Report: Foreclosure mess will get worse

The foreclosure situation in New Hampshire will get worse before it gets better, with about 6,000 state families facing the possibility of losing their home this year and about that many in the same boat in 2008.

However, even if foreclosure rates peak next spring as expected, they are unlikely to be as high as they were during the housing bust of the early 1990s.

Further, Hillsborough and Rockingham counties seem slightly less affected by the current problems than the rest of the state.

Overall, “the underlying economic conditions in New Hampshire remain healthy” but “the national crisis in the subprime mortgage industry may pose a threat to New Hampshire’s economy through its effect on large lending institutions, declining confidence in the credit market and the potential for a national recession.”

Those are among the conclusions of an analysis of the current mortgage market by the New Hampshire Housing Financing Authority, a quasi-state agency that helps fund low-income homes and studies the housing market.

The study, “Mortgage Delinquency, Foreclosure, and Subprime Lending in New Hampshire: How Big is the Problem?” was released Dec. 10. It was put together before the federal government announced plans to cap increases in interest rates for certain adjustable mortgages, which may help curb the growth of the problem in coming months.

It predicts the number of foreclosures will continue to rise through the second quarter of 2008, from the current figure – a very high 1,290 per three-month period to 1,630 – then slowly decline.

Even so, reads the report, “At present more than 95 percent of New Hampshire mortgagees are current in their payments, and almost 30 percent of owner-occupied housing has no mortgage at all.”

“We continue to believe that things will not get as bad in that context as they did in the early 1990s,” said Dean Christon, executive director of the authority.

Among the report’s other conclusions:

• Home sales are slumping, but prices have not yet been sharply affected, which may reflect relative economic prosperity.

The current inventory of houses on the market is at about 13 months, meaning it would take more than a year to sell them all at current rates, even if no new homes were put up for sale.

“That is the highest (rate) we had seen in well over 10 years,” Christon said.

On average, prices have declined less than 5 percent from last year’s peak through this past summer, much less than what happened in the early 1990s.

• The foreclosure problem is less severe in New Hampshire than in most of the rest of the country and still not as bad as it was 15 years ago.

From April to June, the most recent period for which detailed data is available, foreclosure proceedings were started on 0.44 percent of all loans in New Hampshire or about one out of every 227 loans. That was less than the rate in every New England state except Vermont and only about two-thirds of the national foreclosure rate.

It is also far lower than the peak foreclosure rate in the last housing bust. In 1993, that rate approached 0.8 percent in New Hampshire or one out of every 125 mortgages.

• New Hampshire has a lot of adjustable-rate subprime loans, where much of the problem lies.

“The only surprise is that the subprime piece was significantly larger than some may have realized,” Christon said.

In the second quarter of this year, 6 percent of all loans in the state were subprime adjustable – meaning they were loans given with relatively few checks on income or credit and had low interest rates that would increase sharply after a couple of years. That category of loan did not even exist during the last housing crunch.

They account for a whopping 49 percent of all foreclosures in the state.

As happened in the rest of the country, the popularity of these loans has skyrocketed in New Hampshire. In 2004, 10 percent of new loans were subprime, either fixed rate or adjustable; in 2006, that tally had risen to 22 percent.

• Hillsborough and Rockingham counties have a slightly smaller percentage of subprime mortgage loans than the rest of the state.

In Rockingham, 18.8 percent of loans were subprime in 2006, while in Hillsborough, 20.3 percent were. Those were two of the lowest rates in the state’s 10 counties.

The more rural counties had more suspect mortgages – in Coos County, for example, 38 percent of loans were subprime – which seems to cast doubt on the commonly expressed theory that many such loans were taken out by first-time homeowners moving over the border from Massachusetts in search of lower taxes.

“A lot (of subprime loans) did get used for refinancing,” Christon said.

For a full copy of the report, visit