Amid growing signs of an economic recovery, one troubling fact remains: Foreclosure rates aren't slowing down. In March, 367,056 foreclosure filings were reported, according to RealtyTrac, up 19% from February and up 8% from a year earlier. It was the highest monthly total RealtyTrac has recorded since it began issuing a foreclosure report in January 2005.
The five states with the highest number of foreclosures are California (93,173), Florida (59,067), Arizona (18,856), Georgia (17,779) and Michigan (17,700).
"Foreclosure activity in the first quarter of 2010 followed a very similar pattern to what we saw in the first quarter of 2009: a shallow trough in January and February followed by a substantial spike in March," said RealtyTrac CEO James Saccacio in a prepared statement. "One difference, however, is that the increases were more tilted toward the final stage of foreclosure, with REOs [bank repossessions] increasing 9% on a quarterly basis in the first quarter of 2010 compared to a 13% quarterly decrease in REOs in the first quarter of 2009."
Modifying the Mortgage Modification Program
While the real estate market was burning, consumers were apparently out spending. March retail sales (in stores open at least a year) were up 9% from the same period last year, according to Thomson Reuters, and results easily exceeded analysts' expectations for a 6% increase. It seems that consumers tapped into some of their savings and credit to cover March's shopping sprees, given that income levels aren't increasing and the unemployment rate still hasn't budged from 9.7%.
Although the federal government is clearly cognizant of the foreclosure problem -- it has made at least half-a-dozen modifications to its foreclosure prevention program since early 2009 -- its efforts to stem foreclosures have thus far been futile. Most recently, President Obama pitched a plan that was meant to provide unemployed homeowners with temporary mortgage relief. Earlier this month, the federal government also vowed to loosen some of the restrictions on grants set aside for local governments to redevelop abandoned communities or foreclosed properties.
Washington has also rolled out a program to modify second mortgages called 2MP, as well as a plan to provide incentives to banks for forgiving some of the principal on underwater mortgages. Some banks, such as JPMorgan Chase (JPM) are adamantly opposed to the idea of principal reduction, while others have embraced the concept. Bank of America (BAC), for example, said it will reduce the outstanding principal on some mortgages by up to 30%.
Home Foreclosures Hit a Five-Year High in March