A marriage made in hell? Foreclosure firm buys newspapers for free ad space
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Josh Wilson
Jan 16, 2012, 8:43:34 PM1/16/12
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Holy leaping frog monsters from hell!
josh
http://www.oregonlive.com/business/index.ssf/2012/01/northwest_trustee_squeezes_mor.html
By
Jeff Manning, The Oregonian
View full sizeBeth Nakamura/The OregonianHome
foreclosures are predicted to continue for years at a record pace, and
Northwest Trustee's one-stop business model has made it the largest
foreclosure trustee in the region.Rim Publications LLC is bullish about the newspaper industry.
The Bellevue, Wash.-based company and its affiliates have in the past two years bought or started up six weekly newspapers in the Northwest. It could buy as many as 50 more in the Western states, said Rim co-founder Stephen Routh.
Strangely, the moves have more to do with the booming and controversial business of home foreclosures than with journalism.
Routh is also CEO of Bellevue-based Northwest Trustee Services Inc., whose one-stop shopping business model has made it the largest foreclosure trustee in the region. Owning newspapers will reduce costs for Northwest Trustee's lender clients and could make foreclosures more profitable for Routh's firm.
Oregon and most other states require that lenders or their trustees run a series of legal notices in the local newspaper before they auction off a foreclosed home. These legal ads, which generally cost $500-$2,000, are one of the largest expenses of the foreclosure process.
Rim's ambitions provide an intriguing look at the U.S. economy four years since the great crash of 2008. Routh and his partners are basing their investment on the expectation home foreclosures will continue at their unprecedented rate for years to come.
Meanwhile, the beleaguered state of the newspaper industry is making Rim's initiative surprisingly affordable. And though some newspaper publishers decry Rim's entry into the industry, others can't afford to make waves. For many small-town papers, foreclosure notices have become one of their largest revenue sources.
Routh, who has no journalism experience, vows to be a good steward of his company's newspapers. But he makes clear the acquisitions are all about his business of foreclosures. "I don't claim to be a journalist; I'm a businessman providing a service," he said. "We have to publish. It makes sense to control the process."
Four years into a painful economic downturn, the tsunami of home delinquencies, defaults and repossessions shows no sign of slowing.
Routh expects foreclosures to actually pick up steam in 2012. "There's misery coming," he said.
An estimated 2.7 million Americans -- more than 40,000 in Oregon -- have already lost their homes, and experts figure millions more will hand over their house keys in coming years. Estimates of future foreclosures vary wildly, from fewer than 3 million to as many as 10 million.
The glut of repossessed homes has contributed to a 30 to 35 percent decline in home values and a staggering $7 trillion loss in home equity, according to the Federal Reserve.
Today, experts say, 12 million homeowners, about one in five, owe more on their mortgage than their house is worth. Homeowners who are underwater on their mortgage are much more likely to walk away from their mortgage, reasoning that it makes no sense to continue to pay into a bad investment.
Given that enormous pool of potential defaults, experts estimate it will be 2015 or 2016 before the crisis eases. "We're about 40 percent through the snake's belly," said Nancy Koerber, executive director and founder of Good Grief America, an anti-foreclosure activist group based in Medford. "We won't begin to hit bottom until 2015."
Routh agrees with the dismal outlook: "I'm pessimistic about housing getting better anytime soon."
Making the grim situation even worse are widespread allegations, from federal regulators, state attorneys general and homeowners alike that lenders have proceeded with improper, illegal and fraudulent foreclosures.
The allegations have fueled a U.S. Justice Department investigation. Bank of America, Wells Fargo and three other of the largest loan servicers are trying to head off a lawsuit from most of the 50 state attorneys general for their foreclosure practices, offering to pay around $20 billion into a settlement.
Northwest Trustee, hired by lenders to implement foreclosures, has not been immune from the flood of litigation. The firm has been sued 99 times over the past three years just in federal court in Washington and Oregon.
Legal jousting aside, the unprecedented weakness of the housing industry has meant boom times for Northwest Trustee.
Routh said the company's volume of foreclosures doubled to about 48,000 a year after the recession hit in 2008. That volume has since waned, he said, due largely to the widespread legal challenges. But he anticipates foreclosures to surge again in 2012.
Routh and his partners have built Northwest Trustee Services into a vertically integrated foreclosure machine.
Need a law firm? Check. Northwest Trustee has its affiliate, Routh, Crabtree & Olsen, which has 51 lawyers and offices in seven Western states. Need an escrow officer to help with documents? Check. Northwest Trustee has a title company. Need a process server to post a foreclosure notice at a specific property? A property manager to maintain vacant homes? An auctioneer to conduct foreclosure sales? Check, check and check. Northwest Trustee has it all in-house.
Until recently, one of the few elements of foreclosure that the 1,000-employee firm couldn't offer its clients was a venue in which to advertise pending auctions.
Decades ago, Oregon and many other states allowed lenders to conduct what are called "nonjudicial" foreclosures, quicker and cheaper than traditional foreclosures, which require the filing of a lawsuit.
But most states imposed strict notification requirements on the lenders. Oregon, for instance, requires lenders publish notice of a pending foreclosure auction four times in the local newspaper. They require it for two reasons: simply to attract more bidders to the auction and also to impose some level of transparency on the process.
In 2009, with volumes exploding, Routh and his partners decided they could apply their vertical integration strategy to this publishing requirement. In the process, critics argue, they pushed the envelope of what's permissible under Oregon law.
They founded the Oregon Legal Journal and the Washington Legal Journal, weekly listings of foreclosure notices with a thin overlay of wire stories and limited local content.
Northwest Trustee mails the paper to Oregon lawyers and title companies. Circulation is about 4,500, none of it paid.
Local real estate and media lawyers claim the Oregon Legal Journal's circulation is too limited to comply with state law. Oregon statutes say foreclosure notices must be published in "general circulation" newspapers with "bona fide," or paid, subscribers. Courts have interpreted a "general circulation" publication as one that the general public would look to for news of interest, said David Ambrose, a Portland attorney experienced in foreclosures.
"I have serious questions about whether publication in the Oregon Legal Journal of any nonjudicial foreclosure complies with the law," Ambrose said.
Routh insists the Oregon Legal Journal does adhere to state law. But Northwest Trustee has hedged its bets. The company has advertised all its foreclosure notices in existing newspapers in addition to its own Legal Journal.
About the same time it launched its journals, Northwest Trustee began buying newspapers outright.
Rim Publications or affiliates have acquired the Capitol Hill Times, a neighborhood weekly in Seattle, the Monroe Monitor and the Eatonville Dispatch.
Not coincidentally, the three papers are in King, Snohomish and Pierce counties, the major population centers and foreclosure hotbeds in the Puget Sound area. Each is now running foreclosure legal notices from Northwest Trustee's clients.
In early December, Rim bought the Kuna Melba News, another weekly, in suburban Boise.
"We were not actively looking for a buyer; they came to us," said Scott McIntosh, former co-owner of the Idaho paper.
Oregon's newspaper establishment has greeted Northwest Trustee's move into their turf with suspicion and anxiety.
Jeb Bladine, publisher of the McMinnville News-Register, blasted the notion of a foreclosure company buying newspapers. "Newspapers have always been for-profit businesses, but they were making money by being good newspapers and serving their communities," he said. "This is something different altogether. It's a bastardization of the traditions of community journalism. I hate to see it."
Others are more circumspect. Riling Northwest Trustee has become a risky thing.
An amazing thing has happened in much of Oregon since 2008. As foreclosures soared, Northwest Trustee quietly became one of the most powerful advertisers in the state. For papers buffeted by the down economy, new competition on the Internet and the decline of some traditional advertisers, the foreclosure notice revenue has been like an oasis in a desert.
