With low mortgage interest rates and home values already in place, Americans could start receiving a string of good news when it comes to foreclosures. The amount of foreclosure filings for February 2011 decreased 14 percent compared with January numbers. Furthermore, filings dropped 27 percent compared to the same period a year ago. February figures constitute the largest annual drop ever recorded by RealtyTrac. However, until more homeowners can modify or refinance their underwater mortgages to low interest rate mortgages, it may be premature to celebrate an end to the foreclosure nightmare.
The Latest Foreclosure Numbers
State's Attorney General Offices around the country continues to field complaints about improper foreclosure practices committed by mortgage servicing firms. Allegations of improprieties have derailed the foreclosure process for many lenders. These claims have caused many home mortgage lenders to slow the rate of foreclosures to review their foreclosure procedures. In addition, extreme winter weather conditions across the country may have also played a role in delaying paperwork filings and serving notice on delinquent homeowners. February saw 225,000 foreclosure filings and over 64,640 homes seized.
At the peak of the crisis, in September 2010, 102,000 homeowners lost their homes. Nevada, Arizona, California, Utah, Idaho, Georgia, Michigan, and Florida, in order, have the most foreclosure filings. With the various programs intended to help reduce the number of foreclosures, such as the FHA Short Refinance Program, in danger or scheduled to expire, these numbers may represent a just a temporary lull.
Home Builders and the Economy
Not only are homeowners hoping for a prolong reversal in the foreclosure trend, but homebuilders look forward to the onslaught of cheap housing coming onto the market. As banks have flooded markets with discount homes, up to 35 percent in some states, a decrease in inexpensive inventory would help improve the market. Only then, can developers sell their projects and turn a profit.
Stabilizing the foreclosure market would significantly aid the economic recovery. David Crowe of the National Association of Home Builders (NAHB) states that constructing just 100,000 new homes produce 150,000 jobs in the construction sector alone. In addition, related industries like appliance manufacturers, furniture makers, and other product companies add another 150,000 positions.
Loan Servicing Cases Continue to Stall Recovery
A major impediment that continues to form a cloud over the housing market concerns the lack of a settlement to the “foreclosure gate. Last month, the Obama Administration floated a plan designed to bring the issue to a head. The banks would pay billions of dollars to reduce the outstanding mortgage principal on the loans of homeowners with underwater mortgages. Industry analysts estimate the number of homeowners who owe outstanding mortgage balances that exceed the market value of their homes at more than 11 million.
Mortgage lenders, including Fannie Mae and Freddie Mac, have not displayed any real desire to reduce principals or refinance homeowners, especially if they have demonstrated the ability to pay their mortgages. They express concern borrowers who can afford to pay their mortgage payments will stop meeting their monthly obligations in an attempt to qualify for loan modifications. However, experts argue that addressing the problem of homeowners saddled with mortgages that exceed their home value will alleviate a major bind on the housing market. Allowing the current situation to persist, it could have a negative effect on the economy for years.
The alternative solution to reaching a comprehensive nationwide settlement involves various federal agencies exercising their authority to pursue penalties and separate litigation by the each state's Attorney General.
Fast Track a Solution
Everyone realize a perfect solution to the foreclosure does not exist. Banks want to escape from this mess with no responsibility for helping to create the problem. Predatory loan practices; product designed to fail; lost loan modification paperwork; and falsified foreclosure documents - all point to accountability for the crisis. In addition, attempts by banks to foreclose without ownership of the notes or proper assignment of deeds after selling the mortgage constitutes liability.
Again, the various loan mortgage modifications and low interest rate refinance plans failed to deliver on their objective of helping millions of struggling homeowners. Borrowers, underwater in their mortgage, want relief, and the chance to get back on solid financial ground. For many homeowners, a mortgage reduction will help them avoid financial collapse. It seems the financial industry received the exact same thing. The bailout they received from the American taxpayers helped home mortgage lenders regain their financial footing.