Foreclosures jump to record high
Filed under: Economy, Investing
More than 900,000 properties in the third quarter received a foreclosure filing -- which can include a default notice, scheduled auction or bank repossession, according to the U.S. Foreclosure Market Report released by RealtyTrac. That's nearly a 23 percent increase over Q3 2008, but just a five percent increase over Q2 2009. This breaks all records since RealtyTrac began issuing foreclosure reports in the first quarter of 2005."Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters," said James J. Saccacio, chief executive officer of RealtyTrac. "REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties."
We're not only seeing lenders work through the pent-up foreclosure inventory, we're also seeing foreclosures move to the higher end of the market. In the early stages of the downturn, subprime mortgages were the hardest hit, but now we're seeing more and more foreclosures among prime mortgages, as well as Alt-A and Option ARMs. In 2006, about 55 percent of foreclosures were on subprime loans; in 2009, subprimes represent just 35 percent of foreclosures, while another 35 percent are in the middle tier and 30 percent are in the top tier.
Foreclosure filings were reported on 343,638 properties in September, a 4 percent decrease from the previous month but a 29 percent increase over September 2008. Despite the month-over-month decrease, September's total was still the third-highest monthly total since the RealtyTrac report began, behind only July and August of this year.
More than 60 percent of all foreclosures in the U.S. happened in six states -- California, Florida, Arizona, Nevada, Illinois and Michigan. The total number of foreclosures in these six states was 579,541. California alone had nearly 27 percent of the nation's total with 250,054 properties receiving foreclosure filings during the quarter. But there was some good news for California -- the state's foreclosure activity decreased nearly 2 percent from the previous quarter thanks to a 10 percent drop in default notices.
Nevada maintained its position as the state with the highest foreclosure rate in the third quarter, with one in 23 housing units receiving a foreclosure filing. That's nearly six times the national average. Foreclosure filings in Nevada totaled 47,925 during the third quarter, which is an increase of nearly 10 percent from the previous quarter and an increase of nearly 59 percent from the third quarter of 2008. The only good news for Nevada was that defaults decreased 8 percent from the previous quarter, so maybe Nevada will finally start see a slowdown in the number of foreclosures in future quarters.
Arizona posted the nation's second-highest foreclosure rate in the third quarter, with one in every 53 housing units receiving a foreclosure filing. California was No. 3, also with one in every 53 housing units receiving a foreclosure filing during the quarter. Other states with foreclosure rates ranking among the top 10 in the third quarter were Florida, Idaho, Utah, Georgia, Michigan, Colorado and Illinois.
According to the Amherst Security Group, this problem won't go away any time soon, because:• Loans are transitioning into delinquency/foreclosure at a rapid pace, but moving out at a slow pace;
• Cure rates are low. In other words, fewer people are paying their past-due amounts and getting back on track.
• Loans are taking longer to liquidate. In other words, the length of time between the start of the foreclosure process and the point when the lender gets control of the property is growing.
The Amherst Mortgage Insight report notes that there are currently 7 million homes in a shadow market -- homes that are either in delinquency or in foreclosure, but not yet on the market. This number translates into 135 percent of a year of existing home sales, which means that whatever numbers you're seeing now about homes sales, they don't truly reflect the storm that's yet to come. So you can expect house prices to continue to drop in the hardest hit states.
Lita Epstein has written more than 25 books, including The 250 Questions Everyone Should Ask About Buying Foreclosures and The 250 Questions You Should Ask to Avoid Foreclosure.
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Reader Comments (Page 1 of 6)
10-15-2009 @ 10:27AM
Jeff said...
You know, when me and my wife were walking our dog or driving through certain communities, we would always ask each other, "how do they afford these?" big masion, 2 SUV's..., well now we know!
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10-15-2009 @ 10:18AM
Mike said...
Amen, brother! I've been asking that for years. And, "experts" kept saying initially that it was "predatory lending" that suckered people into taking out loans that they couldn't afford. So, how do they now explain why the foreclosure problem has expanded into PRIME mortgages? Here's how I explain it: greedy, materialistic people with instant gratification issues CONSCIOUSLY took out loans they couldn't afford without considering that they'd have to make payments for 30 years whether the properties appreciated or not. Of course, car dealers would loan anybody money, so even with an overpriced mortgage on their hands, these same idiots could easily borrow money to buy two brand new Escalades to park in front of their McMansions. America isn't dying - but a bunch of people here are going to be sucking hind tittie for a long time. Those of us with enough sense to live within our means might do well to invest in firearms. . .
10-15-2009 @ 12:05PM
Gary said...
Man you guys are heartless, could it be the reason now prime loans, are failling now , is that that person has lost there job? Most americans rely on loans, be it if you make 30 thousand a year or 300 thousand a year, when you apply for a mortgage, its a given your mortgage can be a percentage of your earnings, so be it you live in a 100 thousand dollar home or a 300 thousand dollar home, if you loose your job, there goes the means to pay. Even if a family has 6 months or a year income put away, perhaps they have been out of work now longer than that.
Prime mortgage also does not mean jumbo mortgage, a person can have a 50 thousand dollar home and have a prime mortgage!
Sorry to see people realish on other hard times, Whats happened to us all here?
10-15-2009 @ 1:09PM
CUCUMBER said...
That's what I've always asked. The answer was "you're not American enough to understand".By the way I've lived here since I was 18 for the last 28 years.
10-15-2009 @ 2:22PM
Chunga said...
Amen on that brother!
10-15-2009 @ 4:22PM
Richard said...
commissioned sales fees and bank fees/points along with EPS targets will drive EVERYTHING! and it has and it will again. Just watch. Can afford crap, the money lenders will fix it for you, honey, "now what how do you feel about redoing the kitchen and installing some granite counter tops and some new appliances? This house is going to be your own" NOT! down the tube!
10-15-2009 @ 5:46PM
troy said...
responding to your comment sure there are those that signup
for something they cant financially handle but there are those
that are living the american dream and they can afford it without
any problem. you are guilty of looking at the world only through
your eyes and financial ability.
10-16-2009 @ 12:20AM
Kent said...
There was a plumber in our neighborhood who was driving a new BMW every couple of years. Turns out that he was in the real estate business, although we don't know if he was flipping or renting properties.
Either way, he had 4 mortgages on his house. Then two bad things happened. The real estate market started to collapse, and his wife found out about the mistress and filed for divorce.
He lost everything, and the gossip in the neighborhood is that he went back to his native Lithuania to avoid lenders 2, 3, and 4 from trying to collect the unpaid balances.
10-23-2009 @ 4:15AM
JIM said...
If you are in or near foreclosure, you should possibly consult a real estate attorney using the following information.
BACKGROUND
Mortgage-backed securities (MBSs) are simply shares of a home loan sold to investors. They work like this: A bank lends a borrower the money to buy a house and collects monthly payments on the loan. This loan and a number of others -- perhaps hundreds -- are sold to a larger bank that packages the loans together into a mortgage-backed security. The larger bank then issues shares of this security, called tranches (French for "slices"), to investors who buy them and ultimately collect the dividends in the form of the monthly mortgage payments. These tranches can be further repackaged and sold again as other securities, called collateralized debt obligations (CDOs). Home loans in 2008 were so divided and spread across the financial spectrum, it was entirely possible a given homeowner could unwittingly own shares in his or her own mortgage.
Eventually, the most desirable, qualified customers dried up; they all had homes. So banks turned to customers they'd traditionally shunned -- subprime borrowers. These are borrowers with low credit ratings who pose a high risk of defaulting on their loan. But lenders of all stripes bent over backwards in the early 2000s to get this type of borrower into homes. The no-document loan was created, a type of loan for which the lender didn't ask for any information and the borrower didn't offer it. People who may have been unemployed as far as the lender knew received loans for hundreds of thousands of dollars. Why?
One answer is that, with the introduction of MBSs, lenders no longer assumed the risk of a loan default. They simply issued the loan and promptly sold it to others who ultimately took the risk if payments stopped. And since MBSs created early on were based on mortgages granted to the more dependable prime borrowers, the securities performed well. They performed so well that investors clamored for more. In response, lenders loosened their restrictions for mortgage applicants and borrowed heavily to create cash flow for loans in order to create more mortgages. Without mortgages, after all, there are no mortgage-backed securities.
http://www.pbs.org/wgbh/pages/frontline/warning/view/
THE QUESTION
As mortgages were packaged/bundled into mortgage back securities (MBS) and sold to investors and since these MBSs were bought by investors, with some mortgages being split and owned by several institutions or people (tranches), how can the homeowner/borrower know who actually owns their mortgage? If the homeowner /borrower does not know who actually owns their mortgage, then how does the foreclosure court know who actually owns the mortgage and CAN actually proceed with the foreclosure?
The real estate attorneys representing these possible foreclosed homeowners should request that the foreclosing institution show that they ACTUALLY own the mortgage and can bring foreclosure action to court and are not just the mortgage servicer.
