Mortgage News Today

I’ve been saying it for months if not the last couple of years the mortgage and housing crisis is not over. There is so much “Shadow Inventory” being held on the books by the banks and mortgage serrvicing companies that housing prices will not increase on a national level for at least a couple of years.

The government has been allowing banks not to foreclose on every mortgage that is forecloseable due to the fact the banks would be insolvent because of bad debt. Banks are slowly getting each mortgage off their books by selling foreclosed homes slowly into the market. This constant supply of bank-owned properties hitting the market is keeping home prices depressed despite the mortgage market with regard to mortgage rates at an all-time low.

This article from Reuters really supports my above assertion. Here are some tidbits showing why home prices aren’t on the upswing and have yet in fact fallen again this year.

“We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010,” said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio.

“Last year was an anomaly, and not in a good way,” he said.

In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.

Five major banks eventually struck that settlement with 49 U.S. states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.

Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.

Although foreclosure starts were 50 percent or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo’s rose 68 percent and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011.

RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.

“The hangover from this crisis will far outlast the party of the boom years,” said Zillow chief economist Stan Humphries.

Getting through the remaining foreclosures and dealing with the resulting flood of homes on the market in the wake of the bank settlement is a necessary part of the healing process for the U.S. housing market, he added.

According to leading broker dealer Amherst Securities, some 9.5 million homes are still at risk of default and in February it said it expected to see the uptick in foreclosures start to hit in March and April.

There is other evidence that many of the foreclosures that did not happen in 2011 will happen this year.

The sentence from the article that rings true says this, “The answer to the housing crisis now is job creation.”

That is so true though with the current administration don’t hold your breath on job creation, or a mortgage and housing recovery.

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