The Foreclosure Crisis is Dead.  Long Live the Foreclosure Crisis.

RealtyTrac is at it again.  The company’s June foreclosure report is inspiring feel good articles all over the place, once again proclaiming the end of the housing and foreclosure crisis.  The report shows foreclosures nationwide down by 11 percent for the first six months this year, as compared with the first six months of last.

Now, don’t get me wrong… I do love a parade… and it’s not that I’m trying to be a porcupine in anyone’s balloon factory… it’s just that I’m less impressed with the news about the national average foreclosure rate going down by 11 percent… especially considering that the crisis we’re talking about is now a solid eight years old.

Here’s what I’m talking about…

According to RealtyTrac, foreclosure activity in Central Ohio increased by 10 percent this June over the prior year.  They say it’s mostly due to a 22 percent increase in newly filed foreclosure lawsuits.  And statewide the number of foreclosures initiated also increased by 10 percent as compared with the first half of 2015.

Predictably, in my mind anyway, RealtyTrac SVP, Daren Blomquist popped out of his corporate cuckoo clock to lay the blame for Ohio’s rising foreclosures on the state’s foreclosure process requiring judicial approval. 

(Ah ha!  So, it’s that darn judicial approval that’s causing foreclosures.  Now I get it.  I just don’t know what I’d do without Daren to explain things to me.)

Okay, so since RealtyTrac is also reporting that nationwide, foreclosure filings during the first half of this year were down by 11 percent compared with the first half of 2015, I wonder if that decline means less judicial approval is going on.  I mean, if judicial approval caused the number of foreclosures in Ohio to rise recently, then doesn’t stand to reason that foreclosures fell nationwide because of less judicial approval in the mix? 

I have no idea, the whole thing makes me dizzy.

So, let’s move on… to Massachusetts, where according to The Warren Group, foreclose petitions, “rose in Massachusetts during May for the 27th consecutive time on a year-over-year basis.”

Translated into actual numbers, that means that in May of this year lenders filed 1,130 petitions to foreclose in Massachusetts, a 28.7 percent increase over the number filed in May of 2015.  (And in Massachusetts they don’t have a judicial foreclosure process, so Daren can’t pull that card this time around.)

Wow, that’s a pretty sizable year-over-year increase, Considering that the foreclosure crisis started eight years ago, give or take, shouldn’t I be expecting the number of foreclosure filings to have started to level off or (perish the thought) started to decline by now?

And get this… Massachusetts foreclosures in 2015 compared with 2014 absolutely skyrocketed, increasing by an almost inconceivable 55 percent year-over-year, according to Timothy Warren Jr., CEO of The Warren Group.  On July 8, 2016, the Sentinel & Enterprise quoted him as saying, “… it seems unlikely that the total number of foreclosure starts will start to decrease in 2016.”

Ya’ think, Tim?  I wouldn’t exactly describe that sort of forecast as going out on any sort of limb, Mr. Warren, but thanks for weighing in anyway.

Turning to Chicago… a July 14th headline announcing RealtyTrac’s Market Report for June, 2016 reads: “Chicago Foreclosures Not Going Anywhere.”

The article goes on to say that the report shows that Chicago has seen “no significant  change in (foreclosure) activity,” in recent months.  The report did also say that loan defaults in the Chicago area have continued to decline, so assuming the economy continues to improve, perhaps foreclosures will start coming down in the Windy City in the years to come.

Another July 14th headline, this time about foreclosures in New Jersey proclaims: “New Jersey continues to lead the nation in foreclosures.”  And RealtyTrac’s June report shows that New Jersey’s foreclosures went up by 7 percent during the first six months of this year compared with the first half of 2014.

What does RealtyTracs Daren Blomquist have to say about that?  Can’t you guess? 

“New Jersey is one of those outliers that is bucking the national trend, unfortunately,” says Daren, before going on to echo what he said about Ohio’s numbers, blaming the state’s judicial foreclosure process for the increase.  His company’s report states that one out of every 102 homes in New Jersey is in foreclosure, while nationally it’s one in 250.

