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Failure to foreclose holds back real estate rebound
Policies to protect struggling homeowners from foreclosure in the District of Columbia, Maryland and other jurisdictions have offered “fool’s gold,” in the words of one top analyst, and they are holding back a real estate rebound, even as the U.S. housing market begins to roar, or at least growl, across the country.
Lawmakers who developed the policies at the height of the housing market crisis have made little or no effort to change course.
Daren Blomquist, an analyst at RealtyTrac, which tracks foreclosure trends, said markets such as the District, where foreclosures have slowed to a trickle — are “rewarding bad behavior” by creating a backlog of troubled properties that drag down the overall market. The best way to fix the impending foreclosure crisis, he said, is to speed up the process and flush excess foreclosures through the system.
“We’re far past the tipping point of how long homeowners should be given to avoid foreclosure,” he said. “By continuing to give homeowners more time, that is just delaying the housing market recovery.”
Foreclosure numbers offer mixed signals for the market. As the economy sours and housing values sag, the rising number of foreclosures is a key indicator that the market is hurting. But when, as now, the market is trying to mend and clear off an overhang of troubled properties, scaring off buyers and sellers alike, strong foreclosure numbers can paradoxically be a signal that the market is healing.
RealtyTrac this week found that 1.5 million U.S. houses were either in foreclosure or owned by banks in the first quarter of the year, up 9 percent from the first quarter of 2012 but down 32 percent from the 2.2 million at the peak of the housing crisis in December 2010.
“Delinquent loans that fell into a deep sleep after the robo-signing controversy in late 2010 are gradually coming out of hibernation following the finalization of the national mortgage settlement” in the spring of 2012, Mr. Blomquist said.
Stricter laws that allowed for faster foreclosures have helped clear the backlog of foreclosed housing properties that slowed down the nation’s recovery.
The number of actual foreclosures on U.S. home loans fell sharply again in February, down 29 percent from January and now at the lowest level since 2007.
But in the District, a mere four foreclosures were recorded in February, a decline of 84 percent from the same period in 2012. The decrease in large part is a result of the Saving D.C. Homes from Foreclosure Act that took effect in November 2010. That year, according to city data, there were 1,349 foreclosures across the city, followed by 566 in 2011 and 89 in 2012.
“Even one foreclosure is one too many,” Mr. Orange said. “I’m pro-homeownership. I’m taking the position to work with folks. At least this way they have a fighting chance to keep their homes.”
That may be of some comfort to struggling homeowners, but real estate analysts warn that such policies are keeping foreclosure rates “artificially low.”
The Saving D.C. Homes from Foreclosure Act has been blamed for lengthening the foreclosure process. It takes more than 1,000 days, or about three years, for a lender to complete the foreclosure of a home in the District. The national average is 414 days.
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About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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