Foreclosure notices rose again in July, up 3.6% (350,000 filings) from the month before. However, this number is down 9.7% from the same time last year. According to RealtyTrac, this is the 17th consecutive month with over 300,000 filings.
On the other side of the coin, bank repossessions (homes that did not sell at foreclosure auction) was at a near record number of 92,858, second only to May in which 93,777 homes were repossessed. Repossessions have posted gains (when compared to the same month last year) for 8 straight months now.
Reflecting the first half of the year, foreclosures are in an overall decline. Zillow.com reported that in the third quarter only 21.5% of all home loans are underwater, down 23.3% from the previous quarter.
While this number has dropped overall, over foreclosure filings climbed in over 75% nations metropolitan areas in the first half of this year. This number is more of a reflection now of unemployment rates as opposed to toxic mortgages (the previous number one cause), according to RealtyTrac spokesman Rick Sharga.
Home sales continue to decline following the end of the government’s homebuyer’s credit. The overall market has been shrinking for 9 months consecutively now.
Adding into the market freefall frenzy, the Obama administration’s Home Affordable Modification Program (HAMP), designed to make monthly mortgage payments more affordable by reducing eligible troubled homeowners’ monthly payments to no more than 31% of their pre-tax income. Nearly 52,000 delinquent borrowers were giving assistance by HAMP last month, but as of now nearly 13,000 have already dropped out of the program, with only 272 of them having paid off their mortgages. Analysts at Barclay’s Capital said last month said 60% of homeowners may ultimately re-default. HAMP has been criticized for being slow out of the gates and ultimately being too limited to help enough homeowners.
Next month, beginning September 7th, homeowners can start applying for the FHA Short Refinance option. The program allows borrowers who owe more than their homes are worth to refinance into a Federal Housing Administration-backed loan, provided that they are current on their mortgages and their lender agrees to write off at least 10% of their principal balance. The initiative is open to those who do not currently have an FHA loan and who have a credit score of 500 or more. Considering many lenders might not be willing to just write of 10% of a mortgage loan principle, the long-term success of this program may not seem likely.
The Obama administration has done many things to help the housing market, through a variety of programs and incentives to keep interest rates low and the first-time homebuyer’s tax credit. But with unemployment rates on the rise, these are not proving to be enough to keep the housing market from collapsing.
