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Half of auctioned homes in Dayton's suburbs

Homeowners tell sad tales of lost equity: One man says he lost about $130,000

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By Ken McCall, Staff Writer Updated 1:07 PM Monday, August 17, 2009

Foreclosures aren’t just for the inner city anymore.

As the pain of the Great Recession has spread across the country, the effects are being felt well into suburban hinterlands.

In fact, more than half of the foreclosed homes sold at sheriff’s auction in Montgomery County during 2008 and the first half of 2009 were not in the city of Dayton, a Dayton Daily News analysis has found. Of the almost 3,800 homes auctioned during the period, almost 2,200 — or 58 percent — were in Dayton’s suburbs.

The area in the county with the fastest rate of growth in foreclosure sales was the 45458 ZIP code, which makes up southern Centerville and Washington Twp. From 2006 to 2008, foreclosed homes auctioned in the exurban ZIP code more than tripled, from 12 to 43.

And because homes in the southern suburbs tend to be more expensive, neighborhoods in the outer rings have seen more equity lost in the foreclosure auction process.

Just ask Bob Schutte.

The 66-year-old retiree from GM has the painful distinction of having lost the most on his home in a sheriff’s foreclosure auction in a neighborhood that was second in the county in lost value. Value loss, for the analysis, was appraised value minus sale price at auction.

In March 2005, Schutte and his then-wife Lynn bought a 3,500-square-foot, three-bedroom, three-bath house on Sawtry Lane just off Sheehan Road in Washington Twp. for $301,000. Four years later, it sold at auction back to Union Savings Bank for $184,000.

“It was an abomination,” Schutte said, standing on the sidewalk, looking at his former dream house. “When I heard they bought it for $184,000, that just killed me.”

Schutte’s story is an example of the economic shock waves hitting Miami Valley’s suburbs.

In the census tract that contains Schutte’s home, which includes the Golf Club at Yankee Trace and surrounding developments, 40 homes sold at sheriff’s auctions in 2008 and the first half of 2009. The total loss from the sales was more than $1.4 million, or an average of $35,566.

The Schuttes lost a lot more than that.

From the day they moved into the house, he began working on it. Schutte said he landscaped the property, replaced all the light fixtures, and finished the basement, putting in a media room, a bar and 12-by-12-foot cedar closet. In all, he figures he and his now-ex wife put another $70,000 into the house.

“It was my American Dream, and I put everything into it,” Schutte said. “We ended up losing about $130,000, and that’s not even counting the legal fees.”

The tale of Schutte’s descent into foreclosure is one familiar to those who work with people in mortgage trouble. Separation and divorce led to personal and financial difficulties. In addition, an adjustable rate mortgage on two rental properties he owns in Union sent his payments up by $700 a month. Since he wasn’t getting his mail he didn’t know he was falling behind until foreclosures had been filed.

Schutte, who suffers from a number of serious medical problems, ended up filing for Chapter 13 bankruptcy. He’s been making payments of $2,600 a month for the last two years to pay off all his debts, he said, and has only four more left.

But in the process he lost his house, his car and his savings. He was able to keep his rental duplexes in Union, one of which he now calls home.

“It broke my heart,” Schutte said, looking back at his former house. “It’s everything I wanted in my life, and I finally got it. But I walked out of it with very little.”

Jim McCarthy, president and CEO of the Miami Valley Fair Housing Center, said for the last 18 months his agency has been dealing with an increase in people from the suburbs with mortgage and foreclosure problems.

“The number of people who say I think I have a predatory loan, that’s way down,” McCarthy said. “It’s more people saying I just can’t afford my mortgage anymore.”

Oftentimes, he said, the crisis is brought on by loss of a job, or loss of income.

“These are not first-time homebuyers,” McCarthy said. “These are folks who in many cases have lived in their homes for eight, 10, 12, 18 years. It’s rare to see people who haven’t been in their home at least 36 months.”

Many of these people, like the Schuttes, had an adjustable rate mortgage that rose sharply at a given date.

These “artificially low” interest rates, were taken out with the assumption that when the reset date came the owners would be able to refinance. But now refinancing is unavailable to many.

“Let’s say you borrowed $200,000 for a suburban house, and for the first five years you’ve been paying 3.5 percent, or $750 a month,” McCarthy said. “Suddenly the loan resets and now you’re paying 6 percent.

“So your payment goes from $750 to $1,500 a month. In the meantime, you’ve taken a $30,000 loss. What are you going to do?”

A study released last month by the Brookings Institution found unemployment in the suburbs grew at nearly the same rate as in the cities, and the number of suburban residents seeking food assistance grew faster rate than in the city.

In the Dayton metropolitan statistical area, the study found, suburban unemployment grew by 4.4 percent between May 2008 and May 2009, compared to 4 percent in the city. Overall unemployment was 12.6 percent in Dayton and 10.9 percent in the suburbs.

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This type of story should teach what many of us already know - live within your means and then, if you have financial issues, at least you were making smart decisions. Bad things can happen to anyone, but we control more than most think.

wealth
1:06 PM, 8/16/2009

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The economy is not improving . Look at California .. foreclosures are still rising and that means probably the same for the midwest . There are too many predatory mortgage loans or financing companies out there taking advantage of people in need ... More rules or regulations for these companies need put into place to protect the public's interest . Property taxes are too high in many of the cases too .

Jon
1:00 PM, 8/16/2009

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APR's are predatory loans period, the system is designed to fail in due time when sparked by the world bank with help of crooked bankers and Wall St. So to say the loans are not available while banks have billions of bailout funds is absurd. Lets not dress up the real cause for the crooks on Wall St now, ops I forgot these crooks pay the media outlets salaries, my bad :P
All while feds print more money/inflation with the hidden tax.

freshmeat
8:30 AM, 8/16/2009

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Mr.McCall should have noted that the minimum bid a property can sell for, at sheriff's auction, is 2/3's of the appraised value. The lender typically will bid up to the amount of the outstanding mortgage, but only does so when they are bidding against someone else for the property. Comparing the appraised value to the sales price at auction is meaningless, when "purchased" by the lender. The author shows as much understanding of this subject as the gentleman he interviewed.

bobby
8:08 AM, 8/16/2009

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Brian said it well.

Janice
7:11 AM, 8/16/2009

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