The half-yearly foreclosure market report, released by
RealtyTrac, revealed an increase in the overall foreclosure
activity. As per this leading online marketplace of foreclosure
properties, foreclosure filings for the first half of 2012
increased 2% from the prior six months, but dipped 11% from the
prior-year period. This brought the total number of properties
receiving default, auction or repossession notices to 1,045,801.
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Though overall foreclosure activity was low (primarily due to
decline in bank repossessions) in the second quarter, foreclosure
starts - default notices issued and foreclosure auctions (depending
on the state's foreclosure procedure) - surged 9% from the prior
quarter and 6% from the prior-year quarter to 311,010 properties.
This was the first quarterly rise in foreclosure starts since the
fourth quarter of 2009.
Moreover, during the second quarter, foreclosure starts increased
in 31 states on an annual basis, including 17 states with judicial
foreclosure process and the remaining with non-judicial foreclosure
process. Further, the states with the highest foreclosure rates
were Nevada, Arizona, Georgia, California, Illinois, Michigan,
Colorado, Ohio and Utah.
Additionally, the procedure to complete the foreclosure of
properties in the second quarter took an average of 378 days, up
from 370 days in the previous quarter. Further, bank-owned
properties took an average of 195 days to sell from the time they
were foreclosed, up from 178 days in the first quarter.
The increase in foreclosure activity indicates that mortgage
servicers have resumed distressed property dealings with renewed
vigor. The primary reason behind this resumption is the $25 billion
settlement deal that took place between five mortgage servicers -
JPMorgan Chase & Co.
Bank of America Corporation
), Ally Financial Inc. and
Wells Fargo & Company
), 49 states' attorneys general and the regulators earlier this
However, with mortgage servicers finding other options - short sale
and loan modifications - to prevent foreclosure, we believe that
foreclosure activity would take time to show a significant upward
trend. When all these alternatives would wear out, only then a
property would be foreclosed.
As per the RealtyTrac report, there will be a gradual rise in
foreclosure activity for the rest of the year. Also, there will be
additional pressure on the home prices as many properties would
come to the market due to the surge in foreclosure activities.
Moreover, a sharp rise in foreclosure starts indicate 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 in adding to the foreclosure inventory, which is expected to
jeopardize the recovery of overall housing property market in the
Though the leap in foreclosure may dampen the housing prices in the
near-term, this will enable the housing market to revive in the
longer term. Moreover, we hope that there would be enough number of
buyers for these properties; otherwise the housing market will have
little chance to regain a solid foothold.