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Monday, December 05, 2005

Massachusetts: Foreclosure rates on the rise

by Calculated Risk on 12/05/2005 05:32:00 PM

The Sentinel & Enterprise reports: Foreclosure rates on the rise

David Anderson has seen his share of families facing trouble with late bills and expensive mortgages, as a counselor for people about to lose their homes.

But lately Anderson, who works for a Gardner-based Residential Assistance Transitional Housing, got a surprise -- a big jump in foreclosures in the area.

"It used to be that people in foreclosures find themselves in a catastrophic situation, something medical or a losing a job," Anderson said. "But it seems to be now I get a lot of desperate calls from first-time homeowners who have done a 20-80 mortgage or a zero interest mortgage, what some would call predatory lending."

Homeowners across the state are losing their homes at a growing rate, forcing lawmakers to face a hard reality on Beacon Hill -- the state's economy is far from a healthy recovery.
I think this is key: people are getting in trouble, not because of a personal emergency, but because they are simply over their heads in debt.
The number of foreclosures in Massachusetts has increased by more than 33 percent in the past year.
...
Economists who spoke to the Sentinel & Enterprise expect the trend to continue as long as the state's economy, particularly job growth, remains sluggish.

"There has been a confluence of events: very slow job growth and higher interest rates, have all conspired to have this one particular result of (more) foreclosures," Nakosteen said.

Bob Forrant, a professor in the regional economic and social development department at UMass Lowell, said foreclosures are on the rise because high real estate prices and loose mortgage requirements clashed with a lack of well-paying jobs in the state.

"The state is not generating enough well-paying work ... and people have been buying more house than they can afford," he said.
...
William Wheaton, an economist and professor at the Massachusetts Institute of Technology in Cambridge, said the spike in foreclosures is "not an economy thing."

"The economy is improving, not very dramatically, but we are on a recovery," Wheaton said.

Wheaton blames the national lending explosion, where more people than ever before had been able to qualify for a mortgage.

"It used to be that you had to have good credit to get a mortgage, but now no matter who you are, you can get a mortgage," he said. "You get a huge number of young people able to buy homes, but they are at a very high risk (of defaulting on loans) ... so the foreclosure rates there will be very high. It won't be getting any better for awhile."

Wheaton also said tougher federal bankruptcy laws, which went into effect in October, will make it harder for people to escape major debt and leave people stranded with high payments and possibly lose their homes.