It’s a real stretch to garner any good news from RealtyTrac’s August 2009 U.S. Foreclosure Market Report™ released today. Foreclosures remain steady at record levels.
The report reflects that there were 358,471 foreclosure filings — default notices, scheduled auctions and bank repossessions — for August which is a decrease of less than 1 percent from July but a nearly 18 percent increase year-over-year. Same old weary story with only slight variations.
“The August report demonstrates that there is still an ample supply of properties filling the foreclosure pipeline even while the outflow of bank-owned REO properties onto the resale market is being more carefully regulated,” said James J. Saccacio, chief executive officer of RealtyTrac. “After hitting a high for the year in July, REOs dropped 13 percent in August, but we also saw a record high number of properties either entering default or being scheduled for a public foreclosure auction for the first time.”
Nevada, Florida, California post top state foreclosure rates. Six states account for more than 60 percent of national total. Top 10 states with highest foreclosure rates are Nevada, Florida, California, Arizona, Michigan, Idaho, Utah, Colorado, Georgia and Illinois.
It is somewhat discouraging to note the expectations for future foreclosures that are sure pile on ...
Treasury (read yesterday's press release) expecting more foreclosures to come from borrowers not qualified for loan modifications and the unidentified underwater borrowers (h/t Calculated Risk):
Over 570,000 trial modifications have been offered under the program. Over 360,000 trial modifications are underway.Expect continued downward price pressure . Same song, different page.
[W]e recognize that any modification program seeking to avoid preventable foreclosures has limits, HAMP included. Even before the current crisis, when home prices were climbing, there were still many hundreds of thousands of foreclosures. Therefore, even if HAMP is a total success, we should still expect millions of foreclosures, as President Obama noted when he launched the program in February.
Some of these foreclosures will result from borrowers who, as investors, do not qualify for the program. Others will occur because borrowers do not respond to our outreach. Still others will be the product of borrowers who bought homes well beyond what they could afford and so would be unable to make the monthly payment even on a modified loan.
From Bloomberg: Wealthy Families Succumb to Bankruptcy as Real Estate Crashes ...
Wealthy individuals' Chapter 11 bankruptcy filings jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center, a research firm in Burlingame, California.Hoping not to appear like piling on ... also noted from Calculated Risk on the danger of resetting interest only loans. We also know the high number of ARMs that will be resetting over the next few years.
More individuals or families with at least $1,010,650 in secured debt and $336,900 unsecured are using Chapter 11 of the U.S. bankruptcy code typically associated with business reorganizations. Falling U.S. home prices leave them unable to refinance or sell properties when they drop below the value of the mortgage, said Chicago bankruptcy attorney Joseph Baldi.
... Wealthier people filing for bankruptcy typically have large homes, two car payments and children in private schools, said Leslie Linfield, executive director of the Institute for Financial Literacy in Portland, Maine ...
“There are a lot of people with real estate, and they can’t afford it,” said Baldi ... “They can’t make the payments, and they can’t sell the house.”
From David Streitfeld at the NY Times: The House Trap
An analysis for The New York Times by the real estate information company First American CoreLogic shows there are 2.8 million active interest-only home loans worth a combined total of $908 billion.There are a several fascinating anecdotes in the article, including a professor who teaches real estate finance. Here is one:
The interest-only periods, which put off the principal payments for five, seven or 10 years, are now beginning to expire. In the next 12 months, $71 billion of interest-only loans will reset. The year after, another $100 billion will reset. After mid-2011, another $400 billion will reset.“I understand I took a risk,” said [Dean Janis, a Southern California lawyer who bought a $950,000 home in 2004] “But I did not anticipate that the real estate market would go down 30 percent.” He talked with Wells Fargo about his options, and the lender said he had none.
Click here to see individual state foreclosure data for August.