The foreclosure picture for Maui is "not pretty at all" with nearly a thousand single-family homes and condominiums currently pending foreclosure - nearly double the number from a year ago - said the executive director of a non-profit housing organization Thursday.
Another survey showed Kihei leading the state in new foreclosures last month, with 110.
This gloomy financial scene, including short sales and a willingness by some financial institutions to dispose of properties at a loss, continues to drive down housing prices. Still, with little new home construction, these listings are supplying the inventory that has brought a kind of normalcy to the real estate market, according to those involved in Maui housing and foreclosures.
The lower prices are great for buyers but not for others with adjustable rate or exotic mortgages tied to rising home values. Many have lost their homes because of lost jobs or reduced hours; others are seeking advice on loan modifications and short sales.
The foreclosure situation has not yet turned a corner on Maui, said John Andersen, executive director of Na Hale O Maui, a nonprofit organization that converts foreclosed properties into affordable housing.
There are currently 946 pending foreclosures of residential properties; there were 482 last August.
"Nine-hundred-forty-six is the highest number we have ever recorded for pending foreclosures," said Andersen, who has been tracking Maui foreclosures since September 2008 to identify eligible properties for his program.
He said pending foreclosures had leveled off in June and July but started going up again with a rush of new recordings.
"The big picture is that it is continuing to go up," he said in a phone interview Thursday.
Part of the problem is that lenders continue to dispose of their properties slowly, said Andersen, who regularly attends foreclosure auctions on the courthouse steps. At a recent auction, there were 30 properties listed, four were sold; two were canceled, possibly the result of a short sale or successful loan restructuring; and the rest were postponed to another month. Auction listings number 60 to 80 postings on Fridays and 30 to 40 on other weekdays, with most postponed.
The backlog continues to grow as new foreclosures flow in.
"The water behind the dam keeps rising," Andersen said.
His view is that banks are likely postponing auctions and keeping properties in a "pending mode" to manage the "negative event" of a sale on their books.
The foreclosure situation will not take a turn for the better until the number of pending and new foreclosures decreases for several months in a row, he said.
"With a pent-up backlog . . . there is still a lot of distressed properties that have not been absorbed by the marketplace," Andersen said.
Many of those homes are in Kihei, which online foreclosure marketplace RealtyTrac reported had the highest number of new foreclosure filings in the state in July, with 110. Kailua-Kona was second with 74, and Lahaina third with 73.
Andersen points to the growth of Kihei during "the boom years with a lot of properties sold at peak prices" to explain the large number of new filings. There was a lot of real estate activity at high prices, which put many homeowners in distress when prices plummeted. Homeowners were left with mortgages higher than the values of their properties.
Although there are lots of condos in South Maui, Andersen said most of the foreclosures were on single-family homes.
"These are not the second homes. These are resident homes, working families getting displaced," he said. "That is going to hurt the economy."
There were a total of 284 new foreclosure filings in Maui County in July, second highest in the state, RealtyTrac reported. Honolulu had 361 new filings, the Big Island 209 and Kauai 76.
In Maui County, following Kihei and Lahaina were Wailuku with 37 new foreclosure filings, Kahului 19, Makawao 17, Haiku 11, Kula five, Hana three, Lanai City three and Kaunakakai two.
Dave Jorgensen, an attorney in private practice who also is the attorney for the Realtors Association of Maui, often receives two to three calls a day about the foreclosure process from homeowners in trouble.
He hears from speculators who were "rolling the dice" and really couldn't afford the properties in the good times and certainly not now in the bad times; homeowners who claim lenders were negligent for qualifying them for loans that they could not afford and from residents trying to navigate the loan modification process, which more often than not are unsuccessful.
"They are all bad situations," Jorgensen said. He notes that some homeowners "work hard, have good jobs" but get caught up in an adjustable rate mortgage, which they cannot refinance because their property values have taken a dive.
"There is nothing they can do" as their mortgages payments rise with their interest rates, he said.
One homeowner in that situation told him, "I just want to let it go. I'm just going to walk away. I can't afford to modify," Jorgensen said.
Amid all of these calls over distressed properties, he has received some from homeowners who've had their homes foreclosed on but are being allowed by the bank to stay in the homes for free until the property is disposed of.
"Better to have them in there than have the place destroyed," Jorgensen explained.
That would keep values up as lenders list their bank-owned properties - and there appear to be more such properties being listed, said Kenneth Hayo, principal broker for Century 21 All Islands. His company handles real-estate-owned (REO) properties from Fannie Mae, Freddie Mac and Bank of America.
"As fast as they come on they are being sold," he said Thursday. A good percentage have a buyer in one to two weeks.
"Because banks don't want to keep the properties on their books forever," they are willing to reduce their prices, said Hayo. In a similar vein, Na Hale's Andersen said he's noticed recently that banks are willing to accept less than full credit, or the total amount owed, at auction.
That's not good for traditional sellers, who also are competing against REOs and short sellers. For buyers, there are some deals.
"As bad as foreclosures are because some people are out of their homes or can't afford to stay in their homes, if there is a bright side it's that bank-owned properties are being bought by first-time buyers and owner occupants," he said.
The influx of REOs has brought some stability to the real estate market this year, Hayo indicated. Though there is a lack of new home construction, the void has been filled by REOs and short sales.
"I would say it (the real estate market) is back to a regular real estate cycle, when looking at volume of sales to volume of listings," he said. "We are getting back to a normal market."
But it is a different market than in the past. Expertise in short sales and REOs were not as critical in the past. In the current market, Realtors and consumers "are having to re-educate themselves in how real estate works," he said.
* Lee Imada can be reached at leeimada@mauinews.com.
