Nobody’s Immune From Foreclosures
The Salt Lake Tribune reported today that Utah’s foreclosure rate for November increased over last year by 7.2%.
Foreclosure filings in Utah rose 7.2 percent in November, compared with the same month one year ago, reversing a trend of declining foreclosures in the state, a new report shows.
The data for this story came from RealtyTrac, a primary source for this sort of information. RealtyTrac’s press release led with the title “Foreclosure Activity Decreases by 10% in November.”
Sadly, the fact is foreclosure activity in the United States increased 68% year over year. Only seven states in the country saw a decrease. Utah moved up to #17 per capita in the foreclosure statistics.
It’s been said over and over that Utah’s strong economy will keep home
values up and stave off foreclosures. As developments on Wall Street about the mechanics behind home loans continue to be exposed, it’s becoming clear no state is immune. When all the real estate fraud is taken into account, it’s obvious the health of our economy can’t stop foreclosure. Homeowners in the Provo Riverbottoms neighborhood owe hundreds of thousands of dollars more than their homes are worth. It will take years for these values to return to equilibrium.
More and more, even “A” borrowers are resorting to defaulting on mortgages because the underlying asset isn’t worth the money being paid towards it.
There is some hope as the effects of FHA Reform and other programs put into place by the government are starting to take hold. Though Texas has a huge number of foreclosures volume wise, the state has dropped in the overall rankings from #9 in August to #17 in November. California which arguably is facing the greatest pain, has seen its volume drop as well. In August, nearly 60,000 bank owned homes were in the inventory. By November, this number has dropped to about 40,000…still a large number, but it shows these homes are being worked through the inventory. Even the number of homes entering foreclosure in California has decreased by 50%.
My personal theory on the credit crunch has been the lenders and Wall Street companies investing in mortgage backed securities had no idea how much fraud was out there. I believe they’ve priced their write-offs based on the high ratios of fraudulent loans. By the time this thing works its way through I believe more loans will be found to be good and the losses on Wall Street will be surprisingly diminished.
However, that’s not going to stop the tightening in the credit markets for now. In the mean time we need to operate from the perspective that credit will be tough to come by and big lenders will continue to protect themselves as much as possible.
This environment, coupled with increasing fraud revelations, will continue to force the foreclosure rates up…regardless of well performing underlying economies.