More face auction of homes

The number of Massachusetts homeowners facing an auction of their homes from foreclosure jumped 54 percent in April, the fourth consecutive month of increases.

The rise in scheduled auctions of homes is an indication the fallout from delinquent mortgages among subprime borrowers in Massachusetts is growing, according to Warren Group, a Boston real estate research and publishing firm that released monthly data yesterday.

"The problems are getting worse," said Alan Pasnik, Warren Group's research analyst.

Warren Group said the number of foreclosure auctions scheduled for April reached 1,712, the highest since the early 1990s and up from 1,111 in March.

Typically just over one-third of scheduled auctions actually result in the seizure of a home, Pasnik said. In some cases homeowners find the money to stave off foreclosure, by refinancing for example. In other cases, they sell the home to pay off the loan.

But, Pasnik said, once homeowners do reach this advanced state of the foreclosure process, they are running out of options.

Regulators have blamed subprime loans, targeted to buyers with poor credit, for driving the number of Massachusetts homeowners delinquent on mortgage payments to a rec ord 19,487 last year, surpassing 1991 in the depths of a real estate recession.

The typical subprime loan carries a low introductory "teaser" interest rate that rises sharply after two years.

Warren Group bases its report on announcements of pending auctions by lenders posted in 200 Massachusetts newspapers. Through the first four months of this year, lenders had scheduled 4,830 auctions on foreclosed properties, triple the amount for the same period in 2006.

Meanwhile, the number of new foreclosure proceedings initiated by lenders against Massachusetts homeowners decreased in April, the second monthly decline, the Warren Group said. Lenders initiated 2,005 foreclosures in April, down from 2,139 in March and 2,242 in February. In Massachusetts, the process of foreclosure takes about eight months.

But the drop in new proceedings does not indicate foreclosures have hit a peak in Massachusetts, said William Apgar, senior scholar at Harvard University's Joint Center for Housing Studies.

He said there are several reasons for the two-month decline in filings: One may be that lenders faced with soaring numbers of foreclosures are choosing instead to help their borrowers work out of financial straits, by refinancing into a more affordable loan, for example. Those borrowers may also be taking advantage of low-cost mortgages offered by nonsubprime lenders to refinance as well.

Additionally, some lenders may be holding off as the Patrick administration has intervened in the crisis and sought freezes on delinquent borrowers who have brought their cases to the state Division of Banks.

But Apgar expects the pace of foreclosures to continue because there are still many borrowers who have loans with scheduled increases in interest rates, which may put monthly payments beyond what they can afford to pay.

"My sense is there's still more bad loans in the pipeline," Apgar said.

The foreclosures are also holding down slumping housing markets in some parts of Massachusetts, said Timothy Warren, chief executive of Warren Group. Property foreclosures are concentrated in Boston neighborhoods such as Mattapan and Dorchester and outlying cities such as Lynn, Revere, and Chelsea.

Various studies in recent years have shown that house values in neighborhoods with high numbers of foreclosed homes tend to drop as distressed properties sell at lower prices.

"The real estate market is not declining as much as it was in 2006, but it's still weak, and these auctions can't help," he said.

Kimberly Blanton can be reached at blanton@globe.com.