Foreclosures in 2012

The recent news on foreclosures seems pretty good- the lowest since 2007 and a decrease of 34% over 2010.   For those thinking the crisis is over, however, they had better think again.   Here are some things to keep in mind about foreclosures in 2012.

• The Backlog is coming to an end.   For the last 15 months or so, lenders have been facing a serious backlash regarding how the foreclosure process was handled.   So called “robo-signers” were processing paperwork so fast that mistakes were getting made.   By and large, however, these were procedural errors.  A very small percentage of homeowners who were current on their homes faced foreclosure from these mistakes.   Paperwork was routinely filed incorrectly yet  evidence indicates that most foreclosures were legitimate.   After taking some time to insure that proper rules were being followed, lender’s will start moving forward on foreclosures in Q1 2012.
• The holidays are over.   Banks and mortgage companies normally place a self induced moratorium on foreclosure filings from Thanksgiving through the New Year. 
• Stalling techniques have run their course.   For those with any marketing background, the term “low-hanging fruit” signifies something that is easily achievable.  For the past few years, foreclosures have been centered on properties that take less effort.   These are borrowers who have worked with their mortgage companies to give back their property.  Most of those situations have now been resolved and the banks are going to move onto the more difficult cases.  These routinely involve properties where owners can’t be found or ones where owners have used the courts to slow or stymie the process.   Legal opinion has not been on the side of borrowers, and it seems these stalling techniques have run their course. 
• Court backlog is easing.   When foreclosures began to pick up steam in 2007, courts began to experience an unprecedented volume of filings.  As they have eased, the backlog has also started to come down.   Courts continue to face significant budget cuts and shortfalls that affect their ability to process this paperwork.   The upcoming HARP loan program, however, may help.   In Florida alone, up to 2 million loans are potentially eligible.  That means documentary stamp and intangibles taxes for each reworked loan.   That could be a windfall for the the courts and allow them to put more money into streamlining services. 

Rates are up about .125% across the board this week.   The increase is due, in whole, to a surcharge that has been placed on Fannie Mae and Freddie Mac loans.   During the negotiations for the extension of the social security tax cut last month, lawmakers placed a “revenue enhancement” on the final bill.  Those charges are being passed along to borrowers as a rate increase.   Expect continued pressure on rates but do not expect any large rate fluctuations over the coming weeks.