October 29, 2007
Closing time | Despite the subprime fallout, Maine's foreclosure rate remains among the lowest in the country. Some observers say that situation isn't as sweet as it sounds.
By Kerry Elson
Over the last year, the number of home foreclosures in the United States spiked as high-risk borrowers found themselves unable to pay off rising mortgage debt. But despite the mortgage meltdown still rocking most of the country, Maine's foreclosure rate remains lower than the rate in most other states, according to reports from firms like RealtyTrac Inc., which tracks public foreclosure filings from its headquarters in Irvine, Calif.
Nationally, the number of home foreclosures nearly doubled from September 2006 to September 2007, to 223,538 public foreclosure filings, according to RealtyTrac. But over the same period, Maine's foreclosure rate has ranked among the bottom 10 states in RealtyTrac's monthly reports. According to the firm's September figures, the most current available, Maine's foreclosure rate is lower than that of 41 states in the nation.
But state regulators here say the outlook isn't as rosy as these studies suggest. Data on foreclosures throughout the state were only recently made available and more homes here could enter foreclosure in coming years as mortgage rates for high-risk, or "subprime," borrowers switch from discounted "teaser" rates to ones with higher interest.
Will Lund, for example, believes Maine has been hit hard by the mortgage crisis. As director of the state Office of Consumer Credit Regulation, which advocates on behalf of borrowers, Lund says calls to his office from homeowners worried about foreclosure have tripled in the last year to at least 20 a day. Another 100 written complaints about deceptive or unfair mortgage lenders are awaiting his attention at any given time.
"By no means did Maine escape the trend of a dramatic increase in foreclosures," he says, "and that process is going to continue for some time now."
In the next two years, interest rates on about two million adjustable-rate mortgages will reset, and about a quarter of those are expected to go into default, according to the U.S. Department of Housing and Urban Development.
Maine has ranked low partly because of Mainers' characteristic frugality, according to Lund. Borrowers and lenders here have traditionally been wary of high-risk loans, or what he calls "extreme loans," in which borrowers could set their own interest rate for the month.
And the low ranking also may have to do with the way companies like RealtyTrac collect data. The firm collects foreclosure filings from county courthouses to create its report, but not all Maine lenders foreclosed on properties in court. Some used a method called "strict foreclosure," in which the lender could automatically possess the property if the borrower didn't pay his or her monthly bill. "We don't know how common those were," Lund says.
Maine repealed its law allowing strict foreclosure in September of this year, meaning all foreclosures now must be filed in court.
RealtyTrac hadn't collected all foreclosures filed in court, either. Until April 2007, the firm didn't have access to foreclosure filings from Knox, Piscataquis, Somerset, Waldo and Washington counties, which effectively excluded about 13% percent of the state's population and some of Maine's poorest residents, according to Daren Blomquist, marketing communications manager at RealtyTrac. After RealtyTrac began analyzing the five counties, the state's foreclosure rate rose nearly 770% from March to April, from nine total foreclosures to 113.
The state may have a better handle on the extent of subprime lending here after Jan. 1, 2008, when Maine's anti-predatory lending law goes into effect. The Maine Homeowner Protection Act, which passed in June, requires the state to track all foreclosure data to better manage subprime lending, according to Lund.
The law will prevent lenders from charging extra fees when borrowers pay off high-cost mortgages ahead of schedule; requires consumers who are taking out a high-cost mortgage to go through credit counseling; requires lenders to consider borrowers' income when issuing a high-cost loan; and gives the Attorney General's office the authority to prosecute lenders, among other measures.
Even if Maine's foreclosure rate is relatively low, the state should still crack down on predatory lending, warns Carla Dickstein, a senior program officer at Coastal Enterprises Inc. in Wiscasset who authored a 2006 study on predatory lending in Maine. "Even if we have lower statistics, every statistic is a person who can't afford to keep their house," she says.
Nationally, the number of home foreclosures nearly doubled from September 2006 to September 2007, to 223,538 public foreclosure filings, according to RealtyTrac. But over the same period, Maine's foreclosure rate has ranked among the bottom 10 states in RealtyTrac's monthly reports. According to the firm's September figures, the most current available, Maine's foreclosure rate is lower than that of 41 states in the nation.
But state regulators here say the outlook isn't as rosy as these studies suggest. Data on foreclosures throughout the state were only recently made available and more homes here could enter foreclosure in coming years as mortgage rates for high-risk, or "subprime," borrowers switch from discounted "teaser" rates to ones with higher interest.
Will Lund, for example, believes Maine has been hit hard by the mortgage crisis. As director of the state Office of Consumer Credit Regulation, which advocates on behalf of borrowers, Lund says calls to his office from homeowners worried about foreclosure have tripled in the last year to at least 20 a day. Another 100 written complaints about deceptive or unfair mortgage lenders are awaiting his attention at any given time.
"By no means did Maine escape the trend of a dramatic increase in foreclosures," he says, "and that process is going to continue for some time now."
In the next two years, interest rates on about two million adjustable-rate mortgages will reset, and about a quarter of those are expected to go into default, according to the U.S. Department of Housing and Urban Development.
Maine has ranked low partly because of Mainers' characteristic frugality, according to Lund. Borrowers and lenders here have traditionally been wary of high-risk loans, or what he calls "extreme loans," in which borrowers could set their own interest rate for the month.
And the low ranking also may have to do with the way companies like RealtyTrac collect data. The firm collects foreclosure filings from county courthouses to create its report, but not all Maine lenders foreclosed on properties in court. Some used a method called "strict foreclosure," in which the lender could automatically possess the property if the borrower didn't pay his or her monthly bill. "We don't know how common those were," Lund says.
Maine repealed its law allowing strict foreclosure in September of this year, meaning all foreclosures now must be filed in court.
RealtyTrac hadn't collected all foreclosures filed in court, either. Until April 2007, the firm didn't have access to foreclosure filings from Knox, Piscataquis, Somerset, Waldo and Washington counties, which effectively excluded about 13% percent of the state's population and some of Maine's poorest residents, according to Daren Blomquist, marketing communications manager at RealtyTrac. After RealtyTrac began analyzing the five counties, the state's foreclosure rate rose nearly 770% from March to April, from nine total foreclosures to 113.
The state may have a better handle on the extent of subprime lending here after Jan. 1, 2008, when Maine's anti-predatory lending law goes into effect. The Maine Homeowner Protection Act, which passed in June, requires the state to track all foreclosure data to better manage subprime lending, according to Lund.
The law will prevent lenders from charging extra fees when borrowers pay off high-cost mortgages ahead of schedule; requires consumers who are taking out a high-cost mortgage to go through credit counseling; requires lenders to consider borrowers' income when issuing a high-cost loan; and gives the Attorney General's office the authority to prosecute lenders, among other measures.
Even if Maine's foreclosure rate is relatively low, the state should still crack down on predatory lending, warns Carla Dickstein, a senior program officer at Coastal Enterprises Inc. in Wiscasset who authored a 2006 study on predatory lending in Maine. "Even if we have lower statistics, every statistic is a person who can't afford to keep their house," she says.
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