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Foreclosure delays: D.C., Maryland keeping homes but losing value
Question of the Day
Scandals involving lax bank practices helped spark a decline in foreclosures nationwide that began in 2011. A national pause in foreclosure actions followed, and the nation’s biggest lenders agreed to servicing standards that made it even tougher to foreclose.
Maryland and Virginia rank in the middle for foreclosure rates. Maryland has the 20th-highest foreclosure rate among all states and Virginia has the 27th-highest, according to RealtyTrac. The tracking firm said late last week that national foreclosure rates dipped again, in part because laws that took effect in California’s giant market put the brakes on foreclosures.
But states that delay the pain may be making it more intense down the road.
“Do you want to rip the Band-Aid off, or slowly pull it back?” Mr. Blomquist asked. “The Virginia approach is ripping the Band-Aid off, and the Maryland and D.C. approach is slowly pulling it off.”
Through the first half of 2010, an average of about 5,800 households each month received foreclosure notices, according to RealtyTrac.
To protect against the rising tide of foreclosures and to cushion the blow to the state economy, Maryland churned out “aggressive legislation that gave homeowners more time to avoid foreclosure,” Mr. Blomquist said.
The legislation required lenders to give homeowners an additional 45-day notice before starting the foreclosure process.
These policies, in effect, created a moratorium on foreclosure activity. Through October, the average number of Maryland homeowners receiving foreclosure notices plummeted to about 1,700 each month.
Catching up to the market
The problem is that many of those foreclosures eventually catch up to the market. When that happens, home values begin to fall.
“Slow foreclosure laws keep a damper on the housing market recovery because it takes so much longer for the foreclosures to be resolved,” Mr. Whitehurst said. “It’s a very, very tough situation for anyone to have a home foreclosed on them, and no one takes that lightly, but if a foreclosure is inevitable, slowing it down is not really good for the housing market.”
Maryland is starting to see that. In November and December, the average number of homeowners who received foreclosure notices rose to about 2,500 a month.
“We’ve been expecting the other shoe to drop,” Mr. Blomquist said. “The foreclosures are not brand-new homeowners getting into trouble. It’s homeowners who have been struggling for a few years.”
In the District, it’s a similar story. Foreclosure numbers dropped off after local government officials enacted the 2011 law that required lenders to offer mediation to homeowners facing foreclosure.
Through the first 10 months of 2010, the District averaged 234 foreclosures per month, according to RealtyTrac, but after the policy went into effect, the average dropped to about 20 per month — the lowest number of total foreclosures, and the second-lowest foreclosure rate in the nation.
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About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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