After visiting with a few residents of the Corcoran neighborhood last week to discuss the effect of the mortgage foreclosure crisis on their neighborhood, one resident sent this e-mail the next day:
If the focus of your story is to use our neighborhood to educate the public about the foreclosure problem/process in general – we would be disappointed – Adding the stigma of the foreclosure issue to our already PR-challenged neighborhood would not be helpful right now. We would ask you to pick a foreclosed property in Woodbury, Edina or Minnetonka for that purpose.
It’s a fair point. The mortgage foreclosure crisis isn’t just another blot on lower-income neighborhoods. Sometimes it’s a blot on the toney ones, as a search of Hennepin County’s foreclosure database shows.
Take 813 Kenwood Parkway, one of the higher-priced homes in foreclosure in the city.
Kane Loukas, 30, purchased it for $687,500 in July 2005. With an estimated market value of $650,000 — and a $10,000 a year property tax bill — it went into foreclosure and reverted to the bank for $579,000.
What happened? Every picture tells a story, but not the entire one.
“My neighbors hate me now,” Loukas said Tuesday. “It was during the tech boom when I was still in college. I was able to trade and make money too easily. I thought the party was just going to keep on going. I’d just started a new business (renovating and then selling converted condominiums). I had two projects in process, and I’d just bought a mansion in the nicest neighborhood in Minneapolis. It almost seemed too easy.”
And, of course, it was. Loukas intended to use the proceeds from his firm’s condo conversions to rehab the mansion, then sell the duplex at a profit.
Back then — 2005 — he found a mortgage broker willing to lend him the money with nothing down. “I even got cash back on the deal,” he said. The mortgage, taxes, and the cost to renovate took $6,500 a month. When the real estate market softened, he couldn’t sell the projects funding the mansion. Foreclosure was, he says, the only solution after attempts to sell the property failed.
His troubles aren’t over, even though his construction business is starting to bounce back. He’ll get a big tax bill for the difference between the mortgage and the amount the bank accepted at auction. The government will treat that $100,000 as income.
“You really learn, though, it’s only money,” he said.
Lots of other investors are learning that, too. According to the Minnesota Housing Partnership, 50 percent of mortgage foreclosures in the area are on properties that were owned by investors.