Steve Hungerford, whose company, Country Media Inc., owns eight newspapers in Oregon, said FEI, Northwest Trustee's advertising affiliate, has grown to become one of the largest advertisers of his papers in Lincoln City, Tillamook and Seaside.
His St. Helens Chronicle suffered a double-digit percent revenue loss, Hungerford said, when Northwest Trustee opted to move its Columbia County foreclosure notices to the South County Spotlight in Scappoose.
"FEI is a very savvy operation, very knowledgeable about the newspaper business," Hungerford said. "They're not to be taken lightly."
The South County Spotlight is owned by Robert Pamplin Jr.'s Pamplin Media Group. Pamplin's Tigard Times and other weeklies publish virtually all of Northwest Trustee's foreclosure notices in the metro area.
The Oregonian publishes very few foreclosure notices each year -- only two ads from Northwest Trustee in 2011 and none in 2010.
A similar trend has unfolded in much of the rest of the Northwest. When they have a choice, Northwest Trustee has opted to put its ads in smaller, sometimes obscure papers with limited circulation and cheaper ad rates.
In Yamhill County, Northwest Trustee opted initially for the Sheridan Sun rather than the McMinnville News-Register. In Marion and Linn counties, it went with the small weeklies in Jefferson and Scio rather than the dailies in Salem and Albany.
In Jackson County, it opted to go with the Rogue River Press, circulation 1,600, rather than the area dailies in Medford or Ashland.
Critics question whether the use of small papers complies with Oregon law. If there is more than one newspaper in an area, the statute reads, "the notice shall be published in that newspaper or publication which the moving party considers best suited for providing actual notice."
"No reasonable person can argue that the Rogue River Press, which is 20 or more miles away from the main population of Jackson County, is better suited to provide actual notice than the Medford Mail Tribune, with its proven circulation of over 23,000 throughout the county," said Duane Bosworth, a media lawyer in Portland.
"It's wrong," Bladine said. "It violates the spirit and, in my opinion, the letter of Oregon law. People are enriching themselves while denying true public notice to Oregon citizens."
Routh counters that Northwest Trustee is fully complying with the law.
If the recent history in Washington plays out in Oregon, Northwest Trustee could well buy some of those smaller Oregon papers in the near future.
And that's not a bad thing, Routh says. Northwest Trustee is giving its current newspaper employees health and dental coverage and a 401(k) that it matches, benefits that many did not have under prior ownership.
Michael Jeffries, who sold the Eatonville Dispatch in July 2009 to Routh's company, confirms this. The new owner also invested in new computers and software at the Dispatch, Jeffries said.
Northwest Trustee paid Jeffries' asking price. "There was no haggling," he said.
That's in part because newspapers are available cheap these days. Routh said his firm has paid $300,000 each on average for its four papers.
The other big change at the Eatonville paper was the sudden appearance of dozens of pages of foreclosure legal ads. The first week after the deal closed, the Dispatch ran a 48-page third section of foreclosure notices.
The legal ads doubled the Dispatch's revenue, Jeffries said.
But all is not a happy ending in Eatonville.
Jeffries and his wife have since retired to his native Indiana. He keeps close track of the Dispatch via its website.
The Dispatch hired an advertising salesperson and a new editor who doesn't live in Eatonville. It cut ties with two freelancers and didn't replace them. Despite the surge in revenue, the Dispatch has added no staff but will consider adding more this year, according to Northwest Trustee officials.
"I think the paper has gone soft," Jeffries said. "It doesn't have the local flavor."
--Jeff Manning
josh
http://www.oregonlive.com/business/index.ssf/2012/01/northwest_trustee_squeezes_mor.html
Northwest Trustee Services squeezes more profits from home foreclosures with one-stop model
Published: Saturday, January 14, 2012, 10:27 PM Updated: Sunday, January 15, 2012, 1:33 PM
By
Jeff Manning, The Oregonian
View full sizeBeth Nakamura/The OregonianHome
foreclosures are predicted to continue for years at a record pace, and
Northwest Trustee's one-stop business model has made it the largest
foreclosure trustee in the region.The Bellevue, Wash.-based company and its affiliates have in the past two years bought or started up six weekly newspapers in the Northwest. It could buy as many as 50 more in the Western states, said Rim co-founder Stephen Routh.
