US home repossessions spike in August to highest level since
start of mortgage crisis
Lenders took back more homes in August than in any month since the
start of the U.S. mortgage crisis.
The increase in home repossessions came even as the number of
properties entering the foreclosure process slowed for the seventh
month in a row, foreclosure listing firm RealtyTrac Inc. said
In all, banks repossessed 95,364 properties last month, up 3
percent from July and an increase of 25 percent from August 2009,
August makes the ninth month in a row that the pace of homes lost
to foreclosure has increased on an annual basis. The previous high
was in May.
Banks have been stepping up repossessions to clear out their
backlog of bad loans with an eye on eventually placing the
foreclosed properties on the market, but they can't afford to
simply dump the properties on the market.
Concerns are growing that the housing market recovery could stumble
amid stubbornly high unemployment, a sluggish economy and faltering
consumer confidence. U.S. home sales have collapsed since federal
homebuyer tax credits expired in April.
That's one reason fewer than one-third of homes repossessed by
lenders are on the market, said Rick Sharga, a senior vice
president at RealtyTrac.
"These (properties) are going to come to market, but very slowly
because nobody wants to overwhelm a soft buyer's market with too
much distressed inventory for fear of what it would do for house
prices," he said.
As a result, lenders are putting off initiating the foreclosure
process on homeowners who have missed payments, letting borrowers
stay in their homes longer.
The number of properties receiving an initial default notice -- the
first step in the foreclosure process -- slipped 1 percent last
month from July, but was down 30 percent versus August last year,
Initial defaults have fallen on an annual basis the past seven
months. They peaked in April 2009.
Still, the number of homes scheduled to be sold at auction for the
first time increased 9 percent from July and rose 2 percent from
August last year. If they don't sell at auction, these homes
typically end up going back to the lender.
More than 2.3 million homes have been repossessed by lenders since
the recession began in December 2007, according to RealtyTrac. The
firm estimates more than 1 million American households are likely
to lose their homes to foreclosure this year.
In all, 338,836 properties received a foreclosure-related warning
in August, up 4 percent from July, but down 5 percent from the same
month last year, RealtyTrac said. That translates to one in 381
The firm tracks notices for defaults, scheduled home auctions and
home repossessions -- warnings that can lead up to a home
eventually being lost to foreclosure.
Among states, Nevada posted the highest foreclosure rate last
month, with one in every 84 households receiving a foreclosure
notice. That's 4.5 times the national average.
Rounding out the top 10 states with the highest foreclosure rate in
August were: Florida, Arizona, California, Idaho, Utah, Georgia,
Michigan, Illinois and Hawaii.
Economic woes, such as unemployment or reduced income, are now the
main catalysts for foreclosures.
Lenders are offering a variety of programs to help homeowners
modify their loans, but their success rates vary. Hundreds of
thousands of homeowners can't qualify or fall back into
The Obama administration has rolled out numerous attempts to tackle
the foreclosure crisis but has made only a small dent in the
problem. Nearly half of the 1.3 million homeowners who enrolled in
the Obama administration's flagship mortgage-relief program have
The program, known as Making Home Affordable, has provided
permanent help to about 390,000 homeowners since March 2009.
Regardless, many troubled borrowers have seen their efforts to get
a loan modification stymied.
Larry Book of Winter Garden, Fla., was one packet away from a
permanent loan modification from Chase under the Obama
administration's foreclosure prevention plan after more than a year
of back and forth and one failed attempt.
But his modification never went through. Instead, his loan was
transferred from Chase to IBM Lender Business Process Servicers in
July and he was told he owed $9,562.62 and must bring his mortgage
current by Sept. 15 or foreclosure proceedings will begin.
"It just becomes too exhausting," Book said about the modification
process. "That's why some people walk away. But I've invested too
much and given up too much to just let it go."
Written by: AP Real Estate Writer J.W. Elphinstone