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.”
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