Foreclosure-related filings during the last three months of 2008 were down 4 percent from the previous quarter, despite a 17 percent month-over-month bump in filings during December, data aggregator RealtyTrac said today.
RealtyTrac’s year-end Foreclosure Market Report showed an 81 percent increase in the number of properties subjected to foreclosure-related filings in all of 2008 from the year before, to 2.3 million.
Although not all of those homes that enter the foreclosure process are repossessed by banks, RealtyTrac said one in 54 U.S. homes was subject to at least one foreclosure-related filing during the year, including a default notice, auction sale notice or bank repossession.
RealtyTrac Chief Executive Officer James Saccacio said that the big jump in foreclosure-related filings in December came as a surprise, given that Fannie Mae and Freddie Mac suspended foreclosure sales over the holidays and that lenders and loan servicers have launched new streamlined loan modification programs intended to prevent foreclosures (see story).
A number of states have passed legislation that requires lenders to jump through more hoops before initiating the foreclosure process, which "clearly had an effect on fourth-quarter numbers overall, but that effect appears to have worn off by December," Saccacio said in a statement announcing the release of the report.
"Clearly the foreclosure prevention programs implemented to-date have not had any real success in slowing down this foreclosure tsunami," Saccacio said. He said a recent California law, SB 1137, like similar statutes in Massachusetts and Maryland, "appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners."
Some Democrats are pushing for up to $100 billion from the second half of the $700 billion Troubled Asset Relief Program (TARP) to be used to create a government guarantee program for lenders who agree to modify mortgages, and there’s also pending legislation that would allow bankruptcy judges to "cram down" the balance on troubled borrower’s loans (see story).
With 7.29 percent of homes subjected to some type of filing, Nevada had the highest rate of foreclosure-related filings in 2008, followed by Florida (4.52 percent), Arizona (4.49 percent), California (3.97 percent), Colorado (2.41 percent), Michigan (2.35 percent), Ohio (2.25 percent), Georgia (2.2 percent), Illinois (1.91 percent) and New Jersey (1.8 percent). One in 14 homes in Nevada was subjected to at least one foreclosure-related filing in 2008, nearly four times the national average, RealtyTrac said.
In terms of raw numbers, California, Florida and Arizona led the nation, followed by Ohio, Michigan, Illinois, Texas, Georgia, Nevada and New Jersey. A total of 523,624 California properties were subjected to a foreclosure-related filing in 2008, up 110 percent from 2007 and nearly 498 percent from 2006.
Seven of the 10 metro areas with the highest foreclosure rates were located in California and Florida, with Detroit the only city outside of the sunbelt to show up on the top 10 list.
The 10 metro areas with the highest foreclosure rates were Stockton, Calif., with foreclosure-related filings on 9.46 percent of homes, followed by Las Vegas-Paradise, Nev. (8.89 percent); Riverside-San Bernardino, Calif. (8.02 percent); Bakersfield, Calif. (6.17 percent); Phoenix-Mesa, Ariz. (6.02 percent); Fort Lauderdale, Fla. (5.95 percent); Orlando, Fla. (5.48 percent); Miami, Fla. (5.21 percent); Sacramento, Calif. (5.2 percent); and Detroit-Livonia-Dearborn, Mich. (4.52 percent).
At the national level, RealtyTrac’s numbers are in line with statistics compiled by the Mortgage Bankers Association, which last month projected 2.2 million homes would enter the foreclosure process in 2008.
Job losses and general economic deterioration make the outlook for 2009 worse, particularly if problems in mortgage lending become more widespread, MBA Chief Economist Jay Brinkmann said (see story).
A recent report by IHS Global Insight suggests foreclosures, rising unemployment and tight credit could push home prices in many markets below historical price-to-income ratios where they might otherwise find support (see story).
That could put more borrowers "upside down," making it harder for them to refinance out of unaffordable loans — a vicious cycle leading to more foreclosures, more losses for banks, and more tightening of credit.
Moody’s Economy.com estimates that in the last three years, 3 million homes have been lost in foreclosure sales, short sales or deeds-in-lieu of foreclosure, and that by this fall, about 14.6 million U.S. homes will be "upside down," with borrowers owing more on their mortgages than their home is worth.
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