A new report projects that out of every 33 U.S. homeowners, one will face foreclosure during the next two years. North Carolina was cited as one state aggressively tackling the problem, while California was noted as doing too little.
During the next two years, one in 33 homeowners is projected to be in foreclosure, according to Defaulting on the Dream: States Respond to America's Foreclosure Crisis announced Wednesday by The Pew Charitable Trusts.
The report, which analyzed the Mortgage Bankers Association's 4th Quarter National Delinquency Survey and the Center for Responsible Lending's foreclosure projections and Subprime Spillover data, blamed subprime loans originated during 2005 and 2006 for the alarming forecast.
In Nevada, the foreclosure rate is expected to reach one in 11 homeowners, while one in 18 Arizona homeowners is projected to fall into foreclosure.
The wave of foreclosure is expected to hurt the values of 40 million neighboring homeowners by as much as $356 billion, Pew said.
The report suggested that individual states are leading the effort to mitigate the fallout from foreclosure.
Ohio, Michigan and Pennsylvania are among at least nine states that offer publicly funded refinance programs, while Maryland recently passed sweeping reforms that extend the foreclosure process to 150 days from 15 days. Massachusetts, which recently made $2 million in grants to reduce foreclosures, will soon provide borrowers who are at least 90 days delinquent the ability to work with servicers to try to avoid foreclosure.
"Finally, 14 states have created statewide foreclosure task forces to bring government, lenders, consumer advocates and experts together to address the crisis," according to Pew, which also noted California has done little to stem foreclosures.
Among activity taken to improve originations, North Carolina was cited for passing some of the nation's most aggressive consumer protection laws, prompting Colorado, Maine, Massachusetts, Minnesota and Ohio to make similar moves. North Carolina was among 10 states that ban most prepayment penalties. Nine states, including Arkansas and South Carolina, mandate that mortgage brokers represent the interests of the borrower.