Massachusetts' slumping housing market appears to be affecting the mortgage industry and homeowners, according to a report released today. Almost 70 percent more lenders started the foreclosure process against Bay State homeowners in 2006 than in 2005, and 46 percent more homes were advertised to be auctioned, according to data compiled by The Warren Group. Mortgage lenders filed 18,926 petitions to foreclose in Massachusetts Land Court last year, compared with 11,155 in 2005, and lenders announced 6,729 foreclosure auctions in 2006, compared with 4,620 in 2005. Petitions to foreclose are the first step in the foreclosure process, and do not always end in actual foreclosure. Some homeowners eventually sell their homes or refinance. Suffolk County was hit particularly hard, the Warren Group said, with petitions to foreclose rising 79 percent from 2005 to 2006, and auctions rising 93 percent. In 2005, there were 1,127 petitions to foreclose and in 2006 there were 2,015. There were also 521 ads for foreclosure auctions in 2005, while there were 1,007 last year. Declining home values are part of the problem, said Timothy Warren, Jr., CEO of The Warren Group, and too many foreclosures could aggravate that further. “The median sale price for a single-family home declined by nearly 6 percent last year. As housing prices decline, people who had borrowed 90, 95 or even 100 percent of the value of their homes now find themselves owing more than their homes are worth,� Warren said.
“If those people have trouble making their mortgage payments and can't sell the home for a price higher than the outstanding loan balance, then foreclosure is a real possibility. It can also affect the overall housing market. If a significant number of homeowners are being threatened with foreclosure and put their homes on the market for quick sale at distressed prices, the recovery from the current market slump could take longer than currently anticipated. “The other parts of the economy seem to be doing well,� Warren said. “The rates of inflation, unemployment, and mortgage interest all seem favorable for a speedy recovery. The rising rate of foreclosure proceedings seems to be the only storm cloud on the horizon.� Most other counties also saw dramatic increases in petitions and auctions. There were 93 percent more petitions to foreclose in Barnstable County in 2006 than in 2005, and 87 percent more in Bristol County. Essex County's petitions to foreclose went up 75 percent, and petitions in Franklin, Hampden, Middlesex, Norfolk, Plymouth and Worcester counties all rose more than 50 percent from 2005.