Will The Foreclosure Rate Be Up In 2012 or in 2013?
Since the middle of 2011, various housing experts, including Irvine, California based RealtyTrac, have expected that up 1 Million foreclosures would be delayed into 2012, mostly due to lenders being overwhelmed by the sheer volume of foreclosures, and more importantly due to the robo signing scandal. Foreclosure processing centers became veritable factories, churning out dozens of delinquency notices in a single day. Now that the five major banks related to the mortgage crisis have settled with the attorney generals of 49 states with a $25 Billion settlement agreement in February, these factories are due to ramp up again.
It has been suggested that 2012 may even be more dramatic than the dark days of 2010 in terms of foreclosures. However, the situation is substantially different this time around in the type of homeowners affected. The previous surge in foreclosures was mainly blamed on NINA (no income, no assets) borrowers who simply could not afford the properties they purchased, then just walked away. Now that the excesses have been wrung out of the system, the next wave of foreclosures will mainly affect regular job holders who had to suffer pay cuts, or who may have had a spouse downsized.
It is now firmly believed that the recent firming of property prices was just a temporary and artificial floor created by the lull in the foreclosure rate in 2011.
The S&P/Case-Shiller Index of 20 cities reported a 33% drop in property prices from the peak in July, 2006 to April 2012, thereby erasing some $7 Trillion of household wealth, although some areas fared even worse, with Las Vegas and Phoenix, Arizona suffering a horrendous 60% drop.
Already, signs of increased foreclosure activity have surfaced, as 4closurefraud.org, the watchdog group that helped uncover the robo signing scandal, found evidence of a big jump in foreclosures by three major banks in the Palm Beach County area of Florida between March 1 and March 24. In the same time period, Deutsche Bank’s foreclosure initiations were up by 47%, Wells Fargo’s increased by 68%, and Bank of America’s went up by a walloping 7 times. And Zillow.com is still reporting that 25% of homeowners are under water.
More and more stories are appearing of families having exhausted their resources, such as credit cards, savings or retirement accounts, and are now contemplating the sad prospect of losing the roof over their heads.
If this can be any consolation, the length of time between when foreclosure proceedings first started until actual repossession by the lenders has lengthened to an average of 318 days, with New York leading the way at 966 days, followed by New Jersey at 944 days, and finally Florida at 676 days.
For those homeowners who have managed to still fight for survival, now is the time to consider all options available, such as the new HARP 2.0 program, with has much less restrictive requirements than the original HARP.
Another painful solution is to seek Chapter 13 protection, which allows for arrears to be spread over five years, and unsecured debts such as credit cards getting pennies on the dollar, after allowing for living expenses.
Conclusion: It is almost a certainty that the foreclosure rate will be up in 2012 or max by 2013, so be prepared and find the best solution possible for your protection.