Efforts to fight foreclosure finally starting to pay off

For years after the housing bust and subsequent recession, efforts to stem the waves of foreclosures seemed futile. But now struggling homeowners are getting some help — from an improving economy and programs that are making their mortgages more affordable.

As a result, the foreclosure crisis in the state and the nation finally appears to be ebbing. In Massachusetts, foreclosure filings in the first nine months of the year plunged 60 percent from the same period in 2009, when the crisis peaked here, according to Warren Group, a Boston-based real estate research firm.

Nationally, lenders are expected to start 1.1 million fewer foreclosures in 2012 than they did in 2010, a drop of more than 35 percent from that year, when filings peaked at 2.9 million, according to RealtyTrac LLC, a real estate research company in Irvine, Calif.


In addition, home-loan delinquency rates, the number of borrowers falling behind on mortgages payments, are also falling, declining from a peak of about 1.7 million in 2009 to 1.4 million this year, according to Moody’s Analytics, a forecasting firm in West Chester, Pa. “The foreclosure crisis is fading,” said Mark Zandi, chief economist at Moody’s Analytics.

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Various government programs may have helped millions of borrowers across the country stay in their homes, economists said. Zandi said the programs were not as successful as they could have been, but estimated that they accounted for at least half of the 5 million struggling homeowners who received lower interest rates, or other loan modifications, to lower their payments. A slew of other initiatives, including legal actions against lenders, have also contributed to the decline in foreclosures.

Last month, the US Office of Mortgage Settlement Oversight reported that about 278,000 borrowers — nearly 4,000 of them in Massachusetts — received nearly $22 billion in some kind of housing-debt relief this year as part of a national mortgage settlement involving five major lenders across the country.

“There was no silver bullet that was going to solve everything,” said Daren Blomquist, a vice president at RealtyTrac. “Individually, the programs didn’t always work as touted. But in combination together, they worked. The government kind of waged a war of attrition, and it was a lot of things together that helped improve matters.”

The improvement, of course, didn’t come easily. Relentless and brutal market forces forced millions of painful foreclosures, auctions, short sales, and other measures — all of which have helped correct market distortions created by last decade’s housing bubble, economists agreed.


Perhaps the most important factor in moderating foreclosures has been a strengthening economy that is generating jobs, increasing confidence, and helping to boost home sales and prices, economists said. The US unemployment rate has fallen from its peak of 10 percent in 2009 to 7.9 percent in October, while the Massachusetts jobless rate fell to 6.6 percent last month from its peak of 8.7 percent in late 2009, according to the US ­Labor Department.

Spurred by historically low mortgage interest rates, sales of single-family homes nationally reached an annual rate of 5 million in the third quarter. That’s down from a prerecession peak of 8.5 million in 2005, but up substantially from 3.9 million in the third quarter of 2010, according to Moody’s Analytics.

In Massachusetts, single-family home sales soared by nearly 22 percent in the first nine months of this year, compared with the same period last year, according to Warren Group. Home prices haven’t recovered as well, however, falling 1.6 percent over the first nine months of 2012 compared with the same period in 2011.

But Timothy M. Warren, Warren Group’s chief executive, said he expects prices to possibly start rising in coming quarters. US home prices, meanwhile, have increased every quarter so far this year, according to the Federal Housing Finance Agency.

Despite positive trends, economists and industry specialists warn that the housing recovery is still fragile and could easily head south again if the US economy falters. Sluggish job growth, the financial crisis in Europe, and political deadlock in Washington over taxes and spending are among the major concerns.


RealtyTrac’s Blomquist said he’s keeping an eye on the number of US homes that are still “underwater,” meaning the amount owed on the mortgage is greater than the value of the property. The number of underwater homes in the United States was 12.5 million in the third quarter, up from 12 million during the same period in 2011, he said.

Often, people who owe more on their mortgages than their homes are worth just walk away from loan obligations, throwing more properties into foreclosure. “The underwater loans are a big potential problem,” said Blomquist.

But other economists say there are enough positive signs — including slowly rising home prices, decreasing inventories of homes on the market, increasing construction starts, and falling delinquency rates — to think the foreclosure situation will continue to improve into next year.

“Though we still have a long way to go, I think this recovery is sustainable,” said Patrick Newport, an economist at IHS Global Insight in Lexington. “Barring another recession, things should keep improving.”