Central Massachusetts At Risk For More Foreclosures in 2014

Friday, July 26, 2013

Steven Jones-D'Agostino, GoLocalWorcester Contributor

It looks like things are going to get worse before it gets better for Massachusetts foreclosures.

Like the rest of our state’s so-called “gateway” cities, Worcester and Fitchburg got hammered during the foreclosure crisis. Their pain is likely to be further inflamed when the state's new foreclosure-notification forms become mandatory in a few weeks.

News reports keep telling us the Massachusetts foreclosure crisis is over–citing a 71-percent drop in completed foreclosures during the latest first quarter. Yes, to some degree the rise in home-sale prices during that quarter provides hope that the statewide market may be rebounding.

However, the big decrease in completed foreclosures may have more to do with banks slowing down their foreclosure processing. This is what happened in both 2008 and 2010, when a similar completed-foreclosures slowdown led to a similar foreclosure-rate decline.

Our state’s two dozen gateway cities are still feeling the biggest pain, according to the Mass. Housing Partnership. In a report titled New law may be reason why foreclosures down sharply–Rising prices improve market but processing issues make dip 'somewhat artificial,' The Partnership finds that these gateway cities, including Fitchburg and Worcester, “continue to suffer an inordinate amount of distress relative to the state as a whole.”

New foreclosures have stopped or reduced

A 2012 state law requires Mass. banks to notify home-loan borrowers of their rights to pursue a loan modification before the banks foreclose. The delay in implementation of this law may be a factor in the big drop in foreclosures during the latest first quarter, according to the Mass. Housing Partnership report.

Nearly a year ago, Gov. Deval Patrick signed An Act Preventing Unlawful and Unnecessary Foreclosures. This law, which amended two sections of Chapter 244, requires home-mortgage lenders to notify eligible borrowers of their rights to request a modified loan. The web page of the state Attorney General's HomeCorps explains Chapter 244 in detail.

Since the amendments became law last November, Bay State lenders have been slow to include the new notification step in their foreclosure procedures–largely because state banking regulators had yet to finalize a set of standardized notification forms.On June 21, those regulators finalized the new Right to Request a Modified Mortgage Loan foreclosure-notice forms, to be used on a voluntary basis until September 17. Mandatory use of the forms will begin on September 18.

In the meantime, our gateway cities–including Worcester and Fitchburg - continue to suffer most of the distress relative to the state as a whole. While they contain only 25 percent of the state's housing units, they account for 39 percent of its foreclosure distress. Their overall distress rate is 54 percent higher than the statewide rate.

Brockton had the highest levels of foreclosure distress as of April 1 among both the gateway cities and all 351 of the state’s municipalities. Fitchburg had the second highest rate (20.4 distressed units per 1,000 total units) while Worcester had the seventh highest rate (15.4).

Results of the new HomeCorps program of the Mass. Attorney General's Office

Since the number of housing units in each gateway city can dramatically vary, it's useful to analyze distress by census tracts, which generally range from 1,000 to 3,000 units. This helps provide state and local leaders with a better idea of exactly where property distress and neighborhood destabilization may be occurring and where public resources and efforts–such as receivership and first-time homebuyer programs–may have the most impact.

According to the Mass. Housing Partnership analysis, as of last April 1 the 30 most distressed census tracts in the gateway cities were confined to just six cities. Twenty-eight of those gateway-city tracts were among the entire state's 30 most distressed tracts. Almost one-fifth of those 28 gateway-city tracts are in Worcester County–three each, in Fitchburg and Worcester.

Rising distress in non-gateway communities

The Partnership’s analysis focuses on our state’s most distressed urban neighborhoods. But areas of distress exist elsewhere in Mass. They increasingly include communities with populations of less than 35,000 as well as those in larger urban communities with higher median household incomes–such as Arlington, Cambridge, Newton, Somerville and Weymouth.

For the first time, in 2010, these “suburban/rural/higher-income urban” communities had a higher percentage of the state's distressed units (50.6 percent) than the 24 “urban gateway” communities plus Boston (49.4 percent). That gap continued to widen slowly until July 2012, when it stood at 53.8 percent to 46.2 percent.

As of April 1, the distressed-units rate in the “suburban/rural/higher-income urbans” remained stable at 53.7 percent. It was nearly unchanged from 53.9 percent as of January 1.

Among the 30 most distressed of these communities, almost half - including the top 4–are in Worcester County. Among them, 13–about half, in our county - saw an increase in distress from April 2012 to April 2013. Distress declined in 14 of the most distressed communities–more than one-third of them, in our county.

The distress level remained unchanged in three other distressed communities–with two of them, Athol and Winchendon, in Worcester County. Overall, distress declined only 2.2 percent in the most distressed communities compared to a statewide decline of 10.4 percent.

Some relief to distressed homeowners

While we wait for the next completed-foreclosures shoe to drop–the mandatory use of the new foreclosure-notice requirements starting September 18–the state is providing some relief to distressed homeowners. The new Attorney General’s HomeCorps program seeks to prevent foreclosures and provide borrower support.

HomeCorps (see initial results in above infograph) includes a three-part borrower-support and borrower-referral initiative:

Loan Modification Initiative: Offers direct loan-modification advocacy to distressed Mass. borrowers, in order to help many residents avoid unnecessary foreclosure. The Initiative is staffed by a statewide team of skilled loan-modification specialists.
Borrower Representation Initiative: Provides direct legal representation to distressed borrowers, with the goals of resolving legal issues that prevent loan modifications, blocking unlawful foreclosures, and pursuing other potential claims. Attorneys at civil legal-aid offices across the state will be funded by HomeCorps to provide these legal services at no charge to qualifying borrowers.
Borrower Recovery Initiative: A support-and-recovery network for those borrowers who lose their home to foreclosure. Its goals are to help prevent homelessness, and to stabilize borrowers’ housing situation. Staff at selected non-profit organizations statewide will provide supportive resources, such as connecting families to rental housing, available benefits and programs, stabilization assistance, and financial counseling.

If either you or someone you know is facing foreclosure, HomeCorps may be able to help by offering access to some of these services. Contact the HomeCorps Hotline at 617-573-5333.

Steven Jones-D'Agostino is chief pilot of Best Rate of Climb: Marketing, Public Relations, Social Media and Radio Production.