Foreclosure filings fell dramatically last year, according to a report released Thursday. Several prominent economists said the news was a sign that the housing market could be stumbling toward recovery. But there’s still a mountain of foreclosures to work through. And there are millions of Americans living in limbo, reeling from the lingering affects of the housing crisis and waiting to see if they will lose their homes.
The number of homes with foreclosure filings plunged 34 percent to 1.89 million in 2011, according to RealtyTrac, a real estate site that tracks such filings. Total foreclosure activity was at its lowest yearly level since 2007.
The decline in foreclosures was mainly due to banks’ hesitance to foreclose on homeowners in the first half of the year, as the so-called robo-signing crisis played itself out. But there were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets.
The number of 30- and 60-day delinquencies has fallen substantially and that demand for homes is starting to grow, but it still will take four to five years for the housing market to become “well-functioning” again.
That’s a long time for the 1 in 5 homeowners who remain underwater on their mortgages, owing more than their houses are worth. Many homeowners are in limbo as banks try to determine whether to offer modifications on their loans or foreclose on them. Some experts said that the number of foreclosures has declined because there simply are fewer delinquent homeowners.
Banks have been slow to offer loan modifications but recently they have become more willing to facilitate modifications, lowering the number of foreclosures. Banks have realized that they may not make much money selling a foreclosed home in a depressed housing market.
Servicers have been slow to foreclose because they are not timely in processing anything. There could be a double dip in the foreclosure crisis as banks step up foreclosures in 2012.
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