Strangely, the moves have more to do with the booming and controversial business of home foreclosures than with journalism.
Routh is also CEO of Bellevue-based Northwest Trustee Services Inc., whose one-stop shopping business model has made it the largest foreclosure trustee in the region. Owning newspapers will reduce costs for Northwest Trustee's lender clients and could make foreclosures more profitable for Routh's firm.
Oregon and most other states require that lenders or their trustees run a series of legal notices in the local newspaper before they auction off a foreclosed home. These legal ads, which generally cost $500-$2,000, are one of the largest expenses of the foreclosure process.
Rim's ambitions provide an intriguing look at the U.S. economy four years since the great crash of 2008. Routh and his partners are basing their investment on the expectation home foreclosures will continue at their unprecedented rate for years to come.
Meanwhile, the beleaguered state of the newspaper industry is making Rim's initiative surprisingly affordable. And though some newspaper publishers decry Rim's entry into the industry, others can't afford to make waves. For many small-town papers, foreclosure notices have become one of their largest revenue sources.
Routh, who has no journalism experience, vows to be a good steward of his company's newspapers. But he makes clear the acquisitions are all about his business of foreclosures. "I don't claim to be a journalist; I'm a businessman providing a service," he said. "We have to publish. It makes sense to control the process."
MORE FORECLOSURES AHEAD
Four years into a painful economic downturn, the tsunami of home delinquencies, defaults and repossessions shows no sign of slowing.
Routh expects foreclosures to actually pick up steam in 2012. "There's misery coming," he said.
An estimated 2.7 million Americans -- more than 40,000 in Oregon -- have already lost their homes, and experts figure millions more will hand over their house keys in coming years. Estimates of future foreclosures vary wildly, from fewer than 3 million to as many as 10 million.
The glut of repossessed homes has contributed to a 30 to 35 percent decline in home values and a staggering $7 trillion loss in home equity, according to the Federal Reserve.
Today, experts say, 12 million homeowners, about one in five, owe more on their mortgage than their house is worth. Homeowners who are underwater on their mortgage are much more likely to walk away from their mortgage, reasoning that it makes no sense to continue to pay into a bad investment.
Given that enormous pool of potential defaults, experts estimate it will be 2015 or 2016 before the crisis eases. "We're about 40 percent through the snake's belly," said Nancy Koerber, executive director and founder of Good Grief America, an anti-foreclosure activist group based in Medford. "We won't begin to hit bottom until 2015."
Routh agrees with the dismal outlook: "I'm pessimistic about housing getting better anytime soon."
Making the grim situation even worse are widespread allegations, from federal regulators, state attorneys general and homeowners alike that lenders have proceeded with improper, illegal and fraudulent foreclosures.
The allegations have fueled a U.S. Justice Department investigation. Bank of America, Wells Fargo and three other of the largest loan servicers are trying to head off a lawsuit from most of the 50 state attorneys general for their foreclosure practices, offering to pay around $20 billion into a settlement.
Northwest Trustee, hired by lenders to implement foreclosures, has not been immune from the flood of litigation. The firm has been sued 99 times over the past three years just in federal court in Washington and Oregon.
BUSINESS IS GOOD
Legal jousting aside, the unprecedented weakness of the housing industry has meant boom times for Northwest Trustee.
Routh said the company's volume of foreclosures doubled to about 48,000 a year after the recession hit in 2008. That volume has since waned, he said, due largely to the widespread legal challenges. But he anticipates foreclosures to surge again in 2012.
Routh and his partners have built Northwest Trustee Services into a vertically integrated foreclosure machine.
