Foreclosure at a 5-Year Low Nationwide – Where Did the REO’s Go?
A Good Sign of a Housing Recovery
Recent findings reveal that the rate at which new foreclosure are originating have plummeted to the lowest level seen in the last 5 years. The number of foreclosure filings which include default notices, scheduled auctions, and bank repossession that took place in September was 180,427. This marks a 7% decline from the August figures. It is a 16% drop from the numbers found in the same period last year. The figures were obtained from RealtyTrac, an online marketing service which provides information on foreclosed properties.
RealityTrac’s vice president Daren Blomquuist stated, “Foreclosures are making little noise in the housing market.”
Blomquist had been expecting a new wave of foreclosures to hit the already battered housing market ever since the $25 billion mortgage settlement case was reached in April. Lenders had placed many foreclosures on hold as their lending procedures were examined in the case. The suit was prompted by the robo signing scandal that came to light in September of 2010. Settlement of the case cleared a path for them to proceed with foreclosures by defining guidelines as to exactly how they could pursue borrowers who had missed payments. This would let them clear their backlogs of delinquent loans.
Rates of Decline Vary from State to State
Foreclosures have declined most steeply in states such as Texas and California where foreclosures do not have to go through the courts, so called non judicial states. Proceedings can be handled more quickly in these instances. Judicial states such as New York, New Jersey, Florida, and Illinois need to take more time to make sure that the paperwork is accurate and complete. This slows the process down significantly.
Reasons for improvement are attributed to the government’s and banks’ efforts to prevent homeowners from falling into foreclosure. The measures have taken hold. The government has sponsored a Home Affordable Modification Program (HARP) which has helped over a million borrowers receive more affordable mortgages.
Banks are also seeking ways to stop delinquent borrowers from entering foreclosure proceedings. They are choosing to either refinance loans or to allow more short sales in which they agree to a sale price which is lower than what is owed on the mortgage. Lenders prefer such short sales to foreclosures because they end up loosing less money on such transactions in large measure because there are fewer legal costs and other expenses.
Housing Recovery has Finally Arrived
The record low mortgage rates that are currently available have also helped borrowers lower their costs, and this has helped many to hang on to their homes. Numerous borrowers have refinanced their mortgages to a lower rate. This in turn lowered their monthly payments which helped them avoid default. A steadily improving economy has also led to fewer job losses which are closely linked to foreclosure rates.
All this means that the number of distressed properties that are coming onto the market have begun to decline. Foreclosure starts which are the initial phase of proceedings were down 15% in September from levels seen last year at that time.
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