From Staff Reports
Homes receiving at least one foreclosure filing soared 57% in the 12 month-period ended in March and bank repossessions rocketed 129% from a year ago, as the pain from the subprime mortgage crisis continues to spread, real estate data firm RealtyTrac Inc. said yesterday (Tuesday).
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Unfortunately, the worst is yet to come, as the financial tsunami of adjustable-rate mortgage "resets" - when a floating-rate loan shifts to a higher interest rate - won't actually crest until May and June. That means that there's likely to be a major surge in the number of homeowners who are pushed into default and foreclosure in the third and fourth quarters of this year, the Irvine, Calif.-based RealtyTrac said.
"What we're really looking at is ongoing fallout from people overextending themselves to buy homes they couldn't afford and using highly toxic loan products to get into the houses in the first place," Rick Sharga, RealtyTrac's vice president of marketing, told The Associated Press. "We're going to see quite possibly a record amount of foreclosure activity in the third or fourth quarter," reflecting the spike in monthly payments because of the re-sets on adjustable-rate subprime mortgages that will take place in May and June.
The number of U.S. homes receiving at least one foreclosure filing jumped to 234,685 in March, up 57% from the 149,150 properties receiving a filing the year before. Filings include default notices, auction sale notices and bank repossessions.
The overall foreclosure rate is 5% higher than in February, which saw an unexpected month-to-month decline over January. March marked the 27th consecutive month of year-over-year increases in national foreclosure filings.
Lenders took possession of homes at a sharply higher rate, up 129% over last year, as more homeowners relinquished their homes, said Sharga. Banks repossessed 51,393 properties nationwide, many of them without a public foreclosure auction.
Sharga estimates between 750,000 and 1 million bank-owned properties will hit the market this year, representing about 25% of the homes on the market. In some parts of the country, these additional properties can only bog down real-estate sales and hold down home prices.
In fact, it's the decline in home prices and the stricter lending guidelines that are part and parcel of the ongoing credit crunch: The ARM re-sets cause mortgage rates to jump, which also cause the monthly payments to spike. Normally, a homeowner would just refinance their loan at a lower rate to bring the payments back down to a manageable level. But lenders are reluctant to make those loans in the first place, and in many cases are justified because the home has dropped in value enough to obliterate all the homeowner's equity.
Nor can the homeowner count on selling their overpriced house. Often, the homeowner just mails the keys back to the bank and walks away.
Nevada clocked in the worst foreclosure rate for the 15th straight month, The AP reported. Last month, one in every 139 households in that state received a foreclosure-related notice, nearly four times the national rate. Following Nevada in terms of the highest foreclosure rates were:
- California.
- Florida.
- Arizona.
- Colorado.
- Georgia.
- Ohio.
- Michigan.
- Massachusetts.
- and Maryland.
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The Associated Press:
U.S. Home Foreclosures Soar In March.