Thousands in Mass. foreclosed on in '07

By Binyamin Appelbaum Globe Staff 

Mortgage companies foreclosed on 7,563 Massachusetts homes last year, almost nine times the number in 2005, when the housing boom peaked, and almost three times the number in 2006.

It was the most foreclosures in a year since the early 1990s, during the last protracted decline in housing prices. The figures are compiled by Warren Group, a publisher of real estate data and news.

Many housing analysts expect 2008 will be even worse. Housing prices are expected to fall through the year, driven in part by mortgage companies selling foreclosed homes at discounted prices. At the same time, thousands of Massachusetts borrowers face increased monthly mortgage payments as their interest rates jump sharply.

The lending industry is under mounting pressure to help borrowers avoid foreclosure, specifically by reducing the monthly payments on loans that borrowers cannot afford. Sheila Bair, who heads the Federal Deposit Insurance Corp., told a conference in New York Thursday that voluntary industry efforts are moving too slowly.

"We must see a pickup in the pace, and the sooner the better," she said. If not, she said, the government might need to "step in," though she did not specify a course of action. A growing chorus from all parts of the political spectrum favors spending public money to save homes, but that is an idea the Bush administration has resisted.

The lending industry has defended its efforts. The Mortgage Bankers Association reported Thursday that mortgage companies granted some leeway to 236,000 borrowers nationwide between July and September. Only 53,600 of those borrowers received a reduction in monthly payments. Most instead got a repayment plan: They must keep making their regular payments, but missed payments and penalty fees are deferred until the end of the loan.

A preliminary report released yesterday by the Hope Now Alliance, another industry group, said the number of loan modifications tripled in the last three months of the year.

"The number of borrowers being helped is accelerating rapidly," said Faith Schwartz, the group's executive director.

But housing advocates said it is not clear that the industry is helping borrowers avoid foreclosure. People who cannot afford their payments are not helped by deferring repayment of penalties and missed payments, and modification only works if the payment is reduced sufficiently. The Mortgage Bankers' report said 29 percent of foreclosure actions in the third quarter of 2007 were taken against borrowers who previously had received assistance.

"People are using the term modification very loosely and very broadly," said John Taylor, president of the National Community Reinvestment Coalition, which advocates for borrowers. "The real proof of the pudding is the foreclosure numbers, and there is no indication that's changing," he said.

The assistance offered to Massachusetts borrowers tracks the national pattern. The Mortgage Bankers Association reported that 917 Massachusetts borrowers between July and September received a reduction in loan payments, and 3,252 received a repayment plan.

But during that three-month period lenders initiated foreclosure proceedings against 7,467 Massachusetts homeowners, 29 percent of whom previously had received assistance from a lender.

Many foreclosure proceedings do not end in foreclosure - the seizure of the home and the eviction of the borrower. Many homeowners are able to resume making payments or reach a deal with the lender or find a buyer for the home. But the number of new filings against delinquent borrowers suggests a continuing increase in seized homes.

The Patrick administration announced several responses to the foreclosure crisis last summer, but so far the efforts have not had a significant impact on the problem. The most tangible plan created a fund to refinance subprime borrowers into fixed-rate loans, but most applicants haven't met the program's strict eligibility standards. Only four borrowers have been refinanced to date.

To expand access, the program in December dropped a requirement that applicants demonstrate they were the victim of a predatory loan. The state also sent letters to 12,500 homeowners in communities with high foreclosure rates, offering guidance to troubled borrowers.

"The high number of foreclosures in 2007 speaks to a continuing need for an urgent and comprehensive response from all who have a stake in keeping families in their homes and stabilizing our communities," an administration spokeswoman said. "More than ever, we look forward to working with lenders who share our common goal of sustaining homeownership and finding real solutions to this national problem."

Binyamin Appelbaum can be reached at bappelbaum@globe.com.

(Correction: Because of incorrect information provided by The Warren Group, a Page One story on Saturday about real estate foreclosures in Massachusetts in 2007 misstated the total for the year as 7,563. The correct number of foreclosures in 2007, according to The Warren Group, is 7,653.)

 

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