Foreclosures Notices Surge In August, Signaling Pain For Housing Market

Home foreclosures, after slowing to a crawl over the past year, seem to be gaining momentum again, a sign that heralds both pain and perhaps eventual relief for the housing market.

The number of mortgage-default notices filed by banks climbed 33 percent between July and August -- the biggest single-month increase in four years, according to the data provider RealtyTrac. Default notices are the first step in the foreclosure process, and the uptick in August may mean that lenders are beginning to clear the logjam that has held up home foreclosures since 2010.

Last year's discovery of the widespread practice of "robo-signing" -- mortgage paperwork that had been authorized with forged signatures, or signed by people who hadn't read the documents in question -- set back the foreclosure process on a national scale, as lenders were forced to go back and re-examine thousands of filings.

The damage wrought by robo-signing is still evident in RealtyTrac's figures for August 2011. Although default notices were up sharply for the month, they were still down 18 percent from a year ago, suggesting the process hasn't gotten back up to full speed. Meanwhile, the actual number of repossessions was down 4 percent from July to a six-month low.

A return to delay-free foreclosures is expected to bring grief to the housing market, as banks process hundreds of thousands of foreclosed homes and put them up for sale. This massive influx of houses is likely to saturate the market, forcing prices down and suppressing construction activity.

Still, analysts say the market needs to get worse before it can get better, and an increase in foreclosures may be the first step toward that. Home prices are expected to touch bottom eventually and then begin to climb again, though experts are divided on how soon this could happen. Some predict a recovery as early as 2012, while others don't anticipate it until 2013 or 2014.

A measure in President Obama's jobs bill, which is being considered in Congress this week, could relieve some of the downward pressure on the housing market caused by the abundance of foreclosures. The measure, known as Project Rebuild, calls for $15 billion to be set aside for refurbishing foreclosed and vacant properties, including residential buildings.

However, analysts emphasize that Project Rebuild will only be effective in the context of a broader economic recovery, since national employment is closely tied to the health of the housing market.

Due to the delay in foreclosure processing, a notice of mortgage default doesn't necessarily mean that the house will be repossessed any time soon. Many homeowners are still living in foreclosed homes that could take months or even years for the banks to reclaim.

Comments

[Pole Dancing for Jesus]

09:08 PM on 09/26/2011

It seems to me that, if nothing will heal until we reach bottom, maybe the best thing we can do is speed up the process of hitting bottom. Get the banks to sell off all the shadow inventory, hit the reset button, let the other shoe finally drop, and regain stability.

[ichan]

05:17 AM on 09/17/2011

Prices have to reach equilibrium with wages for things to stabilize and grow. Houses are not "investments"... they suck money the moment you take delivery with prop taxes, maintenance, hoa, vanity improvements etc... So many have been suckered in yet again in the last few years... the ones that payed in cash are really rich so they should be alright, but there's a whole bunch that let their emotions (being left out of the last boom) get the best of them. If this continues down as it should there will be more carnage... BOTTOM LINE the price needs to reach levels where the typical family can pay mortgage and expenses and save a little. That's the only math that makes sense.

[whyus]

12:56 PM on 09/16/2011

We know someone who walked away from a house they paid $420,000 because of a job loss; the bank sold it a year later for $170,000.

[grk96]

11:58 AM on 09/16/2011

Memo to the President.

We need two things right away. Mortgage debt relief is the only way to increase consumer demand. This is a consumer driven economy and a consumer driven recession. Everyone else got a bail out, what about the consumer.

Second, we need medicare for all. The way to shore up medicare is to expand it's premium base. The model of private health care and a public health insurance plan works and results in the cost curve for overall health care expenses to actually be impacted due to the bargaining power of the single payer. This would allow for pension reform that Republicans want and take the burden off employers with respect to health insurance. This would lower costs and allow for the expansion of employment once the consumer demand problem is fixed through debt reduction.

[SeanOcali2]

12:11 PM on 09/16/2011

We absolutely don't need either of those. What we need is affordable housing, and a Dutch style healthcare system.

[spinotter11]

01:19 PM on 09/20/2011

Yes, and what are the chances that we will get either one? I am really beginning to believe that those in control are drawing out this mortgage fiasco as long as possible to spare the banks AND to put the ordinary American in a more vulnerable situation.

[aforbes808]

11:43 AM on 09/16/2011

We had the biggest transfer of wealth from Main St. to Wall St. Wall St. has bankrupted this country and her people. Now the House of Representatives wants to take away any lifeline you have left. When the people on unemployment get cut off and can't find a job, what do they think will happen? They won't be able to collect welfare, that will be gone too. Will we just roll over in submission? It is a very dangerous game they are playing. When people don't have anything to live for often times they don't mind dying. Is that what we want? I see war :(

[SeanOcali2]

12:15 PM on 09/16/2011

I share your frustration, but you're just helping the other side by claiming the country is bankrupt. It isn't. The demand for US treasury bonds has literally never been this high. Japan has a debt that's 225% GDP and they're not bankrupt by any means.

[spinotter11]

01:21 PM on 09/20/2011

I do not think the poster meant "bankrupted the country" in a technical or financial sense, but in the sense that huge swaths of the population are impoverished, jobless, and in despair. That too is a kind of moral bankruptcy that we are falling into now.

[cyoohoos]

11:14 AM on 09/16/2011

The best thing anybody who is underwater or is struggling to afford their home could do is just walk away. Stop throwing good money after bad.

[fineartgalaxy]

08:02 AM on 09/16/2011

And foreclosures will continue for years to come. As people with underwater and no home equity homes approach retirement age they may not be able to sustain a home with no line of credit available and yearly increases in RE taxes and homeowners insurance. No chance of a reverse mortgage since there is no equity. But somehow this administration does not seem to be willing to tackle the RE crisis. And on top, add the Americans in denial blaming only the foreclosed homeowners as the only cause for this mess. The fact is that we can blame anybody and any entity we want, but until this is resolved everybody is affected one way or another by the RE crisis. Everybody, sooner or later. Economic growth can not proceed when the most traditional and stable of its long term investment platforms is totally non existent. Because let's face, the RE market as we knew it for hundred of years has been destroyed by negligence and criminal dealings.

[libertymen]

07:23 AM on 09/16/2011

Lots of foreclosures in the pipeline.
Several house i have been watching have been vacant for 2 years?
Kind of crappy low end stuff in general.
Flooded cellars,mold an inch thick.Bad lots,no land.Badly built.
Poor peoples houses.
Sold because of easy standards.Bought with sub prime loans.

[Siebenstein]

01:52 AM on 09/16/2011

Obama is a total loser on the housing issue !!

[SeanOcali2]

12:16 PM on 09/16/2011

Very insightful and helpful. Articulate as well. And productive.

[Siebenstein]

03:16 PM on 09/17/2011

I think everyone knows by now what the foreclsoure crisis is about; you still don't?

[dansup]

11:45 PM on 09/15/2011

george carlin summed it up pretty well a few years back:

http://www.youtube.com/watch?v=LUTkavuPrv8

[4eva]

10:59 PM on 09/15/2011

Issa probing Fannie's big mortgage buy __ 15 Sept 2011
http://thehill.com/blogs/on-the-money/1091-housing/181895-issa-probing-fannies-big-mortgage-buy

[SeanOcali2]

12:16 PM on 09/16/2011

I stopped reading after "Issa."

[h jablome]

05:37 PM on 09/16/2011

you should have kept reading through the "probing fannies" part.

[Under Fed yet Fed Up]

10:18 PM on 09/15/2011

The sooner the government stops trying to support the housing market, the sooner prices can find a real bottom. Only then can the healing begin.

As a kid did you take your medicine in a dozen tiny sips? Or one gulp?

[SeanOcali2]

12:19 PM on 09/16/2011

I agree that's what needs to happen in regard to housing. But if you think that same thing should also apply to labor, GDP contraction, or dollar deflation, you are horrifically confused and badly mistaken.

[Ross Schuman]

08:51 PM on 09/15/2011

If we started calling a trust for a mortgage a Distrust, and a Trustee for a Mortgage a DisTrustee, it would help explain and maybe even solve the one of the most Important problems of the financial markets.

[Collapsing House Price]

08:41 PM on 09/15/2011

"No Housing Bottom In Sight"

http://www.businessinsider.com/no-housing-bottom-in-sight-2011-9

[Beernuts]

08:17 PM on 09/15/2011

Stop it! I said: Stop IT: Does Huffpo or anyone, even the "experts" have any evidentiary information that would lead to home prices rebounding at any point in the next milennium, let alone in "2012, or maybe 2013 or 2014"??? We don't manufacture diddly squat anymore, there is little money in the hands of 95% of the population, and housing prices still are out of line compared to wages, by a factor of four. There is NOTHING to hint at, begin or sustain for more than a few days in a few select areas, a housing "turnaround"
If you think I'm wrong, in 2008, wasn't 2011 the year of choice by "professionals in the field" of the supposed magical mystery turnaround. Drive around Mesa AZ or Whidbey Island WA once a month as I do and then get back to me on how that recovery is doin, will ya?

[frank day]

08:22 PM on 09/15/2011

Mesa was hit hard.

Las Vegas as well.

location, location, location

[Beernuts]

08:49 PM on 09/15/2011

I wish it were that simple. Yeah beachfront always "sells" but now, at "new reduced price"
I drive 11K miles every month in 7 western states, big cities and tiny burgs and EVERY month there are new busineses closed, large and small, strip to fashion mall, chain and Mom & Pop.
Not just a few, many each month and with them go those few jobs remaining in those areas that do not require a degree or a "friend in the busines". Let me pick another city=Caldwell, Idaho. or Weed, CA...or...the list is endless you see because the problem is terminal.

[aklib]

04:35 AM on 09/16/2011

Gotta fan ya for your micro-bio. Plus, your posts are usually pretty good. A badge to honor your intelligence is given. (No, not the LOL badge). Keep up the good work!

[Realtors Are Liars]

08:28 PM on 09/15/2011

"Does Huffpo or anyone, even the "experts" have any evidentiar­y informatio­n that would lead to home prices rebounding at any point"

The Iying reaItors will imply or explicitly state that prices are or will start rising in order to get you to make the bad decision to buy a house now.

Why buy today when you can buy later for 60% less?

[iam99]

02:24 AM on 09/16/2011

Did you see something in the news where the realtors engaged in robosigning, or breaking the chain of title at securitization, or created a false appraisal value? I didn't.
You must work for a banker.

I suggest don't buy at all until these private property rights law and the contract laws that have been severely eroded are corrected. It may be a long long time.