Massachusetts Mortgage Holders Feeling Heat as Foreclosure Rates Rise

Foreclosure filings against Massachusetts home loan holders surged to nearly 13,000 through September, already surpassing 2005’s count, and were prevalent in rural towns in the Central and Western portions of the Bay State, as well as in working-class cities with big minority populations.

According to the Boston Globe, Massachusetts foreclosures increased 54 percent in the first nine months of 2006, compared to the same period last year. And many worry the worst has yet to come.

“I don’t think we have hit the peak yet,” predicted Jeremy Shapiro, the president of ForeclosuresMass.com.

Contrary to popular belief, foreclosure filings do not mean the imminent loss of property for a homeowner. Once they receive notice from a bank or mortgage lender, homeowners may work out a refinancing plan or sell the home and pay off the loan, hence averting foreclosures.

But with mortgage interest rates higher than they were a year ago, there are plenty of homeowners with adjustable-rate mortgages pushing up their mortgage payments and squeezing their household budgets.

The increases — September filings this year are more than double two years ago — are alarming. Yet the percent of Bay State owners facing foreclosure remains below the U.S. rate and below the state’s rate during the early-1990s housing recession.

The worrisome trend has spared wealthy communities. In Andover, Belmont, Lenox, Lincoln, Shelburne, and Wellesley, six or fewer filings were made for every 10,000 people. There were 32-53 per 10,000 in working-class cities with large minority populations such as Brockton, Lawrence, Lowell, and Lynn.

In western and central Massachusetts, the problem was also acute. More than a dozen communities — from Fitchburg and Athol not far from New Hampshire to Springfield near the Connecticut border — had at least 40 foreclosures per 10,000. The highest, Middlefield, had one per 549 residents.

Financially, this can spell disaster. But here’s also the personal impact. Foreclosure filings can be “more significant” in these towns, Shapiro said, because “everyone knows everyone.”

During the accelerating housing market, many people were desperate to buy a house, and credit was easy to come by. Although many could not afford the mortgages once the adjustable rates began to increase, lenders were still willing to issue bad credit mortgage loans to start with, thereby setting the table for the current foreclosure crunch.

Barry Bluestone, Dean of the School of Social Science, Urban Affairs and Public Policy at Northeastern University, said there was a clear pattern in the foreclosure data: Cities with big minority populations or residents of modest means had more of them.

Less than one-half percent of all Massachusetts home loans were in the foreclosure stage in June 2005, compared with 1 percent nationwide. But by June 2006, Massachusetts’ rate increased, to 0.63 percent, while the nation’s was the same.