The foreclosure-crisis crush is easing in most states, but not Maryland.
Nationally, the rate of new foreclosures initiated in the fourth quarter was at pre-crisis levels, and back in its historical range, the Mortgage Bankers Association reported Thursday. But Maryland stood out as having the highest “foreclosure starts” among the states. About 1 percent of all home loans in the state were seriously late and referred to a foreclosure attorney in the fourth quarter.
Virginia ranked 33rd on the list, with a foreclosure start rate below the national average. The contrast is particularly stark given the relative stability of the Washington region’s economy during the recession, Michael Fratantoni, the MBA’s chief economist, said in an interview.
“These are two states with a relatively similar experience during the downturn but very different outcomes in terms of the foreclosure start rates they’re experiencing now,” Fratantoni said. “Because Maryland has a much slower foreclosure process, the foreclosures have lingered much longer.”
Maryland is a “judicial state,” meaning that every foreclosure must be approved by a court. In Virginia, foreclosures do not require court approval and therefore move more swiftly. Once a foreclosure is initiated, it can take a year or multiple years to complete the process, depending on the state.
Twenty-two states require a court’s oversight for foreclosures. Years after the foreclosure crisis peaked, many of those states continue to feel the impact of troubled loans more acutely, the report concluded. Of the 17 states with a foreclosure inventory above the national average, 15 were judicial states, according to the analysis.
The report singled out the Baltimore-Towson area as having the highest rate of loans that were 90 days or more past due in the fourth quarter, with a delinquency rate of 3.87 percent. The performance was better than the previous quarter, when the area’s delinquency rate stood at 4.91 percent.
In 2010, lenders were forced to halt all foreclosures while they addressed widespread mortgage documentation problems. The freeze remained in place until 2012, when lenders reached a nationwide settlement with state attorneys general over their practices. All the while, a backlog of troubled loans grew in judicial states such as Maryland.
The NAACP’s Maryland State Conference, Casa de Maryland and the Legislative Black Caucus of Maryland plan to hold a rally Monday at the State House in Annapolis to demand a six-month freeze on foreclosures, one of the organizers said. During the moratorium, “we want a third party to verify the foreclosures in the pipeline, one by one, to see if they’re illegal or not,” said Carmen Johnson, housing chair of the NAACP conference.
While Maryland continues to feel the pain, the overall national picture looks brighter. Foreclosure starts in the fourth quarter were at their lowest level since 2006. The delinquency rate for single-family homes fell to 6.39 percent of all loans outstanding, the lowest level since the first quarter of 2008.
The delinquency numbers include loans that are at least one payment past due but not those that are in the foreclosure process. The rate of mortgages that were 90 days or more past due or were in the process of foreclosure was 5.41 percent, down from the previous quarter and from a year ago.
Mississippi showed the highest rate of seriously delinquent loans in the nation. The vast majority of distressed loans date back to 2007 or earlier and are concentrated in a few judicial states.