to say, ‘Yes, bring us an offer and we’ll review it.’ They want the money right there.”

According to Peek, there are only 17 pending foreclosures on Bainbridge, but that shouldn’t stop people with mortgage troubles from asking for help, Lehmeyer said.

Before KCCHA counseling services closed last week, Lehmeyer was optimistic about where the housing market was headed and the ability for families to pay off their loans.

“It costs banks more to foreclosure than to work out a payment package. As long as a mortgage holder has a job and income, (lenders) are willing to work out a plan,” she said.

“We are seeing banks reaching out to people, and some people are successfully making their payments, I think 2010 will be the last year that adjustable mortgages will readjust, then we will start coming out of this mess.”

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