Bank foreclosures up 36% in Vermont

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(Host) Bank foreclosures in Vermont have jumped about 36% over the last year.

But the state’s top banking regulator says borrowers in Vermont are in better shape than those in other states.

VPR’s John Dillon reports:

(Dillon) When borrowers can’t pay, banks go to court to collect their loans. If the loan is secured by a mortgage, the bank can take back the property in a foreclosure suit.

And courts in Vermont’s 14 counties have been quite busy with foreclosure actions in the past few years.

Tom Candon, the state’s chief banking regulator, says an analysis by his office shows that bank foreclosures jumped about 36% from 2006 to 2007. In 2006, 887 foreclosure actions were filed, compared to 1,209 last year. In 2005, about 340 foreclosure actions were filed.

Candon said bank examiners looked at some of the cases to find out why foreclosures increased last year.

(Candon) And from what we saw basically just checking five counties it seemed to be the same issues that have been true in the past with medical, marital, and loss of job. We were also checking to see if one lender stuck out may be was targeting predatory lending practices in that county and we didn’t see that.

(Host) The huge surge in foreclosures across the country has undermined financial institutions and shaken Wall Street.

Candon said that despite the increase in Vermont foreclosures, the problem is not as bad here as in many other states. Nationally, the foreclosure rate jumped about 75% in the last year.

(Candon) We haven’t been immune to some of the predatory lending or some of this subprime lending… We do have some foreclosures I’m sure that have been initiated because of that. But for the most part, we haven’t seen as much of a problem as other states…

(Host) Candon said Act 250 – the state’s development review law – gets some of the credit because it appears to have slowed the growth of speculative building projects.

(Candon) The state’s environmental laws have limited our strip developments, housing developments, which have been causing problems in the Floridas, Californias and Arizonas for instance.

(Dillon) Chris D’Elia, president of the Vermont Bankers Association, said banks here were generally more cautious than those in other states.

(D’Elia) We didn’t embrace a lot of the alternative mortgage products that have been in existence and kind of started in California and then flowed across the country. So the interest only, or the adjustable rates, the piggyback loans where they were financing 100 and plus percent of the deal. We didn’t embrace those in Vermont. So we were very conservative in our lending approach.

(Dillon) Vermont also has tough consumer lending laws that require the bank to tell borrowers when the loan has high points and a high interest rate.

For VPR News, I’m John Dillon in Montpelier.

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