Foreclosure Filings Increase with Little Mortgage Relief in Sight for 2009

U.S. foreclosure filings spiked by more than 81% in 2008, a record, according to a report released Thursday, and they’re up 225% compared with 2006. A total of 861,664 families lost their homes to last year, according to RealtyTrac, which released its year-end report Thursday. There were more than 3.1 million foreclosure filings issued during 2008, which means that one of every 54 households received a notice last year. “Clearly the foreclosure prevention programs implemented to date have not had any real success in slowing down this foreclosure tsunami,” said James Saccacio, CEO of RealtyTrac in a statement. Affordable fixed refinance mortgages are not as accessible for people with poor credit as they were in previous years.

And what’s worse, Sharga thinks that as many as 70% of the bank-owned homes listed on RealtyTrac’s site have not yet been posted on multiple listings services, the industry databases of homes for sale. Those homes are less likely to be sold because most real estate agents won’t know they are available. “Either banks are overwhelmed and can’t get the houses on the MLS quickly, or they’re deliberately slowing down so they don’t have to take markdowns to actual home values on their books,” Sharga said. Either way, it has the effect of underestimating the foreclosure inventory problem.

Banks also seem to be slowing the foreclosure process, according to Sharga. They are not sending out foreclosure filings as quickly when homeowners fall behind on payments. Part of that is because some new state regulations require banks to notify delinquent borrowers of their intent to file notices of default, and to offer help to borrowers who want to get their finances back on track. Banks simply lack the manpower to track down so many delinquent homeowners with the required notifications. This creates a delay between the time that borrowers first miss payments and when they go into foreclosure.

After one such rule took effect in California this past summer, notices of default fell by half, to 21,665 from 44,278. But they jumped back to more than 44,000 again in December, probably because banks caught up on many of the postponed notices. “The recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners,” said Saccacio. The loan modification requests in these high foreclosure states, has increased ten-folds.

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