Foreclosure
ERIK PETERSEN/CHRONICLE Bev Axelsen poses for a photo with her dog inside her Livingston home. Axelsen is hopeful she will be able to keep her house despite the threat of foreclosure.

It was two days after Christmas when Bev Axelsen received her foreclosure notice.

"I was devastated," Axelsen, 59, said Friday in the cozy, plant-filled Livingston home she has owned for nine years.

Axelsen, who works at the nonprofit Counterpoint Inc., assisting developmentally disabled adults in group homes, said the past year has been an emotional roller coaster.

She spent months phoning the giant international bank that holds her mortgage, talking to a different representative each time, explaining her situation, seeking loan modifications, sending in financial records over and over, being told her papers were never received, and often getting rude, unsympathetic treatment.

Then came the "notice of trustee sale" by certified letter. The little house she loves is to be auctioned off on May 2. She has contacted an attorney and plans to fight.

"I'm going to every length to save it," Axelsen said.

She is one of thousands of Montanans and a record 2.9 million Americans whose properties faced foreclosure in 2010.

In Gallatin County, filing of foreclosure or trustee sale notices accelerated to a record 830 last year, according to the county clerk and recorder's office. That is 18 percent higher than 2009 and a dramatic 157 percent jump from 2008. The filings include residential and commercial real estate and raw land.

In Montana, only Flathead County appears to have had more foreclosure notices in 2010, with 1,177 filings recorded by its clerk and recorder's office. Missoula County listed 620. Yellowstone County had 593.

For the month of December, Park County had the fourth-highest number of foreclosures in the state, according to RealtyTrac, which compiles foreclosure data nationwide.

Montana is in much better shape than states like California, Florida and Michigan, which led the nation in foreclosures in December. That month, Montana was a distance 45th in new foreclosures nationwide.

Not every foreclosure ends in a sale on the courthouse steps.

Over the past decade, 48 percent of foreclosure notices in Gallatin County have been canceled. Cancellations can mean the owners came up with the money they owed, or worked out a more affordable loan with their lender, or managed to sell the home before the foreclosure date.

Yet often, cancellation means only a temporary postponement of the heartache of foreclosure, said Beverly Johnston, branch director and credit counselor with the Bozeman office of the nonprofit Consumer Credit Counseling of Montana.

"I keep a stock of Kleenex in my office," Johnston said.

Her job as a consumer counselor is to give people free help, explain their options and go to bat for them with lenders.

Despite their best efforts, Johnston said, only about 20 percent of the homeowners she's worked with succeeded in winning a loan modification to make their monthly payments affordable.

Many families end up having to file for bankruptcy, move or split up, with the husband leaving to seek work someplace else.

"It's a huge strain on families," Johnston said.

Foreclosure even appears to have played some role in the case of Judd Schwartz, 36, a Belgrade-area house painter arrested in 2009 after robbing a Bozeman bank in a Halloween mask. For the robbery and for selling methamphetamine, he was sentenced to 13 years in prison.

Before the robbery, Schwartz sought financial help from Johnston. His car was repossessed, he was seeking bankruptcy to erase credit card debts, and he was trying hard to hang onto his house.

"'I built it, I want it, I love it,'" he told Johnston.

Why now?

The reason Gallatin County has so many foreclosures today goes back to the high-flying mid-decade, when home construction was booming, home prices were skyrocketing, speculators were making quick profits flipping houses and people working in construction, real estate and related fields were earning great money.

Then the bubble burst. The stock market and economy crashed in 2008, and now the fallout is hitting home buyers.

"People were trying to hold on and they just couldn't any more," Johnston said.

Many have lost their jobs, run out of savings, or realized they can't afford their mortgages. Some have decided it isn't worth the struggle to keep up payments for a home that's now worth less than they owe.

Some owners had taken out "income-stated" loans, where no one checked to make sure the borrower actually had enough income to cover the monthly payments. During the housing bubble, no one cared because home prices kept soaring, and Wall Street was making huge profits bundling and selling "sub-prime" mortgages.

However, most Bozeman-area foreclosures are due to "the decline of housing prices and job losses," Johnston said.

Nightmare process

When a homeowner has missed three mortgage payments, they get a letter from the lender's attorney saying they have defaulted on their loan. They have to make the back payments, or face foreclosure.

"A lot of people don't want to face it and don't open it," said counselor Sharon Southard, who also offers free help to homeowners at the nonprofit Human Resource Development Council. "They keep thinking it will go away."

That is exactly the wrong thing to do.

"As soon as they think they're not going to make a payment, call us," Southard said. They should also communicate with their lender to try to work something out.

When homeowners do seek help from credit counselors, Southard said, they can be quite emotional. Especially for women, she said, an enormous amount of sentiment is wrapped up in their homes.

"I try to make them see it as a business decision," Southard said.

She asks owners to step back and consider -- if the home's value has fallen so far that it's "under water" and they owe the bank more than it's worth, or their income has fallen drastically -- whether it's wiser to try to keep the house or let it go.

If owners are determined to keep the home, then Southard goes to work trying to get the loan modified to make the monthly payments affordable. She tells clients all the documents they need to gather - pay stubs, bank statements, student loans, credit card, medical bills and so forth.

It only takes an hour to 90 minutes in her office to scan and download the documents and send the lender a request for a loan modification.

But then it can take months, a year, or longer, to work with a distant corporation.

"That process can be intimidating, especially if (homeowners) don't speak the (financial) language." Southard said. But while it is emotionally draining for clients who aren't sleeping well at night, "it's not going to frustrate me to tears."