Actually, when it comes to New Jersey, Daren is hard pressed to come up with an uplifting soundbite for the media, saying:

“…it is hard to pick out too much silver lining in this report. New Jersey is not doing well when it comes to the foreclosure issue still. Foreclosure activity is up, and it is the highest rate in the country.”

Oh, come now Daren… you can do better than that, I know you can.  Maybe he’s getting lazy or just didn’t have the time to invent a silver lining this time out.  It’s summer, so maybe he was on his way out of the office on vacation when this report was published and he just didn’t have time to come up with something positive while at the same time at least remotely plausible.

And then there’s New Mexico, which is yet another state where foreclosures are going up.  Foreclosures in that state went up by 14 percent for the first six months of this year compared with the first six months of last.  So, the beat goes on… the beat goes on.

Looking at the larger picture, and forgetting all comparisons, the OCC’s latest report shows that during the first quarter of this year, 58,900 new foreclosures were initiated in this country.  That’s 60,000 NEW FORECLOSURES over the first three months of 2016.  That’s roughly 650 every single day, 7 days a week and including holidays.

Should anyone be bragging about that sort of thing eight years after the crisis began?  It’s 2016, and we’re still losing 27 homes an hour, 24 hours a day.  I don’t know about how anyone else feels about that, but it makes me want to go curl up with a good bottle of something at least 40 proof and some ice.

Of course, during the first quarter of 2015, there were 83,000 new foreclosures initiated nationally, according to the OCC, so from that perspective I suppose the 60,000 number looks like real improvement, but to me… eight years into this mess… well, I’ll just say that we should be doing a whole lot better at stopping foreclosures by now.

The OCC also reported that during the first quarter of this year, servicers also completed roughly 35,000 loan modifications, so thank God for that because if they hadn’t modified those loans, just think how many more foreclosures would be showing up on RealtyTrac’s scoreboard today. 

I guess I can’t be certain, but I feel like I could stop almost anything bad from happening given billions of dollars, eight years, and the legislative power of the Federal Government.  Maybe I’m wrong about that… maybe the foreclosure crisis is closer to the war in Afghanistan than I think and there are no real solutions available?  I guess it’s possible, but it doesn’t seem like it.

RealtyTrac’s report also shows that in June of this year, there were 94,469 homes in this country with a foreclosure filing (including: default notices, scheduled auctions or bank repossessions).  Now, the report spins that into a positive by making comparisons to prior years, but I don’t care what they want to compare that number to… again, it’s still way to high especially considering that we’ve had eight years to work on the problem.  (Like the kids all say when texting: IMHO.)

And get this… in the second quarter of this year, according to the same RealtyTrac report, “there were a total of 280,989 U.S. properties with foreclosure filings.”

Good Lord… 300,000 foreclosure filings a quarter is 1.2 million a year, and if that turns out to be anywhere near the real deal, then I would have to say that we’re not doing nearly as well as anyone thinks.

Yes, we’re doing better than in the past.  We have to be doing better… in the early years we were absolutely abysmal at preventing foreclosures, so yes… things are better… more loans get modified and the modifications are better than they used to be as well.

But, as far as being anywhere close to “out of the woods,” as they say… we’re just not. 

Last week I noticed that the Hardest Hit Funds just gave Rhode Island another $36 million to help combat foreclosures in that tiny sliver of a commonwealth.  Plus, the state says that the money is expected to last two years, which leads me to believe that we’ll still be talking about this in two years from now. at least, because let’s face it… if you can’t fix Rhode Island, you’ve got absolutely no shot at fixing New Jersey or New York.

However, I think Mortgage Daily’s most recent press release on the subject, which only just came out on July 26th, really did the most to make me ill, so here it is and I think it’s a good way to wrap this up for now…

“While the foreclosure rate fell last month, 30-day delinquency climbed for the third month in a row and foreclosure starts rose for the second straight month.  As of this year’s midpoint, there were 2,736,000 U.S. residential loans that were either at least 30 days past due or were in the process of foreclosure.”

