Mortgage Foreclosures Decline & Rates Stable

Mortgage-foreclosure activity decreased in April for the seventh straight month, bringing total foreclosure activity to a 40-month low, according to a new report from RealtyTrac.  Like any news story there is always the “Headline” story and the “Real” story.

The “real” story here is that foreclosures are down only due to the legal battle over lenders being sued for violating the rules of the mortgage-foreclosure process. Banks were using what have become known as “Robo-Signers” to fraudulently complete foreclosures against home-owners.

Like all legal battles in the courts it can take months if not years to resolve the matter. During this time we will still have this “Shadow” inventory of homes hanging over the market which will limit appreciation levels for some time to come.

“This slowdown continues to be largely the result of massive delays in processing foreclosures, rather than the result of a housing recovery that is lifting people out of foreclosure,” notes RealtyTrac CEO James Saccacio in a statement.

Certainly there are more foreclosures on the horizon, but this legal bottleneck will be around for a while.  This means that a massive wave of additional inventory will not be hitting the markets during the peak purchasing season.  Inventory levels are the key to home prices and any stabilization in those inventory levels regardless of the reason is welcome news to the housing industry even if it is only temporary.

Markets like Texas, with 80 percent LTV, and Cash Out once per 12 month caps on Cash Out, enjoy a head start with a balance of inventory and demand

Mortgage backed securities (MBS) barely moved and lost only -3 basis points last week which helped to keep 30 year fixed rates at fantastic levels.  Mortgage rates continue to enjoy artificial support due to weakness in Europe – particularly with Greece and Portugal. 

Concerns over their massive debt restructuring has investors very concerned about the stability overseas and as a result they continue to purchase U.S. Treasuries and Mortgage Backed Securities which help to keep our rates low due to the extra demand. For now mortgage interest-rates are very attractive for those looking to buy a new home or refinace their existing mortgage.

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