Tags: Legal | Snags | Home | Foreclosures | us | economy

Legal Snags Holding Back Tidal Wave of Home Foreclosures

Thursday, 10 Feb 2011 07:16 AM

U.S. home foreclosures jumped 12 percent last month, but the sharp divide between states suggests the industry remains backlogged by investigations into the foreclosure process.

According to a report from real estate data firm RealtyTrac, lenders foreclosed on 78,133 properties in January, up 12 percent from the month before, but down 11 percent from January a year ago.

Bank seizures at states with non-judicial foreclosure processes jumped 23 percent, while states with a judicial process saw a decrease of 7 percent.

"It suggests the system is still frozen up. We should have seen a much larger increase in both overall activity and bank repossession," said Rick Sharga, senior vice president at RealtyTrac.

"The numbers will inevitably go up, it's just a question of will it be sooner or will it be later."

The number of foreclosure filings, which includes default notices, scheduled auctions and bank repossessions, rose 1 percent to 261,333 in January. Compared to January last year, filings are down 17 percent.

The report also showed 1 in every 497 houses received a foreclosure filing during the month. Five states — California, Florida, Michigan, Arizona and Illinois — continued to account for more than half of all foreclosure filings. California alone accounted for more than one quarter.

Nevada, Arizona and California also had the highest foreclosure rates. Nevada had the country's highest foreclosure rate for the forty-ninth month in a row. One in every 93 Nevada homes received a foreclosure filing in January, more than five times the national average, RealtyTrac said.

Ongoing foreclosures are a major headwind for a market that is already struggling with a glut of unsold houses. Data from Zillow Inc earlier in the week showed the number of single-family homes where the mortgage is worth more than the home increased to 27 percent in the fourth quarter from 23.2 percent the previous quarter, suggesting more potential foreclosures to come.

Meanwhile, a jump in U.S. mortgage rates to their highest level in 10 months has highlighted the fragility of the housing market that will make it difficult for Washington to remove its backstop.

Data on Wednesday showed fixed 30-year mortgage rates averaged 5.13 percent in the week ended February 4, up from 4.81 percent the prior week.

It was the highest rate since the week ended April 9, 2010, the Mortgage Bankers Association said.

The increase sapped demand for mortgages as the MBA's seasonally adjusted index of mortgage applications, which includes both refinancing and home purchase demand, fell 5.5 percent in the week.

Higher interest rates could prove problematic for a market where weak demand remains one of the biggest challenges.

The large number of houses for sale, as well as a continuing wave of foreclosures, has put pressure on prices and eroded homeowner equity, while weak job growth limits demand for loans.

The headwind poses a Catch-22 for the Obama administration, which is due to release proposals on Friday for reducing the government's involvement in the housing market.

Doing nothing would leave taxpayers exposed to potential further bailouts, but acting too aggressively could drive interest rates higher, strangle demand and freeze lending.

"Everyone agrees there needs to be sustained and meaningful change, it's just that the shock-and-awe treatment is probably not the best solution because it's going to have unintended consequences," said Cameron Findlay, chief economist at Lending Tree in Irvine, California.

Signs of strength in other areas of the economy have already pushed up interest rates as investors worry the Federal Reserve will be forced to hike its benchmark interest rate sooner than had been anticipated.

Last April, when rates saw a similar spike higher at the end of the Fed's first stimulus program, mortgage applications also dropped off, suggesting the market — particularly for refinancing — is highly reactive to rate increases.

© 2017 Thomson/Reuters. All rights reserved.

   
1Like our page
2Share
Headline
U.S. home foreclosures jumped 12 percent last month, but the sharp divide between states suggests the industry remains backlogged by investigations into the foreclosure process. According to a report from real estate data firm RealtyTrac, lenders foreclosed on 78,133...
Legal,Snags,Home,Foreclosures,us,economy
626
2011-16-10
Thursday, 10 Feb 2011 07:16 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved