Foreclosure Rates Retreat from Record Highs

Foreclosure rates in the U.S. have been falling since the beginning of this year. According to RealtyTrac’s U.S. Foreclosure Market Report, foreclosure filings in the first quarter of 2011 decreased 15 percent from the previous quarter and 27 percent from the first quarter of 2010.


Foreclosure filings were made on 239,795 properties in March, which is a 35 percent decline from March 2010, when 367,056 homeowners received a foreclosure notice. About 215,000 properties were foreclosed on in the first quarter, which is a 17 percent decrease when compared to the first quarter of the previous year. 269,000 properties were scheduled for foreclosure auction in the first quarter, a 27 percent reduction from the first quarter of 2010.

Nevada, Arizona, California, Utah and Idaho were the top five states with the highest foreclosure rates. Despite seeing a ten percent reduction from the previous quarter, Nevada led the way with foreclosure filings on one in every 35 households. Arizona had the second highest rate with one in every 60 homes receiving a foreclosure filing during the first quarter. But these numbers were down 17 percent from the first quarter of 2010. California came in third with a foreclosure filing on one in every 80 houses.

Utah had the fourth highest rate, where one in 98 households was in foreclosure. Idaho posted the fifth highest foreclosure rate, with one in every 106 homes having a foreclosure filing during the first quarter. Georgia, Michigan, Florida, Colorado and Illinois were the other five that made up the top ten states that had 10 percent foreclosure filings in the first quarter. Florida accounted for nearly 9 percent of U.S. foreclosure activity, documenting 58,322 properties with a foreclosure filing during the quarter.

Some of these foreclosure numbers were artificially low because of processing delays, particularly in states where a judicial foreclosure process is utilized. This was attributed to the ongoing federal investigation of the foreclosure process in these states. States where non-judicial foreclosure process is employed had the 20 highest first quarter foreclosure rates among metropolitan areas. Las Vegas continued to remain in the number one position with the country’s highest metro foreclosure rate, where one in every 31 households had a foreclosure filing in the first quarter.

According to the Mortgage Bankers Association’s quarterly National Delinquency Survey, the percentage of homeowners with mortgages that were in foreclosure or seriously delinquent fell during the first quarter of 2010, and improvement in the performance of loans taken out from 2005-07 suggests a sustainable trend.

The serious delinquency rate -- the percentage of loans in foreclosure or delinquent by 90 days or more, was 8.1 percent during the first quarter, down from 8.6 percent during the first quarter of 2010 and 9.54 percent a year ago.

The percentage of mortgages in foreclosure was 4.52 percent, down from a record high of 4.64 percent in the fourth quarter, and the percentage of loans behind by 90 days or more dropped for the fifth consecutive quarter, to 3.58 percent.

Analysts predict a steep increase in foreclosure rates when the federal investigation is completed. When this happens, it will reveal a realistic U.S. foreclosure rate. Real estate pundits predict the market would stabilize when we get an accurate picture of foreclosure filings, and this will help determine the housing market trend for the rest of 2011.

New Bill introduced to speed Short Sales

A bill named the “Prompt Decision for Qualification for Short Sale Act of 2011” was introduced in the U.S. House of Representatives in April which would require mortgage lenders to respond to short sale requests within 45 days from the time they receive it. Short sales represent about 13% of recent home sales. This bill may be a boon to thousands of home owners who are unable to keep their home and hope to avoid foreclosure. The short sale process is currently inefficient and time consuming and many potential buyers end up walking away from the sale because of long delays, which invariably causes properties to be foreclosed.

The National Association of Realtors® (NAR) is fully supportive of this new bill. NAR had been actively pushing the mortgage industry to revamp the short sales approval process. Short sales are beneficial to lenders because they cost less than foreclosures and it also reduces the negative financial impact on borrowers. Ron Phipps, the president of NAR said “as the leading advocate for home ownership and housing issues, Realtors® want to help more homeowners avoid foreclosure by facilitating a short sale when a family is absolutely unable to keep their home; however, that can only happen if lenders and servicers approve short sale offers in a reasonable amount of time.”

Here’s the problem with the current situation. There are many decision-makers involved in the short sale process including buyers, sellers, investors, servicers, insurers and lenders. All of them must agree to approve or reject each sale. Lenders find it difficult to decide if they must approve or deny a sale. Sometimes this could cause several months of status quo, resulting in potential buyers getting frustrated and canceling their contracts due to a lack of response from lenders, and this results in properties being foreclosed.

According to the proposed bill, the servicer must notify the borrower about the status of their sale within the 45-day deadline. The notification may include approval or denial of the sale process, or a request for additional information and paperwork.

Phipps also stated that “streamlining short sales transactions will reduce the amount of time it takes to sell the property, improve the likelihood that the transaction will close and reduce the overall number of foreclosures. This benefits sellers, lenders, buyers and the entire community.”

This bill has the potential to dramatically reduce the inventory of foreclosed homes across the country. However, it has not yet been assigned to a committee. A similar bill with the same title was introduced in September 2010, but it did not make it to a House committee for debate before the end of the legislative session. NAR has urged Congress to pass this new bill quickly. When passed, the bill would provide much needed relief to millions of home owners by helping them prevent foreclosures. It will also reduce the financial hit on lenders and servicers.