Since last year, Georgia has posted the most number of failed banks among states due to the heavy exposure of banks to delinquent residential and commercial development loans.

According to data from Smart Numbers, a real estate research firm based in Marietta, the total number of vacant home lots in failed subdivision projects in metro Atlanta has reached an astounding 150,000 units, which represent the area’s supply for more than 10 years based on current absorption rates.

Steve Palm, president of Smart Numbers, said the median price for vacant lots has sharply fallen to $30,000 this year, compared to $57,000 during the boom in 2007. He added that there are too many vacant lots and too few buyers.

Palm also said that the hardest hit communities are on the outer parts of the region, such as Newton, Jackson and Bartow Counties, where cheap land for sale abounds but no buyers are interested.

One of the many failed subdivisions is the 600-acre WaterLace, a pricey development in Fayette County which was planned to have almost 400 houses. Developer Stephen Macauley went into bankruptcy in 2008, contributing to the failed loans of his lender Security Bank of Macon, which also closed recently due to delinquent mortgage loans. The subdivision, which has only a few finished homes, is now under the control of the Federal Deposit Insurance Corp.

Adding to the problems of failed subdivisions is the differences in the investment models among lenders. Many of the housing projects in Atlanta were financed by several lenders that have different strategies in solving their delinquent loans.

While some lenders want to hold on to the properties until the housing market improves, the others want to sell them immediately even at bargain prices. Some lenders have been dumping vacant home lots as low as 30 percent of their original market values.

Synovus, the second biggest bank in Georgia, has been selling its distressed assets at bargain prices, including vacant lots in the metro Atlanta area.

According to Joe Moss of Security Exchange Bank, large banks bailed out by the federal government are able to dispose of cheap land for sale quickly despite big losses because of their size. He said that smaller banks are affected much more sharply because they do not have the ability to take big write-offs.

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Ebank, a community thrift and Internet bank based in Vinings, was closed by the Federal Deposit Insurance Corporation and was sold to Minnesota-based Stearns Bank. Its deposits and lone branch were taken over by Stearns, which has previously acquired another Georgia failed bank. In October last year, it took over failed Alpha Bank and Trust which was based in Alpharetta.

Thrift institution Ebank was founded in 1998 and took the name ebank in 1999 as the Internet banking technology was taking off. Since the collapse of the housing market in 2008, Ebank has become the 22nd failed bank in Georgia.

Like many of the failed banks in Georgia, Ebank was battered by its heavy exposure to residential and commercial real estate loans. Out of Ebank’s $95.6 million loan portfolio in the first 3 months of this year, a total of $89.7 million was used to fund residential and commercial property development.

Of the failed banks in metro Atlanta, most of them reported Texas Ratios that surpassed 300 percent. The Texas Ratio refers to the comparison of a bank’s total delinquent loans to total equity capital. This measures the ability of the bank to absorb losses.

The ratio was developed in the aftermath of the savings and loan crisis that downed the Texas banking industry and economy in the 1980s and 1990s. A ratio higher than 100 percent is a sign that delinquent loans have exceeded the ability of a bank to absorb losses. The ratio has been helpful in measuring risks but it has not been used as a regulatory measure in financial statements in the banking industry.

In the case of Ebank, the Texas Ratio said a lot because as of the end of March, the Texas Ratio of Ebank had already surpassed 400 percent.

As part of the sale of Ebank’s assets to Stearns Bank, the FDIC has signed a loss-share agreement with Stearns on around $111 million of the failed bank’s assets. Stearns will share in the asset pool losses.

Meanwhile, the FDIC expects to lose $63 million of its insurance money to cover insured deposits. Ebank will open immediately as a unit of Stearns Bank, but customers can still use their Ebank cards and checks.

NAR blames the low prices of foreclosed homes for sale and their continuing increase as main factors for the decline in home prices.

The median home price in Atlanta in the first quarter fell to $115,600, a decrease from the $154,000 median price in last year’s first quarter. The number of sales deals for foreclosed homes for sale also declined by 6 percent over the same quarter.

Across the nation, prices of previously-owned single-family houses declined in 88 percent of metropolitan areas compared to last year’s first quarter while there were price increases in 18 metropolitan areas.

The median home price for pre-owned single-family houses was $169,000, a decline of 13.8 percent from the median price in last year’s first quarter.

The median home price is the price level at the point where half of all home sales were priced below and the other half were priced above.

Although prices in metropolitan Atlanta declined, there were other metro areas which performed worse. The biggest declines were observed in Akron in Ohio, Saginaw in Michigan and Fort Myers in Florida. The steepest decline occurred in the metro area of Cumberland in Maryland.

For the month of April, RealtyTrac reported that the pace of foreclosures is still increasing. The number of homeowners who received foreclosure filings in April increased to over 342,000, an increase of 32 percent compared to April 2008.

Nationwide, one house in every 374 houses got a foreclosure filing, the fastest monthly pace since January 2005, the month RealtyTrac started tracking foreclosures.

April became the second consecutive month when over 300,000 homeowners got a foreclosure notice, as large inventories of foreclosed homes for sale pushed down prices further below.

However, the increase in foreclosure filings from the month of March was lower than one percent. March had over 340,000 homes which got foreclosure filings. March filings increased by 17 percent compared to February and increased by 46 percent compared to March 2008.

An estimated 63,900 units were repossessed and became foreclosed homes for sale in April, a decline of 11 percent compared to the estimated 71,700 units in March.

In the first quarter, almost half of total home sales were deals involving foreclosed homes for sale, according to NAR.

The bill author Sen. Bill Hamrick promises to make use of the comments to come up with a new version of the bill for the hearing on Monday for he believes that there is no reason to push through when everybody requests for it to be changed.

Georgia foreclosure records have been increasing monthly, which adds more pressure for legislators to act. Just this January, 8,000 foreclosures have been filed by lenders in 13 core metro Georgia counties.

Critics also find that the bill does not help predatory lending victims and they said the bill has also wiped out one of the provisions in law, which bans mortgage flipping–continually trading mortgages until there is no more equity left for the property.

Also, banking experts attack the provision that makes lenders more accountable for their loans and limits on loans.

According to Sen. Vincent Fort, Georgia should have a bill wherein it will be ensured that once a mortgage is reassigned or sold, the new firm must be held liable for a predatory loan. Therefore, offenders must be penalized.

However, local government leaders approve the bill’s provision which requires banks to quickly record deeds after foreclosure. Under current law, this process takes months so the property falls on disrepair. Another good provision is delaying eviction for renters who have paid up but has no idea their landlord will get foreclosed.

On the other hand, Sen. Steve Thompson introduces a similar bill which strengthens lending requirements.

Hopefully, the changes with the foreclosure bill could finally be approved so that the Georgia foreclosure crisis will be relieved.

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True enough, a Georgian resident, Collins, shares how he managed to salvage his home from being an addition to Georgia foreclosures. Collins said that the timing of the foreclosure notice became the key to his problem. Had he been given the notice at an earlier time, he was sure that he won’t have any way out.

With the worsening situation of the housing industry, giant lenders such as Fannie Mae, Freddie Mac, Citibank and JPMorgan Chase & Co have taken steps to help quell the foreclosure crisis. The said companies are now offering programs that would help delinquent homeowners avoid foreclosures.

A lot of local experts in the said industry are positive about the programs. They believe that programs extending loan terms and reducing interest rates will not only have a positive impact on Georgia foreclosures but on the nationwide scene as well.

D&E counselor Amber Willis said that she observed that lenders are now more than willing to negotiate with delinquent homeowners. D&E is an agency that advises people nearing foreclosures.

Although the programs are viewed as a welcome change to borrowers, the said measures can only provide a temporary solution. Emory professor Frank Alexander, in particular, believes that the programs will only provide people with a short-term relief.

Alexander believes that homeowners must try to cut down the principal rates of their loans if they want to permanently avoid foreclosures. The professor fears that most of the mortgaged properties nowadays can be appraised for a lot less compared to the original value they had when delinquent borrowers first made the loans.

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