Foreclosure crisis hits hard in Bay and Granite states

New Hampshire and Massachusetts Foreclosure News

By Bill Kirk , Business Editor
Eagle-Tribune

EDITOR'S NOTE: This is the first in an occasional series about the foreclosure crisis in Massachusetts and New Hampshire.

A growing number of homeowners across the Merrimack Valley and Southern New Hampshire are in danger of losing their homes - or have already lost them - because they can no longer afford their mortgages, according to statistics released last week.

The culprit? Adjustable-rate mortgages with low "teaser rates" offered by unscrupulous brokers to people who really couldn't afford the homes they were buying in the first place. After a year or two, the teaser rates go up, pushing payments to unaffordable levels.

The result? Hundreds of homes in Lawrence, Methuen and Haverhill, dozens more in Andover and North Andover, and scores more in New Hampshire are being foreclosed on at record rates. Meanwhile, federal, state and local financial and housing officials are scrambling for a solution before the problem gets even worse.

But many local housing advocates, who have to help pick up the pieces as families are forced out of their homes and into the streets, say while government help is welcome, it may be a case of too little, too late.

Massachusetts Gov. Deval Patrick "has introduced a foreclosure prevention plan," noted Harold Magoon, program director of the Lawrence/Methuen Neighborhood Coalition, which acts as a clearinghouse for people seeking help with their skyrocketing mortgage payments.

"But I'm afraid for a lot of folks it might be too late," Magoon said.

He noted that even President Bush got into the act, announcing Thursday a freeze on interest rates for people who were lured into homes they couldn't afford with adjustable-rate mortgages.

"It might help some people," he said. "But for people whose rates have already reset, it's a huge problem."

Even some state officials recognize the problem may be getting out of hand, despite their best efforts.

In New Hampshire, staff members from the Banking Department are holding workshops across the state to reach out to homeowners who may be facing foreclosure. And the department opened a phone line so people can call in for help.

"Some of those folks we have helped," said N.H. Banking Department Commissioner Peter Hildreth. "Unfortunately, a lot of them are in houses they simply can't afford."

He and Massachusetts banking and housing officials are encouraging people who think they may be in an adjustable-rate mortgage to call immediately for help.

"They have to do it before they get the foreclosure notice," Hildreth said. "There's not a lot more in many cases that can be done."

Tom Farmer, spokesman for the Massachusetts Housing Finance Agency, which is helping implement Patrick's five-point foreclosure prevention plan, said a "perfect storm" of events has conspired to make the situation so onerous.

"It's heart-breaking, it really is," he said, noting that people are struggling from rising mortgage payments, falling home values, and an economy that is verging on a recession.

"It's created a perfect storm," he said. "In many cases the house is worth less than the loan. So if you owe $150,000 but the house is only worth $120,000 now, you need to get the mortgage company to eat the $30,000."

That's proving difficult to do.

"Unfortunately, people in the business have never seen anything like this before," Farmer said. "It's a difficult and extraordinary situation."

Massachusetts foreclosures up

The Warren Group, a Boston-based real estate data firm, announced Monday that across the state of Massachusetts, the number of foreclosure auctions, also known as foreclosure deeds, so far this year has nearly tripled when compared to the same time period last year. In Essex County, foreclosure auctions rose by 282 percent as of Oct. 31, according to the organization.

Haverhill, for example, saw just 47 foreclosure auctions in the first 10 months of 2006. The same city saw 119 during the same period this year, an increase of 153 percent.

The Warren Group was unable to provide comparable statistics for Lawrence, Methuen, Andover and North Andover. But Foreclosuresmass.com, a company that tracks real estate trends across the state for investors, provided data showing foreclosure petitions - the first step in the process - have skyrocketed over the last year.

From September 2005 to September 2006, 276 foreclosure petitions were introduced in Lawrence. That number jumped to 704 from September 2006 to September 2007. While Lawrence led the pack during that period, Haverhill came in second, with 206 filings in 2005-2006 rising to 398 in 2006-2007.

Methuen also saw a spike, going from 136 to 235; Andover rose from 29 to 51; and North Andover rose from 40 to 58.

Terence Egan, editor in chief at The Warren Group, said foreclosures are rising because of a dangerous combination. Homeowners' adjustable mortgage interest rates are rising at the same time home sales are declining. As people fall behind in their payments, they normally would sell their homes to get out from under the loan. But declining home prices are making that impossible.

