Foreclosure Rate Accelerates In First Quarter Of 2012

Many struggling homeowners took heart from the fact that foreclosure rates sunk to a four year low at the end of 2011, but unfortunately that trend has not continued in the first quarter of 2012. That’s right, the foreclosure express, which has been rampant over recent years has started to step up the pace again.

Statistics For The First Quarter In 2012

• Properties that were bank owned or were being pushed along the foreclosure process accounted for 26% of the total house sales in the first quarter of 2012. Worryingly this was the biggest share foreclosure sales have contributed for around a year and a half.
• The total number of homes actually sold in this period came to 233,299, which represented 8% more when compared with the previous quarter’s figures.
• There are approximately another 1.35 million homes which are either owned by the bank or going through a foreclosure and will be sold in the near future.

What Has Caused This Increase?

• It is thought that sale rates have been boosted by the number of lenders allowing the borrower to short sell their property. Many borrowers are willing to take this option to avoid the foreclosure process and the affect it has on your credit rating afterwards.
• Short sale rates are actually higher than they have been at any point during the last 3 years and have increased by a quarter since this time last year.

Why Are Lenders Allowing Borrowers To Short Sell?

• Firstly, a short sale is where a borrower has an outstanding balance on their mortgage that equates to more than the market value of their home, but the lender allows them to sell the house and they agree to forgive the remaining debt.
• Foreclosure can be an extremely lengthy process that lenders aren’t too keen on going through either and so short sales are being utilized by lenders to avoid that.
• It’s estimated that a lender will recoup a larger share of money owed via (up to 20% more) a short sale than they would if proceeding with a foreclosure.
• In recent months, confusion and paperwork problems have delayed foreclosures from being pushed through and this could have impacted on the lenders change in tactics to recoup their money.

Affect On The Housing Market

• If the number of foreclosures increases, this tends to have an adverse affect on the state of the housing market. This is because sales from foreclosure auctions or short sales don’t tend to fetch nearly as much as a standard sale would. Consequently house prices drop in general.

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