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Lenders Step Up Foreclosures As Moratoriums Expire
By Carrie Bay
Foreclosure floodgates may soon give way as the nation's leading mortgage lenders lift their recent foreclosure suspensions and move those borrowers that are ineligible for federal programs on through the property repossession process.
According to a Wall Street Journalreport, J.P. Morgan Chase, Wells Fargo, Fannie Mae, and Freddie Mac all say they have increased foreclosure activity over the past few weeks. The companies have recently rescinded temporary foreclosure moratoriums that were instituted at the urging of lawmakers and regulators to allow time for the Obama administration's mortgage relief plan to be implemented.
J.P. Morgan Chase says its foreclosure suspension, which commenced on October 31, 2008, and was reinstated with the announcement of the federal housing program, delayed foreclosures for more than 80,000 homeowners, representing $22 billion in Chase-owned mortgages. But now that the moratorium has expired, the bank has ramped up new foreclosure actions.
A Chase spokesperson told the Journal, "We had stopped putting additional loans into the foreclosure process so we could be sure that delinquent borrowers would have every opportunity to take advantage of new initiatives that we were putting in place." Borrowers who are now receiving foreclosure-sale notices, he said, "own vacant properties, have not been in contact with us and/or do not qualify for the modification programs."
The Journal reported that a Wells Fargo spokesperson commented that the bank would continue to work with customers on a resolution up to the actual point of a foreclosure sale, but he said, "the expiration of foreclosure moratoriums is having an impact," and increasing foreclosure actions.
Government-backed lenders Fannie Mae and Freddie Mac lifted their foreclosure suspensions in March, and have begun moving forward with foreclosure sales on investment properties and second homes. Although they have resumed foreclosure proceedings for some assets, both agencies have stated that properties eligible for modification under the government's Making Home Affordable program will still be covered by a moratorium.
A Fannie Mae spokesperson told the Journalthe GSE's servicers have been instructed that "a foreclosure sale may not occur on a Fannie Mae loan until the loan servicer verifies that the borrower is ineligible for a federal loan modification, and all other foreclosure prevention alternatives have been exhausted."
Citigroup, which halted foreclosures on loans serviced for Fannie and Freddie up until March 12, told the Journalthat it has "reverted to our previous business-as-usual moratorium." For Citigroup borrowers who are not a "good candidate" for a loan mod and the investor has not approved a retooling of the mortgage, Citigroup says it will move forward with foreclosures, the Journal reported.
According to Alexis McGee, president of the foreclosure tracking company ForeclosureS.com, the backlog of delayed foreclosures from lenders' foreclosure freezes, coupled with rising unemployment, could distress the housing market's recovery.
McGee said, "Hopefully, this is a short-term surge caused by months of delayed foreclosures. This is a very troubling turn after seeing some bright spots earlier this year."
According to ForeclosureS.com's March report, 175,199 U.S. homes were lost to foreclosure last month - a new monthly record and up 44 percent from the record high set in February - reflecting lenders' renewed foreclosure activities. The company's data shows nearly 370,000 properties have been repossessed by lenders so far this year, a 76 percent increase over repossessions in the first quarter of 2008. And there's more to come - ForeclosureS.com reported that pre-foreclosure filings during the first three months of 2009 topped 600,000, their highest quarterly level since the foreclosure crisis began.
McGee says these high numbers may also be caused by defaults on previously modified loans, citing the mortgage report released earlier this month by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). "The report points to the fact that not all previously modified loans result in lower monthly payments, and when combined with today's economics, the result can be catastrophic for already strapped homeowners," McGee said.
Courtesy of www.DSNews.com
