Dan Levy – “U.S. Foreclosures Rise 55%, Bank Seizures Reach High”


U.S. Foreclosures Rise 55%, Bank Seizures Reach High

Dan Levy | August 14, 2008

Banks repossessed almost three times as many U.S. homes in July as a year earlier and the number of properties at risk of foreclosure jumped 55 percent as falling prices made it harder to sell or refinance.

Bank seizures rose 184 percent to 77,295, the steepest increase since reporting began in January 2005, RealtyTrac Inc., an Irvine, California-based seller of foreclosure data, said today in a statement. More than 272,000 properties, or one in 464 U.S. households, got a default notice, were warned of a pending auction or foreclosed on.

“It’s getting worse,” Rick Sharga, RealtyTrac’s executive vice president for marketing, said in an interview. “The number of properties that have been foreclosed on by the banks and still haven’t sold is the highest we’ve ever seen.”

Nevada, California and Florida had the highest rates. Total foreclosure filings rose 8 percent from the previous month to 272,171, just shy of the record 273,001 set in May, said RealtyTrac, which has a database of more than 1.5 million properties. Through July, 775,244 properties were owned by banks, compared with about 445,000 for all of 2007 and about 224,000 in 2006, Sharga said.

Foreclosures are depressing home prices, contributing to job losses and weakening consumption as fewer people borrow against the value of their home, New York-based analysts at Lehman Brothers Holdings Inc. said Aug. 7.

U.S. home prices fell 15.8 percent in May, the most since at least 2001, according to the S&P/Case-Shiller home-price index. One-third of home sellers in the second quarter lost money, Zillow.com, a Seattle-based provider of home valuations, reported this week.

Seizures Increase

Bank seizures, known as real estate-owned or REO properties, are the “fastest growing segment of foreclosure activity,” James Saccacio, chief executive officer of RealtyTrac, said in the statement. The REO properties in the company’s database represent about 17 percent of the inventory of existing homes reported in June by the National Association of Realtors, he said.

Default notices in July increased 53 percent from a year earlier and auction notices rose 11 percent, RealtyTrac said.

The June total of 252,363 reflected an “artificial depression” due to new state laws designed to help homeowners avoid foreclosure, Sharga said.

New York, California, Massachusetts, Colorado and Maryland are among the states that have imposed temporary foreclosure moratoriums or delayed proceedings by as many as 150 days. Those laws will “likely delay the inevitable that most of those properties go into foreclosure,” Sharga said.

Mortgage Relief

National legislation is designed to help up to 400,000 homeowners refinance their adjustable-rate mortgages into fixed- rate loans. That bill, backed by the Federal Housing Administration, may help borrowers who take advantage of the state relief, Sharga said. Almost one-third of homeowners who bought in the last five years owe more on their mortgages than their houses are worth, Zillow reported.

Foreclosures could put 8.4 percent of total U.S. homeowners, or 12.7 percent of homeowners with mortgages, out of their homes, according to New York-based analysts at Credit Suisse. About 53 percent of subprime borrowers, those with poor or incomplete credit histories, will have negative equity in their homes this year, and that percentage will rise to 63 percent next year, the analysts said in an April 23 report.

Nevada had the highest foreclosure rate for the 19th consecutive month. One in every 106 households was in some stage of foreclosure in July, and bank seizures rose almost fivefold from a year earlier. Filings rose 15 percent from June and 97 percent from July 2007, according to RealtyTrac.

California, Florida

California had the second-highest rate, with one filing for every 182 households. Bank repossessions rose more than fivefold from a year earlier. Filings increased 5 percent from June and rose 85 percent from July 2007, RealtyTrac said.

Florida had the third-highest rate, one filing for every 186 households, while bank repossessions rose almost eightfold. Filings rose 14 percent from June and 139 percent from July 2007.

Arizona had the fourth-highest rate, followed by Ohio, Georgia, Michigan, Colorado, Utah and Virginia, RealtyTrac said.

California led with the most total filings, followed by Florida, Ohio, Arizona, Michigan, Texas, Georgia, Nevada, Illinois and New York.

New York had the 30th highest rate, one in 1,282 households. New Jersey had the 19th highest rate, one in every 751 households.

`Saturation’ Point?

For the first time since April, Stockton, California, didn’t have the highest metropolitan area foreclosure rate, a sign that “it may have finally found its point of saturation,” Sharga said.

Cape Coral-Fort Myers, Florida, had the highest rate of the 230 metro areas surveyed, one filing for every 64 households, more than seven times the national average. Three California cities followed: Merced, Stockton and Modesto. Las Vegas was fifth.

Three more California areas — Riverside-San Bernardino, Bakersfield and Vallejo-Fairfield — ranked sixth through eighth, Fort Lauderdale, Florida was ninth and Phoenix was 10th, RealtyTrac said.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net

Published in: on August 16, 2008 at 11:41 AM  Leave a Comment  

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