Thread: RealtyTrac: Foreclosures to Surge 25 Percent This Year to 1 Million Homes

RealtyTrac: Foreclosures to Surge 25 Percent This Year to 1 Million Homes

Thursday, 16 Feb 2012 03:14 PM

Banks took back more U.S. homes in January than in the previous month, the latest sign that foreclosures are accelerating after slowing sharply last year while lenders sorted out foreclosure-abuse claims.

Foreclosures rose 8 percent nationally last month from December, but were down 15 percent from a year earlier, foreclosure listing firm RealtyTrac Inc. said Thursday.

But RealtyTrac projects foreclosures will rise 25 percent this year to 1 million homes. Last year, lenders took back 804,000 homes.

Meanwhile, despite the annual decrease at the national level, some states posted sharp increases compared to January 2011. In New Hampshire, foreclosures jumped 62 percent. In Massachusetts, 75 percent.

That trend is expected to strengthen this year in light of last week's $25 billion settlement between the nation's biggest mortgage lenders and 49 state attorneys general over the industry's handling of foreclosures.

Many banks and mortgage servicers processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures — a practice dubbed "robo-signing."

Major banks temporarily put foreclosures on hold after the problems surfaced in the fall of 2010. Some had to refile previously filed foreclosure cases and revisit pending cases to prevent errors. Those delays and uncertainty over state and federal probes into the industry's foreclosure practices led to a sharp slowdown in foreclosure activity last year.
The settlement between the banks and state attorneys general helps clarify the rules banks must follow to foreclose on borrowers, said Daren Blomquist, a vice president at RealtyTrac. That will pave the way for more foreclosures, he said.

"The settlement will accelerate the foreclosures that are happening this year and it will accelerate the process of lenders catching up on the backlog of foreclosures that has been building up over the last year and a half," Blomquist said.

Credit rating agency Fitch Ratings also anticipates foreclosures will climb nationally this year, but not right away, noting it will take some time for lenders and mortgage servicers to make sure they are in compliance with the rules set forth in the settlement.

"You probably are going to see the pace pick up as the year goes on," said Grant Bailey, a managing director at Fitch.

RealtyTrac projects foreclosures will rise 25 percent this year to 1 million homes. Last year, lenders took back 804,000 homes.

Even so, the rise in foreclosures isn't expected to be uniform nationwide. That's because the settlement isn't likely to ease the backlog of foreclosure cases in states where courts play a role in the process.

In addition, some states have taken steps to slow lenders down.

Throughout the housing downturn Nevada has had the nation's highest foreclosure rate. There, a law that went into effect in October requires that foreclosure documents must be filed in the county where a property is located and a lender must provide a notarized affidavit detailing their legal right to proceed.

That has contributed to fewer homes entering the foreclosure process, but also a smaller pool of foreclosed homes available for sale in places like Las Vegas.

There are as many as 3,000 fewer homes listed for sale in the greater Las Vegas market than just a year ago, said Rosa Herwick, a broker and owner of Century 21 JR Realty in Henderson, Nev.

That's made multiple offers on foreclosures and other properties priced up to $250,000 commonplace, she said.

"There are tons of homes sitting out here vacant that people haven't paid on for two years, or whatever the case, that should be in the foreclosure pipeline and are not yet," Herwick said.

Foreclosure activity in Nevada fell 8 percent last month from December, but was down 52 percent from January last year, RealtyTrac said.

High unemployment, a sluggish housing market and falling home values remain major factors in homeowners falling behind on their mortgage payments. Many borrowers also have simply stopped paying their mortgage because they owe more on the mortgage than the home is worth.

All told, 210,941 U.S. homes received a default notice, were scheduled for auction or were repossessed by a lender in January, RealtyTrac said.

That's up 3 percent from December, but a drop of 19 percent from January last year. The foreclosure rate translates to one in every 624 U.S. households.

RealtyTrac: Foreclosures to Surge 25 Percent This Year to 1 Million Homes

Foreclosure Abuse Rampant Across U.S., Experts Say

Friday, 17 Feb 2012 07:33 AM

A report this week showing rampant foreclosure abuse in San Francisco reflects similar levels of lender fraud and faulty documentation across the United States, say experts and officials who have done studies in other parts of the country. The audit of almost 400 foreclosures in San Francisco found that 84 percent of them appeared to be illegal, according to the study released by the California city on Wednesday.

