Is the worse behind us?
- Home sales are picking up.
- Home prices are stabilizing.
- The robo-signing scandal of the last year has caused foreclosure numbers to drop by more than a third — a four year low.
Sounds good, right?
The news may not be what it seems. Recent changes in the banking rules (New Accounting Model: Banks Required to Book Projected Losses and Bank Accounting Change Provides Investor Opportunities) have caused lenders to pick up the pace on foreclosures that were stalled last year. I am guessing 2012 will be a bigger year than 2010 in Gross Numbers, and I mean Gross.
My morning reading found this on MSNBC.com “New foreclosure wave to hit ‘everyday’ borrowers. Subprime loans caused first, now job losses, economy will cause a bigger run.”
“Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.
Although foreclosure starts were 50% or more lower than for the same period in 2010, we have turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks – Deutsche Bank up 47%, Wells Fargo up 68% and Bank of America up 700%.
There are warning signs of a new wave of foreclosure are likely to hit much of the United States….”
Looking at the first two months of foreclosure activity for 2012, a trend is forming…
Default notices are up slightly (1%) overall, but increased 20% year over year in a dozen states (Hawaii, Maryland, Connecticut, South Carolina, Indiana, Pennsylvania, Florida and Massachusetts).
Auction notices are down slightly (2%), but increased 25% year over year in thirteen states (Kentucky, Illinois, Iowa, Pennsylvania, Indiana, Minnesota, Maryland, South Carolina and Oklahoma).
Bank Owned (REOs) are down 4%, but increased 20% year over year in seventeen states (Massachusetts, North Carolina, Florida, South Carolina, Georgia, Connecticut, New York and Illinois.)
Once again Nevada, California and Arizona posted the top state foreclosure rates, followed by Georgia, Florida, Illinois, Michigan, South Carolina, Ohio and Wisconsin.
According to foreclosure listings, Ten of the nation’s 20 largest metro areas by population have year over year increases in foreclosure activity, led by Florida cities of Tampa (64%) and Miami (53%) and include east coast cities Philadelphia (47%), and Chicago (43%).
Experts agree that the foreclosure numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.
This wave of foreclosures has a big difference from the early years of the housing crisis, today’s foreclosures are mostly Americans with ordinary mortgages, who had conforming class A loans, whose ability to meet their payment obligation has been hit by the hard economic times. These are not the toxic subprime products with high interest rates, no money down and no proof of income. The evil mortgage broker’s handing out free money to fuel the housing bubble to its ultimate pop are not to blame. Those mortgage’s are through the system.
Today’s foreclosures are middle class, suburban and rural homeowners with conventional 30-year fixed mortgages at a reasonable interest rate. These borrowers put 20% plus down. Unfortunately, the current economy has left them unemployed or underemployed and unable to make the payment. The new foreclosures of 2012 are traditional American homeowners who have been dealt the bad hands of the last 5 years. The national unemployment rate has fallen to 8.3% from its peak of 10% in October 2009, with nearly 13 million Americans jobless. Unemployment insurance is not enough to keep up with their mortgage payments.
From the MSNBC story, “New foreclosure wave to hit ‘everyday’ borrowers. Subprime loans caused first, now job losses, economy will cause a bigger run.”
“Zillow.com says more 25% of American homeowners were “under water” or owed more than their homes were worth in the fourth quarter of 2011. They expect the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes hitting the market as well.
Plus, according to Amherst Securities 9.5 million homes are still at risk of default and in February it said it expected to see the uptick in foreclosures start to hit in March and April.”
Getting through the remaining foreclosures and dealing with the resulting flood of homes on the market in the wake of the bank settlement is a necessary part of the healing process for the U.S. housing market. For investors, this is not only tremendous opportunity, but a civic responsibility — invest wisely and help your community recovery quickly. Every house you buy, fix and sell to a new home buyer, improves the condition and quality of its neighborhood. Do it right. You will be handsomely rewarded by both investment profits and the great feeling of true significance.
It doesn’t get any better than this. Learn how to avoid costly mistakes, and take the right road to your investment profits, while making a difference in your community. Join us Wednesday for details.
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