• Home
• Who Am I?

Is the Foreclosure Crisis in Massachusetts Ending or At Least Slowing?

The foreclosure mess is far from over.

But there is a flurry of signs, some national, and one local, that we just might be finally reaching a turning point.

On the macro level, the number of homeowners falling behind on their mortgages actually fell in the fourth quarter, the Mortgage Bankers Association reported Friday.

Mortgages either 30 or 60 days past due fell in the fourth quarter compared to both the third quarter of 2009 and the last three months of 2008 as well.

Meanwhile, a few government officials appear to be finally getting the idea the time is past for fancy sounding initiatives with big numbers that, when push comes to shove, just don’t work.

The Obama Administration is sending $1.5 billion to five states hardest hit by the foreclosure crisis, namely Nevada, California, Florida, Arizona and Michigan. The money will be used to do everything from bail out underwater homeowners to help the jobless pay their mortgages.

That has got to be more effective than all those silly loan modifications.

And locally, the number of foreclosed homes sitting empty in neighborhoods across Boston is also starting to fall markedly.At one point, there were nearly 1,200 foreclosure specials out there in neighborhoods like Dorchester, Roxbury, East Boston and Mattapan.

That number has since plunged to 778, Evelyn Friedman, head of the Department of Neighborhood Development, tells me.

City Hall has either purchased or put under agreement 120 foreclosed homes, which it plans to resell to local nonprofit housing organizations, developers and individual homeowners.

“I would hope in the next two or three years we would be finished with the foreclosure problem here in Boston,” Friedman said.

Bold words yes, but backed up with some real action.

Foreclosures Expected to Continue in Massachusetts

The worst of the foreclosure crisis that swept through the region in the past few years may be over, but the problem is not going away just yet.

The number of foreclosures fell last year. Yet at the same time, lenders began the process of foreclosing on hundreds more homes in the area.

High unemployment will probably result in more homeowners falling behind on their mortgage payments. If there is another wave of foreclosures, however, it probably will not be as extreme as the original surge, according to government, real estate and bank officials.

“I don’t think we’re entirely out of the woods, not until the economy rebounds more robustly,” said Patrick J. Sullivan, director of New Bedford’s Office of Housing and Community Development. “We’re staying optimistic that the worst has past us.”

The nature of the foreclosures appears to be shifting, too. While the original crisis was sparked by predatory loans and people buying homes they could not afford, future defaults will result from more traditional causes: job losses, illnesses and other personal upheavals, experts said.

Those more standard types of foreclosures might be accelerated in the aftermath of the subprime crisis. People who are facing job losses or divorce also see that the values of their homes have declined and even might be worth less than what they owe, said Carl W. Taber, executive vice president and chief lending officer at Citizens-Union Savings Bank.

Still, Taber doubts that a second wave of foreclosures would equal the scale of the subprime wreckage.

“We are seeing some positive signs, but we are seeing these lingering problems,” he said.

One positive sign is the smaller number of homes lost to foreclosure in 2009.

Bristol County’s foreclosures slid from 1,135 in 2008 to 884 last year, a 22 percent drop. Plymouth County’s foreclosures fell from 1,184 in 2008 to 933 last year, a 21 percent decline, according to The Warren Group, publisher of Banker & Tradesman.

At the same time, however, foreclosures were still above 2007’s numbers, and the number of new foreclosure proceedings rose in 2009.

Petitions jumped by just over 33 percent to 2,490 in Bristol County, and by nearly 34 percent to 3,108 in Plymouth County, when compared to the year before, according to the data.

New foreclosure proceedings could remain high this year as people continue to struggle with job losses or fewer work hours, said Timothy M. Warren Jr., chief executive officer of The Warren Group.

“I do think they are going to remain at their high levels,” Warren said.

At the other end of the process, he said there might be a logjam of pending foreclosures that could become final. He attributed the backlog to some lenders making adjustments after courtroom setbacks and delays of paperwork getting to the registries of deeds.

New Bedford has been hit particularly hard by foreclosures, and the citywide statistics from The Warren Group show a similar mixed picture.

Completed foreclosures in the city declined by a third in 2009 from the previous year. There were 204 properties taken last year, compared to 306 in 2008 and 217 in 2007. Petitions numbered 508 last year, higher than the previous year (399) but still below 2007 (575).

On the national scene, there has been good news and bad news in the past week.

The percentage of borrowers who missed just one payment on their home loans fell to 3.6 percent in the final quarter of 2009 from 3.8 percent in the third quarter, the Associated Press reported, based on the Mortgage Bankers Association’s latest survey results.

While there was a glimmer of hope in the delinquency numbers, there was some disappointment with the progress in the federal government’s efforts to help distressed homeowners.

More than 1 million homeowners across the country have received offers of trial loan modifications under the Obama administration’s Making Home Affordable program, but only 116,000 have permanent modifications through January, according to the new government numbers released last week.

In Massachusetts, out of 21,435 modifications, only 2,788 are considered permanent.

“I have been very disappointed,” U.S. Rep. Barney Frank, D-Mass., said in a telephone interview.

Frank said he will meet with officials from the U.S. Department of Housing and Urban Development and the Treasury to discuss what he sees as an impediment: banks’ unrealistic valuation of second mortgages that they hold. He wants to persuade banks, particularly ones that received federal help, to wipe out those second mortgages.

“Banks have to recognize they’re not worth anything,” he said.

Frank has also proposed using some of the interest from the government’s bailout of the financial industry to help unemployed people who are struggling with their mortgages. He said the plan has passed the House of Representatives.

In other news, President Barack Obama on Friday announced $1.5 billion in funding for programs in states hardest hit by the housing crisis. However, Massachusetts is not among the targeted states.

Helping matters locally, home buyers, bankers and real estate agents have become more accustomed to short sales — when an owner is able to sell a house for less than the mortgage is worth, getting the lender to forgive the difference or work it out somehow, said Ralph Grassia, regional vice president for Jack Conway & Co.

Short sales are more common. In the past six months, some bankers have even started encouraging distressed owners to sell and avoid future problems, Grassia said.

The glut of foreclosed homes that drove down prices is easing as well, he said.

“The real estate market has taken a turn for the better,” he said. “The foreclosures will always be factor out there, but I think what’s happening is the market is not flooded with them as it was before.”

Home Loan Delinquency Rates Rise Based on Foreclosures

Home-loan delinquency rates in the US reached 10% in December, up from the record-high 9.97% in November [1], according to Lender Processing Services (LPS [2]: 38.85 -0.05%), which provides data on mortgage performance.

Accounting for foreclosures in the pipeline, the total non-current rate stands at 13.3%, according to the data in the LPS database. When extrapolated for the entire mortgage industry, 7.2m mortgage loans are behind on their payments. Earlier in January, Fitch Ratings reported the delinquency rate among prime jumbo residential mortgage-backed securities (RMBS) almost tripled to 9.2% [1]in December 2009.

For the amount of loans current at the end of 2008, 4.64% fell into serious delinquency. That means that of the loans current as of Dec. 31, 2008, 2.3m fell into serious delinquency by December 2009.

However, the 2009 vintage loans are performing better than any of the prior five years and improve as more origination months are added into the pool of loans. More restrictive underwriting guidelines drive the improvements, but liquidity “is still not available where it is needed most,” according to the report.

States with the most non-current loans are: Florida, Nevada, Mississippi, Arizona, Georgia, California, Indiana, Michigan, Illinois and Ohio.

States with the fewest are: North Dakota, South Dakota, Alaska, Wyoming, Montana, Nebraska, Vermont, Colorado, Oregon and Washington.