"The audit in San Francisco is the most detailed and comprehensive that has been done — but it's likely those numbers are comparable nationally," Diane Thompson, an attorney at the National Consumer Law Center, told Reuters.

Across the country from California, Jeff Thingpen, register of deeds in Guildford County, North Carolina, examined 6,100 mortgage documents last year, from loan notes to foreclosure paperwork.

Of those documents, created between January 2008 and December 2010, 4,500 showed signature irregularities, a telltale sign of the illegal practice of "robosigning" documents.

Robosigning involves the use of bogus documents to force foreclosures without lenders having to scrutinize all the paperwork involved with mortgages. The practice was at the heart of the foreclosure scandal that led to a $25 billion settlement between the U.S. government and five major banks last week.

The banks have never formally admitted any wrongdoing. A Wells Fargo spokesman said, "We have acknowledged we didn't always follow our policies in the foreclosure process. We found some areas where there were deficiencies in our process."

It is expected that the $25 billion settlement will include no admission of wrongdoing by the banks.

Home loans have dropped 33 percent from a 2006 peak that was fueled by generous loans, often to people with dubious credit records. Nearly 11 million Americans now owe more than their homes are worth.

Thingpen said the San Francisco audit, which was commissioned by the city's assessor-recorder, Phil Ting, was not an exceptional case. "Where there's smoke, there's fire, and we're beyond the smoke stage. There's fires in county recording offices across the country."

John O'Brien, the register of deeds for Essex County in northwestern Massachusetts, conducted an audit of loans issued in 2010 and found 75 percent of the assignments to be invalid and a further 9 percent questionable.

LOAN REPACKAGING MUDDIED OWNERSHIP

One of the major problems that has emerged in the foreclosure crisis is that it is far from clear that many lenders foreclosing on properties actually own the loans and have the right to take action against them.

In many cases during the housing bubble that burst in 2008, original mortgages were repackaged and sold to so many investors that it is now unclear who actually holds the loans

O'Brien could only find the current owners of the mortgages he studied in 287 out of 473 cases.

In the San Francisco study, which studied properties subject to foreclosure sales between January 2009 to November 2011, 45 per cent were sold to entities improperly claiming to be the owner of the loan.

"It is not impossible that there are homeowners who are alleged to have defaulted on loans to which they never fully agreed to and, further, are being foreclosed upon by lenders that might not even own such loans," the report stated.

One factor that probably caused the particularly high 84 per cent rate of illegal foreclosures in San Francisco is that California is a "non-judicial" foreclosure state.

In other words, the foreclosure process does not need to be overseen by a judge. That left the conduct of lenders in California - one of the hardest-hit states in terms of foreclosures - largely unscrutinized until the robosigning scandal gained prominence in late 2010.

In judicial foreclosure states such as New York, some judges have been taking banks to task for submitting faulty foreclosure paperwork.

But Ray Brescia, a visiting professor at Yale Law School and an expert in housing law, said foreclosure fraud had been as rampant in judicial states as non-judicial ones.

"This number around 80 percent is not a number we have not seen before," Brescia said, referring to both the issuing of faulty loans during the housing bubble and the foreclosure crisis that followed.

"There have been a very high level of irregularities across the country."

Foreclosure Abuse Rampant Across U.S., Experts Say

The real estate market is the major economy health indicator, and is not projected to recover for at least a decade.

We are in the end of the four-year cycle in this election year, and traditionally if it is not a bull market it will at least be a stable one.

The mortgages bankruptcies will stay constant, but I don't see the stock market going bust until after the November elections.

Obama Shafts Responsible Homeowners

February 17, 2012 by Chip Wood


Underwater on your mortgage? Good for you!

Hey, look, it’s manna from heaven! If you lost your home to foreclosure, Barack Obama is going to see that you get a check for some 2,000 bucks. Free!

And not only that. If you still own your home but it’s worth a lot less than you owe on it, he’s got even better news for you. The President, in league with the Nation’s attorneys general, has gotten the banks to agree to reduce what you owe.

Isn’t that wonderful?!? Why, it’s almost like getting free money. What a wonderful deal our leaders have arranged.

Of course, it’s only wonderful for people who bought more house than they could afford, got over their heads in debt and are looking for someone to rescue them from their mistakes. And it’s also a pretty good deal for the five huge financial institutions that are participating, as I’ll explain in a moment. They’ll get bailed out of their mistakes, too.

