Ever notice that you never see headlines like "Canadians brace for next
forclosure wave" ???
Now - who's going to be the first bone-head to full-quote the entire
text of this post just to add one line?
Americans brace for next foreclosure wave
Wed Apr 4, 2012 6:22pm EDT
(Reuters) - Half a decade into the deepest U.S. housing crisis since the
1930s, many Americans are hoping the crisis is finally nearing its end.
House sales are picking up across most of the country, the plunge in
prices is slowing and attempts by lenders to claim back properties from
struggling borrowers dropped by more than a third in 2011, hitting a
But a painful part two of the slump looks set to unfold: Many more U.S.
homeowners face the prospect of losing their homes this year as banks
pick up the pace of foreclosures.
"We are right back where we were two years ago. I would put money on
2012 being a bigger year for foreclosures than 2010," said Mark Seifert,
executive director of Empowering & Strengthening Ohio's People (ESOP), a
counseling group with 10 offices in Ohio.
"Last year was an anomaly, and not in a good way," he said.
In 2011, the "robo-signing" scandal, in which foreclosure documents were
signed without properly reviewing individual cases, prompted banks to
hold back on new foreclosures pending a settlement.
Five major banks eventually struck that settlement with 49 U.S. states
in February. Signs are growing the pace of foreclosures is picking up
again, something housing experts predict will again weigh on home prices
before any sustained recovery can occur.
Mortgage servicing provider Lender Processing Services reported in early
March that U.S. foreclosure starts jumped 28 percent in January.
More conclusive national data is not yet available. But watchdog group,
4closurefraud.org which helped uncover the "robo-signing" scandal, says
it has turned up evidence of a large rise in new foreclosures between
March 1 and 24 by three big banks in Palm Beach County in Florida, one
of the states hit hardest by the housing crash
Although foreclosure starts were 50 percent or more lower than for the
same period in 2010, those begun by Deutsche Bank were up 47 percent
from 2011. Those of Wells Fargo's rose 68 percent and Bank of America's,
including BAC Home Loans Servicing, jumped nearly seven-fold -- 251
starts versus 37 in the same period in 2011. Bank of America said it
does not comment on data provided by other sources. Wells Fargo and
Deutsche Bank did not comment.
Housing experts say localized warning signs of a new wave of foreclosure
are likely to be replicated across much of the United States.
Online foreclosure marketplace RealtyTrac estimated that while
foreclosures dropped slightly nationwide in February from January and
from February 2011, they rose in 21 states and jumped sharply in cities
like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).
RealtyTrac CEO Brandon Moore said the "numbers point to a gradually
rising foreclosure tide as some of the barriers that have been holding
back foreclosures are removed."
One big difference to the early years of the housing crisis, which was
dominated by Americans saddled with the most toxic subprime products --
with high interest rates where banks asked for no money down or no proof
of income -- is that today it's mostly Americans with ordinary mortgages
whose ability to meet payment have been hit by the hard economic times.
"The subprime stuff is long gone," said Michael Redman, founder of
4closurefraud.org. "Now the folks being affected are hardworking,
everyday Americans struggling because of the economy."
"HARD TO CATCH UP"
Until December 2010, Daniel Burns, 52, had spent his working life in the
trucking industry as a long-haul driver and manager. When daily loads at
the small family business where he worked tailed off, he lost his job.
Unable to cover his mortgage, Burns received a grant from a government
fund using money repaid from the 2008 bank bailout. That grant is due to
expire in early 2013 and Burns is holding out on hopeful comments from
his former employer that he might get his job back if the economy
"If things don't pick up, I will be out on the street," he said, staring
from his living room window at two abandoned houses over the road in the
middle-class Cleveland suburb of Garfield Heights, the noise of traffic
from a nearby Interstate highway filling the street.
Underscoring the uncertainty of his situation, Burns' cell phone rings
and a pre-recorded message announces that his unemployment benefits are
due to be cut off in April.
A bit further up the shore of Lake Erie, Cristal Fell, who works night
shifts entering data for a trucking company in Toledo, has fallen behind
on her mortgage a second time because her ex-husband lost his job and
her overtime was cut.
