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.

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 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)

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.

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.”

The national mortgage loan delinquency rate — the ratio of borrowers 60 or more days past due — decreased in the first quarter of 2010 after steady increases for 12 consecutive quarters, according to a TransUnion report.

The delinquency rate dropped to 6.77 percent, a level slightly lower than in the fourth quarter of last year. This statistic, which is traditionally seen as a precursor to foreclosure, reflects a decrease of 1.74 percent from the previous quarter’s 6.89 percent average. Year over year, mortgage borrower delinquency is still up approximately 30 percent.

“With prices beginning to rise, increasing consumer confidence and positive trends in the equity markets, home owners who are currently upside down on their mortgages may be less inclined to join the ranks of defaulters, which have been growing in number since the summer of 2008,” FJ Guarrera, vice president in TransUnion’s financial services business unit, said in a statement.

TransUnion culls information quarterly from approximately 27 million anonymous, randomly sampled, individual credit files, representing approximately 10 percent of credit-active U.S. consumers and providing a real-life perspective on how they are managing their credit health.

The company’s forecasting models indicated that mortgage delinquency rates would be leveling off in mid 2010 at both the state and national levels.

Source: TransUnion

In spite of signs of a recovery, many home buyers are continuing to fall behind on their mortgages. Some economists see this as an indication that a second major wave of foreclosures is likely, even though the housing market appears to be stabilizing.

This next upsurge in foreclosures could cause more disruption and push prices down farther.

Housing experts say that the recent favorable housing data doesn’t reflect the number of properties that banks have left in limbo — repossessed, but not yet on the market.

“Lenders are deluged by late-stage delinquencies. The pent-up foreclosure inventory is there,” says Massoud Ahmadi, director of research for the Maryland Department of Housing and Community Development.

Foreclosures declined 8 percent in November compared with October, but were still up 18 percent from November 2008.

This was the fourth-straight month that U.S. foreclosures have declined since hitting an all-time high in July, according to online foreclosure marketer RealtyTrac.

Default notices, an indicator of coming foreclosures, also were down 8 percent from October, but up 22 percent from November 2008. Bank repossessions were flat from the previous month and down 2 percent from November 2008.

“We don’t really believe the underlying problems have been resolved,” said Rick Sharga, senior vice president for RealtyTrac. Many borrowers, he told the Associated Press, “simply aren’t going to qualify” for government and mortgage servicer help.

States with the highest foreclosure rates are:

* Nevada
* Florida
* California
* Arizona
* Idaho
* Michigan
* Illinois
* Utah
* Maryland
* New Jersey

Four states account for more than 50 percent of actual foreclosures: California, Florida, Illinois, and Michigan.

The Federal Housing Administration served subpoenas Tuesday on 15 mortgage companies with high default rates for FHA-backed loans.

The agency has previously taken action against several lenders with questionable records, including Lend America and Taylor, Bean & Whitaker Mortgage Co.

Department of Housing and Urban Development’s Inspector General, Kenneth Donohue said he plans to determine why these 15 lenders had so many loans that defaulted shortly after they closed.

Troubled lenders include: First Tennessee Bank N.A, of Memphis, Tenn.; Alethese LLC, of Lakeway, Texas; Security Atlantic Mortgage Co., of Edison, N.J.; Pine State Mortgage Corp., of Atlanta; Birmingham Bancorp Mortgage Corp., of West Bloomfield, Mich.; Alacrity Financial Services LLC, of Southlake, Texas; Assurity Financial Services LLC, of Englewood, Colo.; D and R Mortgage Corp., of Farmington, Mich.; Webster Bank, of Cheshire, Conn.; Mac-Clair Mortgage Corp., of Flint, Mich.; Americare Investment Group Inc., of Arlington, Texas; 1st Advantage Mortgage, of Lombard, Ill.; American Sterling Bank, of Independence, Mo.; Sterling National Mortgage Co., Inc., of Great Neck, N.Y.; and Dell Franklin Financial LLC, of Columbia, Md.

John Courson, CEO of the Mortgage Bankers Association, applauded the crackdown. “We’re concerned about the viability of the program and we want to make sure that the bad apples and the bad players, frankly, are eliminated,” he said.

The Treasury Department on Tuesday announced that only 9 percent of eligible home owners had been helped by the federal program to modify home loans and prevent foreclosure.

It scolded banking giants Bank of America and Wells Fargo, both of which received federal bailout money, pointing out that these banks have been among the least willing to assist troubled borrowers.

Bank of American modified 4 percent of eligible loans, and Wells Fargo modified 6 percent.

Big banks that did better included JPMorgan Chase & Co., which modified 20 percent of eligible loans, and Citigroup Inc., which modified 15 percent.

The bank with the best results was Saxon Mortgage Services Inc., which helped about 25 percent of its eligible borrowers.

Source: The Associated Press, Alan Zibel (08/04/2009)