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For the taking: who's buying up all the foreclosed homes.


Farzana Alamgir bought a toxic asset that is now her home. It's in a small residential circle near the Beaver Meadow Golf Course in Concord.

"It's a good time to buy," said Alamgir. "Of course, I feel uncomfortable knowing that someone lost this house."

The previous owner had paid $280,000 in 1995 for the home, taking out a mortgage from now-bankrupt First Magnus Financial Corp., an Arizona company that used to originate loans without verifying income, selling them off on the secondary market.

This borrower apparently got in over his head, owing Fannie Mae--which either bought or insured the loan--$220,000 before it foreclosed on the property last year.

Alamgir and her husband, who moved from Ohio to take jobs with the state government, had their eyes on the property--at the time appraised at $296,000--and watched as the price dropped. They made their move and dosed the deal on Feb. 2, buying the house for $238,000.

Did Fannie Mae get, or did Alamgir pay, pennies on the dollar in the transaction? No.

"It wasn't a huge drop in price, but it was reasonable," she said. "When we looked at foreclosure, we had the impression that they were dirty and damaged and not very well taken care of. But Fannie Mae did a great job fixing it up."

Individuals and investors

While not all "toxic assets" have such a happy ending, it is more typical than you might expect. An NHBR examination of 3,500 transactions in New Hampshire in 2008 - based on information provided by Real Data Corp. and collected from county Register of Deeds offices around the state--shows that nearly half the homes foreclosed on last year were sold by the end of the first quarter of 2009.

The foreclosed homes that did sell sold on average in two weeks, and the institutions that owned them sold them for 16 percent less than the amount owed to them.

According to the Real Data statistics, the average New Hampshire home in foreclosure was assessed at slightly over $195,000. And the average property sold in foreclosure went for $157,000.

Furthermore, nine out of 10 of the homes sold in foreclosure in the state went directly into the hands of people like Alamgir, and not speculators.

Of course investment companies are snapping up some of the properties as well.

One, WWM Properties LLC, bought five foreclosed properties in the past year. The manager of the firm, Michael Wesson, of Manchester, declined comment, saying he wasn't one of the big investors.

Others who bought up properties as an investment could not be reached or did not return phone calls. Among them are William Dube, a Nashua developer, and Gabriel Bilc, a Manchester developer, who was a partner on the purchase of four properties with David Montour. Montour, who listed his address as Goffstown, bought 11 foreclosed properties in 2008, by far the largest individual buyer in the state. Montour could not be reached for comment.

But most of the investors bought less than a handful of properties last year, and they live close to the properties they acquired. One, who asked not to be named, owns a small restaurant in Bow. He bought two small multifamily dwellings and plans to fix them up and rent them out. A Chinese-American, he floated the idea of selling them last time he was in China, but no one was interested in the relatively small properties available in New Hampshire. The big money wants larger apartment complexes that are available in places like Atlanta and Miami.

Big banks

Still, half of the foreclosed properties from 2008 are not yet sold, and, since they still remain, they are the hardest properties to sell. And while the loans backing their purchase may have originated through bankrupt companies now enshrined in the subprime hall of shame--Ameriquest, Countrywide, Washington Mutual--the mortgages are now held by some of the biggest institutions in America, recipients of billions of dollars of federal bailout money.

Fannie Mae and Freddie Mac--formerly quasi-governmental companies now taken over in full by the U.S. government and infused with billions of dollars of federal money--foreclosed on some 632 New Hampshire properties, with a total value of $122 million.

But Fannie and Freddie are not alone. Citigroup, which took over Ameriquest, now holds 188 troubled loans, JP Morgan Chase, which took over the bankrupt Washington Mutual, holds 147 of the troubled loans. Bank of America, inheritor of Merrill Lynch and Countrywide, holds 113 loans. Wells Fargo, which now owns Wachovia, holds 112 of the loans.

On paper, some of those forcing foreclosure are the investment vehicles that bought the bundled foreclosures, such as CWABS and Structure Asset Securities Corp. and MASTR Asset Backed Securities. But while these anonymous entities hold rifle, their ownership often can be traced back to other mortgage companies and banks on the list.

