Beaufort News

Foreclosure halt expected to have little effect in Beaufort County, local experts say

South Carolina homeowners facing foreclosure are getting a brief reprieve.

Some people involved in the process, however, are unsure how much that will reduce the torrent of foreclosures in Beaufort County, which had the highest foreclosure rate in the state in the first quarter of 2011.

The S.C. Supreme Court last week ordered a temporary halt in foreclosures on owner-occupied homes.

The order, which took effect Monday and remains unless amended or rescinded by the state's chief justice, is aimed at helping borrowers work out loan-modification plans with lenders.

Under the order, attorneys for lenders who want to foreclose are required to certify that the borrower was notified of the right to seek a loan modification, had a fair opportunity to respond and that the lender received and examined all documents and records required from the borrower to evaluate eligibility for foreclosure intervention.

Or they could certify after 30 days that the borrower refused to participate, and only then could the foreclosure proceed.

The order could help some people stay in their homes, but its impact probably will be limited in coastal areas that have fewer owner-occupied homes and more second homes and investment properties, said Ryan Bassett, owner of hiltonheadforeclosures.com and a Realtor with Charter One Realty & Marketing.

"Unfortunately, I don't know that it will solve the problem," Bassett said.

On Hilton Head Island, for example, less than half the homes and condos sold in May's foreclosure auction were listed in tax records as primary residences, he said.

In Beaufort County, 71 percent of the 646 properties in some stage of foreclosure in the first quarter were owner-occupied, according to RealtyTrac, a California firm that compiles foreclosure data.

Even if a home is occupied, the order only requires lenders to document communication with borrowers. It doesn't dictate that banks modify loans, something they have been reluctant to do, Bassett said.

Catherine West Olivetti, a Hilton Head attorney who represents owners of distressed property, applauds the order's goal of enhancing communication between borrowers and lenders but fears it could further complicate an already complex process.

Lenders often foreclose even after granting loan modifications, so the order could simply clog the system with cases already destined for distress, she said.

"I don't think we will get through this crisis by slowing it down," Olivetti said.

Others were optimistic the order would make a difference.

"We think this will help stem the foreclosure wave," said David Geer, executive director at North Charleston-based Family Services, which offers federally funded loan counseling.

Lack of communication between lenders and borrowers has been a huge problem, according to Sue Berkowitz, attorney and director of the S.C. Appleseed Legal Justice Center, an advocacy group for low-income people. The order is a recognition of that problem, she said.

"I think it could ultimately end up saving thousands of peoples' homes," she said.

Judge Marvin Dukes, Beaufort County master in equity, said the order could be viewed as worthwhile even if the results are modest.

"Even if it prevents just a few people from losing their homes, it's a success," he said in an e-mail.

Successful foreclosure intervention also benefits lenders by saving them carrying costs -- such as association dues, taxes, maintenance and insurance -- they pay if they foreclose on property, Dukes said.

This is the second time the court has halted foreclosures since the U.S. real estate market collapse began. Chief Justice Jean Toal also ordered a temporary halt to certain foreclosure proceedings in 2009.

Beaufort County's total of 646 properties in foreclosure in the first quarter was down from 866 in the same period a year ago and 685 in the fourth quarter of 2010, according to RealtyTrac.

Staff writer Josh McCann and David Slade of postandcourier.com contributed.

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