While recent reports have signaled a rebound for Maine’s economy, the rate of foreclosures in the state is expected to stay high — at least until the fall — according to a recent report by the Maine Bureau of Consumer Credit Protection.
According to the quarterly report presented June 10 to the Maine Legislature, more than 20,000 Maine homeowners have defaulted on their mortgages in the past year.
The BCCP estimates that “while the pace of foreclosures in Maine will not increase dramatically, the state will continue to maintain the current rate at least through the fall and winter months of 2010.”
Sagadahoc County has the highest default rate, with an estimated 13.44 percent of homeowners having received a default notice in the last 12 months. Piscataquis County comes in second at 9.81 percent, and Oxford Country third with 8.84 percent.
But according to data by RealtyTrac, a company that tracks national foreclosure rates, Maine is doing relatively well — the state is ranked 46th in foreclosures. According to the report, California leads the country in foreclosures, accounting for more than 22 percent of the national total in May. Maine’s foreclosure rate dropped 18.15 percent from last year, according to the report.
“If actual foreclosures are slowing down, it’s possible part of the reason is the various approaches put in place by the legislature are having an impact,” said Will Lund, superintendent of the BCCP, referring to the act passed by the Legislature last year that provides mediation services to homeowners and requires lenders to give notice before foreclosing on a home.
Lund says the current wave of foreclosures differs from those that immediately followed the subprime mortgage crisis that began in 2007. During that crisis, people who couldn’t afford payments were given loans anyway. Since housing prices kept rising, they could always refinance to keep their homes.
“The true rate of default was hidden,” Lund said. “As long as the value of the consumer’s home continued to increase, consumers who defaulted on the mortgage could always refinance. We saw refinances take place three, four, five times” on the same home.
But the subprime crisis spurred the greatest economic downturn since the Great Depression, leading to widespread unemployment. Maine’s unemployment rate currently stands at 8.9 percent. This lack of jobs is currently driving this second wave of foreclosures, says Lund.
Now that the housing bubble has popped, home prices are lower, and lenders are less likely to refinance a loan if the homeowner can’t afford it, Lund says.
“The bad news is that these are folks who really would otherwise be able to make their payments, if the economy had not reached the current state,” Lund said. “The good news is that these are folks who are accustomed to making an income — they are motivated because they were in it for the long run, in the first place, and the economy is improving. If eligible homeowners can be put into loan modification programs, if the economy can continue to improve.”
The BCCP has scheduled several workshops over the next few months to advise homeowners worried about being foreclosed upon: