Re-Defaults Flood Foreclosure Inventory

Nearly half, 45 percent, of October foreclosure starts were redefaults—mortgages which had previously defaulted and were modified unsuccessfully either by the lender or the federal government. About 105,000 redefaults increased total foreclosure starts in October to 232,865, 11.5 percent more than the level of a year ago.

These double losers are flooding the foreclosure inventory at a time when foreclosure sales are so slow that starts outnumber sales by a factor of three to one. The national foreclosure inventory hit an all-time high at the end of October of 4.29 percent of all active mortgages. Some 3.9 million loans are delinquent 90 days or more or in foreclosure, according to Lender Processing Services’ November Mortgage Monitor. LPS also reported that processing has slowed to point that the average foreclosure takes 632 days to process and sell.

The result is a huge inventory of empty homes that is still growing faster than it can be absorbed by the marketplace despite fewer defaults. The very existing of this glut of foreclosed properties, even if they are not yet listed for sale, depresses local home values and delays the housing recovery. Even as overall defaults have declined by about 30 percent, redefaults have increased this year, from about 32 percent of all defaults in January, increasing the foreclosure inventory with modification failures.

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via Two-time Losers Flood Foreclosure Inventory – UPI.com.

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