Blomberg: "Foreclosure Deal to Spur U.S. Home Seizures"
The $25 billion settlement with banks over foreclosure abuses may trigger a wave of home seizures, inflicting short-term pain on delinquent U.S. borrowers while making a long-term housing recovery more likely. Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year over allegations of faulty and fraudulent paperwork used to repossess homes. With today’s agreement, banks are likely to resume property seizures.
The backlog of foreclosures has trapped homeowners in properties they can no longer afford, depressed prices by increasing the number of abandoned properties and led banks to tighten mortgage credit standards because of uncertainty about their potential obligations. New foreclosures fell 46 percent in December from October 2010, when the investigation into the so- called robo-signing of mortgage documentation began, according to Irvine, California-based RealtyTrac Inc. The agreement will direct $17 billion to writing down debt to buffer some homeowners from foreclosure. About 11 million U.S. homeowners owe more on their mortgages than their homes are worth, according to CoreLogic Inc. (CLGX), a Santa Ana, California- based real estate data provider. That has limited their ability to sell or refinance and reduced the incentive to keep paying.
The surge of home seizures may drive down home values, at least for a while, in a fragile market. The number of new foreclosure filings fell 34 percent last year, according to RealtyTrac, building up a backlog of homes that now may flood the market with low-cost properties. “All of this will result in more foreclosure pain in the short term as some of the foreclosures that should have happened last year instead happen this year,” Daren Blomquist, a RealtyTrac vice president, said in an e-mail today. About 1 million foreclosures with be completed this year, up 25 percent from 2011, according to the firm.
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http://www.bloomberg.com/news/2012-02-09/foreclosure-deal-to-spur-new-wave-of-u-s-home-seizures-help-heal-market.html
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