After seeing a sudden upturn in the start of foreclosure proceedings in the state in the first quarter of this year, particularly in Southern Connecticut, the market may have corrected itself in the second quarter. At least that’s the hopeful reading of a statewide drop in Lis Penden filings.
Still, the recent activity is enough of a concern that some experts are still not sure which way the market will turn.
At the end of the first quarter of this year, Lis Penden foreclosures, which indicate a pending legal action against a property owner, were up 55 percent statewide over the first quarter of 2011, reaching 4,502 from 2,903 in the state the year before, according to data compiled by the Warren Group for the Connecticut Housing Finance Authority. That number dropped slightly in the second quarter to 4,113.
In the Southern Connecticut region covered by the ROOF Project (Real Options, Overcoming Foreclosure), though, those numbers were even more startling in the first quarter, rising 75 percent in the 15-town region before regaining some footing and postings an 8.2 percent decline in the second quarter.
The ROOF Project covers New Haven and 14 surrounding towns north to Meriden, east to Madison and west to Milford.
Branford, Hamden and Milford all saw year-over-year increases surpassing 100 percent in the first quarter. In Branford, there were 69 foreclosure proceedings in the first quarter of this year compared to 33 in 2011, a 109 percent jump. Hamden saw 91 foreclosures this year compared to 33 in 2011, a 175 percent increase, while Milford climbed from 19 to 70, a whopping 268 percent increase in one year. Meriden saw a 96 percent increase, from 55 in the first quarter of 2011 to 108 this year.
This is a trend that has been continuing for some time, according to The ROOF Project. Back in 2005, the Southern Connecticut region had 1,200 new foreclosure cases. Then came the recession, and those numbers started climbing, reaching 4,600 in 2009 before dropping to 3,900 new cases in 2010. In 2011, the numbers dropped considerably to 2,136, with just 486 in the first quarter of 2011.
Still, it’s difficult to gauge what’s really happening in the market or even if the second quarter improvement is in fact a trend at this point. There had been some speculation that foreclosures would rise following the massive $25 billion federal mortgage settlement with the five largest financial institutions, but Howard Pitkin, banking commissioner for the Department of Banking, said he doesn’t believe that is happening.
“I would say, overall in the state… it is not getting worse, but not getting better [either],” said Pitkin.
And the second-quarter numbers would seem to back up Pitkin’s contention. Along with the statewide drop, the areas in the Southern Connecticut region that saw such sharp increases in the first quarter leveled off, and even fell dramatically, in the second quarter.
Branford saw a 40 percent dip from Quarter 1 to Quarter 2, Hamden a 26 percent improvement and Milford a 48% drop. In all, 11 of the 15 towns in the ROOF Project’s coverage area saw fewer foreclosures in the second quarter.
Pitkin said that a combination of the sub-prime banking crisis in 2007-08 and individual cases of bad luck in the form of illness, unemployment, underemployment or any number of factors, continue to drive the foreclosure numbers.
“I would characterize them as good, hard-working people who have hit a rough patch in life,” Pitkin said. “[But] we’re concerned with the number that exists right now.
“When things are not going well, people tend to not open mail, not answer their phone,” he added. “I would say the first thing people need to do with this is deal with it. The banks will work with you. Nobody wants to take a house away from anyone.”
According to Jeff Gentes, managing attorney for foreclosure prevention at the Connecticut Fair Housing Center, 1 in 13 mortgages in the state is at least 90 days past due.
“People are falling behind in their mortgages, but it’s stayed pretty constant the last three years,” said Gentes, adding that while numbers may indicate more filings in the first quarter, he’s seeing loan modifications becoming a more attractive option for banks. And that may hold down those numbers going forward.
“There has been a bit of a slowdown (in foreclosure proceedings) because banks are a little more reluctant to start foreclosure,” he added. “We’re seeing people that are 14, 15 months behind in their mortgages that have not been foreclosed on yet. Before, banks were foreclosing as soon as someone was three months behind.”
Still, two towns in the ROOF Project area have already surpassed their 2011 totals through two quarters. Woodbridge has seen 15 Lis Penden filings this year versus just 12 in 2011 and Orange has seen 21 this year versus 18 in 2011. Other towns, such as Branford (110 in 2012 vs. 111 in all of 2011), Meriden (223 vs. 292), New Haven (474 vs. 503), North Haven (31 vs. 38) and West Haven (195 vs. 260) all seem destined to surpass year-ago numbers.
“The situation continues to vary from state and state, and from servicer to servicer,” said T.J. Crawford, spokesperson for Bank of America. “Foreclosures are always a last resort; we prefer mortgage modifications or short-sells, with foreclosures being a last resort.”
Echoing Gentes’ thoughts on loan modifications, Crawford noted that Bank of America has “successfully completed 13,000 mortgage modifications in Connecticut since 2008.”
Pitkin said the mortgage settlement will give Connecticut $190 million to help homeowners. The agreement was negotiated in part by Connecticut Attorney General George Jepsen to settle foreclosure fraud and abuses. Under terms of the agreement with Bank of America, Citibank, JP Morgan Chase, GMAC and Wells Fargo, an estimated 7,500 Connecticut borrowers who lost their home to foreclosure from Jan. 1, 2008, through Dec. 31, 2011, and suffered servicing abuse would qualify for $1,500 payments. The state will use $36 million to help underwater borrowers refinance loans and another $27 million to pay for foreclosure prevention programs such as the Connecticut Department of Banking’s foreclosure prevention hotline, HUD-approved housing counselors, the Judicial Branch’s foreclosure mediation program, nonprofit legal aid groups that help homeowners facing foreclosure, and loan modification programs supported by the Connecticut Housing Finance Authority.
Pitkin said his office is happy with the settlement and thinks that some of the other provisions in the agreement that tighten rules governing foreclosure proceedings will also help.
At the same time, Gentes doesn’t see the situation improving in the near future.
“There are still a lot of people with bad loans that are trying to gut it out,” he said. “There a still a lot of people with unemployment, or underemployment, or a couple of bad things, or series of bad things, happened, like medical bills. I think we’re going to be in a period of historical default for a long time.”
