Maryland had the nation's highest foreclosure rate this spring, a new survey has found, and the flood on the market could drag down home values in the state.
Nearly 2 percent -- or 20,000 -- of Maryland's 1.1 million loans included in the survey were moved into foreclosure between April and June, according to a new survey by the Mortgage Bankers Association. The rate was nearly double the national average of about 1 percent of all home loans.
Experts said the new surge in foreclosed homes on the housing market could lower home values in Maryland, where about 5 percent of home loans are in some stage of foreclosure, even as the housing market here has been steadily improving since the 2008 crash.
|More foreclosures coming in Maryland|
|State||Total home loans||In foreclosure||Foreclosures filed Apr.-June 2012|
"Typically those [foreclosure sales] are at a discounted price, and those could drag down values overall," said Daren Blomquist, vice president of the foreclosure-tracking firm RealtyTrac. "There is concern that this could weaken any nascent recovery that there may be in the housing market there."
In Virginia, less than 1 percent of its 1.3 million loans were moved into the foreclosure process during the second quarter. Of D.C.'s 96,500 home loans, less than half a percent were drawn into foreclosure.
The uptick in Maryland is largely related to a major national settlement on so-called "robo-signing" that was reached early this year between lenders and the federal government, 49 states and the District. In the yearlong lawsuit, state and federal governments alleged that mortgage servicers nationwide had carelessly and illegally prepared foreclosure paperwork to the detriment of the homeowners.
"That really put the lid on ... foreclosure activity," said Bloomquist said of the lawsuit.
Although D.C. and Virginia were also affected by the suit, the logjam was worse in Maryland -- where foreclosures are a judicial matter and often take longer. Additionally, Maryland in 2010 passed a law requiring mediation before a lender foreclosed on a homeowner -- a law some said would drag out the foreclosure crisis instead of saving homes.
"After the mediation, banks seemed to hold on to their properties longer than ever," said Matthew Kachura, a University of Baltimore economist. "I think they were waiting for the settlements to clear."
But the surge in Maryland may not mean another housing crisis here. Blomquist said other states like Florida and Illinois that have already seen an uptick in filings and also have a judicial foreclosure process have not seen home prices hurt yet.
"The lull of foreclosure activity has actually allowed those markets to stabilize and get off life support," he said. "I still think it's weakened, but it hasn't had the impact of another double-digit decrease in home values."