That’s who benefits. Now, let me tell you who loses. For the most thrifty and responsible among us, the deal stinks.

My friend Gary Bauer of Campaign for Working Families used an analogy that makes what happened crystal clear. Consider the case of two families who both bought a home on the same street several years ago. Both homes cost $200,000. Couple No. 1 saved for years and denied themselves many extras so they would have $40,000 for a down payment. And over the years, they faithfully made every mortgage payment on time, even though the value of their home fell below what they paid for it.

Couple No. 2 had no savings and couldn’t put anything down. But they were able to get a no-money-down mortgage with an adjustable interest rate. As the economy tanked and their interest rate rose, they found it impossible to make their mortgage payments. They listened to the liberal rhetoric telling them it wasn’t their fault and stopped making mortgage payments altogether.

Now comes the “fairness” President, announcing that the couple that sacrificed and made all their payments on time will get nothing. While the couple that wasn’t as prudent or responsible will have the size of their mortgage and their interest rate on it reduced. If they have been evicted already, they will get a check for $2,000.

So the thrifty and responsible homeowner gets nothing. But in fact he gets worse than nothing. Because when the dust settles, his home will have fallen in value just as much as the other guy’s.

No wonder financial analyst Dick Bove told CNBC viewers that this is “the mortgage deal from hell.” He said that the biggest lesson to learn from all of this is that “only fools meet their financial commitments.” He further said, “If you’re going to do something which is going to reduce the value of existing homes where people are making their payments, every American should stop making his payments on his mortgages, send a letter to the Attorney General in his state and say ‘I qualify to have my principal reduced because I’m not going to make any more payments on my house.’”

Boy, won’t that make America a better place?

But if this is such a bad deal, why were five big banks so eager to join it? You will not be surprised to learn that this is as much a bank bailout deal as it is a help-the-homeowner deal.

David Stockman, Ronald Reagan’s budget director, put it succinctly. “This is ultimately at the end of the day a bailout for JP Morgan and Wells Fargo” and other big underwriters of second mortgages and home-equity loans.

When a foreclosure takes place, these obligations become worthless. With refinancing, they won’t. It’s that simple.

Where is the money for this $25 billion bailout coming from? Ally/GMAC, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo will each put up $5 billion. The President’s plan, Stockman says rightly, is “the worst kind of crony socialism.”

Pacific Investment Management Company, better known as Pimco, owns a ton of mortgage debt. Scott Simon, the head of mortgage investments there, says of the $250 billion in their Total Return Fund, about half is in mortgage debt.

“A lot of the principal reductions would have happened on their loans anyway,” Simon says. “And they’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.”

Simon didn’t mince any words about the morality, or lack of it, with the deal. “You tell your kid, ‘you did something bad, so I’m going to fine you $10. But if you can steal $22 from your mom, you can pay me with that.’” That’s the sort of deal our “fairness” President has foisted on us.

While I’m on the subject of rotten deals, let me say a few words about Obama’s budget for the coming year. It’s a lulu. Forget about the reduction in Federal spending that the overwhelming majority of Americans wants to see. Obama’s budget calls for a 0.2 percent increase in Federal spending, for a total of $3.8 trillion. Our gross domestic product is $13.3 trillion.

Obama wants to spend almost one-fourth of all the money made by all of the production in this country. Every time a dollar changes hands for anything, Washington wants to take a quarter of it. (And if ObamaCare ever gets fully implemented, that ratio is sure to go higher. Pray that never happens. Or better yet, work like blazes to make sure we get a House and Senate this November that will make sure it doesn’t.)

Federal revenues, according to the estimates of Obama’s budget boys, won’t begin to pay for all the money they want to spend. The estimated deficit for the year will hit be $1.33 trillion. That would make four years in a row of annual deficits over $1 trillion.

I don’t plan to write much more about Obama’s budget proposals, because there’s little or no chance Congress will approve them.

While the President’s budget is dead on arrival, that’s not the case with his class-warfare, politics-of-envy, tax-the-rich rhetoric. You can expect a flood of the latter in the coming months. I’m very afraid it might be enough to get that “crony socialist” re-elected this fall.

Until next time, keep some powder dry.

–Chip Wood

Obama Shafts Responsible Homeowners : Personal Liberty Alerts=