Foreclosures Expected to Continue Stifling Effect on Homeowners

by 05 Apr 2012

( --4/5/2012 --  Mortgage lenders in the United States are stepping up the pace of foreclosures that were halted for about a year due to the investigation and lawsuit related to “robo-signing.” The brief respite enjoyed by the American housing market in the last few months is set to finish, even as the proverbial green shoots of home sales and price stabilization take place.

Some foreclosures were halted even before the robo-signing investigation started a year ago. The inquiry was ordered by several attorney generals across many states, and it focused on the practices of five major lenders that signed legal foreclosure filings at a virtually automated pace. This questionable practice of signing documents and foregoing proper review by bank officers or corporate attorneys managed to put a stop to the hectic foreclosure machine that started back in 2008.

Real estate analysts and housing activists now fear that 2012 will bring a lot of pain to homeowners who were able to hold on to their homes for a little longer.

The Foreclosure Machine Reawakens

Mortgage and real estate analytic firms are keeping a close eye on the pace of foreclosures now that the settlement agreement has been signed. Initial foreclosure filings served by lenders on American homeowners increased 28 percent in January, according to a major mortgage servicer. An activist group in Florida is keeping close tabs on foreclosure activity at the Palm Beach County judicial complex, and the group claims that the court clerks are getting busier with new filings.

On a national level, foreclosures remained stable during 2011 –the year in which the robo-signing investigation and lawsuit took place. A closer look at metropolitan areas where the bursting of the housing bubble hit the hardest indicates that foreclosures are picking up at a very fast pace.

Miami and Tampa are just two of the Florida cities where new foreclosures are rapidly rising. The increase of new filings in Miami for January was recorded at 53 percent, while in Tampa it was a somber 64 percent.

Home Prices Will Suffer

While the most damaging effect of the foreclosure machine is that homeowners will be evicted from their properties, the real estate economy and the long-awaited housing recovery also stand to suffer.

Online real estate data firm Zillow expects that a new wave of foreclosures will contribute to a drop in median home prices of about 3.7 percent. In addition to this unwelcomed decrease, Zillow also expects that prices could stagnate for a few years as long as foreclosures continue.

The drop in home prices has slowed down in the last few months; a fact that some analysts and investors hoped would lead to an eventual period of stability in prices. With this new development related to the increased pace of foreclosures, analysts are worried that investors may shy away from taking advantage of record low prices and equally low mortgage interest rates.


Should CFPB have more supervision over credit agencies?