Growth in foreclosures sees a slowdown in June

Jon Chesto

The rising wave of foreclosures that has rocked the Massachusetts real estate market slowed down in June, but industry experts say it’s too soon to know if the worst of the state’s foreclosure disaster is in the past.

The number of foreclosure deeds recorded in June rose by nearly 50 percent from the same month a year ago, in the smallest percentage increase in more than two years recorded by The Warren Group.

The South Boston real estate information and publishing firm also said the number of foreclosures recorded statewide in June – 1,131 – was the lowest the state has seen since February. However, the figure is still above last year’s monthly peak in August of 1,018.

The slowdown in foreclosures follows a steep drop in initial petitions to foreclose. The number of initial petitions, the first step in the foreclosure process, fell 82 percent in May from the same month a year ago, and they fell 85 percent in June.

That drop in initial filings was largely because of a state law that took effect on May 1 that requires lenders to give borrowers 90 days to resolve any loan payment problems before filing a petition to foreclose on a home.

However, it’s unclear how much of a role that law is having on actual foreclosure deeds, as it can take many months for a foreclosure case to be resolved.

Tim Warren, the CEO of The Warren Group, said he doubts the law had much of an impact on the foreclosure deeds in June because most of the foreclosures that month were the result of petitions to foreclose filed last year.

But Michael Nickley, a senior vice president of the residential mortgage division at Rockland Trust, said the law has already delayed some potential foreclosures and likely affected foreclosure deeds to some extent in June.

However, Nickley said the foreclosures could spike again in the coming months if many lenders and borrowers aren’t able to reach satisfactory resolutions during the 90-day window.

“I’m not hearing any reason to believe that we’re at the bottom yet,” he said of foreclosures in the state. “I’m not one to start preaching that the worst is over and the sun will be out tomorrow. It takes more than one report. It takes some time to really know, and we won’t know until it’s passed.”

Warren said another factor could be a delay in the filing of foreclosure deeds with the registries of deeds. He said he has heard that some lenders are waiting months to make sure the properties’ titles are clear before completely foreclosing on certain homes.

“I want to be a little cautious about reading too much in month-to-month changes in numbers (especially) if the lenders are suffering from some kind of paperwork tangle,” Warren said.

Peter Ruffini, a principal at the Options 1-5-3 Real Estate, Mullen & Partners brokerage in Plymouth, said the vast majority of foreclosures in Eastern Massachusetts can be traced back to the many subprime loans that were inappropriate for the borrowers who received them.

As those bad loans get shaken out of the system, Ruffini sees a big improvement in the local foreclosure rate in the near future.

“I would think we would start to see a decline (in foreclosures) as we end ’08,” Ruffini said. “If we’re sitting here a year from now and we’re still looking at the same statistical numbers as far as foreclosures go, I’d be a little surprised.”

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