Foreclosure filings fall as loan modifications slow judicial process
According to RealtyTrac, an online marketer of foreclosed properties, there were 306,627 foreclosure filings last month, making November the fourth straight month of decline (3% drop in October, 4% in September and 1% in August). Nearly 307,000 households received a foreclosure-related notice in November, and banks repossessed about 77,000 homes last month. Foreclosure filings were still up 18 percent from a year ago, and a new wave is expected next year as unemployment stays high and borrowers default out of loan modification programs. "This is providing a welcome respite for the real estate industry, but a full recovery will only come when unemployment recedes to normal, healthy levels and when availability of credit reaches a more rational balance between the extremes of the past few years," RealtyTrac CEO James Saccacio said. RealtyTrac spokesman Rick Sharga isn't convinced the decline is a natural outgrowth of improved market conditions. "I really don't believe we'r e looking at a trend that suggests the problem is going away," he said. "Much of the drop was artificially induced." He attributes the stabilization to mandatory mediation programs that some states have introduced. For example, in Nevada, where filings have declined for three months in a row, lenders are required to go through mediation with borrowers before moving forward with foreclosure documents. In many cases, Sharga said, these programs just delay the inevitable. The "sand states" -- Nevada, Florida, California and Arizona -- continued to amass the largest numbers of foreclosure filings with Nevada the hardest hit state of all. One of every 119 households had a filing in November, nearly four times the national average of one for every 417.
Unemployment up
A consensus estimate of economists surveyed by Briefing.com expected 455,000 new claims, but the Labor Department said in its weekly report that there were 474,000 initial job claims filed in the week ended Dec. 5, up 17,000 from the previous week's unrevised 457,000. The 4-week moving average of initial claims was 473,750, down 7,750 from the previous week's revised average of 481,500. The government said 5,157,000 people filed continuing claims in the week ended Nov. 28, the most recent data available. That's 303,000 down from the preceding week's revised 5,460,000 claims. The 4-week moving average for ongoing claims fell by 123,500 to 5,416,500 from the previous week's revised 5,540,000. Unfortunately the slide probably just signals that more filers are dropping off those rolls into extended benefits. Jobless claims in 21 states declined by more than 1,000 for the week ended Nov. 28, the most recent data available. Claims in California dropped the most, by 28,672, whi ch the state attributed to a shorter work week due to the Thanksgiving holiday and fewer layoffs in the service industry. Seven states said the claims increased by more than 1,000. Claims in Wisconsin jumped by 8,067, which a state-supplied comment said was due to layoffs in the construction, service and manufacturing industries.
HAMP a failure
An editorial in the Providence Journal succinctly outlines the reasons President Obama’s program to curb foreclosures appears to be failing. The Home Affordable Modification Program (HAMP) offered incentives to mortgage companies to reduce payments for struggling homeowners, but as of September only about 1,700 homeowners had passed through all the necessary hoops to win a new permanent loan modification. In the meantime, foreclosures are on the upswing and well over a million mortgages were 60 days past due in October.
HAMP was not designed to deal with one of the biggest aspects of the foreclosure problem: falling home values that leave borrowers “under water,” owing more than their houses are worth. Primarily, HAMP is aimed at reducing interest payments but not principal. Not surprisingly, underwater borrowers are not rushing to sign up, and they're not finding much help when they do. Participants in the program have to show their worthiness by completing a series of trial payments, and around 650,000 borrowers have done that. But many say they are subjected to disorganized claims for additional paperwork, and others fail to provide the necessary documents in the first place. Last year, foreclosure sales topped 1 million. This year there were fewer, thanks to loan-modification efforts and moratoriums, but the danger of a stalled HAMP is that another new wave of foreclosure sales could swamp the market, sending home prices back down and threatening the economic recovery.
Trade deficit narrows
A Commerce Department report shows the U.S. trade deficit narrowed unexpectedly in October as the weak U.S. dollar helped boost exports and demand for imported oil fell to its lowest daily level since January 2000. The trade gap shrank 7.6 percent to $32.9 billion, from a downwardly revised estimate of $35.7 billion in September. Analysts surveyed before the report had expected the gap to widen to about $36.8 billion. The smaller-than-expected trade gap is likely to prompt analysts to raise their estimates of fourth-quarter economic growth and is good news for the Obama administration, which sees export growth as an avenue for creating jobs.
Overall trade volume remains well below last year. But the bigger drop in imports than exports in 2009 could cut the trade gap almost in half from last year's $696 billion. The deficit totaled nearly $304 billion through October versus $611 billion in the same period in 2008. The closely watched U.S. trade deficit with China widened in October to $22.7 billion, the highest since November 2008. U.S. exports to China rose to a record $6.9 billion, but were still swamped by the highest imports from the Asian giant since October 2008.
Renting up, underwater foreclosures coming
The Wall Street Journal reports that thanks to a rare confluence of factors -- mortgages that far exceed home values and bargain-basement rents -- a growing number of families are concluding that the new American dream home is a rental. The U.S home-ownership rate has charted its biggest decline in more than two decades, falling to 67.6% as of September from a peak of 69.2% in 2004. And more renters are on the way: Credit firm Experian and consulting firm Oliver Wyman forecast that "strategic defaults" by homeowners who can afford to pay are likely to exceed one million in 2009, more than four times 2007's level.
Analysts at Deutsche Bank Securities expect 21 million U.S. households to end up owing more on their mortgages than their homes are worth by the end of 2010. If one in five of those households defaults, the losses to banks and investors could exceed $400 billion. As a proportion of the economy, that's roughly equivalent to the losses suffered in the savings-and-loan debacle of the late 1980s and early 1990s. The flip side of those losses, though, is massive debt relief that can help offset the pain of rising unemployment and put cash in consumers' pockets. "It's a stealth stimulus," says Christopher Thornberg of Beacon Economics, a consulting firm specializing in real estate and the California economy. "The quicker these people shed their debts, the faster the economy is going to heal and move forward again."
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