Numerous studies and reports have been issued in the last two weeks on foreclosures, and all seem to reach the same consensus – though there was a decline in foreclosure filings in 2011, inventories are not only a present day problem, but will continue to be a lingering sore for the housing market as time carries on.
The latest data, originally reported by Foreclosure-Response.org, definitely look promising. The serious delinquency rate dropped to 9.3 percent, spurred on mainly by the drop in delinquent loans from 3.7 percent in Dec. 2009 to 1.8 percent in June 2011.
In addition, as we reported last week, the 205,000 foreclosures in December were the lowest monthly total since November 2007, and the 1.8 million foreclosures for all of 2011 were a 35 percent decline from 2010.
Even with those declines, though, inventories persist, as banks, overwhelmed by the cascade of foreclosure filings in recent years, cannot process the distressed properties fast enough, leading to substantial backlogs
Leah Hendey, a research associate at the Urban Institute, a firm that recently released a report on foreclosure inventories, said in a HousingWire piece that the amount of time it may take to clear out the inventories could be immense.
“The foreclosure inventory that is building up is going to take an incredibly long time for lenders to clear,” Hendey said. “At the current pace of foreclosure sales, we are looking at a process that could take decades to complete. It is critical that the status of these properties be resolved quickly if we want to stabilize communities and housing markets.”
Inventories pose particular problems in judicial foreclosure states, which include Illinois and Florida. There, courts are in charge of guiding the foreclosure proceedings, which contribute to an even greater backlog in foreclosure inventories. In the two aforementioned states, for instance, the foreclosure rates increased in some of the major cities, rising by 2.3 percent in Chicago and 2.8 percent in Tampa. Next to New York, New Jersey and California, the state have the highest foreclosure inventories in the country.
Foreclosure inventories could also pose problems for originations, according to the Urban Institute report. All of the metro areas the report surveyed showed a decline in mortgage originations, with Miami leading the way with an incredible 82 percent drop in new home loans in 2011.