[1] the record-high 9.97% in November: http://www.housingwire.com/2010/01/11/more-than-13-of-mortgages-delinquent-or-foreclosed-in-november-lps/

[2] LPS: http://finance.yahoo.com/q/ks?s=LPS

Massachusetts Foreclosures Rise in 2009, Overall

The number of foreclosures initiated in Massachusetts jumped 28.1 percent in 2009 to 27,928 from 21,804 in 2008 but was 5.5 percent below the level in 2007, according to the latest report from The Warren Group, publisher of Banker & Tradesman.

The number of completed foreclosures, meanwhile, declined 25.4 percent to 9,269 last year from 12,430 in 2008 but was still 21.1 percent ahead of the 7,653 foreclosures recorded two years earlier.

“The good news is that not as many homeowners lost their homes to foreclosure in 2009 as they did the prior year. The bad news is that more people faced foreclosure, as they struggled with unemployment and other economic hardships,” said Timothy M. Warren Jr., CEO of The Warren Group. “Efforts to modify mortgage loans and a Massachusetts Land Court decision which forced some lenders to hold back on recording foreclosure deeds or to restart them after proper mortgage assignments have been made helped to temper foreclosure activity last year.”

Foreclosure petitions — the first step in the foreclosure process in Massachusetts — reached 2,060 in December, a 6.4 percent increase from 1,937 in November and 26.8 percent higher than the 1,625 petitions filed in December 2008. The number of foreclosure petitions exceeded 2,000 for most months in 2009, falling below that number only in January and November.

In December, there were 857 foreclosure deeds, a 22 percent jump from November’s 702 deeds but an 8.4 percent drop from the 936 deeds recorded in December 2008. Foreclosure deeds represent completed foreclosures. Foreclosure deeds fluctuated throughout the year, peaking at 978 in January.

The Warren Group also tracked slightly more auction announcements in 2009. A total of 19,441 auction announcements were tracked in 2009, a 0.9 percent increase from 19,270 in 2008. Auction announcements in December totaled 1,931, a 13.3 percent drop from 2,226 in November but a 60.1 percent jump from 1,206 during the same month in 2008.

Arizona Four Seasons Resort and Golf Club Facing Foreclosure

A 400-acre luxury resort that hosts the annual Byron Nelson Championship golf tournament is facing foreclosure.

U.S. Bank has posted the Four Seasons Resort and Club in suburban Dallas, with its more than 400-room hotel and spa, for a Feb. 2 auction. The bank is seeking payment on a $183 million note with Los Angeles-based BentleyForbes.

The real estate investment company did not immediately respond Thursday to a request for comment from The Associated Press.

Four Seasons general manager Michael Newcombe says the owner has been in talks with lenders on ways to restructure debt. He says the posting will not affect the property’s daily operations.

This year’s Byron Nelson Championship is scheduled for May 20-23.

$13.6 million Coming to Boston in Foreclosure Aid

Boston will get $13.6 million in the second round of Neighborhood Stabilization Program funding to assist the city’s foreclosure prevention and reclamation efforts.

The grant will allow the Department of Neighborhood Development to support redevelopment of up to 275 foreclosed homes in Dorchester, East Boston, Roxbury, Hyde Park and Mattapan.

Buyers of foreclosed properties in those neighborhoods may be eligible for low-interest loans or grants of up to $50,000 for purchase and renovation costs.

“This award accelerates our ability to impact the foreclosure challenges that were facing,” said Mayor Thomas M. Menino in a statement. “We’re making important progress, but our neighborhoods are still in danger.”

Boston was one of 482 applicants requesting over $15 billion from the U.S. Department of Housing and Urban Development in foreclosure funding. Since passage of the American Recovery and Reinvestment Act, the city has received nearly $280 million in formula and competitive grants as well as bond allocations.

The NSP initiative was created as part of the Housing and Economic Recovery Act of 2008, designed to boost local economies through the provision of resources to purchase and rehab foreclosed homes. Boston received $4.23 million in 2009 during the first funding round, and later received a matching grant from the state. The latest award brings Boston’s total federal foreclosure funding to more than $21 million.

