The number of Vermont homes under foreclosure is up nearly 17 percent this year, but the problem may be easing, according to the state Department of Financial Regulation.
Through the first six months of the year 448 foreclosures were filed in Vermont, compared to 414 for the same time last year.
But Tom Candon of the Department of Financial Regulation said there is reason to believe foreclosures are starting to decline.
Foreclosures in Vermont and throughout the country spiked starting last year when banks settled with the states over questionable foreclosure practices known as robo-signing, said Candon, the department’s deputy commissioner.
Banks allegedly robo-signed documents without verifying the accuracy of the information. As a result, many foreclosures throughout the country were put on hold. With the settlement, banks resumed foreclosing on homeowners.
“They did do that last year through the first part of this year and now I think those large number of foreclosures are hopefully behind us, unless something else changes in the economy,” Candon said. “But I do think you’re going to start seeing a reduced number as we go through next year until we get back to what’s a normal number.”
As an example, Candon said foreclosures dropped from 163 in May to 121 in June. The number is also 40 less than in June of last year.
Although Vermont continues to have one of the lowest foreclosure rates in the country, there are problems as foreclosures have jumped dramatically since the onset of the world financial crisis five years ago.
According to the state Banking Division, Rutland County continues to lead the state with 135 foreclosures through June 30. Windsor County is second with 125 foreclosures followed by Chittenden County with 122.
For the last three years, Rutland County has registered more foreclosures than any other county. Last year, there were 254 foreclosures; Chittenden County, the state’s most populous, had 241.
NeighborWorks of Western Vermont, a homeownership advocacy group, has seen its share of homeowners in trouble.
Nancy Gilman, a NeighborWorks counselor, said most of the people she sees fall behind in their mortgage payments through no fault of their own.
“I think it’s a mixture of losing their jobs or having to take lower-paying jobs,” Gilman said.
She said homeowners who contact their lenders early on asking for help are told they first need to be in arrears before receiving any help with their loan.
“They basically tell the homeowners you need to be three months behind and then come back to us and we’ll look at doing a modification,” Gilman said.
Homeowners who do go through a loan-modification process are often caught up in a maze of paperwork that drags out the process for a year or more.
“Then they end up being so far behind that it’s hard to get a modification approved because they owe so much in back payments and fees … by the time they roll that back in, they can’t create an affordable payment for them,” Gilman said.
In Washington, Orange and Lamoille counties, it’s much the same problem with loss of jobs the number one culprit, said Harry Sanderson, senior housing counselor with Central Vermont Community Land Trust.
“If you’re looking at the job market, you’re looking at jobs that are probably less than the median income,” Sanderson said.
While he sees the loan-modification process getting better, he doesn’t see the foreclosure problem improving.
“We’re still getting three to four calls every week, new foreclosures because of whatever circumstances they may be in,” Sanderson said.
Through June, there were 85 foreclosures in Washington County, compared to 76 during the same six-month period last year.
In terms of loan modifications, Sanderson said he has a success rate of 11 to 14 percent. “They’re much better than they were last year,” he said.
Ludy Biddle, NeighborWorks executive director, pointed a finger at Bank of America for making a bad situation worse. She said the bank has put up roadblocks when homeowners sought to modify their mortgages.
Biddle said of the 49 open foreclosure intervention cases Neighborworks is handling, 14 are BOA mortgages.
Bank of America was one of 13 banks that settled with the states last year over mortgage foreclosure abuses that included robo-signing.
Sanderson said his experience with Bank of America has improved. Several years ago, he encountered “big, big” problems in getting loans modified for troubled homeowners. Now, he said BOA and several other large banks have created a website to file documents, which speeds up the loan-modification process.
Candon also said his department hasn’t encountered any problems related to loan modifications with Bank of America.
However, he said since January of last year BOA, Wells Fargo and JP Morgan Chase have filed the highest percentage of foreclosures in the state.
Laura Hunter, a Bank of America spokeswoman, said the company is committed to helping customers avoid foreclosure. She said that effort includes working with groups like NeighborWorks.
Hunter said since the economic crisis began the bank has completed 1.25 million mortgage modifications nationwide.
“We have a relatively small portfolio of loans (currently less than 8,400) in Vermont, and the percentage of troubled loans is well below the national average,” Hunter said. “Nevertheless, we have modified 930 mortgages for homeowners in the state.”
Chris D’Elia, president of the Vermont Bankers Association, said there is no question that “horror stories” exist when it comes to large banks dealing with homeowners in foreclosure.
Unlike Vermont’s community banks, D’Elia said Bank of America and other banks with a national footprint have had to deal with an onslaught of paperwork.
“I think the real challenge the big banks have had is just the sheer volume of loan modifications to go through,” D’Elia said.
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