Need a law firm? Check. Northwest Trustee has its affiliate, Routh, Crabtree & Olsen, which has 51 lawyers and offices in seven Western states. Need an escrow officer to help with documents? Check. Northwest Trustee has a title company. Need a process server to post a foreclosure notice at a specific property? A property manager to maintain vacant homes? An auctioneer to conduct foreclosure sales? Check, check and check. Northwest Trustee has it all in-house.
Until recently, one of the few elements of foreclosure that the 1,000-employee firm couldn't offer its clients was a venue in which to advertise pending auctions.
Decades ago, Oregon and many other states allowed lenders to conduct what are called "nonjudicial" foreclosures, quicker and cheaper than traditional foreclosures, which require the filing of a lawsuit.
But most states imposed strict notification requirements on the lenders. Oregon, for instance, requires lenders publish notice of a pending foreclosure auction four times in the local newspaper. They require it for two reasons: simply to attract more bidders to the auction and also to impose some level of transparency on the process.
In 2009, with volumes exploding, Routh and his partners decided they could apply their vertical integration strategy to this publishing requirement. In the process, critics argue, they pushed the envelope of what's permissible under Oregon law.
They founded the Oregon Legal Journal and the Washington Legal Journal, weekly listings of foreclosure notices with a thin overlay of wire stories and limited local content.
Northwest Trustee mails the paper to Oregon lawyers and title companies. Circulation is about 4,500, none of it paid.
Local real estate and media lawyers claim the Oregon Legal Journal's circulation is too limited to comply with state law. Oregon statutes say foreclosure notices must be published in "general circulation" newspapers with "bona fide," or paid, subscribers. Courts have interpreted a "general circulation" publication as one that the general public would look to for news of interest, said David Ambrose, a Portland attorney experienced in foreclosures.
"I have serious questions about whether publication in the Oregon Legal Journal of any nonjudicial foreclosure complies with the law," Ambrose said.
Routh insists the Oregon Legal Journal does adhere to state law. But Northwest Trustee has hedged its bets. The company has advertised all its foreclosure notices in existing newspapers in addition to its own Legal Journal.
About the same time it launched its journals, Northwest Trustee began buying newspapers outright.
Rim Publications or affiliates have acquired the Capitol Hill Times, a neighborhood weekly in Seattle, the Monroe Monitor and the Eatonville Dispatch.
Not coincidentally, the three papers are in King, Snohomish and Pierce counties, the major population centers and foreclosure hotbeds in the Puget Sound area. Each is now running foreclosure legal notices from Northwest Trustee's clients.
In early December, Rim bought the Kuna Melba News, another weekly, in suburban Boise.
"We were not actively looking for a buyer; they came to us," said Scott McIntosh, former co-owner of the Idaho paper.
ADVERTISING CLOUT
Oregon's newspaper establishment has greeted Northwest Trustee's move into their turf with suspicion and anxiety.
Jeb Bladine, publisher of the McMinnville News-Register, blasted the notion of a foreclosure company buying newspapers. "Newspapers have always been for-profit businesses, but they were making money by being good newspapers and serving their communities," he said. "This is something different altogether. It's a bastardization of the traditions of community journalism. I hate to see it."
Others are more circumspect. Riling Northwest Trustee has become a risky thing.
An amazing thing has happened in much of Oregon since 2008. As foreclosures soared, Northwest Trustee quietly became one of the most powerful advertisers in the state. For papers buffeted by the down economy, new competition on the Internet and the decline of some traditional advertisers, the foreclosure notice revenue has been like an oasis in a desert.
Steve Hungerford, whose company, Country Media Inc., owns eight newspapers in Oregon, said FEI, Northwest Trustee's advertising affiliate, has grown to become one of the largest advertisers of his papers in Lincoln City, Tillamook and Seaside.
His St. Helens Chronicle suffered a double-digit percent revenue loss, Hungerford said, when Northwest Trustee opted to move its Columbia County foreclosure notices to the South County Spotlight in Scappoose.
"FEI is a very savvy operation, very knowledgeable about the newspaper business," Hungerford said. "They're not to be taken lightly."