Southard said she tries to get the mortgage rate lowered to 31 percent of family income. If homeowners have an adjustable-rate mortgage, she tries to get the lender to approve a better interest rate.

Lenders will deny the request, require more documents and often deny it again. After 90 days, they ask for updated copies of bank statements and pay stubs already submitted.

Johnston said she worked with one fellow who has been trying for 18 months to get a loan modified by Bank of America.

"It has been nightmarish," Johnston said. "I'm on the phone with Bank of America pretty much every day. You get disconnected, get different answers, you have to resubmit documents over and over. Some companies are backlogged with scanning documents."

Southard has some sympathy for Bank of America employees, who are overwhelmed with 12 million loan-modification requests.

Federal efforts to help homeowners, like the Making Home Affordable program, haven't been very effective. According to the government's own statistics, the program that was supposed to help up to 4 million families modify loans by last summer had only succeeded in helping 200,000 get permanent adjustments.

Courthouse steps

When homeowners get the dreaded foreclosure or notice of trustee sale, it means they have just 120 days, four months, until the home is auctioned on the courthouse steps.

Trustee-sale notices have to be published in the local newspaper three times. That gives readers the impression that the number of foreclosures is even worse than it actually is, said Joyce Miller of Montana Realty, an independent broker.

The owner can cancel the foreclosure right up to the auction date, by selling the home, getting a loan modification or coming up with the money to pay off all the missed mortgage payments plus the bank's attorney fees.

Some owners try to make a short sale, selling the home for less than is owed. But in a lot of cases, there aren't any buyers, Johnston said.

Johnston said she has seen a few seniors use reverse mortgages to avoid foreclosure. Others have filed for bankruptcy to eliminate credit card debt, while "reaffirming" or trying to keep their homes.

Owners facing foreclosure are often desperate and easy targets for scams.

"I've seen people spend $3,000 to $5,000 on foreclosure ‘rescue' companies," Johnston said.

When the auction date finally comes, usually the lender is the only one on the courthouse steps. The bank usually buys the home for the amount owed.

Then the owner has 10 days to move out or be evicted by sheriff's deputies.

The bank or lender then seeks to sell the house, based on the local market. That means homes are often sold for less than the bank was owed.

The surge in foreclosures has created new business opportunities. Some real estate agents are specializing in foreclosed homes. New property preservation companies go in and clean up foreclosed, abandoned homes to help banks sell them. There are attorneys, including firms in North Dakota and Texas, who specialize in foreclosure filings.

Many Realtors are busy now, Miller said, because people see low interest rates and "they see distressed properties and want to get a bargain."

Is the worst over?

The number of new foreclosure notices filed in Gallatin County spiked in August 2010, and since then as been declining, according to RealtyTrac. That and other signs give some hope that a feared second wave of foreclosures may not happen.

"From Bozeman I've seen fewer people coming in recently for foreclosures," Johnston said. "It seems fewer people are losing their jobs, it seems the economy has improved a little."

Robyn Erlenbush, broker owner of ERA Landmark real estate, said in 2010 for all Multiple Listing Service sales in Bozeman, Belgrade, Manhattan, Three Forks, Big Sky and Livingston, the number of foreclosed or bank-owned properties sold reached 169. That was 18 percent of all 944 sales for the year.

In addition, there were 67 "short sales," or 7 percent of the total.

That means 708 sales, or 75 percent of those made in 2010, were traditional sales.

"There is some health coming back to our market, especially in Bozeman," Erlenbush said.

Single-family home sales were up 11 percent in Bozeman last year, up 27 percent in Big Sky, 23 percent in Livingston and 65 percent in Manhattan and Three Forks. The slowest market, Belgrade, was up 3.8 percent.

"I would love to believe the worst may be behind us," Erlenbush said. "I see some breakthrough in the clouds."

Fighting for her dream

The worst may not be over for Bev Axelsen.

Her little house, built in 1918 as a log cabin, was run down when she bought it. She poured herself into fixing it up and making a shop for her business, Healing Earth Honey & Herbs. She sells teas, lotions and tinctures made from wildflowers and her companion, Mike, a laid-off civil engineer, sells honey at farmers markets.

She dreamed of retiring here, in the home they share with two dogs and three cats.

Like many homeowners, Axelsen refinanced her house to take advantage of its astonishing increase in value -- $100,000 in just four years.

She got a "stated income" loan, which she now considers "predatory." The guy who sold it to her said she shouldn't worry about the high interest rate that would kick in after two years. He said she could simply refinance before that happened.

But when the housing bubble burst, she couldn't refinance. Her monthly payments jumped from $900 to $1,400.

The past year has been "confusion and chaos," Axelsen said, as she tried to work with HSBC, a bank based in London and Tokyo. The company did grant her two loan modifications, but they lasted only for six months.

In October she called in her monthly payment, and it was refused. She phoned the company, and someone who sounded "rough and tough" told her, "'You need to make some decisions - you need to make a short sale or turn it over to us for $2,500,'" which the company would give her for moving costs.

The foreclosure notice arrived Dec. 27.

"I'm not at an age I can move somewhere and start another career," Axelsen said. She plans to fight in court.

"People have to stand up for their rights," she said. "I am optimistic. We're going to beat them on it."

Gail Schontzler can be reached at gails@dailychronicle.com.

Related Charts

Source: Gallatin County

Source: RealtyTrac

Source: Gallatin County

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