The campaign seeks to allow Boston’s neighborhoods to recover from the nationwide foreclosure crisis through targeted programs that support existing homeowners while adding new buyers to the market, among other things. Under the umbrella of this initiative, DND has overseen the direct acquisition of 33 units of housing, and is in the process of negotiating the purchase of more than 100 others from banks.

Boston’s Rich Suburbs See Foreclosure Increases

Massachusetts Real Estate Foreclosure Update

The number of foreclosures initiated in Massachusetts during the month of November fell below 2,000 for the first time since January, according to a new report by The Warren Group, publisher of Banker & Tradesman. Still, petitions to foreclose, which mark the start of the foreclosure process, remain at a relatively high level and were 45 percent higher than last November.

1 Million Homes Foreclosed in the US During 3rd Quarter 2009

Troubled home loans continued to mount in the nation’s banks in the third quarter as even once-solid borrowers increasingly fell behind on their mortgage payments.

For the first quarter ever, the number of homes in foreclosure with mortgages serviced by U.S. national banks and savings and loans topped the 1-million mark, according to figures released Monday by the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

The percentage of prime borrowers whose loans were 60 or more days past due doubled from the July-to-September period a year earlier. And more than half of all homeowners whose payments had been lowered through modification plans defaulted again.

The report, which covers about 34 million loans, or about 65% of all U.S. mortgages, underscores the obstacles to strengthening the nation’s rickety housing market. Stubborn unemployment is making it tough for millions of homeowners to pay their debts. In addition, many people whose monthly installments have been lowered still are unable to keep up with their payments.

Of the mortgages serviced by national banks and thrifts, only 87.2% were current and performing. It was the sixth straight quarter that the quality of those home loan portfolios had slipped.

“Mortgage performance continued to decline as a result of continuing adverse economic conditions including rising unemployment and loss in home values,” the report said.

Seriously delinquent mortgages — loans 60 or more days past due and loans to delinquent borrowers who have filed for bankruptcy — rose to 6.2% of the servicing portfolio. That’s a 16.7% increase over the second quarter and a 73.8% increase from a year earlier, the report said.

Of those seriously delinquent loans, the number of homes in the foreclosure process reached 1.09 million, about 3.2% of all the loans surveyed.

The report highlighted some troubling trends as the housing market continues to struggle despite increasing sales and prices in many areas. Difficulties increased for holders of prime mortgages, with the percentage of those loans that were 60 days or more past due increasing to 3.2%, up almost 20% from the second quarter and more than double the rate of a year earlier.

In addition, holders of mortgages whose payments had been lowered through government or private modification plans re-defaulted at high rates. More than half of all homeowners with modified loans fell 60 days or more behind in their payments within six months of the modification taking place.

But Bruce Krueger, a mortgage analyst for the Office of the Comptroller of the Currency, noted that homeowners with more-recent modifications were doing better at keeping up with their new payments, reflecting a push by the Obama administration to get mortgage servicers to come up with better plans.

About 35% of homeowners who received modifications in the third quarter of 2008 fell 60 days or more behind on their payments within three months of the modification, the report said. That figure decreased to about 19% of homeowners who received a modification in the second quarter of this year.

Still, the report’s data could add pressure on Congress to give financially strapped homeowners additional help by allowing judges to lower mortgage principle as part of bankruptcy, said Jaret Seiberg, a financial policy analyst with Concept Capital’s Washington Research Group.

“While the re-default rate seems to be getting better, it’s still very high and it’s high enough to continue causing a political problem for the industry,” he said.

Mortgage modifications increased in the third quarter as the Obama administration pushed servicers to participate in its Making Home Affordable modification program. The report said servicers modified 680,000 loans through that program or their own efforts. Overall, mortgage servicers started almost twice as many modifications as new foreclosures.

Oddly, the increased attempt to keep people in their homes with lower payments contributed to the rise in the number of homes in the foreclosure process. The pace of homes beginning foreclosure proceedings remained about the same in the third quarter as it was earlier this year. But fewer of those proceedings were finished, as mortgage servicers worked with homeowners to modify some of those loans.

