Foreclosures Climb to Highest-Ever Level
RealtyTrac reports that foreclosures reached their highest-ever level in March: “[F]ilings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.”
The troubles continued to be felt most acutely in the so-called “sand states”: California, Nevada, Arizona, and Florida. In California alone 216,263 properties received a foreclosure notice. Ten states accounted for more than 70 percent of foreclosure activity, RealtyTrac said.
Why the sudden spike, so many months since the start of the burst of the housing bubble? The underpinning reason, of course, is persistent joblessness, declining incomes, and declining real estate prices. President Obama’s emergency foreclosure plans – including the Home Affordable Modification Program, or HAMP, under scrutiny this week — have delayed much foreclosure activity, but not changed the underlying fundamentals.
The more immediate reason is that banks have decided to take action against homeowners late on their payments, both for mortgages and home-equity loans (secondary loans taken against the value of a house). The subprime mess remains a multibillion-dollar liability on the banks’ books. Reporting earnings yesterday, J.P. Morgan, the massive investment bank, for instance, wrote down $1.1 billion in home-equity losses. Lenders with more immediate exposure to mortgages — such as Bank of America — have much more to lose. And a recent report from CreditSights, a research firm, said that Bank of America, Wells Fargo, and J.P. Morgan might need an additional $30 billion to cover home-equity losses alone.