Home Foreclosures Hit a Five-Year High in March

April 15, 2010

Daily Finance

By: Betsy Schiffman

Amid growing signs of an economic recovery, one troubling fact remains: Foreclosure rates aren’t slowing down. In March, 367,056 foreclosure filings were reported, according to RealtyTrac, up 19% from February and up 8% from a year earlier. It was the highest monthly total RealtyTrac has recorded since it began issuing a foreclosure report in January 2005.

The five states with the highest number of foreclosures are California (93,173), Florida (59,067), Arizona (18,856), Georgia (17,779) and Michigan (17,700).

“Foreclosure activity in the first quarter of 2010 followed a very similar pattern to what we saw in the first quarter of 2009: a shallow trough in January and February followed by a substantial spike in March,” said RealtyTrac CEO James Saccacio in a prepared statement. “One difference, however, is that the increases were more tilted toward the final stage of foreclosure, with REOs [bank repossessions] increasing 9% on a quarterly basis in the first quarter of 2010 compared to a 13% quarterly decrease in REOs in the first quarter of 2009.”

Modifying the Mortgage Modification Program

While the real estate market was burning, consumers were apparently out spending. March retail sales (in stores open at least a year) were up 9% from the same period last year, according to Thomson Reuters, and results easily exceeded analysts’ expectations for a 6% increase. It seems that consumers tapped into some of their savings and credit to cover March’s shopping sprees, given that income levels aren’t increasing and the unemployment rate still hasn’t budged from 9.7%.

Although the federal government is clearly cognizant of the foreclosure problem — it has made at least half-a-dozen modifications to its foreclosure prevention program since early 2009 — its efforts to stem foreclosures have thus far been futile. Most recently, President Obama pitched a plan that was meant to provide unemployed homeowners with temporary mortgage relief. Earlier this month, the federal government also vowed to loosen some of the restrictions on grants set aside for local governments to redevelop abandoned communities or foreclosed properties.

Washington has also rolled out a program to modify second mortgages called 2MP, as well as a plan to provide incentives to banks for forgiving some of the principal on underwater mortgages. Some banks, such as JPMorgan Chase (JPM) are adamantly opposed to the idea of principal reduction, while others have embraced the concept. Bank of America (BAC), for example, said it will reduce the outstanding principal on some mortgages by up to 30%.

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Record Year for Foreclosures as Unemployment Rises

January 14, 2010

My Way News

By Adrian Sainz

A record 2.8 million households were threatened with foreclosure last year, and that number is expected to rise this year as more unemployed and cash-strapped homeowners fall behind on their mortgages.

The number of households that received a foreclosure-related notice rose 21 percent from 2008, RealtyTrac Inc. reported Thursday. One in 45 homes were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions.

In December, more than 349,000 households, or one in 366 homes, were hit with a foreclosure-related notice. That represents a 14 percent spike from November and a 15 percent jump from December 2008.

Banks repossessed more than 92,000 homes, up 19 percent from November. That increase was likely due to lenders working to clear their books at the end of the year, RealtyTrac said.

Stemming the tide of foreclosures is an important step for the real estate market and the economy to recover. Because foreclosures are usually sold at heavy discounts they can lower the value of surrounding properties. Cities lose property tax dollars from empty foreclosures and declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006.

The foreclosure crisis isn’t letting up. Between 3 and 3.5 million homes are expected to enter some phase of foreclosure this year, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac, which began tracking the data five years ago.

High foreclosures forced the federal government and several states to come up with plans to prevent or delay foreclosures to help troubled borrowers.

“It was bad, but it could have been much worse, and it probably should have been worse,” Sharga said.

One plan intended to help homeowners is the Obama administration’s loan modification program known as Making Home Affordable. Lenders participating in the program have offered trial loan modifications to 760,000 eligible borrowers since it was launched in March. A loan modification changes the terms of the loan, such as lowering the interest rate, to make the monthly payments more affordable.

As of November, just 31,000 of them had been made permanent. Nearly the same number had dropped out of the program or were found to be ineligible. The Treasury Department will release updated figures Friday.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

The Mortgage Bankers Association on Wednesday recommended changes to the government’s program to account for borrowers who’ve lost their jobs. The program, for example, should include a suspension of payments as the first step for borrowers with a temporary loss of income.

The government also should refrain from “endless incremental program changes,” the trade association said.

Since April 2009, there have been nine instances where new program requirements were released, and more than 90 clarifications for new or revised forms, reporting changes and policies. The changes forced mortgage companies to implement new procedures and retrain employees, taking away time that could be spent helping borrowers.

The same three states that led the nation in foreclosure rate in December also posted the highest rates for the entire year: Nevada, Arizona and Florida. More than 10 percent of Nevada housing units received at least one foreclosure filing in 2009, with Florida and Arizona following with about 6 percent each.

The other states ranked in the top 10 for the year were California, Utah, Idaho, Georgia, Michigan, Illinois, and Colorado.

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