The Statistics
For the third month in a row U.S. foreclosure activity registered at more than 50% above the level it was at a year ago.
For the month of March:
- Foreclosure activity was up 57% to 234,685 , compared with 149,150 properties a year ago.
- Bank repossessions were up 129%.
- March marked the 27th consecutive month of year-over-year increases in national foreclosure filings.
RealtyTrac, a company who provides mortgage default information to subscribers, released their foreclosure activity report for March 2008, which provides foreclosure statistics across all 50 states. Nevada, California, Florida, and Arizona make up the top 4 foreclosure states for March. These were highly speculative markets, thus declines in home prices are likely to be most severe in these areas.
Nevada has been hit hard in March with 3.9 times the national average of foreclosures, and the highest foreclosure rate for the 15th consecutive month.
California holds the highest number of foreclosure filings in March, and has had the most of any state for the 15th consecutive month. California's foreclosure filings more than doubled (compared to a year ago) increasing by 21% in February, and 20% in March.
Although Arizona has had a 5% drop in it's foreclosure filings this month, it has posted the nation’s fourth highest state foreclosure rate for the 3rd consecutive month.
The Consequences for Walkaways
The two largest U.S. sources of mortgage money have reacted to the growing issue with walkaways, where homeowners stop making payments and months later give the house keys back to the lender. The result... You will feel the pain.
On March 31, Fannie Mae sent out new guidelines to lenders targeting walkaways, and other foreclosure situations. Borrowers who have filed for foreclosure will be prohibited from obtaining a new mortgage through Fannie Mae for 5 years, unless there are "documented extenuating circumstances." In those cases, the mortgage prohibition will be limited to 3 years.
Nevada has been hit hard in March with 3.9 times the national average of foreclosures, and the highest foreclosure rate for the 15th consecutive month.
California holds the highest number of foreclosure filings in March, and has had the most of any state for the 15th consecutive month. California's foreclosure filings more than doubled (compared to a year ago) increasing by 21% in February, and 20% in March.
Although Arizona has had a 5% drop in it's foreclosure filings this month, it has posted the nation’s fourth highest state foreclosure rate for the 3rd consecutive month.
- Top Ten States For Foreclosures - March, 2008
| Rank | State | Total # | %+/- Feb 08 | %+/- Mar 07 | Ratio |
1. | Nevada | 7,659 | 24.19% | 61.65% | 1 in 139 homes |
| 2. | California | 64,711 | 20.66% | 105.86% | 1 in 204 homes |
| 3. | Florida | 30,254 | -6.76% | 111.52% | 1 in 282 homes |
| 4. | Arizona | 9,199 | -4.67% | 105.52% | 1 in 283 homes |
| 5. | Colorado | 6,180 | -8.27% | -1.39% | 1 in 339 homes |
| 6. | Georgia | 11,047 | 44.76% | 63.20% | 1 in 351 homes |
| 7. | Ohio | 11,273 | 8.54% | 37.11% | 1 in 448 homes |
| 8. | Michigan | 9,494 | -13.35% | 10.27% | 1 in 475 homes |
| 9. | Massachusetts | 5,573 | 42.68% | 59.37% | 1 in 486 homes |
| 10. | Maryland | 4,275 | 6.45% | 343.01% | 1 in 538 homes |
| United States | 234,685 | 4.93% | 57.35% | 1 in 538 homes | |
Click image below to enlarge  | |||||
The Media's Reaction
On Tuesday, April 15th, Bloomberg, seeking to expand upon the RealtyTrac report, posted their own report U.S. Foreclosures Jump 57% as Homeowners Walk Away. To illustrate how truly dire the current situation is, I have quoted the most relevant portions of the article below:
On the same day, MSN produced it's own report Foreclosures continue to soar, worst is not over; expanding on the RealtyTrac data. Below is a quote from that article:
On the following day, Wednesday, April 16th, the LA Times posted Foreclosure glut further depresses housing prices; their thoughts and findings on the foreclosure epidemic. Again, I have quoted the most relevant portions of the article below:
There are many stimulus initiatives currently being proposed. Some bipartisan and others are not. However, the one constant is that everyone in the Federal Government has ideas about what is needed to fix the economy.
On Tuesday, April 15th, Bloomberg, seeking to expand upon the RealtyTrac report, posted their own report U.S. Foreclosures Jump 57% as Homeowners Walk Away. To illustrate how truly dire the current situation is, I have quoted the most relevant portions of the article below:
- About $460 billion of adjustable-rate loans are scheduled to reset this year, according to New York-based analysts at Citigroup Inc. Auction notices rose 32 percent from a year ago, a sign that more defaulting homeowners are "simply walking away and deeding their properties back to the foreclosing lender'' rather than letting the home be auctioned, RealtyTrac Chief Executive Officer James Saccacio said in the statement.
