Foreclosure Activity Drops to 3-Year Lows
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.
Lenders ‘Foreclose’ Homes They Don’t Own
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)
Fannie, Freddie in the Home-Selling Business
Fannie Mae and Freddie Mac repossessed more than 191,000 homes during the first six months of 2010, twice as many as a year earlier.
The mortgage financiers must act carefully to avoid flooding the market with foreclosures, which tend to depress neighborhood home prices in the process.
As an alternative, Fannie Mae has launched a pilot “lease-and-hold” program in which foreclosures are rented rather than sold; the move could pose challenges, however, as the firm takes on the new role of property manager.
Source: The Wall Street Journal, Nick Timiraos (09/17/10)
Lenders Warn Foreclosure May End in Lawsuit
The housing crisis will spark a wave of lawsuits filed by lenders seeking to recoup loses on home sales and foreclosure auctions that do not return enough money to pay the mortgages in full, according to real estate and legal experts.
Experts predict that mortgage companies will begin to sue home owners in the next two years, including borrowers who ransack a house that has been lost to foreclosure and those who walk away from “underwater mortgages,” with hopes of discouraging others from such behavior.
Lenders are unlikely to target borrowers who negotiate in good faith or have defaulted on their home due to job loss or other unforeseen circumstances; other borrowers could be hounded by collection agencies that have purchased their mortgage debt from their lender.
Strategic Defaulters Won’t Buy Again Soon
How long will it be before former homeowners who walked away from their mortgages can buy again?
Mortgage lenders are saying that in the future, losing a home because of illness or job loss will be seen differently than choosing to abandon a mortgage obligation for other reasons.
“If you made a strategic decision to default on paying your mortgage, it will work against you,” said Bill Merrell of the National Association of Review Appraisers and Mortgage Underwriters.
It will probably be seven or eight years before walkaways are able to buy another home, said Jay Brinkmann, chief economist for the Mortgage Bankers Association. “Credit scores are only one component of a complete credit decision,” Brinkmann said. “[In these cases] credit scores are not a good indicator of their willingness to continue to pay their mortgage.”
