Foreclosures Up Again: Who Will Turn The Switch Off?

Jun 18, 2012

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Editor’s Comment:

With the settlement out of the way using the office of the attorney general covering all 50 states, the Banks are on the move again, and the number of new foreclosures is rising. But what is readily apparent from the data is that it never really went down and is continuing at the rate of millions of foreclosures per year.

RealtyTrac and others are spinning this as a good thing since it is clearing out the inventory and the rate of foreclosures measured month to month went down. As usual they are trying to distract us from looking at the numbers and using small changes in percentages to say that the housing market hit bottom. It hasn’t hit bottom and it didn’t hit bottom the last 27 times they said it hit bottom. But some people believe it. If you repeat a lie often enough more and more people will believe it.

The fact is that in any given month more than 200,000 homes are in the process of foreclosure. That means that in any given month there is an average of 500,000 people faced with foreclosure and eviction, assuming 3 people per household. The fact is that new Foreclosures are staying the course too, with small, meaningless percentage changes. More than 100,000 NEW foreclosures or auctions are being started every month which means that over the next 12 months we will see over 1.2 MILLION new foreclosures. And that is on top of the 5-6 million foreclosures we have already seen.

Compare this scene not to yesterday but to 6 years ago when foreclosures were at a minimum, although rising. If somehow the number of foreclosures shot up to 6 million all at once we would have considered it a national catastrophe, which it is. If we suddenly had 100,000 new foreclosures per month we would have been outraged. If we suddenly had over 200,000 homes in foreclosure we would immediately perceive the threat to our economy and do something about it.

But our senses have been dulled by the drone of foreclosure and mortgage statistics. And so what was and should be unacceptable has become accepted. Somehow our country doesn’t get the new impending crisis that is hidden for the time being by printing money and the flight of investor money to U.S. treasury bonds because they look safe compared to what is going on in Europe. And we don’t hear much about the horrendous economic crisis in Europe because politicians here don’t want us to have information that would frighten us into action — like Europe is taking action.

There was and remains only one way, one path to economic recovery. A house built on sand will continue to shift and then fall once it grows large enough. The foundation of our society and our financial system was ripped out from under us. We rewarded the wrong-doing with bailouts and permission to keep on sucking us dry. The origination of mortgages in the securitization market was wrong and illegal. We are prevented from seeking solutions to the housing crisis not because a percentage of loans are in default but rather because of all the derivatives hanging on the same tree — a bad loan, non-complying with law or lending standards that was treated in a bad way and which was funded by wrongful misrepresentations to investors.

And the banks refuse to cooperate. Small wonder — for every actual dollar in any currency denomination in the world there are more than ten dollars of derivatives being used as cash equivalents on the balance sheets of financial institutions and other companies. This house of cards must fall. It is the Banks that MUST fail, not our society.

The one and only path to economic recovery is principal and rate reduction. The switch is there on the wall to light up the room, but somehow the moral hazard of the threat from the banks is being hidden by some gibberish about “if you turn the light on then other people will get to see too.” Everyone should see the truth and this madness must end.

A Brand New Troubling Sign For The Housing Market

By Mamta Badkar

RealtyTrac

Despite talk of a housing bottom, new data shows that foreclosure filings jumped 9 percent from April to 205,990 according RealtyTrac’s latest foreclosure report.While the rise in foreclosure activity above the 200,000 mark is worrying, an even more worrisome sign is the rise in foreclosure starts – default notices or scheduled foreclosure auctions.

Foreclosure starts were filed on 109,051 U.S. properties and were up for the first time in 27 straight months on a year-over-year basis (YoY).

Daren Blomquist, vice president at RealtyTrac said in an email interview that the uptick in foreclosure starts is troublesome “because the real estate market has started to stabilize over the past few months, helped in part by decreasing foreclosure activity. This new batch of properties entering the foreclosure process could threaten to destabilize the market once again.”

For now Blomquist says lenders are pushing “smaller waves of distressed loans into foreclosure rather than filling the foreclosure pipeline all at once,” which should prevent a sudden drop in home prices.

Foreclosure starts increased on an annual basis in 33 of 50 states. Some of the biggest increases were seen in the judicial foreclosure states like New Jersey, where foreclosure starts were up 118 percent YoY, Pennsylvania, 93 percent. In Tennessee, a non-judicial foreclosure state, foreclosure starts were up a whopping 165 percent YoY.

Going forward, a higher percent of these foreclosure starts are likely to end up as short sales or auction sales rather thank bank repossessions according to RealtyTrac CEO Brandon Moore. Pre-foreclosure sales have less of a negative impact on home prices than bank-owned sales but they can benefit the lender since, pre-foreclosure sales sell at a higher average price point than bank-owned homes.

Here’s a chart from RealtyTrac that shows the rise in foreclosure starts: