I spent time last night studying a foreclosure spreadsheet covering most of the towns and cities across our metro area put together by RealtyTrac.

The typical suspects – poor urban neighborhoods and small industrial cities – continue to struggle, with foreclosure activity, everything from initial notices to auctions, measuring well into the hundreds.

But the volume of activity is surging in the suburbs, especially in some of the towns along the Boston-to-Providence corridor and along the South Shore as well, especially in the Plymouth area.

There’s a lot of data here, so for today, I am going to focus on those southerly suburbs on the Providence corridor, stretching from Medfield and Walpole to Wrentham, possibly one of the more intriguing buying opportunities out there.

The prices are generally a step down from the tony western suburbs, while the commute to Boston is still endurable. Jump on the commuter rail say in Walpole and you are in town in 45 minutes to an hour – as far as I know there are no competing freight trains, as there is on the Wellesley/Framingham line, to constantly derail schedules.

After skyrocketing during the bubble years, prices have also settled back to earth in these towns, with the median price of a home in Medfield now back at $565,000. Other towns in the southerly suburbs, like Millis, Medway, Norwood, Walpole, Sharon and Foxboro, have median sale prices in the $305,000-to-$370,000 range.

And it’s an area that is now seeing a sharp spike in distressed properties. While the numbers may seem small compared to the hundreds of foreclosure notices and auctions that have ripped through Boston’s poorer neighborhoods in just the first four months of the year, in many cases foreclosure activity in these towns is on par or exceeds regular sales activity.

More than 70 homes in Franklin fell into trouble during the first four months of the year, spanning the range from initial foreclosure notices to auctions. Through the end of April, by contrast, 63 homes were sold in the town, at a median price of $373,000, the Warren Group reports.

Other towns in Boston-to-Providence corridor are also seeing sizable jumps during the first four months of 2010 compared to the same period in 2009, RealtyTrac reports. All sales numbers and prices below come from the Warren Group.

• Medfield saw 16 homes fall into foreclosure trouble, a 250 percent increase, compared to 33 homes sold overall. The median price is $565,000.
• Sharon saw a 100 percent jump in foreclosure activity involving 34 homes, a doubling from the same period in 2009. Forty homes were sold during the same period, at a median price of $370,500.
• Medway experienced a 275 percent surge in foreclosure activity involving 45 homes. That is well more than the 25 homes that sold during the first four months of the year, at a median price of $325,000.
• Foreclosure activity in Millis soared 250 percent, affecting 28 homes, more than double the 12 homes that sold in town through April at a median price of $306,000.
• Foxboro saw foreclosure activity jump 68 percent, with 27 homes involved, compared to the 31 homes that sold during the same period at a median price of $351,000.

The mistake when looking at foreclosure data may be in thinking too literally – great, I will try and snag a home set at a foreclosure auction.

The auctions are tricky and by that point the bank or investors with cash to burn have already swooped in. But there are a whole bunch of homes that never get that far – the owners are facing trouble but trying to do a short sale or are just ready to bargain and sell fast.

Beyond that, a rising number of distressed properties in a particular town are certain to put downward pressure on prices, forcing other prospective home sellers to compete.

Bank of America’s Foreclosure Fight Plan

Wednesday, March 24, 2010

SUSIE GHARIB: Welcome relief today for some people who can’t make their mortgage payments if they’re with Bank of America. Tom, under pressure from state attorneys general, the bank agreed to forgive as much as 30 percent of the loan principal. Today’s announcement comes as part of a settlement with the state of Massachusetts.

TOM HUDSON: And you know Susie, lots of strings are attached though to qualify. In fact for one thing, relief is only for certain types of mortgages. The homeowners also have to be at least 60 days behind on their payments and significantly underwater on those loans. Now just 45,000 people are eligible nationwide.

GHARIB: And those loans could be reduced by a combined total of $3 billion. The plan goes into effect in May. Now leading the negotiations with Bank of America was Massachusetts Attorney General Martha Coakley and she joins us now. Attorney General Coakley, thank so you much for coming on the program.

MARTHA COAKLEY, MASSACHUSETTS ATTORNEY GENERAL: Good evening.

GHARIB: Let me begin by just congratulating you on the deal. Forty five thousand people will be helped by this agreement. But my question is, is that enough? We report on our show all the time that there are millions of people who are under water in that they owe more to banks than the value of their home. Is this enough?

COAKLEY: Well, it is certainly a good start, because we’ve tried with other attorneys general to push this idea that modifying loans, reducing principal so that you get modifications that actually work to keep people in their homes, this is the first time that people have really been willing to do this. And so Countrywide, those who have Countrywide Mortgages will benefit, but our hope is that other servicers, holders of notes will recognize that this is really what has to happen to make sure that we stop the spread of foreclosure and we start to turn this economic crisis around.

GHARIB: Well, that’s a good point. Do you think that your agreement with Bank of America will be a prototype for other lenders and even for the Federal government for the Treasury to do something similar?

COAKLEY: Well, we hope so because for several years now, we’ve worked on foreclosure rescue schemes, on bringing lawsuits. The attorneys general had an agreement with Bank of America, with Countrywide in the past. But even though the servicers have said they’ve been willing to modify loans, we’ve seen somewhat half hearted efforts even from the Federal pressure. This is an agreement that they will do this and we believe it’s commercially reasonable for them to do it, rather than to have homes foreclosed upon. And we hope that it finally is beginning to dawn that this is what should happen to turn this around, keep them in the home, but also stop the greater threat of foreclosures, make sure we don’t have the abandoned property and keep people back, you know, paying a monthly amount so that we really stop the trend that we’ve seen that’s really underlying the root of a lot of this economic crisis.

GHARIB: You mentioned about the half hearted efforts. Even in the case of this deal with Bank of America, what can you do to make sure that they really do modify loans in this way?

COAKLEY: Well, I think it’s clear that as a result of our investigation and in fact that we were looking for this remedy. We were prepared to bring suit if we weren’t able to reach this agreement. And some of the money that comes to the commonwealth are for monitoring and implementation of this agreement. We believe very strongly that this has to happen. It has to happen in a way that actually keeps people in their homes. So we’re committed to it. And the fact that it is going to be national I think will have both other servicers as well as other attorneys (AUDIO GAP) people in their homes not just modifying those foreclosure in another six months or a year.

GHARIB: So what’s next? What’s your next move? What else can you do and other states do to help distressed homeowners who are not part of, who do not have loans with Bank of America, but what more can you do to help distressed homeowners?

COAKLEY: Well, as we have looked at the range of options, as we have in Massachusetts brought a suit against Freemont and a suit pending against Option One, we are continuing to focus on both holding accountable those who made these kinds of loans and I should point out that they’re not just sub-prime loans here. These were loans that were made in a variety of ways to people who might have had more, they were credit worthy borrowers. They might have had less risky financial products and I think we’re going to continue to look at those who have made the loans, those who are servicing the loans, where the sticking point has been. Let’s get the servicers together with the holders of the notes to say this is what really should be happening, to continue this push to really stop the spread of foreclosures. So we’re going to continue to stay active with many of the other attorneys general and I know the Federal government through its program in working in conjunction with attorneys general looking at mortgage fraud, but also looking at ways in which we start making these remedies be real remedies to keep people in their homes.

GHARIB: Certainly a lot more work to be done. We appreciate your coming on the program to tell us about this first phase. Thank you very much.

COAKLEY: Thank you.

GHARIB: My guest tonight, Martha Coakley, Massachusetts attorney general.

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.

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.”

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

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.

Massachusetts Foreclosure Data 2007-2009

“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.

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.