"We're not near the bottom of this at all,'' said Kenneth Rosen, chairman of Rosen Real Estate Securities LLC, a hedge fund in Berkeley, California and chairman of the Fisher Center for Real Estate at the University of California at Berkeley. "The foreclosure process will accelerate throughout the year.''
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About 2.5 million foreclosed properties will be on the market this year and in 2009, Lehman Brothers Holdings Inc. analysts led by Michelle Meyer said in an April 10 report. U.S. home price declines will probably double to a national average of 20 percent by next year, with lower values most likely in metropolitan areas in California, Florida, Arizona and Nevada, mortgage insurer PMI Group Inc. said last week in a report.
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The percentage of homes currently in foreclosure is similar to that of the early 1980s and early 1990s, Rosen said. [Sound familiar? See It's all happened before...]
"It's comparable to the peak levels of those periods, but my guess it will be the worst since the 1930s when it's all over,'' he said.
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"I've had people sitting in my office in tears because there are no loans available,'' said Goldman. "There are no loans for someone who's upside down on their house.''
On the same day, MSN produced it's own report Foreclosures continue to soar, worst is not over; expanding on the RealtyTrac data. Below is a quote from that article:
- And the worst isn’t over: The wave of adjustable-rate loans resetting to higher rates will crest in May and June. And that’s expected to push more homeowners into default and foreclosure in the third and fourth quarters of this year, according to RealtyTrac Inc. of Irvine, Calif.
On the following day, Wednesday, April 16th, the LA Times posted Foreclosure glut further depresses housing prices; their thoughts and findings on the foreclosure epidemic. Again, I have quoted the most relevant portions of the article below:
- The traditional spring home-buying season is off to its worst start in 20 years, data released Tuesday show, with sales so weak that foreclosures now account for more than one-third of all market activity.
Nearly 38% of Southern California homes sold in March had been foreclosed at some point in the prior year, up from 8% in March 2007, DataQuick Information Systems said.
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The median price for a Southern California home fell below $400,000, to $385,000. Homes are now typically selling for what they fetched in April 2004, with the median price 20% below the market peak of $505,000 last year.
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Homeowners who aren't facing foreclosure, meanwhile, often cling to outdated notions of what their properties are worth, real estate agents say.
There are many stimulus initiatives currently being proposed. Some bipartisan and others are not. However, the one constant is that everyone in the Federal Government has ideas about what is needed to fix the economy.
The Senate has recently passed a bill which would offer a $7,000 tax credit to buyers for purchasing a home in foreclosure.
The benefits, as they see it, are two fold:
- It helps to resolve the issue with the glut of foreclosed homes that have entered or are preparing to enter the market.
- The tax credit may act as additional stimulus money, that may be spent to upgrade, repair, or perhaps decorate the newly purchased home.
The Consequences for Walkaways
The two largest U.S. sources of mortgage money have reacted to the growing issue with walkaways, where homeowners stop making payments and months later give the house keys back to the lender. The result... You will feel the pain.
On March 31, Fannie Mae sent out new guidelines to lenders targeting walkaways, and other foreclosure situations. Borrowers who have filed for foreclosure will be prohibited from obtaining a new mortgage through Fannie Mae for 5 years, unless there are "documented extenuating circumstances." In those cases, the mortgage prohibition will be limited to 3 years.
However, even after 5 years, borrowers with foreclosures on their records will be required to come up with at least a 10% down payment, and have at minimum a 680 FICO score.
Freddie Mac (the alternative to Fannie Mae) counts foreclosures against borrowers for 7 years, and a senior official stated the company is now aggressively pursuing some walkaway borrowers "to preserve our deficiency rights" where permitted under state law.
Conclusion
Freddie Mac (the alternative to Fannie Mae) counts foreclosures against borrowers for 7 years, and a senior official stated the company is now aggressively pursuing some walkaway borrowers "to preserve our deficiency rights" where permitted under state law.
Conclusion
Foreclosures have hit this country hard, and are at the core of the Housing Crisis. So it should be no surprise that both Fannie Mae and Freddie Mac are seeking to ease the pain of lenders by reducing what they deem as non-hardship (or walkaway) foreclosures. There is a possible unintended consequence here though... If a significant number of borrowers don't have enough cash, high enough credit scores, or are prohibited (as a result of walkaway, foreclosure, or bankruptcy) from obtaining mortgages for 5 to 7 years, who will buy all of these bank-owned homes?
It's clear that the Federal Government is trying to do all they can to repair our fragile and damaged economy. However, The Senate's recent bill has two potential downsides I see... One for buyers and one for sellers. The problem for buyers is that this bill also asks them to take the inherent risk of buying in a market where prices are continuing to free fall. The problem for sellers is that it puts them at a further disadvantage in terms of selling their homes, because now not only will they compete with foreclosures on price, there's the extra $7,000 tax credit a buyer gets for buying a foreclosure instead of a normal resale.
The good news is, eventually this will pass. The bad news is, it may get worse, before it gets any better...
The good news is, eventually this will pass. The bad news is, it may get worse, before it gets any better...
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