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State's Home Loan Pain Grows: Foreclosure, Delinquency Rate Soars

KENNETH R. GOSSELIN

November 20, 2009

Foreclosures and seriously delinquent home loans in Connecticut logged another grim milestone in the third quarter, soaring a full percentage point to 7 percent of all loans — the largest quarterly increase in nearly 30 years, according to a new report Thursday.

Residential mortgages that were either in the foreclosure process or 90 days or more past due remained at record levels in the state for the seventh consecutive quarter. The Mortgage Bankers Association, which provided the report, began tracking delinquencies and foreclosures by state in 1979.

Although there are nascent signs of recovery in the economy, experts see little relief soon from foreclosures — especially as job losses take an increasingly bigger toll. Connecticut's unemployment rate jumped to 8.8 percent in October, the state Department of Labor said Thursday.

Those job losses are affecting growing numbers of homeowners with traditional, fixed-rate mortgages even more than the risky subprime loans that touched off the housing crisis in 2007.

As of Sept. 30, Connecticut had 37,022 residential mortgages in foreclosure or 90 days or more past due — one in every 14 mortgages.

That compares with 6 percent, or one in every 17 mortgages, for the previous quarter. And the numbers do not include foreclosures that have already been completed in this recession — a growing tally for which exact figures are not readily available.

Connecticut's foreclosure and delinquency level for the most recent quarter was still lower than the national rate of nearly 9 percent and about the same as that of New England.

Nationally, foreclosure woes remained concentrated in four states: Florida, Nevada, California and Arizona. Florida topped all states, with 19 percent of all loans in foreclosure or seriously delinquent.

The total number of delinquent loans in Connecticut — including those past due by at least 30 days but not in foreclosure — was 8.6 percent of all loans, compared with 9.9 percent for the nation.

Foreclosures are causing pain for thousands in Connecticut, and helping to push down property values. For one thing, foreclosure sales typically bring bargain prices. Beyond that, once a foreclosure sale takes place, it affects the perceived value of nearby properties, particularly when they are used for comparable sales in an appraisal of a property that is under contract, mortgage brokers say.

But there is a bright side in all the gloom, said Tim Malburg, president of Capstone Mortgage Co. in Wilton.

"If you have the money, and you are willing to put down a healthy down payment, this is a good time to buy," he said.

Malburg said low borrowing rates, the expanded home buyer tax credit and lower asking prices are making a purchase more attractive — and sales of single-family houses are begin- ning to show a bit of a spark.

Freddie Mac reported on Thursday that a 30-year, fixed-rate mortgage averaged 4.83 percent this week, with an average seven-tenths of a point, down sharply from 4.91 percent a week ago.

Connecticut's jobs picture might not improve until well into next year, perhaps not until the fall, some economists say.

"There is still going to be a strain, even when the jobs come back," Ronald F. Van Winkle, an economist and the town manager of West Hartford, said. "We're probably going to lose over 100,000 jobs, and those people aren't going to find work right away."

Although the eye-catching jump in foreclosures in Connecticut in the third quarter was heavily influenced by job loss, there is another factor at work: Some delinquent mortgages are remaining in the foreclosure and mediation process longer because of the volume of troubled mortgages nationwide.

The federal government is urging lenders to try to modify those loans and keep borrowers in their homes. As a result, some mortgages that would have cycled out the system are staying in longer, helping to push up the quarterly statistics.

Short sales — in which the lender agrees to accept less than the amount that is owed to avert foreclosure — also take longer than a typical sale.

The state's foreclosure mediation program, which passed its first anniversary in July, is chipping away at the problem, but officials say there has been no let-up in those seeking assistance.

As of Oct. 31, the program had logged 4,448 cases. Of those, 2,721 borrowers had reached agreements that allowed them to stay in their homes. Another 611 also had reached agreements, but had to move out after a short sale or other measure. The remaining 1,116 could not avoid foreclosure.

"We thought we'd be over the hurdle by now," said Roberta Palmer, the mediation program's manager. "But we're not."