Rise In Foreclosures Burdens States, Economy The foreclosure crisis is deepening in Massachusetts, Florida, Nevada and other states. Some analysts say foreclosures are tied more closely to bad economic conditions than to the type of loan homeowners have. Many troubled homeowners still don't know where to turn for help.
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Rise In Foreclosures Burdens States, Economy

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Rise In Foreclosures Burdens States, Economy

Rise In Foreclosures Burdens States, Economy

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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.


And as NPR's Anthony Brooks reports, the foreclosure crisis is now deepening in states like Massachusetts, places that were initially spared the worst of the real estate collapse.

ANTHONY BROOKS: Paul Collier is an attorney in Cambridge, Massachusetts, who represents homeowners facing foreclosure. Collier says these days he's busier than ever.

PAUL COLLIER: The financial conditions that created this meltdown and the legal conditions that created the meltdown are still there.

BROOKS: Last month, banks took more than 1,300 Massachusetts homes - more than double the rate of the same period last year. That, according to Timothy Warren, CEO of the Warren Group, who tracks real estate in Massachusetts.

TIMOTHY WARREN: Foreclosures are at high levels right now. People are entering foreclosure at a very high rate. And, you know, that indicates a certain level of economic distress and that we're probably going to be facing that for some period of time.

BROOKS: Beyond that, Aaron Gornstein, who heads an affordable housing advocacy group in Boston, says the unemployment rate remains stubbornly high.

AARON GORNSTEIN: People are losing their jobs or have reduced work hours. We have a lot of people in the construction trades that are unemployed - close to 40 percent. So those people are falling behind on their mortgage. They can't keep up and, as a result, they're going into foreclosure.

BROOKS: Joel Searby agrees and says the high foreclosure rate has more to do with the tough economy than with the fallout from the subprime mortgage crisis. Searby is with a Florida research company that polled 500 Pennsylvanians who lost their homes to foreclosure, and asked them why.

JOEL SEARBY: Forty-one percent had a prime, fixed-rate loan, while only eight percent had a subprime adjustable loan. The most significant finding is that those experiencing foreclosure experience job loss in a combination. That is, they didn't just simply lose their job, they lost their job and then something else happened.

BROOKS: According to a recent RealtyTrac report, in the first half of this year, the number of foreclosures went up in three-quarters of the largest U.S. metropolitan areas, compared with a year ago.

COLLIER: And until we do something about it we are going to be unable to resolve the current economic crisis.

BROOKS: Collier says federal initiatives that encourage banks to rework loans and avoid foreclosures are too weak because they're basically voluntary. But he says it doesn't have to be that way. Collier points out that in the wake of the 1930s Depression, some states enacted tough measures to compel banks to lower monthly payments, and that dramatically reduced foreclosures.

COLLIER: States like Kansas and Iowa simply adopted mandatory mediation. That is, every lender had to sit in a room with a professional mediator and a homeowner and discuss modification of that loan. And foreclosures went down within 20 months of the passage of that bill by 94 percent.

BROOKS: But Joel Searby - who did the polling on those facing foreclosure in Pennsylvania - found that a majority of those surveyed didn't know how or where to get help.

SEARBY: There's no doubt that there's been a disconnect between what the federal government and state governments have been offering and what these folks who are experiencing foreclosure are needing.

BROOKS: Anthony Brooks, NPR News.

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