Foreclosure Activity Hits Record 932,234 properties in First Quarter; Defaults Rise In Loan Modification Program; Statistical Nonsense on "Help"

Foreclosure activity of all types spiked in the first quarter of 2010 according to RealtyTrac. Activity is now at an all time record of 932,234 properties. Please consider Foreclosure Activity Increases 7 Percent in First Quarter.

April 15, 2010 — RealtyTrac®, the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for Q1 2010, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 932,234 properties in the first quarter, a 7 percent increase from the previous quarter and a 16 percent increase from the first quarter of 2009. One in every 138 U.S. housing units received a foreclosure filing during the quarter.

Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.

“Foreclosure activity in the first quarter of 2010 followed a very similar pattern to what we saw in the first quarter of 2009: a shallow trough in January and February followed by a substantial spike in March,” said James J. Saccacio, chief executive officer of RealtyTrac. “One difference, however, is that the increases were more tilted toward the final stage of foreclosure, with REOs increasing 9 percent on a quarterly basis in the first quarter of 2010 compared to a 13 percent quarterly decrease in REOs in the first quarter of 2009.

“This subtle shift in the numbers pushed REOs to the highest quarterly total we’ve ever seen in our report and may be further evidence that lenders are starting to make a dent in the backlog of distressed inventory that has built up over the last year as foreclosure prevention programs and processing delays slowed down the normal foreclosure timeline.”

Activity Type

• 304,799 Default Notices
• 369,491 Foreclosure Auctions
• 257,944 Bank Repossessions

Banks will have to unload those repossessions and sooner rather than later. That will affect earnings and put downward pressure on home prices.

Foreclosures in 10 states accounted for 70% of the total with Nevada leading the pack once again. According to RealtyTrak An amazing "One in every 33 Nevada housing units received a foreclosure filing during the quarter, more than four times the national average and an increase of nearly 15 percent from the previous quarter. Still, Nevada’s total of 34,557 properties receiving a foreclosure filing in the first quarter was down 16 percent from the first quarter of 2009."

Wow. 1 in 33 Nevada properties received a foreclosure filing yet that number is an improvement from a year ago. There is more in the report on Florida, California, and other states.

Making Home Affordable Not

It's rather hard to make homes affordable when there are 14 million unemployed. Thus it should not be surprising to see Defaults Rise in Loan Modification Program

The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government’s modification program nearly doubled in March, continuing a trend that could undermine the entire program.

The Treasury Department said it could not explain the growing number of what it called cancellations, almost all of which were apparently prompted by the borrower’s being unable to make the new payment. A scant number — 37 — were because the loan had been paid off, presumably because the borrower sold the house.

About seven million households are behind on their mortgage payments.

The Treasury took issue with the report and said the pace of modifications was picking up. The number of active permanent modifications in March was 227,922, an increase of 35 percent from those in February. An additional 108,212 permanent modifications are awaiting borrower approval.

While the program is too new to predict its long-term success, the data on previous modification efforts is not encouraging.

Sixty percent of modifications undertaken by banks in late 2008 were in default a year later, according to the latest Mortgage Metrics Report compiled by the Office of Thrift Supervision and the comptroller of the currency.

Many of these private plans either kept the payments the same or increased them. Inevitably, those mortgages suffered the highest failure rate: about two-thirds of the borrowers defaulted again.

Loans for which the payments were decreased by at least 20 percent failed at a slower but still significant rate of about 40 percent.

Even after modification, $61 out of every $100 earned by the borrower goes to servicing debt, government figures show. For increasing numbers of modification recipients, mortgage relief is apparently not enough to stave off financial collapse.

“If you can help 60 percent, and 40 percent have to fall back, is that worthwhile?” asked John Courson, president of the Mortgage Bankers Association. “Clearly for the 60 percent it was, and the 40 percent weren’t going to make it anyway.”

Statistical Nonsense On "Help"

For the 40% that end up defaulting anyway, how much money, time and mental energy did they waste in these programs? Assuming the other 60% keep their houses I have to ask "Who was it that was really helped? The bank or the home owner?"

I suggest in most instances if anyone was "helped" it was the lender. It is no favor to make someone a debt slave forever in these programs. Finally, one must look at other costs.

For example, how many people stopped paying their mortgages just to get "help"? Also note that the sooner housing prices bottom, the better off everyone will be. These programs harm price disclosure, help to keep prices elevated, and thus curtail genuine demand.

From these perspectives, HAMP and the entire gamut of "help" programs has done anything but help. Speaking of government help programs, please consider the Mission Statement of Fannie Mae.

We are a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

A quick check now shows the link I had with that mission statement has been redirected to About Fannie Mae

The link now states "Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity, stability and affordability to the U.S. housing and mortgage markets."

Fannie Mae clearly failed its mission to provide stability and affordability to housing. The truth is no government program ever provides stability or affordability. HAMP won't either, and the truth should be easy to see.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List