Debra Brown almost lost her house of 20 years earlier this year. She and her husband both lost their jobs, and they got behind on their house payment.
They were able to hang on with help from the Urban League of Kansas, but others haven't been as fortunate.
Foreclosures in Sedgwick County surged to 367, a 10-year-high, in September. The increase was fueled in part by the foreclosure of an entire subdivision in Bentley, but those who counsel homeowners such as Brown say they are seeing more people come through their doors for help.
"It started picking up this summer," said Wichita bankruptcy lawyer Bill Zimmerman. "It's just kind of mounted and mounted. You can see it coming. People are tired. They've hung on as much as they can hang on."
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Sedgwick County leaders are keeping a close watch on foreclosures, which can affect housing values and, in turn, the taxes coming in to government checkbooks.
Some studies estimate that for every house in foreclosure, property values on the block decrease 1 percent. Foreclosures also increase blight as properties sit vacant. Grass and weeds grow; utilities get shut off; pipes freeze and burst; vandalism can increase.
"The number of foreclosures can cause significant strains on every local governmental body and on the state of Kansas," Commissioner Karl Peterjohn said, adding he is "absolutely" concerned.
Government is dependent upon property tax revenue, and "if assessed values go down, you have to raise the mill levy or cut back on your operations," Peterjohn said.
Sedgwick County appraiser Michael Borchard said his office is studying how foreclosures are affecting property values locally.
The county saw 3,334 properties, valued together at more than $296 million, foreclosed on from January 2008 through September of this year. Wichita's foreclosures numbered 2,615.
During that period, 900 foreclosed properties were valued at $50,000 or less (many of those are clustered north of Kellogg between Oliver and Broadway); 931 valued between $50,001 and $75,000; 573 valued between $75,001 and $100,000; 642 valued between $100,001 and $150,000; 153 valued between $150,001 and $200,000; and 135 valued between $200,001 and $8.2 million.
"We're concerned," commissioner Dave Unruh said. "We know that it has a downward spiraling effect not only on the neighborhood itself but attitudes in general, which in turn has an effect on the community. If you have lots of foreclosures or if you have several in a neighborhood, they end up having a downward effect on the values."
Frustrated with lender
Brown said she was laid off in January from one of Wichita's aircraft plants. Her husband was laid off later from another plant.
"We got behind on all our bills, and the house happened to be one of them," Brown said.
Their mortgage was a subprime loan — subprime loans carry high interest rates and are used by people who can't get a loan elsewhere —and the Urban League helped guide them through a loan modification that reduced their interest rate to 5 percent, which in turn shaved $300 off their monthly house payment, she said.
She and her husband called their lender when they were laid off to explain their situation and ask for help. Brown said they thought the lender was working with them, but then the lender kept losing paperwork they had sent in for documentation.
Brown said that was frustrating; Kevin Andrews, a housing counselor at the Urban League, said it is common.
Then, the notice of foreclosure arrived.
"They really don't waste a lot of time," Brown said.
They had lost their jobs. The idea of losing their home, too, was overwhelming.
"To know that I've been in my house for 20 years and to know that I'm going to lose it and I don't know what the next step is going to be.. "Brown said.
Lenders are beginning to do more modifications such as the one that helped the Browns, said Jeff Witherspoon, executive director of Consumer Credit Counseling Service in Wichita and Salina. The agreements allow people to modify their loans, most often their interest rate.
People with less-than-stellar credit often have to turn to subprime loans to buy a home. But the high-interest loans can cause further problems for people on the edge of financial problems.
Witherspoon said his office, which provides delinquent mortgage counseling, is seeing more people "upside down" on their homes, meaning they owe more than their home is worth, a problem common with auto loans.
"I think a lot of it is we're still seeing a lot of layoffs and a lot of people that were laid off, the fact that their benefits are running out or are reduced," Witherspoon said. "Now they're starting to face the reality of the situation where they just can't keep their house."
Zimmerman helps people keep their houses through Chapter 13 bankruptcies, which allow homeowners to spread out past-due payments.
He also has noticed that lenders are beginning to do more loan modifications. A federal government program gives incentives to lenders that work with homeowners.
"It seemed to take them a long time to do what Congress asked them to do," Zimmerman said. "Modifications have helped some people. But the process is so frustratingly hard. And when you're laid off, there's nothing you can do. If you don't have income, you can't make a house payment."
But Zimmerman said not everyone he's seeing in his office has been laid off.
"I think a lot of it, and some of us have talked about it, is people are just tired," he said. "They're deciding 'I don't need a big house' or 'We just don't need this debt load.' I think people are frustrated that things aren't getting better quicker. They've said the heck with it. They're going to go to plan B."
There's no doubt the foreclosure rate is rising in Sedgwick County, but how that rate will affect the community remains to be seen, said Wichita State University professor Stan Longhofer, the Stephen L. Clark Chair of Real Estate and Finance at Wichita State University and director of the Center for Real Estate and the W. Frank Barton School of Business.
He calculates foreclosure rates by comparing the number of foreclosures with the number of mortgages filed during the past five years. Going back to the late 1980s, he said, there was one foreclosure per 1,000 mortgages filed the previous five years. That rate held locally until about 1992.
From 1992 to 1994, "there was a pretty sharp drop to about one-half foreclosure" per 1,000 mortgages. Starting in the late '90s through 2008, the rate rose steadily to 1.2 foreclosures per 1,000 mortgages. Last year, "this rate really jumped up" and there was a sharp spike to 1.5 foreclosures per 1,000 mortgages, he said.
"That jump is very consistent with the layoffs we saw starting in 2008. The foreclosure rate over the last year or so has been substantially higher than it's been in recent years," Longhofer said.
Foreclosures have two major effects on neighborhoods and communities, Longhofer said.
One is a "distress" effect, which Longhofer said is not that much different from any other house that is neglected or abandoned, say the house on your block where the owner never mows or paints.
"The second effect that foreclosures have is what I call a supply effect," Longhofer said. "So imagine if you're trying to sell your house and you've got three other homes that are on the market on your block. That's going to affect the price you get."
Foreclosed houses generally are in poorer shape than a house for sale that isn't in foreclosure, Longhofer said. People selling their homes because they are moving or moving up to a bigger house typically spruce up their home for sale while people facing foreclosure are just trying to hang on.
"Those two homes are going to sell for different prices," Longhofer said.
As houses sit empty, their condition worsens. "The power was turned off, so the sump pump didn't work, and the basement flooded," Longhofer said. "You hear those anecdotal stories on a regular basis."
Research suggests that in neighborhoods where there are a lot of foreclosures, "the impact is greater. If you have an isolated foreclosure, somebody will buy the home and bring it up to the average property value in the neighborhood. When you have large concentrations of foreclosures, the payoff of reinvesting in the house can be brought into question. That has a deeper impact on a neighborhood.
The Browns worked through a temporary modification agreement and now are on a permanent plan.
Her husband, who was laid off from Cessna after being laid off from Boeing, found work earlier this month.
"Thank God we're trying to pick up the pieces, which is good," she said.