US Foreclosure Filings Surge 48 Percent In May

WASHINGTON — Soaring foreclosures are continuing to raise questions about the mortgage industry's claims that they are making a dent in the housing crisis.

Foreclosure filings last month were up nearly 50 percent compared with a year earlier. Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48 percent from 176,137 in the same month last year and up 7 percent from April, foreclosure listing service RealtyTrac Inc. said Friday.

The latest grim foreclosure news comes as criticism mounts that efforts by government and the mortgage industry to stem the tide of foreclosures aren't keeping up with the rising number of troubled homeowners. Critics say a Bush administration-backed mortgage industry coalition, dubbed Hope Now, is falling far short.

"It's clear that these voluntary efforts in and of themselves cannot really make a dent," said Allen Fishbein, director of credit and housing policy at the Consumer Federation of America. "Government intervention is going to be necessary."

Mark Zandi, chief economist of Moody's Economy.com who also serves as an adviser to Republican John McCain's presidential campaign wrote earlier this week that "the Bush administration's efforts to encourage loan modifications and delay foreclosures are being completely overwhelmed."

A Credit Suisse report from this spring predicted that 6.5 million loans will fall into foreclosure over the next five years, reaching more than 8 percent of all U.S. homes.

Sobering statistics like these are leading to more calls for government intervention, especially from lawmakers pushing a plan for the government to guarantee as much as $300 billion in new loans to help borrowers refinance into cheaper, fixed-rate mortgages.

A new government report released Wednesday found that among mortgages held by nine large banks, including Bank of America and Citigroup Inc., foreclosures climbed to 1.23 percent of all loans in March from 0.9 percent in October.

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In a speech, Comptroller of the Currency John Dugan said the federal agency conducted its own examination of foreclosures and loan modifications after finding "significant limitations" with data collected by trade groups like Hope Now.

"Virtually none of the data had been subjected to a rigorous process to check for consistency and completeness," Dugan said. "They were typically responses to surveys that produced aggregate, unverified results from individual firms."

The comptroller's report found that 2.7 percent of seriously delinquent mortgages had been modified as of March, up from 1.8 percent in November 2007.

The industry has continued to favor repayment plans, which help borrowers get back on track after missing a few payments, rather than permanent loan modifications, such as lower interest rates.

Rep. Barney Frank, D-Mass., said this week that Dugan' analysis shows that "much more aggressive action is needed."

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't get refinanced into an affordable loan.

Making matters worse, mortgage rates have been rising, reflecting increased concerns about what the Federal Reserve might do to battle inflation. Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 6.32 percent this week, the highest level in nearly eight months and up sharply from 6.09 percent last week.

According to the RealtyTrac report, one in every 483 U.S. households received a foreclosure filing in May, the highest number since RealtyTrac started the report in 2005 and the second-straight monthly record.

Foreclosure filings increased from a year earlier in all but 10 states. Nevada, California, Arizona, Florida and Michigan had the highest statewide foreclosure rates.

Metropolitan areas in California and Florida accounted for nine of the top 10 areas with the highest rate of foreclosure. That list was led by Stockton, Calif. and the Cape Coral-Fort Myers area in Florida.

Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. Nearly 74,000 properties were repossessed by lenders nationwide in May, while more than 58,000 received default notices, the company said.

In Nevada, one in every 118 households received a foreclosure-related notice last month, more than four times the national rate. In California, one in every 183 households faced foreclosure.

Rick Sharga, RealtyTrac's vice president of marketing, said foreclosures are unlikely to peak until sometime this fall, as more loans made to borrowers with poor credit records reset at higher levels. "I don't think we've seen the high point," he said.

About 50 to 60 percent of borrowers who receive foreclosure filings are likely to lose their homes, Sharga said. The rest are likely to be able to sell or refinance.

As foreclosed properties pile up, they add to the inventory of homes on the market and drag down home prices. The trend is most dramatic in many parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously.

Sales of foreclosures, vacant new homes and other distressed properties now dominate some markets, causing grief for individual homeowners who need to sell for other reasons, like a job in a new city.

Nationwide, one out of every four sales between January and March was a distressed sale, and that figure jumps to more than 50 percent in the hardest-hit areas like Las Vegas, Detroit and distant suburbs of Los Angeles, according to Moody's Economy.com.

In some neighborhoods, lenders are slashing prices dramatically to rid themselves of an unprecedented number of foreclosed properties, sparking bidding wars and multiple offers. While that's a positive for the real estate market, buyers in other parts of the country are still holding back.

"I think a lot of people are waiting to see if we really have hit the bottom," Sharga said.

Lehman Brothers economist Michelle Meyer said in a report Thursday that U.S. home sales are likely to hit bottom at the end of this summer, but said a recovery in sales is likely to be "feeble." Home prices, she wrote, are still expected to fall another 10 percent by the end of 2009.

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On the Net:

RealtyTrac Inc.: http://www.realtytrac.com

Comments

[watchTVgetSTUPID]

I can only hope the full impact of the housing meltdown in Florida occurs in time for the elections. Then people can hold accountable the Repulican management style of failing to enforce the laws against the corporations and their policy of cutting back on staff that regulate Corporations.

McCain is familiar with the crooked process from his S&L scam days. He directly interfered with the investigation of the S&L megacrook Keating. McCain personally visited the Government regulators on behalf of his campaign contributer Keating to try to get them to back off. I also remember Harvey Pitt bragging how he cut the wall street regulators in half. The corporate crooks were pleased the watchdog cops were cut in half by the political party that favors corporate leaders.

Let every voter in Florida realize the Republicans sold them out in favor of their corporate backers on wall street.

[JoeBlough]

Leave the government out of this. The private sector caused the problem and they can solve the problem. Let this be a leason, so that is doesn't happen again.

[joebhed]

ummmmm....
The private sector can solve the problem?
If the private sector solves the problem, then every available homeowner will be out on his or her rear.
The post said 8 percent of all US homes, and some real people live in some of those homes.
Some mortgage bankers will end up selling a bunch of American real estate to the people who have the money. That would be the uber-rich(themselves) and a bunch of foreigners.

I do agree that we should approach the problem so that it never happens again.
Have you ever heard of the business cycle?
How do you ensure the bait and switch capitalist business cycle neverhappens again.
Without government action?
You could say the government caused this crisis.
They did.
By NOT doing their job.
But you can't prevent this chaotic tragedy from repeating itself simply by ensuring that the government cannot do its job - now, and in the future.

[WorkingClass]

People who bought houses in the bubble have no way to get out from under the mortgage except to walk away. Credit can be repaired over time but it takes thirty years to pay off a $300,000 note on a $100,000 house. Lenders would be wise to reduce loan balances. But there are no lenders. Just anonymous *investors* We are screwed.

[rwe2late]

Many have also suffered loss in the trade-in value of the vehicle they purchased when supposed "free-market" was promoting larger vehicles. They can't even purchase a more fuel efficient vehicle without taking a loss of thousands on the trade-in.

[Troubledwawa]

Perhaps the most devastating aspects of this crisis in my neck of the woods are: the foreclosed houses have about a 10% sell thru rate at the public auctions (that are rapidly increasing in frequency); and the open pilfering of the vacant houses that didn't sell.

Unfortunately, the numbers you are reading are MLS listings, and not the ever growing shadow inventory of homes that the banks have kept off of the MLS in order to try and keep some type of a resemblance of previous home equity. Hence, shadow inventory.

Being that these homes are vacant and no one really watches them, pilferers pretty much have an open invitation. And they are taking, from what I've been hearing from neighborhood homeowners that haven't been foreclosed on, anything they can get their hands on - like carpeting, wiring, plumbing (tubing), doors, etc. - Note: this is after the the home owner got foreclosed on and took what they wanted, like the range, garbage disposal, light fixtures, plumbing fixtures, tile work (with plaster), etc.

It's a mess.

The foreclosed houses I've looked at (before the pilferers) have averaged anywhere of 20K to 40K in repairs, that I spotted walking through, just to make the house a warm one again. I have to wonder when the banks are going to get tired of paying the property taxes on their listed and shadow inventories, and let them go to someone for the price of the back taxes, myself.

[taoist]

Agree, my son and i were looking at some homes in Beaumont Ca. One house we went into when we went around the corner somebody had taken all the kitchen cabinets and doors. When i noticed a stain going down the middle of the stairway i went upstairs and they had stole the toilet and dragged it down the stairs. They even tried to take the fieplace out but guess that it was too much work but broke some of the tiles in doing so. The realtor showed us about 8 houses and all but 1 was not trashed. 2 of them the previous owners had hooked up the garage door to a car and pulled them down. These were at 1 time nice houses in nice areas. Very sad.

[darthdarcy]

Thanks Phil Gramm and his boss buddy John McCain and UBS..

We could solve this immediately by Pegging the Sub Primes to 3% above the Fed Rate and or the Prime Rate..then not one dime of Tax Payers money needs to be further embezzled for these corrupt lenders or the borrowers..and forgive all penalties to date 1/2of which are illegal anyway..

to bad our politicians are sold out crooks and liars..with very few exceptions...

[SwingingFromCenter]

And this is surprising, why? We all live in neighborhoods where the houses are going up for sale by the bank left and right.

Heck, I live in a development where the cheapest house is almost 3/4 of a million dollars, and we've had 9 foreclosure auctions here in the last 6 weeks. My house is one of 3 on my entire street (street spans 14 houses) that isn't for sale.

Not news. We all see the reality.

[ErnestineBass]

Yeah, and guess where I'm living?

In a 2,400 square ft. house on 7 1/2 acres five miles south of America's newest "Silicon Valley".

Bought, built and paid for back in 1996.

Some of us were smart enought to see the handwriting on the wall during the sell-out Clinton administration and were willing to work our fingers to the bone to make personal SECURITY a reality.

Anybody over the age of fifty who's still paying off a mortgage is a sucker. Just that simple.

[jennbeez]

We did the same thing, but only because the technology boom years were very good to us computer types. So many people spent during the 90s as if the big money would go on forever. When the outsourcing began, we said sayanora to the good times.

Today I'm so happy we acted from good old fashioned fiscal conservatism. You know, those ideas the republicans are supposed to be in favor even while they run the deficit up sky high.

[KillTheMessenger]

Congrats. We are paid off, too. But there is an endless number of people who are and will be in debt for decades to come. They are paying the price for the false dream.

[NoahVail]

For a guy who generally posts intelligent comments, this is an incredibly stupid statement.

[bbrecht]

Not everyone had the cash to buy a 2,4000 sq ft house in Silicon Valley. Congrats to you and I guess the rest of us are idiots because we are not you. Thanks so much.

[SwingingFromCenter]

1) I think you misunderstood the point I was trying to make. This foreclosure thing is hitting EVERY range of the market, not just those you'd normally expect to see in that situation.

2) I'm paying off a mortgage. I'm not a sucker--it makes me smarter. The tax write off is one of the best ones a person can have. The only suckers are the ones who AREN'T paying a mortgage. I should of course also disclaim that statement to point out I have enough money squirreled away in a separate account that can pay off my house at any given moment should I need to do so, but still.