Foreclosures as the Family Business

Thursday, March 22, 2007 | For most families, the thought of losing their home due to missed mortgage payments is their worst nightmare. But in a wood-paneled office on University Avenue in La Mesa, one family rallies around the real estate F-word: foreclosure. Indeed, for Donna Sanfilippo and two of her sons, Erik and Robert Weichelt, foreclosures are the family business.

The brothers’ wives also work in the office, as does Sanfilippo’s husband, their step-dad. Sanfilippo opened the office in 1992. Robert got into the business in 1986, and Erik followed in 1996. Even Robert’s 11-year-old son told his grade-school class a few years ago he wants to grow up to be a “loaner” — a mortgage broker, like his dad.

They work for lenders, selling the homes for which borrowers have fallen months behind on their mortgage payments. Their business, San Diego REO Realtors, is named for the real-estate-owned designation placed by banks on homes in the last stages of foreclosure.

They become the local eyes and ears of faceless nationwide mortgage lenders, the hands that tuck a moving notice in the doorframe of the homes inhabited by embattled homeowners. They are the liaison between whoever lives in the foreclosed home — even an unsuspecting tenant — and the lender. And at a time when every month bears a higher number of county homeowners missing payments and moving into the foreclosure process, business in this part of the market is exploding.

Around lunch time in the REO Realtors office one recent afternoon, agents swap files and papers in between bites of gyro sandwiches. When a new listing comes in from the lender, the agents write it on whiteboards with blue and orange markers.

By the time the office gets the listing, the bank has already posted a notice of trustee’s sale on the homeowner’s door, warning them the home will be auctioned. The REO Realtors drive to the property to see if anyone is still living there. They deliver a letter to the home, alerting the inhabitants of any money the lender may be willing to send their way to help them move. They set a deadline with the inhabitants, and when the house is cleared, they recommend repairs and give a price estimate to the lender. Then the agents list the home for sale and sell it on behalf of the lender.

Robert Weichelt picks up a stack of files for the afternoon drive and heads out to his silver Mercedes-Benz. Its license plate is emblazoned with “Team RLW,” his initials. A Lincoln Navigator and a Cadillac Escalade are among other cars parked out back.

He says, though his first boss told him it’s best to “keep your Porsche in the garage” when dealing with clients, he doesn’t find that his line of work clashes with his car.

“Some of these people can’t even afford to keep their lights on and I’m rolling up in a car that could probably pay off their house,” he says. “But it hasn’t been an issue before.”

Once in the car, Weichelt fumbles with the GPS system, attempting to plug in the addresses of the homes he needs to visit, but the map ends up in Allentown, Pa., and he gives up on the computer.

“It’s better just to use a Thomas Guide,” he tells his passenger.

Weichelt is old school when it comes to his business mindset, too. Unlike some people who got into extremely specialized facets of the real estate industry when homes were sizzling a few years ago and are now losing their jobs, Weichelt claims he wears enough real estate hats to weather any direction the market can go. He considers himself a jack-of-all-trades in the business, having worked in title insurance, mortgage brokering, refinancing and lending, escrow and listings. And, of course, foreclosures.

“I call it ‘insulation,’” he says. “When the refi market was cranking, I was in there. Now, the foreclosure market is cranking, and I’m in there.”

Weichelt and his family are reminiscent of Dog, the as-seen-on-TV bounty hunter in Hawaii. That television show has its share of car chases and fugitive rough-handling, and at the end of the day, it’s about catching the wanted person. But Dog and his sons and his wife also pepper the show with bursts of compassion that humanize both criminal and bounty hunter.

Weichelt shows similar bursts of kindness as he hunts houses instead of people.

He arrives at the first home a few blocks from his office, where weeds are encroaching on several rosebushes. He speaks softly as he walks up the front steps.

“This property needs some love,” he says.

He raps three times on the front door, then takes several steps away from the door while he waits for someone to answer. People aren’t often too happy to see him, he explains. He loathes entering a house he’s thought to be vacant, only to find someone sleeping inside.

“It scares the daylight out of me,” he says. “I feel like a cop without a gun.”

The REO Realtors often have to go with marshals to what’s called a “marshal lockout,” where the inhabitants of a house refuse to leave until they’re forced out by armed officers.

“I have not had the opportunity to have someone come after me,” he quips.

When no one answers the door, he walks to a side entrance and peeks through a window. Craning to see if anyone’s there, he notices a couple of couches sitting in a mostly empty living room. To make sure, he pulls a brick from the front walk to give him a boost for a better look.

“Looks like they’re gone,” he says, and returns the brick to the garden before he leaves.

Weichelt explains it’s their job to get as much money for the lender as they can. The last time the foreclosures business boomed was in the mid-1990s, after the last real estate bust. Then, banks had to unload the properties at “50 cents on the dollar, fire sale” prices, Weichelt explains. Now, at least while foreclosures are still at relatively low rates, the lenders are hoping to get top dollar for the properties.

“The last thing [the lenders] want to do is be the downturn in the market,” Sanfilippo explained earlier. “They’re just like Mr. and Mrs. Smith — they have an appraised value and they want to sell as close to that as they can.”

But they’ll still sometimes offer relocation assistance in return for a quick move-out. In the business, that’s called “cash for keys,” and Weichelt considers offering that to pinched families one of the most important parts of his job.

On the way to the next house, Weichelt answers a call from a woman he’s spoken with a few times already — her husband left her and her teenage daughter, and now the home’s in foreclosure. Weichelt heads to her home and sits down in the living room to chat. He tells her he can get her some relocation assistance money from the lender if she can move out in two weeks.

Back in the car, Weichelt says the fact that the woman’s daughter is the same age as his own struck a chord with him, but for the most part, he doesn’t compare himself to the people he’s approaching.

“At the end of the day, I’m there to get them out,” he says. “Banks don’t mess around. But if I can do it with a smile, at least I’m getting them options.”

After a pause, he continues: “It’s not all about the Benjamins, you know what I mean? I do whatever I can to be sympathetic. I’m not going to say, ‘That’s OK, take your time.’ But I am going to say, ‘Beat it’ — with a heart.”

Most of the people he’s talking to these days are still victims of the typical reasons for foreclosure — the “life happens” kind, such as illness or job loss or divorce, he says. But a growing number are defaulting on loans they shouldn’t ever have taken out, he says.

Recent tumult in the mortgage market has shed light on lax lending standards embraced by brokers and banks during the boom that allowed hundreds of thousands of people to get into loans they would have previously been barred from. The number of homes in foreclosure activity was at a record low for years during the latest real estate boom, because homeowners in trouble could either sell their homes for a profit or refinance their roller-coaster mortgages for a more predictable, traditional payment. Now, though, declining home values mean more and more homeowners find themselves stuck between payments they can’t make and slow sales conditions that make it difficult, if not impossible, to sell their homes before the bank repossesses them.

Under the housing market’s current conditions, foreclosures represent a niche that is growing nearly as quickly as home values ascended a few years ago. The number of San Diego County homes in some level of foreclosure activity reached 1,150 in January, according to RealtyTrac, a nationwide tracker of foreclosure data. That was up 20 percent from January 2006 and up more than 240 percent from the first month of 2005. Sanfilippo has increased her staff by one-third to handle the jump in business. Tuesday, they had seven new properties come in, more than double their daily usual, even these days.

“It certainly is an uptick in foreclosures,” Sanfilippo says after two decades in the business. “In 2003, 2004, there were very, very few in San Diego County, because of that quick appreciation.”

And some buyers who used mortgages to cover the entire cost of their homes near the end of the price-appreciation boom are now upside-down, owing more than their now-declining home is worth, with no equity cushion to protect against sudden illness, job loss, divorce, or the payments on adjustable-rate mortgages ramping up. The loans to consumers with poor credit, termed subprime mortgages, have proved especially troublesome in recent weeks.

Like an arthritic who can tell when it’s going to rain, Weichelt has made success in knowing where the market’s going and what customers will want. While home values were rapidly appreciating, and homeowners were taking out second and third and fourth mortgages from their newfound equity boost, Weichelt was there with loans. He owned a 100-employee mortgage lending business between 2001 and 2005. He also made loans to people with poor credit. He says he got out just in time.

“It’s really risky,” he says of subprime lending. “You’re doing loans to people you almost don’t trust they can make their payments.”

And besides, Weichelt says, now he gets to spend more time with his mom and brother.

Erik, his brother, thinks more positively about the loan innovations that were made popular in the housing boom.

“They allow people to get in,” Erik Weichelt says. “So many more people were able to afford homes using what I consider to be ‘progressive’ loans.”

Both brothers say they’re in real estate for the long haul, and they’ll keep working hard. After all, it’d be pretty embarrassing to have their own homes show up in orange or blue on the foreclosure listing whiteboard.

“I’m just working hard not to get a letter,” Erik says.

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