Where the foreclosure crisis goes from here
Which way do you see the national foreclosure drama headed: Getting better? Or worse?
There was grist for both arguments in the first-quarter Mortgage Bankers Association numbers, released Wednesday.
On the one hand, Maryland's total delinquencies fell compared with the fourth quarter -- coming at a time when job numbers started growing again. The "but" waiting to strike at that bit of good news is that first-quarter delinquencies almost always fall compared with the fourth quarter, as some borrowers catch up from budgetary hits at the end of the year such as first heating bills. (An exception: Last year, when delinquencies rose in defiance of trends.)
On the "getting worse" side, Maryland homeowners whose lenders have started foreclosure proceedings now total 4 percent of all borrowers -- a record. The state's increase in foreclosure starts was one of the largest in the nation.
Of course, there's a "but" there, too. Mediation legislation was wending its way through the General Assembly during the first quarter, so some of that rise could be lenders deciding to start foreclosure proceedings with long-delinquent borrowers before anything took effect.
The Greater Baltimore Board of Realtors, meanwhile, crunched sales numbers to see how much of the market is bank-owned properties and short sales. It's significant. Check it out in today's mortgage delinquency story.
Categories: The foreclosure mess
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Comments
I hate to say it, but the storm is far from over. Foreclosure filings used to start when you were 90 to 120 days behind. That is no longer the case. Banks are taking their time. The foreclosure process can take up to a year or more. All of those bank owned REO's are foreclosures from a year ago. The current foreclosures, or those still in the pipeline, won't be on the market for another year from now. The fact is that foreclosures have continued to rise year over year. Sure, there might be a quarter where it is less than the previous quarter. But, when you take the numbers for the entire year, they are still increasing.
Have foreclosures reached their peak yet? I don't think so. I think it will be 2012 when foreclosures peak since the process takes so long. Also, now that the tax credit is over, values will continue to go down again. As values go down, more people will strategically default on their mortgage. The new MD mediation law is a stalling tactic. Even if a homeowner can get a modification approved, there will NOT be principal reduction. Homeowners will still walk when they owe much more on their home than what it is worth. I suspect we will see a 10% to 20% drop in values over the next year or two as less people will buy homes. Even if interest rates are low, I don't think that will have as much of an impact now that the credit is gone.
Mortgage applications for purchases reached a 13 YEAR LOW last week. The lowest reading since 1997. If the credit was not driving the market, why did applications plummet upon expiration?
Posted by: Frank Rizzo | May 20, 2010 1:13 PM
I agree with Frank that foreclosures are far from over. Even though I feel sorry for the financially troubled homeowners (although not so much for those who bought what they clearly couldn't afford), I think new mediation process will not help much but, just as the tax credit, will postpone the inevitable.
Perhaps instead the legislators should make the property transfer from those who cannot afford to those who can easier? E.g. why is it so difficult to do a short sale? Wouldn't it be better for everyone? The owners move on, bank gets some money back sooner than through foreclosure, state gets taxes, courts don't have to deal with bankruptcies, etc. Yet hardly any real estate agent even works with short sales.
Additionally, many foreclosures get trashed by the former owners. I think a short sale would provide a more dignified way for them to part from their home.
P.S. Jamie, a not-so-related comment: I can't help but notice that on the Business page Baltimore Sun still has links like 'Areas most expensive homes', 'Baltimore's most exclusive neighborhoods", etc. Haven't we had enough of this already? Isn't this time to showcase the areas most efficient and modest homes, for example?
Posted by: Jelena | May 20, 2010 2:24 PM
Jelena, the "hidden-gem neighborhoods" project was designed to do just that -- feature nice places with more affordable homes. But most people like to lookyloo at pricey houses, too. Something for everyone.
Posted by: Jamie Smith Hopkins | May 20, 2010 2:28 PM
Stalling tactics, well put Frank. Recent data shows only 25% of homeowners who attempt the main modification program (HAMP) actually complete it. I call it amend, extend, and pretend:
http://finance.yahoo.com/news/Dropouts-rise-in-govt-loan-apf-504735259.html?x=0
"critics say it is merely delaying an inevitable surge in foreclosures."
Posted by: Josh | May 20, 2010 5:28 PM