Half a decade into the deepest U.S. housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end. House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.
But a painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.
“We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010,” said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio.
“Last year was an anomaly, and not in a good way,” he said.
In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.
Five major banks eventually struck that settlement with 49 U.S. states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.
Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.
More conclusive national data is not yet available. But watchdog group, 4closurefraud.org which helped uncover the “robo-signing” scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash
Although foreclosure starts were 50 percent or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo’s rose 68 percent and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment.
Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.
Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).
RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”
One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it’s mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.
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One Response
While the ““robo-signing” scandal” was a serious affront to the legal system, it didn’t result in people getting wrongfully forclosed. All the delay did was to give a windfall for the people who are going to be foreclosed -in the form of free rent – whether they are losing their houses because their income fell unexpectedly, or whether because they are gambling on housing prices going up and lost their bet. There are strong reasons to believe the cause of the problem was the willingness of people to use their house as an ATM machine, and the stupidity of the banks to go along with this.
Letting the foreclosures run their course is the only solution. People will move into housing they can afford. Banks and homeowners will learn that the if they want to make risky bets, they should stick to horse races and megamillions – not loaning money to people who can’t repay in the hope the collateral will go up in value to cover the difference.