Foreclosures in Fairfax County have ripple effect


As he does about two times a week these days, attorney Eric D. White stands just outside the main entrance to the new Fairfax County Courthouse and holds an auction of foreclosed houses located throughout the county.

Despite the handful of potential buyers present Monday morning, no one made a bid as evidenced by White’s uttering the same phrase over and over, about 10 times in all, once for each of the homes for sale by banks or other lenders that have repossessed the houses from owners unable to keep up mortgage payments.

“Going once … going twice … and sold to the note holder,” said White, who works for the Virginia Beach law firm Samuel I. White, PC.

Attorney Eric D. White of the Virginia Beach law firm Samuel I. White PC, stands outside the main entrance to the Fairfax County Courthouse on March 10 prior to holding a public auction of foreclosed homes. – Times Staff Photo/Frank Mustac
With home foreclosures rising at alarming rates throughout the United States, including Fairfax County where foreclosures have increased by nearly eight times from about 600 in 2006 to more than 4,500 in 2007, purchasing houses with mortgages in default no longer seems as tempting as it was a few years ago at the height of the over-heated real estate market. In many cases, auction prices are substantially more than market value.

The high foreclosure rates are also having a devastating ripple effect on homeowners, a good portion of whom were speculators in the business of flipping houses for quick profit; on renters caught in the middle and facing eviction notices; on local governments with the bulk of their revenue coming from real estate taxes; and on neighborhoods beginning to see empty, unkempt residences.

In Fairfax County, foreclosures are especially concentrated in Springfield, Herndon and Centreville. Some of the homes in those areas represent recent purchases by landlords who converted the residences into illegal boarding houses, often filled with illegal immigrants.

Accelerated attempts by county officials to crackdown on such residences may be having the unintended consequence of forcing the homes into foreclosure since landlords are less able to make mortgage payments with the loss of tenants.

Fairfax County Executive Anthony Griffin recently called the skyrocketing foreclosures a very complex subject.

Many professionals close to the issue are advising property owners who are having trouble paying their loans not to ignore notices and letters from the bank.
“Don’t get ostrich syndrome. Take your head out of the sand and make some calls,” said Kevin R. Hildebeidel, an attorney in Fairfax City.

“Call your lender. Call the trustee,” he said. “The banks will work with people.”

“Right now there are a lot of forbearance programs. There are a lot of loss mitigation programs, Hildebeidel said. “These banks do not want the houses, and people need to understand that.”

Some banks are adding missed mortgage payments to the back end of loans, or allowing homeowners to gradually pay back missed remittances.

“A lot of people have also looked at short sales,” said Hildebeidel describing a scenario by which the homeowner finds a buyer who is offering a purchase price that is less than the value of the mortgage.

A caveat is that the difference between the outstanding mortgage amount and the purchase price may be considered taxable earned income and the homeowner could wind up owing the IRS.

Perhaps most vulnerable are unsuspecting tenants facing eviction because their landlord did not pay the mortgage, yet collected rent and often ran off with the security deposit.

“These tenants are people playing by the rules,” Hildebeidel said. “They’re paying their rent. They’re not defaulting at all.

“I have a great deal of sympathy for them. They’re the people that need some help,” he said. “Those are the people, who in my opinion, that Congress and politicians ought to be focused on.”

Times staff writers Layla Wilder and James Cullum contributed to this article.