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New data released from RealtyTrac on Thursday show the foreclosure crisis is easing: Foreclosure notices filed during the first three months of 2011 dropped 27 percent compared with the first quarter of 2010. More than 681,000 homes received a foreclosure filing during the first quarter of 2011.

And while 215,046 borrowers lost their homes, that marks a 17 percent decrease year-over-year.

However, while the improvement may be encouraging, experts warn that the decrease in foreclosure activity is likely temporary.

“The nation’s housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low,” says James Saccacio, RealtyTrac’s CEO. “Weak demand, declining home prices, and the lack of credit availability are weighing heavily on the market, which is still facing the dual threat of a looming shadow inventory of distressed properties and the probability that foreclosure activity will begin to increase again as lenders and servicers gradually work their way through the backlog of thousands of foreclosures that have been delayed due to improperly processed paperwork.”

Following this fall’s “robo-signing” scandal, in which banks were accused of processing foreclosures without proper reviews, banks have slowed their pace of foreclosures until they clean up their paperwork procedures, experts say. Otherwise, the number of foreclosures would be much higher for the quarter, says RealtyTrac spokesman Rick Sharga.

Meanwhile, Nevada continues to post the highest rate of foreclosure activity, followed by Arizona and California. Nevada alone had 32,000 properties, or one in every 35, receiving a foreclosure filing.

A bill introduced in the U.S. House of Representatives would waive withdrawal penalties on certain retirement plans if the funds were used to buy a house that has been in foreclosure for a year or more, HousingWire reports.

The bill, introduced recently by congressman and real estate professional Bill Posey, R-Fla, is expected to apply to Roth IRAs, 401(k) plans, and company pension plans.

The legislation’s aim is to promote REO home purchases by owner occupants or second home owners rather than investors just looking to “flip” a foreclosure for fast money. According to the bill, purchasers must agree to hold the property for at least two years to be exempt from early retirement plan withdrawal penalties.

“It’s just another idea to help the housing market,” says press secretary George Cecala.

The bill has been sent to committee for further consideration.

A recent survey by Zillow Mortgage Marketplace found that borrowers who received a home loan in the past five years spent, on average, five hours researching their options. That’s about half the amount of time borrowers spent researching a car purchase (10 hours). What’s more, nearly one-third spent two hours or less, according to Zillow.

While a home purchase is typically one of the largest investments people make, the lack of mortgage knowledge can be a costly mistake, experts say.

Here are a few basics about home loans that more customers need to know about.
1. What type of mortgage do you have?
Alarmingly, some people aren’t even aware if they have a fixed-rate mortgage or adjustable-rate mortgage. Unlike a fixed-rate mortgage, an ARM can have low rates early on that later rise significantly over time, which from a financial planning perspective can become a costly surprise if the borrower isn’t even aware they have one.

2. Do you have mortgage insurance?
Home owners who purchased a home with conventional financing and a down payment of less than 20 percent may not even realize that they likely are paying private mortgage insurance, which costs about $25-$100 extra a month. Once home owners have sufficient equity in their home (20 percent), they no longer need to pay mortgage insurance and should contact their lender for some savings.

3. Do you understand all of your loan options
Many borrowers don’t understand all of the loan options available to them — conventional loans, FHA, VA, USDA, etc. Experts recommend researching and comparing various mortgage rates and loan types to see what works best for their situation.

4. Is there a prepayment penalty?
Some loans have a prepayment penalty if a borrower pays off the loan earlier than intended. Typically, prepayment penalties are charged when borrowers sell or refinance their homes in the first few years of the mortgage. FHA, VA, and USDA loans do not have prepayment penalties. But it’s important home owners with other mortgages become aware whether their loan has a prepayment penalty and understand the pros and cons of accepting such a penalty, experts note.

Source: “5 Things to Understand About Your Home Loan,” Zillow.com (April 19, 2011)

Sales of existing homes rose slightly in March, marking the sixth consecutive monthly rise for existing home sales in the last eight months, the National Association of REALTORS reported Wednesday.

“We’re clearly on a recovery path,” says Lawrence Yun, NAR chief economist.

Existing home sales rose 3.7 percent in March from February, as distressed sales, such as those in foreclosure, continued to make up a big bulk of home sales (40 percent of all purchases).

“At this point, we’re likely to see a steady improvement in sales,” says economist Joel Naroff of Naroff Economic Advisors.

So just in time for the spring buying season, here’s what economists have to say about who’s buying and currently driving the market:

Investors: All-cash deals last month made up a record number of sales, accounting for 35 percent of all resold homes. Investors continue to make up a big part of those cash deals. Investors are buying distressed homes and flipping them for a slight profit or turning them into rentals, says Patrick Newport, economist at IHS Global Insight.