The South County Spotlight is owned by Robert Pamplin Jr.'s Pamplin Media Group. Pamplin's Tigard Times and other weeklies publish virtually all of Northwest Trustee's foreclosure notices in the metro area.
The Oregonian publishes very few foreclosure notices each year -- only two ads from Northwest Trustee in 2011 and none in 2010.
A similar trend has unfolded in much of the rest of the Northwest. When they have a choice, Northwest Trustee has opted to put its ads in smaller, sometimes obscure papers with limited circulation and cheaper ad rates.
In Yamhill County, Northwest Trustee opted initially for the Sheridan Sun rather than the McMinnville News-Register. In Marion and Linn counties, it went with the small weeklies in Jefferson and Scio rather than the dailies in Salem and Albany.
In Jackson County, it opted to go with the Rogue River Press, circulation 1,600, rather than the area dailies in Medford or Ashland.
Critics question whether the use of small papers complies with Oregon law. If there is more than one newspaper in an area, the statute reads, "the notice shall be published in that newspaper or publication which the moving party considers best suited for providing actual notice."
"No reasonable person can argue that the Rogue River Press, which is 20 or more miles away from the main population of Jackson County, is better suited to provide actual notice than the Medford Mail Tribune, with its proven circulation of over 23,000 throughout the county," said Duane Bosworth, a media lawyer in Portland.
"It's wrong," Bladine said. "It violates the spirit and, in my opinion, the letter of Oregon law. People are enriching themselves while denying true public notice to Oregon citizens."
Routh counters that Northwest Trustee is fully complying with the law.
PURCHASES AND CHANGES
If the recent history in Washington plays out in Oregon, Northwest Trustee could well buy some of those smaller Oregon papers in the near future.
And that's not a bad thing, Routh says. Northwest Trustee is giving its current newspaper employees health and dental coverage and a 401(k) that it matches, benefits that many did not have under prior ownership.
Michael Jeffries, who sold the Eatonville Dispatch in July 2009 to Routh's company, confirms this. The new owner also invested in new computers and software at the Dispatch, Jeffries said.
Northwest Trustee paid Jeffries' asking price. "There was no haggling," he said.
That's in part because newspapers are available cheap these days. Routh said his firm has paid $300,000 each on average for its four papers.
The other big change at the Eatonville paper was the sudden appearance of dozens of pages of foreclosure legal ads. The first week after the deal closed, the Dispatch ran a 48-page third section of foreclosure notices.
The legal ads doubled the Dispatch's revenue, Jeffries said.
But all is not a happy ending in Eatonville.
Jeffries and his wife have since retired to his native Indiana. He keeps close track of the Dispatch via its website.
The Dispatch hired an advertising salesperson and a new editor who doesn't live in Eatonville. It cut ties with two freelancers and didn't replace them. Despite the surge in revenue, the Dispatch has added no staff but will consider adding more this year, according to Northwest Trustee officials.
"I think the paper has gone soft," Jeffries said. "It doesn't have the local flavor."
--Jeff Manning
© 2012 OregonLive.com. All rights reserved.
Michelle Ferrier
Jan 17, 2012, 10:20:28 AM1/17/12
to Josh Wilson, jtm...@googlegroups.com
Ditto! Wonder what the journalism looks like;-)
Michelle
Michelle
On 1/16/12 8:43 PM, "Josh Wilson" <mr.joshu...@gmail.com> wrote:
Holy leaping frog monsters from hell!
josh
http://www.oregonlive.com/business/index.ssf/2012/01/northwest_trustee_squeezes_mor.html
Northwest Trustee Services squeezes more profits from home foreclosures with one-stop model
Published: Saturday, January 14, 2012, 10:27 PM Updated: Sunday, January 15, 2012, 1:33 PM
By Jeff Manning, The Oregonian
View full sizeBeth Nakamura/The OregonianHome foreclosures are predicted to continue for years at a record pace, and Northwest Trustee's one-stop business model has made it the largest foreclosure trustee in the region.
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