AUGUSTA, Maine — Between 2007 and 2008, the number of homes in Maine that were in foreclosure jumped by 45 percent. But that figure likely tells only part of the story.
By including mortgage holders deemed to be “seriously delinquent” on payments, the number of Maine property owners either in foreclosure or on the brink of losing their homes swelled to more than 8,600 by the end of 2008, according to the Center for Responsible Lending.
On Tuesday, state lawmakers will hold public hearings on bills aimed at lessening the impacts of Maine’s growing foreclosure crisis on homeowners, communities and the courts.
Some of the measures seek to slow down the foreclosure process, while others attempt to protect renters caught in the middle. Several bills propose creating mandatory mediation processes to ensure that homeowners are aware of their rights while simultaneously reducing the foreclosure backlog in the courts.
The bills will be heard at 1 p.m. Tuesday in the Insurance and Financial Services Committee.
Much of the focus during the past year has been on the collapse of the subprime lending market and resulting foreclosures. But as the ranks of the unemployed continue to climb in Maine and nationally, the percentage of prime mortgages headed into foreclosure is also increasing.
“Unfortunately, we are seeing a lot more people where the foreclosure is happening because of the economy and job loss,” said Carla Dickstein, senior vice president at Coastal Enterprises Inc., a nonprofit heavily involved in efforts to address the foreclosure crisis in Maine.
One of the more comprehensive proposals pending before the Legislature that has won the backing of CEI and other organizations is LD 1418 by Rep. Sharon Treat, D-Hallowell.
The central provision of the bill is creation of a mandatory foreclosure mediation program within the Court Alternative Dispute Resolution Service. The aim of mediation as well as other parts of the bill is to make sure that consumers struggling to pay their mortgages are aware of their options and have an opportunity to meet with the holder of the mortgage, which may have changed several times since the initial signing.
The bill also aims to keep houses going through foreclosure from falling into disrepair — and thereby contributing to urban blight — by requiring either the homeowner or the lender to make sure the home remains inhabitable. It also prohibits tenants from being evicted from foreclosed properties.
Treat said she was inspired to introduce the bill after hearing about the problems in the lending industry as a member of the Insurance and Financial Services Committee in recent years. The Legislature passed a predatory-lending bill in 2007, but Treat said she was concerned about the homeowners who entered into mortgage contracts before that.
Treat pointed out that her bill is not intended to give anyone money.
“It’s really about having a better procedure and helping the courts figure out how to deal with all of these cases that are coming through the door,” Treat said.
Federal and state courts are also examining ways make the foreclosure process fairer for consumers and lenders while reducing the burden on the judicial system.
Pinning down foreclosure rates in Maine can be difficult or confusing because of different reporting requirements and the increasingly international nature of the lending industry.
In its March 2009 report, the Center for Responsible Lending reported that 5,455 properties were in foreclosure in Maine at the end of 2008. About 58 percent of those were subprime loans, but the number of prime loans in foreclosure increased by 72 percent between 2007 and 2008.
The Maine Bureau of Financial Institutions, which is part of the Department of Professional and Financial Regulation, said earlier this month that Maine-chartered banks reported a modest increase in foreclosures and delinquencies in the fourth quarter of 2008.
While the Center for Responsible Lending said Maine’s foreclosure rate remains higher than the national average, the Department of Professional and Financial Regulation’s superintendent, Lloyd LaFountain III, said foreclosures among Maine-chartered financial institutions are lower than in other parts of the country.
“Additionally, there were encouraging signs, such as a decrease in the number of initiated foreclosures,” LaFountain said in a statement. “Overall, the level of foreclosures — while tragic on an individual basis — does not currently threaten the strength and solvency of Maine-chartered banks and credit unions.”
The 32 Maine-chartered financial institutions included in the state’s survey held more than 87,000 mortgage loans at the end of last year. However, the survey did not include figures for the many more federally chartered banks and mortgage companies licensed to do business in Maine but not regulated by the federal Bureau of Financial Institutions.
Dickstein with Coastal Enterprises Inc. said there are people who won’t be helped by the proposals because they are either too far behind in their payments or the value of their homes is well below the amount owed on the mortgage.
But Dickstein believes there are many more people facing foreclosure who still can be helped if they can get access to mediation. That can benefit not only the homeowners but also courts, communities and lending institutions that otherwise would lose more money by foreclosing upon a house, she said.
Treat has proposed paying for the mediation services either through court fees or real estate transfer fees but said she is open to any practical solutions.