Luxury consumers: Some real estate professionals are reporting a pick up in luxury markets in some cities too. “The confidence is back in the market,” says Neil Palmer, CEO at Christie’s International Real Estate.

Foreign buyers: Coastal markets, in particular, are seeing a surge of foreign buyers, such as in New York, Palm Beach, Fla., and San Francisco, AOL Real Estate news reports.

Traditional buyers: Traditional buyers are also re-emerging. Mortgage applications to buy homes rose 10 percent over a seven-week period, according to the Mortgage Bankers Association’s most recent report. “This pickup in demand should show up in improved existing home sales in April and May, unless lending conditions tighten,” Newport says.

The market is making “slow, steady progress” and demand in housing is rising even with higher mortgage rates “so that’s encouraging,” Pierre Ellis, an economist at Decision Economics in New York, told The New York Times.

“It’s the new financial psychology,” says Jarvis Slade Jr., Christie’s managing director for the Americas. “We’ve had two years of hesitation, the sellers are realistic, the buyers confident and cautious, but Americans are starting to feel better.”

Source: “Rising home sales point to a recovery; Prices expected to keep falling 5% to 7% this year,” USA Today

Michele Lerner, author of Homebuying: Tough Times, First Time, Any Time, offers reasons why real estate is likely to improve in 2011. Here are five reasons she thinks consumers should consider a home purchase next year:

Mortgage rates will stay low. Even with rates climbing — maybe to as high as 6 percent by 2012 — they are still well below where they have been historically.

Tax cuts could help. Extending the tax cuts could encourage a more rapid recovery for the economy.\

Americans want to be home owners. A recent Fannie Mae survey showed that Americans still believe a home is a safe and desirable investment.

Builders are about to begin building. Home builders have been sitting on the sidelines. This year, they think pent-up demand will create an appetite for new homes.

Homes are shrinking. Homes are getting smaller, which has made them more affordable.

Source: Investopedia, Michele Lerner (12/24/2010)

In dozens of incidents nationwide, confused banks have ransacked properties that were either not mortgaged at all or were mortgaged by a different lender or were a customer of the bank in question but were current on their payments.

For instance, Bank of America broke into Alan Schroit’s second home in Galveston, Texas, and turned off the power, allowing 75 pounds of salmon and halibut Schroit had caught on an Alaskan fishing vacation to spoil and create a reeking mess. Schroit had previously paid off the property. Schroit and the bank settled a lawsuit for an undisclosed sum.

Critics of the mortgage process say these kinds of incidents are evidence that the mortgage foreclosure business is flawed and needs to be reformed.

”Every day, smaller wrongs happen to people trying to save their homes: being charged the wrong amount of money, being wrongly denied a loan modification, being asked to hand over documents four or five times,” says Ira Rheingold, executive director of the National Association of Consumer Advocates.

Source: The New York Times, Andrew Martin (12/22/2010)

Habitat for Humanity says it has built its 400,000th home. The organization was founded in 1976, and has served more than 2 million people worldwide.

“In 2005 we celebrated our 200,000th house. Now, five years later, we have more than doubled that number thanks to the generous support of our volunteers and sponsors,” says CEO Jonathan Reckford.

A copy of Habitat for Humanity International’s fiscal year 2010 annual report, “What We Build,” is now available on the group’s Web site. The report gives a snapshot of Habitat’s work around the world.

Source: Habitat for Humanity (12/13/2010)

Using data from Moody’s Economy.com, Forbes identified the top-10 states where more residents are leaving than arriving.

The factors that encourage outbound migration from these states are mostly economic — high employment and high cost of living — although both Louisiana and Mississippi have been affected by natural disasters.

The 10 states that have said goodbye to the most residents are:

1. New York
2. Illinois
3. Ohio
4. Nebraska
5. Kansas
6. Iowa
7. Louisiana
8. North Dakota
9. South Dakota
10. Mississippi

Source: Forbes, Jenna Goudreau (12/08/2010)

Freddie Mac analysts point to five features that they believe will likely characterize the 2011 housing and mortgage markets:

1. Low mortgage rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most (or all) of 2011, relatively low mortgage rates will be a feature of the 2011 mortgage market. Thirty-year fixed-rate loans are likely to remain below 5 percent throughout the year, and initial rates of 5/1 hybrid adjustable-rate mortgages will likely remain below 4 percent in 2011.

2. Prices have hit bottom. House prices are likely to begin a gradual, but sustained recovery in the second half of 2011.

3. Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market in the New Year, likely translating into more home sales in 2011 than in 2010.

4. Refinances will dwindle. Many eligible borrowers have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they will move up gradually, making it even less likely that refinances will be attractive to most home owners.

5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings — known as the “seriously delinquent rate” — generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.

Source: Freddie Mac (12/09/2010)