Foreclosures Hit Rural America, But Quietly

The RealtyTrac Numbers

The research firm RealtyTrac mapped out the number of households with foreclosure filings in August 2008. Gray areas represent counties omitted from the report.

A RealtyTrac map from August 2008 shows the limits of its reporting on American foreclosures. i i

A RealtyTrac map from August 2008 shows the limits of its reporting on American foreclosures. RealtyTrac hide caption

itoggle caption RealtyTrac
A RealtyTrac map from August 2008 shows the limits of its reporting on American foreclosures.

A RealtyTrac map from August 2008 shows the limits of its reporting on American foreclosures.

RealtyTrac

The HUD Numbers

The percentage of loans in which foreclosure notices have been sent out, according to complete figures compiled by HUD for the past 18 months:

  1. Nevada - 8.6 percent
  2. Florida - 8 percent
  3. Michigan - 7.1 percent
  4. California - 6.7 percent
  5. Ohio - 6.7 percent
  6. Indiana - 6.7 percent
  7. Rhode Island - 6 percent
  8. Arizona - 5.6 percent
  9. Georgia - 5.2 percent
  10. Mississippi - 5.2 percent

U.S. policymakers who hope to address the nation's housing crisis may have a blind spot: rural counties.

A company called RealtyTrac provides some of the most widely followed statistics on home foreclosures, but it fails to report on more than 900 rural counties.

Critics say that omitting data from outside metropolitan areas gives the false impression that there is no foreclosure crisis in rural America. And, they say, it could undermine attempts to help homeowners.

RealtyTrac, based in California, compiles data that government officials — and journalists — rely on for a picture of the nation's housing market. But in West Virginia last year, it counted fewer than 500 foreclosure notices. New federal statistics counted 12,000 notices in the state, since the start of 2007.

One of those notices went to June Waselchalk, 79, who lives in a small cinder block house on Sewell Mountain, W.Va. A coal miner's widow, Waselchalk says a fast-talking mortgage broker convinced her to refinance her home.

"He had a whole bunch of papers, and he said sign here, sign here, sign here. He just said I was getting a loan, and my interest was going to be real low, and my payment was going to be real low," Waselchalk said.

But she did not read the fine print. Her monthly payments doubled, and the company threatened her with foreclosure.

Waselchalk turned to a nonprofit law firm called Mountain State Justice for help. And Bren Pomponio, a public interest lawyer at the firm, said Waselchalk wasn't the only one.

"The number of people coming to us to try to save their homes has steadily increased," he said. "It's almost more than we can handle."

Pomponio said he was surprised when RealtyTrac said that West Virginia has one of the nation's lowest foreclosure rates. And, it turned out, the company's data was wrong.

A color-coded map on RealtyTrac's Web site shows huge blank spots in the rural West, Midwest and South — the result of not counting foreclosure notices in 900 rural counties.

That means RealtyTrac's foreclosure rates are far too low for states like South Dakota, Vermont and West Virginia.

"We know we're underreporting in West Virginia. We know we're not covering the whole state as thoroughly as we'd like to," said Rick Sharga of RealtyTrac.

He admits his company only counts a fraction of rural foreclosures across the country. But, he says, RealtyTrac's first priority is large, urban areas.

"If I miss a county in California, I miss more in a month than I'd miss in West Virginia for the whole year," Sharga said.

In all, eight of the 10 most rural states in America are also on RealtyTrac's top 10 list for the lowest foreclosure rate.

Sen. Jay Rockefeller (D-WV) said he believes that rural states are being ignored.

"It's ridiculous, it's embarrassing, it's stupid," Rockefeller said. "And I'm going to fight to make sure everybody gets accurate information, and they get counted."

Rockefeller co-sponsored the Foreclosure Prevention Act, which Congress passed in July. The bill required the Department of Housing and Urban Development to measure foreclosure rates in each state.

On HUD's new list, rural states have significantly higher foreclosure rates. For example, RealtyTrac ranks Mississippi near the bottom. But HUD says it's in the top 10.

And that's important, critics say, because lawmakers depend on RealtyTrac's numbers. In West Virginia, a predatory lending bill died after legislators saw RealtyTrac's low ranking for the state.

"They were led to believe that West Virginia was unique and there wasn't a big problem here, which wasn't the case," Pomponio said. "So nothing ever got done."

HUD is using its new data to distribute money to each state for foreclosure relief.

But the agency has only agreed to gather the complete statistics one time. Rockefeller wants to force the government to continue tracking foreclosures — and not rely on incomplete numbers from companies like RealtyTrac.

Scott Finn reports from West Virginia Public Broadcasting.

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