A nationwide freeze on home foreclosures would have little effect on Maine’s real estate market because foreclosures make up a small fraction of total sales here, figures show.

From January through August 2010, 6,887 sales of existing homes had been recorded by the Maine Association of Realtors. During that period, Maine had 132 foreclosure sales – roughly 2 percent of the total – according to RealtyTrac, which records foreclosure activity.
By contrast, one-quarter of the home sales nationally this year have been deeply discounted foreclosures. In Nevada and Arizona, about half of all homes sold were in foreclosure during the second quarter of the year, RealtyTrac found.

Maine’s standing is noteworthy, as attorneys general in 50 states today announced that they would jointly investigate potentially faulty foreclosures. The announcement, which had been rumored since last weekend, came two days after President Obama rejected the idea of a nationwide freeze on home foreclosures.

The state actions and Obama’s comments follow some of the nation’s largest lenders imposing foreclosure freezes, and some lawmakers and attorneys general called for moratoriums while the industry’s paperwork and legal practices are reviewed.

Figures show that Maine is a very small contributor to the foreclosure crisis, accounting for less than 1 percent of the nation’s total, according to RealtyTrac.

For the year, Maine has a foreclosure rate of one in every 2,585 homes, placing it 46th in RealtyTrac’s national ranking.

A couple of factors contribute to Maine’s favorable status: The housing market here is more stable, and didn’t suffer from the boom-and-bust price swings that burden some states. Maine also has a stringent legal process for foreclosures that delays action and encourages resolution. That process now includes mediation.

Despite its small number of foreclosures, Maine has been at the forefront of the evolving controversy. Questions about possible document fraud raised by Thomas Cox, a retired South Portland lawyer active in the Maine Attorneys Savings Homes advocacy group, helped force GMAC Mortgage Co./Ally Financial Inc. to stop foreclosures last month in 23 states, including Maine. Other big mortgage-servicing companies, including JP Morgan Chase and Bank of America, have since enacted bans.

A nationwide foreclosure freeze could give some struggling owners time to straighten out their finances and stay in their homes. But analysts also worry that it could delay a housing recovery, seen as critical to broader economic vitality.

In Maine, foreclosures are concentrated in York County, followed by Kennebec, Cumberland and Penobscot. But a foreclosure ban wouldn’t have much impact on sales or prices in Maine, according to John Hatcher of The Hatcher Group at Keller Williams in Portland. Even in those four counties, foreclosures make up a small part of the market.

Unlike some states, Maine has few neighborhoods of distressed homes, Hatcher said, and banks continue to make financing available. In Cumberland County, he estimated, overall values have fallen less than 15 percent from the market peak, so most homes aren’t selling at distressed prices. In August, year-over-year median sales prices rose nearly 6 percent in the county, according to the Realtors group.

“When people see all these statistics and the gloom and doom, they assume it’s in their backyard,” he said.

When Mainers do have trouble paying a mortgage, they have a better chance of resolving the problem here than in many states, lawyers for both mortgage servicers and homeowners agree. It can take a year for the foreclosure process to run its course in Maine, they say.

“The rush to foreclosure doesn’t apply to Maine,” said Leonard Morley, a Portland lawyer who represents national mortgage companies.

Maine is one of 23 states with judicial review of foreclosures, meaning a judge hears arguments for and against the action. Lenders must file a notice of default and give owners 35 days to bring the loan into balance before starting a foreclosure process. Owners then have time to answer the notice and oppose the court motion. After a judgment, Maine has a 90-day right of redemption period, during which owners can stay in the home and pay off the loan.

In January, Maine became one of only a handful of states to automatically enter all foreclosures on primary homes into a mediation program. That can also give owners more time, and help them work out a deal with lenders.

The process is ramping up as lenders become familiar with it, according to Laura O’Hanlon, director of court services and court counsel in the Maine Judicial Branch. But it has already had an impact.

The program mediated 300 foreclosures in the first half of 2010, O’Hanlon said. Of those cases, 39 were resolved and 65 were not. Most of the rest needed more time, or forged a temporary agreement.

Mediation is an important tool because nine in 10 people who go through foreclosure don’t have a lawyer, according to Andrea Bopp Stark, who works with the attorney advocacy group.

“We have a pretty decent foreclosure process that tries to guard against abuses,” she said.

One positive effect of the ongoing debate about a foreclosure freeze, Bopp Stark said, is it may prod lenders to take a closer look at loan modifications that would allow people to stay in their homes.

“Even if we’re 46th in the nation, it doesn’t diminish the impact on the individual,” she said. “It’s still one house at a time, one homeowner losing their house.”