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Foreclosures, Delinquent Mortgages Drop Again In State

By KENNETH R. GOSSELIN

November 18, 2010

The number of Connecticut homeowners seriously delinquent on their mortgage payments or in foreclosure has declined for two quarters in a row now, according to a new report Thursday — an encouraging sign for a housing market struggling to shake off the recession.

The state's housing market has been bumping along at a bottom, with sales still declining prices are rising modestly. Thursday's report was fodder for optimism, combined with the fact that mortgage rates this week rose for the first time since August, typically a sign of a strengthening market.

Without a doubt, Connecticut still faces a tough slog. Deeply troubled mortgages in the state are still near record highs. Unemployment remains stubbornly high, keeping a broad cross-section of homeowners at risk of falling behind on their mortgages.

And those on the front lines helping distressed borrowers say the pain isn't easing.

"We definitely seeing more people," said Erin Kemple, executive director of the Connecticut Fair Housing Center in Hartford, which runs monthly foreclosure clinics around the state. "The number of people at our clinics continue to go up."

On Thursday, the Mortgage Bankers Association reported that foreclosures and mortgages 90 days or more past due declined to 7.56 percent of all mortgages in Connecticut in the three months ended Sept. 30, down from 7.83 percent in the previous quarter.

In the first three months of the year, foreclosures and seriously delinquent loans reached a record high of 8.13 percent. The association has tracked delinquencies and foreclosures by state since 1979 as part of a national report.

One in 13 mortgages was 90 days past due or in foreclosure in Connecticut in the third quarter. That compares with one in 11 for the nation as a whole.

The decline in the most recent quarter was due largely to lower levels of seriously delinquent mortgages. The number of properties falling from delinquency into foreclosure rose compared with the previous quarter, a sign that banks were stepping up efforts to move home loans through the foreclosure process.

It remains unclear how the "robo-signing" scandal that temporarily put a halt to foreclosures will affect the association's snapshot for the last three months of this year. It could push up the foreclosure inventory.

In Connecticut and nationally, Thursday's report also had an ominous sign: The number of mortgages that were 30 days past due rose for the second quarter — indicating that another wave of trouble may be on the way.

That may be the first fallout from pay option adjustable-rate mortgages and other "exotic" home loans resetting their interest rates, jacking up monthly payments.

So far this year, the fair housing center logged more than 1,000 homeowners attending the five foreclosure clinics it runs monthly around the state. That's more than triple the 313 that attended the clinic for all of last year, Kemple said.

The center also has already exceeded the 295 clients it represented in foreclosure cases in 2009. Through October, the number had already crested 300, Kemple said.

Nationally, loan delinquencies aren't expected to decline significantly in the coming year given the "headwinds" from the job market, said Michael Fratantoni, the association's vice president for research and economics.

"We still have a long way to go," Fratantoni said on a conference call Thursday.