Foreclosures petitions, which mark the first step in the foreclosure process in the Bay State, fell 9.4 percent to 2,110 from 2,329 in May 2009 and were also down 13.2 percent from 2,431 in April. A total of 11,118 petitions to foreclose were filed statewide in the first five months of the year, a 1.3 percent increase from 10,978 during the same period in 2009.

But the number of completed foreclosures more than doubled in May compared to a year earlier. Foreclosure deeds, which are recorded when a property has been foreclosed on, surged 119.7 percent to 1,283 from 584 in May 2009. May foreclosures were down 6.7 percent from the prior month’s 1,375 foreclosure deeds. Year-to-date foreclosure deeds rose 48.4 percent to 6,107 from 4,114 a year earlier.

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 the problem is by no means over: The number of foreclosure deeds filed – the final step in the foreclosure process – has risen by 14 percent in the first two months of this year compared with the same time last year, according to statistics tracked by The Warren Group.

However, the number of initial petitions to foreclose fell 6.1 percent in the first two months of this year, compared with the same period in 2009.

Warren Group CEO Tim Warren said he currently considers initial petitions to represent a more accurate barometer of the status of delinquent loans in the state. He said that’s partly because there is a widening delay between when a home is auctioned off in a foreclosure auction and when the ownership change is recorded as a foreclosure deed.

Warren said the initial petitions peaked last summer, at a rate of nearly 3,000 petitions a month statewide. In contrast, about 2,100 were filed in the state last month. That’s a modest increase from the nearly 1,900 petitions filed in January, but still roughly in line with what The Warren Group has seen in the past four months.

Warren said he expects foreclosures will continue to haunt the local real estate market because of the state’s relatively high unemployment rate of 9.5 percent.

“We haven’t solved the jobs problem,” Warren said. “As long as people are unemployed … to the tune of 10 percent, that’s a bunch of people who are struggling to make ends meet, trying to squeeze a mortgage payment out of unemployment benefits.”

The city of Boston has seen significant improvements with its foreclosure problem. The number of foreclosure deeds filed in Suffolk County – which consists of Boston, Chelsea, Revere and Winthrop – in the first two months of this year fell 22.3 percent from the same time in 2009, and the number of initial petitions to foreclose fell 20.9 percent.

But Cape Cod, with its prominent second home market, continues to struggle. The number of foreclosure deeds filed on Cape Cod rose 46 percent in the first two months of this year, and the number of initial petitions were up by 1.4 percent.

Cutting loan balances is perhaps the best way to keep people in their homes, especially those with properties whose value has fallen well below the mortgage amount. More broadly, B of A is the nation’s biggest financial institution and by far the largest issuer of mortgages. Its move could spur other lenders to offer similar foreclosure relief.

“It’s a step in the right direction,” Roberto Quercia, director of the Center for Community Capital at the University of North Carolina in Chapel Hill, told me.

B of A is implementing the program under an agreement with Massachusetts officials, although it will be offered nationwide. Another motive — consumer advocates have filed a class-action lawsuit against the company in Massachusetts district court for allegedly breaching its agreement to modify people’s mortgage under the federal Home Affordable Modification Program. B of A faces a similar suit in Washington. Massachusetts residents also have filed complaints against J.P. Morgan Chase (JPM), OneWest Bank and Wells Fargo (WFC) accusing the companies of violating HAMP guidelines.

B of A’s principal-reduction program is aimed at both subprime and prime borrowers. For qualified homeowners, the bank will look first to cut up to 30 percent of the mortgage balance; only then it will consider other options to reduce loan payments, such as cutting the interest rate.

Initially, however, the program will cover only two kinds of loans — pay-option and hybrid ARMs. That’s a concern, Quercia said, explaining that to really draw a line against foreclosures B of A needs to expand the initiative to include other types of mortgages. He also noted that the program seeks to rehabilitate underwater loans over a period of five years. That may not do much to help people recover their home equity in the short-term, he said, and people might still be tempted to walk away if they are too far underwater.

