Government foreclosure prevention programs, and poor weather, resulted in the second consecutive month of declines in US foreclosure filings last month. Despite the reduction in percentage of foreclosure filings, foreclosure filings on an annual basis were still up year-over-year, and the federal HAMP program continues to receive broad criticism for ineffectively addressing the millions of homeowners who are underwater on their mortgages. See the following article from Money Morning for more on this.
U.S. mortgage foreclosure filings dropped for the second straight month in February and posted the smallest annual increase in four years as government housing-rescue efforts and poor weather constrained bank repossessions, a report released by RealtyTrac Inc. showed today (Thursday).
RealtyTrac, which sells mortgage default data collected from more than 2,200 counties representing 90% of the U.S. population, said filings declined 2% from January. But filings were up only 6% from a year earlier, the smallest increase in four years.
“The 6% year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases,” James J. Saccacio, RealtyTrac chief executive officer said in a statement obtained by Reuters.
A total of 308,524 properties received a filing – including mortgage default notices, house auctions and home seizures by banks – or one in every 418 households, the Irvine, California-based company said in a statement.
Foreclosures are considered to be one of the most important measures of the U.S. housing market, which continues to be vulnerable to setbacks and remains heavily dependent on support from government programs. Consistent shrinkage in the number of foreclosures would be a very strong signal that the market is on the road to recovery.
It’s probably premature to declare an end to the foreclosure epidemic, however.
“This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity,” Saccacio said in the statement.
Severe winter weather probably temporarily slowed the processing of foreclosure records in some states, RealtyTrac said.
The Obama administration’s main effort to keep people in their homes – the Home Affordable Modification Program (HAMP) – resulted in about 830,000 trial loan modifications for delinquent borrowers through January, according to the Treasury Department.
But many critics say the foreclosure prevention program has fallen short of addressing the main causes of the problem. On an annual basis, foreclosure filings were still up for the 50th straight month in February and topped the 300,000 mark for the 12th consecutive month, RealtyTrac said.
HAMP has been hammered by relentless criticism from lawmakers and housing experts who say it has failed to offer adequate relief to homeowners who are “underwater” on their mortgages. Homeowners with negative equity are frequently unable to refinance or sell their homes and are more likely to walk away or default on such mortgages.
Only about 116,000 mortgages have been permanently modified under the government’s program, compared with as many as 4 million targeted by December 2012. New data will be released March 15, Meg Reilly, a Treasury spokeswoman, told Bloomberg News.
Meanwhile, homes repossessed by banks are swelling the number of houses on the market.
Lenders seized 78,683 properties last month, up 6% from February 2009 but down 15% from the peak in December, RealtyTrac said. More than 2 million empty homes were on the market in the fourth quarter, according to the Census Bureau.
“We’ve got a disjointed market where most of the housing supply is coming from foreclosures rather than building new homes,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, told Bloomberg. Bethune predicted a “high” rate of foreclosures for at least the next 12 months.
RealtyTrac expects bank repossessions to set an all-time record this year, said Rick Sharga, executive vice president for marketing.
Nevada had the highest foreclosure rate for the 38th straight month in February, with one in 102 households receiving a filing. Arizona and Florida tied for second at one in 163 households, according to an analysis of the data by The Wall Street Journal.
California ranked fourth at one in 195 households, followed by Michigan at one in 226. Utah, Idaho, Illinois, Georgia and Maryland rounded out the 10 highest foreclosure rates.
The most filings were in California, with 68,562, down 15% from a year earlier. Florida was second with 54,032, up 16%, and Michigan was third at 20,028, a whopping 59% rise.
Las Vegas had the highest foreclosure rate for cities with a population of more than 200,000, with one in 90 households receiving a filing. Cape Coral-Fort Myers, Florida, was second at one in 92.
Port St. Lucie, Florida, showed a 66% increase, said RealtyTrac.
This article has been republished from Money Morning. You can also view this article at Money Morning, an investment news and analysis site.