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April 05, 2012
Author: Nick Carey, Reuters.

Even as real estate sales are picking up across most of the country, a painful second act of the housing slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.

“We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010,” said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio. “Last year was an anomaly, and not in a good way.”

In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.

Five major banks eventually struck that settlement with 49 states in February. Signs are growing that 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 January.

More conclusive national data are 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 vs. 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.

According to Moody’s Analytics, sales of repossessed properties probably will rise 25 percent this year from 1 million in 2011, Bloomberg News reported. Prices for the foreclosed homes could drop as much as 10 percent because they deteriorated as they were held in reserve during the investigations by state officials resolved in February, according to online foreclosure marketplace RealtyTrac. That month, 43 percent of foreclosures were delinquent for two or more years, from a 21 percent share in 2010, according to Lender Processing Services.

“The longer a foreclosed home is in the mill, the bigger the losses,” Todd Sherer, who manages distressed mortgage investments for Dalton Investments, a Los Angeles-based hedge fund, said in an interview with Bloomberg News. “We have a bulge of these properties coming through the system.”

Real estate company 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.