The monthly foreclosure market report, released by RealtyTrac
for May 2012, revealed that overall foreclosure activity has been
soaring. As per this leading online marketplace of foreclosure
properties, foreclosure filings for the reported quarter surged 9%
from the prior month, but dipped 4% from the prior-year period.
This brought the total number of properties receiving default,
auction or repossession notices to 205,990.
In May, foreclosure starts - default notices issued and
foreclosure auctions (depending on the state's foreclosure
procedure) - jumped 12% from April 2012 and 16% from May 2011 to
109,051 properties. Foreclosure starts increased in 33 states on an
annual basis, including 17 states with judicial foreclosure process
and remaining with non-judicial foreclosure process.
Moreover, bank repossessions (REO) grew 7% from the prior month
but fell 18% from the prior-year month to 54,844 properties.
Further, overall foreclosure activity surged 26% in judicial
states, while it declined 20% in non-judicial states.
The increase in foreclosure activitiy indicates that mortgage
servicers have resumed distressed property dealings with full
force. The primary reason behind this resumption is 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 in February.
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.
In the first quarter of 2012, there was a 25% rise in the short
sale of properties that were at some stage of foreclosure, whereas
the sale of bank-owned properties declined 15% on the
year-over-year basis. The lenders also support short-sales, which
are a quicker way to get back some amount from their mortgages than
wait for foreclosures (a more expensive and time-consuming
process).
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 to
come to the market due to the surge in foreclosure activities.
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, we hope that there would be enough number of
buyers for these properties; otherwise the housing market will have
a little chance to regain a solid foothold in the market.
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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