Foreclosure Lists Will Soar Again, Economist Zandi Says

by Donald Hanz on Foreclosure Listings

Foreclosure lists throughout the country will soar again next year, according to Mark Zandi, head economist of Moody’s

In a talk with reporters, Zandi said that home prices will fall again in the coming months as more mortgage lenders will pursue foreclosure actions on mortgages not qualified under the Home Affordable Modification Program.

Zandi explained that foreclosure filings and foreclosure sales slowed down in many areas during some months this year, but the slowdown was only a lull. He said that this was caused by the intensified efforts by the federal government to pressure mortgage lenders to modify loans. Lenders, he said, suspended many of their foreclosure filings to comply.

The economist also said that home prices nationwide will hit their bottom next year during the July-September quarter after dropping by 38 percent, based on house price estimates by Standard & Poor’s/Case-Shiller.

He said that the Case-Shiller price index reached its highest level in the April-June quarter in 2006 and hit its lowest level this year in the first quarter, marking a decline of around 32 percent.

Zandi also explained that the increase in house prices in many areas was driven by temporary declines in sales from foreclosure lists. He added that majority of the estimated 7.5 million foreclosed homes that would be sold off between the years 2006 and 2011 have not yet been sold. About 4.8 million foreclosed properties will be released for sale between this year and 2011.

The housing market has been showing some signs of recovery because of increases in sales in a lot of areas, driven largely by record-low mortgage rates, high home affordability levels and the record number of first time home buyers who took advantage of the federal tax credit program, which was set to expire last November 30 but which was extended until April next year.

According to Zandi, two significant reasons for the continued rise in foreclosure actions are the overwhelming proportion of underwater mortgage borrowers and unemployed homeowners. These borrowers could not save their homes through various loan modification and mediation programs offered because of their substantial negative equities and their lack of income.

About one-fourth of borrowers who purchased single-family houses with loans are underwater, many of which are facing defaults and foreclosures.

Additionally, the nationwide unemployment rate in October has hit10.2 percent, the highest level reached in 26.5 years. Without jobs, homeowners are left without any facility to save their homes from foreclosure lists.