As Mass. foreclosures soar, R.I. seeing decline

When the Obama administration announced a $26 billion settlement with the nation’s five largest mortgage lenders over abusive foreclosure practices at the beginning of February, many predicted it would kick off a wave of foreclosure proceedings that had been held in legal limbo.
And in many places, like Massachusetts and Connecticut, where foreclosure filings have been rising since the latter part of last year, that appears to be happening.
In February, Bay State foreclosure filings surged 37 percent compared with February 2011, according to real estate data firm RealtyTrac. For the same period, Connecticut filings jumped 58 percent year over year.
Rhode Island, on the other hand, hasn’t followed the script.
At the same time the foreclosure systems in neighboring states were heating up, foreclosure filings in Rhode Island were cooling down, dropping 1 percent in January and 39 percent in February compared with the same period in 2011, RealtyTrac said.
The difference is even more pronounced within the Providence metropolitan area, where foreclosure filings in Bristol County, Mass. rose 38 percent in February, while filings for the area as a whole, led by Rhode Island, fell 24 percent.
Exactly why foreclosures in the two states are on such different tracks is difficult to determine, as is whether the numbers represent a larger trend or short-term volatility.
Since the national foreclosure settlement, increases in foreclosure volume have been most pronounced in states with court oversight of the foreclosure process. In those states, lenders were quicker to suspend foreclosures while questions about robo-signing and improper procedures were worked out.
Neither Rhode Island nor Massachusetts are judicial-foreclosure states, but Connecticut is. William Farrell, legal counsel for the Rhode Island Bankers Association, doesn’t think legal concerns are responsible for the difference in recent foreclosures levels between Rhode Island and Massachusetts, but rather that banks here have been genuine in their efforts to avoid taking back homes if it can be avoided.
“I don’t think it’s a procedural issue; I just think you have the banks working as hard as they can to avoid foreclosures wherever possible,” Farrell said. “Whether it was due to the national settlement or not, you have seen national people setting up rental programs instead of foreclosure. You have heard from major players that they are going to modify loans and do reductions in principal.” Farrell said when the settlement was reached, he had expected there would be an increase in foreclosures here and elsewhere, but cautioned that it was still early and foreclosure totals have a tendency to swing back and forth from month to month.
One of the perplexing things about the foreclosure numbers, Farrell said, is that they seem to be heading counter to the larger economic trends in Rhode Island and for it’s neighbors.
“Many of the earlier foreclosures were a result of predatory lending, but now they are all a result of unemployment and the economy,” Farrell said. “That makes this seem conflicting because you still have relatively high unemployment here and the other states are doing better.”
Citizens Bank referred all questions about foreclosures to Farrell while Bank of America and Rockland Trust declined to comment.
In January, foreclosure filings in Massachusetts increased 51 percent compared with January 2011 – Bristol County, Mass., filings jumped 64 percent – while Rhode Island filings declined just over 1 percent.
In December, Massachusetts filings rose 85 percent compared with December 2010 – Bristol County, Mass. 63 percent – while Rhode Island foreclosure filings dropped 14 percent.
November was the last time foreclosures filings in Rhode Island rose year over year.
In Massachusetts, the sky-high foreclosure numbers, while unpleasant, have been described as a sign that the market there has turned a corner and banks are finally putting resources into turning distressed properties around.
With that in mind, Richard Godfrey, executive director of the nonprofit finance agency Rhode Island Housing, said foreclosures in Rhode Island are likely to rise again when the economy starts picking up here and creating jobs.
“We expect foreclosures will pick up through 2012,” he said. “Lenders see optimism at the end of the tunnel and have put more resources to foreclosures and workouts.”
Godfrey said the roller coaster won’t end until the state starts producing more jobs.
“There is only so much you can modify when someone is out of work,” he said. •

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