"Once you get behind it's so hard to catch up," she said.
Fell, a mother of four, hopes the economy will gather enough speed to
help her avoid any risk of losing her home. Her ex-husband has found a
new job and she is getting more overtime, so she hopes she can catch up
on her mortgage by the fall.
Burns and Fell are the new face of the U.S. housing crisis: Middle
class, suburban or rural with a conventional 30-year fixed mortgage at a
reasonable interest rate, but unemployed or underemployed. Although the
national unemployment rate has fallen to 8.3 percent from its peak of 10
percent in October 2009, nearly 13 million Americans remain jobless,
meaning many are struggling to keep up with their mortgage payments.
Real estate company Zillow Inc says more than one in four American
homeowners were "under water" or owed more than their homes were worth
in the fourth quarter of 2011. The crisis has wiped out some $7 trillion
in U.S. household wealth.
"We're seeing more people coming through who have good loans with
reasonable interest rates," said Ed Jacob, executive director of
non-profit lender Neighborhood Housing Services of Chicago Inc, which
provides foreclosure counseling. "But in many households only one person
works now instead of two, or they had their hours cut."
"The answer to the housing crisis now is job creation."
EARLY SIGNS OF UPTICK?
Zillow expects the resurgence in foreclosures this year, combined with
excess inventory of unsold, bank-owned homes will contribute to a 3.7
percent national decline in prices before the market hits bottom in 2013
and stays there until 2016.
"The hangover from this crisis will far outlast the party of the boom
years," said Zillow chief economist Stan Humphries.
Getting through the remaining foreclosures and dealing with the
resulting flood of homes on the market in the wake of the bank
settlement is a necessary part of the healing process for the U.S.
housing market, he added.
According to leading broker dealer Amherst Securities, some 9.5 million
homes are still at risk of default and in February it said it expected
to see the uptick in foreclosures start to hit in March and April.
There is other evidence that many of the foreclosures that did not
happen in 2011 will happen this year.
A January report by the Neighborhood Economic Development Advocacy
Project in New York found that in the first half of 2011 the number of
90-day pre-foreclosure notices in New York City outnumbered court
foreclosure actions by a ratio of 14 to one, indicating that while
proceedings were initiated against many homeowners, they were left
"Now the banks have a settlement, foreclosure numbers for 2012 are going
to be high," said NEDAP co-director Josh Zinner.
A recent survey by the California Reinvestment Coalition, an umbrella
group of nearly 300 non-profit groups in the state, of member agencies
found 75 percent of respondents expected increased demand for their
foreclosure prevention services in 2012 but more than a third had to
scale back services because of funding cuts.
"Funding is a major concern given what our members expect for this
year," said associate director Kevin Stein.
All this has non-profits intensifying calls for the Federal Housing
Finance Agency to drop its opposition to allowing the government-backed
mortgage giants Fannie Mae and Freddie Mac it regulates to reduce
principal for underwater homeowners.
Principal reduction involves reducing the amount borrowers owe in order
to make a loan modification affordable for struggling homeowners.
Republicans and the FHFA oppose principal reduction because of the risk
of "moral hazard"- that homeowners who do not need help will seek to
abuse largesse and have their mortgages reduced too.
ESOP in Ohio engages in "hits" on Chase branches -- they say Chase is
the least accommodating major bank when it comes to working with
struggling homeowners -- where they try to hand letters to bank mangers
calling on chief executive Jamie Dimon to lobby FHFA head Edward DeMarco
for principal reductions. A Chase spokeswoman said the bank has made
"extensive efforts" to work with homeowners, helping 775,000 borrowers
stay in their homes since early 2009, avoiding foreclosure "more than
twice as often as we have had to foreclose." Housing groups like ESOP
maintain, as they have throughout the housing crisis, that unless the
FHFA embraces widespread principal reduction, many more under water
borrowers face losing their homes.
"Until banks engage in meaningful principal reduction as a matter of
course," ESOP's Seifert said after a recent protest at a Chase branch in
Cleveland, "this crisis will not end."