State bucks U.S. foreclosure trend

Maryland mortgage foreclosures fell 12 percent, compared to a 42 percent rise nationwide

However, another survey by the Mortgage Bankers Association of Washington, D.C., found that the percentage of mortgage loans entering foreclosure proceedings in Maryland increased during the past year, though more slowly than nationally.

A record 0.54 percent of American homeowners with a mortgage faced foreclosure proceedings during the last quarter of 2006.

In Maryland, however, the rate for the quarter was only 0.31 percent, up from 0.21 in the first quarter of 2006.

Maryland’s rising home prices provide a cushion that’s missing in many other states, said Daren Blomquist, a spokesman for RealtyTrac of Irvine, Calif. The median sales price of a home in Maryland rose 5 percent in January from a year ago to $303,842, according to the Maryland Association of Realtors.

Meanwhile, nationally the median price of a home declined by 3 percent in January from the year before to $210,600, according to the National Association of Realtors.

‘‘Homeowners have a better chance of refinancing their way out of foreclosure as long as their home continues to go up in value,” Blomquist said.

Maryland is also not hit as hard by other damaging factors, such as mortgage fraud in states such as Colorado or rising unemployment in a state like Michigan, he said.

While foreclosures dropped by 12 percent in 2006 from 2005 in Maryland, the state saw foreclosures rise by 12.7 percent in January over a year ago, according to RealtyTrac. That was still lower than the national average increase of 25 percent in January.

RealtyTrac and the Mortgage Bankers Association conduct their studies differently. RealtyTrac relies on researchers to pull public court records across the nation, which company officials believe is more comprehensive than the mortgage group’s method, Blomquist said. The mortgage association surveys banks and other lenders, as officials say they cover about 80 percent of the mortgage market.

Mortgage firms see drop in stocks, profits

The uptick in foreclosures nationally has been a key factor in causing the profits and stock prices of home lenders such as Fieldstone Investment Corp., a public company headquartered in Columbia and parent of Fieldstone Mortgage Co., to plunge.

Fieldstone posted a net loss of $28.3 million in the first nine months of 2006, compared with net income of $88.6 million in the same period in 2005, according to its most recent financial statement. Revenues declined by 65 percent over that period to $65 million.

Officials largely blamed an increase in delinquent loans and said the company was taking steps to address the situation. That included curbing the practice of approving high-risk loans that don’t require down payments and have ballooning interest rates. Fieldstone specializes in such subprime mortgages to high-risk borrowers.

‘‘We are working to ... lower our cost to originate new loans and to improve the level of our loan originations,” Michael J. Sonnenfeld, president and CEO, said in a statement. ‘‘Our servicing initiatives include accelerated intervention on delinquent loans, engagement of a delinquency and loss mitigation monitor for our 2006 loans and elimination prospectively of our highest delinquency products. ... We have eliminated the lowest credit, highest risk loans from our guidelines.”

Fieldstone’s stock price lost more than 50 percent in the past year and was at $3.85 early Thursday. The company recently agreed to be purchased by Credit-Based Asset Servicing and Securitization, a New York financial firm, for about $260 million.

Other lenders, including Countrywide Financial Corp., which is based in California but has numerous offices in Maryland, have taken similar measures to stop the bleeding. Countrywide saw its net income rise 6 percent to $2.7 billion last year but reported that foreclosures more than quadrupled.

Regulators at the Maryland Department of Labor, Licensing and Regulation have ordered New Century Financial Corp. of Irvine to stop accepting new mortgage loan applications in the state and to fund approved applications. Officials with the company, which has some 475 customers in Maryland, have said there is no funding for approved loans.

‘‘The market for subprime loans has changed dramatically in the past few days,” Charles Turnbaugh, Maryland financial regulation commissioner, said in a statement. ‘‘Maryland residents who have loans pending with New Century should not expect to have their loans approved and closed.”

Douglas Duncan, the mortgage association’s chief economist, cautioned lawmakers to avoid passing legislation that would ‘‘impede the ability of the market to respond to changes in underlying economic conditions.” He expected delinquency and foreclosure rates to level off later this year ‘‘as the housing market regains its footing.”

Lawsuits likely to increase

Class-action lawsuits filed by borrowers who claim they were misled into getting mortgages such as those featuring interest rates that start low but rise will likely proliferate, according to a recent report by analyst Jerome Idaszak with Kiplinger, a financial information business in the District. Chevy Chase Bank of Bethesda, one of the largest banks in Maryland in terms of deposits, already faces such a suit.

In January, a federal judge in Milwaukee ruled that a couple could get out of their adjustable-rate mortgage with Chevy Chase Bank because employees failed to clearly explain the details; he also certified the lawsuit as a class action. Chevy Chase officials could not be reached for comment.

‘‘Increasing delinquencies may temper economic growth as they prompt lenders to tighten requirements,” Idaszak said. ‘‘Fewer potential buyers could mean a longer convalescence for the slumping housing market, keeping it largely flat well into 2008.”

Banks have learned not to put all their eggs in the mortgage loan basket, as they earn more from fees, stocks and insurance than they did in the last major real estate slump from 1988 through 1991, he said.

Few foreclosures

The region that includes Montgomery and Frederick counties ranked first among the largest metropolitan areas in fewest foreclosures per household with one per every 1,285 residences in 2006, according to RealtyTrac. The Baltimore area was sixth best, with one foreclosure per 559 households.

Detroit ranked last with one foreclosure per 21 households.

Among states, Colorado had the most foreclosures per household in 2006 with one per 33. Vermont had the fewest, with one per 6,542 households. Maryland ranked as 13th best with one per 474 residences.

COMPLAINT LINE

Consumers with complaints about mortgage loans can call the Maryland Division of Financial Regulation at 410-230-6097 or 888-784-0136.