See what I mean… a little over 2.7 MILLION HOMES in this country over 30 days delinquent or in foreclosure?  But the foreclosure crisis is coming to an end, Mr. SVP Blomquist?  Things are looking up, are they Derwood?  (Do you see why I can’t help but make fun of that guy?)

Of course, Mortgage Daily’s release also presented the obligatory comparison needed to stop people from jumping off of bridges, and the like…

“The count deteriorated compared to May 31, 2016, when there were 2,727,000 non-current loans. But the number improved from 3,183,000 a year earlier.”

So, I guess it’s… YAY!  We’re down below the $3 MILLION HOMES at risk of foreclosure mark!  Go fetch the balloons and I’ll hire a marching band.

SO, WHAT’S MY POINT?  AM I JUST TRYING TO DEPRESS PEOPLE? 

No, actually I’m not.  In fact, there’s nothing I’d like to do more than report that the foreclosure crisis is over or even nearly over.  The problem is that it simply doesn’t appear to be the case and I don’t see any upside that would result from spinning the data into positive affirmations.  In fact, denial of the problem is a HUGE part of how we got here in the first place.  (That was directed at you, Mr. Bernanke, in case you’re reading this.)

My point… or maybe I should say, my goal for this article is to get those reading it to realize that we should not be allowing the HAMP loan modification program to sunset at the end of this year, as scheduled.  It’s been extended every past year that it was scheduled to end… and this time should be no different than the others.

We are simply not over the foreclosure crisis yet and letting HAMP expire can ONLY make things worse… it CANNOT make anything better.  Plus, HAMP still has plenty of money… it’s the one federal program that’s been underspending from day one, so we don’t need to fund it… it’s got plenty of funds left to continue helping things be better than they’d otherwise be… so why let it end and risk seeing thousands of reported modifications turning into thousands of reported foreclosures. 

I’m serious about this… we are not ready to fly without HAMP.  It needs to be extended for at least another year or two, but that won’t happen unless we all make some noise.  If we don’t speak out to our elected representatives in Washington about this now, we could see the end of HAMP only a few months from now and that would be a bad thing for millions of American homeowners who are still at risk of losing homes to foreclosure.

I’m not saying that HAMP has been wonderful in any sense of the word, but it did accomplish a lot.  While HAMP may have only saved less than 2 million homes from foreclosure, it also led to banks doing more in-house modifications by providing the framework upon which other programs were later introduced.

And, although not true when HAMP was first introduced, today HAMP guidelines have some real teeth behind them and servicers know it.  Today, if you don’t receive a reason for a loan mod denial, you can do something about it.  Today, the servicer must allow you 30 days to appeal a decision.  And today, if you’re dual tracking, your playing with fire.

None of those things were true back in 2009… it’s taken time to create new laws and federal agencies to support what HAMP was created to accomplish… we’ve come along way, even if we haven’t come far enough, but to let HAMP go away now would risk a return to something worse… and there’s no possibility that getting rid of HAMP can make anything better.

The only people who would benefit from HAMP coming to an end are the banks and servicers that would no longer have HAMP rules to follow… they’d be right back to handling things as they see fit exclusively.  And I don’t care what they or anyone else says… it’s just too early to risk that.

I hope people will pass this article along to others, spread the message far and wide that we need to take a few moments out of our day to let those in Congress know that we’re paying attention… and don’t want to see HAMP end in 2016.  It couldn’t hurt to write to Hillary too. 

Whatever you decide to do… if you agree with my point, it’s really important that you do it soon and that you get others to do it too.  If we don’t all take action on this point, the bank lobbyists are going to persuade Congress that we simply don’t need HAMP any longer… that they can handle things from here without those bothersome HAMP rules and guidelines.

I hope I’ve made my case here, I really do.  We’ve come so far… endured eight years of hell on earth… lost just shy of 10 million homes to foreclosure… and spent trillions to prevent another Great Depression.  Now is NOT the time to start canceling the programs that helped get us here.  Now is not the time to throw away the rule book that took so long to create.

Now is the time to stay on target… doing things that can make things better, and not those that risk making things worse.

 

Mandelman out.