COVER STORY

A number of potentially troublesome mortgages were set in 2006, with rate increases scheduled for 2008 and 2009, according to U.S. Rep. Paul Hodes of New Hampshire. "So," he says in a stark assessment of the foreclosure crisis, "the sticker shock isn't over."

The voltage may depend on the form of financing, but there are plenty of views on whether the mortgage madness on the national level is really so bad on Maine and New Hampshire. By their size, the states may escape the doom and gloom of, say, California.

Reports, like opinions, vary. Take the U.S. Conference of Mayors. The group released a report last month by Global Insight, a financial analysis firm based in Massachusetts, that offered a cloudy economic forecast due to the foreclosure crisis. Morover, it placed the Manchester-Nashua region of New Hampshire within the Top 10 metropolitan areas hardest hit by foreclosures.

Foreclosures will result in a loss of growth in gross domestic product equaling $166 billion. The report forecast a related loss of 524,000 jobs in 2008 and a potential loss of $6.6 billion in tax revenues in the 10 states struggling the most.

"Not that long ago, economists said housing was the backbone of our economy," said Douglas Palmer, mayor of Trenton, N.J., when he unveiled the report. He is president of the U.S. Conference of Mayors.

"Today the foreclosure crisis has the potential to break the back of our economy, as well as the backs of millions of American families, if we don't do something soon," he said. "We must not let the economic numbers mask the face of this tragedy — families who are struggling to pay their mortgages and stay in their homes."

The mayors called it the No. 1 economic challenge for big American cities.

U.S. Rep Paul Hodes of New Hampshire. Courtesy photo

But the analysis just doesn't ring true for New Hampshire, says Peter Francese, a veteran demographer and consumer markets expert, who is also director of demographic forecasts for the New England Economic Partnership.

"It just doesn't sound realistic to me. It sounds overly pessimistic," Francese says. He thinks the analysis might have been off base because of a reliance on modeling software that poorly reflected what is occurring in this region's market.

New Hampshire has a smaller population, is better educated, and has higher wages on average than the rest of the country. Francese says that when you combine these factors with a higher than average college graduate level, it means fewer subprime mortgages and fewer foreclosures. The state's significant base of second homes also shores up the market, he says.

"The thing we have to keep in mind about New Hampshire is how significantly different it is from the rest of the country," Francese says.

While it might not reflect the national trend, or the severity of the crisis in bigger states, Hodes estimated 4,300 New Hampshire homeowners will lose their homes to foreclosure between now and the end of 2009.

While a financial catastrophe for families, it would also mean the loss of about $3.8 million in property tax revenue for the state, he says.

"It's bad in New Hampshire. It's not quite as bad as it is in parts of the country," Hodes said.

Hodes plans to host a mortgage-crisis roundtable later this month or early next — similar to one he held in December — to convene vested parties and chart solutions.

He filed an amendment to a bill known as the Mortgage Reform and Anti-Predatory Lending Act designed to strengthen oversight of the industry. The legislation would, among other things, institute penalties for abusive servicing practices and require lenders to disclose an accurate cost of the loan to homeowners, including escrow costs. The House bill still needs Senate review and approval.

The housing market will send economic ripples across Maine and New Hampshire this year, the New England Economic Partnership forecasts.

In Maine, home sales fell 16 percent in September compared with a year earlier, while new housing permits are expected to drop by nearly 25 percent in 2007 and another 19 percent in 2008 before rebounding in 2009, according to Charles Colgan, professor of public policy and management at the University of Southern Maine.

"Even when the rebound occurs, however, it will be to levels nearly one-hird below the peak activity of 2004," Colgan, the Maine forecast chairman for the New England Economic Partnership, said in the nonprofit association's November report. "House prices are falling, with the median price dropping from $193,600 in 2006 to a forecast $178,100 in 2008."

Dennis C. Delay, deputy director of the New Hampshire Center for Public Policy Studies and New Hampshire's forecast chairman, added that New Hampshire could continue to bear some housing market woe into early 2008.

"Delinquencies for non-prime mortgages and associated foreclosures will continue through the end of 2007, holding down real estate values until well into 2008," Delay said in a statement. "Even though housing prices so far have held up well, sales have tumbled from the highs seen in 2005, and sales show no signs of recovery."

The New England Economic Partnership, at its November conference, said the end of the decline in regional housing prices appears to be on the horizon.

More than a couple of voices in the national debate worried late last year about what they called a financial perfect storm — rising foreclosures and falling consumer confidence resulting in a drop in home equity.

But there are statistics to inspire one to second-guess economic forecasts and assumptions. The most recent market comparison report prepared by the New Hampshire Association of Realtors shows housing prices on average have not dropped all that much.

The state's average sale price for a home was $306,155 over the first nine months of 2007, down just 1 percent from the same period in 2006.

Such numbers are not alarming in that context. It is, as Francese described it, more of "a modest correction."