For now, B of A expects to be able to offer principal reductions to only 45,000 customers nationwide. That’s a significant number, but not so much relative to the huge number of its customers who face foreclosure. According to the latest federal data, fewer than 21,000 B of A borrowers out of an eligible pool of nearly 1.1 million have had their mortgages permanently modified under HAMP.

As I explored in my recent piece about OneWest (aka IndyMac), such desultory figures aren’t solely B of A’s fault. HAMP itself is a bust. In a new report, TARP Special Inspector General Neil Barofsky characterized the $75 billion modification program as ineffectual and said it has fallen far short of expectations. He also accused the U.S. Treasury of inflating the number of homeowners who’ve gotten help by focusing on the number of trial, rather than permanent, loan modifications. Says the report:

“Absent a thorough review of HAMP and its goals, the program risks helping few, and for the rest, merely spreading out the foreclosure crisis over the course of several years, at significant taxpayer expense and even at the expense of those borrowers who continued to struggle to make modified, but still unaffordable, mortgage payments for months more before succumbing to foreclosure anyway.”

HAMP is riddled with problems, according to Barofsky. These include changing document requirements for borrowers; confusion over how participating lenders calculate whether a mortgage qualifies for relief; inadequate verification of homeowners’ income; and poor training for loan servicers in HAMP.

To this I would add an even more important factor: Banks and loan servicers have financial incentives to foreclose on homes rather than to alter mortgages. Concluded Diane Thompson, an attorney with the NCLC, in a recent report: “The compensation and constraints imposed on and chosen by servicers generally lead servicers to prefer refinancing, foreclosures and short-term repayment plans to modifcations.”

What’s the solution? B of A’s move will help, as will patching up HAMP by, for instance, clarifying who qualifies for the program. But the best option would be for the Obama administration and Congress to revisit legislation empowering bankruptcy courts to “cram down” mortgages.

That would hurt bank earnings. But companies like B of A are strong enough to take the pain, with analysts predicting a major rebound for the industry. Meanwhile, the foreclosure epidemic continues to rage. Time for stronger medicine.

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 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.

Statistics regarding foreclosures in Massachusetts for the month of October were a mixed bag of news, according to Timothy M. Warren Jr., CEO of The Warren Group.

According to the latest report released by the Warren Group, a provider of real estate data in New England, foreclosures in Massachusetts rose nearly 30 percent in October compared to September, but on a year-to-year basis the number of foreclosures in October 2009 dipped, with 85 fewer than the same time last year.

While the number of new foreclosures initiated in the state in October dropped 9 percent from September, these same results created an 11 percent increase from the same period last year.

“The number of foreclosures in October was actually the third highest so far this year. But the pace of foreclosures is still lower than it was last spring and summer when there was an average of nearly 1,200 foreclosures a month,” Warren said. “Still, a key concern is the level of petitions to foreclose, which indicate how many distressed property owners are at risk of foreclosure in Massachusetts. Lenders have filed an average of over 2,500 foreclosure petitions a month since May.”

As the first step in the state’s foreclosure process, petitions to foreclose decreased 9.1 percent in October, compared to September. While month-to-month numbers were down, there was an 11.2 percent increase in petitions to foreclose this October compared to October 2008. Year-to-date petitions to foreclose have surged 27 percent. Due to high delinquency rates, unemployment, and income issues many homeowners are facing, Warren said he fears this initial step of foreclosure will increase in the next few months.

Completed foreclosures, referred to as foreclosure deeds, rose 29.6 percent from September to October this year, but compared to October 2008, this number decreased 8.5 percent, the Warren Group said. The 7,707 foreclosure deeds recorded in Massachusetts so far this year show a 27.3 percent decline from the 10,606 completed foreclosures in 2008.

On the auction front, announcements increased 38 percent in October compared to September of this year and surged 57.3 percent from the same period last year. With a total of 15,273 auction announcements so far in 2009, numbers are down 9.8 percent compared the 16,930 in 2008.

