Foreclosures Increase in 3rd Quarter Due to Reduced Loan Modification Help – Irvine Real Estate – Irvine Homes for Sale

by Robert Mack on December 31, 2010

in Buyers, Latest News, Sellers

Foreclosed homes saw an increase over the summer due to a drop in the number people receiving assistance in lowering their monthly mortgage payments, according to a new report from the Office of the Comptroller of the Currency and Office of Thrift Supervision. The report, released on Wednesday, revealed the number of homeowners receiving help in the third quarter dropped 17 percent from the previous quarter and a 32 percent from the same period in the prior year.

Foreclosures Rose 11.2 Percent

The report found that 470,000 homeowners received help either directly from banks or through government programs in the July-September quarter. This huge drop in the number of people getting help with their mortgage loan is said to have had a huge effect on foreclosed homes.

According to the report, the number of completed foreclosures rose to nearly 245,000 in the third quarter. This represents an 11.2-percent increase from the previous three months.

Foreclosures Should Peak Next Year

While foreclosures were abundant in 2010 (Moody’s Analytics estimates there will be 1.8 million foreclosed homes in the U.S. this year), they are expected to increase next year. As noted by Moody’s chief economist, Mark Zandi, foreclosures should peak next year, reaching approximately 2.1 million.

One major reason foreclosures are expected to increase is because many were put on hold in 2010 due to the foreclosure freeze. With many national mortgage servicers encouraged to stop their processes while being investigated for the robo-signing scandal, many repossessions were halted.

Home Prices Expected to Keep Dropping

An increase in foreclosures has a direct effect on home prices as empty homes drive down property values. According to the report, the spike in foreclosed homes was a major reason why prices fell in 20 of the largest U.S. metropolitan areas in October from September.

Unfortunately, this trend is expected to continue into 2011 unless banks sort through delinquent borrowers and choose to modify their mortgages. While reports show some banks have already sorted through some borrowers to make the decision, because such a large percentage are underwater and would require that the banks write off a portion of the loan, many don’t want to modify.

The Success of Federal Modification Programs

Several government programs have been introduced over the past few years to assist in loan modifications, but some reports have argued that they have minimal success in getting the job done.

Of the most recent programs introduced, the FHA Short Refinance Program was created specifically to help homeowners who are underwater. However, due to narrow eligibility criteria, its potential for success is also being questioned.

Only time will tell what will come of the housing industry in 2011. However, with fewer modifications, increased repossessions and lowering home prices, the prospects of the market in the new year don’t look too promising.

It’s a shame that banks aren’t doing more to help these homeowners out! Less help from the bank equals more and more foreclosed or bank owned homes in Irvine, Orange Couny!

Posted on Irvine Orange County Real Estate Market News

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Post by Robert Mack

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