Metro area foreclosures still climbing: Portland-Vancouver ranks 62nd on list of 203 similar areas

Oct. 29--The number of homes in foreclosure continued to rise in the Portland-Vancouver metro area, according to a third-quarter tally released this week.

The area ranked 62nd out of 203 U.S. metro areas with populations of 200,000 or more, said California-based RealtyTrac. And with the Portland-Vancouver area's unemployment rate running at 11.6 percent in September, some say foreclosure rates here could move higher before retreating.

"It wouldn't shock me if it was at least two more years before we work our way through the troubled properties," said John Bruce, a mortgage banker with Lake Oswego-based Summit Funding Inc.

There were 6,123 total housing units in foreclosure in the third quarter in the Portland-Vancouver area, up more than 78 percent from the 3,432 houses in foreclosure during the same period in 2008.

Local foreclosure rates increased by nearly 5 percent from this year's second quarter, RealtyTrac said.

Initially hit by homeowners defaulting on subprime mortgages in 2008, the local real estate market has lately been hampered by the high unemployment rate and a new wave of "option ARMs" or adjustable rate mortgages, Bruce said.

Popular at the height of the housing boom in 2005, option ARM loans allowed home buyers to make much smaller, partial-interest payments on their loans.

"On a loan with payments that had $1,000 worth of interest, you might have had a payment that allowed you to pay only $400. The additional $600 was added to the principal balance, so instead of your principal balance shrinking, it actually grew," said Bruce, whose company offers services throughout the region.

While the values of homes were rising, borrowers were happy with option ARMs, Bruce said. However, many of those loans have now reached a five-year "reset" period in which loan amounts will reflect the true interest amount.

"With the clarity of hindsight, there's no way they can make those payments," Bruce said of home loan borrowers with option ARMs.

Some brokers don't expect the region's ranking to change.

"I think we'll probably stay along with where we are in the middle of the pack because the other areas will be hit with the same things we are," said Scott Anthony, a broker who specializes in selling bank-owned real estate through Windermere Real Estate Stellar Group in Vancouver.

Cities in California, Florida and Nevada accounted for the 10 highest foreclosure rates in the third quarter. Las Vegas topped the list with 40,408 residential properties in foreclosure, accounting for one in every 20 households.

The Seattle-Tacoma metro area ranked No. 95 on the list, with one in every 217 houses in foreclosure.

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