Is this a False Bottom in the Foreclosure Arena?

Foreclosures down slightly in September, loan modification process to be streamlined

October 15, 9:01 AM

Mortgage and Housing Examiner

Shelby Bateson

The rate of foreclosures finally appears to be moderating slightly. While the third quarter numbers were the highest on record, totaling 1 of every 136 houses in some level of the foreclosure process, September numbers finally showed a slight drop.

According to Realty trac, the rate of foreclosure filings dropped 4% in September, from the high numbers shown in August.  This is not reason to celebrate yet. September numbers were still the third highest on record, but a 4% drop is significant, indicating that perhaps lenders are starting to work through inventories, and perhaps also finally starting to modify more loans as opposed to foreclosing.

Nevada still leads the country with 1 out of every 24 homes in default. California, Florida, Arizona, Nevada, Illinois and Michigan accounted for 62% of U.S. foreclosure activity in the third quarter, with a total of 580,000 properties subject to foreclosure filings.  On the upside, we are hearing that the report card issued by the US Treasury department, regarding bank modifications was not good.

Lenders did reach the 500,000 number of loans in the three month HAMP trial modification process that the Treasury department was striving for. However, only a very disappointing 17,000 of those modifications have been made permanent.  Apparently the issue with getting trial modifications converted to permanent is that most home owners do not realize they must submit more paperwork to get this accomplished.

Laurie Maggiano, policy director at the U.S. Treasury Department’s Office of Homeownership Protection, said the government is introducing a new, streamlined application with just two documents to be signed, acknowledging the original paperwork was onerous.  Speaking at a session of the conference in San Diego, Maggiano said the government also intends to have the Internal Revenue Service use its formidable computer system to process these applications and get a “yes” or “no” answer back to servicers in two days.

Perhaps if lenders do finally get their acts together regarding modifications, we will actually start to see the number of foreclosure filings drop. There are still issues to be worked through, such as unemployment, but news is that the administration is working on that.