Foreclosures on the rise again
Although CoreLogic reported Thursday that home prices were improving, thus were underwater mortgage levels in the first quarter, RealtyTrac was simultaneously releasing their data on the second quarter of the year showing a spike in new foreclosure filings.
During the first half of 2012, RealtyTrac says more than one million homes were served with foreclosure filings, up 2.0 percent from the previous six month period. Filings fell 11 percent in the first six months of 2012 from the first six months of 2011, but 20 states saw substantial annual increases, with filings up over 20 percent in Connecticut, Florida, Illinois, Indiana, Pennsylvania, and South Carolina.
What has rung the alarm bell is the spike in new foreclosure starts in the second quarter, up 9.0 percent from the first quarter, rising 6.0 percent from the second quarter of 2011. This increase is the first year over year rise since 2009, reversing the good fortune many had predicted for 2012, calling into question individuals proclaiming that the housing slump is over.
An increase in foreclosure activity
RealtyTrac VP, Daren Blomquist points to the $25 billion mortgage settlement reached this spring, which set clear guidelines for how banks should properly foreclose on delinquent mortgage borrowers.
“The mortgage settlement was signed off by a judge in April, and then in May we saw the first year-over-year increase in foreclosure starts in 28 months,” Blomquist said.
RealtyTrac reports that California’s foreclosure rate is at its highest point since the company began tracking seven years ago, rising 18 percent year over year in June. Despite the spike, the state doesn’t even have the highest foreclosure rate, as it lags behind Nevada, Arizona, and Georgia.
What could turn things around?
“The increases in foreclosure starts will likely translate into more short sales and bank repossessions in the second half of the year and into next year,” said RealtyTrac CEO, Brandon Moore.
Blomquist asserts that prevention could turn things around, as servicers have improved their helping mortgage borrowers to save their home and modifying loans. As home prices increase, underwater mortgages reduce, allowing many to be saved from potential foreclosure.
“If home prices are increasing, homeowners are a lot less likely to consider walking away from their mortgages,” said Blomquist. “They can see some light at the end of the tunnel, where their homes might become valuable assets again.”