Thread: U.S. Foreclosures May Rise to Three Million This Year

U.S. Foreclosures May Rise to Three Million This Year

Thursday, 14 Jan 2010 07:13 AM

A record 2.8 million households were threatened with foreclosure last year, and that number is expected to rise this year as more unemployed and cash-strapped homeowners fall behind on their mortgages.

The number of households that received a foreclosure-related notice rose 21 percent from 2008, RealtyTrac Inc. reported Thursday. One in every 45 households got at least one filing last year, a rate almost four times that of 2006. Filings include default notices, scheduled foreclosure auctions and bank repossessions.

In December, more than 349,000 households, or one in 366 homes, were hit with a foreclosure-related notice. That represents a 14 percent spike from November and a 15 percent jump from December 2008.

Banks repossessed more than 92,000 homes, up 19 percent from November. That increase was likely due to lenders working to clear their books at the end of the year, RealtyTrac said.

Stemming the tide of foreclosures is an important step for the real estate market and the economy to recover. Because foreclosures are usually sold at heavy discounts they can lower the value of surrounding properties. Cities lose property tax dollars from empty foreclosures and declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006.

The foreclosure crisis isn't letting up. Between 3 and 3.5 million homes are expected to enter some phase of foreclosure this year, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac, which began tracking the data five years ago.

High foreclosures forced the federal government and several states to come up with plans to prevent or delay foreclosures to help troubled borrowers.

"It was bad, but it could have been much worse, and it probably should have been worse," Sharga said.

One plan intended to help homeowners is the Obama administration's loan modification program known as Making Home Affordable. Lenders participating in the program have offered trial loan modifications to 760,000 eligible borrowers since it was launched in March. A loan modification changes the terms of the loan, such as lowering the interest rate, to make the monthly payments more affordable.

As of November, just 31,000 of them had been made permanent. Nearly the same number had dropped out of the program or were found to be ineligible. The Treasury Department will release updated figures Friday.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

The Mortgage Bankers Association on Wednesday recommended changes to the government's program to account for borrowers who've lost their jobs. The program, for example, should include a suspension of payments as the first step for borrowers with a temporary loss of income.

The government also should refrain from "endless incremental program changes," the trade association said.

Since April 2009, there have been nine instances where new program requirements were released, and more than 90 clarifications for new or revised forms, reporting changes and policies. The changes forced mortgage companies to implement new procedures and retrain employees, taking away time that could be spent helping borrowers.

The same three states that led the nation in foreclosure rate in December also posted the highest rates for the entire year: Nevada, Arizona and Florida. More than 10 percent of Nevada housing units received at least one foreclosure filing in 2009, with Florida and Arizona following with about 6 percent each.

The other states ranked in the top 10 for the year were California, Utah, Idaho, Georgia, Michigan, Illinois, and Colorado.

http://moneynews.com/Headline/US-Forecl ... /id/346312

Fitch: Some Prime Mortgages Will Soar 15 Percent

Thursday, 14 Jan 2010 04:19 PM
By: Julie Crawshaw

More than $47 billion of prime and Alt-A mortgages are due to recast from interest only payments to fully amortizing payments over the next 12 months, Fitch Ratings reports.

This recast exposes borrowers to an average payment increase of 15 percent and possibly higher if interest rates increase.

During the next two years, a total of $80 billion of prime and Alt-A loans, and a total of $50 billion subprime loans, are due to recast.

This payment shock will have a substantial effect on the recasting
 population, according to Managing Director Roelof Slump.

“Sixty-day
 delinquency rates have risen over 250 percent in the 12 months following
 previous recasts for prime and Alt-A loans," said Slump.

And even though
 Fitch’s current ratings consider the risks of upcoming interest-only recasts, 
mortgage pools with significant interest-only loan concentrations may
 be downgraded if performance is worse than anticipated, he said.

Recasts, the report notes, typically have a significant impact on loan performance.

While
 only 3.3 percent of prime loans are 60 or more days delinquent prior to recast, 
 delinquencies the year after recast increased to 9.3 percent.

Similar effects
 have been seen in Alt-A and subprime, with delinquencies increasing from
 12 percent to 29 percent for Alt-A, and from 20 percent to 58 percent for subprime.

Commercial real estate is not faring any better.

In fact, speaking at a recent bank-sponsored healthcare conference, JP Morgan Chase head Jamie Dimon said, "Commercial real estate is a train wreck, but it's already happened."

Dimon noted that, with roughly $3.5 trillion in commercial real estate loans outstanding, a sizable portion of that debt needs to be refinanced each year; the problem is that the value of the properties backing those loans has fallen.

http://moneynews.com/StreetTalk/fitch-p ... /id/346414