Foreclosure Speeding Up Again

I’ve definitely seen an increase in foreclosure activity in Phoenix lately.  I’ve also seen a false sense of bravado on the part of loan servicers and trustees, based in part on the idea that BT Capital says that to stop a foreclosure sale, a cash-strapped homeowner must depend on not just trying to obtain, but obtain and maintain a court order, prior to even be able to exercise his due process rights to bring claims and defenses related to the deed of trust or the sale under a deed of trust.  Of course, BT Capital involved a competing bidder who was vastly underbidding the property, a trustee error, and a beneficiary wanting to take back the property.

Here’s an excerpt from an article by Jean Braucher on foreclosure fatigue; the full Credit Slips post is here:

Folks in Washington tell me there is a general sense of “foreclosure fatigue” in our nation’s capital. It’s just so boring to keep thinking about all the people losing their homes year after year. Can’t we move on to something new? This attitude goes along with a failure to do anything meaningful to get out of the five-year-old mortgage crisis, still very much with us. More charitably, the people who would like to do something see no political opening in an election year.

Looking back on all that time, there has been no shortage of good ideas; what has been lacking is will. Remember principal write-down in bankruptcy (aka, cramdown)? Peter Swire, who coordinated housing finance policy at the National Economic Council in 2009-2010, recently admitted that the administration should have pushed for it early on. “Cram-down, on balance, today, would have been a good idea,” he said.

 

But there is still floating around the idea of the principal paydown plan in chapter 13, which could be implemented by the Federal Housing Finance Agency.  But remember Ed DeMarco . . . here, here and here.

If it is hopeless to do anything on the federal level now, how about local initiatives? Just this week, Robert Shiller (of the Case Shiller price indices) in a New York Times piece promoted state and local government efforts to use eminent domain to seize underwater mortgages, pay their fair market value, and then write them down, making new loans for the public purposes of stabilizing the housing market and reducing blight caused by vacant homes.

There is plenty of reason to develop some will for action.  It should not go unnoticed here that both foreclosure starts and repossessions went up in the most recent monthly report of Realty Trac. Foreclosure starts in May resulted in the first 12-month increase nationally in more than two years. The highest rates of foreclosure activity, from one in 300 to one in 340 housing units, were, in order, in Georgia, Arizona, Nevada, California, Illinois, and Florida. The top three metro areas for foreclosure starts, in order, were Riverside, CA, Atlanta, and Phoenix.

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