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Foreclosure Filings Up a Record 65% in April

One in every 519 homes in foreclosure nationwide

By Mark Huffman
ConsumerAffairs.com

May 14, 2008

"Although only about two percent of households nationwide are in foreclosure, these properties contribute to already bloated inventories of homes for sale, and put downward pressure on home values," said James J. Saccacio, chief executive officer of RealtyTrac. "Areas of California, Florida, Nevada and Arizona continue to be particularly hard-hit.

"Property tax bases are eroding, putting municipal budgets in peril. For example, the city council in Vallejo, California - part of a metropolitan area with a foreclosure rate that ranked sixth highest in the nation in April - last week voted to have the city file for bankruptcy," Saccacio said.

The White House earlier this week threatened to veto a measure that would spend $300 billion to help distressed homeowners avoid foreclosure. The House passed the measure last week while a similar bill is making its way through the Senate.

Nevada has highest rate

Despite a five percent month-over-month decrease in foreclosure activity in April, Nevada continued to document the nation's highest state foreclosure rate. One in every 146 Nevada households received a foreclosure filing in April, 3.6 times the national average, and the state's foreclosure activity was up 95 percent from April 2007.

California posted the second highest state foreclosure rate in April, with one in every 204 households receiving a foreclosure filing during the month. Foreclosure filings were reported on 64,683 California properties in April, down less than 1 percent from the previous month but still the most of any state and an increase of 112 percent from April 2007.

Arizona foreclosure activity in April increased 26 percent from the previous month and 181 percent from April 2007, helping to bump the state's foreclosure rate up to third highest among the states. Foreclosure filings were reported on 11,620 Arizona properties in March, one in every 224 total households.

With one in every 242 households receiving a foreclosure filing in April, Florida documented the nation's fourth highest state foreclosure rate. Foreclosure filings were reported on 35,264 Florida properties during the month, the nation's second highest total. Florida foreclosure activity increased nearly 17 percent on a month-to-month basis and 146 percent on a year-over-year basis.

Colorado foreclosure activity in April was down nearly 3 percent from the previous month and up just 3 percent from April 2007, but the state's foreclosure rate still registered fifth highest among the states. One in every 349 Colorado households received a foreclosure filing in April, nearly 1.5 times the national average.

Other states with foreclosure rates ranking among the top 10 were Maryland, Georgia, Ohio, Michigan and Massachusetts.

Highest totals

Foreclosure filings were reported on 11,680 Ohio properties in April, the third highest state total behind California and Florida. Ohio foreclosure activity increased nearly four percent from the previous month and more than two percent from April 2007. The state's foreclosure rate continued to rank among the top 10, with one in every 432 households receiving a foreclosure filing during the month.

With foreclosure filings reported on 11,406 properties in April, Texas reported the fifth highest total, behind Arizona at No. 4.

Foreclosure activity in Texas increased nearly 7 percent from the previous month but was down less than 1 percent from April 2007. With one in every 809 Texas households receiving a foreclosure filing during the month, the state's foreclosure rate registered below the national average and ranked No. 17 among the states.

Other states in the top 10 for total properties with filings were Michigan, Georgia, Illinois, Nevada and Maryland.

Six California cities documented foreclosure rates that ranked in the top 10 among the 230 metropolitan areas tracked in the report. Merced took the top spot, with one in every 66 households receiving a foreclosure filing during the month, followed by Stockton at No. 2, Modesto at No. 3 and Riverside-San Bernardino at No. 4. Other California cities on the list were Vallejo-Fairfield at No. 6 and Bakersfield at No. 8.

Three Florida cities registered foreclosure rates among the top 10: Cape Coral-Fort Myers at No. 5; Port Lucie-Fort Pierce at No. 9; and Fort Lauderdale at No. 10.

With one in every 116 households received foreclosure filings in April, the Las Vegas metro area documented the nation's seventh highest metro rate.

Foreclosure bill

The American Housing Rescue and Foreclosure Prevention Act (H.R. 3221), authored by Rep. Barney Frank (D-MA), is aimed at expanding federal programs available to distressed homeowners. The White House says the plan rewards speculators and and lenders who make shaky loans.

Frank disagrees, saying the legislation combines a number of bipartisan bills including measures to modernize the Federal Housing Administration, which he says will provide crucial liquidity to the mortgage markets. He says it would also strengthen regulation and oversight for the future.

Frank and other Democrats say the housing package would help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process. Though the measure passed the full House last week, it failed to gain a veto-proof margin.

The Bush Administration said it would be willing to compromise with Democrats to come up with a bill acceptable to both sides. In an interview with Reuters, acting Housing and Urban Development Secretary Roy Bernardi said he believes there's room to come together.

In a speech last week, Federal Reserve Board Chairman Ben Bernanke appeared to signal support for stronger medicine than that prescribed by the White House. He recommended a number of measures contained in the House bill, and called on lenders to voluntarily write down a portion of their troubled mortgages.

Frank says his bill expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government -insured mortgages they can afford to repay. He says the legislation will help troubled borrowers avoid foreclosure while minimizing taxpayer exposure.

Frank also said the plan is limited to primary residences, and that no speculators, investment properties, second or third homes would be refinanced.

Bernanke's plea

Bernanke said many foreclosures are not preventable. He said investors, for example, are unlikely to want to hold onto a property whose value has depreciated significantly, and some borrowers -- perhaps because they were put into an inappropriate loan or because personal circumstances have changed--cannot realistically sustain homeownership.

"However, if a foreclosure is preventable, and the borrower wants to stay in the home, the economic case for trying to avoid foreclosure is strong," Bernanke said.

Because foreclosures impose high costs, including legal and administrative costs as well as the costs of leaving the property vacant for a possibly extended period, he said both the borrower and the lender usually are better off avoiding foreclosure.

Clusters of foreclosures can destabilize communities, reducing the property values of nearby homes, and lower municipal tax revenues. At both the local and national levels, foreclosures add to the stock of homes for sale, increasing downward pressure on home prices in general.

Bernanke's concern is that an escalation in downward pressure on home prices could have an adverse impact on the broader economy and, through their effects on the valuation of mortgage-related assets, on the stability of the entire U.S. financial system.

"Thus, finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy," Bernanke said.

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