Five major banks eventually struck that settlement with 49 U.S.
states in February. Signs are growing the pace of foreclosures is
picking up again, something housing experts predict will again weigh on
home prices before any sustained recovery can occur.
Mortgage servicing provider Lender Processing Services reported
in early March that U.S. foreclosure starts jumped 28 percent in
More conclusive national data is not yet available. But watchdog
group, 4closurefraud.org which helped uncover the "robo-signing"
scandal, says it has turned up evidence of a large rise in new
foreclosures between March 1 and 24 by three big banks in Palm Beach
County in Florida, one of the states hit hardest by the housing crash.
Although foreclosure starts were 50 percent or more lower than
for the same period in 2010, those begun by Deutsche Bank were up 47
percent from 2011. Those of Wells Fargo's rose 68 percent and Bank of
America's, including BAC Home Loans Servicing, jumped nearly seven-fold
-- 251 starts versus 37 in the same period in 2011. Bank of America said
it does not comment on data provided by other sources. Wells Fargo and
Deutsche Bank did not comment.
Housing experts say localized warning signs of a new wave of
foreclosure are likely to be replicated across much of the United
Online foreclosure marketplace RealtyTrac estimated that while
foreclosures dropped slightly nationwide in February from January and
from February 2011, they rose in 21 states and jumped sharply in cities
like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).
RealtyTrac CEO Brandon Moore said the "numbers point to a
gradually rising foreclosure tide as some of the barriers that have been
holding back foreclosures are removed."
One big difference to the early years of the housing crisis,
which was dominated by Americans saddled with the most toxic subprime
products -- with high interest rates where banks asked for no money down
or no proof of income -- is that today it's mostly Americans with
ordinary mortgages whose ability to meet payment have been hit by the
hard economic times.
"The subprime stuff is long gone," said Michael Redman, founder
of 4closurefraud.org. "Now the folks being affected are hardworking,
everyday Americans struggling because of the economy."
"HARD TO CATCH UP"
Until December 2010, Daniel Burns, 52, had spent his working life
in the trucking industry as a long-haul driver and manager. When daily
loads at the small family business where he worked tailed off, he lost
Unable to cover his mortgage, Burns received a grant from a
government fund using money repaid from the 2008 bank bailout. That
grant is due to expire in early 2013 and Burns is holding out on hopeful
comments from his former employer that he might get his job back if the
"If things don't pick up, I will be out on the street," he said,
staring from his living room window at two abandoned houses over the
road in the middle-class Cleveland suburb of Garfield Heights, the noise
of traffic from a nearby Interstate highway filling the street.
Underscoring the uncertainty of his situation, Burns' cell phone
rings and a pre-recorded message announces that his unemployment
benefits are due to be cut off in April.
A bit further up the shore of Lake Erie, Cristal Fell, who works
night shifts entering data for a trucking company in Toledo, has fallen
behind on her mortgage a second time because her ex-husband lost his job
and her overtime was cut.
"Once you get behind it's so hard to catch up," she said.
Fell, a mother of four, hopes the economy will gather enough
speed to help her avoid any risk of losing her home. Her ex-husband has
found a new job and she is getting more overtime, so she hopes she can
catch up on her mortgage by the fall.
Burns and Fell are the new face of the U.S. housing crisis:
Middle class, suburban or rural with a conventional 30-year fixed
mortgage at a reasonable interest rate, but unemployed or underemployed.
Although the national unemployment rate has fallen to 8.3 percent from
its peak of 10 percent in October 2009, nearly 13 million Americans
remain jobless, meaning many are struggling to keep up with their
Real estate company Zillow Inc says more than one in four
American homeowners were "under water" or owed more than their homes
were worth in the fourth quarter of 2011. The crisis has wiped out some
$7 trillion in U.S. household wealth.
"We're seeing more people coming through who have good loans with
reasonable interest rates," said Ed Jacob, executive director of
non-profit lender Neighborhood Housing Services of Chicago Inc, which
provides foreclosure counseling. "But in many households only one person
works now instead of two, or they had their hours cut."
"The answer to the housing crisis now is job creation."
EARLY SIGNS OF UPTICK?
Zillow expects the resurgence in foreclosures this year, combined
with excess inventory of unsold, bank-owned homes will contribute to a
3.7 percent national decline in prices before the market hits bottom in
2013 and stays there until 2016.
"The hangover from this crisis will far outlast the party of the boom years," said Zillow chief economist Stan Humphries.
Getting through the remaining foreclosures and dealing with the
resulting flood of homes on the market in the wake of the bank
settlement is a necessary part of the healing process for the U.S.
housing market, he added.
According to leading broker dealer Amherst Securities, some 9.5
million homes are still at risk of default and in February it said it
expected to see the uptick in foreclosures start to hit in March and
There is other evidence that many of the foreclosures that did not happen in 2011 will happen this year.
A January report by the Neighborhood Economic Development
Advocacy Project in New York found that in the first half of 2011 the
number of 90-day pre-foreclosure notices in New York City outnumbered
court foreclosure actions by a ratio of 14 to one, indicating that while
proceedings were initiated against many homeowners, they were left
"Now the banks have a settlement, foreclosure numbers for 2012 are going to be high," said NEDAP co-director Josh Zinner.
A recent survey by the California Reinvestment Coalition, an
umbrella group of nearly 300 non-profit groups in the state, of member
agencies found 75 percent of respondents expected increased demand for
their foreclosure prevention services in 2012 but more than a third had
to scale back services because of funding cuts.
"Funding is a major concern given what our members expect for this year," said associate director Kevin Stein.
All this has non-profits intensifying calls for the Federal
Housing Finance Agency to drop its opposition to allowing the
government-backed mortgage giants Fannie Mae and Freddie Mac it
regulates to reduce principal for underwater homeowners.
Principal reduction involves reducing the amount borrowers owe in
order to make a loan modification affordable for struggling homeowners.
Republicans and the FHFA oppose principal reduction because of the risk
of "moral hazard"- that homeowners who do not need help will seek to
abuse largesse and have their mortgages reduced too.
ESOP in Ohio engages in "hits" on Chase branches -- they say
Chase is the least accommodating major bank when it comes to working
with struggling homeowners -- where they try to hand letters to bank
mangers calling on chief executive Jamie Dimon to lobby FHFA head Edward
DeMarco for principal reductions. A Chase spokeswoman said the bank has
made "extensive efforts" to work with homeowners, helping 775,000
borrowers stay in their homes since early 2009, avoiding foreclosure
"more than twice as often as we have had to foreclose." Housing groups
like ESOP maintain, as they have throughout the housing crisis, that
unless the FHFA embraces widespread principal reduction, many more under
water borrowers face losing their homes.
"Until banks engage in meaningful principal reduction as a matter
of course," ESOP's Seifert said after a recent protest at a Chase
branch in Cleveland, "this crisis will not end."
(Reporting By Nick Carey; Editing by Martin Howell and William Schomberg; Desking by Andrew Hay)