"Home values going down has exposed a lot of problems," Egan said.

Jeremy Shapiro, CEO of Foreclosuresmass.com, also said the high numbers are a "combination of the depressed housing market and rising interest rates."

"They can't sell, can't refinance, and can't pay the existing mortgage, so the homeowner quickly heads toward foreclosure," he said.

Many people got into trouble because they agreed to loans they couldn't afford. In some cases, those loans were so-called "subprime" loans to people with bad credit. In other cases, people with bad credit or insufficient resources were targeted by predatory lenders, which put them in loans with rapidly increasing interest rates.

Foreclosures in Essex County are surpassing the increase statewide because of its two major urban clusters, Egan said, where more minorities and low-income people targeted by predatory lenders live. Lawrence, Haverhill and surrounding cities all saw increases in foreclosures, as have Lynn, Peabody and Salem.

But people living in the suburbs should not feel they've escaped.

Thomas Callahan, executive director of the nonprofit Massachusetts Affordable Housing Alliance, said suburban homeowners could be hurt by falling home prices made worse by the foreclosure crisis.

"There's a ripple effect foreclosure sales have on overall values in eastern Massachusetts," Callahan said. "It depresses the market most severely on your block. But when there are so many foreclosures in Essex County, you can get to point that all of those foreclosures on the market have an effect of dampening values going forward."

New Hampshire numbers spiking, too

In New Hampshire, meanwhile, Hildreth, the banking commissioner, said 2,000 to 3,000 homes could be foreclosed on by the end of 2008. He said the problem is particularly pronounced in the more populated parts of the state and along the border with Massachusetts.

"Rockingham County and Southern Hillsborough County will feel the brunt of it," he said. "That's where housing prices were high to start with. People had to really stretch to afford some of those homes."

The problem has become so severe that Congressman Paul Hodes, a Democrat from the 2nd New Hampshire Congressional District, held a Mortgage Crisis Roundtable on Monday with organizations, businesses and regulators involved in the New Hampshire mortgage sector.

He said in a press release on his Web site after the event that an estimated 4,300 New Hampshire homeowners "will lose their homes to foreclosure between now and the end of 2009. These foreclosures can be a financial catastrophe for families, and are also estimated to cost the Granite State an estimated $3.8 million in property tax revenue."

Massachusetts and New Hampshire are by no means unique.

The Mortgage Bankers Association in its quarterly snapshot of the market released Thursday reported that the percentage of all mortgages nationwide that started the foreclosure process jumped to a record high of 0.78 percent during the July-to-September period. That surpassed the previous high of 0.65 percent set in the prior quarter.

More homeowners also fell behind on their monthly payments.

The delinquency rate for all mortgages climbed to 5.59 percent in the third quarter. That was up from 5.12 percent in the second quarter and was the highest since 1986, the association said. Payments are considered delinquent if they are 30 or more days past due.

Homeowners with spotty credit who have subprime adjustable-rate loans were especially hard hit. Foreclosures and late payments for these borrowers also reached all-time highs in the third quarter.

Staff writer Ed Mason contributed to this story.

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Foreclosure process

Massachusetts

* A petition to foreclose is the first step in the foreclosure process. When a homeowner gets behind on his or her payments, the lender may file a petition to foreclose.

* A foreclosure auction announcement is run in a newspaper, advertising the date and time of a foreclosure auction. This usually happens at least three months after the petition is filed, and lately it's taking even longer than that.

* A foreclosure deed is filed with the registry of deeds when the property is sold at auction.

New Hampshire

In New Hampshire, once a foreclosure is announced, an auction follows soon after, according to Jeremy Shapiro of Foreclosuresmass.com.

Source: N.H. Banking Department, Congressman Paul Hodes and the Warren Group.

Foreclosures over the years

Merrimack Valley

Community#Sept. 2005-Sept. 2006#Sept. 2006-Sept. 2007#Percent change

Lawrence#276#704#155

Haverhill#206#398#93

Andover#29#51#75

Methuen#136#235#73

North Andover#40#58#45

New Hampshire

* Estimated number of foreclosures by end of 2008: 2,000 to 3,000

* Estimated number of foreclosures by the end of 2009: 4,300

Coming next week

How foreclosures are affecting neighborhoods.

Article Source http://www.eagletribune.com/punews/local_story_343113937?page=5