With record foreclosures on both the prime and subprime market being reported, Maryland’s foreclosure rate is among the lowest in the country.
“Maryland’s foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent,” said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
But economists say those numbers will soon rise.
“Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates,” said Anirban Basu, an economists and principal of the Sage Policy Group. “However they are rising fast and the worst period is in front of us, not behind.
“Existing home sales in Maryland are down to a four year low cutting into home value and new home sales are up, but those numbers don’t reflect the fact that builders are slashing prices to move inventory, which is not a good sign for the economy.”
Basu says that the increasing amount of housing stock in Maryland is due not to foreclosures, but “the resettling of adjustable mortgage rates and the fact that people can’t make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary [foreclosure] homesales.”
U.S. Sen. Chris Dodd, D-Conn., has called on the Federal Reserve Board to implement tougher guidelines on lending practices to avert a market crash.
“It is my hope that the Board… at a minimum requires originators to fully evaluate a borrower’s ability to repay; requires escrows for taxes and insurance; and restricts the use of low- and no-documentation loans,” he said in a statement.
It is estimated that close to 70 percent of Americans own their own homes and many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford, according to the Maryland Bankers Association.
“The regulatory environment is shifting,” said Basu. “Borrowers who could have accessed credit in 2002-2003 can’t anymore. The subprime market is virtually shutdown. If the state’s economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures.”
