Foreclosures are the good news
If beauty is in the eye of the beholder, then why do so many of us take Internet and newspaper headlines literally? If you’re in the habit of only reading the headlines, this would be a good time to change your habits.
On April 15, tax day, I opened my computer first thing in the morning and was accosted with an Associated Press posting titled, “Foreclosure rates surge, biggest jump in five years.” Had I not moved any further than the headlines, April 15 would have proven to be even more depressing than it normally is. As it turned out the content of the report was way more uplifting than the headlines, at least in the eyes of this beholder.
The reported foreclosure statistics were compiled by Realty Trac summing up the first three months of the year. During this period, the number of United States homes taken over by banks jumped 35 percent in the first quarter from the first quarter a year ago. In addition, households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009.
Sounds bad, right? But a closer reading of the report discloses the reason for this increase is because the banks are starting to wade through the backlog of troubled home loans at a faster pace. Many of these foreclosure judgments have been delayed because the banks were under pressure from the government to modify home loans for troubled borrowers instead of proceeding with a foreclosure. Also, states enacted foreclosure moratoriums in the hope of giving homeowners behind in payments time to catch up.
Unfortunately, most of the federal and state loan modification programs have failed to help any substantial number of troubled homeowners. New legislation enacted last month to expand the modification programs are expected to take months to work out and will, therefore, not be available to help homeowners for a long time.
Florida has the third highest foreclosure rate in the country behind Nevada and Arizona. Manatee County’s foreclosure rate for the month of March was up 11.4 percent from February and almost 63 percent from March of last year according to Realty Trac. One in every 160 Manatee County households has received a foreclosure filing. In the state of Florida one out of every 57 properties has received a foreclosure filing.
So why do I see this report as a good thing? In my view, anything that moves the stagnant real estate market forward is progress. Banks sitting on mountains of foreclosure paperwork without making any advancement is doing nothing for the recovery of real estate and all the other national industries that depend on a vibrant real estate market. Once it’s established that a homeowner has no way of saving his/her property, the best course of action is for the lender to take back the property, put it on the market and sell it to a qualified purchaser as soon as possible.
The high volume of foreclosures will continue to muddy up the marketplace with lower property values and an excess of inventory. The sooner these bad debts are off the banks’ books the better for everyone.
I guess there’s nothing really beautiful about foreclosures, except the fact that the cycle may have peaked and we’ve taken the first step on the road to recovery. Now that’s a beautiful thing.