Monday’s report comes on the heels of a private report last week that said there were 1.7 million homes headed for the market because of foreclosures or delinquency. That backlog of “shadow inventory” increased 55% in the year that ended Sept. 30, said the report by First American CoreLogic, a Santa Ana research firm.

The Obama administration has been trying to reduce foreclosures through its mortgage modification program, but reported this month that few of the three-month trial modifications were being made permanent. Of the more than 700,000 trial modifications offered by mortgage servicers, just 31,382 had been made permanent as of Nov. 30. Administration officials have increased pressure on mortgage servicers to improve that figure.

Nantucket, MA, Concord, MA, Weston, MA, and Winchester, MA Foreclosures are Increasing 3X, or 4X

The state’s foreclosure crisis, which has largely battered lower cost cities like Worcester, Springfield, and Lynn, is slowly creeping into the state’s tonier towns, reflecting a tough financial year for even some of Massachusetts’ wealthiest residents.

Affluent towns including Nantucket, Concord, Weston, and Winchester, saw triple or quadruple digit percent increases in foreclosure deeds during the first 11 months of the year, according to data released yesterday by Warren Group, a private company that tracks real estate data.

The numbers are tiny to be sure – 19 homes in Nantucket and six in Concord – a problem dwarfed by the hundreds of homes lost to foreclosure in cities like Springfield, Worcester, and Brockton. However, the increasing problem in costlier towns presents evidence that the battered economy and an 8.8 percent unemployment rate is leaving no community untouched, many housing experts agree.

“The wealthier communities are experiencing maybe for the first time the hardship that low-income and minority communities have been feeling for many years,’’ said Bruce Marks, chief executive of the Neighborhood Assistance Corp. of America, a nonprofit advocacy organization based in Jamaica Plain.

Statewide, the number of foreclosure deeds, which represent a completed foreclosure, dropped 26.8 percent to 8,409 between January and November compared with the same time last year, according to Warren Group. But petitions, the first step in a foreclosure process, increased 28.2 percent this year to 25,868 – a sign that the foreclosure crisis has yet to ebb.

Many communities that were hardest hit by foreclosures over the last several years saw the problem slow in 2009. For example, in Worcester the number of foreclosure deeds fell to 445 between January and November, a 36.8 percent drop compared with the same time last year. Dorchester, the Boston neighborhood most plagued by streets of boarded-up and abandoned buildings, saw foreclosure deeds fall 40.5 percent to 352 this year.

Dean Baker, codirector of the Center for Economic and Policy Research in Washington, D.C., said that poorer neighborhoods most affected by the subprime market and predatory lending probably have seen the worst wave of the foreclosure crisis, which occurred in 2007 and 2008. Most vulnerable homeowners already have lost their homes. In wealthier neighborhoods, residents are now being affected by the economy and housing price declines that can wipe out all their equity, he said.

“You have record high rates of unemployment for people with college degrees,’’ Baker said.

In Nantucket, where median home prices hover at about $1.25 million, 19 homes were lost to foreclosure during the first 11 months of the year, up 1,800 percent from the one recorded foreclosure in 2008, according to Warren Group. Foreclosure petitions also jumped to 75, a 102.7 percent increased compared with the same period in 2008.

Weston, where median home prices reach $1.2 million, saw a rise in foreclosure deeds between January and November of this year to six compared with two during the same time last year. Seventeen homeowners went into foreclosure this year, representing a 41 percent increase from the year before, according to Warren data.

Virginia Pratt, a foreclosure prevention counselor at the nonprofit, Jamaica Plain-based Ecumenical Social Action Committee, said she gets more calls from distressed homeowners in the suburbs. She said many with incomes of about $150,000 talk about losing their jobs or having a health complication that limits their income. They no longer can access credit to help them through lean times and aren’t able to cut costs enough.

“The lower income doesn’t support the higher income lifestyle,’’ she said. “It’s people being stuck.’’

Copyright | Boston House Foreclosures