For instance, several properties listed as belonging to CWABS went to the Bank of New York as trustee and its mailing address was Countrywide Home Loans, according to the foreclosure deed. MASTR Asset Backed Securities can be tracked to US Bank as trustee, with the mailing address of Option One Mortgage Corp. Structured Asset Securities Corp. also can be traced to US Bank--its address is the same as that of the bank's corporate headquarters in Cincinnati.

These institutions--despite all the various government programs and private promises--are continuing to foreclose at a voracious rate.

In March, according to Real Data's statistics, 833 foreclosure notices were served in New Hampshire, compared to 450 in the March 2008. Not all notices result in foreclosures, but that figure does not bode well for the number of foreclosures going forward.

According to Real Data, the top lenders appearing on the foreclosure schedule are the same old names--Fannie Mae, Walls Fargo, Deutsche Bank, US Bank, HSBC, Bank of America and IP Morgan Chase

Two weeks prior to the end of the first quarter of 2009, 722 New Hampshire foreclosures were recorded--slightly less than the 755 foreclosures recorded in the entire first quarter of last year. And last year was a horrendous one as far as foreclosures go in New Hampshire, with some 3,563 foreclosures recorded, compared to 2,072 in 2007, 1,060 in 2006 and 459 in 2005.

More to come

The coming foreclosures are as toxic as those already on the books--more toxic, perhaps, because they will mean even more homes looking for buyers in an already saturated market, driving down the price of each sale.

Fannie Mae--the initiator of the most foreclosure proceedings in the state by far--last month said it wouldn't foreclose on homes for loan modifications. But the company has 65 foreclosures scheduled from April 2 to May 21--the largest number in the state, according to Real Data.

Spokesperson Amy Bonitatibus notes that Fannie Mae also is the biggest lender or backer of loans in the country, so it's only natural that it would have more foreclosures.

Nationwide, Fannie foreclosed on 95,000 homes last year, but sold some 65,000 of them, with an average disposal in 90 days, according to Bonitatibus. Most of the homes are sold though specialized brokers who have had relationships with the agency for years.

Thus, in the world of foreclosed properties, someone's loss is another person's gain, with a whole new world of affordable real estate opening up.

"I can tell you it has been a brisk business," said one of the 15 or so brokers who specialize in foreclosure sales in the state. She was told by her agency that she could not talk on the record.

This broker claims the sale of some 115 foreclosed homes in the last year and has another in the hopper. Yes, some of the homes are still occupied by their former owners, but Fannie Mae offers between $2,000 and $3,000 to those who move out without a fight.

"There are very few people who don't take cash for keys," said the broker.

The main thing is not to shove money in their hands, "but to just talk to them and let them tell their stories," the broker said.

What is the most heartbreaking are the renters, the broker said, "who have been paying rent on time for years to their landlord and are suddenly without a home through no fault of their own."

Fannie and Freddie used to evict them as a policy matter, assuming it was easier to sell an empty house. Now both agencies maintain leases while selling such properties.

Fannie and Freddie are two of the best companies to work for, the broker said. They both put a lot of money into fixing up the properties ($6,500 on average, according to Bonitatibus). Many others are not as experienced and their "titles are a nightmare," the broker said.

It's the broker who has to put up the money to fix up properties, and reimbursement can take months. Still compared to what other real estate brokers are facing these days, the broker said, she can't complain.

Homes that Realtors can't sell go to liquidation companies--the largest being Real Estate Disposition Corp., or REDC, based in Irvine, Calif.--that sell the homes all at once at auction (or work out deals right before an auction.)

On March 7, REDC auctioned of some 62 New Hampshire homes for a total price of $4.2 million--an impressive one-day haul, but it makes barely a dent in the more 1,700 foreclosed homes available in New Hampshire. (Nationwide, the firm has sold almost 33,000 homes, but there have been more than 3.3 million foreclosures.) REDC spokesman Rick Weinberg said the company won't get back to the Granite State until the fall.

Still, said Weinberg, his company eventually expects to move some 85 percent of the properties they do put up for auction.

