More US Homes Facing Foreclosure Risk in June
LOS ANGELES (AP) - Banks are increasingly placing homes with unpaid mortgages on a countdown that could deliver a swell of new foreclosed properties onto the market by early next year, potentially weighing further on home values.
June provided the latest evidence of this trend, as the number of U.S. homes entering the foreclosure process for the first time increased on an annual basis for the second month in a row, foreclosure listing firm RealtyTrac Inc. said Thursday.
California in particular saw a big spike in foreclosure starts, or homes placed on the foreclosure path for the first time. They increased 18 percent versus June last year, the firm said.
The increase in foreclosure starts comes as banks make up for time lost last year as the mortgage-lending industry grappled with allegations that it had processed foreclosures without verifying documents.
The nation’s biggest mortgage lenders reached a $25 billion settlement in February with state officials. And that’s cleared the way for banks to address their backlog of unpaid mortgages.
Lenders initiated foreclosure on 12 percent of the loans behind in payment in June - the highest level since the first half of 2009, according to Fitch Ratings.
"These properties that are starting the foreclosure process are mostly homeowners who likely have been missing their payments for a year or more and just now are officially starting the foreclosure process," said Daren Blomquist, a vice president at RealtyTrac.
That means the latest crop of homes entering the foreclosure process does not signal that there is a fresh wave of homeowners in distress and missing payments.
Still, the increase in foreclosure starts sets the stage for a potential increase in homes sold at a discount via short sale, when the lender agrees to accept less than what is owed on the seller’s mortgage. Others could end up taken back by banks and placed on the market also at a sharp discount.
Either way, short of homeowners obtaining loan modifications or otherwise arranging to exit the foreclosure process, many of these properties could end up adding to the inventory of foreclosed homes on the market, dragging down the values of nearby homes.
Those homes may not hit the market for many months, however.