The flood of new foreclosures might ebb for a while as major lenders GMAC, Bank of America and JP Morgan Chase suspend filings in 23 states due to sloppy procedures.
But like a finger in the hole of a broken dam, these actions — and any possible political reactions — are unlikely to stop the pressure foreclosures are putting on the housing recovery .
The mortgage and housing markets already are awash in repossessed and delinquent homes. And banks are only putting a fraction of their inventory up for sale. That slow-drip release helps prevent another big price drop, but it also means home values will be under pressure for years to come.
And it’s even more unlikely that foreclosures will filter out of the system anytime soon in light of the growing controversy over mishandled documents. The three big lenders have suspended foreclosures in 23 states where courts han dle filings. The Justice Department said Wednesday it would look into the issue after House Speaker Nancy Pelosi and other Democrats urged Attorney General Eric Holder to investigate.
Meanwhile, more properties are falling into trouble. The weak economy is pushing previously sound borrowers over the edge. Many owners with modified loans quickly redefault.
Loans in foreclosure made up about 4% of all mortgages in August vs. the 1995-2005 average of just 0.53%, according to LPS Applied Analytics, which tracks the mortgage market.
“This is unprecedented,” said Herb Blecher, senior vice president at LPS. “In the size and the scope of the problem we’re dealing with now, there is no historical comparison I’ve come across.”
When loans with at least one past due payment are added in, the combined percentage of problem loans rose to nearly 14% of the total outstanding in the second quarter, said the Mortgage Bankers Association.
Loans at least 90 days past due actually fell, indicating many were modified or reclassified as performing. But the rate of short-term missed payments rose. An MBA economist said that the reason was likely tied to a rise in first-time jobless claims and loan modifications that had soured again “because those borrowers, by definition, have weak credit.”
Only about 20% of the 1.2 million homes in the foreclosure process are on the market, says Rick Sharga, senior vice president of RealtyTrac. And of the 900,000 homes that banks have repossessed after auctions and other means came up empty, just 30% are for sale, he said. That means the other 600,000 bank-owned properties are in the “shadow inventory.”
Most Foreclosures Not On The Market
The flood of new foreclosures might ebb for a while as major lenders GMAC, Bank of America and JP Morgan Chase suspend filings in 23 states due to sloppy procedures.
But like a finger in the hole of a broken dam, these actions — and any possible political reactions — are unlikely to stop the pressure foreclosures are putting on the housing recovery .
The mortgage and housing markets already are awash in repossessed and delinquent homes. And banks are only putting a fraction of their inventory up for sale. That slow-drip release helps prevent another big price drop, but it also means home values will be under pressure for years to come.
And it’s even more unlikely that foreclosures will filter out of the system anytime soon in light of the growing controversy over mishandled documents. The three big lenders have suspended foreclosures in 23 states where courts han dle filings. The Justice Department said Wednesday it would look into the issue after House Speaker Nancy Pelosi and other Democrats urged Attorney General Eric Holder to investigate.
Meanwhile, more properties are falling into trouble. The weak economy is pushing previously sound borrowers over the edge. Many owners with modified loans quickly redefault.
Loans in foreclosure made up about 4% of all mortgages in August vs. the 1995-2005 average of just 0.53%, according to LPS Applied Analytics, which tracks the mortgage market.
“This is unprecedented,” said Herb Blecher, senior vice president at LPS. “In the size and the scope of the problem we’re dealing with now, there is no historical comparison I’ve come across.”
When loans with at least one past due payment are added in, the combined percentage of problem loans rose to nearly 14% of the total outstanding in the second quarter, said the Mortgage Bankers Association.
Loans at least 90 days past due actually fell, indicating many were modified or reclassified as performing. But the rate of short-term missed payments rose. An MBA economist said that the reason was likely tied to a rise in first-time jobless claims and loan modifications that had soured again “because those borrowers, by definition, have weak credit.”
Only about 20% of the 1.2 million homes in the foreclosure process are on the market, says Rick Sharga, senior vice president of RealtyTrac. And of the 900,000 homes that banks have repossessed after auctions and other means came up empty, just 30% are for sale, he said. That means the other 600,000 bank-owned properties are in the “shadow inventory.”