"We take a vacant house to one paying mortgage and property taxes and hiring landscapers. It's a real boost to the economy," he said.

Some abandoned homes festering in foreclosure

It's one thing when a building is foreclosed. The issue becomes more complicated when a foreclosed building, or an apartment within a foreclosed building, is uninhabitable.

Nashua city code enforcement officers faced that when a building on Pine Street went into foreclosure One of the apartments inside had to be condemned.

Nelson Ortega, the city's code enforcement department manager, doesn't blame the landlord.

"He's a nice guy. We're not out to mess with him or anything," Ortega said of the landlord. The tenant in question dropped off the rent check each month, and the landlord had no idea of the condition inside, Ortega said.

The stench inside the apartment was so bad that code inspectors had to wear breathing masks. Trash was strewn everywhere, a sign of the type of severe hoarding associated with mental illness.

The tenant had abandoned the apartment, and the mess inside. Because that occurred during winter, residents who lived downstairs kept their windows shut and didn't detect the odor from above.

A foreclosed building lands in the ownership of a bank. Banks distant from the property are required by law to hire a property manager or representative who lives within 25 miles, Ortega said.

When the foreclosed property has code violations, the city has to make the bank realize that no one can occupy the building until the problems are corrected, Ortega said.

"When an apartment becomes vacant, it goes away for us. We don't deal with vacant units. But when it becomes occupied, code becomes involved again," Ortega said.

The same issues apply to single-family homes.

Take for example a house at 30 Nagle St., which for months has sat foreclosed and unoccupied. As many homeowners have done during the economic crisis, the owner abandoned the house, walked away from the mortgage and moved to Tennessee, Ortega said.

The mortgage now is being held in Arizona, he said.

The code issue stood out like a sore thumb, Ortega said. The foundation wall had collapsed. Ortega guesses that it will cost less to raze the house than to repair it.

As of the end of March, code officers were handling 28 cases of foreclosed properties with code violations. They included apartments, condominiums and single-family homes. That's up from just 15 in late winter.

"We're going to start heating about more foreclosed properties," Ortega said. "The snow will start to melt, the grass will start to grow, and the neighbors will complain and wonder what's going on. We'll see some more," he said.


Bob Sanders can be reached at
Top 20 initiators
of foreclosures
in N.H.

This is a list of the top 20 companies by number
of foreclosures in 2008, totaling slightly
less than a third of the institutional foreclosures
in the state, both in number and
amount. The amount, based on the foreclosure
deed, usually represents the amount
owed to the bank by the lender, plus interest
and late fees. More than half of these properties
remained unsold toward the end of the
first quarter of 2009.

FROM OTHER LENDERS)                                  #          $

FANNIE MAE                                           426     83,957,078
FREDDIE MAC                                          206     39,158,494
CITIGROUP (AMERIQUEST, LONGBEACH, ARGENT)            188     34,413,956
  STEARNS, EMC MORTGAGE)                             147     30,345,932
CWABS (BUYER OF MORTGAGE NOTES)                      119     20,367,952
  FIRST FRANKLIN, LASALLE)                           113     21,433,578
WELLS FARGO BANK (WACHOVIA)                          112     23,580,169
U S BANK                                             103     19,232,927
HSBC (HOUSEHOLD FINANCE CORP, BENEFICIAL)             89     14,263,731
NH HOUSING FINANCE AUTHORITY                          81     10,837,533
AURORA LOAN SERVICES (LEHMAN BROTHERS)                74     15,510,133
MORGAN STANLEY                                        70     12,094,602
DEUTSCHE BANK                                         53     11,138,373
SAXON MORTGAGE SERVICES (NOVASTAR)                    49      8,894,067
NEW CENTURY (CARRINGTON MORTGAGE)                     47     10,105,699
SOUNDVIEW                                             43      8,025,435
  (BUYER OF MORTGAGE NOTES)                           36      6,858,193
  MORTGAGE NOTES)                                     36      6,854,802
  LENDERS)                                         3,342   $642,000,000
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Title Annotation:ECONOMY
Author:Sanders, Bob
Publication:New Hampshire Business Review
Date:Apr 10, 2009
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