After a relative reprieve that lasted longer than a year, evictions resulting from foreclosures and the subsequent repossessions by mortgage lenders and servicers are once again picking up steam. According to real estate analytics firm RealtyTrac, the foreclosure repossession rate in November 2012 was 11 percent higher than in October, and five percent higher than a year ago.
The uptick in foreclosure activity is a grim reminder that the huge backlog of distressed properties caused by the great real estate crash of the first decade in this century still looms uncomfortably large. Many of the pending foreclosures in the pipelines of law firms and corporate legal teams representing lenders have been sitting here for more than a year.
Time to Pay the Piper
Many of the foreclosure repossessions and sheriff sales expected to take place in the months to come have been frozen for a number of reasons, most notably due to the National Mortgage Foreclosure Settlement Agreement signed by the five biggest lenders in the United States earlier this year. The agreement was preceded by a judicial investigation into questionable practices that put a virtual halt to the foreclosure process for quite a few months.
Now that the major lenders are complying with the provisions of the agreement, financial analysts and observers worried that a flood of foreclosures could materialize and throw a wrench into the engine of housing recovery. The November jump in foreclosure activity is enough to make anyone concerned, especially since the national foreclosure rate had dropped for the previous 26 months. For many homeowners who knew that their options had practically run out, the reckoning may be near.
There is Still Hope
The RealtyTrac report was somber insofar as noting that the jump in repossessions may also mean that banks are ready to file new foreclosures now that they are adjusting to the provisions of the agreement. This could be the case in major regional housing markets in Arizona, California, Florida, and Nevada.
There is a strong possibility that lenders will not pursue foreclosures as aggressively as they did in the past. They are being closely watched by monitors who were appointed as per the terms of the foreclosure agreement. Investor demand in hard-hit states is still a bright point of the recovery, and this could result in a preference for short sales in lieu of foreclosure. Plus, banks are now required to actively offer borrowers opportunities to modify their mortgages and hopefully stay in their homes.