Businesses see ups, downs due to foreclosure activity

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It is no secret that the steady escalation of foreclosures around Wisconsin has forced thousands of homeowners to deal with financial and emotional hardships.

The rise in foreclosures has affected businesses in a variety of ways. Some groups, such as attorneys specializing in foreclosures, are benefiting from more business. At the same time, the overall number of mortgage brokers is declining. Moving companies are also noting less activity as the housing market slows.

Gray & Associates, LLP, in Milwaukee is one law firm that has seen more activity as a result of handling foreclosures.

“It’s an unfortunate situation because in a lot of cases, bad things are happening to law abiding people,” said Duncan C. Delhey, an attorney with Gray.

Delhey has practiced real estate law for 14 years with Gray and has frequently handled foreclosure cases. He currently specializes in representing lenders in residential foreclosure cases, and like many other attorneys, who do the same, business has been booming.

“We’ve certainly been busy for the last couple of years,” said Delhey. “There has been an influx of more cases from lenders we’ve dealt with in the past, as well as cases from new lenders.”

He has also seen both borrowers and lenders become much more receptive to negotiating a compromise when monthly payments are not made in an effort to avoid foreclosure.

“Borrowers don’t want to lose the house and lenders certainly don’t want to lose the money,” said Delhey, who estimated the entire process takes nine to 10 months which gives both sides time to talk.

Patrick Essie, executive director of the Wisconsin Association of Mortgage Brokers (WAMB) has also witnessed that trend emerge as a method to curb foreclosures, but noted that members are “anxious for the market to turn around.”

Despite an increase in the number of brokerage shops from 148 in 2005 to 197 this year, the number of loan originators has decreased from more than 1,800 in 2005 to around 1,500 now because larger companies are hiring fewer brokers, according to WAMB data.

“As (foreclosure) rates have gone up, there have been fewer brokers,” said Essie, who estimated that Wisconsin has seen a 20- to 30-percent decrease in the number of state licensed brokers during the last few years.

The banking industry appears to have a better survival rate largely due to federal restrictions. Wisconsin Bankers Association Senior Vice President Rose M. Oswald Poels indicated that while association members, large and small, have dealt with adversity, it has not been overwhelming.

“Our membership is largely traditional financial institutions which are heavily regulated,” said Oswald Poels. “They don’t make a lot of marginal loans because examiners are in every 18 months, so the impact hasn’t been as great as on mortgage brokers.”

The news is not all bad for those in the real estate industry as property management companies are finding a profitable niche. Some are consistently being appointed to handle the transition of multi-family and apartment complexes from receivership into foreclosure.

Marjean K. Pountain, senior vice president of Milwaukee-based Ogden & Company, Inc., has seen an increase in commercial residential properties being foreclosed on and interim “managers” are needed until the property is purchased.

“Instead of getting one a year, it’s been more like one a month,” said Pountain who noted that Ogden has added staff to handle the workload. “It used to be one person and the process would be pretty casual.”

In the best cases, companies like Ogden are retained by new investors to continue managing the property because owners may want to maintain continuity for tenants.

Still, a rise in foreclosures would lead to the assumption that more people are on the move, but that is not what at least one local company is experiencing.

Chris Dahlke, president of the Milwaukee branch of the national moving company Two Men and Truck, is anticipating “negative growth” for the first time in the 14-year history of the franchise.

“There is definitely an indirect relationship because foreclosures are hurting the overall housing market, which is definitely hurting us,” said Dahlke, who oversees locations in Brown Deer, West Allis and Franklin.

He estimated the franchise was 20 percent ahead of its 2006 revenue pace, but a sluggish second quarter, which includes the historically heavy moving months of April, May and June, has all but erased a profit.

“We’re going to be about even for the year after June and the downward trend is predicted to continue, so even though the bottom line will be okay, the top line is going to continue to suffer,” said Dahlke. “I think everyone got a little spoiled the last 10 years or so when the housing market was going gangbusters. Now things are starting to normalize.”