According to the Warren Group, a number of factors have helped temper foreclosure activity in Massachusetts. Most noted of these factors were federal efforts to offer loan modifications to troubled borrowers and a Massachusetts Land Court decision forcing some lenders to hold back on foreclosure proceedings until proper mortgage assignments have been made. Additionally, a state law went into effect last year which slowed the rate of foreclosure petition filings by requiring lenders to give delinquent borrowers 90 days to catch up with missed payments before starting a foreclosure proceeding.

Just as all the hoopla over the extension of the home buyer tax credit starts to fade, along comes the The Mortgage Bankers Association to bring the market back to reality.

One in seven loans is now in foreclosure, up from one in ten at the start of the year. It’s the highest on record since the MBA began track this stuff in 1972.

And forget about all those goofy subprime loans. The driver now is the ever rising jobless rate, which has topped 10 percent and may top 11 percent or higher before it settles out.

Foreclosures on prime mortgages accounted for 33 percent of all foreclosures last quarter, up from 21 percent at the start of the year, the group reports.

The mortgage bankers project rising foreclosures well into 2010, not leveling off unitl the jobless rate starts to moderate.

And the local numbers don’t look much better, either.

The number of homes seized and sold by lenders, the last step in a months long process, has actually been on the decline so far this year in Massachusetts.

But the number of initial foreclosure notifications sent out by lenders kicking off the process is up, and up dramatically, according to local real estate data tracker the Warren Group, publisher of Banker & Tradesman.

Initial filings were up 11 percent in October over October 2008 and have risen 27 percent year to date.

Here again rising unemployment, not foolish subprime loans, appears to be driving the increase.

It certainly helps back up Rep. Barney Frank’s case that we need to start thinking about emergency loans to jobless homeowners.

And the foreclosure debate is clearly shifting now, from one about personal responsibility to the fallout of a brutal recession.

That’s my take. How about you?

A Newton, Massachusetts mother is hoping the kindness of friends and strangers can help her keep her family home.

When Elinor Beatrice met her husband Jeff 20 years ago, they each had children from previous marriages, but they would spend the coming years expanding their family even more.

They raised 11 kids in the same house Jeff grew up in, a rambling Victorian on a leafy street in Newton.

“My husband was the heart of the home. It’s very quiet without him now,” she said.

Not even two weeks ago, Jeff Beatrice had a heartache in that same home. He died in Elinor’s arms. He was 49 years old.

“It’s hard to believe he’s gone. Every day gets a little harder,” Elinor said.

Harder still because Jeff was the breadwinner, a struggling self employed CPA whose financial woes spiraled after a bad real estate investment. The Beatrice’s had trouble making ends meet and after a few years, the mortgage got away from them.

“We’ve tried food stamps but, you know, we’ve always made just a little too much to qualify for any real assistance,” Elinor said.

Eventually, they were foreclosed upon and just days before Jeff died, the mortgage company let them know it would be auctioning off their house. The family did not get swindled or taken advantage of. They fell behind and now Elinor must figure things out, with seven kids still living at home — the youngest just five.

“It’s just an overwhelming thought. And where do you go with seven kids?” Elinor said.
Thankfully, she is not answering that question alone. For the past two decades, Jeff Beatrice has coached every youth sports team imaginable — from Newton Little League to girls basketball.

“You never knew who his kids were,” family friend Jim Byrne said. “It was all the same to Jeff.”

“Any kid that was in trouble, their family was struggling, they weren’t getting enough attention at home, those kids gravitated toward the Beatrice’s house,” family friend Diane Wilcox said.

When word got out that the Beatrice family needed help, hundreds of people stepped up to the plate. A memorial fund has been established, the high school hockey team gave up money from their yard sale, strangers have dropped off everything from gift cards to groceries.

“Even my eleven year old’s friend gave me $6 from her piggy bank, which is all she had, but she was willing to give to us,” Elinor said.

The house was supposed to be auctioned off November 5th, but strangers and politicians have gotten the family a 60 day extension. Sixty days to keep a house a home.