June 22, 2018
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Study: Foreclosures, new home loans up

By Mal Leary, Maine Public

AUGUSTA, Maine — The quarterly survey of the State Bureau of Financial Institutions indicates mortgage foreclosures are continuing to increase, but so are the number of new home mortgage loans.

That’s an encouraging trend said Superintendent Lloyd LaFountain, but some argue the data are incomplete.

“We are seeing a significant increase in new home mortgage loans by state-regulated institutions,” he said.

In the second quarter of 2008, the state survey of the 20 banks and 12 credit unions that the state regulates recorded 2,222 new first mortgages. In the second quarter of this year, 3,583 new first mortgage loans were initiated.

“That is a dramatic increase,” he said, “We are very encouraged by that.”

LaFountain said the increase in mortgage foreclosures is “modest” even though the most recent quarterly data show 260 foreclosures started for all types of residential mortgages, up from 186 for the same quarter in 2008.

At the same time, the number of second mortgages being secured by Mainers is down from 2,343 in the quarter ending June 2008 to 1,719 in the quarter ending June of this year.

But University of Maine Business School Dean John Mahon is not sure the state survey represents what is fully going on in the state. He said a significant number of mortgages are written by federally chartered banks, credit unions and mortgage companies, and they deal very differently with their customers than do local banks.

“Because of their ties to the local community, they really do resist to the greatest extent they can to making unneeded foreclosures,” he said. “They will work with you as long as they can to try to keep that an active loan, whereas with a national bank, you are just a statistic, you are a number on a large sheet of paper.”

Mahon said because of that difference, the state survey might downplay the number of foreclosures under way in the state. LaFountain said he would “like to think” that the national banks operate as the state banks in dealing with foreclosures, but admitted that is “a guess” because there are no similar data for national banks, fed-erally chartered credit unions or mortgage companies licensed to do business in the state.

“We tried to get data from the national banks, but since we do not regulate them, the result we got was very spotty,” he said. “Some would report one month and not the next and others not report at all.”

LaFountain said the state-regulated institutions hold very few of the subprime loans that have been plaguing other banks and mortgage lenders across the country. He said that more conservative approach to lending has led to lower state numbers for foreclosures in Maine than in some other areas of the country.

Mahon said the increased mortgage lending might not be an indication of the real estate market rebounding. He suggested it might reflect some “bargain basement” sales of homes more reflective of pent-up demand than anything else.

“Part of it is people selling their homes because they can no longer afford them,” he said. “It’s not that they go into foreclosure. They are staying ahead of that by selling their home.”

LaFountain said he believes some of the increased mortgage activity is simply because of low interest rates and first-time-buyer incentives offered by the federal government.

“I saw one offering of 4 percent for 15 years,” he said. “That didn’t last long, but I see a lot of 30-year loans right around 5 percent.”

Mahon agreed that low interest rates and federal subsidies for first-time home buyers are helping with new loans, but he does not expect the real estate market to grow until the recession ends and consumer confidence grows.

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