10-15-2009 @ 10:05AM
Charlie said...
Does this really surprise you? When is America going to wake up and see the money that the government put out there is not helping. It is not going to get any better with people in office that cannot even follow or own constitution. You cannot give away what you do not have. I can see things only getting worst.
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10-15-2009 @ 10:07AM
Margie said...
WHAT A BUMMER? And then they (the powers that be) have the nerve to state the the recession is going away! Where are they getting their information? In my estimation, this is the worse economy since the GREAT DEPRESSION! I'm afraid this country is in ruins due to greed, bad decisions on the part of lawmakers and the tremendous loss of substantial jobs for the American people. Where do we go from here? Your guess is as good as mine but may God have mercy on us!
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10-15-2009 @ 10:11AM
Elizabeth Earnhardt said...
It's a shame. Yes, those that are loosing their homes dreamed the American dream. The rug was pulled out from under them. They loose their jobs that went off shore, realestate agents encouraged them with reasonable rates which could have been affordable with husband and wife working, loans were sold off and house payments increased, companies went off shore and jobs lost. Don't expect me to be critical of the American Dream. I'm disgusted with our government for making it possible for American companies to leave our shores and go elsewhere and import products back into the US without supporting our taxation and not have any decensy for others.
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10-15-2009 @ 10:17AM
brian gindy said...
Foreclosures will only continue to climb until a market adjustment on homes is established. No one is wise to stay in their home when they owe 40 percent more than it's worth..it's not a wise decision. lowering the interest rate and extending the term of the loan to 40 years won't cut it. The only way to stop foreclosures and re-establish the housing market is to re adjust mortgages to the new (post depression era) value of the homes. Otherwise the Banks end up with all the property/homes...and the Government is giving them "our" tax dollars to allow the Banks to take all the homes back. No bottom to the housing crisis until a market adjustment is made....which also means the economy will not recover either without the market adjustment. It's simple folks...and Washington knows it.
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10-15-2009 @ 10:21AM
timothy said...
Now R U willing to believe that 'jobs belong to the company'...not the worker or the government. A job that is moved from the US to somewhere else is NOT an American job (its not coming back unless we find a way to make it a favorable decision for the COMPANY). Most jobs are first 'created' in small companies. (Ford did not start as a 50,000 employee business) Therefore our government can help create jobs in the US by lowering taxes on small companies. You dont need to be a cllege educated economist to see the simplicity of this approach.
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10-16-2009 @ 4:38AM
al brown said...
A whole lot of small companies are not making any profits due to this recession, so tax relief is not helpful.
Whats needed is a gov't ;loan program that is accessible to small businesses. The SBA is a joke. The banks who make the SBA loans bury you in paperwork and fees before they tell you no.
The idea of the gov;t making loans is to create jobs, profits & in the long run..taxes
10-15-2009 @ 10:40AM
Jim said...
Actually lowering the taxes on a small business has nothing to do with the issue as most small businesses are pass thru companies (S corp, LLC). This means the profits or loss pass thru to the owners personal taxes and thus the person's tax rate. ( I own 3). So the owner can make the books show the amount of profit they want the company to show on the books. So the only corporations that can get their taxes lowered are C corps. C corps used to pay 45% of the taxes in the U. S. A. Now, C corps pay only 9 to 10% of the total taxes to the Government. C corps have lobbied Congress for lower taxes or sent the jobs offshore and only bring back the amounts they really want to show on their U. S parent corporation.
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10-15-2009 @ 1:50PM
jake192168 said...
john, put an option in on neom . buy 5 blocks at 1.00 3/1/10
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10-15-2009 @ 10:46AM
ajgorm said...
Housing prices ...Why is it key to our recovery ? Given the fact that most of us depend on our jobs to buy a home we need more jobs before it can recover. So if you consider some Job facts I can assume that the way this is being crafted we can predict the outcome. Billionaires and a disappearing middle class. So what will that do to our economy --i think it will deflate it globally. Cap N Trade come on and NAFTA types in congress socializing our pay to fit into cap n trade GDPs. You got to be kidding if you think the rich wont get richer and something will be done to rewire the rich getting richer while the poor fight for crumbs from the misers. WE will revolt.
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10-15-2009 @ 10:47AM
luette said...
no that CANT be right.....according to liberals....Obama and the Democrats that have been controlling the congress for three years has Saved us.....chant chant chant chant......Lemmings
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10-15-2009 @ 10:54AM
Carleche Arnoux said...
How can someone stop a foreclosure if the bank who started the foreclosure can not show proof they have own the mortgage and how long does that normally take.
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