Massachusetts Mortgage Trouble: Foreclosures Up 300 Percent in Last Year

The Boston Globe reports that the Bay State experienced the second-biggest increase in foreclosure activity in the country last month.

Massachusetts was second only to Alabama in the rise in total properties entering some stage of foreclosure, including lenders’ initial notices that homeowners were in delinquency stage, foreclosed property sales and auctions, and lenders’ sales of repossessed property.

In November, 2,100 Massachusetts mortgage holders were facing foreclosure, up 299 percent from 526 in November 2005, RealtyTrac data shows. Alabama’s increased 466 percent during the same period.

By the end of the year, Massachusetts could surpass its 1991 record for the number of foreclosure notices by lenders against homeowners, according to a separate report yesterday by ForeclosuresMass.com. There were a whopping 15,133 filings statewide from January-October, compared with 17,000 in all of 1991.

“Some of the states that had the biggest booms over the past few years are now experiencing the highest number of new foreclosure filings,” said Rick Sharga, RealtyTrac V.P. of marketing.

However, because the Massachusetts market has not collapsed and mortgage rates remain low, only about one in five properties is currently repossessed by a bank or mortgage company. In most cases, the homeowner is able to sell the house or work out a refinancing plan with the lender.

RealtyTrac’s November data confirm its second-quarter findings, when there were 4,270 Massachusetts properties in various stages of foreclosure, up 481 percent from the second quarter of 2005. That was the second highest after Rhode Island’s increase.

Jeremy Shapiro, president of ForeclosuresMass, blamed the foreclosure boom on exotic loan products that often offer a low initial interest rate and low monthly payments, which later rise as the rate adjusts upward.

Massachusetts now has among the highest house prices in the country, which lenders say put pressure on buyers to finance homes with adjustable rate mortgages rather than a traditional 30-year, fixed-rate mortgage.

“When you have homeowners who have a home they were able to pay for but aren’t going to be able to pay for” when payments go up, Shapiro said, “that leaves them with very few options. One is foreclosure.”