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Foreclosure Filings Rising In Connecticut

Kenneth R. Gosselin

March 12, 2010

There were 3.4 percent more foreclosure filings in Connecticut in February than in January, as more borrowers fell behind in mortgage payments, according to a new report Thursday.

That compares with a 2 percent decrease nationally for the same period, RealtyTrac, the foreclosure tracking firm, said in its monthly report of national and state-by-state foreclosure trends.

The report comes as the Connecticut General Assembly's banks committee holds a public hearing on extending the state's foreclosure mediation program another year and making some changes to the program.

RealtyTrac's report takes a different measure of troubled borrowers than the one conducted quarterly by the Mortgage Bankers Association. The MBA looks at mortgages that are in various stages of delinquency and in the foreclosure process.

Connecticut had 2,294 foreclosure filings in February, compared with 2,218 the previous month. In February, the largest portion, 1,538, or 67 percent, were first-time "lis pendens" filings, notifying property owners that foreclosure proceeding were beginning.

Foreclosure filings are now being driven primarily by borrowers who have lost their jobs and can't make mortgage payments. But economists say a new wave of mortgage rate adjustments is kicking in for prime borrowers who have "pay option" adjustable-rate mortgages resetting to higher payments.

Pay option ARMs give borrowers the option of making small payments initially, with the difference between what is paid and the full monthly payment added to the mortgage balance. Typically, after five years, the payment reverts to a full monthly payment, which can be a huge increase.

There appeared to be some encouraging news nationally in Thursday's report. Filings rose 6 percent compared with a year ago, but it's the smallest year-over-year increase since RealtyTrac began reporting year-over-year statistics in January 2006.

But James J. Saccacio, RealtyTrac's chief executive, cautioned against reading too much into today's report.

"This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress or at risk of foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity — albeit at a historically high level that will likely continue for an extended period," he said.

For more information on Connecticut's mediation program, call 860-263-2734.