The monthly foreclosure market report, released by RealtyTrac,
revealed a drop in the overall foreclosure activity. As per this
leading online marketplace of foreclosure properties, foreclosure
filings for July decreased 10% from the prior-year month and 3%
from the prior month. This brought the total number of properties
receiving default, auction or repossession notices to 191,925.
On the other hand, foreclosure starts - default notices issued and
foreclosure auctions (depending on the state's foreclosure
procedure) - surged 6% from July 2011 but decreased 6% from June
2012 to 98,174 properties. This was the third consecutive monthly
rise in foreclosure starts. Moreover, foreclosure starts increased
in 27 states on an annual basis, including 16 states with judicial
foreclosure process and the remaining with non-judicial foreclosure
process.
Additionally, bank repossessions (REOs) plummeted 21% from the
prior-year month and 1% from the last month to 53,654 properties.
This was the 21st straight monthly fall in REOs on a year-over-year
basis. Also, REO activity slipped annually in 38 states and the
District of Columbia. Some of the biggest REO decreases occurred in
non-judicial states including Nevada, Virginia, California, Georgia
and Washington.
The recent decline in overall foreclosure activity is primarily
attributable to the switching of mortgage servicers to other
options - short sale and loan modifications - to prevent
foreclosures. Further, the Consumer Financial Protection Bureau
(CFPB) has come up with a new set of proposals to ensure that the
procedures (related to payment collections and foreclosures)
followed by the mortgage servicers gains more transparency for the
borrowers. The new proposed regulations necessitate the mortgage
servicers to issue monthly statements, warn customers before
interest rates adjustments and provide more options to prevent
foreclosures.
However, with the $25 billion settlement deal that took place
between five mortgage servicers -
JPMorgan Chase & Co.
(
JPM
),
Bank of America Corporation
(
BAC
),
Citigroup Inc.
(
C
), Ally Financial Inc. and
Wells Fargo & Company
(
WFC
), 49 states' attorneys general and the regulators earlier this
year, foreclosure activity is expected to accelerate as mortgage
servicers resume distressed property dealings with renewed vigor.
A jump in foreclosure starts indicates that there would be
potential rise in short sale, where the homeowner sells the
property at a lower amount than owned on his/her loan. Also, others
could be repossessed by the banks and placed on the market at a
significant discount. Thus, many properties are likely to end up
adding to the foreclosure inventory, which is expected to
jeopardize the recovery of overall housing property market in the
near future.
Though the leap in foreclosures may dampen the housing prices in
the near-term, this will enable the housing market to revive in the
longer term. Moreover, the housing market will have a chance of
regaining a solid foothold if there are sufficient buyers for these
properties.
BANK OF AMER CP (BAC): Free Stock Analysis
Report
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
Report
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