Foreclosures Hit Eagle Pass, Del Rio Unscathed

April 15, 2008
By Bill Sontag
Feature Writer

“Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow—even for those with good credit.” Alan Zibel and J.W. Elphinstone, writing for Associated Press, addressed the “Mortgage Clampdown” in the San Antonio Express-News, Friday (March 21).

Is the national lending and foreclosure crisis harming real estate values in Del Rio and Eagle Pass? As with most controversies, it depends on who you talk to. In general, Del Rio lenders and realtors are more sanguine about real estate stability than at least one broker in Eagle Pass.

“In general it’s correct, that we’re not in a crisis here,” said Sid Cauthorn, president and CEO of The Bank & Trust, 2411 Bedell Avenue. “Sub-prime lending has not been the problem here that it has been in some places,” he said, “but there has been some softening of the real estate market. There have been more homes going on the market, and, yes, I think there are more homes on the market now than there were last year this time.”

Cauthorn cautions some would-be borrowers rather than increasing risks all around. “Sometimes you’re going to make loans to people that can’t pay them back, and that happens. But when some places were loosening their underwriting standards, we never loosened ours. So we sometimes turn people down to protect the bank, as well as to let folks know they just can’t quite afford a home just now.”

Eagle Pass Realtor® Charlotte Banks, owner/manager/broker of Century 21 Charlotte Banks Realty, 1505 S. Veterans Blvd., is nervous, though her market share of foreclosed homes to sell has increased significantly. “I used to have one or two a year, but really have about 15 at any given time now—where they’ve been foreclosed, or they have already moved out and we’re still waiting to get the value on them,” said Banks. “The problem is, you have people moving in with nothing, didn’t even pay their closing costs, they have absolutely no equity.”

With no financial resources to fall back on when borrowers can’t pay the mortgage debt service, foreclosures ensue. “As long as there are these loopholes [allowing borrowers to move into a new home with no down payment and associated costs incurred], and until they stop these programs, this will just keep happening all over again,” Banks said. Banks warned against national companies that thrive now as middlemen for a $400 fee (as an example) to notify sellers that—to consummate a deal—t hey must pay as much as $9,000 in closing and other costs. These companies then turn around that amount to the buyers who, with no down payment and no closing costs, can move in to their dream home, until the first mortgage payments turn the dream into a nightmare for everyone.

John Sontag, vice president for title operations, Southwest Abstract Company, Inc., 115 E. Losoya St., Del Rio, elaborated. “Not a lot of older people are losing their homes,” Sontag said. “Most of them [foreclosures] are on loans that are only two to four years old, with almost no equity built up in them.” But the number of foreclosure notices is, according to Sontag, a poor measure of the impact here. “Most of them—probably 80 percent or more—may get pulled just before the foreclosure actually goes through,” Sontag said, explaining that last-minute financing or debt payments save the family home, farm, or ranch. Sealing the deal on a foreclosure, Sontag said, is the monthly foreclosure auction on the front steps of the Val Verde County Courthouse. “It always takes place on the first Tuesday of the month.”

Sontag believes there’s a trend away from sub-prime lending, saying he knows of no lenders in town offering sub-prime loans. “I think they are happening a lot less, now. Here at Southwest Abstract, we are actually getting pretty busy again. We had some slow months last year; but this year is better.”

Aida Campos, a loan officer at Amistad Mortgage, 1301 Veterans Blvd., Del Rio, says loan approvals are trickier to come by. “It’s tougher to qualify now than it used to be, so we’re all having to pay for this,” Campos said, signifying that, since fewer loans are negotiated, there’s less income for everyone in the lending pipe. “And a lot of the sub-prime lenders are not even in business anymore.”

Though Amistad Mortgage and Amistad Bank keep few loans in-house—most are brokered with national homebuyer lending institutions—Campos does arrange loans for new construction, adding that Amistad Bank has initiated no home foreclosures this year. “But we love making loans,” Campos said. “It’s not just about making a loan, but about helping people become homeowners.” Common problems for securing loans now include maxed-out credit cards, and, more recently, a poor payment record on outstanding high medical bills, usually among the uninsured.

Declines in property values have, in some states, dropped below the outstanding balance due on mortgages, creating unexpected losses to sellers. On Friday, March 21, MSNBC commentator Chris Matthews reported that the Washington D.C. home of Federal Reserve Board Chairman Ben Bernanke had declined $250,000 in value.

Charlotte Banks said the softening is reflected in Eagle Pass in somewhat depressed prices and a slowdown of construction of smaller and mid-sized homes. “But this is really not happening to larger homes, probably 1,800 square feet and up. If buyers can get a loan now, it’s certainly a buyer’s market. I just hope people will read and think twice before making a commitment, because—if they don’t—it can ruin their credit for years.”

President and CEO Sid Cauthorn said The Bank & Trust shies away from bad credit risk. “In the 15 to 20 years we’ve been in the mortgage business we’ve probably only written off about $30,000,” Cauthorn said. “We prefer to keep loans in-house. We have sold some loans, but they were for low rates when [the loan applicant] had no deposit relationship with us. This last month, our past due [loan payment] ratio was less than 1 percent, like 0.38 percent, and that includes mortgages. We just really have no collection problems.

“We’re still doing more than $1 million a month in residential mortgage loans. We qualify people the old fashioned way, and if they can qualify to get into a house, we sure try to help them. That’s our baseline—a million a month—and if we don’t make that we feel like we’re not doing something right. But we have been doing it for at least 10 or 15 years.”

Brett Griffith, vice president for commercial lending, Del Rio National Bank, 525 S. Main St., said Del Rio enjoys an important buffer from national economic downturns. “We’re a little bit insulated here. With the Border Patrol, Laughlin Air Force Base, U.S. Customs, and the National Park Service, there’s a lot of government money helping the whole town,” said Griffith.

“And recreation interest hasn’t died, either. There are a lot of people from Midland-Odessa and New Mexico coming here to build near the lake. It’s oil and gas money that’s coming here to do it. The lake is still bringing a lot of outside money here, and, as far as I can tell, things have not slowed down out there at all.

“In town it always ebbs and flows, but I still don’t see foreclosures being a big problem.” Griffith said he has not seen any “bump” in foreclosures in Del Rio.

Flo Cadena, broker/owner, Cadena Realty, 609 S. Main St., agrees with Griffith. “We have a lot of federal people paid well here, and always moving in and out, and being replaced again. And out at the lake, tourists and fishermen are buying a lot of property,” said Cadena. “Crisis? What crisis?” asks Cadena. “I haven’t felt it. I’ve been terribly busy.

“The lenders are much stricter. In the past, if they [borrowers] had a little bad credit, it was OK, but now it’s much more difficult. We have had some foreclosures turned over to us, but actually not that many, about five in the last three months, and maybe three in the same period last year this time.

“I haven’t really seen a real ‘crisis’ here,” said Cadena, “and I don’t think we will.”