A new report out Wednesday finds that 4.3 percent of all Maine homes with a mortgage were in the foreclosure process in April, the second highest rate in New England.
That is up slightly — by 0.1 percent — over the same period a year ago, according to the CoreLogic FCL report that came out Wednesday. The report noted that 212 homes in Maine had been foreclosed on in the 12 months ending in April.
Nationally, 3.4 percent of homes with a mortgage — or 1.4 million homes — were in the foreclosure process in April.
Regionally, the state with the highest percentage was Connecticut at 4.6 percent. Maine came in at 4.3 percent, followed by Rhode Island at 3.2 percent, Vermont at 2.5 percent, Massachusetts at 2 percent and New Hampshire at 1.5 percent.
It appears Maine had the least number of homes foreclosed on in New England in the 12 months leading up to April, though data wasn’t available for Vermont. The state with the most foreclosures in the region was Massachusetts, at 8,690.
The report differentiates between judicial versus nonjudicial foreclosure state categories. In judicial foreclosure states, lenders must provide evidence to the courts of delinquency in order to move a borrower into foreclosure, while in nonjudicial foreclosure states lenders can issue notices of default directly to the borrower without court intervention. Maine, Massachusetts, Vermont and Connecticut are judicial foreclosure states, while New Hampshire and Rhode Island are not.
“The inventory of homes in foreclosure in judicial foreclosure states is growing, but this increase is being more than offset by declining inventories in nonjudicial states where the processing timelines to clear a foreclosure are shorter,” said Anand Nallathambi, CEO of CoreLogic. “Nationally the inventory of homes in foreclosure decreased 0.1 percent from what it was a year ago at this time, and has leveled off over the first four months of 2012.”
William N. Lund, superintendent of the Maine Bureau of Consumer Credit Protection, said his office doesn’t track foreclosures in the state. Rather, it measures homeowner mortgage defaults. When a lender like a bank or credit union sends a “notice of right to cure default,” telling homeowners they have 35 days to pay all past-due bills, that lender also must notify Lund’s office, providing the name and address of the homeowner.
“We, in turn, send out informational packets inviting homeowners to call our hotline for immediate help from staff here, or for referral to a counselor who is part of our statewide network,” said Lund. “So far this month we’ve sent out 2,882 informational packets. This is very consistent with the numbers sent out each month for the last six months, indicating a continuing, moderately high level of delinquent mortgages.”
Lund said that notice sent by lenders is the last step they must take before initiating foreclosure. While his office didn’t track how many of them actually foreclosed following those notices, he did say many of them don’t. The number of notices being sent out is “an indication of the number of consumers who are in default and who are facing possible foreclosure,” said Lund.
Of those 2,882 notices in May, 442 were sent out by state-chartered banks and credit unions.
“In other words, four out of five default notices were sent to homeowners from federal banks or national investors, rather than by state-chartered banks or credit unions,” Lund noted.
Lund said his office is getting calls every day from homeowners who are looking for help. The office categorizes the problems and refers cases to the 14 counselors located around the state. Many seeking help are late in the foreclosure process, he said, possibly hoping the problem would go away. In some cases, the issues involved are challenging and complex. In others, the lender hasn’t done a good job of working with the borrower to avoid foreclosure.
Lund said that, overall, he thought the state was on the back half of the foreclosure bubble, heading toward the end of the problem.
Maine’s overall foreclosure numbers are certainly better than the states that had the biggest problems, as laid out by the CoreLogic report.
According to the CoreLogic report, the five states with the highest number of completed foreclosures for the 12 months ending in April 2012 were California (142,000), Florida (92,000), Michigan (60,000), Texas (58,000) and Georgia (57,000). These five states account for 48.8 percent of all completed foreclosures nationally.
The five states with the lowest number of completed foreclosures for the 12 months ending in April 2012 were South Dakota (62), District of Columbia (162), North Dakota (541), West Virginia (598) and Hawaii (601).
The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were Florida (12.0 percent), New Jersey (6.7 percent), Illinois (5.3 percent), Nevada (5.0 percent) and New York (5.0 percent).
Lund said the national trend of “short sales” is also hitting Maine. Basically, a short sale works like this: A homeowner may owe $200,000 on a mortgage. A buyer comes along who will pay $150,000 for the house. The lender agrees to sell for that amount rather than foreclose on the homeowner.
“Nationally, more homes are sold now at short sales than are sold by banks following foreclosure auctions. Short sales raise many issues, especially surrounding the potential deficiency balances remaining after the sales. If the debt is forgiven, it’s taxable income to the homeowner,” Lund explained. “If it’s not forgiven, then it remains as a possible collectible debt that can be sold by the mortgage lender to a debt buyer at some point in the future.”