Foreclosures are UP and Back in the Headlines Again

According to RealtyTrac, the poster-child for the foreclosure crisis being “almost” over for the last five or so years, as reported by National Mortgage News, says that foreclosure starts have “jumped 18% in March, from February, to 94,100, and were up 7% from a year earlier.”

RealtyTrac also reports that the rise in foreclosures has occurred “across all investor categories,” AND, “in judicial and nonjudicial states,” AND, “among all stages of delinquency.”

Yeah, well I’d have to call that “across the board,” wouldn’t you say?  I mean, what else is left after taking into account all the states, all the stages of delinquency and all the investor categories?  Nothing, is the answer to that question.

RealtyTrac also reported that, “bank repossessions hit a 27-month high in April at 45,168, up 50% from a year earlier.”

Up by 50 percent over last year.  Did any of this actually surprise anyone at RealtyTrac or anywhere else for that matter?  How is that even possible?  It sure as heck didn’t even come close to surprising me, as my readers know.

The story also brought up that a significant number of the homeowners who were granted loan modifications in 2010 are now facing rate resets… because their interest rates were only reduced for five years… and the Treasury Department has warned that could cause further defaults. 

Boy, those guys at the Treasury Department are wicked insightful, aren’t they? 

The National Mortgage News story ended by saying: “Many home equity lines of credit also are due to reset this year, a double whammy that could create hardships due to higher payments.”

The ability of these folks to see around corners is flat out non-existent.

The very same day the above story was released, The Wall Street Journal reported that borrowers who took out home-equity lines of credit (HELOCs) are now struggling to make the payments as the loans adjust to being fully amortizing loans, after years of only requiring borrowers to make interest-only payments.

According to data provided by credit-reporting firm Equifax, homeowners who took out HELOCs back in 2004, were at least 30 days late on $1.8 billion worth of loans just four months after the loans started requiring that principal be included in their monthly payments.  That’s a 4.3 percent delinquency rate, but the WSJ pointed out that it represents a huge increase from the 2.7 percent delinquency rate that was occurring only one month before the loans reached the end of their interest only period, which typically is 10 years.

That represents 4.3 percent of the balance on outstanding 2004 Helocs, according to Equifax “”a sharp rise from the 2.7 percent delinquency rate on those same Helocs one month before borrowers reached the end of the interest-only period, which typically lasts for 10 years, the Journal reported.

The WSJ’s conclusion is that as a result, banks are facing billions in losses as a result of HELOC defaults, and it should be obvious to everyone that it can only lead to a continuing of the flood of foreclosures, which is now in its eighth year.  When the interest-only period of a HELOC ends, monthly payments can rise by hundreds of dollars a month, so absent any sort of reduction/modification, more defaults should be viewed as a fate accompli.   

They’re not viewed that way, but they sure as heck should be.

All that Dennis Carlson, deputy chief economist at Equifax could bring himself to say was: “There are some early signs of choppy waters ahead.”

LMAO.  People often comment that they think I’m a decent wordsmith… but Dennis is a true master at turning a phrase.  Ah well, I suppose it just goes to show you that one man’s “choppy waters,” are another man’s tsunami in Thailand.

Experian also looked at delinquency rates on other consumer debts like mortgage, credit cards, auto loan and auto lease, finding that those delinquent on HELOCs were also more likely to be delinquent on other loans.  I don’t know why but that “across the board” phrase keeps coming to mind, because none of this is representative of a small pocket or some sort of anomaly, it’s almost as simple to understand as A-B-Cs.  It’s the same economic downturn that we’ve all been living through since 2007.

The bottom-line is that the foreclosure crisis isn’t anywhere close to over… in fact, it’s just entering its next phase, and since we continue to pretend that it’s not happening, who knows how many phases there are to this tragic play.

Mandelman out.