Why foreclosures are good for the market

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By Tracy Harris

While the number of foreclosures fell to the lowest rate since 2007 last year, rates are beginning to rise as banks make up for delays caused by a robo-signing settlement signed earlier this year.

After 28 months of declining foreclosure rates, May and June rates crept higher, according to RealtyTrac, a foreclosure listing firm.

Locally, Oldham County foreclosure filings are up 15 percent over last year with 180 filings since Jan. 1, up from 152 filings during the same period last year.

But analysts say the rising rates will help the housing market recover.

“We have been waiting for this shoe to drop: lenders are finally catching up with all these delayed foreclosures from last year,” said Daren Blomquist, a RealtyTrac vice president. 

“These properties that are starting the foreclosure process are mostly homeowners who likely have been missing their payments for a year or more and just now are officially starting the foreclosure process,” Blomquist said. 

That process can take a long time — often almost a year from start to finish. 

The national average in 2011 was 348 days for a defaulting borrower to undergo the entire process, according to RealtyTrac, although that number is rising, too. 

In the second quarter of 2012, RealtyTrac found it took an average of 378 days for a home to complete the process — the highest since early 2007.

The upswing in foreclosures comes after five of the nation’s largest mortgage lenders settled with 49 state attorneys general in February for a total of $25 billion.

According to Kentucky Attorney General Jack Conway, $58.75 million of that settlement will be directed to consumers in the Commonwealth.

The funds will provide assistance for loan-term modifications, principal write-downs and refinancing. 

Consumers who were foreclosed upon using robo-signed documents between 2008 and 2011 may be eligible for direct payments. 

Robo-signing is a practice where banks did not properly review foreclosure paperwork and applied automatic signatures to court documents.

“This is a first step in holding bank accountable for the mortgage foreclosure crisis that’s affected every community in our country and our Commonwealth,” Conway said.

The five banks included in the settlement are Bank of America, JP Morgan Chase, Wells Fargo, Citi and Ally/GMAC.

“I am committed to utilizing these resources to assist consumers,” Conway said, adding that he plans to continue investigating Mortgage Electronic Registration System Inc., a company he believes may have circumvented state law by failing to properly record mortgage assignments and pay filing fees to county clerks.

Crestwood resident Pam Issac has been trying to spread the word about the settlement to other homeowners after a family member faced foreclosure.

Issac said finding solutions can be difficult and addressed fiscal court July 17 to recommend several websites to residents.

The U.S. Department of Housing and Urban Development has a website section specifically on avoiding foreclosure, she said. 

The site focuses on solutions stemming from the Making Home Affordable program, part of President Barack Obama’s Emergency Economic Stabilization Act of 2008.

Options are presented for modifying or refinancing current loans to make them affordable, restoring “underwater mortgages” where the home is worth less than the loan’s value and assistance for unemployed homeowners.

 “If you’re in trouble, take a look at that website because it may be able to help you,” Issac said.

The state attorney general’s website also provides detailed information on the mortgage settlement for those who believe they may be eligible for compensation.

For information, visit hud.gov or ag.ky.gov.