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U.S. homes repossessed by banks set to hit record 1 million this year

By Ariana Eunjung Cha

The number of American homes repossessed by banks hit a record high in the second quarter of the year, putting the number of foreclosures on track to hit a record 1 million by the end of 2010.

Bank repossessions increased 5 percent from the previous quarter and 38 percent from the second quarter of 2009 to 268,962, according to data released early Thursday by RealtyTrac, an Irvine, Calif., firm that tracks the foreclosure market.

But while the number of homes in the final stage of the foreclosure process increased, the number of new filings fell. Both default and auction notices were down on a month-over-month and year-over-year basis.

The combination of bad news and good news can be explained by two seemingly contradictory trends that are the result of Obama administration efforts to encourage with lenders to help homeowners in distresss.

Over the past few months, lenders have been clearing out a backlog of homes that had been temporarily saved from foreclosure thanks to prevention efforts in 2009. And at the same time, they have been delaying foreclosure proceedings on homeowners with delinquent payments and instead trying to work with more aggressive loan modification strategies or to accept a short sale.

So while foreclosure activity may seem to be flattening out--particularly in hard-hit states like California, where filings were down 13 percent from a year ago, and in Nevada, where they were down 6 percent from a year ago--it's probably only temporary.

"We're seeing some positive signs, but the caveat is that we believe most of the decrease is not the result of the housing market really recovering but more of the result of artificial intervention on the part of government and lenders," said Daren Blomquist, director of marketing communications for RealtyTrac.

The new foreclosure data do little to dispel worries about the stability of the economic recovery, as dismal indicators such as declining retail sales and lowered growth forecasts from the Federal Reserve continued to pile up this week.

By Ariana Eunjung Cha  |  July 15, 2010; 12:02 AM ET
 
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Comments

Is this any surprise? Once the average home prices re-normalize at the 1995 levels, we should be entering 2015. That's a 20-year lapse, and just to catch back up to where we should be in 2015, inflation would have to skyrocket to 5% - 5.5% -- right now. Obviously that would kill the recovery and catapult us into a second, even greater depression.

We're stuck between stagflation in order to keep nearly 1/3 of all homeowners in their homes, and hyperinflation, which would raise the price of a gallon of gas to $40.00 on average. Both are unsustainable and if we don't get some kind of intervention VERY soon, we could lose this whole decade, just like the Japanese did in the 1990s.

Posted by: thelongblueline | July 15, 2010 7:03 AM | Report abuse

This is wonderful news. All of us responsible, debt-paying, paycheck-saving hard workers will finally be able to afford a reasonably-priced home. Do people not realize the average American was priced out of buying during the bubble years? Home prices were astronomical and there was no way a normal schmoe could actually afford a genuine payable mortgage. All those speculators and McMansion-living greedmonkeys can move back in with their extended families now, two to a room like the old days. Sit on the porch to escape the evening heat, socialize with the neighbors. Suburban opulence is not a necessary facet of American life.

Posted by: Religulous | July 15, 2010 8:02 AM | Report abuse

Last time I looked we, the people and our elected officials gave the financial services insusty almost three trillion dollars (when you add the free money the Fed is making available to TARP) to save their butts and the economy at the same time.

But, now the same firms which we saved are having difficulty finding ways to use some of that operating capital we have given them to re-negotiate bad loans? Or are they still living with the belief/myth that if they do not take some write down on these loans their balance sheets will look even better to investors and creditors?

Banks got better real quick because they have still deferred paying some pain for their executives and shareholders in the form of write offs or write downs from re-negotiating these loans. Not only are foreclosures high, but the percentage of home owners who are in arrears for three months or more is an all time high.

