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 of this year, 6,887 sales of existing homes were 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.

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 all 50 states announced Wednesday that they would jointly investigate potentially faulty foreclosures. The announcement came two days after President Barack Obama rejected the idea of a nationwide freeze on home foreclosures.

Some of the nation’s largest lenders have frozen foreclosures, and some lawmakers and attorneys general have called for a moratorium 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 — 46th in RealtyTrac’s national ranking.

A couple of factors contribute to that. The housing market here is more stable and didn’t go through the boom-and-bust price swings that now 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 document fraud raised by Thomas Cox, a retired lawyer from South Portland who is active in the Maine Attorneys Saving 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 JPMorgan Chase and Bank of America, have since enacted moratoriums.

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

In Maine, foreclosures are concentrated in York County, followed by Kennebec, Cumberland and Penobscot counties. A foreclosure ban wouldn’t have much impact on sales or prices in Maine, said John Hatcher of The Hatcher Group at Keller Williams Realty 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, and banks continue to make financing available, Hatcher said. 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 sale prices rose nearly 6 percent in the county, according to the Maine Real Estate Information System.

“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 mortgages, they have a better chance of resolving the problem than mortgage holders in many other states, say lawyers for mortgage servicers and homeowners. 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 lawyer in Portland who represents national mortgage companies.

Maine is one of 23 states that have judicial review of foreclosures, meaning a judge hears arguments for and against any action. A lender must file a notice of default and give an owner 35 days to bring the loan into balance before starting the foreclosure process. The owner then has 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 deals with lenders.

The process is ramping up as lenders get familiar with it, said Laura O’Hanlon, director of court services and court counsel in the Maine Judicial Branch. It has already had an effect.

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

Mediation is an important tool because nine in 10 people who go through foreclosure don’t have lawyers, said Andrea Bopp Stark, who works with Maine Attorneys Saving Homes.

She said one positive effect of the debate about a foreclosure freeze is that it may prod lenders to take a closer look at loan modifications to let people 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.”

 

Staff Writer Tux Turkel can be contacted at 791-6462 or at: tturkel@pressherald.com