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Optimism despite increase in foreclosures

A snapshot of mortgage loans in Maryland and across the U.S. in the fourth quarter of 2010 prompted some optimism about the coming year despite a record number of loans in foreclosure.

In a report released Thursday by the Mortgage Bankers Association, loans in foreclosure increased to 4.63 percent during the quarter, up from 4.39 percent in the third quarter and tying a record set in the first quarter of 2010. In Maryland, the number of loans in the foreclosure process increased from 3.22 percent of all loans in the third quarter to 3.41 percent in the fourth quarter.

The final quarter of the year saw large lenders like GMAC Mortgage and Bank of America slowing and sometimes stopping foreclosures over concerns about the accuracy of signed court documents.

According to the survey, Maryland had the biggest jump in the percentage of loans starting foreclosure in the fourth quarter compared to the three months prior. Only 11 states recorded a quarter-to-quarter increase at the end of the year. In Maryland, 0.89 percent of all loans entered the foreclosure process, compared to 0.75 percent in the third quarter.

Nevada had the highest percentage of loans starting foreclosure in the quarter at 2.95 percent.

Delinquent loans in the state — but not those that have reached foreclosure — declined in the quarter to 10.11 percent from 10.41 percent the prior three months. While a decrease, the percent of delinquent loans still ranked Maryland 10th among all states. Mississippi ranked first in the percentage of delinquent loans at 13.31 percent.

David Meurer, president of the Maryland Mortgage Bankers Association, said the numbers seem to indicate that factors like the state’s mediation law, which went into effect in July, were having a positive impact. That, combined with national trends like a decrease in the jobless rate, seemed to show things were improving.

“There is no doubt that there is still a lot of pain,” Meurer said. “But, I feel in my heart that we have turned the corner and are headed for better times.”

Nationwide, one contributing factor to the jump in foreclosures was the performance of prime fixed loans, which make up 63 percent of all mortgages. In the fourth quarter, the number of prime fixed loans in foreclosure increased to 2.67 percent — the highest since the association started the survey in 1953. Foreclosure actions were started on 1.27 percent of mortgages in the final quarter of the year, compared to 1.34 percent in the third quarter. Maryland saw an increase in the number of prime fixed loans in foreclosure increased to 1.44 percent.

While the percentage of mortgages in foreclosure climbed, the number of delinquent loans was at the lowest level in two years in the quarter. The delinquency rate for loans on one-to-four-unit residential properties was 8.22 percent.

Jay Brinkmann, chief economist for the Mortgage Bankers Association, said the study revealed some optimism, especially in the number of loans past due.

“While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner,” Brinkmann said in a prepared statement. “Absent a significant economic reversal, the delinquency picture should continue to improve during 2011.”

The National Delinquency Survey covers roughly 43.6 million first-lien mortgages on one- to four-unit residential properties. This amounted to a decrease of about 389,000 loans from the previous quarter and an 850,000 decrease from 2009.