Picture it: a piece of land with a mountain view, on a golf course… it sounds like a slice of heaven. Many families and investors invested in North Carolina mountain and coastal property in the vacation lot boom between 2004 and 2006 as the values were steadily increasing and the views are, in a word – breathtaking. However, those slices of heaven have turned out to be bank account drains and headaches for these property owners. To name a few of these failed communities – Queen’s Gap in Rutherford County, The Cliffs in Buncombe/Henderson County, Mountain Air in Yancey County, and The Village of Penland in Mitchell County.
The potential lot owners were wooed by crafty salespeople at lavish invitation only events with helicopter tours of the acreage. In some cases they were further persuaded by bankers who seemed to have a vested interest in the sales of the lots. These situations have given rise to many disgruntled buyers and several lawsuits in both state and federal court. In an April 18, 2010 article in The Post and Courier, Jay Price writes that over 700 plaintiffs have filed suit against three main developers: R.A. North Development, Wakefield Development, and Coastal Communities of Brunswick Co. The North Carolina Attorney General, Roy Cooper, has been active in creating a sounding board for consumer complaints and has actively filed an action in The Village of Penland debacle in Mitchell Co.
The new wave of loss mitigation and foreclosure prevention efforts are focused on lot loans that are failing in North Carolina. These loans were interest-only, short term loans that are maturing or otherwise converting to principal and interest payments that are double or triple of the current payment amount. Wells Fargo has created a entire division in its loss mitigation department just to handle lot loans – and they are still struggling to keep up. In most cases, the decisions on these lot loans are handled on a case by case basis by a committee. Perseverance is perhaps the most valuable tool in counseling a landowner who wants to relinquish his/her rights in their slice of heaven. However, some property owners want to do the “right thing” and pay most of what they owe to the banks. The banks have been reluctant to take the properties back via a Deed in Lieu of Foreclosure, because (I’m guessing) they simply don’t want these worthless pieces of land. In some of these subdivisions, there are no roads, sewers, or other basic utilities – and with developers tied up in bankruptcy and other heated lawsuits, there is no notion of completion in the near future (if ever).
This creates the conundrum for property owners across NC and across the US – why should I pay for a piece of land that is now worthless? More and more property owners are terminating payments on these obligations – by choice or out of necessity in an effort to get some attention from their lender. As a consumer advocate, it is appalling to me that bank expect people to drain all of their savings and investments to pay back a loan on an obviously inflated property value. While I do appreciate the risk involved in investing in real estate, the current housing and real estate crisis goes beyond just chalking a six figure loss up to that “oops” factor. Banks should be willing to work with property owners according to the current values of the properties and reach a reasonable repayment figure.
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