A million homes sitting in the hands of the banks at inflated values versus their real market value) will be the next big accounting scandal because all this means is banks are inflating their real assets and carrying more dead weight over time. That can go on so long as the Fed continues to aid and abet in this scam but when it is time to raise interest rates and tighten credit, this portfolio of unsalable houses will be like a stone around the neck of the banking industry and we will face another crisis and, guess what, another handout to these Wizards of Wall Street who just can't seem to accept the fact they made some very bad decisions and might have to take it in the shorts for once rather than continuing to be backstopped by a clueless Congress and a compliant Federal Reserve.

Posted by: bobfbell | July 15, 2010 8:27 AM | Report abuse

The Recovery Summer is off to a great start.
Real recovery will only begin, I said begin.....after Nov.

Posted by: richard36 | July 15, 2010 8:32 AM | Report abuse

Well said, bobfbell. The banks are currently zombies, going around sucking up capital without making any loans. They're doing that because they're spooked about recognizing all the bad debt papers they have sitting in their vaults. They will continue to be zombies indefinitely until they are forced to write off their bad papers. Until then, we're in for a Japanese-style Lost Decade of high unemployment and deflation since we're in a liquidity trap.

Posted by: Cavan9 | July 15, 2010 9:06 AM | Report abuse

I like your comment Religulous. Me and my wife waited also and we make good money things were just not adding up. Now we can wait until the prices drop a little more and buy something we can afford. Sorry for the luck of others but your parents should have taught you better.

Posted by: access11 | July 15, 2010 9:26 AM | Report abuse

like your comment Religulous. Me and my wife waited also and we make good money things were just not adding up. Now we can wait until the prices drop a little more and buy something we can afford. Sorry for the luck of others but your parents should have taught you better.

Posted by: access11 | July 15, 2010 9:26 AM

------------------------------------------

I'll second that.

Posted by: adrienne_najjar | July 15, 2010 10:02 AM | Report abuse

Totally agree with your comment Religulous & Adrienne. Those who deliberately chose to live beyond their means; you should have known better. Don't expect a handout from those who lived responsibly or the Government (which is funded by the responsible taxpayers).

Posted by: Gertie3 | July 15, 2010 10:32 AM | Report abuse

"Those who deliberately chose to live beyond their means; you should have known better. "

The people who were living beyond their means lost their homes in 2007 and 2008.
The people losing homes now are the people who are also losing their jobs.

This may come as a shock, most people don't have enough cash in savings to make house payments for a year if they lose their job without depleting retirement and any educational savings.

Be prepared for 20-25% down on a home and no other debts.

Posted by: knjincvc | July 15, 2010 10:54 AM | Report abuse

Posted:thelongblueline,July 15, 2010 7:03 AM

" Both are unsustainable and if we don't get some kind of intervention VERY soon, we could lose this whole decade, just like the Japanese did in the 1990s."

The party of "HELL NO WE AREN'T GOING TO DO "ANYTHING" TO HELP THE LITTLE PEOPLE" believes intervention is a mistake if it helps Obama look good. If republicans take over the house it will get worse because that is where spending bills originate. Republicans have already gridlocked the senate.

But to Japans lost decade, elderly Japanese born 1930-1955 know how to hunker down and live while spending very little thanks to being bombed back to the stone age. Japan built a very good public transportation system, they live in much smaller homes than most Americans, spend less on utilities and save a heck of a lot more than Americans.
They also outsourced much of their middle class factory jobs to China, sound familiar?
Japaneese are not spending but they are saving.
Americas economy depends on spending.

Posted by: knjincvc | July 15, 2010 11:08 AM | Report abuse

My wife and I lost our home to foreclosure, not because we over purchased( our total debt was 31%, way below the 45% threshold) and our mortgage was our only debt.
We lost it because after 4 layoffs in 2 years we had depleted our savings and had no money to make the payments. Many people losing their homes today are doing so for the same reason.
All you out there who want to point the fingers at us and accuse us of buying beyond our means need to reconsider your postion. That is simply untrue. It makes no difference if you have no job to pay the mortgage.

Posted by: willhowell55 | July 15, 2010 2:00 PM | Report abuse

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