LOS ANGELES (AP) – July 15, 2010
More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.

“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.

By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.

The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.

The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.

In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.

Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn’t read too much into that.

“The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market,” he said.

On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.

Assuming the U.S. economy doesn’t worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.

And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn’t improve fast enough to lift home sales.

The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

“The downward pressure from foreclosures will persist and prices will be very weak well into 2012,” said Celia Chen, senior director of Moody’s Economy.com.

She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.

Lenders are offering to help some homeowners modify their loans. But many borrowers can’t qualify or they are falling back into default. The Obama administration’s $75 billion foreclosure prevention effort has made only a small dent in the problem.

More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.

Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.

Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.

Copyright 2010 The Associated Press, Alex Veiga, AP Real Estate Writer. AP Real Estate Writer Alan Zibel in Washington contributed to this report.

Foreclosures are at an all-time high in America. Experts predict nearly 1.4 million homeowners will face foreclosure in 2008 and residents of Florida, California and Texas will take the hardest hit.

In 2007, Arizona foreclosures rose nearly 40-percent and Colorado reported one of every 345 households either filed foreclosure or were on the brink of filing. Currently, the only states immune from escalating foreclosure rates are Vermont, Maine and the District of Columbia. However, experts predict these states will experience an explosion of filings when adjustable-rate mortgages begin escalating later this year.

How did the housing crisis in America occur and why was it allowed to happen? Americans have always strived to reach the American Dream of homeownership. When zero-down, interest-optional balloon payment loans were offered, people were attracted to them like flies to honey. Millions of unsuspecting people were suckered into sub-prime loans and invested in houses way beyond their means.

As adjustable rates increased, mortgage payments doubled or even tripled. Individuals struggling to make their ,000 note payment were now looking at ,000 to ,000 monthly payments. The sad reality is they simply did not possess the financial means to pay their note. When the bubble burst, their dream quickly became a nightmare.

Foreclosures not only have a devastating effect on the homeowner, but the lending institutions and local community as well. Individuals who reside in communities with high foreclosure rates are forced to pay higher property taxes, local taxes and increased fees for utilities.

Additionally, the potential for crime increases. Vacant homes are a magnet for unscrupulous characters. Vandals destroy property, oftentimes breaking windows and doors or leaving graffiti on both interior and exterior walls. Criminals engage in illegal activities including the sale of illegal drugs or weapons.

Real estate experts claim each individual foreclosure costs lending institutions approximately ,000, while preventing foreclosure costs less than 00. If this is true, why are foreclosures skyrocketing?

The primary factor stems from the fact that many people facing foreclosure become paralyzed with fear. They avoid contacting their lender and instead wait for the sheriff to arrive with their eviction notice.

There are steps homeowners can take to stop the foreclosure process. First and foremost, individuals in financial distress should contact their lender. Foreclosures are usually handled by the lender’s Loss Mitigation Department. Additionally, the U.S. Department of Housing and Urban Development (HUD) offers free credit counseling through approved agencies and can assist homeowners negotiate with their lender.

Analysts claim America’s housing crisis will eventually make a turn for the better. However, they predict it will take three to five years to recover from the onslaught of foreclosures.

On the bright side, there has never been a better time for real estate investors. With an abundance of distressed properties being offered for pennies on the dollar, now is the time to buy. However, not every foreclosure property is a great deal and due diligence must be conducted before riding the foreclosure wave.

One of the best ways to invest in foreclosures is to seek out private real estate investors who purchase bank portfolios of real estate owned property. Investors are able to purchase properties in bulk and pass their savings along to interested parties. It’s not uncommon to purchase bank foreclosures from private investors with instant equity of 20-percent or more.

Although the real estate market currently looks bleak, there is hope on the horizon. If you are currently facing foreclosure take the first step and contact your lender immediately. If they are unable or unwilling to work with you, contact HUD. While the foreclosure process can be overwhelming, it can be overcome with persistence and patience.

true/slant.com
author Megan Cottrell

As the $8,000 home buyer tax credit dried up, so did housing sales. The number of people buying a new house dipped to the lowest levels in recorded history after tax credit ended in May, causing many people to worry that the recession will be shaped like a W – a perilous double dip.

What’s the cure for the ailing housing market? One real estate analyst says the answer is counter-intuitive: more foreclosures.

Why? Well, analyst Mark Hanson says foreclosures are what people want to buy. The new home buyers out there want (and perhaps can only afford) a good deal. But lately, pressures on banks to halt foreclosures have curbed the supply of cheap houses. Because we’re in a market where people are iffy about taking a big risk, unless the carrot is big and juicy enough, people aren’t going to bite.

Plus, Hanson says, there’s still a huge shadow market out there – homes where the mortgage isn’t in good standing, but they’re not in foreclosure yet. Hanson says we’ve got to clear through all this bad inventory – both the homes in foreclosure now and the ones yet to be – if we want the market to turn around.

The way he explains it sounds sort of like an old rusty faucet – you’ve got to let the water run orange for awhile before it starts to come out clear.

At our current pace of foreclosure, he says, it will take 101 months to clear through the system – 8 years. But if we doubled our rate of foreclosure to 180,000 a month, he says it till take 42 months, or about 3 and a half years.

Housing activists all over the nation are putting pressure on banks to slow the rate of foreclosure. It’s hard to argue with. Who wants to put more people out of their homes?

But then again, Hanson could be right. If the entire economy is spooked by low housing sales, it means less jobs being created, fewer people spending money. Many of those who are dreading a foreclosure can’t pay their mortgage because they can’t find a job or find one that will pay a decent wage.

Is it better to be without a house in the short term paired with a quicker recovery? Or if Hanson’s right, are we just dragging out the inevitable?