If the boom in refinancings represents the green shoots of the housing market, the continued surge in foreclosures seems to be the desert wind that makes the bottom of the market hard to spot. First-quarter foreclosure filings hit a record 803,489, notes the National Short Sale Center; it expects such filings to exceed one million in the second quarter. The U.S. Senate is still considering legislation for foreclosure relief, without the claw-down provision contained in the version passed by the House. And the White House has announced new initiatives as part of its Making Home Affordable program that provide incentives for borrowers and services to “pursue short sales and deeds-in-lieu of foreclosure in cases where a borrower is eligible for a MHA modification but unable to complete the modification process.” On a sobering note, the Treasury Department says that “eligible borrowers will be accepted until December 31, 2012.”
The White House also added what it calls Home Price Decline Protection Incentives in a further effort to stabilize the housing market, which provide “payments based on recent declines in home prices to reduce the risk of loss to lenders from modifications compared to alternatives that could result in the loss of homeownership,” according to a fact sheet released by the Treasury.
These incentives “will take a little bit of time” to kick in, says Matt McCabe, chief operating officer of National Short Sale Center, which serves a neutral third party between borrowers and servicers. “It will help alleviate the problem, but the scope is enormous. A lot of homeowners with non-performing loans have moved out,” he notes. Increased short sales will “reduce the sheer volume of foreclosures, and reduce blight from a neighborhood perspective,” he believes.
The Senate’s Helping Families Save Their Homes Act may not include the House version’s judicial cram-down provision allowing bankruptcy judges to modify owner-occupied first mortgages, but it confers that power to servicers, stating that they “must be given authorization to modify mortgage loans and engage in other loss mitigation activities.” McCabe supports the Senate version, because “anything you can do to keep people in their house is positive.”
While home resales are picking up, “price declines continue at a pretty rapid pace,” McCabe adds. Until the price stability returns it will be “difficult to see an appreciating market, and lenders and sellers don’t have the luxury to wait.” Meanwhile, the foreclosure filings continue to pile up.