Just under 3 percent of Maryland homeowners with a mortgage were one payment behind at the end of March, the Mortgage Bankers Association said Wednesday. The average was just over 3 percent between 1979, when the trade group's quarterly survey began, and 2006, before the mortgage and financial meltdowns that pushed the country into recession.
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"In that sense, we're back to normal," said Jay Brinkmann, the trade group's chief economist. "I think this improvement does reflect a generally improving jobs picture that we've seen over the past year, and we would continue to improve, barring a recession or serious reversal."
But a number of states — Maryland in particular — still have very high numbers of homeowners who are seriously behind on their mortgage payments. The problem, the mortgage bankers say, is most severe in states where foreclosure is a judicial matter, which includes Maryland.
The state has the nation's second-highest share of borrowers who are seriously behind — 90 days or more — and not yet in foreclosure, 4.7 percent. Its percentage of borrowers in the foreclosure process, the auction block looming, is 15th-highest in the nation.
Maryland's process isn't a full court proceeding, but the state requires that mortgage servicers file a request to foreclose with the courts and have auction sales ratified. Servicers must wait until a borrower is 90 days behind to start the process, and they must have a sit-down mediation session before auction if the borrower requests it. Mediation is intended as a last-ditch effort to find an alternative, such as a short sale.
In Maryland, 3.9 percent of mortgaged homes were in the foreclosure process at the end of March, the Mortgage Bankers Association said. Virginia — where foreclosure doesn't go through the courts — is at 1.8 percent.
Michael Fratantoni, the Mortgage Bankers Association's vice president of research and economics, said these two states, "separated by the Potomac River, otherwise very similar," show the effect that different foreclosure rules can have. There's no other reason a servicer would delay foreclosure, he said.
"That is really leading to a lengthening of the problem in Maryland," Fratantoni said.
But Anne Balcer Norton, Maryland's deputy commissioner of financial regulation, said the state's experience seems to be less about a court backlog than servicer decisions to hit the brakes after the robo-signing scandal broke in late 2010.
Maryland's highest court approved emergency rules in October 2010 to give judges permission to root out fraudulent documentation in foreclosure cases. That same month, state attorneys general across the country launched an inquiry that only recently settled.
In March, a month after the settlement was announced, servicers gave the owners of 32,600 Maryland homes a heads up that they could be in foreclosure within a month and a half — more than double the number a year earlier. It's not clear whether the timing is coincidental, Norton said.
On average, the borrowers notified were behind on their mortgages by more than a year. Under Maryland law, servicers can send warnings to borrowers once they're 45 days behind, Norton said.
Still, slowing the process was one of the goals when state law was changed in 2008 as the foreclosure crisis worsened. Before that, servicers could move more rapidly in Maryland than nearly any other state, with foreclosure permitted just 15 days after the first late payment.
Norton defended the state's foreclosure process, noting that consumer advocates and industry players collaborated on reforms in the last few years.
"It has been the policy of the state to ensure that homeowners are not wrongly put out of their homes," she said.
Marceline White, executive director of the Maryland Consumer Rights Coalition, said she's concerned that foreclosure-warning notices are being mailed so much later than they could be. The further behind a borrower gets, the less likely that any option but foreclosure is possible.
"I think that calls into question how well the system is functioning and how orderly the process is right now," she said.