Banks Threaten More Homeowners With Foreclosure

Mortgage delinquencies are falling and the demand for real estate is on the rise due to record-low borrowing costs and tight inventories, according to Bloomberg.

The bad news for homeowners is that banks are now notifying more households that they face foreclosure in a final attempt to further accelerate a rebound in the housing market.

Economics professor at George Mason University Anthony B. Sanders said, “You have to get to the point where the market can heal itself and foreclosures and price adjustments are the only way that can happen.”

Foreclosures have been stalled since the end of 2010 when federal regulators and state attorneys general began investigating alleged bank abuses. After a $25 billion settlement from the nation's five largest banks this past February, foreclosures have picked up the pace again.

Daren Blomquist, a spokesman for Irvine – a California-based RealtyTrac said that the latest slew of foreclosures don't necessarily represent a bad omen for the housing market. Blomquist says the market has strengthened to the point where it is better “equipped to absorb this additional foreclosure inventory.” 

From Bloomberg:

“More price weakness could ignite more defaults as more underwater homeowners think that prices aren’t going to rise anytime soon,” Zandi said yesterday in an e-mail. “The threat is that a vicious cycle is re-ignited. I don’t expect this to happen, but it is a risk.”

Another dip in home prices could push more homeowners underwater just as a recovery was starting to take hold. In the first quarter, about 11.4 million properties, or 23.7 percent of homes with a mortgage, had negative equity, CoreLogic said in a report today. That was down from 12.1 million, or 25.2 percent, in the fourth quarter, as prices began to rise in hard hit areas such as Arizona, the Santa Ana, California-based company said.

Analysts say this will hurt for the next year, but is the only way to insure the housing market and our nation's economy will be able to return to a firm foundation.